<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to __________
Commission file number 0-15638
NORTH STAR UNIVERSAL, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0498850
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6479 City West Parkway
Eden Prairie, Minnesota 55344
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (612) 941-3200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No______
At July 31, 1996, 9,913,000 shares of common stock of the registrant were
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
North Star Universal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-----------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 11,199 $ 3,369
Accounts receivable, net 9,193 8,784
Inventories 6,746 6,631
Prepaid expenses and other current assets 448 1,306
----------------------------------
Total current assets 27,586 20,090
Property and equipment, net 1,622 1,453
Investment in unconsolidated subsidiaries 82,785 83,542
Goodwill, net 4,880 4,960
Other assets 262 189
----------------------------------
$ 117,135 $ 110,234
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable to bank $ 2,938 $ 937
Current portion of long-term debt 11,187 13,161
Accounts payable and accrued expenses 9,732 10,401
----------------------------------
Total current liabilities 23,857 24,499
Long-term debt, net of current maturities 25,087 29,319
Deferred income taxes 26,505 21,935
Shareholders' Equity
Common stock, $.25 par value
100,000,000 shares authorized,
issued and outstanding 9,913,000
shares in 1996 and 9,448,000 in 1995 2,478 2,362
Additional paid-in-capital 31,296 31,105
Retained earnings 7,912 1,014
----------------------------------
Total shareholders' equity 41,686 34,481
----------------------------------
$ 117,135 $ 110,234
==================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
North Star Universal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------------
1996 1995 1996 1995
-----------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 16,431 $ 13,697 $ 31,793 $ 26,254
Operating and product costs 12,303 9,885 23,503 18,666
-----------------------------------------------
Gross profit 4,128 3,812 8,290 7,588
Selling, general,
and administrative expenses 4,319 3,719 8,273 7,224
-----------------------------------------------
Operating income (loss) (191) 93 17 364
Interest expense, net (846) (1,031) (1,768) (2,093)
Investment income - - 7,713 -
-----------------------------------------------
Income (loss) before income taxes
and equity in earnings of
unconsolidated subsidiaries (1,037) (938) 5,962 (1,729)
Income tax provision (benefit) (390) (325) 2,440 (535)
-----------------------------------------------
Income (loss) before equity in
earnings of unconsolidated
subsidiaries (647) (613) 3,522 (1,194)
Equity in earnings of
unconsolidated subsidiaries 1,068 1,325 2,119 2,532
-----------------------------------------------
Income from continuing
operations 421 712 5,641 1,338
Discontinued operations
Loss from operations, net of
income tax benefits - (245) - (934)
Gain (loss) on disposition,
net of income taxes 1,257 (2,091) 1,257 (2,091)
-----------------------------------------------
1,257 (2,336) 1,257 (3,025)
-----------------------------------------------
Net income (loss) $ 1,678 $ (1,624) $ 6,898 $ (1,687)
===============================================
Income (loss) per share
Continuing operations $ 0.04 $ 0.08 $ 0.57 $ 0.14
Discontinued operations 0.13 (0.25) 0.13 (0.32)
-----------------------------------------------
Net income (loss) $ 0.17 $ (0.17) $ 0.70 $ (0.18)
===============================================
Weighted average shares
outstanding 9,939,400 9,438,000 9,913,000 9,438,000
===============================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
North Star Universal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
1996 1995
----------------------------------
<S> <C> <C>
Net cash used in operating activities $ (2,685) $ (2,164)
Cash flows from investing activities
Capital expenditures (542) (142)
Proceeds from sale of CorVel stock 11,052 -
Proceeds from divestiture 3,196 2,500
Other (159) (253)
----------------------------------
Net cash provided by investing activities 13,547 2,105
----------------------------------
Cash flow from financing activities
Issuance of common stock 437 -
Proceeds from long-term debt 926 30,291
Payments on long-term debt (7,132) (31,452)
Proceeds from notes payable 34,453 -
Payments on notes payable (32,452) -
Cash dividends received from Michael Foods 736 736
----------------------------------
Net cash used in financing activities (3,032) (425)
----------------------------------
Net increase (decrease) in cash
and cash equivalents 7,830 (484)
Cash and cash equivalents
at beginning of period 3,369 5,102
----------------------------------
Cash and cash equivalents
at end of period $ 11,199 $ 4,618
==================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
North Star Universal, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation --
The accompanying unaudited condensed consolidated financial statements have
been prepared by North Star Universal, Inc. ("North Star" or the "Company"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The information furnished in the condensed consolidated
financial statements includes normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of such financial
statements. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's latest
annual report on Form 10-K.
Results for the three and six months ended June 30 may not necessarily be
indicative of the results to be expected for the full year.
2. Reorganization Agreement --
On December 21, 1995, the Company entered into a reorganization agreement
with Michael Foods which, in July 1996, the parties agreed to amend in
connection with Michael Foods' agreement to acquire Papetti's Hygrade Egg
Products, Inc. The effect of this agreement is to distribute the shares of
Michael Foods common stock owned by North Star directly to shareholders of North
Star and reposition North Star's continuing operations and investments into a
new holding company, ENStar Inc. ("ENStar"). Prior to the reorganization, the
Company will transfer to ENStar, its wholly owned subsidiary Americable, which
owns Transition, and its equity investment in CorVel. The shares of ENStar will
be declared payable in a tax free dividend to North Star's shareholders of
record prior to the effective date of the reorganization and be distributed
immediately following the reorganization.
Under the terms of the agreement, North Star will transfer indebtedness,
net of cash and cash equivalents, in the range of $15 million to $29 million to
Michael Foods, together with Michael Foods shares approximately equal to the
debt transferred. The actual number of Michael Foods shares in the exchange
will be based on an average market price for a period of time prior to the
closing date, less a discount ranging from 6% to 9% depending on the actual
amount of debt transferred. At the effective time of the reorganization, North
Star will effect a reverse stock split which reduces its shares outstanding to
the same number of shares it owns in Michael Foods reduced by the shares
redeemed in the transfer of the indebtedness. In the reorganization, each
outstanding share of Michael Foods common stock will be exchanged for one share
of North Star common stock. Following the reorganization, North Star will be
renamed Michael Foods, Inc.
The reorganization is subject to the receipt of a favorable ruling from the
Internal Revenue Service that the distributions are tax free to the shareholders
of Michael Foods and the Company, the approval of each company's shareholders
and other closing conditions. The agreement can be terminated by either party
under various circumstances including if Michael Foods' stock price is outside a
predetermined price range.
<PAGE>
North Star Universal, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Discontinued Operations --
On April 26, 1996, the Company completed the sale of Eagle Engineering &
Manufacturing, Inc. ("Eagle") for approximately $3.7 million of cash and notes.
The gain on disposition was approximately $1.3 million, net of an income tax
provision of $804,000. Eagle has been classified within net assets held for
sale.
On May 5, 1995, the Company completed the sale of its shares in Dalworth
Holdings, Inc. and subsidiaries, including C.E. Services Inc. (collectively
"C.E. Services") to Amdahl Corporation for $2.5 million cash. The loss on
disposition was approximately $2.1 million, net of an income tax benefit of
approximately $1.3 million. The accompanying condensed consolidated statements
of operations for 1995 have been restated to reflect C.E. Services as
discontinued operations. The following are summarized results of operations for
C.E. Services through the date of sale (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Revenues $ 6,442
Gross profit 1,233
Pretax loss (1,414)
Income tax benefit 480
Loss from operations (934)
</TABLE>
4. Investment in Unconsolidated Subsidiaries and Investment Income --
The Company's unconsolidated subsidiaries consist of its investments in
Michael Foods, Inc. ("Michael Foods") and CorVel Corporation ("CorVel"). CorVel
has a fiscal year ended March 31. The following is summarized balance sheet and
income statement information of the Company's unconsolidated subsidiaries as of,
and for the six month period ended June 30, 1996 (in thousands):
<TABLE>
<CAPTION>
Michael Foods CorVel
----------------------------------
<S> <C> <C>
Current assets $ 110,668 $ 39,573
Noncurrent assets 255,453 17,467
Current liabilities 108,595 7,294
Noncurrent liabilities 72,572 1,718
Revenues 295,550 55,107
Gross profit 37,111 9,999
Net income 6,555 3,620
</TABLE>
In January 1996, the Company sold 350,000 shares of CorVel for approx-
imately $11 million, resulting in a pre-tax gain of approximately $7.7 million.
<PAGE>
North Star Universal, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Inventories --
Inventories are stated at the lower of average cost (first-in, first-out)
or market. Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------------------------------
<S> <C> <C>
Work in process and finished goods $ 4,988 $ 4,092
Purchased parts and supplies 1,758 2,539
---------------------------------
$ 6,746 $ 6,631
=================================
</TABLE>
6. Earnings Per Share --
Earnings per share are based on the average number of shares outstanding
during the period after giving effect to the assumed exercise of outstanding
stock options, except where the effects are antidilutive.
7. Income Taxes --
Deferred income taxes arise from temporary differences between financial
and tax reporting. To the extent the Company's financial reporting basis in its
investment in unconsolidated subsidiaries exceeds its tax basis, and is not
expected to be realized in a tax-free manner, the Company records a deferred tax
liability. At June 30, 1996, the deferred tax liability includes a cumulative
tax effect of approximately $24.6 million and $4.6 million for the differences
in the financial reporting and tax basis of the Company's investments in Michael
Foods and CorVel, respectively.
As described in Note 2, the Company has entered into a reorganization
agreement with Michael Foods under which it may realize its investment in
Michael Foods in a tax-free manner. The agreement can be terminated by either
party under various circumstances. Accordingly, the Company has continued to
carry a deferred tax liability related to its investment in Michael Foods.
8. Reclassifications --
Certain 1995 amounts have been reclassified to conform with the financial
statement presentation used in 1996. Such reclassifications had no impact on
previously reported retained earnings or net income.
<PAGE>
North Star Universal, Inc. and Subsidiaries
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
North Star Universal, Inc. ("North Star" or "the Company") is a holding
company. The Company's three key holdings consist of Michael Foods, Inc.
("Michael Foods"), CorVel Corporation ("CorVel") and its computer businesses.
At June 30, 1996, the Company owned a 38% interest in Michael Foods and a
26% interest in CorVel. The common stock of each of Michael Foods and
CorVel is included on the NASDAQ National Market System under the symbols MIKL
and CRVL. The Company's investments in Michael Foods and CorVel are accounted
for as unconsolidated subsidiaries using the equity method of accounting.
The Company's continuing operations consist of Americable, Inc.
("Americable") and Transition Networks, Inc., formerly Transition Engineering
("Transition"). Americable is a provider of connectivity and networking
products and services. Transition designs, manufactures and markets
connectivity devices used in local area network ("LAN") applications.
The following are unaudited summarized operating results for each of the
Company's continuing operations for the three and six months ended June 30
(in thousands).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------------
1996 1995 1996 1995
---------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Americable $ 12,819 $ 10,490 $ 24,920 $ 19,769
Transition Networks 3,992 3,447 7,643 7,089
Eliminations (380) (240) (770) (604)
---------------------------------------------
$ 16,431 $ 13,697 $ 31,793 $ 26,254
=============================================
Gross Profit
Americable $ 2,752 $ 2,560 $ 5,484 $ 4,998
Transition Networks 1,376 1,252 2,806 2,590
---------------------------------------------
$ 4,128 $ 3,812 $ 8,290 $ 7,588
=============================================
Selling, General and Administrative Expenses
Americable $ 2,553 $ 2,219 $ 4,973 $ 4,391
Transition Networks 1,404 1,115 2,656 2,152
Corporate 362 385 644 681
---------------------------------------------
$ 4,319 $ 3,719 $ 8,273 $ 7,224
=============================================
Operating Income (Loss)
Americable $ 199 $ 341 $ 511 $ 607
Transition Networks (28) 137 150 438
Corporate (362) (385) (644) (681)
---------------------------------------------
$ (191) $ 93 $ 17 $ 364
=============================================
</TABLE>
<PAGE>
North Star Universal, Inc. and Subsidiaries
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 vs. THREE MONTHS ENDED JUNE 30, 1995
Consolidated revenues increased $2.7 million or 20%, to $16.4 million from
$13.7 million in 1995.
Revenues at Americable increased approximately $2.3 million or 22%, to
$12.8 million. Higher customer demand resulted in increased sales of networking
products of approximately $3.0 million and increased revenues from installation
and services of approximately $170,000. Included in these amounts is
approximately $870,000 of higher sales of networking products to one customer
which is not expected to continue during the remainder of the year. For the
quarter, sales of networking products and services were approximately $7.9
million or 62% of Americable's revenues. Offsetting these increases was
approximately $700,000 of reduced volume of cable assemblies and other
connectivity products to contractors and resellers.
Revenues at Transition increased approximately $545,000 or 15.8%, to $4.0
million. Sales of Transition's advanced LAN products increased approximately
92% to $600,000, reflecting the continued demand for new products introduced
during 1995. Sales from new product introductions and enhancements during 1996
accounted for less than 1% of net sales for the quarter ended June 30, 1996
versus 24% for the comparable period in 1995. Sales of basic LAN and terminal
products increased approximately 8% to $3.4 million. Sales to domestic
customers increased approximately $414,000 or 19%, to $2.6 million, which
reflects higher demand from its existing base of distributors and resellers.
Sales to international customers increased approximately $131,000 or 10%, to
$1.4 million, which was primarily a result of the addition of new distributors.
Consolidated gross profit, as a percent of revenues, decreased to 25.1% in
1996 as compared to 27.8% in 1995. Decreased margins at Americable are
primarily attributable to higher volume of lower margin networking products
and lower pricing on cable and other connectivity products due to competition.
Decreased margins at Transition were a result of lower pricing on certain
product lines due to increased competition.
The Company's selling, general and administrative expenses increased
$600,000 or 16.1%, to $4.3 million from $3.7 million in 1995.
Operating expenses at Americable increased approximately $334,000 or 15%
for the period, which reflects approximately $216,000 of increased selling
expenses primarily attributable to higher sales commissions and the addition of
new sales personnel and costs related to its new catalog. In addition, this
increase reflects approximately $108,000 of higher engineering expense due to
the addition of technical and engineering personnel. Overall, general and
administrative expenses at Americable were relatively unchanged between years.
<PAGE>
North Star Universal, Inc. and Subsidiaries
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Transition had increased operating expenses of approximately $289,000 or
26%, which reflects increased engineering expenses of approximately $160,000
due to the addition of engineering personnel associated with new product
development. In addition, selling expenses increased approximately $138,000
due primarily to the addition of new sales personnel and higher expenses for
advertising, trade shows, and other marketing-related programs.
Net interest expense decreased $185,000 or 18% to $846,000 from $1,031,000
in 1995 due primarily to lower outstanding levels of debentures between years
and increased interest income resulting from higher level of cash and cash
equivalents.
The income tax benefits of $390,000 in 1996 and $325,000 in 1995 relate to
the elimination of deferred tax liabilities that will reverse as net operating
losses available for carryforward are utilized in future periods. To the
extent loss carryforwards are realized in the future, deferred taxes will be
reinstated.
Equity in earnings of unconsolidated subsidiaries decreased $257,000 to
$1,068,000 from $1,325,000 in the previous year. This includes decreases of
$220,000 and $37,000 in the equity in earnings of Michael Foods and CorVel
Corporation, respectively, which is a result of lower earnings at Michael Foods
and the Company's lower ownership interest in CorVel. Further information with
respect to the results of operations of Michael Foods and CorVel is contained in
the Management's Discussion and Analysis of Financial Condition and Results of
Operation section of their respective quarterly reports on Form 10-Q as filed
with the Securities and Exchange Commission.
The gain from discontinued operations in 1996 represents the disposition
gain on the sale of Eagle, which was completed April 26, 1996. The loss from
discontinued operations for 1995 includes the operating and disposition losses
of C.E. Services, which was sold May 5, 1995 (see Note 3 to the Notes to
Condensed Consolidated Financial Statements).
<PAGE>
North Star Universal, Inc. and Subsidiaries
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS (Continued)
SIX MONTHS ENDED JUNE 30, 1996 vs. SIX MONTHS ENDED JUNE 30, 1995
Consolidated revenues increased $5.5 million, or 21%, to $31.8 million
from $26.3 million in 1995.
Revenues at Americable increased approximately $5.1 million, or 26%, to
$24.9 million. Increased sales of networking products of approximately $6.3
million and increased revenues from installation and services of approximately
$470,000, both due primarily to higher demand, contributed to the increase in
sales at Americable. Included in these amounts is approximately $3.2 million of
higher sales of networking products to two customers, which is not expected to
continue during the remainder of the year. For the period, sales of networking
products and services were approximately $15.2 million, or 61%, of Americable's
revenues. Sales of cable and other connectivity products decreased
approximately $1.1 million, due primarily to lower volume to contractors and
resellers and lower demand for certain types of bulk cable due to increased
market supply of such product during the period. In addition, sales of cable
assemblies decreased approximately $500,000, due to competitive pressures and
technological changes within modular assembly applications.
Revenues at Transition increased approximately $554,000, or 7.8%, to $7.6
million. Sales of Transition's advanced LAN products increased approximately
71% to $1.0 million, reflecting additional revenues from new products introduced
during 1995. Sales from new product introductions and enhancements accounted
for approximately 1% of net sales for the six months ended June 30, 1996 versus
24% for the comparable period in 1995. Sales of basic LAN and terminal products
increased approximately 2% to $6.6 million. Sales to domestic customers
increased approximately $390,000, or 9%, to $4.8 million which primarily
reflects higher demand for Transition's advanced LAN products. Sales to
international customers increased approximately $164,000, or 6%, to $2.8
million, which was primarily a result of the addition of new customers.
Transition's ability to maintain its present level of sales and its continued
sales growth is highly dependent upon its ability to offer new products that
meet customer's demands in a rapidly changing market, particularly in light of
the relatively short life cycle of its products.
Consolidated gross profit, as a percent of revenues, decreased to 26.1%
in 1996 as compared to 28.9% in 1995. Decreased margins at Americable are
primarily attributable to a higher volume of lower margin networking products
and lower pricing on cable due to competition and overall higher market supply
on certain types of bulk cable. Margins at Transition were relatively unchanged
between years. North Star expects its gross profit margins to decline due to
expected competitive pricing pressures on products sold by both Americable and
Transition.
<PAGE>
North Star Universal, Inc. and Subsidiaries
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS (Continued)
The Company's selling, general and administrative expenses increased
$1,049,000 or 14.5%, to $8.3 million from $7.2 million in 1995. The increase
in operating expenses at Americable reflects increased expenses of
approximately $385,000 due to higher sales salaries and commissions and
increased expenses of approximately $187,000 due to the addition of technical
and engineering personnel. Overall, general and administrative expenses of
Americable were relatively unchanged between years. Americable expects that
its sales and marketing expenses, as a percentage of revenues, may increase
during the remainder of 1996. Such increases resulted from the addition of
sales and technical personnel in new geographic locations and costs associated
with the release of a new catalog in the first quarter of 1996. If the company
is unable to maintain current gross profit margins and continued sales growth,
the anticipated increases in operating expenses may result in a further
reduction in operating profits at Americable.
Transition had increased operating expenses of approximately $504,000, or
23%, which reflects increased engineering expenses of approximately $287,000 due
to the addition of engineering personnel associated with new product
development. In addition, this increase also reflects higher sales and
marketing expenses of approximately $138,000, associated with advertising,
participation in trade shows, and other promotional expenses. In an effort to
successfully develop and launch new advanced LAN products, Transition
anticipates the increased levels of spending on engineering, marketing and
promotional costs to continue throughout 1996. If such increased level of
spending does not result in the timely introduction of commercially successful
products, Transition may experience significantly reduced levels of sales growth
and operating results.
Corporate expenses decreased approximately $37,000, or 5.4% primarily due
to lower professional fees.
Investment income of $7.7 million represents the pre-tax gain recognized
from the January 1996 sale of 350,000 shares of CorVel. Net interest expense
decreased $325,000, or 15%, to $1,768,000 from $2,093,000 in 1995, due primarily
to increased interest income resulting from higher level of cash and cash
equivalents and lower interest rates and lower outstanding levels of debentures
between years.
The income tax provision in 1996 reflects the Company's estimated effective
annual tax rate. The income tax benefit of $535,000 in 1995 relates to the
elimination of deferred tax liabilities that will reverse as net operating
losses available for carryforward are utilized in future periods. To the extent
loss carryforwards are realized in the future, deferred taxes will be
reinstated.
<PAGE>
North Star Universal, Inc. and Subsidiaries
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS (Continued)
Equity in earnings of unconsolidated subsidiaries decreased $413,000 to
$2,119,000 from $2,532,000 in the previous year. A decrease of $316,000
resulted from lower earnings at Michael Foods, and a decrease of approximately
$97,000 resulted from the Company's reduced ownership interest in CorVel
following the January 1996 sale of stock. Further information with respect to
the results of operations of Michael Foods and CorVel is contained in the
Management's Discussion and Analysis of Financial Condition and Results of
Operation section of their respective annual and quarterly reports as filed on
Forms 10-K and 10-Q with the Securities and Exchange Commission.
The gain from discontinued operations for the period represents the
disposition gain on the sale of Eagle which was completed April 26, 1996.
The loss from discontinued operations for 1995 includes the operating and
disposition losses of C.E. Services which was sold May 5, 1995 (see Note 3
to the Notes to Condensed Consolidated Financial Statements).
<PAGE>
North Star Universal, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
CAPITAL RESOURCES AND LIQUIDITY
The Company has historically experienced cash flow deficits from
operations. Cash used in operations was $2.7 million for the six months ended
June 30, 1996, as compared to $2.2 million in 1995. The Company expects
operating cash flow deficits to continue.
The Company does not have the use of cash flow generated by either Michael
Foods or CorVel other than proceeds from quarterly dividends. In each of the
six month periods ended June 30, 1996 and 1995, the Company received dividends
of $736,000 from Michael Foods. There can be no assurance that Michael Foods
will continue to declare such dividends. Since its initial public offering,
CorVel has not declared any dividends, and has indicated that it does not
anticipate doing so for the foreseeable future.
The Company has historically maintained a program whereby it sold
subordinated debentures of various maturities to investors. The debentures were
offered on a continuous basis at interest rates that change from time to time
depending on market conditions. A substantial portion of maturing debentures
have historically been reinvested in new debentures. At June 30, 1996, the
Company had approximately $36.1 million principal amount of subordinated
debentures outstanding.
On November 7, 1995, in light of the negotiations with Michael Foods, the
Company ceased the sale of any new debentures under its debenture program.
Under the terms of the reorganization agreement, the amount of outstanding
debentures at the date of the reorganization will be effectively assumed by
Michael Foods. In January 1996, the Company sold 350,000 shares of its holdings
in CorVel for approximately $11 million cash. In addition, on April 26, 1996,
the Company completed the sale of Eagle resulting in net cash proceeds of
approximately $3.2 million. Proceeds from these transactions will be used
primarily to fund scheduled maturities of debentures through the date of the
proposed reorganization.
To the extent the reorganization agreement with Michael Foods is not
consummated, the Company plans to reinitiate the sale of debentures. Under
these circumstances, however, there can be no assurance that future reinvested
and newly sold debentures will equal or exceed redemptions. The Company has
been highly dependent on the continued sales of debentures under its debenture
program. In the event that, after the sales of debentures are reinitiated,
redemptions substantially exceed reinvested and newly sold debentures or the
program is interrupted for an extended period, the Company would be required to
fund maturities through its existing cash on hand, asset sales, or other means
of financing.
Long-term debt repayments for the six months ended June 30, 1996 of
approximately $7.1 million consist primarily of redemptions of subordinated
debentures. Proceeds from long-term debt of approximately $926,000 represents
compounded interest on debentures. The net activity under the debenture program
for the period ended June 30, 1996, resulted in a net cash use to the Company of
approximately $5.1 million.
<PAGE>
North Star Universal, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
In August 9, 1996, Americable and Transition amended the terms of their
revolving line of credit facility with their principal bank to provide
borrowings up to $4 million and $2 million, respectively, due in June 1998.
Borrowings under the amended revolving credit facilities are based on eligible
accounts receivable and inventory with interest at prime, (8.25% at June 30,
1996) with optional fixed rate advances at the London Interbank Offered Rate
("LIBOR") plus 2.5%. At June 30, 1996, there were outstanding borrowings of
$2,983,000 under the revolving line of credit, including $857,000 of amounts
transferred from the companies' previous term loan facility which matured in May
1996. Previously, the companies maintained a revolving line of credit with
interest at prime plus 1.5%, and term loan facility with interest at 10.665%.
At June 30, 1996, North Star had approximately $11.1 million of cash and
cash equivalents, excluding cash of its operating subsidiaries. The Company
believes that its available cash and cash equivalents along with the amounts
available under the credit facilities of its operating companies, will be
adequate to meet expected cash requirements, including debenture redemptions,
capital expenditures and potential acquisitions for the remainder of the year.
<PAGE>
PART II - OTHER INFORMATION
North Star Universal, Inc. and Subsidiaries
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed with this report on Form 10-Q:
10.1 Sixth Amendment to Amended and Restated Loan and Security
Agreement, dated August 9, 1996, among Americable, Inc.,
Transition Networks, Inc., Cable Distribution Systems,
Inc., and First Bank National Association, amending the
terms of the Amended and Restated Loan and Security
Agreement (filed as Exhibit 10.26 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994,
and incorporated herein by reference).
10.2 Loan and Security Agreement, dated August 9, 1996, between
Transition Networks, Inc. and First Bank National
Association.
10.3 Commercial Lease Agreement between Americable, Inc. and
Petroleum, Inc.
27.1 Financial Data Schedules
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH STAR UNIVERSAL, INC.
--------------------------
(Registrant)
Date August 14, 1996 by /s/ Jeffrey J. Michael
--------------------------- --------------------------
Jeffrey J. Michael
President and Chief Executive Officer
Date August 14, 1996 by /s/ Peter E. Flynn
--------------------------- --------------------------
Peter E. Flynn
Executive Vice President,
Chief Financial Officer
and Secretary
(Principal Financial and Accounting
Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- ----------
10.1 Sixth Amendment to Amended and Restated Loan and Security
Agreement, dated August 9, 1996, among Americable, Inc.,
Transition Networks, Inc., Cable Distribution Systems,
Inc., and First Bank National Association, amending the
terms of the Amended and Restated Loan and Security
Agreement (filed as Exhibit 10.26 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994,
and incorporated herein by reference).
10.2 Loan and Security Agreement dated August 9, 1996 between
Transition Networks, Inc. and First Bank National
Association.
10.3 Commercial Lease Agreement between Americable, Inc. and
Petroleum, Inc.
27.1 Financial Data Schedules
<PAGE>
SIXTH AMENDMENT TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(the "Amendment") is dated as of August 9, 1996, and is by and among AMERICABLE,
INC., a Minnesota corporation ("Americable"), TRANSITION NETWORKS, INC. f/k/a
Transition Engineering, Inc., a Minnesota corporation ("Transition"), and CABLE
DISTRIBUTION SYSTEMS, INC., a Georgia corporation ("Cable") (Americable,
Transition and Cable are hereinafter each individually referred to as a
"Borrower" and collectively as the "Borrowers") and FIRST BANK NATIONAL
ASSOCIATION, a national banking association (the "Bank"). Capitalized terms
not otherwise expressly defined herein shall have the meanings set forth in the
Loan Agreement.
RECITALS
WHEREAS, the Borrowers and the Bank are parties to an Amended and
Restated Loan and Security Agreement, dated as of June 1, 1993, as amended by a
First Amendment dated as of November 29, 1993, a Waiver, a Second Amendment
dated March 3, 1995, a Third Amendment dated May 31, 1996, a letter amendment
dated June 28, 1996 and a letter amendment dated July 31, 1996 (as so amended,
the "Loan Agreement");
WHEREAS, the Borrowers and the Bank desire to further amend the terms of
the Loan Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I - AMENDMENTS TO THE LOAN AGREEMENT
1.1 Amendments to Loan Agreement. The Loan Agreement is hereby
amended as follows:
(a) the definition of "Borrower" and "Borrowers" set forth in the
preamble to the Loan Agreement is hereby amended in its
entirety to read as follows:
"Americable and Cable are hereinafter each individually
referred to as a 'Borrower' and collectively as the
'Borrowers'.
(b) the definitions of "Business Day", "EBITDA", "Guarantor",
"Guaranty Documents", "Obligations", "Subordinated Debt",
"Subordination Agreement", "Tangible Net Worth" and
"Termination Date" appearing in Section 1.1 of the Loan
Agreement are hereby respectively amended in their entirety
to read as follows:
<PAGE>
"'Business Day': Any day (other than a Saturday, Sunday
or legal holiday in the State of Minnesota) on which
national banks are permitted to be open in Minneapolis,
Minnesota and, with respect to Eurodollar Advances, a day
on which dealings in Dollars may be carried on by the Bank
in the interbank eurodollar market.
'EBITDA': For any period of determination, the
unconsolidated net income of Americable before provision
for income taxes, interest expense (including, without
limitation, implicit interest expense on Capitalized
Leases), depreciation, and amortization, all as determined
in accordance with GAAP, excluding therefrom (to the
extent included): (a) non-operating gains (including,
without limitation, extraordinary or nonrecurring gains,
gains from discontinuance of operations and gains arising
from the sale of assets other than Inventory) during the
applicable period; and (b) similar non-operating losses
during such period.
'Guarantor': Transition Networks, Inc. f/k/a Transition
Engineering, Inc., a Minnesota corporation.
'Guaranty Documents': The Transition Loan Agreement and
that certain Guaranty, dated as of the date hereof made by
the Guarantor in favor of the Bank.
'Obligations': All of the liabilities, obligations and
indebtedness of the Borrowers or the Guarantor to the Bank
of any kind or nature, however created, arising or
evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing or due or to become
due, and including, without limitation, (a) the Borrowers'
and the Guarantor's obligations under the Loan Documents
or the Transition Loan Documents, including obligations of
performance, (b) the Borrower's and the Guarantor's
obligations with respect to any "Letter of Credit" or any
"Application" described in this Agreement or the
Transition Loan Agreement, and (c) interest, charges,
expenses, Attorneys' Fees and other sums chargeable to the
Borrower or the Guarantor by the Bank under the Loan
Documents or the Transition Loan Documents. "Obligations"
shall also include any and all amendments, extensions,
renewals, refundings or refinancings of any of the
foregoing.
'Subordinated Debt': All Indebtedness of Americable or
Transition to NSU which is subordinated pursuant to a
Subordination Agreement and that portion of any
liabilities, obligations or Indebtedness of any Borrower
which contains terms satisfactory to the Bank and is
subordinated, in a manner satisfactory to the Bank, as to
right and time of payment of principal and interest
thereon, to any and all of the Obligations.
<PAGE>
'Subordination Agreement': That certain Subordination
Agreement dated as of May 30, 1991 (the 'Americable
Subordination Agreement') among Americable, NSU and if the
Americable Spin-off occurs, any Subordination Agreement
among Transition, NSU and the Bank containing terms
substantially similar to the Americable Subordination
Agreement and, in each case, each of the other documents
delivered in connection therewith.
'Tangible Net Worth': As of any date of determination, the
sum of the amounts set forth on the unconsolidated balance
sheet of Americable as the common stock, preferred stock,
additional paid-in capital, and retained earnings of
Americable (excluding treasury stock), less the book value
of all assets of Americable that would be treated as
intangible assets under GAAP, including, without
limitation, all such items as goodwill, trademarks, trade
names, service marks, copyrights, patents, licenses,
unamortized debt discount and expense and unamortized
deferred charges.
'Termination Date': June 30, 1998, or such later date to
which the Termination Date may be extended pursuant to
Section 12.6."
(c) Section 1.1 of the Loan Agreement is further amended to add
the following new definitions of "Advance", "Americable
Spin-off", "Consolidated EBITDA", "Consolidated Tangible
Capital Base", "Consolidated Tangible Net Worth",
"Eurodollar Advance", "Eurodollar Interbank Rate",
"Eurodollar Rate (Reserve Adjusted)", "Eurodollar Rate
Interest Period", "Reference Rate Advance", "Transition
Loan Agreement", "Transition Guaranty" and "Transition Loan
Documents" in proper alphabetical order:
"'Advance': The portion of the outstanding Revolving Loans
bearing interest at the same type of interest rate, and
in the case of Eurodollar Advances, for an identical
Eurodollar Rate Interest Period, provided that all
Reference Rate Advances shall be deemed a single Advance.
An Advance may be a "Eurodollar Advance" or a "Reference
Rate Advance" (each, a "type" of Advance).
'Americable Spin-off': NSU's spin-off of not less than
90% of its stock ownership in Americable to NSU's
shareholders.
'Consolidated EBITDA': For any period of determination,
the consolidated net income of Americable and its
Subsidiaries before provision for income taxes, interest
expense (including, without limitation, implicit interest
expense on Capitalized Leases), depreciation, and
amortization, all as determined in accordance with GAAP,
excluding therefrom (to the extent included): (a) non-
operating gains (including, without limitation,
<PAGE>
extraordinary or nonrecurring gains, gains from
discontinuance of operations and gains arising from the
sale of assets other than Inventory) during the
applicable period; and (b) similar non-operating losses
during such period.
'Consolidated Tangible Capital Base': The total of (a)
Consolidated Tangible Net Worth, plus (b) Subordinated
Debt plus (c) the aggregate unpaid accrued interest on
all Subordinated Debt of Americable and its Subsidiaries
owing to NSU, plus or minus (as the case may be) (d)
Americable's foreign exchange translation adjustment for
the conversion of Canadian dollars into United States
dollars.
'Consolidated Tangible Net Worth': As of any date of
determination, the sum of the amounts set forth on the
consolidated balance sheet of Americable as the common
stock, preferred stock, additional paid-in capital, and
retained earnings of Americable (excluding treasury
stock), less the book value of all assets of Americable
and its consolidated Subsidiaries that would be treated
as intangible assets under GAAP, including, without
limitation, all such items as goodwill, trademarks, trade
names, service marks, copyrights, patents, licenses,
unamortized debt discount and expense and unamortized
deferred charges.
'Eurodollar Advance': An Advance designated as such in a
notice of borrowing under Section 2.5(a) or a notice of
continuation or conversion under Section 2.13.
'Eurodollar Interbank Rate': The offered rate for
deposits in United States Dollars (rounded upwards, if
necessary, to the nearest 1/16 of 1%), for delivery of
such deposits on the first day of an Eurodollar Rate
Interest Period of a Eurodollar Advance, for the number
of days comprised therein, which appears on the Reuters
Screen LIBO Page as of 11:00 a.m., London time, on the
day that is two Business Days preceding the first day of
the Eurodollar Rate Interest Period of such Eurodollar
Advance or the rate determined by the Bank at such time
based on such other published service of general
application as shall be selected by the Bank for such
purpose. If the Reuters Screen LIBO Page or such other
service does not report such rates or such rates do not,
in the judgment of the Bank, accurately reflect the rates
of interest applicable to the Bank in the relevant
markets, the rate for such Eurodollar Rate Interest
Period shall be determined by the Bank based on rates
offered to the Bank for United States Dollar deposits in
the interbank eurodollar market. "Reuters Screen LIBO
Page" means the display designated as page "LIBO" on the
Reuter Monitor Money Rates Service (or such other page as
may replace the LIBO Page on that service for the purpose
of displaying London interbank offered rates of major
banks for United States Dollar deposits).
<PAGE>
'Eurodollar Rate (Reserve Adjusted)': A rate per annum
(rounded upward, if necessary, to the nearest 1/16 of 1%)
calculated for the Eurodollar Rate Interest Period of a
Eurodollar Advance in accordance with the following
formula:
ERRA = Eurodollar Interbank Rate
1.00 - ERR
In such formula, "ERR" means "Eurodollar Reserve Rate"
and "ERRA" means "Eurodollar Rate (Reserve Adjusted)", in
each instance determined by the Bank for the applicable
Eurodollar Rate Interest Period. The Bank's
determination of all such rates for any Eurodollar Rate
Interest Period shall be conclusive in the absence of any
manifest error.
'Eurodollar Rate Interest Period': With respect to any
Eurodollar Advance, the period which shall begin on (and
include) the date of the initial borrowing of such
Eurodollar Advance or the date of the conversion of any
other type of Loan into a Eurodollar Advance or the date
of the continuation of a Eurodollar Advance as a
Eurodollar Advance upon the termination of the Eurodollar
Rate Interest Period then applicable thereto and, unless
the final maturity of such Eurodollar Advance is
accelerated, shall end on (but exclude) the date which is
one, two, three, six or twelve months thereafter as
selected by the Borrowers; provided, however, that: (x)
any such Eurodollar Rate Interest Period which would
otherwise end on a day not a Business Day shall end on
the next succeeding Business Day unless such extension
would cause the last day of such Eurodollar Rate Interest
Period to fall in the next following calendar month, in
which event the last day of such Eurodollar Rate Interest
Period shall occur on the next preceding Business Day;
(y) no Eurodollar Rate Interest Period may end later than
the scheduled Termination Date; and (z) any Eurodollar
Rate Interest Period which begins on the last day of a
calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at
the end of such Eurodollar Rate Interest Period) shall
end on the last Business Day of the calendar month at the
end of such Eurodollar Rate Interest Period.
'Eurodollar Reserve Rate': A percentage equal to the
daily average during such Eurodollar Rate Interest Period
of the aggregate maximum reserve requirements (including
all basic, supplemental, marginal and other reserves), as
specified under Regulation D of the Federal Reserve
Board, or any other applicable regulation that prescribes
reserve requirements applicable to Eurocurrency
liabilities (as presently defined in Regulation D) or
applicable to extensions of credit by the Bank the rate
of interest on which is determined with regard to rates
applicable to Eurocurrency liabilities. Without limiting
the generality of the foregoing, the Eurocurrency Reserve
<PAGE>
Requirement shall reflect any reserves required to be
maintained by the Bank against (i) any category of
liabilities that includes deposits by reference to which
the Eurodollar Interbank Rate is to be determined, or
(ii) any category of extensions of credit or other assets
that includes Eurodollar Advances.
'Reference Rate Advance': An Advance designated as such
in a notice of borrowing under Section 2.5(a) or a notice
of continuation or conversion under Section 2.13.
'Transition Loan Agreement': That certain Loan and
Security Agreement dated as of August 9, 1996 between
Transition and the Bank as it may be amended, modified,
supplemented, restated or replaced from time to time.
'Transition Guaranty': That certain Guaranty dated as of
August 9, 1996 made by the Borrowers in favor of the
Bank guaranteeing the payment of Transition's
"Obligations" under the Transition Loan Agreement as it
may be amended, modified, supplemented, restated or
replaced from time to time.
'Transition Loan Documents': The "Loan Documents" as
defined in the Transition Loan Agreement, in each case as
amended, modified, supplemented, restated or replaced
from time to time."
(c) Section 2.1.1. is amended by adding the following new
subsection (c):
(c) The Revolving Loans shall be constituted of Eurodollar
Advances and Reference Rate Advances, as shall be
selected by the Borrower, except as otherwise provided
herein. Any combination of types of Advances may be
outstanding at the same time, except that the total of
outstanding Eurodollar Advances shall not exceed
$1,500,000 at any one time. Each Eurodollar Advance
shall be in a minimum amount of $100,000.00 or in an
integral multiple of $100,000.00 above such amount.
(d) Section 2.5(a) is amended in its entirety to read as follows:
"(a) Any request by the Borrower for a Revolving Loan,
except for Overdraft Loans, shall be in writing, or by
telephone promptly confirmed in writing, and must be
given so as to be received by the Bank not later than:
(I) 1:00 p.m., Minneapolis time, on the date of the
requested Loan, if the Loan shall be comprised
of Reference Rate Advances; or
(ii) 11:00 a.m., Minneapolis time, two Business Days
prior to the date of the requested Loan, if the
Loan shall be, or shall include, a Eurodollar
Advance.
<PAGE>
Each request for a Revolving Loan shall specify (i) the
borrowing date (which shall be a Business Day), (ii)
the amount of such Loan and the type or types of
Advances comprising such Loan, and (iii) if such Loan
shall include Eurodollar Advances, the initial
Eurodollar Rate Interest Periods for such Advances.
Unless the Bank determines that any applicable
condition specified in Article VI has not been
satisfied, the Bank will make the amount of the
requested Loan available to the Borrower at the Bank's
principal office in Minneapolis, Minnesota, in
immediately available funds not later than 2:00 p.m.,
Minneapolis time, on the date requested. Failure to
confirm any such telephonic notice or otherwise comply
with the provisions of this Section 2.5(a) shall not in
any manner affect the obligations of the Borrower to
repay such Loan in accordance with the terms of this
Agreement."
(e) Section 2.5(c) is amended in its entirety to read as follows:
"(c) The Borrowers further agree to provide to the Bank a
current borrowing base certificate ("Borrowing Base
Certificate") within 15 days after the end of each
month and at such other times as the Bank may request.
The Borrowing Base Certificate shall be in
substantially the form of Exhibit A, executed and
certified as accurate by such person or persons as the
Borrower designates in writing to the Bank pursuant to
duly adopted resolutions of the Borrower's Board of
Directors authorizing such action."
(f) Article II is amended by adding the following new Sections
2.13, 2.14, 2.15, 2.16, 2.17 and 2.18:
Section 2.13 Continuation or Conversion of Loans. The
Borrowers may elect to: (a) continue any outstanding
Eurodollar Advance from one Eurodollar Rate Interest Period
into a subsequent Eurodollar Rate Interest Period to begin on
the last day of the earlier Eurodollar Rate Interest Period;
or (b) convert any outstanding Advance into another type of
Advance (on the last day of an Eurodollar Rate Interest
Period only, in the instance of a Eurodollar Advance), by
giving the Bank telephonic notice promptly confirmed in
writing given so as to be received by the Bank not later
than: (r) 1:00 p.m., Minneapolis time, on the date of the
requested continuation or conversion if the continuing or
converted Advance shall be a Reference Rate Advance; or (s)
11:00 a.m., Minneapolis time, two Business Days prior to the
date of the requested continuation or conversion, if the
continuing or converted Advance shall be a Eurodollar
Advance. Each notice of continuation or conversion of an
Advance shall specify: (x) the effective date of the
continuation or conversion date (which shall be a Business
Day); (y) the amount and the type or types of Advances
following such continuation or conversion (subject to the
limitation on amount set forth in Section 2.1.1(c)); and (z)
<PAGE>
for continuation as, or conversion into, Eurodollar Advances,
the Eurodollar Rate Interest Periods for such Advances.
Absent timely notice of continuation or conversion, each
Eurodollar Advance shall automatically convert into a
Reference Rate Advance on the last day of an applicable
Eurodollar Rate Interest Period, unless paid in full on such
last day. No Advance shall be continued as, or converted
into, a Eurodollar Advance if the shortest Eurodollar Rate
Interest Period for such Advance may not transpire prior to
the Termination Date or if an Event of Default or Unmatured
Event of Default shall exist.
Section 2.14 Funding Losses. The Borrowers will indemnify
the Bank upon demand against any loss or expense which the
Bank may sustain or incur (including, without limitation, any
loss or expense sustained or incurred in obtaining,
liquidating or employing deposits or other funds acquired to
effect, fund or maintain any Advance) as a consequence of:
(a) any failure of the Borrowers to make any payment when due
of any amount due hereunder or under any Note; (b) any
failure of the Borrowers to borrow, continue or convert an
Advance on a date specified therefor in a notice thereof; or
(c) any payment (including, without limitation, any payment
pursuant to Section 2.1(b) or Section 2.14), prepayment or
conversion of any Eurodollar Advance on a date other than the
last day of the Eurodollar Rate Interest Period for such
Advance. Any demand made by the Bank pursuant to this
Section 2.14 shall be accompanied by a calculation, in
reasonable detail, of the amount demanded. Determinations by
the Bank for purposes of this Section 2.14 of the amount
required to indemnify the Bank shall be conclusive in the
absence of manifest error.
Section 2.15 Increased Costs. If, as a result of any law,
rule, regulation, treaty or directive, or any change therein
or in the interpretation or administration thereof, or
compliance by the Bank with any request or directive (whether
or not having the force of law) from any court, central bank,
governmental authority, agency or instrumentality, or
comparable agency:
(a) any tax, duty or other charge with respect to any Loan,
the Note or this Agreement is imposed, modified or
deemed applicable, or the basis of taxation of payments
to the Bank of interest or principal of any Loan or of
the Non-Use Fee (other than taxes imposed on the
overall net income of the Bank by the jurisdiction in
which the Bank has its principal office) is changed;
(b) any reserve, special deposit, special assessment or
similar requirement against assets of, deposits with or
for the account of, or credit extended by, the Bank is
imposed, modified or deemed applicable;
<PAGE>
(c) any increase in the amount of capital required or
expected to be maintained by the Bank or any
person controlling the Bank is imposed, modified
or deemed applicable; or
(d) any other condition affecting this Agreement is
imposed on the Bank or the relevant funding
markets;
and the Bank determines that, by reason thereof, the cost to
the Bank of making or maintaining the Revolving Loans or this
Agreement is increased, or the amount of any sum receivable
by the Bank hereunder or under the Note is reduced; then, the
Borrowers shall pay to the Bank upon demand such additional
amount or amounts as will compensate the Bank (or the
controlling person in the instance of (iii) above) on an
after-tax basis for such additional costs or reduction
(provided that the Bank has not been compensated for such
additional cost or reduction in the calculation of the
"Eurodollar Reserve Rate"). Determinations by the Bank for
purposes of this Section of the additional amounts required
to compensate the Bank shall be conclusive in the absence of
manifest error. In determining such amounts, the Bank may
use any reasonable averaging, attribution and allocation
methods.
Section 2.16 Deposits Unavailable or Interest Rate
Unascertainable or Inadequate; Impracticability. If the Bank
determines (which determination shall be conclusive and
binding on the parties hereto) that:
(a) deposits of the necessary amount for the relevant
Eurodollar Rate Interest Period for any Eurodollar
Advance are not available to the Bank in the relevant
market or that, by reason of circumstances affecting
such market, adequate and reasonable means do not exist
for ascertaining the Eurodollar Interbank Rate for such
Eurodollar Rate Interest Period;
(b) the Eurodollar Rate (Reserve Adjusted) will not
adequately and fairly reflect the cost to the Bank of
making or funding the Eurodollar Advance for its
relevant Eurodollar Rate Interest Period; or
(c) the making or funding of Eurodollar Advances has become
impracticable as a result of any event occurring after
the date of this Agreement which, in the opinion of the
Bank, materially and adversely affects such Advances or
the Bank's obligation to make Advances or the relevant
market;
the Bank shall promptly give notice of such determination to
the Borrowers, and (i) any notice of a new Eurodollar Advance
previously given by the Borrowers and not yet borrowed or
converted shall be deemed to be a notice to make a Reference
Rate Advance and (ii) the Borrowers shall be obligated to
either prepay in full any outstanding Eurodollar Advances
<PAGE>
without premium or penalty on the last day of the current
Eurodollar Rate Interest Period with respect thereto or
convert any such Eurodollar Advance to a Reference Rate
Loan Advance on such last day.
Section 2.17 Illegality. If at any time due to the adoption
of any law, rule, regulation, treaty or directive, or any
change therein or in the interpretation or administration
thereof by any court, central bank, governmental authority,
agency or instrumentality, or comparable agency charged with
the interpretation or administration thereof, or for any
other reason subsequent to the date of this Agreement, it
shall become unlawful or impossible for the Bank to make or
fund any Eurodollar Advance, the obligation of the Bank to
provide such Advance shall, upon the happening of such event,
forthwith be suspended for the duration of such illegality or
impossibility. If any such event shall make it unlawful or
impossible for the Bank to continue any Eurodollar Advance
previously made by it hereunder, the Bank shall, upon the
happening of such event, notify the Borrowers thereof in
writing, and the Borrowers shall, at the time notified by the
Bank, either convert each such unlawful Advance to a
Reference Rate Advance or repay such Advance in full,
together with accrued interest thereon, subject to the
provisions of Section 2.14.
Section 2.18 Discretion of the Bank as to Manner of Funding.
Notwithstanding any provision of this Agreement to the
contrary, the Bank shall be entitled to fund and maintain its
funding of all or any part of the Loans made by it in any
manner it elects; it being understood, however, that for
purposes of this Agreement, all determinations hereunder
shall be made as if the Bank had actually funded and
maintained each Eurodollar Advance during the Eurodollar Rate
Interest Period for such Advance through the purchase of
deposits having a term corresponding to such Eurodollar Rate
Interest Period and bearing an interest rate equal to the
Eurodollar Interbank Rate for such Eurodollar Rate Interest
Period (whether or not the Banks shall have granted any
participations in such Loans)".
(g) The last sentence of Section 5.5 is amended in its entirety
to read as follows:
"Any and all such inspections and/or audits shall be at the
Borrowers' expense and the Bank may charge a Disbursement
Account or any other account of the Borrowers with the Bank
or advance the amount thereof to the Borrowers as a
Revolving Loan; provided that, so long as no Event of
Default or Unmatured Event of Default has occurred and is
continuing, the Borrowers' obligations to reimburse the Bank
for its inspections and/or audits shall be limited to $450
per day and an aggregate amount of $4,000 during each
calendar year determined on a consolidated basis for
inspections and/or audits under this Agreement and the
Transition Loan Agreement, plus, in all cases, the Bank's
out-of pocket costs and expenses, provided, further that any
such inspection and/or audits made while any Event of
<PAGE>
Default or Unmatured Event of Default has occurred and is
continuing shall not be subject to such limitation."
(h) Section 6.12(a) is amended in its entirety to read as
follows:
"(a) Indebtedness under the terms of this Agreement and
other Indebtedness to the Bank;".
(i) Section 6.14 is amended in its entirety to read as follows:
"6.14 Contingent Liabilities. Except for the Transition
Guaranty, either: (a) endorse, guarantee, contingently agree
to purchase or to provide funds for the payment of, or
otherwise become contingently liable upon, any obligation of
any other Person, except by the endorsement of negotiable
instruments for deposit or collection (or similar
transactions) in the ordinary course of business, (b) agree
to maintain the net worth or working capital of, or provide
funds to satisfy any other financial test applicable to, any
other Person."
(j) Section 7.1(a) is amended in its entirety to read as follows:
"(a) Non Payment. The Borrowers or any other Obligor shall
fail to pay, when due or declared due, any of the
Obligations;".
(k) Section 7.1(b) is amended in its entirety to read as follows:
"(b) Non-Payment of Other Indebtedness. Any Borrower, any
other Obligor or any Subsidiary shall fail to pay, when due,
whether by acceleration or otherwise (subject to any
applicable grace period), any Indebtedness of, or guaranteed
by, any Borrower, any other Obligor or any Subsidiary;"
(l) Section 7.1(d) is amended in its entirety to read as follows:
"(d) Other Obligations. Any Borrower, any other Obligor or
any Subsidiary shall fail to pay, when due, whether by
acceleration or otherwise, or perform or observe (subject to
any applicable grace period or waiver of such default) (i)
any obligation or agreement of any Borrower, any other
Obligor or any Subsidiary to or with the Bank (other than
any Obligation) or (ii) any material obligation or agreement
of any Borrower, any other Obligor or any Subsidiary to or
with any other Person (other than (A) any such material
obligation or agreement constituting or related to
Indebtedness, (B) accounts payable arising in the ordinary
course of business, and (C) any material obligation or
agreement of any Subsidiary to any Borrower or to any other
Subsidiary), except only to the extent that the occurrence
of any such failure is being contested by such Borrower,
such other Obligor or such Subsidiary, as the case may be,
in good faith and by appropriate proceedings and such
Borrower, such other Obligor or such Subsidiary, as
applicable, shall have set aside on its books such reserves
<PAGE>
or other appropriate provisions therefor as may be required
by GAAP;".
(m) Section 7.1(o) is amended in its entirety to read as follows:
"(o) Ownership. (i) So long as the Americable Spin-off has
not occurred, NSU shall cease to own at least 90% of the
shares of all voting stock of Americable; or (ii)
Americable shall cease to own at least 90% of the shares of
all voting stock of Transition and Cable."
(n) Supplement A attached to the Loan Agreement is hereby deleted
and Supplement A (Amended 8/9/96) attached to this Amendment
is substituted therefor. All references in the Loan
Agreement to "Supplement A" shall be references to Supplement
A (Amended 8/9/96).
(o) The Borrowing Base Certificate attached to the Loan Agreement
as Exhibit A is hereby amended to conform to Exhibit A
(Amended 8/9/96) attached to this Amendment.
1.2 Construction. All references in the Loan Agreement to "this
Agreement," herein" and similar references shall be deemed to
refer to the Loan Agreement as amended this Amendment.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Amendment and to make and maintain
the Loans under the Loan Agreement as amended hereby, the Borrowers hereby
warrant and represent to the Bank that: (a) The execution, delivery and
performance by the Borrowers of this Amendment and any other documents to which
any Borrower is a party have been duly authorized by all necessary corporate or
partnership action, do not require any approval or consent of, or any
registration, qualification or filing with, any government agency or authority
or any approval or consent of any other person (including, without limitation,
any stockholder or partner), do not and will not conflict with, result in any
violation of or constitute any default under, any provision of such Borrower's
articles of incorporation or bylaws, any agreement binding on or applicable to
such Borrower or any of its property, or any law or governmental regulation or
court decree or order, binding upon or applicable to such Borrower or of any of
its property and will not result in the creation or imposition of any security
interest or other lien or encumbrance in or on any of its property pursuant to
the provisions of any agreement applicable to the such Borrower or any of its
property; (b) The Loan Agreement as amended by this Amendment is the legal,
valid and binding obligations of each Borrower and is enforceable in accordance
with its terms, subject only to bankruptcy, insolvency, reorganization,
moratorium or similar laws, rulings or decisions at the time in effect affecting
the enforceability of rights of creditors generally and to general equitable
principles which may limit the right to obtain equitable remedies.
ARTICLE III - CONDITIONS AND EFFECTIVENESS
This Amendment shall become effective on the date first set forth above,
provided, however, that the effectiveness of this Amendment is subject to the
satisfaction of each of the following conditions:
3.1 Before and after giving effect to this Amendment, the
representations and warranties in ARTICLE IV of the Loan Agreement
<PAGE>
shall be true and correct as though made on the date hereof except
for changes that are permitted by the terms of the Loan Agreement.
The execution by the Borrowers of this Amendment shall be deemed a
representation that the Borrowers have complied with the foregoing
condition.
3.2 Before and after giving effect to this Amendment, no Event of
Default or no Default, shall have occurred and be continuing under
the Loan Agreement except for those expressly waived by the terms
hereof. The execution by the Borrowers of this Amendment shall be
deemed a representation that the Borrower has complied with the
foregoing condition.
3.3 The Bank shall have received the following documents appropriately
completed and duly executed by the Borrower and the other Obligors
where appropriate:
(a) This Amendment appropriately completed and duly executed by
the Borrowers, together with a resolution of each of the
Borrowers authorizing the execution and delivery of this
Amendment substantially in the form of Exhibit B;
(b) A Guaranty appropriately completed and duly executed by
Transition, together with: (i) a resolution of Transition
authorizing the execution and delivery of such Guaranty in
form and substance satisfactory to the Bank; and (ii) an
incumbency certificate of the secretary or an assistant
secretary of Transition, certifying the names of the officers
of Transition authorized to sign the Loan Documents to which
it is a party together with the true signatures of such
officers;
(c) The Acknowledgement of NSU in form and substance satisfactory
to the Bank;
(d) The Transition Loan Documents appropriately completed and
duly executed by the parties thereto together with all other
approvals, opinions or documents necessary to satisfy the
conditions precedent specified in Section 9.1 of the
Transition Loan Agreement; and
(e) Such other approvals, opinions or documents, as the Bank may
reasonably request.
ARTICLE IV - GENERAL
4.1 Expenses. The Borrowers agree to reimburse the Bank upon demand
for all reasonable expenses, including reasonable fees of
attorneys (who may be employees of the Bank) and legal expenses
incurred by the Bank in the preparation, negotiation and execution
of this Amendment and any other document required to be furnished
herewith, and in enforcing the obligations of the Borrowers
hereunder, and to pay and save the Bank harmless from all
liability for, any stamp or other taxes which may be payable with
respect to the execution or delivery of this Amendment, which
obligations of the Borrowers shall survive any termination of the
Loan Agreement.
<PAGE>
4.2 Counterparts. This Amendment may be executed in as many
counterparts as may be deemed necessary or convenient, and by the
different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same instrument.
4.3 Severability. Any provision of this Amendment which is prohibited
or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
4.4 Law. This Amendment shall be a contract made under the laws of
the State of Minnesota, which laws shall govern all the rights and
duties hereunder.
4.5 Successors: Enforceability. This Amendment shall be binding upon
the Borrowers and the Bank and their respective successors and
assigns, and shall inure to the benefit of the Borrowers and the
Bank and the successors and assigns of the Bank. Except as hereby
amended, the Loan Agreement shall remain in full force and effect
and is hereby ratified and confirmed in all respects.
4.6 Recitals. The recitals hereto are incorporated herein by
reference and constitute an integral part of this Amendment.
4.7 Acknowledgement and Release. In order to induce the Bank to enter
into this Amendment, the Borrowers: (a) represent and warrant to
the Bank that no events have taken place and no circumstances
exist at the date hereof which would give the Borrowers the right
to assert a defense, offset or counterclaim to any claim by the
Bank for payment of the Obligations; and (b) hereby release and
forever discharge the Bank and its successors, assigns, directors,
officers, agents, employees and participants from any and all
actions, causes of action, suits, proceedings, debts, sums of
money, covenants, contracts, controversies, claims and demands, at
law or in equity, which the Borrowers ever had or now have against
the Bank or its successors, assigns, directors, officers, agents,
employees or participants by virtue of their relationship to the
Borrowers in connection with the Loan Documents and the
transactions related thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
AMERICABLE, INC., a Minnesota corporation
By:________________________________________
Title:_____________________________________
<PAGE>
TRANSITION NETWORKS, INC., a Minnesota corporation
By:________________________________________
Title:_____________________________________
CABLE DISTRIBUTION SYSTEMS, INC., a Georgia corporation
By:________________________________________
Title:_____________________________________
FIRST BANK NATIONAL ASSOCIATION, a national banking association
By:_______________________________________
Title:_____________________________________
<PAGE>
SUPPLEMENT A to AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated as of JUNE 1, 1993 Among FIRST BANK NATIONAL ASSOCIATION (the "Bank") and
AMERICABLE INC., and CABLE DISTRIBUTION SYSTEMS, INC. (collectively, the
"Borrowers")
(AMENDED 8/9/96)
1. Loan Agreement Reference. This Supplement A, as it may be amended or
modified from time to time, is a part of the Amended and Restated Loan and
Security Agreement, dated as of June 1, 1993, among the Borrowers and the Bank
(together with all amendments, modifications and supplements thereto, the "Loan
Agreement") . Terms used herein which are defined in the Loan Agreement shall
have the meanings given such terms in the Loan Agreement unless the context
otherwise requires.
2. Credit Amount; Borrowing Base.
2.1 Credit Amount. The maximum amount of Loans which the Bank
will make available to the Borrowers shall not exceed FOUR
MILLION AND N0/100 DOLLARS ($4,000,000) (such amount is
herein called the "Credit Amount") (unless such amount is
increased by the Bank in its sole and absolute discretion);
provided, however, that the aggregate outstanding principal
balance of the Loans plus the Letter of Credit Obligations
shall not exceed the Credit Amount.
2.2 Borrowing Base. The term "Borrowing Base," as used herein,
shall mean:
(a) an amount of up to 85% of the net amount (as determined by
the Bank after deduction of such reserves and allowances as
the Bank deems proper and necessary) of the Borrowers'
Eligible Accounts Receivable; plus
(b) an amount of up to the lesser of (i) 40% of the net value
(the lower of the cost or market value of such Inventory as
determined by the Bank on a first in first out basis and
after deduction of such reserves and allowances as the Bank
deems proper and necessary ) of the Borrowers' Eligible
Inventory or (ii) $1,500,000.
2.3 Bank's Rights. The Borrowers agree that nothing contained in
this Supplement A (a) shall be construed as the Bank's
agreement to resort or look to a particular type or item of
Collateral as security for any specific Loan or advance or in
any way limit the Bank's right to resort to any or all of the
Collateral as security for any of the obligations, (b) shall
be deemed to limit or reduce any lien on or any security
interest in or upon any portion of the Collateral or other
security for the Obligations or (c) shall supersede Section
2.10 of the Loan Agreement.
3 Interest.
3.1 Revolving Loans. The unpaid balance of the Revolving Loans
shall bear interest to maturity as follows:
<PAGE>
(a) Eurodollar Advances. The unpaid principal amount of each
Eurodollar Advance shall bear interest prior to maturity at a
rate per annum equal to the Eurodollar Rate (Reserve
Adjusted) in effect for each Interest Period for such
Eurodollar Advance plus 2.50% per annum.
(b) Reference Rate Advances. The unpaid principal amount of each
Reference Rate Advance shall bear interest prior to maturity
at a rate per annum equal to the Reference Rate.
3.2 Default Rate. If any amount of the Loans is not paid when
due, whether by acceleration or otherwise, the entire unpaid
principal balance of the Loans (other than overdraft Loans
and Over Advances) shall bear interest until paid at a rate
per annum equal to the greater of (i) the Reference Rate from
time to time in effect plus four percent (4%) or (ii) two
percent (2%) above the rate in effect at the time such amount
became due for such past due amount.
3.3 Overdraft Loans; Over Advances. Overdraft Loans and over
Advances shall bear interest at the rate(s) determined
pursuant to Section 2.8 or Section 2.9 of the Credit
Agreement, as applicable.
4. Eligible Account Receivable Data.
(a) The Account Receivable must not be unpaid on the date that is
90 days after the date of the invoice evidencing such Account
Receivable.
(b) If invoices representing 10% or more of the unpaid net amount
of all Accounts Receivable from any one Account Debtor are
unpaid more than 90 days after the dates of the invoices
evidencing such Accounts Receivable, then all Accounts
Receivable relating to such Account Debtor shall cease to be
Eligible Accounts Receivable.
5. Additional Covenants. From the date of the Loan Agreement and thereafter
until all of the Borrowers' Obligations under the Loan Agreement are paid in
full, the Borrowers agree that, unless the Bank shall otherwise consent in
writing, it will not, and will not permit any Subsidiary to, do any of the
following:
5.1 Tangible Capital Base. During each of the periods set forth
below, permit the Tangible Capital Base to be less than the
amount set forth below opposite such period at any time:
Period Tangible Capital Base
June 1, 1996 through and
including December 30, 1996 $3,300,000
December 31, 1996 through and
including December 30, 1997 $3,500,000
<PAGE>
December 31, 1997 through and
including May 30, 1998 $4,000,000
May 31, 1998 and thereafter $4,750,000.
5.2 Leverage Ratio. During each of the periods set forth below,
permit the ratio of (a) the total of (i) Americable's
unconsolidated Indebtedness, minus (ii) Americable's
unconsolidated Subordinated Debt, minus (iii) the aggregate
unpaid accrued interest on all Subordinated Debt of
Americable owing to NSU, to (b) Tangible Capital Base to be
greater than: (x) 2.5:1 during the period on and after June
30, 1996 to and including December 30, 1996; or (y) 2.2:1 at
any time thereafter.
5.3 Interest Coverage Ratio. Permit the ratio, as of the last
day of any fiscal quarter for the period commencing on the
first day of Americable's fiscal year through and including
such day, of (a) Americable's unconsolidated EBITDA to (b)
the total of (i) Americable's unconsolidated interest expense
(including, without limitation, imputed interest expense on
Capitalized Leases) minus (ii) the aggregate unpaid accrued
interest on all Subordinated Debt of Americable owing to NSU,
to be less than 2:1.
5.3 Capital Expenditures. Make Capital Expenditures in an amount
exceeding the following amounts determined on a consolidated
basis for the Borrowers only (excluding Transition): (a)
$500,000 during Americable's fiscal year ending December 31,
1996; (b) $550,000 during Americable's fiscal year ending
December 31, 1997; and (c) $600,000 during any fiscal year
thereafter.
5.4 Consolidated Tangible Capital Base. During each of the
periods set forth below, permit the Consolidated Tangible
Capital Base to be less than the amount set forth below
opposite such period at any time:
Period Tangible Capital Base
June 1, 1996 through and
including December 30, 1996 $6,800,000
December 31, 1996 through and
including December 30, 1997 $7,000,000
December 31, 1997 through and
including May 30, 1998 $8,000,000
May 31, 1998 and thereafter $9,000,000;
provided, however, that if Americable fails to acquire
substantially all of the assets or capital stock of Threshold
Technology Systems, Inc. (the "Threshold Acquisition") by
September 29, 1996, then the minimum required Consolidated
Tangible Net Worth shall be $7,000,000.00 on and after
September 30, 1996 through and including December 30, 1996.
<PAGE>
5.5 Consolidated Leverage Ratio. During each of the periods set
forth below, permit the ratio of (a) the total of (i)
Americable's consolidated Indebtedness, minus (ii)
Americable's Subordinated Debt, minus (iii) the aggregate
unpaid accrued interest on all Subordinated Debt of
Americable owing to NSU, to (b) Consolidated Tangible Capital
Base to be greater than 2:1; provided, however, that if
Americable fails to consummate the Threshold Acquisition by
September 29, 1996, then the maximum permitted ratio
described above shall be 2.2:1 on and after September 30,
1996.
5.6 Consolidated Interest Coverage Ratio. Permit the ratio, as
of the last day of any fiscal quarter for the period
commencing on the first day of Americable's fiscal year
through and including such day, of (a) Americable's
Consolidated EBITDA to (b) the total of (i) Americable's
consolidated interest expense (including, without limitation,
imputed interest expense on Capitalized Leases) minus (ii)
the aggregate unpaid accrued interest on all Subordinated
Debt of Americable owing to NSU, to be less than 2:1.
Borrowers' Initials ___________
___________
Bank's Initials ___________
Date: as of August 9, 1996
<PAGE>
EXHIBIT B
CERTIFICATE
I, , do hereby certify that I am the duly
appointed or elected and qualified Secretary and the
keeper of the records of , a corporation organized and
existing under the laws of the State of (the "Corporation")
and that the following is a true and correct copy of resolutions duly adopted by
unanimous written action of the Borrower's Board of Directors on the 9th day
of August 1996;
and that such resolutions are now in full force and effect, unamended,
unaltered, and unrepealed:
WHEREAS, there has been presented to the directors a form of:
(a) Sixth Amendment (the "Sixth Amendment") to that certain Amended and
Restated Loan and Security Agreement dated as of June 1, 1993 as
amended by a Waiver and First Amendment dated as of November 29,
1993, a Second Amendment dated March 3, 1995, a Third Amendment dated
May 31, 1996, a letter amendment dated June 28, 1996 and a letter
amendment dated July 31, 1996 (as so amended, the "Americable Loan
Agreement"), among this Corporation, Transition Networks, Inc.
("Transition"), (" ") and First Bank National Association (the
"Bank") pursuant to which, among other things, Transition ceases to
be a "Borrower" party to the Americable Loan Agreement;
(b) Loan and Security Agreement (the "Transition Loan Agreement")
pursuant to which Transition may obtain loans and letters of credit
from the Bank; and
(c) Guaranty (the "Guaranty") pursuant to which this Corporation
guaranties the payment and performance of Transition's liabilities to
the Bank.
NOW, THEREFORE, BE IT RESOLVED, that any one of the President, Secretary,
Vice President or Vice President--Finance of this Corporation is authorized to
execute, in the name and on behalf of this Corporation, and deliver to the Bank
the Sixth Amendment and the Guaranty, and any promissory note or other
instrument, document or agreement required by the Bank in connection with such
Sixth Amendment or Guaranty, substantially in the form of that reviewed by the
directors, except for such changes, additions or deletions as such officer(s)
shall deem proper; execution by such officer(s) of an amendment, guaranty and
related documents to be conclusive evidence that such officer(s) deem(s) all of
the terms and provisions thereof to be proper (the executed Sixth Amendment is
hereafter called the "Amendment");
FURTHER RESOLVED, that any one of the President, Secretary, Vice
President or Vice President--Finance of this Corporation be and hereby is
authorized on behalf of this Corporation to borrow from time to time under the
Americable Loan Agreement as amended by the Amendment, to agree to rates of
interest and other terms of loans, and to repay all amounts so borrowed;
<PAGE>
FURTHER RESOLVED, that each officer of this Corporation be and hereby is
authorized to take such action from time to time on behalf of this Corporation
as he/she may deem necessary, advisable or proper in order to carry out and
perform the obligations of this Corporation under the Americable Loan Agreement
as amended by the Amendment, the Guaranty and all related instruments, documents
and agreements;
FURTHER RESOLVED, that all authority conferred by these resolutions shall
be deemed retroactive and any and all acts authorized hereunder performed prior
to the adoption of this resolution are hereby ratified, affirmed, adopted and
approved;
FURTHER RESOLVED, that the Secretary or any other officer of this
Corporation is authorized to certify to said Bank a copy of these resolutions
and the names and signatures of this Corporation's officers or employees hereby
authorized to act, and the Bank is hereby authorized to rely upon such
certificate until formally advised by a like certificate of any change therein,
and is hereby authorized to rely on any such additional certificates.
I FURTHER CERTIFY THAT the Bylaws and Articles of Incorporation
previously delivered by this Corporation to said Bank have not been amended,
modified or restated after the date of such delivery.
I FURTHER CERTIFY THAT the following persons have been appointed or
elected and are now acting as officers or employees of said Corporation in the
capacity set before their respective names:
TITLE NAME SIGNATURE
President Gary L. Eizenga
Secretary Peter E. Flynn
Vice President Jeffrey J. Michael
Vice Pres.-Finance Thomas S. Wargolet
IN WITNESS WHEREOF, I have subscribed my name as ____________ Secretary this 9th
day of August 1996.
Secretary
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT is made as of August 9, 1996, by and between FIRST BANK
NATIONAL ASSOCIATION, a national banking association having its principal office
at First Bank Place, 601 Second Avenue South, Minneapolis, Minnesota 55402-4302
(the "Bank"), and TRANSITION NETWORKS, INC. f/k/a/ Transition Engineering, Inc.,
a Minnesota corporation (the "Borrower").
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
1.1 Definitions. In addition to terms defined elsewhere in this
Agreement or any Supplement, Exhibit or Schedule hereto, the following terms
shall have the following respective meanings (and such meanings shall be equally
applicable to both the singular and plural forms of the terms defined, as the
context may require):
"Account Debtor": Any Person who is or who may become obligated to the
Borrower under, with respect to, or on account of an Account Receivable, General
Intangible or other Collateral.
"Account Receivable": Any account of the Borrower and any other right of
the Borrower to payment for goods sold or leased or for services rendered,
whether or not evidenced by an instrument or chattel paper and whether or not
yet earned by performance.
"Advance": The portion of the outstanding Revolving Loans bearing
interest at the same type of interest rate, and in the case of Eurodollar
Advances, for an identical Eurodollar Rate Interest Period, provided that all
Reference Rate Advances shall be deemed a single Advance. An Advance may be
a "Eurodollar Advance" or a "Reference Rate Advance" (each, a "type" of
Advance).
"Adverse Event": The occurrence of any event that could have a material
adverse effect on the business, operations, property, assets or condition
(financial or otherwise) of the Borrower or on the ability of the Borrower or
any other Obligor to perform its obligations under the Loan Documents.
"Agreement": This Loan and Security Agreement, as it may be amended,
modified, supplemented, restated or replaced from time to time.
"Americable": The term "Americable" shall mean Americable, Inc., a
Minnesota corporation.
<PAGE>
"Americable Loan Agreement": That certain Amended and Restated Loan and
Security Agreement dated as of June 1, 1993 among Americable, the Borrower,
Cable and the Bank as amended to date and as it may be further amended,
modified, supplemented, restated or replaced from time to time.
"Americable Guaranty": That certain Guaranty dated as of August 9, 1996
made by the Borrower in favor of the Bank as amended, modified, supplemented,
restated or replaced from time to time.
"Americable Loan Documents": The "Loan Documents" as defined in the
Americable Loan Agreement, in each case as amended, modified, supplemented,
restated or replaced from time to time.
"Americable Spin-off": NSU's spin-off of not less than 90% of its stock
ownership in Americable to NSU's shareholders.
"Application": An application by the Borrower, in a form and containing
terms and provisions acceptable to the Bank, for the issuance by the Bank of a
Letter of Credit.
"Attorneys' Fees": The value of the services (and costs, charges and
expenses related thereto) of the attorneys (and all paralegals, secretaries,
accountants and other staff employed by such attorneys) employed by the Bank
(including, without limitation, attorneys and paralegals who are employees of
the Bank) from time to time (a) in connection with the administration and
enforcement of the Loan Documents, (b) to prepare documentation related to the
Loans and other Obligations incurred hereunder, (c) to represent the Bank in any
litigation, contest, dispute, suit or proceeding or to commence, defend or
intervene in any litigation contest, dispute, suit or proceeding or to file a
petition, complaint, answer, motion or other pleading, or to take any other
action in or with respect to, any litigation, contest, dispute, suit or
proceeding (whether instituted by the Bank, the Borrower or any other Person and
whether in bankruptcy or otherwise) in any way or respect relating to the
Collateral, any Third Party Collateral, the Loan Documents, or the Borrower's or
any other Obligor's or any Subsidiary's affairs, (d) to protect, collect, lease,
sell, take possession of, or liquidate any of the Collateral or any Third Party
Collateral, (v) to attempt to enforce any security interest in any of the
Collateral or any Third Party Collateral or to give any advice with respect to
such enforcement, and (e) to enforce any of the Bank's rights to collect any of
the Obligations.
"Bank": The term "Bank" shall have the meaning given such term in the
preamble.
"Borrower": The term "Borrower" shall have the meaning given such term in
the preamble.
"Borrowing Base": The term "Borrowing Base" shall have the meaning given
such term in Supplement A.
"Borrowing Base Certificate": The term "Borrowing Base Certificate" shall
have the meaning given such term in Section 2.5(c).
<PAGE>
"Business Day": Any day (other than a Saturday, Sunday or legal holiday
in the State of Minnesota) on which national banks are permitted to be open in
Minneapolis, Minnesota and, with respect to Eurodollar Advances, a day on which
dealings in Dollars may be carried on by the Bank in the interbank eurodollar
market.
"Cable": The term "Cable" shall mean Cable Distribution Systems, Inc., a
Georgia corporation.
"Capital Expenditure": Any amount debited to the fixed asset account on
the consolidated balance sheet of the Borrower in respect of (a) the acquisition
(including, without limitation, acquisition by entry into a Capitalized Lease),
construction, improvement, replacement or betterment of land, buildings,
machinery, equipment or of any other fixed assets or leaseholds, and (b) to the
extent related to and not included in clause (a), materials, contract labor and
direct labor (excluding expenditures properly chargeable to repairs or
maintenance in accordance with GAAP).
"Capitalized Lease": Any lease which is or should be capitalized on the
books of the lessee in accordance with GAAP.
"Code": The Internal Revenue Code of 1986, as amended, or any successor
statute, together with the regulations thereunder.
"Collateral": The term "Collateral" shall have the meaning given such
term in Section 3.1.
"Collateral Account(s)": The term "Collateral Account(s)" shall have the
meaning given such term in Section 3.2(b).
"Controlled Disbursement Account": The term "Controlled Disbursement
Account" shall have the meaning given such term in Section 2.3(c).
"Credit": The facility established under this Agreement pursuant to which
the Bank will make Loans to the Borrower or issue Letters of Credit for the
account of the Borrower.
"Credit Amount": The term "Credit Amount" shall have the meaning given
such term in Supplement A.
"Default Rate": With respect to a Loan, the rate of interest which is
applicable to such Loan after any amount thereof is not paid when due, as
determined pursuant to Supplement A.
"Disbursement Account(s)": The term "Disbursement Account(s)" shall have
the meaning given such term in Section 2.3(b).
<PAGE>
"EBITDA": For any period of determination, the consolidated net income of
the Borrower and its Subsidiaries before provision for income taxes, interest
expense (including, without limitation, implicit interest expense on Capitalized
Leases), depreciation, and amortization, all as determined in accordance with
GAAP, excluding therefrom (to the extent included): (a) non-operating gains
(including, without limitation, extraordinary or nonrecurring gains, gains from
discontinuance of operations and gains arising from the sale of assets other
than Inventory) during the applicable period; and (b) similar non-operating
losses during such period.
"Eligible Account Receivable": An Account Receivable owing to the
Borrower which meets the following requirements:
(a) it is genuine and in all respects what it purports to be;
(b) it arises from either (i) the performance of services by the
Borrower, which Services have been fully performed and, if applicable,
acknowledged and/or accepted by the Account Debtor with respect thereto; or (ii)
the sale or lease of goods by the Borrower and (A) such goods comply with such
Account Debtor's specifications (if any)and have been shipped to, or delivered
to and accepted by, such Account Debtor, (B) the Borrower has possession of, or
has delivered to the Bank, at the Bank's request, shipping and delivery receipts
evidencing such shipment, delivery and acceptance, and C) such goods have not
been returned to the Borrower;
(c) it (i) is evidenced by an invoice rendered to the Account
Debtor with respect thereto which (A) is dated not earlier than the date of
shipment or performance and (B)has payment terms not unacceptable to the Bank;
and (ii) meets the Eligible Account Receivable requirements set forth in
Supplement A hereto;
(d) it is not subject to any assignment, claim or Lien other than
(i) a Lien in favor of the Bank and (ii) Liens consented to by the Bank in
writing;
(e) it is a valid, legally enforceable and unconditional obligation
of the Account Debtor with respect thereto and is not subject to setoff,
counterclaim, credit or allowance (except any credit or allowance which has been
deducted in computing the net amount of the applicable invoice as shown in the
original schedule or Borrowing Base Certificate furnished to the Bank
identifying or including such Account Receivable) or adjustment by the Account
Debtor with respect thereto, or to any claim by such Account Debtor denying
liability thereunder in whole or in part, and such Account Debtor has not
refused to accept any of the goods or services which are the subject of such
Account Receivable or offered or attempted to return any of such goods;
(f) there are no proceedings or actions which are then threatened
or pending against the Account Debtor with respect thereto or to which such
Account Debtor is a party which might result in any material adverse change in
such Account Debtor's financial condition or in its ability to pay any Account
Receivable in full when due;
<PAGE>
(g) it does not arise out of a contract or order which, by its
terms, forbids, restricts or makes void or unenforceable the assignment by the
Borrower to the Bank of such Account Receivable;
(h) the Account Debtor with respect thereto is not a Subsidiary,
Related Party or Obligor, or a director, officer, employee or agent of the
Borrower, a Subsidiary, Related Party or Obligor;
(i) the Account Debtor with respect thereto is a resident or
citizen of and is located within the United States of America unless the sale of
goods giving rise to such Account Receivable is on letter of credit, banker's
acceptance or other credit support terms satisfactory to the Bank;
(j) it does not arise from a "sale on approval," "sale or return"
or "consignment," nor is it subject to any other repurchase or return agreement;
(k) it is not an Account Receivable with respect to which
possession and/or control of the goods sold giving rise thereto is held,
maintained or retained by the Borrower, any Subsidiary, Related Party or Obligor
(or by any agent or custodian of the Borrower, any Subsidiary, Related Party or
Obligor) for the account of or subject to further and/or future direction from
the Account Debtor with respect thereto;
(l) it does not, in any way, fail to meet or violate any warranty,
representation or covenant contained in the Loan Documents relating directly or
indirectly to the Borrower's Accounts Receivable;
(m) the Account Debtor with respect thereto is not located in the
States of Indiana, New Jersey or Minnesota, provided, however, that such
restriction shall not apply if (i) the Borrower has filed and has effective a
Notice of Business Activities Report with the appropriate office or agency of
the States of Indiana, New Jersey or Minnesota, as applicable, for the then
current year or (ii) the Borrower is exempt from the filing of such report;
(n) it arises in the ordinary course of the Borrower's business;
(o) if the Account Debtor with respect thereto is the United States
of America or any department, agency or instrumentality thereof, the Borrower
has assigned its right to payment of such Account Receivable to the Bank
pursuant to the Assignment of Claims Act of 1940 as amended
(p) if the Bank, in its sole and absolute discretion, has
established a credit limit for the Account Debtor with respect thereto, the
aggregate dollar amount of Accounts Receivable due from such Account Debtor,
including such Account Receivable, does not exceed such credit limit; and
<PAGE>
(q) if it is evidenced by chattel paper or instruments, (i) the
Bank shall have specifically agreed to include such Account Receivable as an
Eligible Account Receivable, (ii) only payments then due and payable under such
chattel paper or instrument shall be included as an Eligible Account Receivable
and (iii) the originals of such chattel paper or instruments have been assigned
and delivered to the Bank in a manner satisfactory to the Bank.
An Account Receivable which is at any time an Eligible Account Receivable
but which subsequently fails to meet any of the foregoing requirements shall
forthwith cease to be an Eligible Account Receivable. Further, with respect to
any Account Receivable, if the Bank at any time or times hereafter determines,
in its sole and absolute discretion, that the prospect of payment or performance
by the Account Debtor with respect thereto is or will be impaired for any reason
whatsoever, notwithstanding anything to the contrary contained above, such
Account Receivable shall forthwith cease to be an Eligible Account Receivable.
"Eligible Inventory": Inventory of the Borrower which meets the following
requirements:
(a) it is owned by the Borrower and is not subject to any prior
assignment, claim or Lien other than (i) a Lien in favor of the Bank and (ii)
Liens consented to by the Bank in writing;
(b) if held for sale or lease or furnishing under contracts of
service, it is (except as the Bank may otherwise consent in writing) new and
unused;
(c) except as the Bank may otherwise consent, it is not stored with
a bailee, warehouseman or similar party; if so stored with the Bank's consent,
such bailee, warehouseman or similar party has issued and delivered to the Bank,
in form and substance acceptable to the Bank, such documents and agreements as
the Bank may require, including, without limitation, warehouse receipts therefor
in the Bank's name;
(d) the Bank has determined, in its sole and absolute discretion,
that it is not unacceptable due to age, type, category, quality and/or quantity;
(e) it is not held by the Borrower on "consignment" and is not
subject to any other repurchase or return agreement except an agreement pursuant
to which the Inventory is returned for exchange or substitution in the ordinary
course of business;
(f) it complies with all standards imposed by any governmental
agency having regulatory authority over such goods and/or their use, manufacture
or sale;
<PAGE>
(g) it does not, in any way, fail to meet or violate any warranty,
representation or covenant contained in the Loan Documents relating directly or
indirectly to the Borrower's Inventory; and (h) it satisfies the Eligible
Inventory Requirements, if any, set forth in Supplement A hereto.
Inventory of the Borrower which is at any time Eligible Inventory but which
subsequently fails to meet any of the foregoing requirements shall forthwith
cease to be Eligible Inventory.
"Environmental Laws": The Resource Conservation and Recovery Act of 1987,
the Comprehensive Environmental Response, Compensation and Liability Act, any
so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act, and
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning any Hazardous Materials or other hazardous,
toxic or dangerous waste, substance or constituent, or other substance, whether
solid, liquid or gas, as now or at any time hereafter in effect.
"Environmental Lien": A Lien in favor of any governmental entity for (a)
any liability under any Environmental Law, or (b) damages arising from or costs
incurred by such governmental entity in response to a spillage, disposal, or
release into the environment of any Hazardous Material or other hazardous, toxic
or dangerous waste, substance or constituent, or other substance.
"Equipment": All equipment of the Borrower of every description,
including, without limitation, fixtures, furniture, vehicles and trade fixtures,
together with any and all accessions, parts and equipment attached thereto or
used in connection therewith, and any substitutions therefore and replacements
thereof.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended,
or any successor statute, together with the regulations thereunder.
"ERISA Affiliate": Any trade or business (whether or not incorporated)
that is a member of a group of which the Borrower is a member and which is
treated as a single employer under Section 414 of the Code.
"Eurodollar Advance": An Advance designated as such in a notice of
borrowing under Section 2.5(a) or a notice of continuation or conversion under
Section 2.13.
"Eurodollar Interbank Rate": The offered rate for deposits in United
States Dollars (rounded upwards, if necessary, to the nearest 1/16 of 1%), for
delivery of such deposits on the first day of an Eurodollar Rate Interest Period
of a Eurodollar Advance, for the number of days comprised therein, which appears
on the Reuters Screen LIBO Page as of 11:00 a.m., London time, on the day that
is two Business Days preceding the first day of the Eurodollar Rate Interest
Period of such Eurodollar Advance or the rate determined by the Bank at such
time based on such other published service of general application as shall be
<PAGE>
selected by the Bank for such purpose. If the Reuter Screen LIBO Page or such
other service does not report such rates or such rates do not, in the judgment
of the Bank, accurately reflect the rates of interest applicable to the Bank in
the relevant markets, the rate for such Eurodollar Rate Interest Period shall be
determined by the Bank based on rates offered to the Bank for United States
Dollar deposits in the interbank eurodollar market. "Reuters Screen LIBO Page"
means the display designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may replace the LIBO Page on that service for the
purpose of displaying London interbank offered rates of major banks for United
States Dollar deposits).
"Eurodollar Rate (Reserve Adjusted)": A rate per annum (rounded upward,
if necessary, to the nearest 1/16 of 1%) calculated for the Eurodollar Rate
Interest Period of a Eurodollar Advance in accordance with the following
formula:
ERRA = Eurodollar Interbank Rate
1.00 - ERR
In such formula, "ERR" means "Eurodollar Reserve Rate" and "ERRA" means
"Eurodollar Rate (Reserve Adjusted)", in each instance determined by the Bank
for the applicable Eurodollar Rate Interest Period. The Bank's determination of
all such rates for any Eurodollar Rate Interest Period shall be conclusive in
the absence of any manifest error.
"Eurodollar Rate Interest Period": With respect to any Eurodollar Advance,
the period which shall begin on (and include) the date of the initial borrowing
of such Eurodollar Advance or the date of the conversion of any other type of
Loan into a Eurodollar Advance or the date of the continuation of a Eurodollar
Advance as a Eurodollar Advance upon the termination of the Eurodollar Rate
Interest Period then applicable thereto and, unless the final maturity of such
Eurodollar Advance is accelerated, shall end on (but exclude) the date which is
one, two, three, six or twelve months thereafter as selected by the Borrower;
provided, however, that: (x) any such Eurodollar Rate Interest Period which
would otherwise end on a day not a Business Day shall end on the next succeeding
Business Day unless such extension would cause the last day of such Eurodollar
Rate Interest Period to fall in the next following calendar month, in which
event the last day of such Eurodollar Rate Interest Period shall occur on the
next preceding Business Day; (y) no Eurodollar Rate Interest Period may end
later than the scheduled Termination Date; and (z) any Eurodollar Rate Interest
Period which begins on the last day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Eurodollar Rate Interest Period) shall end on the last Business Day of the
calendar month at the end of such Eurodollar Rate Interest Period.
<PAGE>
"Eurodollar Reserve Rate": A percentage equal to the daily average during
such Eurodollar Rate Interest Period of the aggregate maximum reserve
requirements (including all basic, supplemental, marginal and other reserves),
as specified under Regulation D of the Federal Reserve Board, or any other
applicable regulation that prescribes reserve requirements applicable to
Eurocurrency liabilities (as presently defined in Regulation D) or applicable to
extensions of credit by the Bank the rate of interest on which is determined
with regard to rates applicable to Eurocurrency liabilities. Without limiting
the generality of the foregoing, the Eurocurrency Reserve Requirement shall
reflect any reserves required to be maintained by the Bank against (i) any
category of liabilities that includes deposits by reference to which the
Eurodollar Interbank Rate is to be determined, or (ii) any category of
extensions of credit or other assets that includes Eurodollar Advances.
"Event of Default": The term "Event of Default" shall have the meaning
given such term in Section 7.1.
"Excess Cash Flow": For any period of determination, the total of (a)
consolidated net income of the Borrower and the Subsidiaries, excluding
therefrom (to the extent included) non-operating gains (including, without
limitation, extraordinary or nonrecurring gains, gains from discontinuance of
operations and gains arising from the sale of assets other than Inventory), plus
(b) the sum of (i) amortization and (ii) depreciation minus (c) the sum of (i)
Capital Expenditures, (ii) mandatory payments on Indebtedness and (iii) any net
positive change in Consolidated Working Capital (not including changes in cash
or borrowings from the Bank) for such period, all as determined in accordance
with GAAP.
"Federal Reserve Board": The Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP": Generally accepted accounting principles promulgated by the
Financial Accounting Standards Board, as applied in the preparation of the
audited financial statement of Americable referred to in Section 4.6.
"General Intangibles": All of the Borrower's intangible personal property
including things in action, causes of action and all other personal property of
the Borrower of every kind and nature (other than goods, accounts, chattel
paper, documents, instruments and money) including, without limitation,
corporate or other business records, inventions, designs, patents, patent
applications, trademarks, trademark applications, trade names, trade secrets,
goodwill, copyrights, registrations, licenses, franchises, customer lists, tax
refund claims, claims against carriers and shippers, guarantee claims, security
interests, security deposits or other security held by or granted to the
Borrower to secure payment by an Account Debtor of any of the Accounts
Receivable, any other rights to payment, including, without limitation, rights
to reimbursement or indemnification, and any other rights of whatsoever nature.
<PAGE>
"Guarantor": Americable and Cable.
"Guaranty Documents": The Americable Loan Agreement and the Americable
Guaranty.
"Hazardous Materials": Any hazardous substance or pollutant or
contaminant defined as such in (or for the purposes of) any Environmental Law
including, without limitation, petroleum, including crude oil or any fraction
thereof which is liquid at standard conditions of temperature or pressure (60
degrees fahrenheit and 14.7 pounds per square inch absolute), any radioactive
material, including any source, special nuclear or by-product material as
defined at 42 U.S.C. section 2011 et. seq., as amended or hereafter amended, and
asbestos in any form or condition.
"Indebtedness": Without duplication, all obligations, contingent or
otherwise, which in accordance with GAAP should be classified upon the obligor's
balance sheet as liabilities, but in any event including the following (whether
or not they should be classified as liabilities upon such balance sheet): (a)
any obligation secured by any mortgage, pledge, security interest, lien, charge
or other encumbrance existing on property owned or acquired subject thereto,
whether or not such obligation shall have been assumed and whether or not such
obligation is the obligation of the owner or another party; (b) any obligation
on account of deposits or advances; (c) any obligation for the deferred purchase
price of any property or services, except accounts payable arising in the
ordinary course of business; (d) any obligation as lessee under any Capitalized
Lease; (e) any guaranty, endorsement or other contingent obligation in respect
to Indebtedness of others; and (f) any undertaking or agreement to reimburse or
indemnify issuers of letters of credit. For all purposes of this Agreement, the
Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture in which such Person is a general partner or a joint venturer.
"Indemnified Liabilities": The term "Indemnified Liabilities" shall have
the meaning given such term in Section 10.2.
"Indemnitees": The term "Indemnitees" shall have the meaning given such
term in Section 10.2.
"Inventory": Any and all of the Borrower's goods, including, without
limitation, goods in transit, wheresoever located which are or may at any time
be leased by the Borrower to a lessee, held for sale or lease, furnished under
any contract of service or held as raw materials, work in process, or supplies
or materials used or consumed in the Borrower's business, or which are held for
use in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, and all goods, the sale or other disposition of
which has given rise to an Account Receivable, which are returned to and/or
repossessed and/or stopped in transit by the Borrower or the Bank, or at any
time hereafter in the possession or under the control of the Borrower or the
Bank, or any agent or bailee of either thereof, and all documents of title or
other documents representing the same.
<PAGE>
"Investment": The acquisition, purchase, making or holding of any stock
or other security, any loan, advance, contribution to capital, extension of
credit (except for trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in accordance
with customary trade terms), any acquisitions of real and personal property
(other than real and personal property acquired in the ordinary course of
business) and any purchase or commitment or option to purchase stock or other
debt or equity securities of, or any interest in, another Person or any integral
part of any business or the assets comprising such business or part thereof.
"L/C Draft": A draft drawn on the Bank pursuant to a Letter of Credit.
"Letter of Credit": A letter of credit issued by the Bank on the
Application of the Borrower.
"Letter of Credit Obligations": An amount equal to the aggregate of the
original face amounts of all Letters of Credit minus the sum of (a) the amount
of any reduction(s) in the original face amount of any Letter of Credit which
did not result from a draw made under such Letter of Credit, (b) the amount of
any payments made by the Bank with respect to a Letter of Credit or L/C Draft
for which the Borrower has reimbursed the Bank and (c) the undrawn portion of
any issued, but expired, Letter of Credit plus the amount of any increase(s) in
the original face amount of any Letter of Credit. For purposes of determining
the outstanding Letter of Credit Obligations at any time, the Bank's acceptance
of an L/C Draft shall constitute a draw on the applicable Letter of Credit at
the time of such acceptance.
"Lien": Any security interest, mortgage, pledge, lien, hypothecation,
judgment lien or similar legal process, charge, encumbrance, title retention
agreement or analogous instrument or device (including, without limitation, the
interest of lessors under Capitalized Leases and the interest of a vendor under
any conditional sale or other title retention agreement).
"Loan": Loan referred to in Section 2.1, and any other loans or advances
made to the Borrower by the Bank under or pursuant to this Agreement.
"Loan Account": The term "Loan Account" shall have the meaning given such
term in Section 2.3(a).
"Loan Availability": The lesser of (a) the Credit Amount minus the Letter
of Credit Obligations and (b) the Borrowing Base minus the Letter of Credit
Obligations.
"Loan Documents": This Agreement, any Note, the Guaranty Documents, the
Subordination Agreement and each other instrument, document, guaranty, mortgage,
deed of trust, chattel mortgage, pledge, power of attorney, consent, assignment,
contract, notice, security agreement, lease, financing statement, subordination
agreement, trust account agreement, or other agreement executed and delivered by
the Borrower or any guarantor or party granting security interests in connection
with this Agreement, the Loans or the Collateral.
<PAGE>
"Note": Any promissory note of the Borrower evidencing any loan or
advance (including but not limited to the Loans) made by the Bank to the
Borrower pursuant to this Agreement.
"NSU": North Star Universal, Inc., a Minnesota corporation.
"Obligations": All of the liabilities, obligations and indebtedness of
the Borrower or the Guarantor to the Bank of any kind or nature, however
created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing or due or to become due, and including,
without limitation, (a) the Borrower's and the Guarantors' obligations under the
Loan Documents or the Americable Loan Documents, including obligations of
performance, (b) the Borrower's and the Guarantor's obligations with respect to
any "Letter of Credit" or any "Application" described in this Agreement or the
Americable Loan Agreement, and (c) interest, charges, expenses, Attorneys' Fees
and other sums chargeable to the Borrower or the Guarantor by the Bank under the
Loan Documents or the Americable Loan Documents. "Obligations" shall also
include any and all amendments, extensions, renewals, refundings or refinancings
of any of the foregoing.
"Obligor": The Borrower and each other Person who is or shall become
primarily or secondarily liable on any of the Obligations or who grants to the
Bank a Lien on any property of such Person as security for any of the
Obligations.
"Occupational Safety and Health Law": The Occupational Safety and Health
Act of 1970 and any other federal, state or local statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to or imposing liability
or standards of conduct concerning employee health and/or safety.
"Over Advance": The term "Over Advance" shall have the meaning given such
term in Section 2.8.
"Overdraft Loan": The term "Overdraft Loan" shall have the meaning given
such term in Section 2.7.
"Participant": Any Person, now or at any time or times hereafter,
participating with the Bank in the Loans made to the Borrower hereunder.
"PBGC": The Pension Benefit Guaranty Corporation, established pursuant to
Subtitle A of Title IV of ERISA, or any successor thereto or to the functions
thereof.
"Person": Any natural person, corporation, partnership, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision thereof, or any other entity,
whether acting in an individual, fiduciary or other capacity
<PAGE>
"Plan": An employee benefit plan or other plan, maintained for employees
of the borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or
Section 412 of the Code.
"Reference Rate": The rate of interest from time to time publicly
announced by the Bank as its "reference rate." The Bank may lend to its
customers at rates that are at, above or below the Reference Rate. For purposes
of determining any interest rate which is based on the Reference Rate, such
interest rate shall change on the effective date of any change in the Reference
Rate.
"Reference Rate Advance": An Advance designated as such in a notice of
borrowing under Section 2.5(a) or a notice of continuation or conversion under
Section 2.13.
"Related Party": Any Person (other than a Subsidiary): (a) which
directly or indirectly, through one of more intermediaries, controls, is
controlled by or is under common control with, the Borrower, (b) which
beneficially owns or holds 5% or more of the equity interest of the
Borrower, or (c) 5% or more of the equity interest of which is beneficially
owned or held by the Borrower or a Subsidiary. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Reportable Event": A reportable event, as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC, by regulation, has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event; provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and Section 302 of ERISA
shall be a reportable event regardless of the issuance of any such waivers in
accordance with Section 412(d) of the Code.
"Revolving Loan": The term "Revolving Loan" shall have the meaning given
such term in Section 2.1.
"Subordinated Debt": All Indebtedness of the Borrower to Americable which
is subordinated pursuant to the Subordination Agreement and that portion of any
liabilities, obligations or Indebtedness of the Borrower which contains terms
satisfactory to the Bank and is subordinated, in a manner satisfactory to the
Bank, as to right and time of payment of principal and interest thereon, to any
and all of the Obligations.
"Subordination Agreement": The Subordination Agreement dated as of the
date hereof among the Borrower, Americable and the Bank and each of the other
documents delivered in connection therewith.
<PAGE>
"Subsidiary": Any Person of which or in which the described Person and
its other Subsidiaries own directly or indirectly 50% or more of: (a) the
combined voting power of all classes of stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
Person, if it is a corporation, (b) the capital interest or profits interest of
such Person, if it is a partnership, joint venture or similar entity, or (c) the
beneficial interest of such Person, if it is a trust, association or other
unincorporated organization.
"Supplemental Documentation": The term "Supplemental Documentation" shall
have the meaning given such term in Section 3.5.
"Tangible Capital Base": The total of (a) Tangible Net Worth, plus (b)
Subordinated Debt plus (c) the aggregate unpaid accrued interest on all
Subordinated Debt of the Borrower owing to Americable, plus or minus (as the
case may be) (d) the Borrower's foreign exchange translation adjustment for the
conversion of Canadian dollars into United States dollars.
"Tangible Net Worth": As of any date of determination, the sum of the
amounts set forth on the consolidated balance sheet of the Borrower as the
common stock, preferred stock, additional paid-in capital, and retained earnings
of the Borrower (excluding treasury stock), less the book value of all assets of
the Borrower and its consolidated Subsidiaries that would be treated as
intangible assets under GAAP, including, without limitation, all such items as
goodwill, trademarks, trade names, service marks, copyrights, patents, licenses,
unamortized debt discount and expense and unamortized deferred charges.
"Taxes": With respect to any Person means taxes, assessments or other
governmental charges or levies imposed upon such Person, its income or any of
its properties, franchises or assets.
"Termination Date": June 30, 1998, or such later date to which the
Termination Date may be extended pursuant to Section 12.6.
"Third Party Collateral": Any property of any Person other than the
Borrower which secures payment or performance of any Obligations.
"UCC": The Uniform Commercial Code as in effect in the State of Minnesota
and any successor statute, together with any regulations thereunder, in each
case as in effect from time to time. References to sections of the UCC shall be
construed to also refer to any successor sections.
"Unmatured Event of Default": Any event which, with the giving of notice
to the Borrower or lapse of time, or both, would constitute an Event of Default.
"Unused Credit Amount": The Credit Amount minus the sum of (a) the
outstanding principal balance of the Loans plus (b) the Letter of Credit
Obligations.
<PAGE>
1.2 Accounting Terms and Calculations. Except as may be expressly
provided to the contrary herein, all accounting terms used herein or in any
certificate or other document made or delivered pursuant hereto shall be
interpreted and all accounting determinations hereunder (including, without
limitation, determination of compliance with financial ratios and restrictions
in Articles V and VI) shall be made in accordance with GAAP consistently
applied. Any reference to "consolidated" financial terms shall be deemed to
refer to those financial terms as applied to the Borrower and the Subsidiaries
in accordance with GAAP.
1.3 Computation of Time Periods. For purposes of this Agreement, in
the computation of a period of time from a specified date to a later specified
date, unless otherwise stated, the word "from" means "from and including" and
the words "to" or "until" mean "to but excluding."
1.4 Other Definitional Provisions. Unless otherwise defined herein,
all terms defined in this Agreement shall have such defined meanings when used
in any other Loan Document. Terms used in this Agreement which are defined in
any Supplement, Exhibit or Schedule hereto shall, unless the context otherwise
indicates, have the meanings given them in such Supplement, Exhibit or Schedule.
Other terms used in this Agreement shall, unless the context otherwise
indicates, have the meanings given such terms in the Minnesota Uniform
Commercial Code to the extent the same are used or defined therein. The words
"hereof," "herein," and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. Reference to "this Agreement" shall
include the provisions of Supplement A hereto. References to Sections,
Exhibits, Schedules and like references are to this Agreement unless otherwise
expressly provided. Section captions used in this Agreement are for convenience
only, and shall not affect the construction of this Agreement.
ARTICLE II LOANS; LETTERS OF CREDIT; OTHER MATTERS
2.1 Loans.
(a) Subject to the terms and conditions of the Loan Documents, and
in reliance upon the warranties of the Borrower set forth herein and in the
other Loan Documents, the Bank agrees to make such loans or advances
(individually, a " Revolving Loan" and collectively, the "Revolving Loans") to
the Borrower as the Borrower may from time to time request, up to but not in
excess of the Loan Availability. Revolving Loans made by the Bank may be repaid
and, subject to the terms and conditions hereof, reborrowed to the Termination
Date unless the Credit extended under this Agreement is otherwise terminated as
provided in this Agreement.
(b) In the event the aggregate outstanding principal balance of the
Revolving Loans exceeds the Loan Availability, the Borrower shall, unless the
Bank shall otherwise consent, immediately and without notice of any kind, make
such payments or take such other action as shall be necessary to eliminate such
excess.
<PAGE>
(c) The Revolving Loans shall be constituted of Eurodollar Advances and
Reference Rate Advances, as shall be selected by the Borrower, except as
otherwise provided herein. Any combination of types of Advances may be
outstanding at the same time, except that the total of outstanding Eurodollar
Advances shall not exceed $500,000 at any one time. Each Eurodollar Advance
shall be in a minimum amount of $100,000 or in an integral multiple of $100,000
above such amount.
(d) All Loans and other Obligations hereunder shall be paid by the
Borrower on the Termination Date, unless payable sooner pursuant to the
provisions of this Agreement.
2.2 Letters of Credit.
(a) In addition to Loans made pursuant to Section 2.1, the Bank will,
upon receipt of duly executed Applications and such other documents, instruments
and/or agreements as the Bank may require, issue Letters of Credit on such terms
as are satisfactory to the Bank; provided, however, that no Letter of Credit
will be issued if, before or after taking such Letter of Credit into account,
the Letter of Credit Obligations exceeds the least of (i) $500,000, (ii) the
Credit Amount minus the outstanding principal balance of the Loans and (iii) the
Borrowing Base minus the outstanding principal balance of the Loans.
(b) The Borrower agrees to pay the Bank on demand, the Bank's standard
administrative operating fees and charges in effect from time to time for
issuing and administering any Letters of Credit. The Borrower further agrees to
pay the Bank a commission on the undrawn amount of each Letter of Credit and on
each L/C Draft accepted by the Bank in such amount(s) as may from time to time
be established by the Bank. Such commissions shall be paid at such frequency as
the Bank shall determine. The Bank may provide for the payment of any fees,
charges or commission due by charging a Disbursement Account or any other
account of the Borrower with the Bank, or advancing the amount thereof to the
Borrower as a Revolving Loan.
(c) The Borrower agrees to reimburse the Bank on demand for each payment
made by the Bank under or pursuant to any Letter of Credit or L/C Draft. The
Borrower further agrees to pay to the Bank on demand, interest at the Default
Rate, on any amount paid by the Bank under or pursuant to any Letter of Credit
or L/C Draft from the date of payment until the date of reimbursement to the
Bank. The Bank may provide for such reimbursement or payment of interest by
charging a Disbursement Account or any other account of the Borrower with the
Bank or advancing the amount thereof to the Borrower as a Revolving Loan.
(d) Notwithstanding anything to the contrary herein or in any Application
of the Borrower, upon the occurrence of an Event of Default, an amount equal to
the aggregate amount of the outstanding Letter of Credit Obligations shall, at
the Bank's option and without further notice to the Borrower, be deemed (as
between the Bank and the Borrower) to have been paid or disbursed by the Bank
under the Letters of Credit and L/C Drafts accepted by the Bank notwithstanding
that such amounts may not in fact have been so paid or disbursed, and a Loan to
the Borrower, in the amount of such Letter of Credit Obligations, to have been
made and accepted, which Loan shall be immediately due and payable. In lieu of
the foregoing, at the election of the Bank at any time (whether before or after
an Event of Default), the Borrower shall, upon the Bank's demand, deliver to the
Bank cash or other Collateral of a type satisfactory to the Bank having a value,
as determined by the Bank, equal to the aggregate Letter of Credit Obligations.
Any such Collateral and/or any amounts received by the Bank in payment of the
Loan made pursuant to this paragraph (d) shall be held by the
<PAGE>
Bank in a Collateral Account or a separate account appropriately designated as a
cash collateral account in relation to this Agreement and the Letters of Credit
and retained by the Bank as collateral security for the Borrower's Obligations.
Such amounts shall not be used by the Bank to pay any amounts drawn or paid
under or pursuant to any Letter of Credit or L/C Draft but may be applied to
reimburse the Bank for drawings or payments under or pursuant to Letters of
Credit or L/C Drafts which the Bank has paid or, if no such reimbursement is
required, to payment of such other Obligations as the Bank shall determine. Any
amounts remaining in any cash collateral account established pursuant to this
paragraph (d) following payment in full of all Obligations which are not (as
determined by the Bank) to be applied to reimburse the Bank for amounts actually
paid by the Bank in respect of a Letter of Credit or L/C Draft shall be returned
to the Borrower (after deduction of the Bank's expenses).
2.3 Loan Account; Disbursement Account; Controlled Disbursement
Account.
(a) Loan Account. The Bank shall establish or cause to be established on
its books in the Borrower's name one or more accounts (the "Loan Account") to
evidence Loans made to the Borrower. Any amounts advanced as Loans hereunder
which are credited to the Borrower's Disbursement Account, together with any
other amounts advanced to the Borrower as a Loan pursuant to this Agreement,
will be debited to the applicable Loan Account and result in an increase in the
principal balance outstanding in such Loan Account in the amount thereof.
(b) Disbursement Accounts. Unless otherwise provided in this Agreement,
the Bank will credit or cause to be credited to a commercial account (the
"Disbursement Account" and collectively, the "Disbursement Accounts") maintained
by the Borrower at the Bank's First Bank Place, 601 Second Avenue South,
Minneapolis, Minnesota 55402-4302 office the amount of any sums advanced as
Loans hereunder.
(c) Controlled Disbursement Account. If required by the Bank, the
Borrower shall maintain a commercial account (the "Controlled Disbursement
Account") with First Bank Montana, National Association, 235 First Street,
Havre, Montana 59501 into which deposits from the Disbursement Account may be
authorized by the Bank and from which the Borrower may draw checks for corporate
purposes.
2.4 Interest; Nonuse Fee.
(a) Interest. The outstanding principal balance of each Loan to the
Borrower hereunder shall bear interest at the rate(s) applicable to such Loan
indicated in Supplement A; provided, however, that no provision of this
Agreement or any Note shall require the payment or permit the collection of
interest in excess of the rate permitted by applicable law. Interest as
aforesaid shall be charged for the actual number of days elapsed over a year
consisting of 360 days on the actual daily balance of such Loan. Interest on the
unpaid principal of any Loan shall accrue from the date such Loan is made to the
date such Loan is paid. Interest shall be paid by the Borrower on the last day
of each month, commencing on the first such day to occur after the date hereof,
and on maturity. After maturity of any Loan, whether by acceleration or
otherwise, interest shall be payable on demand. The Bank may provide for the
payment of any unpaid accrued interest by charging a Disbursement Account or any
other bank account maintained by the Borrower with the Bank or advancing the
amount thereof to the Borrower as a Loan.
<PAGE>
(b) Interest After Default. If any Loan or any amount thereof is not
paid in full when due, whether by acceleration or otherwise, the entire unpaid
principal balance of such Loan shall bear interest at the Default Rate
applicable to such Loan.
(c) Nonuse Fee. The Borrower shall pay to the Bank a nonuse fee for the
period from the date hereof to the date the Credit terminates in an amount equal
to one-quarter of one percent (1/4%) of the average daily Unused Credit Amount.
The nonuse fee shall be charged for the actual number of days elapsed over a
year consisting of 360 days on the actual daily balance of the Loans. The
nonuse fee shall be paid by the Borrower on the last day of each March, June,
September and December, commencing on the first such day to occur after the date
hereof, and on the date the Credit terminates for the period then ended. The
Bank may provide for the payment of any unpaid nonuse fee by charging a
Disbursement Account or any other bank account maintained by the Borrower with
the Bank or advancing any amount thereof to the Borrower as a Revolving Loan.
2.5 Requests for Loans; Borrowing Base Certificates; Other Information.
(a) Any request by the Borrower for a Loan, except for Overdraft
Loans, shall be in writing, or by telephone promptly confirmed in writing, and
must be given so as to be received by the Bank not later than:
(i) 1:00 p.m., Minneapolis time, on the date of the requested
Loan, if the Loan shall be comprised of Reference Rate Advances; or
(ii) 11:00 a.m., Minneapolis time, two Business Days prior to
the date of the requested Loan, if the Loan shall be, or shall include, a
Eurodollar Advance.
Each request for a Loan shall specify (i) the borrowing date (which shall
be a Business Day), (ii) the amount of such Loan and the type or types of
Advances comprising such Loan, and (iii) if such Loan shall include Eurodollar
Advances, the initial Eurodollar Rate Interest Periods for such Advances.
Unless the Bank determines that any applicable condition specified in Article VI
has not been satisfied, the Bank will make the amount of the requested Loan
available to the Borrower at the Bank's principal office in Minneapolis,
Minnesota, in immediately available funds not later than 2:00 p.m., Minneapolis
time, on the date requested. Failure to confirm any such telephonic notice or
otherwise comply with the provisions of this Section 2.5(a) shall not in any
manner affect the obligations of the Borrower to repay such Loan in accordance
with the terms of this Agreement.
(b) In the event that the Borrower shall at any time, or from time
to time, (I) make a request for a Loan hereunder, or (ii) be deemed to have
requested an Overdraft Loan, the Borrower agrees to forthwith provide the Bank
with such information, at such frequency and in such format, as is required by
the Bank, such information to be current as of the time of such request.
<PAGE>
(c) The Borrower further agrees to provide to the Bank a current
borrowing base certificate ("Borrowing Base Certificate") within 15 days after
the end of each month and at such other times as the Bank may request. The
Borrowing Base Certificate shall be in substantially the form of Exhibit A,
executed and certified as accurate by such person or persons as the Borrower
designates in writing to the Bank pursuant to duly adopted resolutions of the
Borrower's Board of Directors authorizing such action.
(d) The Borrower shall provide the Bank with documentation satisfactory
to the Bank indicating the names of those employees of the Borrower authorized
by the Borrower to sign Borrowing Base Certificates, among other things, and/or
to make a telephone request for a Loan, and/or to authorize disbursement of the
proceeds of a Loan by wire transfer or otherwise, and the Bank shall be entitled
to rely upon such documentation until notified in writing by the Borrower of any
change(s) in the names of persons so authorized. The Bank shall be entitled to
act on the instructions of anyone identifying himself as one of the persons
authorized to request Loans or disbursements of Loan proceeds by telephone and
the Borrower shall be bound thereby in the same manner as if the person were
actually so authorized. The Borrower agrees to indemnify and hold the Bank
harmless from any and all claims, damages, liabilities, losses, costs and
expenses (including Attorneys' Fees) which may arise or be created by the
acceptance of instructions for making or paying Loans or wire transfers by
telephone.
2.6 Notes. Except to the extent a Loan may, in the Bank's sole and
absolute discretion, be evidenced by a Note, all Loans and payments hereunder
shall be recorded on the Bank's books, which shall be rebuttable presumptive
evidence of the amount of such Loans outstanding at any time hereunder. The
Bank will account monthly as to all Loans and payments hereunder and each
monthly accounting will be fully binding on the Borrower unless, within 15 days
following the Borrower's receipt thereof, the Borrower shall provide the Bank
with a specific listing of exceptions. Notwithstanding any term or condition of
this Agreement to the contrary, the failure of the Bank to record the date and
amount of any Loan hereunder shall not limit or otherwise affect the obligation
of the Borrower to repay any such Loan.
2.7 Overdraft Loans. The Bank, in its sole and absolute discretion and
subject to the terms hereof, may make a Revolving Loan to the Borrower in an
amount equal to the amount of any overdraft which may from time to time exist
with respect to any Disbursement Account or any other bank account which the
Borrower may now hereafter have with the Bank. The existence of such overdraft
shall be deemed to be a request by the Borrower for such Revolving Loan. The
Borrower acknowledges that the Bank is under no duty or obligation to make any
Revolving Loan to the Borrower to cover any overdraft. The Borrower further
agrees that an overdraft shall constitute a separate Revolving Loan under this
Agreement (an "Overdraft Loan"), which shall bear, from the date on which the
overdraft occurred until paid, interest in an amount equal to the greater of
130% of the highest rate of interest then charged for Revolving Loans (other
than Overdraft Loans) made hereunder, or $50.00 per day. If the Bank, in its
sole and absolute discretion, decides not to make a Revolving Loan to cover part
or all of any overdraft, the Bank may return any check(s) which created such
overdraft.
<PAGE>
2.8 Over Advances. The Bank, in its sole and absolute discretion, may
make Revolving Loans to the Borrower, either at the Borrower's request or to pay
amounts due to the Bank under this Agreement or any other Loan Document, in
excess of the Loan Availability or permit the total Revolving Loans to at any
time exceed the Loan Availability (such excess Obligations are hereinafter
referred to as "Over Advances") and no such event or occurrence shall cause or
constitute a waiver by the Bank of its right to refuse to make any further
Revolving Loan or issue, or cause to be issued, any Letters of Credit at any
time that an Over Advance exists or would result therefrom. During any period
in which an Over Advance exists, the amount of the Over Advances shall bear
interest at a rate equal to 130% of the highest rate of interest then charged
for Revolving Loans made hereunder.
2.9 All Loans One Obligation. All Loans under this Agreement shall
constitute one Loan, and all Indebtedness and other Obligations shall constitute
one general obligation secured by the Bank's Lien on all of the Collateral and
Third Party Collateral and by all other Liens heretofore, now or at any time or
times hereafter granted by the Borrower or any other Obligor to the Bank. The
Borrower agrees that all of the rights of the Bank set forth in the Loan
Documents shall, unless otherwise agreed to in writing, apply to any
modification of or supplement to the Loan Documents.
2.10 Making of Payments; Application of Collections; Charging of
Accounts.
(a) All payments hereunder (including payments with respect to any Notes)
shall be made without set-off or counterclaim and shall be made to the Bank in
immediately available funds (or as the Bank may otherwise consent) prior to
12:30 p.m., Minneapolis time, on the date due at its office at First Bank Place,
601 Second Avenue South, Minneapolis, Minnesota 55402-4302, or at such other
place as may be designated by the Bank to the Borrower in writing. Any payments
received after such time shall be deemed received on the next Business Day.
Whenever any payment to be made hereunder or under any Note shall be stated to
be due on a date other than a Business Day such payment may be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of payment of interest or any fees.
(b) The Borrower authorizes the Bank to, and the Bank will, subject to
the provisions of this Section 2.10(b), apply the whole or any part of any
amounts received by the Bank (whether deposited in a Collateral Account or
otherwise received by the Bank) from the collection of items of payment and
proceeds of any Collateral or Third Party Collateral against the principal
and/or interest of any Loans made hereunder and/or any other Obligations,
whether or not then due, in such order of application as the Bank may determine,
unless such payments or proceeds are, in the Bank's sole and absolute
discretion, released to the Borrower; provided, however, that no checks, drafts
or other instruments received by the Bank shall constitute final payment to the
Bank unless and until such item of payment has actually been collected. All
items or amounts which are delivered to the Bank by or on behalf of the Borrower
or any Obligor or any Account Debtor on account of partial or full payment or
otherwise as proceeds of any of the Collateral or Third Party Collateral
(including any items or amounts which may have been deposited to a Collateral
Account) may from time to time, in the Bank's sole and absolute discretion, be
released to the Borrower or may be applied by the Bank towards such of the
Obligations, whether or not then due, in such order of application as the Bank
may determine. Notwithstanding anything to the contrary herein, (i) all cash,
checks, instruments and other items of payment, solely for purposes of
<PAGE>
determining the occurrence of an Event of Default hereunder, shall be deemed
received upon actual receipt by the Bank unless the same is subsequently
dishonored for any reason whatsoever, (ii) for purposes of determining whether,
under Sections 2.1 and 2.2, there is availability for Revolving Loans or
Letters of Credit, all cash, checks, instruments and other items of payment
shall be applied against the Obligations on the second Business Day following
receipt thereof by the Bank, and (iii) solely for purposes of interest
calculation hereunder, all cash, checks, instruments and other items of payment
shall be deemed to have been applied against the Obligations on the second
Business Day following receipt thereof by the Bank.
(c) The Borrower hereby authorizes the Bank and the Bank may, in its sole
and absolute discretion, charge to the Borrower, at any time, all or any portion
of any of the Obligations (and interest, if any, thereon) including, without
limitation, any Attorneys' Fees and other costs and expenses of the Bank for
which the Borrower is liable pursuant to the terms of the Loan Documents, by
charging a Disbursement Account or any other bank account of the Borrower with
Bank or by advancing the amount thereof to the Borrower as a Revolving Loan;
provided, however, that the provisions of this Section 2.10(c) shall not affect
the Borrower's obligation to pay when due all amounts payable by the Borrower
under any of the Loan Documents whether or not there are sufficient funds
therefor in the Disbursement Accounts or any such other bank account of the
Borrower with the Bank, or sufficient Loan Availability.
2.11 Bank's Election Not to Enforce. Notwithstanding any term or
condition of this Agreement to the contrary, the Bank, in its sole and absolute
discretion, at any time and from time to time may suspend or refrain from
enforcing any or all of the restrictions imposed in this Section 2 but no such
suspension or failure to enforce shall impair the Bank's right and power
under this Agreement to refrain from making a Loan or issuing, or causing to be
issued, a Letter of Credit requested by the Borrower if all conditions precedent
to the Bank's obligation to make such Loan or issue, or cause to be issued, such
Letter of Credit have not been satisfied.
2.12 Reaffirmation. Each Loan or Letter of Credit requested by the
Borrower pursuant to this Agreement shall constitute an automatic certification
by the Borrower to the Bank that (a) all of the representations and warranties
of the Borrower in each of the Loan Documents are true and correct on the date
of such request to the same extent as if made on such date except for such
changes as are specifically permitted thereunder and (b) immediately before and
after making the requested Loan or issuing, or causing to be issued, the
requested Letter of Credit, no Event of Default or Unmatured Event of Default
then exists or would result therefrom.
Section 2.13 Continuation or Conversion of Loans. The Borrower may
elect to:
(a) continue any outstanding Eurodollar Advance from one Eurodollar Rate
Interest Period into a subsequent Eurodollar Rate Interest Period to begin on
the last day of the earlier Eurodollar Rate Interest Period; or (b) convert any
outstanding Advance into another type of Advance (on the last day of an
Eurodollar Rate Interest Period only, in the instance of a Eurodollar Advance),
by giving the Bank telephonic notice promptly confirmed in writing given so as
to be received by the Bank not later than: (r) 1:00 p.m., Minneapolis time, on
the date of the requested continuation or conversion if the continuing or
converted Advance shall be a Reference Rate Advance; or (s) 11:00 a.m.,
<PAGE>
Minneapolis time, two Business Days prior to the date of the requested
continuation or conversion, if the continuing or converted Advance shall be a
Eurodollar Advance. Each notice of continuation or conversion of an Advance
shall specify: (x) the effective date of the continuation or conversion date
(which shall be a Business Day); (y) the amount and the type or types of
Advances following such continuation or conversion (subject to the limitation on
amount set for in Section 2.1.1(c)); and (z) for continuation as, or conversion
into, Eurodollar Advances, the Eurodollar Rate Interest Periods for such
Advances. Absent timely notice of continuation or conversion, each Eurodollar
Advance shall automatically convert into a Reference Rate Advance on the last
day of an applicable Eurodollar Rate Interest Period, unless paid in full on
such last day. No Advance shall be continued as, or converted into, a
Eurodollar Advance if the shortest Eurodollar Rate Interest Period for such
Advance may not transpire prior to the Termination Date or if an Event of
Default or Unmatured Event of Default shall exist.
Section 2.14 Funding Losses. The Borrower will indemnify the Bank upon
demand against any loss or expense which the Bank may sustain or incur
(including, without limitation, any loss or expense sustained or incurred in
obtaining, liquidating or employing deposits or other funds acquired to effect,
fund or maintain any Advance) as a consequence of: (a) any failure of the
Borrower to make any payment when due of any amount due hereunder or under any
Note; (b) any failure of the Borrower to borrow, continue or convert an Advance
on a date specified therefor in a notice thereof; or (c) any payment (including,
without limitation, any payment pursuant to Section 2.1(b) or Section 2.14),
prepayment or conversion of any Eurodollar Advance on a date other than the last
day of the Eurodollar Rate Interest Period for such Advance. Any demand made by
the Bank pursuant to this Section 2.14 shall be accompanied by a calculation, in
reasonable detail, of the amount demanded. Determinations by the Bank for
purposes of this Section 2.14 of the amount required to indemnify the Bank shall
be conclusive in the absence of manifest error.
Section 2.15 Increased Costs. If, as a result of any law, rule,
regulation, treaty or directive, or any change therein or in the interpretation
or administration thereof, or compliance by the Bank with any request or
directive (whether or not having the force of law) from any court, central bank,
governmental authority, agency or instrumentality, or comparable agency:
(a) any tax, duty or other charge with respect to any Loan, the Note
or this Agreement is imposed, modified or deemed applicable, or the basis of
taxation of payments to the Bank of interest or principal of any Loan or of the
Non-Use Fee (other than taxes imposed on the overall net income of the Bank by
the jurisdiction in which the Bank has its principal office) is changed;
(b) any reserve, special deposit, special assessment or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, the Bank is imposed, modified or deemed applicable;
(c) any increase in the amount of capital required or expected to be
maintained by the Bank or any person controlling the Bank is imposed, modified
or deemed applicable; or
<PAGE>
(d) any other condition affecting this Agreement is imposed on the
Bank or the relevant funding markets; and the Bank determines that, by reason
thereof, the cost to the Bank of making or maintaining the Revolving Loans or
this Agreement is increased, or the amount of any sum receivable by the Bank
hereunder or under the Note is reduced; then, the Borrower shall pay to the Bank
upon demand such additional amount or amounts as will compensate the Bank (or
the controlling person in the instance of (iii) above) on an after-tax basis for
such additional costs or reduction (provided that the Bank has not been
compensated for such additional cost or reduction in the calculation of the
"Eurodollar Reserve Rate"). Determinations by the Bank for purposes of this
Section of the additional amounts required to compensate the Bank shall be
conclusive in the absence of manifest error. In determining such amounts, the
Bank may use any reasonable averaging, attribution and allocation methods.
Section 2.16 Deposits Unavailable or Interest Rate Unascertainable or
Inadequate; Impracticability. If the Bank determines (which determination shall
be conclusive and binding on the parties hereto) that:
(a) deposits of the necessary amount for the relevant Eurodollar Rate
Interest Period for any Eurodollar Advance are not available to the Bank in the
relevant market or that, by reason of circumstances affecting such market,
adequate and reasonable means do not exist for ascertaining the Eurodollar
Interbank Rate for such Eurodollar Rate Interest Period;
(b) the Eurodollar Rate (Reserve Adjusted) will not adequately and
fairly reflect the cost to the Bank of making or funding the Eurodollar Advance
for its relevant Eurodollar Rate Interest Period; or
(c) the making or funding of Eurodollar Advances has become
impracticable as a result of any event occurring after the date of this
Agreement which, in the opinion of the Bank, materially and adversely affects
such Advances or the Bank's obligation to make Advances or the relevant market;
the Bank shall promptly give notice of such determination to the Borrower, and
(i) any notice of a new Eurodollar Advance previously given by the Borrower and
not yet borrowed or converted shall be deemed to be a notice to make a Reference
Rate Advance and (ii) the Borrower shall be obligated to either prepay in full
any outstanding Eurodollar Advances without premium or penalty on the last day
of the current Eurodollar Rate Interest Period with respect thereto or convert
any such Eurodollar Advance to a Reference Rate Loan Advance on such last day.
Section 2.17 Illegality. If at any time due to the adoption of any law,
rule, regulation, treaty or directive, or any change therein or in the
interpretation or administration thereof by any court, central bank,
governmental authority, agency or instrumentality, or comparable agency charged
with the interpretation or administration thereof, or for any other reason
subsequent to the date of this Agreement, it shall become unlawful or impossible
for the Bank to make or fund any Eurodollar Advance, the obligation of the Bank
to provide such Advance shall, upon the happening of such event, forthwith be
suspended for the duration of such illegality or impossibility. If any such
event such make it unlawful or impossible for the Bank to continue any
Eurodollar Advance previously made by it hereunder, the Bank shall, upon the
happening of such event, notify the Borrower thereof in writing, and the
Borrower shall, at the time notified by the Bank, either convert each such
unlawful Advance to a Reference Rate Advance or repay such Advance in full,
together with accrued interest thereon, subject to the provisions of Section
2.14.
<PAGE>
Section 2.18 Discretion of the Bank as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, the Bank shall
be entitled to fund and maintain its funding of all or any part of the Loans
made by it in any manner it elects; it being understood, however, that for
purposes of this Agreement, all determinations hereunder shall be made as if
the Bank had actually funded and maintained each Eurodollar Advance during the
Eurodollar Rate Interest Period for such Advance through the purchase of
deposits having a term corresponding to such Eurodollar Rate Interest Period and
bearing an interest rate equal to the Eurodollar Interbank Rate for such
Eurodollar Rate Interest Period (whether or not the Banks shall have granted any
participations in such Loans)".
ARTICLE III COLLATERAL
3.1 Grant of Security Interest. As security for the payment of all
Loans now or hereafter made by the Bank to the Borrower hereunder or under any
Note, and as security for the payment or other satisfaction of all other
Obligations, the Borrower hereby grants to the Bank a security interest in and
to the following property of the Borrower, whether now owned or existing, or
hereafter acquired or coming into existence, wherever now or hereafter located
(all such property is hereinafter referred to collectively as the "Collateral"):
(a) Accounts Receivable (whether or not Eligible Accounts
Receivable), including all other rights and interests (including all liens and
security interests) that the Borrower may at any time have by law or agreement
against any Account Debtor or other obligor obligated to make any such payment
or against any of the property of such Account Debtor or other obligor;
(b) Equipment and fixtures, including all accessories, parts and
other property at any time affixed thereto or used in connection therewith;
(c) Inventory (whether or not Eligible Inventory), including,
without limitation, all cables, cable assemblies, cable accessories, patch
panels, connectors, blocks, network devices, signal changers, cabinets, racks,
tools and production supplies;
(d) General Intangibles;
(e) documents;
(f) all chattel paper and instruments evidencing, arising out of or
relating to any obligation to the Borrower for goods sold or leased or services
rendered or otherwise arising out of or relating to any property described in
clauses (a) through (e) above;
(g) goods, instruments, documents or chattel paper that are in the
possession or control of, or in transit to, the Borrower or any agent or bailee
for the Bank for any reason and all interest on, dividends and distributions and
other rights in connection with such property, and any and all balances,
credits, deposits (general or special, time or demand, provisional or final),
accounts or monies of or in the name of the Borrower now or hereafter with the
Bank and any and all property of every kind or description of or in the name of
the Borrower now or hereafter, for any reason or purpose whatsoever, in the
possession or control of, in transit to or standing to the Borrower's credit on
the books of, the Bank or any agent or bailee for the Bank or any Participant;
<PAGE>
(h) all interest of the Borrower in any goods the sale or lease of
which shall have given or shall give rise to, and in all guaranties and other
property securing the payment of or performance under, any Accounts Receivable,
General Intangibles or any chattel paper or instruments referred to in clause
(f) above;
(i) any and all other property of the Borrower of any kind or
description, including, without limitation, real estate of the Borrower, subject
to a separate mortgage, pledge or security interest in favor of the Bank or in
which the Bank now or hereafter has or acquires a security interest securing any
Obligations, pursuant to any written agreement or instrument other than this
Agreement;
(j) all replacements, substitutions, additions or accessions to or
for any of the foregoing;
(k) to the extent related to the property described in clauses (a)
through (j) above, all books, correspondence, credit files, records, invoices
and other papers and documents, including, without limitation, to the extent so
related, all tapes, cards, computer runs, computer programs and other papers and
documents in the possession or control of the Borrower or any computer bureau
from time to time acting for the Borrower, and, to the extent so related, all
rights in, to and under all policies of insurance, including claims of rights to
payments thereunder and proceeds therefrom, including any credit insurance; and
(l) all proceeds (including, without limitation, any Accounts
Receivable or other proceeds arising from the sale or other disposition of any
Collateral, any returns of any Equipment or Inventory sold by the Borrower and
the proceeds of any insurance covering any of the Collateral) of any of the
foregoing.
3.2 Accounts Receivable.
(a) If the Bank directs, the Borrower shall notify the Bank
immediately of all disputes and claims by any Account Debtor; provided, however,
that the Borrower shall notify the Bank immediately of all disputes and claims
in excess of $50,000 by any Account Debtor. The Borrower shall settle or adjust
any and all such disputes and claims at no expense to the Bank. If the Bank
directs, no discount or credit allowance shall be granted thereafter by the
Borrower to any Account Debtor. All Account Debtor payments and all net amounts
received by the Bank in settlement, adjustment or liquidation of any Account
Receivable may be applied by the Bank to the Borrower's Obligations or credited
to a Disbursement Account (subject to collection), as the Bank may deem
appropriate, as more fully described in Section 2.10. If requested by the
Bank, the Borrower will make proper entries in their books, disclosing the
assignment of Accounts Receivable to the Bank.
(b) Unless otherwise consented to by the Bank, the Borrower will,
forthwith upon receipt by the Borrower of all checks, drafts, cash and other
remittances in payment or as proceeds of, or on account of, any of the Accounts
Receivable or other Collateral, deposit the same into one or more special bank
accounts (each, a "Collateral Account" and collectively, the "Collateral
Accounts") with the Bank or such other bank or financial institution as the Bank
shall consent, over which the Bank alone has power of withdrawal, and will
designate with each such deposit the particular Accounts Receivable or other
<PAGE>
item of Collateral upon which the remittance was made including, without
limitations, the "Collateral Account" No. __________ established pursuant to
that certain Collateral Account and Disbursement Account Agreement dated
May 28, 1993 among Americable, Borrower, Cable and the Bank. The Borrower
acknowledges that the maintenance of the Collateral Accounts is solely for the
convenience of the Bank in facilitating its own operations and the Borrower does
not and shall not have any right, title or interest in the Collateral Accounts
or in the amounts at any time appearing to the credit thereof. Said proceeds
shall be deposited in precisely the form received except for the Borrower's
endorsement where necessary to permit collection of items, which endorsement the
Borrower agrees to make. Pending such deposit, the Borrower agrees not to
commingle any such checks, drafts, cash and other remittances with any of their
funds or property, but will hold them separate and apart therefrom and upon an
express trust for the Bank until deposit thereof if made in a Collateral
Account. During any period in which the outstanding principal balance of the
Revolving Loans is zero, the Bank may, in its sole and absolute discretion,
either release to the Borrower the whole or any part of any amounts received by
the Bank from the collection of items of payment and proceeds of any Collateral
or Third Party Collateral or deposit the same into a separate interest bearing
account appropriately designated as a cash collateral account in relation to
this Agreement and retained by the Bank as collateral security for the
Borrower's Obligations in respect of this Agreement. Upon the full and final
liquidation of all Obligations, the Bank will pay over to the Borrower any
excess amounts received by the Bank as payment or proceeds of Collateral,
whether received by the Bank as a deposit in a Collateral Account or received by
the Bank as a direct payment on any of the sums due hereunder.
(c) If any Accounts Receivable, chattel paper or General Intangible
arises out of contracts with the United States or any department, agency, or
instrumentality thereof, the Borrower will, unless the Bank shall otherwise
agree, immediately notify the Bank in writing and execute any instruments and
take any steps required by the Bank in order that all monies due and to become
due under such contracts shall be assigned to the Bank and notice thereof given
to the government under the Federal Assignment of Claims Act of 1940, as
amended.
(d) If any Accounts Receivable is evidenced by chattel paper or
instruments, the Borrower will, unless the Bank shall otherwise agree, deliver
the originals of same to the Bank, appropriately endorsed to the Bank's order
and, regardless of the form of such endorsement, the Borrower hereby expressly
waives presentment, demand, notice of dishonor, protest and notice of protest
and all other notices with respect thereto.
3.3 Inventory.
(a) Unless the Bank shall otherwise agree, if the Borrower sells
Inventory for cash, all full and partial payments therefor shall immediately be
delivered by the Borrower to the Bank in their original form for deposit in a
Collateral Account or other application to reduction of the Obligations. All
such cash shall be held by the Borrower in trust for the Bank and shall be
remitted to the Bank at the end of the day received or at such other time as the
Bank may designate.
<PAGE>
(b) The Bank shall not be liable or responsible in any way for the
safekeeping of any Inventory delivered to it, to any bailee appointed by or for
it, to any warehouseman, or under any other circumstances. The Bank shall not
be responsible for collection of any proceeds or for losses in collected
proceeds held by the Borrower in trust for the Bank. Any and all risk of loss
for any or all of the foregoing shall be upon the Borrower except for such loss
as shall result from the Bank's gross negligence or willful misconduct.
(c) The Borrower shall, upon acquiring an interest in any
Inventory, deliver to the Bank schedules of such Inventory, together with
supplier's invoices, warranties, production, cost and other records as the Bank
may request. If requested by the Bank, the Borrower shall deliver to the Bank
schedules of the sale of any Inventory immediately upon its sale. Any material
change in the value or condition of any Inventory and any errors discovered in
schedules delivered to the Bank shall be reported to the Bank immediately.
(d) The Borrower shall (i) notify the Bank immediately if the
Borrower obtains possession (by return, repossession or otherwise) of any
Inventory which has been sold and shall inform the Bank of the identity of the
returned or repossessed Inventory, the applicable Account Debtor and the amount
of the applicable Account Receivable; (ii) receive such Inventory in trust; and
(iii) resell such Inventory for the Bank unless instructed to deliver it to the
Bank.
3.4 Equipment.
(a) In the event any Equipment is sold, transferred or otherwise
disposed of, unless the Bank shall agree otherwise, the Borrower shall deliver
all of the proceeds of any such sale, transfer or disposition to the Bank, which
proceeds shall be deposited in a Collateral Account or otherwise applied to the
repayment of the Obligations.
(b) The Borrower will, upon request of the Bank, submit to the Bank
a current listing of all of the Borrower's Equipment which listing shall
indicate the type, model, serial number and location of such Equipment.
3.5 Supplemental Documentation. At the Bank's request, the Borrower
shall execute and/or deliver to the Bank, at any time or times hereafter, such
agreements, documents, financing statements, warehouse receipts, bills of
lading, notices of assignment of Accounts Receivable, schedules of Accounts
Receivable assigned, and other written matter necessary or requested by the Bank
to perfect and maintain perfected the Bank's security interest in the Collateral
(all the above hereinafter referred to as "Supplemental Documentation"), in form
and substance acceptable to the Bank, and pay all taxes, fees and other costs
and expenses associated with any recording or filing of the same. The Borrower
hereby irrevocably makes, constitutes and appoints the Bank (and all Persons
designated by the Bank for that purpose) as the Borrower's true and lawful
attorney (and agent-in-fact) to sign the name of the Borrower on any of the
Supplemental Documentation and to deliver any of the Supplemental Documentation
to such Persons as the Bank in its sole and absolute discretion, may elect. The
Borrower agrees that a carbon, photographic, photostatic, and other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement.
<PAGE>
3.6 Power of Attorney. The Borrower irrevocably designates, makes,
constitutes, and appoints the Bank (and all Persons designated by the Bank) as
the Borrower's true and lawful attorney (and agent-in-fact) and the Bank, or the
Bank's agent, may, without notice to the Borrower:
(a) at such time or times hereafter as the Bank or said agent, in
its sole and absolute discretion, may determine, in the Borrower's or the Bank's
name, (i) notify the post office authorities to change the address for delivery
of the Borrower's mail to an address designated by the Bank; (ii) receive, open
and dispose of all mail received at the address of the Borrower; (iii) notify
and/or require the Borrower to notify, any Account Debtor or other Person
obligated under or in respect of any Collateral, of the fact of the Bank's Lien
thereon and of the collateral assignment thereof to the Bank; (iv) direct and/or
require the Borrower to direct, any Account Debtor or other Person obligated
under or in respect of any Collateral, to make payment directly to the Bank of
any amounts due or to become due thereunder or with respect thereto; (v) use the
Borrower's stationery and sign the name of the Borrower to request verification
of Accounts Receivable or other Collateral from Account Debtors; (vi) endorse
the Borrower's name on any checks, notes, drafts or any other items of payment
relating to and/or proceeds of the Collateral which come into the possession of
the Bank or under the Bank's control and apply such payment or proceeds to the
Obligations; (vii) endorse the Borrower's name on any chattel paper, document,
instrument, invoice, freight bill, bill of lading or similar document or
agreement in the Bank's possession relating to Accounts Receivable, Inventory
Equipment or any other Collateral; (viii) use the information recorded on or
contained in any data processing equipment and computer hardware and software to
which the Borrower has access relating to Accounts Receivable, Inventory,
Equipment and/or other Collateral; (ix) if not done by the Borrower, do all acts
and things necessary, in the Bank's sole and absolute discretion, to fulfill the
Borrower's obligations under this Agreement; and;
(b) at such time or times after the occurrence of an Event of
Default, as the Bank or said agent, in its sole and absolute discretion, may
determine, in the Borrower's or the Bank's name: (i) demand, collect, surrender,
release or exchange all or any part of any Collateral or any amounts due
thereunder or with respect thereto; (ii) settle, adjust, compromise, extend or
renew for any period (whether or not longer than the initial period) any and all
sums which are now or may hereafter become due or owing upon or with respect to
any of the Collateral; (iii) enforce, by suit or otherwise, payment or
performance of any of the Collateral; (iv) settle, adjust or compromise any
legal proceedings brought to collect any sums due or owing upon or with respect
to any of the Collateral; (v) exercise all of the Borrower's rights and remedies
with respect to the collection of any amounts due upon or with respect to any of
the Collateral; (vi) if permitted by applicable law, sell or assign the
Collateral upon such terms, for such amounts and at such time or times as the
Bank may deem advisable; (vii) discharge and release the Collateral; (viii)
prepare, file and sign the Borrower's name on any proof of claim in bankruptcy
or similar document against any Account Debtor; (ix) prepare, file and sign the
Borrower's name on any notice of lien, assignment or satisfaction of lien or
similar document in connection with the Accounts Receivable and/or other
Collateral; and (x) do all acts and things necessary, in the Bank's sole and
absolute discretion, to obtain repayment of the Obligations and to fulfill the
Borrower's other obligations under this Agreement.
<PAGE>
Under no circumstances shall the Bank be under any duty to act in regard to
any of the foregoing matters. The costs relating to any of the foregoing
matters, including Attorneys' Fees and out-of-pocket expenses shall be borne
solely by the Borrower whether the same are incurred by the Bank or the Borrower
and the Bank may charge a Disbursement Account or any other account of the
Borrower with the Bank or advance the amount thereof to the Borrower as a
Revolving Loan.
Neither the Bank nor any of its directors, officers, employees or agents
will be liable for any acts of commission or omission nor for any error in
judgment or mistake of fact or law, unless the same shall have resulted from
gross negligence or willful misconduct. This power, being coupled with an
interest, is irrevocable until either (i) all Obligations are paid in full, or
(ii) this Agreement is terminated, whichever shall last occur. The Borrower
expressly waives presentment, demand, notice of dishonor and protest of all
instruments and any other notice to which it might otherwise be entitled.
ARTICLE IV REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make Loans to the
Borrower hereunder, the Borrower makes the following representations and
warranties, all of which shall be true and correct as of the date hereof and
survive the execution of this Agreement:
4.1 Organization. The Borrower and each of its corporate Subsidiaries
is a corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its respective incorporation. All of the
Borrower's other Subsidiaries, if any, are entities duly organized, validly
existing and in good standing under the laws of the jurisdictions of their
respective organization. The Borrower and all of the Subsidiaries are in good
standing and are duly qualified to do business in each state where, because of
the nature of their respective activities or properties, such qualification is
required. On the date hereof, the Borrower and each Subsidiary conducts
business in its own name exclusively and has no trade names, styles or doing
business forms except as disclosed on Schedule 4.1. The Borrower's taxpayer
identification numbers is I.D. No. 41-1602109.
4.2 Authorization. The Borrower is duly authorized to execute and
deliver the Loan Documents and any Supplemental Documentation contemplated by
this Agreement, and are and will continue to be duly authorized to borrow monies
hereunder and to perform its obligations under the Loan Documents and any
Supplemental Documentation contemplated by this Agreement and the borrowings
hereunder do not and will not require any consent or approval of any
governmental agency or authority.
4.3 No Conflicts. The execution, delivery and performance by the
Borrower of the Loan Documents and any Supplemental Documentation contemplated
by this Agreement, do not and will not conflict with (a) any provision of law,
(b) the charter or by-laws of the Borrower, (c) any agreement binding upon the
Borrower, or (d) any court or administrative order or decree applicable to the
Borrower, and do not and will not require, or result in, the creation or
imposition of any Lien on any asset of the Borrower or any Subsidiary except as
provided herein.
<PAGE>
4.4 Validity and Binding Effect. The Loan Documents and any
Supplemental Documentation contemplated by this Agreement, when duly executed
and delivered will be, legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of creditors'
rights or by general principles of equity limiting the availability of equitable
remedies.
4.5 No Default. Neither the Borrower nor any Subsidiary is in default
under any agreement or instrument to which the Borrower or any Subsidiary is a
party or by which any of its respective properties or assets is bound or
affected, which default (a) might materially and adversely affect the Bank's
Lien on or rights with respect to any Collateral or Third Party Collateral or
(b) constitutes an Adverse Event. No Event of Default or Unmatured Event of
Default has occurred and is continuing.
4.6 Financial Statements. Americable's audited consolidated and
consolidating financial statement as of December 31, 1995 and Americable's
unaudited consolidated and consolidating financial statement as of May 31, 1996,
copies of which have been furnished to the Bank, have been prepared in
conformity with generally accepted accounting principles promulgated by the
Financial Accounting Standards Board and applied on a basis consistent with that
of the preceding fiscal year and period and present fairly the financial
condition of Americable and its Subsidiaries as at such dates and the results of
their operations for the periods then ended, subject (in the case of the interim
financial statement) to year-end audit adjustments. Since December 31, 1995, no
Adverse Event has occurred.
4.7 Insurance. Schedule 4.7 sets forth a summary of the property and
casualty insurance program carried by the Borrower and the Subsidiaries on the
date hereof, including the insurer's(s') name(s), policy number(s), expiration
date(s), amount(s) of coverage, type(s) of coverage, the annual premium(s),
Best's policyholder's and financial size ratings of the insurers, exclusions,
deductibles and self-insured retention, and describes in detail any
retrospective rating plan, fronting arrangement or any other self-insurance or
risk assumption agreed to by the Borrower or any Subsidiary or imposed upon the
Borrower or any Subsidiary by any such insurer. This summary also includes any
self-insurance program that is in effect.
4.8 Litigation; Contingent Liabilities
(a) Except for those referred to in Schedule 4.8, no claims
litigation, arbitration proceedings or governmental proceedings are pending or
threatened against or are affecting the Borrower or any Subsidiary.
(b) Other than any liability incident to the claims, litigation or
proceedings disclosed in Schedule 4.8, neither the Borrower nor any Subsidiary
has any contingent liabilities which are material to the Borrower or any
Subsidiary.
<PAGE>
4.9 Liens. None of the Collateral or other property or assets of the
Borrower or any Subsidiary is subject to any Lien (including, without
limitation, Liens pursuant to Capitalized Leases under which the Borrower or any
Subsidiary is a lessee) except: (a) Liens in favor of the Bank; (b) Liens for
current Taxes not delinquent or Taxes being contested in good faith and by
appropriate proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained; (c) carriers',
warehousemen's, mechanics', materialmen's and other like statutory Liens arising
in the ordinary course of business securing obligations which are not overdue or
which are being contested in good faith and by appropriate proceedings and as to
which such reserves or other appropriate provisions as may be required by GAAP
are being maintained; and (d) Liens listed on Schedule 6.12.
4.10 Subsidiaries. The Borrower has no Subsidiaries except as listed on
Schedule 4.10. The Borrower and the Subsidiaries own the percentage of the
Subsidiaries as set forth on Schedule 4.10.
4.11 Partnerships. Neither the Borrower nor any Subsidiary is a partner
or joint venturer in any partnership or joint venture other than the
partnerships and joint ventures listed on Schedule 4.11.
4.12 Business Locations. On the date hereof the office where the
Borrower keeps its books and records concerning Accounts Receivable and other
Collateral, and the Borrower's chief places of business and chief executive
offices, is located at the address of the Borrower set forth on the signature
pages of this Agreement, and all of the Borrower's other places of business and
all locations and places of business of the Subsidiaries are listed on Schedule
4.12. On the date hereof, the names of any landlords and/or mortgagees of any
of such locations are identified in Schedule 4.12.
4.13 Collateral Locations. On the date hereof the Borrower's Inventory,
Equipment and, if applicable, fixtures (except any part thereof which prior to
the execution of this Agreement, the Borrower shall have advised the Bank in
writing consists of Collateral normally used in more than one state) is located
at the addresses set forth in Schedule 4.13. The legal descriptions of any real
property on which any fixtures are located and the name(s) of the record owner
of such real property is set forth in Schedule 4.13.
4.14 Eligibility of Collateral. (a) All of the Accounts Receivable are
and will continue to be bona fide existing obligations created by the sale of
goods, the rendering of services, or the furnishing of other good and sufficient
consideration to Accounts Debtors in the regular course of business and all
shipping or delivery receipts and other documents furnished or to be furnished
to the Bank in connection therewith are and will be genuine; (b) Each Account
Receivable or item of Inventory which the Borrower shall, expressly or by
implication, request the Bank to classify as an Eligible Account Receivable or
as Eligible Inventory, respectively, will, as of the time when such request is
made, conform in all respects to the requirements of such classification set
forth in the respective definitions of "Eligible Account Receivable" and
"Eligible Inventory" set forth herein; (c) with respect to each schedule of
Inventory delivered to the Bank pursuant to Section 3.3: (i) the descriptions,
origins, size, qualities, quantities, weights, and markings of all goods stated
thereon, or on any attachment thereto, are true and correct in all material
<PAGE>
respects; (ii) to the best of the Borrower's knowledge, all goods stated
thereon have been produced by the Borrower in compliance with all requirements
of the Fair Labor Standards Act; and (iii) none of the goods stated thereon are
defective, of second quality, used, or goods returned after shipment, except
where described as such; and (iv) all Inventory not included on such schedule
has been previously scheduled.
4.15 Control of Collateral; Lease of. The Borrower is not now
conducting, or permitting or suffering to be conducted, any activities pursuant
to or in conjunction with which any of the Collateral is now, or will be (while
any Obligations exist or this Agreement is in effect), in the possession or
control of, any Subsidiary, Obligor (other than the Borrower) or Related Party.
Except as listed on Schedule 4.15, none of the machinery, equipment or real
property used by the Borrower or any Subsidiary is subject to a lease (excluding
only Capitalized Leases included on Schedule 6.12) under which the Borrower or
any Subsidiary is the lessee.
4.16 Patents, Trademarks, Etc. The Borrower and the Subsidiaries
possess or have the right to use all of the patents, trademarks, trade names,
service marks and copyrights, and applications therefor, and all technology,
know-how, processes, methods and designs used in or necessary for the conduct of
their businesses, without known conflict with the rights of others. All such
licenses, patents, trademarks, trade names, service marks and copyrights, and
applications therefor existing on the date hereof are listed on Schedule 4.16.
4.17 Solvency. The Borrower and each Subsidiary now has capital
sufficient to carry on its respective business and transactions and all business
and transactions in which it is about to engage and is now solvent and able to
pay its respective debts as they mature, and the Borrower and each Subsidiary
now owns property having a value, greater than the amount required to pay the
Borrower's or such Subsidiary's debts.
4.18 Contracts; Labor Matters. Except as disclosed on Schedule 4.18:
(a) neither the Borrower nor any Subsidiary is a party to any contract or
agreement, or subject to any charge, corporate restriction, judgment, decree or
order, the performance of which constitutes an Adverse Event; (b) no labor
contract to which the Borrower or any Subsidiary is subject is scheduled to
expire during the original term of this Agreement; and (c) on the date of this
Agreement (i) neither the Borrower nor any Subsidiary is a party to any labor
dispute and (ii) there are no strikes or walkouts relating to any labor
contracts to which the Borrower or any Subsidiary is subject.
4.19 ERISA. Each Plan complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event, other than a Reportable Event for
which the reporting requirements have been waived by regulations of the PBGC,
has occurred and is continuing with respect to any Plan. All of the minimum
funding standards applicable to such Plans have been satisfied and there exists
no event or condition which would permit the institution of proceedings to
terminate any Plan under Section 4042 of ERISA. The Current value of the Plans'
benefits guaranteed under Title IV of ERISA does not exceed the current value of
the Plans' assets allocable to such benefits. Except as listed on Schedule 4.8,
neither the Borrower nor any Subsidiary has any contingent liability with
respect to any "employee welfare benefit plans," as such term is defined in
Section 3(1) of ERISA, which covers retired or terminated employees and their
beneficiaries.
<PAGE>
4.20 Regulation U. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (as
defined in Regulation U of the Federal Reserve Board), and no part of the
proceeds of any Loan hereunder will be used to purchase or carry margin stock or
for any other purpose which would violate any of the margin requirements of the
Federal Reserve Board.
4.21 Compliance. The Borrower and each Subsidiary is in material
compliance with all statutes and governmental rules and regulations applicable
to it. To the best of the Borrower's knowledge, all Inventory of the Borrower's
has been produced in compliance with all requirements of the Fair Labor
Standards Act.
4.22 Taxes. The Borrower and each Subsidiary has filed all federal,
state and local tax returns required to be filed and has paid, or made adequate
provisions for the payment of, all Taxes due and payable pursuant to such
returns and pursuant to any assessments made against it or any of its property
(other than Taxes the amount or validity of which is currently being contested
in good faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower). No tax
Liens have been filed and no material claims are being asserted with respect to
any such Taxes. The charges, accruals and reserves on the books of the Borrower
in respect of Taxes are adequate. The federal income tax liability of the
Borrower and the Subsidiaries has been audited by the Internal Revenue Service
and has been finally determined and satisfied (or the time for audit has
expired) for all tax years up to and including the tax year ended December 31,
1988. The Borrower is not aware of any proposed assessment against the Borrower
or any Subsidiary for additional Taxes (or any basis for any such assessment)
which might be material to the Borrower and the Subsidiaries taken as a whole.
4.23 Investment Company Act. Neither the Borrower nor any Subsidiary is
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
4.24 Public Utility Holding Company Act. Neither the Borrower nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
4.25 Environmental and Safety and Health Matters. Except as disclosed
on Schedule 4.25: (a) the operations of the Borrower and each Subsidiary
complies in all respects with (i) all applicable Environmental Laws, and (ii)
all applicable Occupational Safety and Health Laws; (b) none of the operations
of the Borrower or any Subsidiary is subject to any judicial or administrative
proceeding alleging the violation of any Environmental Law or Occupational
Safety and Health Law; (c) none of the operations of the Borrower or any
Subsidiary is the subject of federal or state investigation evaluating whether
any remedial action is needed to respond to (i) a spillage, disposal or release
into the environment of any Hazardous Material or other hazardous, toxic or
dangerous waste, substance or constituent, or other substance, or (ii) any
unsafe or unhealthful condition at any premises of the Borrower or any
Subsidiary; (d) neither the Borrower nor any Subsidiary has filed any notice
under any Environmental Law or Occupation Safety and Health Law indicating or
reporting (i) any past or present spillage, disposal or release into the
environment of, or treatment, storage or disposal of, any Hazardous Material or
<PAGE>
other hazardous, toxic or dangerous waste, substance or constituent, or other
substance or (ii) any unsafe or unhealthful condition at any premises of the
Borrower or any Subsidiary; and (e) neither the Borrower nor any Subsidiary has
any known contingent liability in connection with (i) any spillage, disposal or
release into the environment of, or otherwise with respect to, any Hazardous
Material or other hazardous, toxic or dangerous waste, substance or constituent,
or other substance, or (ii) any unsafe or unhealthful condition at any premises
of the Borrower or any Subsidiary.
ARTICLE V AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until all Obligations of the
Borrower hereunder are paid in full, the Borrower agrees that unless the Bank
shall otherwise consent in writing, it will:
5.1 Financial Statements and Other Reports
5.1.1 Financial Reports. Furnish to the Bank in form satisfactory to the
Bank:
(a) Annual Audit Report. As soon as available and in any event
within 120 days after the end of each fiscal year of Americable, the annual
audit report of Americable and its Subsidiaries prepared on a consolidating and
consolidated basis in conformity with GAAP, consisting of at least statements of
income, cash flow, changes in financial position and stockholders' equity, and a
consolidated balance sheet as at the end of such year, setting forth in each
case in comparative form corresponding figures from the previous annual audit,
certified, without qualification, by independent certified public accountants of
recognized standing selected by Americable and acceptable to the Bank, together
with any management letters, management reports or other supplementary comments
or reports to Americable or its board of directors furnished by such
accountants.
(b) Accountant's Certificate. Together with the audited financial
statements required under Section 5.1.1(a), a certificate from the accounting
firm performing such audit (i) acknowledging its understanding that the Bank and
any Participant is relying on such audit report and (ii) stating that it has
reviewed this Agreement and that in performing its examination, nothing came to
its attention that caused it to believe that any Event of Default or Unmatured
Event of Default exists, or, if such Unmatured Event of Default or Event of
Default exists, describing its nature.
(c) Monthly Financial Statement. As soon as available and in any
event within 30 days after the end of each month of each fiscal year of the
Borrower, a copy of the unaudited financial statement of the Borrower and its
Subsidiaries prepared in the same manner as the audit report referred to in
Section 5.1.1(a), signed by the Borrower's chief financial officer and
consisting of at least consolidated statements of income, cash flow, changes in
financial position and stockholders' equity for and its Subsidiaries for such
month and for the period from the beginning of such fiscal year to the end of
such month, and a consolidated balance sheet of the Borrower as at the end of
such month.
<PAGE>
(d) Projections. As soon as available and in any event not later
than 15 days following the last day of each fiscal year of the Borrower, a
projected financial statement of the Borrower and its Subsidiaries prepared in
the same manner as the audit report referred to in Section 5.1.1(a), signed by
the Borrower's chief financial officer and presenting fairly the Borrower's best
good faith projections of the financial position and results of operations of
the Borrower and its Subsidiaries for each month of the following fiscal year.
(e) Officer's Certificate. Together with the financial statements
furnished by the Borrower under Section 5.1.1(a) and (c), a certificate of the
Borrower's chief financial officer, dated the date of such annual audit report
or such monthly financial statement, as the case may be, to the effect that no
Event of Default or Unmatured Event of Default has occurred and is continuing,
or, if there is any such event, describing it and the steps, if any, being taken
to cure it, and containing a computation of, and showing compliance with, each
of the financial ratios and restrictions contained in Articles V and VI and
Supplement A.
(f) GAAP Changes. In the event that a material change occurs, in
the Bank's judgment, in GAAP, either the Bank and the Borrower shall amend, in
writing, the covenants in this Agreement, Supplement A, and the other Loan
Documents which are calculated on the basis of GAAP to reflect such change, or,
if the Bank and the Borrower fail to agree on and enter into such an amendment,
the Bank shall have the right to deem such change in GAAP to be an Event of
Default.
5.1.2 Agings; Ineligible Accounts Receivable Certification. Within 15
days after the end of each month, (a) an aging of all Accounts Receivable,
including, without limitation, a reconciliation to the aging report delivered to
the Bank for the preceding month, (b) a certification of ineligible Accounts
Receivable and (c) an aging of all accounts payable as of the end of the
preceding month, each in form and content acceptable to the Bank.
5.1.3 Inventory Certification. Within 15 days after the end of each
month, an Inventory certification report as of the end of the preceding month
for all Inventory locations, in form and content acceptable to the Bank.
5.1.4 Other Reports.
(a) SEC and Other Reports. Promptly upon the making or filing
thereof, copies of all financial statements, reports and proxy statements mailed
to Americable's shareholders, and copies of all registration statements,
periodic reports and other documents filed with the Securities and Exchange
Commission (or any successor thereto) or any national securities exchange.
(b) Report of Change in Subsidiaries or Partnerships. Promptly
from time to time, a written report of any change in the list of the Borrower's
Subsidiaries set forth on Schedule 4.10 or in the list of partnerships and joint
ventures set forth on Schedule 4.11.
(c) Patents, Etc. Promptly from time to time, a written report of
any change to the list of patents, trademarks, copyrights and other information
set forth in Schedule 4.16.
(d) Other Reports. The information required to be provided
pursuant to other provisions of this Agreement, and such other reports from
time to time requested by the Bank.
<PAGE>
5.2 Notices. Notify the Bank in writing of any of the following
immediately upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken by the Person(s) affected with respect
thereto:
(a) Default. The occurrence of (i) any Event of Default or
Unmatured Event of Default, and (ii) to the extent not included in clause (i)
above, the default by the Borrower, any other Obligor or any Subsidiary under
any note, indenture, loan agreement, mortgage, lease, deed or other material
similar agreement to which the Borrower, any other Obligor or any Subsidiary, as
appropriate, is a party or by which it is bound.
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding affecting the Borrower, any other Obligor,
any Subsidiary, any Collateral or any Third Party Collateral, whether or not
considered to be covered by insurance which could result in liability to the
Borrower in an amount which exceeds $50,000.
(c) Judgment. The entry of any judgment or decree against the
Borrower, any other Obligor or any Subsidiary, if the amount of such judgment
exceeds $50,000.
(d) ERISA. With respect to any Plan, the occurrence of a
Reportable Event (other than a Reportable Event for which the reporting
requirements have been waived by PBGC regulations) or any "prohibited
transaction" (as defined in Section 4975 of the Code), a notice specifying the
nature thereof and what action the Borrower proposes to take with respect
thereto, and, when received, copies of any notice from PBGC of intention to
terminate or have a trustee appointed for any Plan; or the incurrence of any
material increase in the contingent liability of the Borrower, any other Obligor
or any Subsidiary with respect to any "employee welfare benefit plan" as defined
in Section 3(1) of ERISA which covers retired employees and their beneficiaries.
(e) Change in Collateral Locations. If any of the Borrower's
Inventory or Equipment is placed in locations other than those identified in
this Agreement or in Schedule 4.13.
(f) Change in Place(s) of Business. Any proposed opening, closing
or other change in the list of offices and other places of business of the
Borrower and the Subsidiaries set forth in Schedule 4.12, and any opening,
closing or other change in the offices and other places of business of each
other Obligor.
(g) Change of Name. Any change in the name of the Borrower, any
other Obligor or any Subsidiary, and any change in the list of trade names and
trade styles set forth in Schedule 4.1.
(h) Environmental and Safety and Health Matters. Receipt of any
notice that the operations of the Borrower, any other Obligor or any Subsidiary
are not in full compliance with requirements of any applicable Environmental Law
or any Occupational Safety and Health Law; receipt of notice that the Borrower,
any other Obligor or any Subsidiary is subject to federal, state or local
investigation evaluating whether any remedial action is needed to respond to (i)
any spillage, disposal or release into the environment of any Hazardous Material
or other hazardous, toxic or dangerous waste, substance or constituent, or other
substance, or (ii) any unsafe or unhealthful condition at any premises of the
Borrower, any other Obligor or any Subsidiary; or receipt of notice that any
properties or assets of the Borrower, any other Obligor or any Subsidiary are
subject to an Environmental Lien.
<PAGE>
(i) Adverse Event. The occurrence of an Adverse Event.
(j) Default by Others. Any material default by any Account Debtor
or other Person obligated to the Borrower, any other Obligor, or any Subsidiary,
under any contract, chattel paper, note or other evidence of amounts payable or
due or to become due to the Borrower, such Obligor or Subsidiary if the amount
payable under such contract, chattel paper, note or other evidence of amounts
payable or due or to become due is material.
(k) Moveable Collateral. If any of the Collateral or Third Party
Collateral shall consist of goods of a type normally used in more than one
state, whether or not actually so used, any use of any such goods in any state
other than a state in which the Borrower shall have previously advised the Bank
such goods will be used. The Borrower agrees that such goods will not, unless
the Bank shall otherwise consent in writing, be used outside the continental
United States or in Louisiana; provided, however, that the Borrower may sell
Inventory to Account Debtors located in Louisiana.
(l) Change in Management or Line(s) of Business. Any substantial
change in the senior management of the Borrower or any Subsidiary, or any change
in the Borrower's or any Subsidiary's line(s) of business.
(m) Other Events. The occurrence of such other events as the Bank
may from time to time specify.
5.3 Existence. Maintain and preserve, and cause each Subsidiary to
maintain and preserve, its respective existence as a corporation or other form
of business organization, as the case may be, and all rights, privileges,
licenses, patents, patent rights, copyrights, trademarks, trade names,
franchises and other authority to the extent material and necessary for the
conduct of its respective business in the ordinary course as conducted from time
to time.
5.4 Nature of Business. Engage, and cause each Subsidiary to engage,
in substantially the same fields of business as it is engaged in on the date
hereof.
5.5 Books, Records and Access. Maintain, and cause each Subsidiary to
maintain, complete and accurate books and records (including, without
limitation, records relating to Accounts Receivable, Inventory, Equipment and
other Collateral), in which full and correct entries in conformity with GAAP
shall be made of all dealings and transactions in relation to its respective
business and activities. Cause its books and records as at the end of any
calendar month to be posted and closed not more than 30 days after the last
business day of such month. Permit, and cause each Subsidiary to permit, access
by the Bank and its agents or employees to the books and records of the Borrower
and any Subsidiary at the Borrower's or such Subsidiary's place or places of
business at intervals to be determined by the Bank and without hindrance or
delay, and permit, and cause each Subsidiary to permit, the Bank or its agents
and employees to inspect the Borrower's Inventory and Equipment and any
Subsidiary's inventory and equipment, and to inspect, audit, check and make
copies and/or extracts from the books, records, journals, orders, receipts,
correspondence and other data relating to Inventory, Accounts Receivable,
chattel paper, General Intangibles, Equipment and any other Collateral or
Third Party Collateral, or to any other transactions between the parties hereto.
Any and all such inspections and/or audits shall be at the Borrower's expense
and the Bank may charge a Disbursement Account or any other account of the
<PAGE>
Borrower with the Bank or advance the amount thereof to the Borrower as a
Revolving Loan; provided that, so long as no Event of Default or Unmatured Event
of Default has occurred and is continuing, the Borrower's obligations to
reimburse the Bank for its inspections and/or audits shall be limited to $450
per day and an aggregate amount of $4,000 during each calendar year determined
on a consolidated basis for inspections and/or audits under this Agreement and
the Americable Loan Agreement, plus, in all cases, the Bank's out-of pocket
costs and expenses, provided, further that any such inspection and/or audits
made while any Event of Default or Unmatured Event of Default has occurred and
is continuing shall not be subject to such limitation.
5.6 Insurance. Maintain, and cause each Subsidiary to maintain,
insurance to such extent and against such hazards and liabilities as is commonly
maintained by companies similarly situated or as the Bank may reasonably request
from time to time. Keep the Collateral properly housed and insured for its full
insurable value against loss or damage by fire, theft, explosion, sprinklers,
collision (in the case of motor vehicles) and such other risks as are
customarily insured against by persons engaged in business similar to that of
the Borrower, with such companies, in such amounts and under policies in such
form as shall be satisfactory to the Bank. Certificates of such policies of
insurance have been delivered to the Bank prior to the date hereof together with
evidence of payment of all premiums therefor. The Borrower shall cause each
issuer of an insurance policy to provide the Bank, within 15 days after the date
hereof, with an endorsement or an independent instrument (a) substantially in
the form of Exhibit B or such other form and containing such other terms as
shall be acceptable to the Bank and (b) showing loss payable to the Bank and, if
required by the Bank, naming the Bank as an additional insured. The Borrower
hereby directs all insurers under such policies of insurance to pay all proceeds
payable thereunder directly to the Bank. The Borrower irrevocably makes,
constitutes and appoints the Bank and any Person whom the Bank may from time to
time designate (and all officers, employees or agents designated by the Bank or
such Person) as the Borrower's true and lawful attorney (and agent-in-fact) for
the purpose of making, settling and adjusting claims under such policies of
insurance, endorsing the name of the Borrower on any check, draft, instrument
or other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance. In the event the Borrower at any time or times hereafter shall fail
to obtain or maintain any of the policies of insurance required herein or to pay
any premium in whole or in part relating thereto, the Bank, without waiving or
releasing any obligations or default by the Borrower hereunder, may at any
time or times thereafter (but shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto which the Bank deems advisable. All sums so
disbursed by the Bank, including reasonable Attorneys' Fees, court costs,
expenses and other charges relating thereto, shall be payable on demand by the
Borrower to the Bank, and the Bank may, in its sole and absolute discretion,
charge a Disbursement Account or any other account of the Borrower with the Bank
or advance such sums to the Borrower as a Revolving Loan.
5.7 Insurance Survey. At the request of the Bank, provide to the Bank
at least annually within 90 days of the end of Americable's fiscal year, a
certificate signed by its chief financial officer that attests to and summarizes
the property and casualty insurance program carried by the Borrower and the
Subsidiaries. This summary shall include the insurer's(s') name, policy
number(s), expiration date(s), amount(s) of coverage, type(s) of coverage, the
annual premium(s), Best's policyholder's and financial size ratings of the
<PAGE>
insurers, exclusions, deductibles and self-insured retention and shall describe
in detail any retrospective rating plan, fronting arrangement or any other self-
insurance or risk assumption agreed to by the Borrower or any Subsidiary or
imposed upon the Borrower or any Subsidiary by any such insurer, as well as any
self-insurance program that is in effect. The Borrower shall (a) notify the
Bank in writing at least 30 days prior to any cancellation or material change of
any such insurance by the Borrower or any Subsidiary and (b) within five
business days after receipt of any notice (whether formal or informal) thereof,
of any cancellation or change in any of its insurance by any of its insurers or
any material change in the cost thereof or which reduces the policyholder's or
financial size ratings of the insurance carriers of the Borrower or any
Subsidiary, as established by Best's Insurance Reports. Annually, the Bank
Shall have the right to request the Borrower to have a risk management survey
completed by a recognized independent risk management consultant acceptable to
it and the Bank which will identify, quantify and assess any catastrophic
uninsured, underinsured or self-insured exposures faced by the Borrower and the
Subsidiaries. The cost of such survey shall be borne solely by the Borrower. A
copy of the results of each such a survey shall be promptly delivered by the
Borrower to the Bank.
5.8 Repair. Maintain, preserve and keep, and cause each Subsidiary to
maintain, preserve and keep, its properties in good repair, working order and
condition, and from time to time make, and cause each Subsidiary to make, all
necessary and proper repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained.
5.9 Taxes. Pay, and cause each Subsidiary to pay, when due, all of its
Taxes, unless and only to the extent that the Borrower or such Subsidiary, as
the case may be, is contesting such Taxes in good faith and by appropriate
proceedings and the Borrower or such Subsidiary has set aside on its books such
reserves or other appropriate provisions therefore as may be required by GAAP.
5.10 Compliance. Comply, and cause each Subsidiary to comply, with all
statutes and governmental rules and regulations applicable to it, including,
without limitation, the Fair Labor Standards Act.
ARTICLE VI NEGATIVE COVENANTS
From the date of this Agreement and thereafter until all Obligations are
paid in full, the Borrower agrees that, unless the Bank shall otherwise consent
in writing, it will not, and will not permit any Subsidiary to, do any of the
following:
6.1 Merger. Merge or consolidate or enter into any analogous
reorganization or transaction with any Person.
6.2 Sale of Assets. Sell, transfer, convey, lease, assign or otherwise
dispose (with or without recourse) of any of its assets (including, without
limitation, any Accounts Receivable, instruments or chattel paper) except for
sales and leases of Inventory in the ordinary course of business.
6.3 Purchase of Assets. Purchase or lease or otherwise acquire all or
substantially all the assets of any Person.
<PAGE>
6.4 ERISA. Permit any condition to exist in connection with any Plan
which might constitute grounds for the PBGC to institute proceedings to have
such Plan terminated or a trustee appointed to administer such Plan; permit any
Plan to terminate under any circumstances which would cause the lien provided
for in Section 4068 of ERISA to attach to any property, revenue or asset of the
Borrower or any Subsidiary; or permit the underfunded amount of Plan benefits
guaranteed under Title IV of ERISA to exceed $50,000.
6.5 Changes in Collateral or Business Locations. Change (a) the
location of its chief executive office or chief place of business; (b) its name;
or (c) the locations where it stores or maintains Inventory or Equipment
without, in each case, at least 30 days' prior written notice to the Bank.
6.6 Subsidiaries, Partnerships and Joint Ventures. Either: (a) form
or acquire any corporation which would thereby become a Subsidiary; or (b) form
or enter into any partnership as a limited or general partner or into any joint
venture.
6.7 Other Agreements. Enter into any agreement, bond, note or other
instrument with or for the benefit of any Person other than the Bank which would
(a) prohibit the Borrower or any Subsidiary from granting, or otherwise limit
the ability of the Borrower or any Subsidiary to grant, to the Bank any Lien on
any assets or properties of the Borrower or any Subsidiary, or (b) be violated
or breached by the Borrower's performance of its obligations under the Loan
Documents.
6.8 Restricted Payments. Purchase or redeem any shares of its stock,
declare or pay any dividends thereon (other than stock dividends and dividends
payable to Americable), make any distribution to stockholders as such (other
than Americable) or set aside any funds for any such purpose, and not prepay,
purchase or redeem any subordinated Indebtedness of the Borrower or any
Subsidiary; provided, however, that, so long as no Event of Default or
Unmatured Event of Default has occurred and is continuing or would result
therefrom, the Borrower may make payments to Americable or NSU, as the case may
be (a) with respect to any tax obligation of the Borrower or any of its
Subsidiaries actually paid by Americable or NSU (less any refund actually
received by Americable or NSU), and (b) following receipt by the Bank of the
annual audited financial statements of the Borrower and its Subsidiaries, with
respect to interest on Subordinated Debt and dividends payable on the stock of
the Borrower owing to Americable by the Borrower, in an amount not to exceed
50% of Excess Cash Flow for the immediately preceding fiscal year to be applied
first to accrued interest on Subordinated Debt and second to dividends. Any
Excess Cash Flow which is not paid to the Borrower in the next succeeding fiscal
year may not be included in the determination of Excess Cash Flow for such
fiscal year.
6.9 Borrower's and Subsidiaries' Stock. Purchase or otherwise acquire
any shares of the stock of the Borrower, and not take any action which will
result in a decrease in the Borrower's or any Subsidiary's ownership interest in
any Subsidiary.
6.10 Leases. Enter into or permit to exist any arrangements for the
leasing by the Borrower or any Subsidiary, as lessee, of any real or personal
property (or any interest therein) under leases (other than Capitalized Leases),
which require the payment by the Borrower and the Subsidiaries on a consolidated
basis of rental amounts in the aggregate in excess of $900,000 in any one fiscal
year.
<PAGE>
6.11 Investments. Acquire for value, make, have or hold any
Investments, except:
(a) advances to employees of the Borrower or the Subsidiaries for travel
or other ordinary business expenses, provided that the aggregate amount
outstanding at any one time shall not exceed $50,000 in the aggregate for all
employees; (b) advances to subcontractors and suppliers in maximum aggregate
amounts reasonably acceptable to the Bank; (c) extensions of credit in the
nature of Accounts Receivable or notes receivable arising from the sale of goods
and services in the ordinary course of business; (d) shares of stock,
obligations or other securities received in settlement of claims arising in the
ordinary course of business; (e) Investments (other than Investments in the
nature of loans or advances) outstanding on the date hereof in Subsidiaries by
the Borrower and other Subsidiaries; (f) other Investments outstanding on the
date hereof and listed on Schedule 6.11; and (g) other Investments consented to
by the Bank in writing.
6.12 Indebtedness. Incur, create, issue, assume or suffer to exist any
Indebtedness, including, without limitation, Indebtedness as lessee under any
Capitalized Lease, except: (a) Indebtedness under the terms of this Agreement
and other Indebtedness to the Bank; (b) Subordinated Debt; (c) Indebtedness
hereafter incurred in connection with Liens permitted under Section 6.13 (d);
(d) other Indebtedness outstanding on the date hereof and listed on Schedule
6.12; and (e) other Indebtedness approved in writing by the Bank.
6.13 Liens. Create, incur, assume or suffer to exist any Lien with
respect to any property, revenues or assets now owned or hereafter arising or
acquired, except: (a) Liens for current Taxes not delinquent or Taxes being
contested in good faith and by appropriate proceedings and as to which such
reserves or other appropriate provisions as may be required by GAAP are being
maintained; (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, and other like statutory Liens arising in the ordinary course of
business securing obligations which are not overdue or which are being contested
in good faith and by appropriate proceedings and as to which such reserves or
other appropriate provisions as may be required by GAAP are being maintained;
(c) pledges or deposits in connection with workers' compensation, unemployment
insurance and other social security legislation; (d) Liens in connection with
Capital Expenditures attaching only to the property being acquired if the
Indebtedness secured thereby does not exceed 100% of the fair market value of
such property at the time of acquisition thereof; (e) Liens in favor of the
Bank; (f) Liens referred to in Section 4.9; and (g) Liens consented to by the
Bank in writing.
6.14 Contingent Liabilities. Except for the Americable Guaranty,
either: (a) endorse, guarantee, contingently agree to purchase or to provide
funds for the payment of, or otherwise become contingently liable upon, any
obligation of any other Person, except by the endorsement of negotiable
instruments for deposit or collection (or similar transactions) in the ordinary
course of business, or (b) agree to maintain the net worth or working capital
of, or provide funds to satisfy any other financial test applicable to, any
other Person.
6.15 Change in Accounts Receivable. After the occurrence of an Event of
Default or receipt of notice from the Bank that the Bank intends to commence
direct collection of Accounts Receivable, permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account Receivable, including any of the terms
relating thereto.
<PAGE>
6.16 Unconditional Purchase Obligations. Enter into or be a party to
any contract for the purchase of materials, supplies or other property or
services, if such contract requires that payment be made by it regardless of
whether or not delivery is ever made of such materials, supplies or other
property or services.
6.17 Use of Proceeds. Use or permit any proceeds of the Loans to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying any margin stock" within the
meaning of Regulation U of the Federal Reserve Board, as amended from time to
time, and furnish to the Bank upon request, a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U of the
Federal Reserve Board.
6.18 Transactions with Related Parties. Enter into or be a party to any
transaction or arrangement, including, without limitation, the purchase, sale,
lease or exchange of property or the rendering of any service, with any Related
Party, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person not a Related
Party.
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default:
(a) Non Payment. The Borrower or any other Obligor shall fail to
pay, when due or declared due, any of the Obligations;
(b) Non-Payment of Other Indebtedness. The Borrower, any other
Obligor or any Subsidiary shall fail to pay, when due, whether by acceleration
or otherwise (subject to any applicable grace period), any Indebtedness of, or
guaranteed by, the Borrower, any other Obligor or any Subsidiary;
(c) Acceleration of Other Indebtedness. Any event or condition
shall occur which results in the acceleration of the maturity of any
Indebtedness of, or guaranteed by, the Borrower, any other Obligor or any
Subsidiary or enables the holder or holders of such other Indebtedness or any
trustee or agent for such holders (any required notice of default having been
given and any applicable grace period having expired) to accelerate the maturity
of such other Indebtedness;
(d) Other Obligations. The Borrower, any other Obligor or any
Subsidiary shall fail to pay, when due, whether by acceleration or otherwise, or
perform or observe (subject to any applicable grace period or waiver of such
default) (i) any obligation or agreement of the Borrower, any other Obligor or
any Subsidiary to or with the Bank (other than any Obligation) or (ii) any
material obligation or agreement of the Borrower, any other Obligor or any
Subsidiary to or with any other Person (other than (A) any such material
obligation or agreement constituting or related to Indebtedness, (B) accounts
payable arising in the ordinary course of business, and (C) any material
obligation or agreement of any Subsidiary to the Borrower or to any other
Subsidiary), except only to the extent that the occurrence of any such failure
<PAGE>
is being contested by the Borrower, such other Obligor or such Subsidiary, as
the case may be, in good faith and by appropriate proceedings and the Borrower,
such other Obligor or such Subsidiary, as applicable, shall have set aside on
its books such reserves or other appropriate provisions therefore as may be
required by GAAP;
(e) Insolvency. The Borrower, any other Obligor or any Subsidiary
becomes insolvent, or generally fails to pay, or admits in writing its inability
to pay, its debts as they mature, or applies for, consents to, or acquiesces in,
the appointment of a trustee, receiver or other custodian for the Borrower, any
other Obligor or any Subsidiary, or for a substantial part of the property of
the Borrower, any other Obligor or any Subsidiary, or makes a general assignment
for the benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for the
Borrower, any other Obligor or any Subsidiary or for a substantial part of the
property of the Borrower, any other Obligor or any Subsidiary and is not
discharged or dismissed within 30 days; or any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is instituted by or against the Borrower,
any other Obligor or any Subsidiary and, if instituted against the Borrower any
other Obligor or any Subsidiary, shall have been consented to or acquiesced in
by the Borrower, such Obligor or such Subsidiary, or shall remain undismissed
for 30 days; or any warrant of attachment or similar legal process is issued
against any substantial part of the property of the Borrower, any other Obligor
or any Subsidiary;
(f) ERISA. The institution by the Borrower or any ERISA Affiliate
of steps to terminate any Plan if, in order to effectuate such termination, the
Borrower or any ERISA Affiliate would be required to make a contribution to such
Plan or would incur a liability or obligation to such Plan, in excess of
$50,000; or the institution by the PBGC of steps to terminate any Plan;
(g) Non-Compliance With this Agreement.
(i) The Borrower shall fail to comply with any of the Borrower's
agreements set forth in Section 7 of Supplement A); or
(ii) The Borrower shall fail to comply with any of the
Borrower's agreements set forth in this Agreement (and not constituting an Event
of Default under any of the other subsections of this Section 7.1, including,
without limitation, Section 7.1(g)(i)), and such failure to comply shall
continue for ten days;
(h) Non-Compliance With Loan Documents. Failure by the Borrower,
any other Obligor or any Subsidiary to comply with any of its respective
agreements set forth in any Loan Documents other than this Agreement (and not
constituting an Event of Default under any of the other subsections of this
Section 7.1), and such failure to comply shall continue after the grace period
(if any) set forth therein;
(i) Warranty. Any warranty made by the Borrower or any other
Obligor in any of the Loan Documents is untrue or misleading in any material
respect when made or deemed made; or any schedule, statement, report, notice,
certificate or other writing furnished by the Borrower or any other Obligor to
the Bank is untrue or misleading in any material respect on the date as of which
the facts set forth therein are stated or certified; or any certification made
or deemed made by the Borrower or any other Obligor to the Bank is untrue or
misleading in any material respect on or as of the date made or deemed made;
<PAGE>
(j) Litigation. There shall be entered against any one of the
Borrower, any other Obligor or any Subsidiary one or more judgments or decrees
in excess of $50,000 in the aggregate at any one time outstanding, excluding
those judgments or decrees (i) that shall have been outstanding less than 30
calendar days from the entry thereof or (ii) for and to the extent which the
Borrower, such Obligor or such Subsidiary, as applicable, is insured and with
respect to which the insurer has assumed responsibility in writing or for and to
the extent which the Borrower, such Obligor or such Subsidiary, as applicable,
is otherwise indemnified if the terms of such indemnification are satisfactory
to the Bank;
(k) Death of Obligor. If any natural person who is an Obligor,
partner in a partnership which is an Obligor, or owner of a material interest in
a corporate Obligor, shall die or be declared legally incompetent;
(l) Validity. If the validity or enforceability of any of the Loan
Documents shall be challenged by the Borrower, any other Obligor or any other
Person, or shall fail to remain in full force and effect;
(m) Conduct of Business. If the Borrower, any other Obligor or any
Subsidiary is enjoined, restrained or in any way prevented by court order, which
has not been dissolved or stayed within five Business Days, from conducting all
or any material part of its business affairs; and
(n) Adverse Event. The Bank shall have determined in good faith
(which determination shall be conclusive) that (i) an Adverse Event has occurred
or (ii) the Bank's interest in any material Collateral or Third Party Collateral
has been adversely affected or impaired, or the value thereof to the Bank has
been diminished to a material extent, or (iii) the prospect of payment or
performance of any obligation or agreement of the Borrower or any other Obligor
under any of the Loan Documents is materially impaired, and the condition giving
rise to such determination does not constitute an Event of Default under any of
the other subsections of this Section 7.1; or
(o) Ownership. (i) So long as the Americable Spin-off has not
occurred, NSU shall cease to own at least 90% of the shares of all voting stock
of Americable; or (ii) Americable shall cease to own at least 90% of the shares
of all voting stock of the Borrower and Cable.
7.2 Effect of Event of Default; Remedies.
(a) In the event that one or more Events of Default described in
Section 7.1(e) shall occur, then the Credit extended under this Agreement shall
terminate and all Obligations hereunder and under any Notes shall be immediately
due and payable without demand, notice or declaration of any kind whatsoever.
(b) In the event an Event of Default other than one described in
Section 7.1(e) shall occur, then the Bank may declare all Obligations hereunder
and under any Notes immediately due and payable without demand or notice of any
kind whatsoever, whereupon the Credit extended under this Agreement shall
terminate and all Obligations hereunder and under any Notes shall be immediately
due and payable. The Bank shall promptly advise the Borrower of any such
declaration, but failure to do so shall not impair the effect of such
declaration.
<PAGE>
(c) In the event of the occurrence of any Event of Default the Bank
may exercise any one or more or all of the following remedies, all of which are
cumulative and non-exclusive:
(i) any remedy contained in the Loan Documents or any
Supplemental Documentation;
(ii) any rights and remedies available to the Bank under the
Uniform Commercial Code as enacted in Minnesota as of the date of this
Agreement, and any other applicable law;
(iii) without notice, demand or legal process of any kind,
the Bank may take possession of any or all of the Collateral (in addition to
Collateral which it might already have in its possession), wherever it might be
found, and for that purpose may pursue the same wherever it may be found, and
may enter into any premises where any of the Collateral may be or is supposed to
be, and search for, take possession of, remove, keep and store any of the
Collateral until the same shall be sold or otherwise disposed of, and the Bank
shall have the right to store the same in any of the Borrower's premises without
cost to the Bank;
(iv) at the Bank's request, the Borrower will, at the
Borrower's expense, assemble the Collateral and make it available to the Bank at
a place or places to be designated by the Bank which is reasonably convenient to
the Bank and the Borrower; and,
(v) the Bank at its option, and pursuant to notification
given to the Borrower as provided for below, may sell any Collateral actually or
constructively in its possession at public or private sale and apply the
proceeds thereof as provided below.
7.3 Setoff. In addition to and not in limitation of all rights of
offset that the Bank or any other holder of a Note may have under applicable
law, the Bank or such other holder of a Note shall, upon the occurrence of any
Event of Default, or any Unmatured Event of Default described in Section 7.1(e)
hereof, have the right to appropriate and apply to the payment of the
Obligations any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter with the Bank or other holder.
ARTICLE VIII COLLATERAL AND THE BANK'S RIGHTS
8.1 Notice of Disposition of Collateral. Any notification of intended
disposition of any of the Collateral required by law shall be deemed reasonably
and properly given if given at least five calendar days before such disposition.
8.2 Application of Proceeds of Collateral. Any proceeds of any
disposition by the Bank of any of the Collateral may be applied by the Bank to
the payment of expenses in connection with the taking possession of, storing,
preparing for sale, and disposition of Collateral, including Attorneys' Fees and
legal expenses, and any balance of such proceeds may be applied by the Bank
toward the payment of such of the Obligations, and in such order of application,
as the Bank may from time to time elect.
<PAGE>
8.3 Care of Collateral. The Bank shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if it takes such action for that purpose as the Borrower requests in
writing, but failure of the Bank to comply with such request shall not, of
itself, be deemed a failure to exercise reasonable care, and no failure of the
Bank to preserve or protect any rights with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such
Collateral not so requested by the Borrower, shall be deemed a failure to
exercise reasonable care in the custody or preservation of such Collateral.
8.4 Performance of Borrower's Obligations. The Bank shall have the
right, but shall not be obligated, to discharge any claims against or Liens, and
any Taxes at any time levied or placed upon any or all Collateral including,
without limitation, those arising under statute or in favor of landlords, taxing
authorities, government, public and/or private warehousemen, common and/or
private carriers, processors, finishers, draymen, coopers, dryers, mechanics,
artisans, laborers, attorneys, courts, or others. The Bank may also pay for
maintenance and preservation of Collateral. The Bank may, but is not obligated
to, perform or fulfill any of the Borrower's responsibilities under this
Agreement which the Borrower has failed to perform or fulfill. The Bank may
charge a Disbursement Account or any other account of the Borrower with the Bank
or advance to the Borrower as a Revolving Loan any payment made or expense
incurred by the Bank under this Section 8.4.
8.5 Bank's Rights. None of the following shall affect the obligations
of the Borrower to the Bank under this Agreement or the Bank's rights with
respect to the remaining Collateral or any Third Party Collateral (any or all of
which actions may be taken by the Bank at any time, whether before or after an
Event of Default, at its sole and absolute discretion and without notice to the
Borrower):
(a) acceptance or retention by the Bank of other property or
interests in property as security for the Obligations, or acceptance or
retention of any obligor(s), in addition to the Borrower, with respect to any of
the Obligations;
(b) release of its security interest in, or surrender or release
of, or the substitution or exchange of or for, all or any part of the Collateral
or any Third Party Collateral or any other property securing any of the
Obligations (including, without limitation, any property of any Obligor other
than the Borrower), or any extension or renewal for one or more periods (whether
or not longer than the original period) , or release, compromise, alteration or
exchange, of any obligations of any guarantor or other Obligor with respect to
any Collateral or any such property;
(c) extension or renewal for one or more periods (whether or not
longer than the original period), or release, compromise, alteration or exchange
of any of the Obligations, or release or compromise of any obligation of any
Obligor with respect to any of the Obligations; or
(d) failure by the Bank to resort to other security or pursue any
Person liable for any of the Obligations before resorting to the Collateral.
<PAGE>
ARTICLE IX CONDITIONS PRECEDENT
9.1 Conditions Precedent. The obligation of the Bank to make the Loans
hereunder shall be subject to the satisfaction of the following conditions
precedent, in addition to the applicable conditions precedent set forth in
Section 9.2:
9.1.1 No Change in Condition. No change in the condition or
operations, financial or otherwise, of the Borrower, any other Obligor or any
Subsidiary, shall have occurred which change, in the sole credit judgment of the
Bank, may constitute an Adverse Event or have a material adverse effect on any
Collateral or Third Party Collateral or the Bank's interest therein.
9.1.2 Accounting Methods. The Borrower shall not have made any
material, as determined by the Bank, change in its accounting methods or
principles.
9.1.3 Survey. The Bank shall have completed its updated survey of
the business, operations and assets of the Borrower, each Subsidiary and each
other Obligor, and such survey shall provide the Bank with results and
information which, in the Bank's determination, are satisfactory to the Bank.
9.1.4 No Material Transaction. The Borrower, other Obligor or
Subsidiary shall not have entered into any material, as determined by the Bank,
commitment or transaction, including, without limitation, transactions for
borrowings and capital expenditures, which are not in the ordinary course of
their respective businesses.
9.1.5 Litigation. No litigation shall be outstanding or have been
instituted or threatened which the Bank determines to be material against the
Borrower, any other Obligor or any Subsidiary.
9.1.6 Filing of Documents. All financing statements, mortgages and
other documents relating to the Collateral and Third Party Collateral shall have
been filed or recorded, as appropriate.
9.1.7 Delivery of Documents. The Borrower shall have delivered to
the Bank with each of the following, each duly executed and dated the date
hereof or such earlier date as shall be acceptable to the Bank:
(a) Americable.
(i) Resolutions. A copy, duly certified by the secretary or an
assistant secretary of Americable, of (1) the resolutions of the Board of
Directors of Americable authorizing the execution, delivery and performance by
Americable of the Loan Documents to which Americable is a party or by which it
is bound and (2) all documents evidencing other necessary corporate action; and
(3) all approvals or consents, if any, with respect to the Loan Documents;
(ii) Incumbency Certificate. A certificate of the secretary or
an assistant secretary of Americable, certifying the names of the officers of
Americable authorized to sign the Loan Documents to which it is a party and any
Supplemental Documentation, together with the true signatures of such officers;
(iii) Bylaws. A copy, duly certified by the secretary or an
assistant secretary of Americable, of Americable's Bylaws;
<PAGE>
(iv) Articles of Incorporation. A copy, duly certified by the
secretary or an assistant secretary of Americable, of Americable's Articles of
Incorporation;
(v) Americable's Certificate. A certificate of the President
of Americable certifying, to the best of his/her knowledge after diligent
inquiry, to the fulfillment of all conditions precedent to closing and funding
the secured financing transaction contemplated by this Agreement and to the
truth and accuracy, as of such date, of the representations and warranties of
Americable contained in the Loan Documents to which Americable is a party;
(b) the Borrower.
(i) Resolutions. A copy, duly certified by the secretary or
an assistant secretary of the Borrower, of (1) the resolutions of the Board of
Directors of the Borrower authorizing (A) the borrowings by the Borrower
hereunder, (B) the execution, delivery and performance by the Borrower of the
Loan Documents to which the Borrower is a party or by which it is bound and (C)
certain officers or employees of the Borrower to request borrowings by telephone
and to execute Borrowing Base Certificates; (2) all documents evidencing other
necessary corporate action; and (3) all approvals or consents, if any, with
respect to the Loan Documents;
(ii) Incumbency Certificate. A certificate of the secretary
or an assistant secretary of the Borrower, certifying the names of the officers
of the Borrower authorized to sign the Loan Documents to which it is a party and
any Supplemental Documentation, together with the true signatures of
such officers;
(iii) Bylaws. A copy, duly certified by the secretary or an
assistant secretary of the Borrower, of the Borrower's Bylaws;
(iv) Articles of Incorporation. A copy, duly certified by
the secretary or an assistant secretary of the Borrower, of the Borrower's
Articles of Incorporation;
(v) Borrower's Certificate. A certificate of the President
of the Borrower certifying, to the best of his/her knowledge after diligent
inquiry, to the fulfillment of all conditions precedent to closing and funding
the secured financing transaction contemplated by this Agreement and to the
truth and accuracy, as of such date, of the representations and warranties of
the Borrower contained in the Loan Documents to which the Borrower is a party;
(c) Cable.
(i) Resolutions. A copy, duly certified by the secretary or
an assistant secretary of Cable, of (1) the resolutions of the Board of
Directors of Cable authorizing the execution, delivery and performance by Cable
of the Loan Documents to which Cable is a party or by which it is bound and (2)
all documents evidencing other necessary corporate action; and (3) all approvals
or consents, if any, with respect to the Loan Documents;
<PAGE>
(ii) Incumbency Certificate. A certificate of the
secretary or an assistant secretary of Cable, certifying the names of the
officers of Cable authorized to sign the Loan Documents to which it is a party
and any Supplemental Documentation, together with the true signatures of such
officers;
(iii) Bylaws. A copy, duly certified by the secretary or
an assistant secretary of Cable, of Cable's Bylaws;
(iv) Articles of Incorporation. A copy, duly certified by
the secretary or an assistant secretary of Cable, of Cable's Articles of
Incorporation;
(v) Cable's Certificate. A certificate of the President
of Cable certifying, to the best of his/her knowledge after diligent inquiry, to
the fulfillment of all conditions precedent to closing and funding the secured
financing transaction contemplated by this Agreement and to the truth and
accuracy, as of such date, of the representations and warranties of Cable
contained in the Loan Documents to which Cable a party;
(d) Subordination Agreement. The Subordination Agreement
appropriately completed and duly executed by Americable.
(e) Opinion. A legal opinion of Efron and Roberts, counsel to the
Borrower and the Guarantors, substantially in the form set forth as Exhibit C;
(f) Insurance. Evidence satisfactory to the Bank of the existence
of insurance on the Collateral and Third Party Collateral in amounts and with
insurers acceptable to the Bank, together with evidence establishing that the
Bank is named as a loss payee on all related insurance policies;
(g) Good Standing Certificates. Certificates of good standing as
to the Borrower and each other corporate or partnership Obligor issued by the
Secretary of State of the state in which the Borrower or such other Obligor, as
applicable, is organized, and each other state in which the failure of the
Borrower or such other Obligor, as applicable, to be in good standing would
constitute an Adverse Event or have a material adverse effect on the Bank's
rights in any Collateral or Third Party Collateral;
(h) Landlords and Warehousemen Waivers. If required by the Bank,
(i) from each lessor or landlord identified on Schedule 4.12 or Schedule 4.13, a
landlord waiver and (ii) from each operator of a public warehouse where
Inventory is stored, a letter from such operator, in each case in form
acceptable to the Bank; and
(i) Other. Such other documents, instruments or agreements as the
Bank shall determine to be necessary or desirable.
9.1.8 Security Interest. The Lien in the Collateral and Third
Party Collateral granted to the Bank to secure the Obligations shall be senior,
perfected Liens except as otherwise agreed by the Bank.
9.1.9 Collateral Account and Disbursement Account Agreements. If
required by the Bank, the Borrower shall have entered into a Controlled
Disbursement Account Agreement, substantially in the form of Exhibit E, with the
Bank and First Bank Montana, National Association, for, among other things, the
collection and remittance to the Bank of cash proceeds of the Collateral.
<PAGE>
9.1.10 Effect of Law. No law or regulation affecting the
Bank's entering into the secured financing transaction contemplated by this
Agreement shall impose upon the Bank any material obligation, fee, liability,
loss, cost, expense or damage.
9.1.11 Exhibits; Schedules. All Exhibits and Schedules to
the Loan Documents shall have been completed in form and substance satisfactory
to the Bank and shall contain no facts or information which the Bank, in its
sole judgment, determines to be unacceptable.
9.2 Conditions Precedent to all Loans. The obligation of the Bank to
make any Loan hereunder shall be subject to the satisfaction of the following
conditions precedent:
(a) Representations and Warranties. All of the representations and
warranties of the Borrower and each other Obligor set forth in the Loan
Documents to which the Borrower or such other Obligor, as applicable, is a party
shall be true and correct.
(b) Event of Default. Immediately before and after making such
Loan, no Event of Default or Unmatured Event of Default shall exist or be
continuing.
ARTICLE X INDEMNITY
10.1 Environmental and Safety and Health. The Borrower hereby
indemnifies the Bank and agrees to hold the Bank harmless from and against any
and all losses, liabilities, damages, injuries, costs, expenses and claims of
any and every kind whatsoever (including, without limitation, court costs and
Attorneys' Fees) which at any time or from time to time may be paid, incurred or
suffered by, or asserted against, the Bank for, with respect to, or as a direct
or indirect result of the violation by the Borrower or any Subsidiary, of any
Environmental Law or Occupational Safety and Health Law; or with respect to, or
as a direct or indirect result of (a) the presence on or under, or the escape,
seepage, leakage, spillage, disposal, discharge, emission or release from,
properties utilized by the Borrower and/or any Subsidiary in the conduct of its
business into or upon any land, the atmosphere, or any watercourse, body of
water or wetland, of any Hazardous Material or other hazardous, toxic or
dangerous waste, substance or constituent, or other substance (including,
without limitation, any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under the Environmental Laws) or (b) the
existence of any unsafe or unhealthful condition on or at any premises utilized
by the Borrower and/or any Subsidiary in the conduct of its business. The
provisions of and undertakings and indemnification set out in this Section 10.1
shall survive satisfaction and payment of the Obligations and termination of
this Agreement.
10.2 General Indemnity. In addition to the payment of expenses pursuant
to Section 12.3, whether or not the transactions contemplated hereby shall be
consummated, the Borrower agrees to indemnify, pay and hold the Bank and any
holder of any Notes, and the officers, directors, employees, agents, and
affiliates of the Bank and such holders (collectively called the "Indemnitees")
harmless from and against, any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for any of such Indemnitees in
<PAGE>
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not any of such Indemnitees shall be
designated a party thereto), that may be imposed on, incurred by, or asserted
against the Indemnitees, in any manner relating to or arising out of the Loan
Documents, the statements contained in any commitment letters delivered by the
Bank, the Bank's agreement to make the Loans or to issue Letters of Credit
hereunder, or the use or intended use of any Letters of Credit, or the use or
intended use of the proceeds of any of the Loans hereunder (the "Indemnified
Liabilities"); provided, however, that the Borrower shall have no obligation to
an Indemnitee hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of an Indemnitee. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower shall contribute the maximum portion that it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
indemnified liabilities incurred by the Indemnitees or any of them. The
provisions of the undertakings and indemnification set out in this Section 10.2
shall survive satisfaction and payment of the Obligations and termination of
this Agreement.
10.3 Capital Adequacy. If the Bank shall reasonably determine that the
application or adoption of any law, rule, regulation, directive, interpretation,
treaty or guideline regarding capital adequacy, or any change therein or in the
interpretation or administration thereof, whether or not having the force or law
(including, without limitation, application of changes to Regulation H and
Regulation Y of the Federal Reserve Board issued by the Federal Reserve Board on
January 19, 1989 and regulations of the Comptroller of the Currency, Department
of the Treasury, 12 CFR Part 3, Appendix A, issued by the Comptroller of the
Currency on January 27, 1989) increases the amount of capital required or
expected to be maintained by the Bank or any Person controlling the Bank, and
such increase is based upon the existence of the Bank's obligations hereunder
and other commitments of this type, then from time to time, within 10 days after
demand from the Bank, the Borrower shall pay to the Bank such amount or amounts
as will compensate the Bank or such controlling Person, as the case may be, for
such increased capital requirement. The determination of any amount to be paid
by the Borrower under this Section 10 shall take into consideration the policies
of the Bank or any Person controlling the Bank with respect to capital adequacy
and shall be based upon any reasonable averaging, attribution and allocation
methods. A certificate of the Bank setting forth the amount or amounts as shall
be necessary to compensate the Bank as specified in this Section 10.3 shall be
delivered to the Borrower and shall be conclusive in the absence of manifest
error.
ARTICLE XI ADDITIONAL PROVISIONS
Additional provisions are set forth in Supplement A.
ARTICLE XII GENERAL
12.1 Borrower's Waiver. Except as otherwise provided for in this
Agreement, the Borrower's waives (a) presentment, demand and protest and notice
of presentment, protest, default, non-payment, maturity, release, compromise,
settlement, one or more extensions or renewals of any or all commercial paper,
accounts, documents, instruments, chattel paper and guaranties at any time held
by the Bank on which the Borrower may in any way be liable and hereby ratifies
and confirms whatever the Bank may do in this regard; (b) all rights to notice
<PAGE>
and a hearing prior to the Bank's taking possession or control of, or the Bank's
relevy, attachment or levy on or of, the Collateral or any bond or security
which might be required by any court prior to allowing the Bank to exercise any
of the Bank's remedies; and (c) the benefit of all valuation, appraisement and
exemption laws. The Borrower acknowledges that they have been advised by
counsel of their choice with respect to this Agreement and the transactions
evidenced by this Agreement.
12.2 Expenses; Attorney's Fees The Borrower agrees, whether or not any
Loan is made hereunder, to pay the Bank upon demand for all expenses and
Attorneys' Fees, including, without limitation, those incurred by the Bank in
connection with (a) the preparation, negotiations and execution of the Loan
Documents, (b) the preparation, negotiation and execution of any and all
amendments to the Loan Documents and all other instruments or documents provided
for therein or delivered or to be delivered thereunder or in connection
therewith, (c) the collection or enforcement of the Borrower's or any other
Obligor's obligations under any of the Loan Documents and (d) the collection or
enforcement of any of the Bank's rights in or to any Collateral or Third Party
Collateral. The Bank may charge a Disbursement Account or any other account of
the Borrower with the Bank or advance all such amounts to the Borrower as a
Revolving Loan. The Borrower also agrees (y) to indemnify and hold the Bank
harmless from any loss or expense which may arise or be created by the
acceptance of telephonic or other instructions for making Loans and (z) to pay,
and save the Bank harmless from all liability for, any stamp or other taxes
which may be payable with respect to the execution or delivery of this Agreement
or the issuance of any Note or of any other instruments or documents provided
for herein or to be delivered hereunder or in connection herewith. The
borrower's foregoing obligations shall survive any termination of this
Agreement.
12.3 Bank Fees and Charges. The Borrower agrees to pay the Bank on
demand the customary fees and charges of the Bank for maintenance of accounts
with the Bank or for providing other services to the Borrower. The Bank may, in
its sole and absolute discretion, provide for such payment by charging the
Disbursement Account or any other account of the Borrower with the Bank or
advancing the amount thereof to the Borrower as a Revolving Loan.
12.4 Lawful Interest. In no contingency or event whatsoever shall the
interest rate charged pursuant to the terms of this Agreement exceed the highest
rate permissible under any law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto. In the event that such a court
determines that the Bank has received interest hereunder in excess of the
highest applicable rate, the Bank shall promptly refund such excess interest to
the Borrower.
12.5 No Waiver by Bank; Amendments. No failure or delay on the part of
the Bank in the exercise of any power or right, and no course of dealing between
the Borrower and the Bank shall operate as a waiver of such power or right, nor
shall any single or partial exercise of any power or right preclude other or
further exercise thereof or the exercise of any other power or right. The
remedies provided for herein are cumulative and not exclusive of any remedies
which may be available to the Bank at law or in equity. No notice to or demand
on the Borrower not required hereunder shall in any event entitle the Borrower
to any other or further notice or demand in similar or other circumstances or
<PAGE>
constitute a waiver of the right of the Bank to any other or further action in
any circumstances without notice or demand. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement shall in
any event be effective unless the same shall be in writing and signed and
delivered by the Bank. Any waiver of any provision of this Agreement, and any
consent to any departure by the Borrower from the terms of any provision of this
Agreement, shall be effective only in the specific instance and for the specific
purpose for which given.
12.6 Termination of Credit. The Borrower, by written notice given to
the Bank at least 60 days but not more than 90 days prior to the Termination
Date, may request in writing an extension of the Termination Date for an
additional period of time and if the Bank, in its sole and absolute discretion
and based on such review of the Borrower's financial performance and condition
and such other factors as the Bank considers relevant (which may include,
without limitation, future loan policies and other policies adopted by the Bank
unrelated to the Borrower's financial condition), consents in writing to such
extension, then the Termination Date shall be extended for such additional
period of time, and in such extended period the Borrower may repeat their
request within the same time limit and if the Bank consents the Termination Date
shall be further extended for an additional period, and so on from time to time.
In the case of any such extension, the Termination Date shall be the last day of
the period to which such extension has been granted. The Bank shall be under no
obligation or commitment to extend the Termination Date, and no such obligation
or commitment on the part of the Bank should be inferred from the provisions of
this Section 12.6. All of the Bank's rights and remedies, the liens and
security interests of the Bank in the Collateral and all of the Borrower's
duties and obligations under this Agreement shall survive termination of the
Credit extended to the Borrower hereunder until all of the Obligations hereunder
have been paid in full. The termination or cancellation of the Credit under
this Agreement shall not affect or impair the liabilities and obligations of the
Borrower or any one or more of the Obligors to the Bank or the Bank's rights
with respect to any Loans and advances made and other Obligations incurred prior
to such termination or with respect to the Collateral or any Third Party
Collateral.
12.7 Notice. Except as otherwise expressly provided herein, any notice
hereunder to the Borrower or the Bank shall be in writing (including
telegraphic, telex, or telecopy communication) and shall be given to the
Borrower or the Bank at its address, telex number or fax number set forth on the
signature pages hereof or at such other address, telex number or telecopier
number as the Borrower or the Bank may, by written notice, designate as its
address, telex number or fax number for purposes of notice hereunder. All such
notices shall be deemed to be given when transmitted by telex and the
appropriate answer back is received, transmitted by fax, delivered to the
telegraph office, delivered by courier, personally delivered or, in the case of
notice by mail, three days following deposit in the United States mails,
properly addressed as herein provided, with proper postage prepaid.
<PAGE>
12.8 Participations; Information. The Borrower hereby consents to the
Bank's grant of participations in or sale, assignment, transfer or other
disposition, at any time and from time to time hereafter, of the Loan Documents,
or of any portion of any thereof, including without limitation lender's rights,
titles, interests, remedies, powers and/or duties. The Bank may furnish any
information concerning the Borrower in the possession of the Bank from time to
time to assignees of the rights and/or obligations of the Bank hereunder and to
participants in any Loan (including prospective assignees and participants) and
may furnish information in response to credit inquiries consistent with general
banking practice.
12.9 Severability. Any provision of this Agreement which is prohibited
or 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.
12.10 Successors. This Agreement shall be binding upon the Borrower and
the Bank and their respective successors and assigns, and shall inure to the
benefit of the Borrower and the Bank and the successors and assigns of the Bank.
The Borrower shall not assign its rights or duties hereunder without the consent
of the Bank.
12.12 Captions. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.
12.13 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
12.14 Construction. The Borrower acknowledges that this Agreement shall
not be binding upon the Bank or become effective until and unless accepted by
the Bank, in writing. If so accepted by the Bank, THE LOAN DOCUMENTS AND ANY
SUPPLEMENTAL DOCUMENTATION SHALL, UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN,
BE DEEMED TO HAVE BEEN NEGOTIATED AND ENTERED INTO IN, AND SHALL BE GOVERNED AND
CONTROLLED BY THE LAWS OF, THE STATE OF MINNESOTA AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, CHOICE OF LAW, AND IN ALL OTHER
RESPECTS, INCLUDING, BUT NOT LIMITED TO, THE LEGALITY OF THE INTEREST RATE AND
OTHER CHARGES, BUT EXCLUDING PERFECTION OF SECURITY INTERESTS AND LIENS WHICH
SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION.
12.15 Consent to Jurisdiction. To induce the Bank to accept this
Agreement, the Borrower, irrevocably, agrees that, subject to the Bank's sole
and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THE LOAN DOCUMENTS OR ANY SUPPLEMENTAL
DOCUMENTATION OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN
THE CITY OF MINNEAPOLIS, STATE OF MINNESOTA. The BORROWER HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN
SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON The
BORROWER, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED
MAIL DIRECTED TO The BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF
AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.
<PAGE>
12.16 Subsidiary Reference. Any reference herein to a Subsidiary or
Subsidiaries of the Borrower(s), and any financial definition, ratio,
restriction or other provision of this Agreement which is stated to be
applicable to "the Borrower(s)" and the Subsidiaries or which is to be
determined on a "consolidated" or "consolidating" basis, shall apply only to the
extent the Borrower(s) has any Subsidiaries and, where applicable, to the extent
any such Subsidiaries are consolidated with the Borrower for financial reporting
purposes.
12.17 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS (a) UNDER THE LOAN DOCUMENTS OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT
OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
THEREWITH OR (b) ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
TRANSITION NETWORKS, INC.
By:____________________________________
Title:_________________________________
Address:
6475 City West Parkway
Eden Prairie, Minnesota 55344
Attention: Thomas Wargolet
Director of Finance
Telephone: (612) 942-3800
Fax No.: (612) 944-8021
FIRST BANK NATIONAL ASSOCIATION
By:___________________________________
Title:________________________________
Address:
First Bank Place MPFP0804
601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Business Credit Division
Telephone: (612) 973-0611
Fax No.: (612) 973-0829
EXHIBITS
Exhibit A - Form of Borrowing Base Certificate
Exhibit B - Form of Insurance Endorsement
Exhibit C - Form of Borrower's Opinion of Counsel
Exhibit D - Form of NSU Acknowledgement
Exhibit E - Form of Controlled Disbursement Account Agreement
SCHEDULES
Schedule 4.1 - Trade Names, Etc.
Schedule 4.7 - Insurance
Schedule 4.8 - Litigation and Contingent Liabilities
Schedule 4.10 - Subsidiaries
Schedule 4.11 - Partnerships and Joint Ventures
Schedule 4.12 - Business Locations
Schedule 4.13 - Collateral Locations
Schedule 4.15 - Leases
Schedule 4.16 - Patents, Trademarks, Copyrights
Schedule 4.18 - Contracts and Labor Disputes
Schedule 4.25 - Environmental Matters
Schedule 6.11 - Investments
Schedule 6.12 - Indebtedness/Liens
<PAGE>
SUPPLEMENT A to AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated as of AUGUST 9, 1996 Between FIRST BANK NATIONAL ASSOCIATION (the
"Bank") and TRANSITION NETWORKS, INC. (the "Borrower")
1. Loan Agreement Reference. This Supplement A, as it may be amended or
modified from time to time, is a part of the Loan and Security Agreement, dated
as of August 9, 1996, between the Borrower and the Bank (together with all
amendments, modifications and supplements thereto, the "Loan Agreement") . Terms
used herein which are defined in the Loan Agreement shall have the meanings
given such terms in the Loan Agreement unless the context otherwise requires.
2. Credit Amount; Borrowing Base.
2.1 Credit Amount. The maximum amount of Loans which the Bank will make
available to the Borrower shall not exceed TWO MILLION AND N0/100 DOLLARS
($2,000,000) (such amount is herein called the "Credit Amount") (unless such
amount is increased by the Bank in its sole and absolute discretion); provided,
however, that the aggregate outstanding principal balance of the Loans plus the
Letter of Credit Obligations shall not exceed the Credit Amount.
2.2 Borrowing Base. The term "Borrowing Base," as used herein, shall mean:
(a) an amount of up to 75% of the net amount (as determined by the Bank
after deduction of such reserves and allowances as the Bank deems proper and
necessary) of the Borrower's Eligible Accounts Receivable; plus
(b) an amount of up to the lesser of (i) 20% of the net value (the
lower of the cost or market value of such Inventory as determined by the Bank on
a first in first out basis and after deduction of such reserves and allowances
as the Bank deems proper and necessary ) of the Borrower's Eligible Inventory or
(ii) $500,000.
2.3 Bank's Rights. The Borrower agrees that nothing contained in this
Supplement A (a) shall be construed as the Bank's agreement to resort or look to
a particular type or item of Collateral as security for any specific Loan or
advance or in any way limit the Bank's right to resort to any or all of the
Collateral as security for any of the obligations, (b) shall be deemed to limit
or reduce any lien on or any security interest in or upon any portion of the
Collateral or other security for the Obligations or (c) shall supersede Section
2.10 of the Loan Agreement.
3 Interest.
3.1 Revolving Loans. The unpaid balance of the Revolving Loans shall bear
interest to maturity as follows:
(a) Eurodollar Advances. The unpaid principal amount of each
Eurodollar Advance shall bear interest prior to maturity at a rate per annum
equal to the Eurodollar Rate (Reserve Adjusted) in effect for each Interest
Period for such Eurodollar Advance plus 2.50% per annum.
(b) Reference Rate Advances. The unpaid principal amount of each
Reference Rate Advance shall bear interest prior to maturity at a rate per annum
equal to the Reference Rate.
<PAGE>
3.2 Default Rate. If any amount of the Loans is not paid when due, whether by
acceleration or otherwise, the entire unpaid principal balance of the Loans
(other than overdraft Loans and Over Advances) shall bear interest until paid at
a rate per annum equal to the greater of (i) the Reference Rate from time to
time in effect plus four percent (4%) or (ii) two percent (2%) above the rate in
effect at the time such amount became due for such past due amount.
3.3 Overdraft Loans; Over Advances. Overdraft Loans and over Advances shall
bear interest at the rate(s) determined pursuant to Section 2.8 or Section 2.9
of the Credit Agreement, as applicable.
4. Eligible Account Receivable Data.
(a) The Account Receivable must not be unpaid on the date that is 90
days after the date of the invoice evidencing such Account Receivable.
(b) If invoices representing 10% or more of the unpaid net amount of
all Accounts Receivable from any one Account Debtor are unpaid more than 90 days
after the dates of the invoices evidencing such Accounts Receivable, then all
Accounts Receivable relating to such Account Debtor shall cease to be Eligible
Accounts Receivable.
5. Additional Covenants. From the date of the Loan Agreement and thereafter
until all of the Borrower's Obligations under the Loan Agreement are paid in
full, the Borrower agrees that, unless the Bank shall otherwise consent in
writing, it will not, and will not permit any Subsidiary to, do any of the
following:
5.1 Tangible Capital Base. During each of the periods set forth below, permit
the Tangible Capital Base to be less than the amount set forth below opposite
such period at any time:
Period Tangible Capital Base
June 1, 1996 through and
including December 30, 1997 $3,500,000
December 31, 1997 through and
including May 30, 1998 $4,000,000
May 31, 1998 and thereafter $4,250,000
5.2 Leverage Ratio. During each of the periods set forth below, permit the
ratio of (a) the total of (i) the Borrower's unconsolidated Indebtedness, minus
(ii) the Borrower's unconsolidated Subordinated Debt, minus (iii) the aggregate
unpaid accrued interest on all Subordinated Debt of the Borrower owing to NSU,
to (b) Tangible Capital Base to be greater than 1.75:1.
<PAGE>
5.3 Interest Coverage Ratio. Permit the ratio, as of the last day of any
fiscal quarter for the period commencing on the first day of the Borrower's
fiscal year through and including such day, of (a) the Borrower's unconsolidated
EBITDA to (b) the total of (i) the Borrower's unconsolidated interest expense
(including, without limitation, imputed interest expense on Capitalized Leases)
minus (ii) the aggregate unpaid accrued interest on all Subordinated Debt of the
Borrower owing to NSU, to be less than 2:1.
5.4 Capital Expenditures. Make Capital Expenditures in an amount exceeding:
(a)$500,000 during the Borrower's fiscal year ending December 31, 1996; or (b)
$450,000 during any fiscal year thereafter.
Borrower's Initials___________
Bank's Initials_______________
Date: as of August 9, 1996
<PAGE>
Freeport Tech
COMMERCIAL LEASE AGREEMENT
Petroleum Inc., as Landlord
AND
Americable, Inc., as Tenant
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between Petroleum, Inc.,
hereinafter referred to as "Landlord", and Americable, Inc., hereinafter
referred to as "Tenant";
W I T N E S S E T H :
1. PREMISES AND TERM.
A. In consideration of the mutual obligations of Landlord and Tenant set
forth herein, Landlord leases to Tenant, and Tenant hereby takes from Landlord
the approximately 10,800 square feet more particularly outlined on the floor
plan attached as Exhibit "A-1" (the "Premises), which Premises are part of that
approximately 105,220 square foot building (the "Building") located on the real
property situated within the County of Dallas, State of Texas, which real
property is more particularly described on EXHIBIT "A" attached hereto and
incorporated herein by reference (the "Land"), together with all rights,
privileges, easements, appurtenances, and amenities belonging to or in
any way pertaining to the Premises, to have and to hold, subject to the terms,
covenants and conditions in this Lease.
B. The term of this Lease shall commence on July 1, 1996 or if there will
be alterations or improvements to the Premises and an Exhibit "B" is attached to
this Lease and initialed by Landlord and Tenant, then the Commencement Date
shall be as defined in the following Paragraph C. (the "Commencement Date").
The term of this Lease shall end on the last day of the calendar month that is
60 full calendar months after the Commencement Date.
C. If the Premises or part thereof are to be constructed, the Commencement
Date shall be deemed to be the date upon which the Premises and other
improvements to be erected in accordance with the plans and specifications
described on "Exhibit "B" attached hereto and incorporated herein by reference
(the "Plans") have been substantially completed. As used herein, the term
"substantial completion" or "substantially completed" shall mean that, in the
opinion of the architect or space planner that prepared the Plans, such
improvements have been completed in accordance with the Plans and the Premises
are in good and satisfactory condition, subject only to completion of minor
punch list items. As soon as such improvements have been substantially
completed, Landlord shall notify Tenant in writing that the Commencement Date
has occurred. Within ten (10) days thereafter, Tenant shall submit to Landlord
in writing a punch list of items needing completion or correction. Landlord
shall use its best efforts to complete such items within thirty (30) days after
the receipt of such notice. In the event Tenant, its employees, agents or
contractors cause construction of such improvements to be delayed, the
Commencement Date shall be deemed to be the date that, in the opinion of the
architect or space planner that prepared the Plans, substantial completion would
have occurred if such delays had not taken place.
2. BASE RENT, SECURITY DEPOSIT AND ESCROW PAYMENTS.
A. Tenant agrees to pay to Landlord Base Rent for the Premises, in
advance, without demand, deduction or set off, at the rate of Six Thousand Three
Hundred and 00/100 Dollars ($6,300.00) per month during the term hereof. One
such monthly installment, plus the other monthly charges set forth in Paragraph
2.C. below shall be due and payable on the date hereof and a like monthly
installment shall be due and payable on or before the first day of each calendar
month succeeding the Commencement Date, except that all payments due hereunder
for any fractional calendar month shall be prorated.
<PAGE>
B. In addition, Tenant agrees to deposit with Landlord on the date hereof
the sum of Eight Thousand One Hundred Nine and 00/100 Dollars ($8,109.00),
which shall be held by Landlord as security for the performance of Tenant's
obligations under this Lease, it being expressly understood and agreed that this
deposit is not an advance rental deposit or a measure of Landlord's damages in
case of Tenant's default. Upon each occurrence of an event of default, Landlord
may use all or part of the deposit to pay past due rent or other payments due
Landlord under this Lease, and the cost of any other damage, injury, expense or
liability caused by such event of default without prejudice to any other remedy
provided herein or provided by law. On demand, Tenant shall pay Landlord the
amount that will restore the security deposit to its original amount. The
security deposit shall be deemed the property of Landlord, but any remaining
balance of such deposit shall be returned by Landlord to Tenant when Tenant's
obligations under this Lease have been fulfilled.
C. Tenant agrees to pay, as additional rent its Proportionate Share of all
costs incurred in owning, operating and maintaining the Land and Building and
the facilities and services provided for the common use of the Tenant and any
other tenants of the Building (as defined in Paragraph 22.B. below), including
the following items: (1) Taxes (defined below) and the cost of any tax
consultant employed to assist Landlord in determining the fair tax valuation of
the Building and Land; (2) the cost of maintaining insurance, (3) the cost of
any jointly metered utilities payable pursuant to Paragraph 8. below, and (4)
the cost of repairs, reasonable replacement reserves, reasonable management
fees, landscape maintenance and reasonable replacement, security service (if
provided), sewer service (if provided), trash service (if provided), and other
operating expenses required by this Lease. During each month of the term of this
Lease, on the same day that Base Rent is due hereunder, Tenant shall escrow with
Landlord an amount equal to 1/12 of the estimate annual cost of its
Proportionate Share of such items. Tenant authorizes Landlord to use the funds
deposited with Landlord under this Paragraph 2.C. to pay such costs. The
initial monthly escrow payments are based upon the estimated amounts for the
year in question, and shall be increased or decreased annually to reflect the
projected actual cost of all such items. Tenant reserves the right to audit the
annual operating expenses at the designated offices of the Landlord. If
Tenant's total escrow payments are less than Tenant's actual Proportionate Share
of all such items, Tenant shall pay the difference to Landlord within ten (10)
days after demand. If the total escrow payments of Tenant are more than
Tenant's actual Proportionate Share of all such items, Landlord shall retain
such excess and credit it against Tenant's next annual escrow payments. The
amount of the monthly rental and the initial monthly escrow payments are as
follows:
(a) Base Rent as set forth in Paragraph 2.A. $6,300.00
(b) Taxes as set forth in Paragraph 3. $963.00
(c) Insurance as set forth in Paragraphs 2.C.(2) $63.00
(d) Utilities and Operating Expenses as set forth in $ 783.00
Paragraphs 2.C. (3) and (4).
Monthly Payment Total $8,109.00
<PAGE>
3. TAXES.
A. Landlord agrees to pay all taxes, assessments and/or governmental
charges of any kind and nature (collectively referred to herein as "Taxes")
that accrue against the Premises, the Land and/or the Building. If at any time
during the term of this Lease, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part upon such rents from the Premises, the Land and/or the
Building, then all such taxes, assessments, levies or charges, or the part,
thereof so measured or based, shall be deemed to be included within the term
"Taxes" for the purposes hereof. The Landlord shall have the right to employ a
tax consulting firm to attempt to assure a fair tax burden on the building and
grounds within the applicable taxing jurisdiction. Tenant agrees to pay its
Proportionate Share of the cost of such consultant.
B. Tenant shall be liable for all taxes levied or assessed against any
personal property or fixtures placed in the Premises. If any such taxes are
levied or assessed against Landlord or Landlord's property and (i) Landlord pays
the same or (ii) the assessed value of Landlord's property is increased by
inclusion of such personal property and fixtures and Landlord pays the increased
taxes, then, upon demand Tenant shall pay to Landlord such taxes. In addition,
if the Building is a multiple occupancy Building and the cost of any
improvements constructed to the Tenant's Premises is disproportionately higher
than the cost of improvements constructed to the premises of other tenants of
the Building, then upon demand Tenant shall pay the amount of Taxes attributable
to such disproportionately more expensive improvements in addition to its
Proportionate Share of Taxes.
4. LANDLORD'S REPAIRS.
A. Tenant understands and agrees that this Lease is intended to be a "net"
lease, and as such, Landlord's maintenance, repair and replacement obligations
are limited to those set forth in this Paragraph 4 A. Landlord, at its own cost
and expense, shall be responsible only for roof replacement and for repair and
replacement of only the foundation and all the structural members of the
exterior walls of the Building. The terms "roof" and "walls" as used herein
shall not include skylights, windows, glass or plate glass, doors, special store
fronts or office entries. Tenant shall immediately give Landlord written notice
of defect or need for repairs, after which Landlord shall have reasonable
opportunity to repair same or cure such defect. Landlord's liability with
respect to any defects, repairs, replacement or maintenance for which Landlord
is responsible hereunder shall be limited to the cost of such repairs or
maintenance or the curing of such defect.
B. Landlord reserves the right to perform the Tenant's maintenance,
repair and replacement obligations and any other items that are otherwise
Tenant's obligations under Paragraph 5.B, in which event, Tenant shall be liable
for the cost and expense of such repair, replacement, maintenance and other such
items.
5. TENANT'S MAINTENANCE AND REPAIR OBLIGATIONS.
A. Tenant, at its own cost and expense, shall maintain all parts of the
Premises (except those for which Landlord is expressly responsible hereunder) in
good condition, ordinary wear and tear excepted, and promptly make all necessary
repairs and replacements to the Premises.
<PAGE>
B. In addition to Tenant's obligations under the preceding subparagraph
A., if Tenant is the only occupant of the Building, unless Landlord and Tenant
otherwise agree, Tenant is responsible for causing the parking areas, driveways,
alleys and grounds surrounding the Premises (except those for which Landlord is
expressly responsible hereunder) to be maintained in a good, neat, clean and
sanitary condition, consistent with the operation of a first class office/
warehouse building, which includes without limitation, prompt maintenance,
repairs and replacements (1) of any drill or spur track servicing the Premises,
(2) of the parking area associated with the Building, (3) of all grass,
shrubbery and other landscape treatments surrounding the Building, (4) of the
exterior of the Building (including painting), (5) of sprinkler systems, sewage
lines, and (6) of any other maintenance, repair or replacement items normally
associated with the foregoing. In addition, Tenant shall repair and pay for any
damage caused by the negligence of Tenant, or Tenant's employees, agents or
invitees, or caused by Tenant's default hereunder.
C. In the event that the Tenant is not the sole occupant of the Building,
then subject to payment by Tenant, Landlord shall perform the maintenance,
repair, and replacement obligations set forth in the foregoing Subparagraph B.
Tenant shall be liable for its Proportionate Share of the cost and expense of
such repair, replacement, replacement reserve, maintenance and other such items.
The amount of Tenant's rental obligation set forth in Paragraph 2.A. above does
not include the cost of such items, and Landlord's performance of repair,
replacement, maintenance and other items, is not a condition to payment of such
rental obligations.
D. Tenant agrees to pay its Proportionate Share of the cost of (1)
operation, maintenance and/or landscaping of any property or facility that is
operated, maintained or landscaped by any property owner or community owner
association that is named in any restrictive covenants or deed restrictions to
which the Premises are subject and which are actually billed to the Building,
and (2) operating and maintaining any property, facilities or services provided
for the common use of Tenant and other Tenants of the Building, which costs
shall include, without limitation, maintenance and repair costs, sewer,
landscaping, trash and security (if furnished by Landlord), amounts paid to
contractors or subcontractors for work or services performed in connection with
the operation and maintenance of the Building, all service, supplies, repairs,
replacements or other expenses for maintaining and operating the Building, and
any other facilities or services provided for the common use of Tenant and other
Tenants of the Building.
E. Tenant shall enter into a regularly scheduled preventive maintenance/
service contract with a maintenance contractor for servicing all hot water,
heating and air conditioning systems and equipment within the Premises, with a
contractor approved by Landlord. Tenant shall be responsible for all costs and
expenses required thereunder.
6. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises without the prior written consent of Landlord which
consent shall not be unreasonably withheld. Tenant, at its own cost and
expense, may erect such shelves, bins, machinery and trade fixtures as it
desires provided that (a) such items do not alter the basic character of the
Premises or the Building; (b) such items do not overload or damage the same; (c)
such items may be removed without injury to the Premises; and (d) the
construction, erection or installation thereof complies with all applicable
governmental laws, ordinances, regulations and with Landlord's specifications
and requirements. All shelves, bins, machinery and trade fixtures installed by
Tenant shall be removed on or before the earlier to occur of the date of
termination of this Lease or vacating the Premises, at which time Tenant shall
restore the Premises to their original condition. All installations, removals
and restoration shall be performed in a good and workmanlike manner so as not to
damage or alter the primary structure or structural qualities of the Building or
the Premises.
<PAGE>
7. SIGNS. Any signage Tenant desires for the Premises shall be subject to
Landlord's written approval and shall be submitted to Landlord prior to the
commencement date of this Lease. Tenant shall repair, paint, and/or replace,
the building facie surface to which its signs are attached upon vacation of the
Premises, or the removal or alteration of its signage. Tenant shall not, (i)
make any changes to the exterior of the Premises, (ii) install any exterior
lights, decorations, balloons, flags, pennants, banners or painting, or (iii)
erect or install any signs, windows or door lettering, decals, window and
storefront stickers, placards, decorations or advertising media of any type that
can be viewed from the exterior of the Premises, without Landlord's prior
written consent. All signs, decorations, advertising media, blinds, draperies,
and/or other window treatments or bars or other security installations visible
from the outside of the Premises shall conform in all respects to the criteria
established by the Landlord and the deed restrictions and park covenants as
established by the Freeport Park Association.
8. UTILITIES. Tenant shall obtain and pay for all water, gas, heat,
light, power, telephone, sewer, sprinkler charges and other utilities and
services used on or at the Premises, together with any taxes, penalties,
surcharges or the like pertaining to the Tenant's use of the Premises, and any
maintenance charges for utilities. Landlord shall have the right to cause any
of said services to be separately metered to Tenant, at Tenant's expense.
Tenant shall pay its pro rata share, as reasonably determined by Landlord, of
all charges for jointly metered utilities. Landlord shall not be liable for any
interruption or failure of utility service on the Premises.
9. INSURANCE.
A. Landlord shall maintain insurance covering the Building and the
Premises in an amount not less than eighty percent (80%) of the "replacement
cost" thereof insuring against the perils and costs of Fire, Lightning, Extended
Coverage, Vandalism and Malicious Mischief, Liability and Rental Interruption
and such other insurance as Landlord shall deem necessary.
B. Tenant, at its own expense, shall maintain during the term of this
Lease (1) a policy or policies of worker's compensation and comprehensive
general liability insurance (with contractual liability endorsement), including
personal injury and property damage in the amount of Five Hundred Thousand
Dollars ($500,000.00) per occurrence for property damage and One Million Dollars
($1,000,000.00) per occurrence for personal injuries or deaths of persons
occurring in or about the Premises and (2) fire and extended coverage insurance
covering the replacement cost of (a) all alterations, additions, partitions and
improvements installed or placed on the Premises, (b) all of Tenant's personal
property contained within the Premises and (c) business interruption insurance
insuring loss of profits in the event of an insured peril damaging the Premises.
Said policies shall (i) name Petroleum, Inc. and The Industrial Group Management
Services, Inc.. as additional insureds, (ii) be issued by an insurance company
which is reasonably acceptable to Landlord, (iii) provide that said insurance
shall not be canceled unless thirty (30) days prior written notice shall have
been given to Landlord, (iv) shall be delivered to Landlord by Tenant upon
commencement of the term of the Lease and upon each renewal of said insurance,
and (v) shall provide primary coverage to Landlord when any policy issued to
Landlord is similar or duplicate in coverage, and Landlord's policy shall be
excess over Tenant's policies.
<PAGE>
C. Tenant will not permit the Premises to be used for any purpose or in
any manner that would (1) void the insurance thereon, (2) increase the insurance
risk, or (3) cause the disallowance of any sprinkler credits. Tenant shall pay
any increase in the cost of any insurance on the Premises or the Building, which
is caused by Tenant's use of the Premises, or because Tenant vacates the
Premises.
10. FIRE AND CASUALTY DAMAGE.
A. Tenant immediately shall give written notice to Landlord if the
Premises or the Building are damaged or destroyed. If the Premises or the
Building should be totally destroyed or so damaged by an insured peril and in
Landlord's estimation, rebuilding or repairs cannot be completed within one
hundred eighty (180) days after the date of Landlord's actual knowledge of such
damage, and Landlord has within sixty (60) days of Landlord's actual knowledge
of such damage given written notice to tenant of Landlord's intentions for
replacing the Premises or the Building, this Lease shall terminate and the rent
shall be abated during the unexpired portion of this Lease, effective upon the
date of the occurrence of such damage.
B. If the Building or the Premises should be damaged by any insured peril,
and in Landlord's estimation, rebuilding or repairs can be substantially
completed within one hundred eighty (180) days after the date of Landlord's
actual knowledge of such damage, this Lease shall not terminate, and Landlord
shall restore the Premises to substantially its previous condition, except that
Landlord shall not be required to rebuild, repair or replace any part of the
partitions, fixtures, additions and other improvements required to be covered by
Tenant's insurance pursuant to Paragraph 9.B. above. Effective upon the date of
the occurrence of such damage and ending upon substantial completion (as defined
in Paragraph 1.B. above), if the Premises are untenantable in whole or part
during such period, the rent shall be reduced to such extent as may be fair and
reasonable under all of the circumstances. If such repairs and rebuilding have
not been substantially completed within one hundred eighty (180) days after the
date of such damage, Tenant, as Tenant's exclusive remedy, may terminate this
Lease by delivering written notice of termination to Landlord in which event
the rights and obligations hereunder shall cease and terminate.
C. In connection with any repair or reconstruction to the Premises
arising from or necessitated by fire or other casualty which is covered by the
insurance provided pursuant to Paragraph 9.A. above, Tenant shall pay Landlord
the amount of the deductible, which will not to exceed $20,000.00, of such
insurance unless the cost of such repair or reconstruction is necessitated by
the negligence, willful misconduct or default of Landlord or those of its
employees, agents or contractors.
D. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
Premises requires that the insurance proceeds be applied to such indebtedness,
then Landlord shall have the right to terminate this Lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made known by any such holder, whereupon all rights and obligations hereunder
shall cease and terminate.
<PAGE>
E. Anything in this Lease to the contrary notwithstanding except as set
forth in Paragraph 10.C. above, to the extent of a recovery of loss proceeds
under the policies of insurance described in this Lease, Landlord and Tenant
hereby waive and release each other and any related parties and affiliates of
and from any and all rights of recovery, claim, action or cause of action,
against each other, their agents, officers and employees, for any loss or
damage that may occur to the Premises, the Building, or personal property
within the Building and/or Premises arising from or caused by fire or other
casualty or hazard covered or required to be covered by hazard insurance under
this Lease. Upon execution of this Lease, Landlord and Tenant shall notify
their respective insurance companies of the mutual waivers contained herein and,
if available, shall cause each policy described in this Lease to be so endorsed.
11. LIABILITY AND INDEMNIFICATION.
A. Landlord shall hold Tenant harmless and defend Tenant against any and
all claims, actions, damages or liability (including without limitation, all
costs, attorneys fees and expenses incurred in connection therewith) in
connection with any loss, injury or damage to any person or property occurring
in, on or about or arising out of all or part of the Premises and/or the
Building or the use or occupancy thereof, or the conduct or operation of
Landlord's Business, when such injury or damage shall be caused by the act,
neglect, fault of, or omission of, any duty with respect to the same by
Landlord, its agents, servants and employees (unless the indemnified loss is
caused wholly or in part by Tenant's negligence, in which event this indemnity
shall not apply to the allocable share of such loss resulting from Tenant's
negligence).
B. Tenant shall indemnify, protect, hold harmless and defend Landlord, its
agents, employees, contractors, customers, partners, directors, officers and any
affiliates (as defined in the Securities Act of 1933) of the aforementioned,
(collectively, the "Landlord Affiliates") against any and all obligations,
suits, losses, judgements, claims, actions, damages or liability (including
without limitation, all costs, attorney fees and expenses incurred in connection
therewith) in connection with any loss, injury or damage to any person or
property occurring in, on or about or arising out of all or part of the Premises
and/or the Building or the use or occupancy thereof, or the conduct or operation
of Tenant's business, when such injury or damage (1) shall be caused by the act,
neglect, fault of, or omission of, any duty with respect to the same by Tenant,
its agents, servants and employees, and/or (2) arises from a breach, violation,
or non-performance of any term, provision, covenant or agreement of Tenant
hereunder, or a breach or violation by Tenant, even if the Losses are caused
wholly or in part by the negligence of Landlord and/or Landlord affiliates. If
any claim against Landlord or Landlord affiliates which Tenant is required to
indemnify above, Tenant, at its sole cost and expense, shall defend any such
claim, suit or proceeding by or through attorneys satisfactory to Landlord.
C. The provisions of this Paragraph shall survive the expiration or
termination of this Lease with respect to any claims or liability occurring
prior to such expiration or termination. The indemnification provided by this
Paragraph is subject to Tenant's and Landlord's waiver of recovery in the
preceding Paragraph 10. to the extent of either Tenant's or Landlord's recovery
of loss proceeds under policies of insurance described in Paragraph 10.
<PAGE>
D. In the event of any claim against Landlord arising from this lease,
Tenant agrees that it shall look solely, first, to any insurance coverage of
Landlord, and then to the estate and property of Landlord in the land and
buildings comprising the Premises, for the payment of money by Landlord in the
event of any default or breach by Landlord with respect to any of the terms,
covenants and conditions of this Lease to be observed and/or performed by
Landlord, and no other assets of Landlord shall be subject to levy, execution or
other procedures for the satisfaction of Tenant's remedies. Tenant hereby
waives all rights to proceed against the assets of Landlord except as expressly
set forth in this Paragraph 11(D). In the event Landlord transfers this Lease,
upon such transfer, Landlord will be released from all liability and obligations
hereunder arising from and after the date of the assignment, provided that the
transferee assumes the obligations of this Lease.
12. USE.
A. The Premises shall be used only for the purpose of receiving, storing,
shipping and selling (other than retail) products, materials and merchandise
made and/or distributed by Tenant and for such other lawful purposes as may be
incidental thereto. Tenant shall not use the Premises for the receipt, storage
or handling of any product, material or merchandise that is explosive or highly
inflammable or hazardous. Outside storage, including without limitation,
storage of trucks and other vehicles, is prohibited without Landlord's prior
written consent. Tenant shall comply with all governmental laws, ordinances and
regulations applicable to the use of the Premises, and promptly shall comply
with all governmental orders and directives for the correction, prevention and
abatement of nuisances in or upon, or connected with, the Premises, all at
Tenant's sole expense if due to Tenants particular use of the Premises. Tenant
shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise
or vibrations to emanate from the Premises, nor take any other action that would
constitute a nuisance or would disturb, unreasonably interfere with, or endanger
Landlord or any other Tenants of the Building.
B. Tenant and its employees, customers and licensees shall have the
non-exclusive rights to use any parking areas associated with the Premises that
have been designated for such use by Landlord, subject to (1) all reasonable
rules and regulations promulgated by Landlord and (2) rights of ingress and
egress of other Tenants. Landlord shall not be responsible for enforcing
Tenant's parking rights against any third parties.
13. INSPECTION. Landlord and Landlord's agents and representatives shall
have the right to enter the Premises at any reasonable time during business
hours with prior notice to Tenant, to inspect the Premises and to make such
repairs as may be required or permitted pursuant to this Lease. During the
period that is twelve (12) months prior to the end of the Lease term, Landlord
and Landlord's representatives may enter the Premises with prior notice to
Tenant during business hours for the purpose of showing the Premises. In
addition, Landlord shall have the right to erect a suitable sign on the
Premises stating the Premises are available. Tenant shall notify Landlord in
writing at least thirty (30) days prior to vacating the Premises and shall
arrange to meet with Landlord for a joint inspection of the Premises prior to
vacating. If Tenant fails to give such notice or to arrange for such
inspection, then Landlord's inspection of the Premises shall be deemed correct
for the purpose of determining Tenant's responsibility for repairs and
restoration of the Premises.
<PAGE>
14. ASSIGNMENT AND SUBLETTING.
A. Tenant shall not have the right to sublet all or part of the Premises
or to assign, transfer or encumber this Lease, or any interest therein, without
the prior written consent of Landlord. Assignment to successor corporation any
attempted assignment, subletting, transfer or encumbrance by Tenant in violation
of the terms and covenants of this Paragraph shall be void. No assignment,
subletting or other transfer, whether consented to by Landlord or not, or
permitted hereunder, shall relieve Tenant of its liability hereunder. If an
event of default occurs while the Premises or any part thereof are assigned or
sublet, then Landlord, in addition to any other remedies herein provided, or
provided by law, may collect directly from such assignee, subTenant or
transferee all rents payable to the Tenant and apply such rent against any sums
due Landlord hereunder. No such collection shall be construed to constitute a
novation or a release of Tenant from the further performance of Tenant's
obligations hereunder.
B. If Tenant is a corporation, partnership, or other entity, for purposes
of subparagraph A. above, any transfer or series of related transfers of equity
ownership interests in Tenant (or any direct or indirect owners of Tenant) that
results in the change of the ultimate ownership of more than fifty percent (50%)
of the equity ownership of Tenant shall constitute an assignment of this Lease.
The foregoing provision shall not apply, however, if Tenant assigns or sublets
to Americable, Inc. or to any direct or indirect subsidiary of Tenant or
Americable, Inc., its successors or assigns with sufficient capital reasonably
acceptable to the parties or guaranteed by another direct or indirect subsidiary
of Tenant or Americable, Inc. reasonably acceptable to the parties.
C. Upon the occurrence of an assignment or subletting, whether consented
to by Landlord, or mandated by judicial intervention, Tenant hereby assigns,
transfers and conveys all rents or other sums received by Tenant under any such
assignment or sublease, which are in excess of the rents and other sums payable
by Tenant under this Lease, and agrees to pay such amounts within ten (10) days
after receipt.
D. If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. pp 101 et. seq., (the "Bankruptcy
Code"), any and all monies or other consideration payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of Landlord and be promptly
paid or delivered to Landlord.
E. Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code, shall be deemed, without further act or deed,
to have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall upon demand execute and
deliver to Landlord an instrument confirming such assumption.
15. CONDEMNATION. If more than fifty percent (50%) of the Premises are
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking prevents or materially interferes with the use of the
Premises for the purpose for which they were leased to Tenant, this Lease shall
terminate and the rent shall be abated during the unexpired portion of this
Lease, effective on the date of such taking. If less than fifty percent (50%)
of the Premises are taken for any public or quasi-public use under any
governmental law, ordinance or regulation, or by right of eminent domain, or by
private purchase in lieu thereof, this Lease shall not terminate, but the rent
payable hereunder during the unexpired portion of this Lease shall be reduced
to such extent as may be fair and reasonable under all of the circumstances.
<PAGE>
All compensation awarded in connection with or as a result of any of the
foregoing proceedings shall be the property of Landlord and Tenant hereby
assigns any interest in any such award to Landlord; provided, however, Landlord
shall have no interest in any award made to Tenant for loss of business or
goodwill or for the taking of Tenant's fixtures and improvements, if a separate
award for such items is made to Tenant. Landlord agrees that Tenant may pursue
an independent award for such items.
16. HOLDING OVER. At the termination of this Lease by its expiration or
otherwise, Tenant immediately shall deliver possession to Landlord with all
repairs and maintenance required herein to be performed by Tenant completed.
If, for any reason, Tenant retains possession of the Premises after the
expiration or termination of this Lease or fails to complete any repairs
required hereby, unless the parties hereto otherwise agree in writing, such
possession shall be subject to termination by either Landlord or Tenant at any
time upon not less than ten (10) days advance written notice, and all of the
other terms and provisions of this Lease shall be applicable during such period,
except that Tenant shall pay Landlord from time to time, upon demand, as rental
for the period of such possession, an amount equal to double the rent in effect
on the termination date, computed on a monthly basis for any day of each
calendar month of such period. No holding over by Tenant, whether with or
without consent of Landlord, shall operate to extend this Lease except as
otherwise expressly provided. The preceding provisions of this Paragraph 16.
shall not be construed as consent for Tenant to retain possession of the
Premises in the absence of written consent thereto by Landlord.
17. QUIET ENJOYMENT. Landlord covenants that on or before the
Commencement Date it will have good title to the Premises, free and clear of
all liens and encumbrances, excepting only the lien for current taxes not yet
due, such mortgage or mortgages as are permitted by the terms of this Lease,
zoning ordinances and other building and fire ordinances and governmental
regulations relating to the use of such property, and easements, restrictions
and other conditions of record. If this Lease is a sublease, then Tenant agrees
to take the Premises subject to the provisions of the prior lease. Landlord
represents that it has the authority to enter into this Lease and that so long
as Tenant pays all amounts due hereunder and performs all other covenants and
agreements herein set forth, Tenant shall peaceably and quietly have, hold and
enjoy the Premises for the term hereof without hindrance or molestation from
Landlord, subject to the terms and provisions of this Lease.
18. EVENTS OF DEFAULT. The following events (herein individually
referred to as "event of default") each shall be deemed to be events of
nonperformance by Tenant under this Lease:
A. Tenant shall fail to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein when
due or any payment or reimbursement required under any other lease with
Landlord, and such failure shall continue for a period of five (5) days from
the date such payment was due.
B. Tenant shall fail to pay any amounts owed to contractors or
subcontractors for work or services performed in connection with the operation,
construction, management and maintenance of the Building as provided herein, and
such failure shall continue for a period of five (5) days from the date such
payment was due.
<PAGE>
C. The Tenant or any guarantor of the Tenant's obligations hereunder
shall (i) become insolvent; (ii) admit in writing its inability to pay its
debts; (iii) make a general assignment for the benefit of creditors; (iv)
commence any case, proceeding or other action seeking to have an order for
relief entered on its behalf as a debtor or to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or of any substantial part of its property; or (v) take any action to
authorize or in contemplation of any of the actions set forth above in this
Paragraph.
D. Any case, proceeding or other action against the Tenant or any
guarantor of the Tenant's obligations hereunder shall be commenced seeking (I)
to have an order for relief entered against it as debtor or to adjudicate it a
bankrupt or insolvent; (ii) reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors; (iii)
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, and such case, proceeding or
other action (a) results in the entry of an order for relief against it which it
is not fully stayed within seven (7) business days after the entry thereof or
(b) shall remain undismissed for a period of forty-five (45)days.
E. Intentionally Deleted.
F. Tenant shall fail to discharge any lien placed upon the Premises in
violation of Paragraph 21. hereof within twenty (20) days after any such lien or
encumbrance is filed against the Premises.
G. Tenant shall fail to comply with any term, provision or covenant of
this Lease (other than those listed in this Paragraph 18.), and shall not cure
such failure within twenty (20) days after written notice thereof to Tenant
unless Tenant has commenced to cure and is diligently pursuing the cure after
receipt of written notice thereof to Tenant.
19. REMEDIES.
A. Upon each occurrence of an event of default, Landlord shall have the
option to pursue any one or more of the following remedies without any notice or
demand:
(1) Terminate this Lease; and/or
(2) Enter upon and take possession of the Premises without terminating
this Lease by process of Law; and/or
(3) Alter all locks and other security devices at the Premises with or
without terminating this Lease, deny access to Tenant, and pursue, at Landlord's
option, one or more remedies pursuant to this Lease, Tenant hereby specifically
waiving any state or federal law to the contrary. This provision shall control
over any conflicting provisions of the Texas Property Code or any successor
statute governing the right of landlords to change the door locks of commercial
tenants.
B. Upon the occurrence of any event of default, in addition to other
rights or remedies Landlord may have at law or in equity, any and all rent for
the entire unexpired part of the term and all other sums due and owing hereunder
or that might become owing under this Lease, shall be accelerated and
immediately become due and payable to Landlord. Landlord may collect all rent,
including all sums of money of whatever collectible under this Lease, by any
means prescribed by law or by this Lease.
<PAGE>
C. Upon the occurrence of any event of default Tenant immediately shall
surrender the Premises to Landlord, and if Tenant fails so to do, Landlord,
without waiving any other remedy it may have, may enter upon and take possession
of the Premises by process of Law and expel or remove Tenant and any other
person who may be occupying such Premises or any part thereof, without being
liable for prosecution or any claim of damages therefor.
D. If Landlord repossesses the Premises with or without terminating the
Lease, Tenant, at Landlord's option, shall be liable for and shall pay Landlord
on demand all rental and other payments owed to Landlord hereunder, accrued to
the date of such repossession, plus all amounts required to be paid by Tenant to
Landlord until the date of expiration of the term as stated in Paragraph 1.
Actions to collect amounts due by Tenant to Landlord under this subparagraph may
be brought from time to time, on one or more occasions, without the necessity of
Landlord's waiting until expiration of the Lease term.
E. Upon an event of default, in addition to any sum provided to be paid
herein, Tenant also shall be liable for and shall pay to Landlord (1) any
brokerage fees incurred by Landlord in connection with the execution of this
Lease; (2) brokers' fees incurred by Landlord in connection with any reletting
of the whole or any part of the Premises; (3) the costs of removing and storing
Tenant's or other occupant's property; (4) the costs of repairing, altering,
remodeling or otherwise putting the Premises into condition acceptable to a new
Tenant or Tenants; and (5) all reasonable expenses incurred by Landlord in
enforcing or defending Landlord's rights and/or remedies. If either party
hereto institute any action or proceeding to enforce any provision hereof by
reason of any alleged breach of any provision of this Lease, the prevailing
party shall be entitled to receive from the losing party all reasonable
attorneys' fees and all court costs in connection with such proceeding.
F. In the event Tenant fails to make any payment due hereunder when
payment is due, to help defray the additional cost to Landlord for processing
such late payments, Tenant shall pay to Landlord on demand a late charge in an
amount equal to five percent (5%) of such installment; and the failure to pay
such amount within ten (10) days after demand therefor shall be an additional
event of default hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord's remedies
in any manner.
G. Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available, including without limitation, the institution by Landlord,
its agents or attorneys of a forcible detainer or ejectment action to re-enter
the premises shall not be construed to be an election to terminate this Lease
or relieve Tenant of its obligation to pay rent hereunder and shall not be
deemed to be an acceptance of surrender of the Premises by Landlord, whether by
agreement or by operation of law, it being understood that such surrender can be
effected only by the written agreement of Landlord and Tenant. Tenant and
Landlord further agree that forbearance by Landlord to enforce its rights
pursuant to the Lease at law or in equity, shall not be a waiver of Landlord's
right to enforce one or more of its rights in connection with any subsequent
default.
H. In the event of or repossession of the Premises for an event of
default, Landlord shall use reasonable efforts to relet the Premises; provided,
that, Tenant shall not be entitled to credit or reimbursement of any proceeds in
excess of the rental owed hereunder. Landlord may relet the whole or any
portion of the Premises for any period, to any Tenant and for any use and
purpose.
<PAGE>
I. If Landlord fails to commence to perform any of its obligations
hereunder within thirty (30) days after written notice from Tenant specifying
such failure, Tenant's exclusive remedy shall be an action for damages. Unless
and until Landlord fails to so cure said default after such notice, Tenant shall
not have any remedy or cause of action by reason thereof. All obligations of
Landlord hereunder will be binding upon Landlord only during the period of its
possession of the Premises and not thereafter. The term "Landlord" shall mean
only the owner, for the time being of the Premises, and in the event of the
transfer by such owner of its interest in the Premises, such owner shall
thereupon be released and discharged from all covenants and obligations of the
Landlord thereafter accruing, but such covenants and obligations shall be
binding during the Lease term upon each new owner for the duration of such
owner's ownership. Notwithstanding any other provision hereof, Landlord shall
not have any personal liability hereunder. In the event of any breach or
default by Landlord in any term or provision of this Lease, and, as a
consequence, if Tenant shall recover a money judgment against Landlord, such
judgment shall be satisfied only out of the proceeds received at a judicial sale
upon execution and levy against the right, title and interest of Landlord in the
Building, and in the rents or other income from the Building receivable by
Landlord, and neither Landlord nor Landlord's owners, partners or venturers
shall have any personal, partnership, corporate or other liability hereunder.
J. If Landlord repossesses the Premises pursuant to the authority herein
granted, then Landlord shall have the right to (i) keep in place and use or (ii)
remove and store all of the furniture, fixtures and equipment at the Premises,
including that which is owned by or leased to Tenant at all times prior to any
foreclosure thereon by Landlord or repossession thereof by any Landlord thereof
or third party having a lien thereon. Landlord also shall have the right to
relinquish possession of all or any portion of such furniture, fixtures,
equipment and other property to any person ("Claimant") who presents to Landlord
a copy of any instrument represented by Claimant to have been executed by Tenant
(or any predecessor of Tenant) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment or
other property, without the necessity on the part of Landlord to inquire into
the authenticity or legality of said instrument. Landlord may, at its sole
option and without prejudice to, or waiver of any rights it may have i) escort
Tenant to the Premises to retrieve any personal belongings of Tenant and/or its
employees not covered by the Landlord's lien and security interest described in
Paragraph 25. hereof, or ii) obtain a list from Tenant of the personal property
of Tenant and/or its employees that is not covered by the Landlord's lien and
security interest described in Paragraph 25. hereof, and make such property
available to Tenant and or Tenant's employees; provided, however, Tenant first
shall pay in cash all costs and estimated expenses to be incurred in connection
with the removal of such property and making it available. The rights of
Landlord herein stated shall be in addition to any and all other rights that
Landlord has or may hereafter have at law or in equity, and Tenant stipulates
and agrees that the rights herein granted Landlord are commercially reasonable.
K. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord under this Lease, whether or not
expressly denominated as rent, shall constitute rent.
L. This is a contract under which applicable law excuses Landlord from
accepting performance from (or rendering performance to) any person or entity
other than Tenant.
<PAGE>
20. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a lien
or charge upon the Premises or the improvements situated thereon or the building
of which the Premises are a part, provided, however, that if the mortgagee,
trustee, or holder of any such mortgage or deed of trust elects to have Tenant's
interest in this Lease superior to any such instrument, then by notice to Tenant
from such mortgagee, trustee or holder, this Lease shall be deemed superior to
such lien, whether this Lease was executed before or after said mortgage or deed
of trust. Tenant agrees to attorn to any mortgagee, trustee under a deed of
trust or purchaser at a foreclosure sale or trustee's sale as Landlord under
this Lease. Tenant, at any time hereafter, within ten (10) days after demand,
shall execute any instruments, releases or other documents that may be required
by any mortgagee for the purpose of subjecting and subordinating this Lease to
the lien of any such mortgage. If Tenant fails to execute the same within such
ten (10) day period, Landlord is hereby authorized to execute the same as
attorney-in-fact for Tenant. Any such future subordination by Tenant will be
subject to tenant receiving a nondisturbance agreement from the party to whom it
is subordinating, which nondisturbance agreement will recognize the rights of
Tenant under this Lease so long as Tenant is not in default.
21. MECHANIC'S LIENS. Tenant has no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature whatsoever upon,
or in any manner to bind the interest of Landlord or Tenant in the Premises or
to charge the rentals payable hereunder for any claim in favor of any person
dealing with Tenant, including those who may furnish materials or perform labor
for any construction or repairs. Tenant covenants and agrees that it will pay
or cause to be paid all sums legally due and payable by it on account of any
labor performed or materials furnished in connection with any work performed
on the Premises and that it will save and hold Landlord harmless from any and
all loss, cost or expense based on or arising out of asserted claims or liens
against the leasehold estate or against the right, title and interest of the
Landlord in the Premises or under the terms of this Lease. Tenant agrees to
give Landlord immediate written notice of the placing of any lien or encumbrance
against the Premises. Tenant will pay for any labor, services, materials,
supplies or equipment furnished to Tenant in or about the Premises, and will pay
and discharge any mechanic's, materialmen's or other lien against the Premises
resulting from Tenant's failure to make such payment, or will contest the lien
and deposit with Landlord, or an escrow agent or title insurance company, cash
equal to 125% of the amount of the lien, or otherwise post security sufficient
to release the Building from such lien. If the lien is reduced to final
judgement and all appeals are exhausted or waived, Tenant will discharge the
judgement and may use any cash deposited with Landlord for such purpose, and
Landlord will return all remaining cash deposited by Tenant.
22. MISCELLANEOUS.
A. Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions
inserted in this Lease are for convenience only and in no way define, limit or
otherwise describe the scope or intent of this Lease, or any provision hereof,
or in any way affect the interpretation of this Lease.
B. In the event the Premises constitute a portion of a multiple occupancy
building, Tenant's Proportionate Share, as used in this Lease, shall mean a
fraction, the numerator of which is the space contained in the Premises and the
denominator of which is the entire space contained in the Building.
C. The terms, provisions and covenants and conditions contained in this
Lease shall run with the land and shall apply to, inure to the benefit of, and
be binding upon, the parties hereto and upon their respective heirs, executors,
personal representatives, legal representatives, successors and assigns, except
as otherwise herein expressly provided. Landlord shall have the right to
<PAGE>
transfer and assign, in whole or in part, its rights and obligations in the
Building and property that are the subject of this Lease. Each party agrees to
furnish to the other, promptly upon demand, a corporate resolution, proof of due
authorization by partners, or other appropriate documentation evidencing the due
authorization of such party to enter into this Lease.
D. Landlord and Tenant shall not be held responsible for delays in the
performance of its obligations hereunder when caused by material shortages, acts
of God or labor disputes.
E. Tenant agrees, from time to time, within ten (10) days after request
of Landlord, to deliver to Landlord, or Landlord's designee, a Certificate of
Occupancy, financial statements and an estoppel certificate stating that this
Lease is in full force and effect, the date to which rent has been paid, the
unexpired term of this Lease and such other factual matters pertaining to this
Lease as may be requested by Landlord. It is understood and agreed that
Tenant's obligation to furnish such estoppel certificates in a timely fashion is
a material inducement for Landlord's execution of this Lease. If Tenant fails
to execute the same within such ten (10) day period, Landlord is hereby
authorized to execute the same as attorney-in-fact for Tenant. In the event
during the term of this Lease that Tenant pursues an Initial Public Stock
Offering and it is required by the underwriter(s) and Tenant submits proof to
Landlord then Landlord will sign an estoppel letter in a form acceptable to
Landlord setting forth rent, term, and Tenant's status as to lease payments on
date of such estoppel.
F. This Lease constitutes the entire understanding and agreement of the
Landlord and Tenant with respect to the subject matter of this Lease, and
contains all of the covenants and agreements of Landlord and Tenant with respect
thereto. Landlord and Tenant each acknowledge that no representations,
inducements, promises or agreements, oral or written, have been made by Landlord
or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not
contained herein, and any prior agreements, promises, negotiations, or
representations not expressly set forth in this Lease are of no force or effect.
This Lease may not be altered, changed or amended except by an instrument in
writing signed by both parties hereto.
G. All obligations of Landlord and Tenant hereunder not fully performed
as of the expiration or earlier termination of the term of this Lease shall
survive the expiration or earlier termination of the term hereof, including
without limitation, all payment obligations with respect to taxes and insurance
and all obligations concerning the condition and repair of the Premises. Upon
the expiration or earlier termination of the term hereof, and prior to Tenant
vacating the Premises, Tenant shall pay to Landlord any amount reasonably
estimated by Landlord as necessary to put the Premises, including without
limitation, all heating and air conditioning systems and equipment therein, in
good condition and repair, reasonable wear and tear excluded. Tenant shall
also, prior to vacating the Premises, pay to Landlord the amount, as estimated
by Landlord, of Tenant's obligation hereunder for real estate taxes and
insurance premiums for the year in which the Lease expires or terminates. All
such amounts shall be used and held by Landlord for payment of such obligations
of Tenant hereunder, with Tenant being liable for any additional costs therefor
upon demand by Landlord, or with any excess to be returned to Tenant after all
such obligations have been determined and satisfied as the case may be. Any
security deposit held by Landlord shall be credited against the amount due for
Tenant under this Paragraph 22.G.
<PAGE>
H. Intentionally Deleted.
I. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added, as a
part of this Lease, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and be legal,
valid and enforceable.
J. All references in this Lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this Lease.
K. Tenant represents and warrants that it has dealt with no broker, agent
or other person other than Fults & Associates in connection with this
transaction or that no broker, agent or other person brought about this
transaction, other than as may be referenced in a separate written agreement
executed by Tenant, and delivered to Landlord prior to execution of this Lease,
and Tenant agrees to indemnify and hold Landlord harmless from and against any
claims by any other broker, agent or other persons claiming a commission or
other form of compensation by virtue of having dealt with Tenant with regard
to this leasing transaction.
L. If and when included within the term "Landlord", as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of a notice
specifying some individual at some specific address for the receipt of notices
and payments to Landlord. If and when included within the term "Tenant", as
used in this instrument, there is more than one person, firm or corporation, all
shall jointly arrange among themselves for their joint execution of a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively, shall be bound
by notices given in accordance with the provisions of Paragraph 23. hereof to
the same effect as if each had received such notice.
M. TENANT ACKNOWLEDGES THAT (1) IT HAS INSPECTED AND ACCEPTS THE PREMISES
IN AN "AS IS, WHERE IS" CONDITION ONLY AFTER IMPROVEMENTS IN EXHIBIT "B" ARE
COMPLETED IN A TIMELY, GOOD AND WORKMANLIKE MANNER AND A FINAL BUILDING
INSPECTION PERMIT HAS BEEN ISSUED BY THE CITY OF IRVING, (2) THE BUILDINGS AND
IMPROVEMENTS COMPRISING THE SAME ARE SUITABLE FOR THE PURPOSE FOR WHICH THE
PREMISES ARE LEASED AND LANDLORD HAS MADE NO WARRANTY, REPRESENTATION, COVENANT,
OR AGREEMENT WITH RESPECT TO THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE OF THE PREMISES, (3) THE PREMISES ARE IN GOOD AND SATISFACTORY
CONDITION, (4) NO REPRESENTATIONS AS TO THE REPAIR OF THE PREMISES, NOR PROMISES
TO ALTER, REMODEL OR IMPROVE THE PREMISES HAVE BEEN MADE BY LANDLORD (UNLESS AND
EXCEPT AS MAY BE SET FORTH IN EXHIBIT B ATTACHED TO THIS LEASE, IF ONE SHALL BE
ATTACHED, OR AS IS OTHERWISE EXPRESSLY SET FORTH IN THIS LEASE), AND (5) THERE
ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESSED, IMPLIED OR STATUTORY, THAT
EXTEND BEYOND THE DESCRIPTION OF THE PREMISES.
<PAGE>
N. Landlord and Tenant agree that the terms and conditions of this Lease
are confidential and the parties hereto agree not to disclose the terms of this
Lease to any third party. In the event during the term of this Lease that
Tenant pursues an Initial Public Stock Offering and it is required by the
underwriter(s) and Tenant submits proof to Landlord then Tenant may share the
terms and conditions of this Lease to said underwriter(s).
O. Landlord agrees to have the HVAC system serviced prior to Tenant
occupancy as defined herein.
23. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivering of notice or the making of any payment by
Landlord to Tenant or with reference to the sending, mailing or delivering of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
A. All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at the address for Landlord set forth
below or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligation to pay
rent and any other amounts to Landlord under the terms of this Lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord. In addition to base rental due hereunder, all sums of
money and all payments due Landlord hereunder shall be deemed to be additional
rental owed to Landlord.
B. All payments required to be made by Landlord to Tenant hereunder shall
be payable to Tenant at the address set forth below, or at such other address
within the continental United States as Tenant may specify from time to time by
written notice delivered in accordance herewith.
C. Any written notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered upon the earlier to occur of (1)
tender of delivery (in the case of a hand-delivered notice) or (2) deposit in
the United States Mail, postage prepaid, Certified or Registered Mail, addressed
to the parties hereto at the respective addresses set out below, or at such
other address as they have theretofore specified by written notice delivered in
accordance herewith.
<PAGE>
24. HAZARDOUS WASTE. The term "Hazardous Substances", as used in this
Lease shall mean pollutants, contaminants, toxic or hazardous wastes, or any
other substances, the removal of which is required or the use of which is
restricted, prohibited or penalized by any "Environmental Law", which term shall
mean any federal, state or local law or ordinance relating to pollution or
protection of the environment. Tenant hereby agrees that (i) no activity will
be conducted on the Premises that will produce any Hazardous Substances, except
for such activities that are part of the ordinary course of Tenant's business
activities (the "Permitted Activities") provided said Permitted Activities are
conducted in accordance with all Environmental Laws and have been approved in
advance in writing by Landlord; (ii) the Premises will not be used in any manner
for the storage of any Hazardous Substances except for any temporary storage of
such materials that are used in the ordinary course of Tenant's business (the
"Permitted Materials") provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and approved in advance in
writing by Landlord; (iii) no portion of the Premises will be used as a landfill
or a dump; (iv) Tenant will not install any underground tanks of any type; (v)
Tenant will not allow any surface or surface conditions to exist or come into
existence that constitute, or with the passage of time may constitute a public
or private nuisance; (vi) Tenant will not permit any Hazardous Substances to be
brought onto the Premises, except for the Permitted Materials, and if so brought
or found located thereon, the same shall be immediately removed, with proper
disposal, and all required cleanup procedures shall be diligently undertaken
pursuant to all Environmental Laws. If at any time during or after the term of
the Lease, the Premises is found to be so contaminated or subject to said
conditions, Tenant agrees to indemnify and hold Landlord harmless from all
claims, demands, actions, liabilities, costs, expenses, damages and obligations
of any nature, including reasonable attorneys' fees, arising from or as a result
of the use of the Premises by Tenant. The foregoing indemnification shall
survive the termination or expiration of this Lease. Tenant at Tenant's own
cost and expense may, at its option, complete a Phase I Environmental Study by
an environmental company approved by the Landlord on the Premises prior to
occupancy and no more than thirty (30) days prior to the termination of this
Lease.
25. Intentionally Deleted.
26. Choice of Law and Forum. This Agreement shall be governed by the
laws of the State of Texas. Any legal proceedings relating to this Agreement
shall be brought exclusively in the State District Court, Dallas County, Texas,
or in the United States District Court Northern District of Texas at Dallas,
Texas, and both parties hereto consent to the jurisdiction of said courts.
27. Improvement Allowance. Landlord, at Landlord's sole cost and
expense, will provide $15,000.00 for the construction of the improvements
outlined and described in Exhibit B attached hereto and incorporated herein
by reference. All improvements shall be performed according to Landlord's
specifications.
28. EARLY TERMINATION. It is agreed and understood that if lessee is not
in default of any of the terms, covenants and conditions hereof and lessee has
not assigned this lease or sublet the premises (or part thereof), Lessee shall
have the option to terminate this Lease Agreement after the thirty-sixth (36)
month of the primary term of the Lease Agreement. Such termination is
conditioned upon Lessee's providing prior notice through registered or certified
mail and upon the payment schedule as follows to Lessor:
Effective June 1, 1999 = $125,000.00
The above payment will serve as penalty at the time of notice to Lessor. Notice
of Lessee's intention to terminate this Lease Agreement and payment of penalty
<PAGE>
must be received by Lessor in writing not less than one hundred eighty (180)
days prior to the to the effective date of termination. Said date of
termination would be effective as if the date had been the original termination
date under this Lease Agreement. Accordingly, Lessee shall be liable and
responsible for its obligation and liabilities under the Lease Agreement, which
include but are not limited to, excess tax assessments and restoration of the
premises to its original condition. In the event Lessee fails to deliver such
notice of termination within the time period set forth above, this lease shall
remain in full force and effect.
29. Renewal Option. Provided that Tenant is not in default of any of the
terms, covenants and conditions hereof, and this Lease has not been assigned or
the premises (or a part thereof) sublet, Tenant shall have the right and option
to extend the original term of this Lease for one further term of thirty six
(36) months. Such extension of the original term shall be on the same terms,
covenants and conditions as provided for in the original term except for this
paragraph and except that the rental during the extended term shall be at the
fair market rental then in effect on equivalent properties, of equivalent size,
in equivalent areas (but in no event less than the rental rate specified in
Paragraph 2.A. of this Lease). Tenant shall deliver written notice to Landlord
of Tenant's intent to exercise the renewal option granted herein not more than
one hundred and twenty (180) days nor less than one hundred fifty days (150)
days prior to the expiration of the original term of this Lease. In the event
Tenant fails to deliver such written notice within the time period set forth
above then Tenant's right to extend the term hereof shall expire and be of no
further force and effect. In the event Landlord and Tenant fail to agree in
writing upon the fair market rental within thirty (30) days after exercise by
Tenant of this renewal option, Tenant's right hereunder to extend the term under
this Paragraph 29. shall become null and void.
EXECUTED BY LANDLORD, this ____________ day of ____________________ , 1996.
Attest/Witness
By: __________________________________
By:___________________________________
Name:_________________________________
Name:_________________________________
Title:__________________________________ Title:_________________________________
ADDRESS:
Petroleum, Inc.
301 North Main, Suite 1300
Wichita, Kansas 67202-4813
<PAGE>
EXECUTED BY TENANT, this _______ day of _________________ , 19___.
Attest/Witness
By:___________________________________
By:___________________________________
Name:_________________________________
Name:_________________________________
Title:_________________________________ Title:__________________________________
ADDRESS:
Americable, Inc.
805-E Franklin Court
Marietta, Georgia 30067
770-428-5050
<PAGE>
Exhibit A
Description of Real Property
Being a 10,800 square foot space out of an approximately 105,220 square foot
project located on the real property whose description is more particularly
described as follows:
Field Notes
(Freeports 8 & 9)
Being a tract of land in the J. Tilley Survey, Abstract No. 1474, Dallas County,
Texas, said tract being part of Lot 2, Block C-C, DFW Freeport, 11th
Installment, as shown on plat filed June 30, 1982 recorded in Volume 82128, Page
1192, Dallas County Deed Records, said tract being more particularly described
as follows:
BEGINNING at a 1/2 inch iron rod with a yellow plastic cap stamped "ALBERT H.
HALFF ASSOC." (hereafter referred to as "with cap") found at the most northerly
point of a 25-foot corner clip at the intersection of the east right-of-way line
of Esters Blvd. (80 feet wide) with the north right-of-way line of Royal Lane
(width varies);
THENCE North 0 degrees 10 minutes 30 seconds East, along said east right-of-way
line of Esters Blvd., a distance of 765.11 feet to a 1/2-inch iron rod with cap
found for corner;
THENCE North 89 degrees 51 minutes 25 seconds East, departing said east line, a
distance of 350.56 feet to a cut "x" in concrete found for corner;
THENCE South 45 degrees 08 minutes 25 seconds East, a distance of 146.90 feet to
a cut "x": in concrete found for corner;
THENCE South 0 degrees 10 minutes 30 seconds West, a distance of 681.41 feet to
a 1/2-inch iron rod with cap found for corner, said point being on the north
line of Royal Lane;
THENCE North 89 degrees 49 minutes 30 seconds West, along said north line, a
distance of 437.32 feet to a 1/2-inch iron rod with cap found for corner, also
being the most southerly end of aforementioned 25-foot corner clip;
Thence North 44 degrees 49 minutes 30 seconds West, a distance of 25.00 feet to
the POINT OF BEGINNING AND CONTAINING 351.157 square feet or 8.0615 acres of
land.
<PAGE>
Exhibit A-1
Floor Plan of Premises
<PAGE>
Exhibit B
Plans and Specifications
Americable, Inc.
Tenant Finish Scope of Work
<PAGE>
The above referenced $15,000.00 tenant improvement allowance (paragraph 27.)
shall be applied to the following scope of work for the Lease space. Any costs
over the $15,000.00 shall be at Tenants sole cost and expense.
1.Open rear wall for access to overhead door
2.Case open warehouse walls where indicated
3.Add Ramp where raised floor meets concrete floor in parts/inventory center
4. Demo walls in assembly area
5.Demo Walls in Technology Training and Development Center area
6.Add closet to cover up electrical in Technology Training and Development
Center area and relocate thermostat
7.Patch and paint walls in Demo room
8.Patch and paint walls in Design/Planning Conference room
9.Clean all carpets in offices in Sales/Engineering
10.Repaint walls in Sales/Engineering, except for the Literature/Library room
11.Recarpet open area in Sales/Engineering
12.Demo Wall in Sales/Engineering
13.Clean carpets in Customer Lounge area, Design/Planning, and Demo room areas
14. Replace red plexiglass in Assembly area
15. Add one door in back and one door in front of Training room
16. Add 6 lights on reostat as indicated
17. Remove walls on small office in Training area
18. Relocate door for largs office in Training area
19. Add 7 duplex outlets in Training area as indicated
20. Recarpet and repaint Training area
21. Add water connection in Training reception area
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,199
<SECURITIES> 0
<RECEIVABLES> 9,709
<ALLOWANCES> (516)
<INVENTORY> 6,746
<CURRENT-ASSETS> 27,586
<PP&E> 4,526
<DEPRECIATION> (2,904)
<TOTAL-ASSETS> 117,135
<CURRENT-LIABILITIES> 23,857
<BONDS> 25,087
<COMMON> 2,478
0
0
<OTHER-SE> 31,296
<TOTAL-LIABILITY-AND-EQUITY> 117,135
<SALES> 31,793
<TOTAL-REVENUES> 31,793
<CGS> 23,503
<TOTAL-COSTS> 23,503
<OTHER-EXPENSES> 8,191
<LOSS-PROVISION> 82
<INTEREST-EXPENSE> 1,768
<INCOME-PRETAX> 5,962
<INCOME-TAX> 2,440
<INCOME-CONTINUING> 5,641
<DISCONTINUED> 1,257
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,898
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
