SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT
Under Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTER ENDED APRIL 30, 1995
Commission File No. 1-7886
PENRIL DATACOMM NETWORKS, INC.
A Delaware Corporation
IRS Employer Identification No. 34-1028216
1300 Quince Orchard Blvd., Gaithersburg, Maryland 20878
Telephone - (301) 417-0552
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 and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Common Stock, $.01 par value,
7,534,204 shares outstanding
as of June 7, 1995
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS
April 30, July 31,
1995 1994
------- -------
CURRENT ASSETS (unaudited) (audited)
<S> <C> <C>
Cash $ 1,161 $ 997
Accounts receivable, net 15,315 18,348
Inventories-
Raw materials 8,394 7,180
Work in process 2,864 2,219
Finished goods 6,368 7,445
------- -------
17,626 16,644
Other current assets 2,258 585
------- -------
TOTAL CURRENT ASSETS 36,360 36,774
Property, equipment and technology, net 3,890 5,177
Excess of cost over net assets acquired, net 6,159 6,901
Other assets 2,780 3,491
------- -------
TOTAL ASSETS $ 49,189 $ 52,343
======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Short-term borrowing $ 5,125 $ 3,225
Current portion of long-term debt 2,921 3,153
Accounts payable 8,265 7,217
Accrued expenses 2,707 3,880
------- -------
TOTAL CURRENT LIABILITIES 19,018 17,475
Long-term debt, net of current portion 3,868 5,762
Other noncurrent liabilities 740 526
------- -------
TOTAL LIABILITIES 23,626 23,763
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value 75 74
Additional paid-in capital 22,327 21,704
Retained earnings 3,188 6,998
Equity adjustments (26) (196)
------- -------
TOTAL SHAREHOLDERS' EQUITY 25,563 28,580
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 49,189 $ 52,343
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
2<PAGE>
<PAGE>
Item 1. Financial Statements (continued)
PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET REVENUES $ 14,835 $ 18,448 $ 45,477 $ 55,768
COSTS AND EXPENSES
Cost of revenues 8,603 9,743 25,617 29,121
Selling, general and administrative 5,077 5,517 15,642 16,572
Product development and engineering 2,228 2,687 6,850 7,706
Amortization of cost over
net assets acquired 233 183 699 683
------- ------- ------- -------
16,141 18,130 48,808 54,082
OPERATING INCOME (LOSS) (1,306) 318 (3,331) 1,686
------- ------- ------- -------
OTHER EXPENSE
Interest expense (374) (223) (908) (636)
Other, net (18) (1) (99) (78)
------- ------- ------- -------
(392) (224) (1,007) (714)
INCOME (LOSS) BEFORE INCOME TAXES (1,698) 94 (4,338) (972)
BENEFIT (PROVISION) FROM INCOME TAXES -- (9) 528 244
NET INCOME (LOSS) $ (1,698) $ 85 $ (3,810) $ 1,216
======= ======= ======= =======
Net income (loss) per common and
equivalent share $ (.22) $ .01 $(.51) $ .15
======= ======= ======= =======
Shares used in per share calculation 7,534 7,991 7,534 7,904
======= ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
3<PAGE>
<PAGE>
PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
For the Nine
Months Ended April 30,
1995 1994
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) from continuing operations $ (3,810) $ 1,216
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,776 2,533
Benefit for income tax (528) (244)
Other (189) 675
Decrease (increase) in accounts receivable 2,933 (3,149)
Increase in inventories (982) (2,056)
Increase in other current assets (133) (284)
Increase (decrease) in accounts payable 1,048 (145)
Increase (decrease) in other current liabilities (567) 496
------- -------
Net cash provided by (used in) operating activities 1,548 (1,170)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for purchased technology (255) (463)
Expenditures for property and equipment (1,205) (1,558)
------- -------
Net cash used in investing activities (1,460) (2,021)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit 1,900 3,094
Borrowings on long-term debt 84 2,656
Payments on long-term debt (2,208) (3,232)
Issuance of common stock 132 270
Dividends paid -- (147)
Other 168 197
------- -------
Net cash provided by financing activities 77 2,838
CASH AT THE BEGINNING OF THE PERIOD 997 774
------- -------
CASH AT THE END OF THE PERIOD $ 1,161 $ 421
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4<PAGE>
<PAGE>
PENRIL DATACOMM NETWORKS, INC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months
Ended April 30, 1995 and 1994
1. The accompanying condensed consolidated financial statements,
which should be read in conjunction with the Annual Report on
Form 10-K for the fiscal year ended July 31, 1994, apply to
the Company and its wholly-owned subsidiaries and reflect all
adjustments which are, in the opinion of management, necessary
for a fair presentation of the Company's consolidated
financial position as of April 30, 1995 and the results of
operations for the three and nine months ended April 30, 1995
and 1994. The results of operations for such periods,
however, are not necessarily indicative of the results to be
expected for a full fiscal year.
Certain reclassifications have been made to prior period
consolidated financial statements to conform to the April 30,
1995 presentation.
2. The Company has recorded a benefit for income taxes for the
nine months ended April 30, 1995 of $528,000. The benefit is
based on the projected annualized effective tax rate for the
fiscal year including the effects of state taxes and foreign
tax liabilities.
3. As noted in the Company's Annual Report on Form 10-K, the
Company had a working capital facility with a total borrowing
capacity of $5,500,000 which expired on December 31, 1994. In
addition, the Company has several term loans with its
principal bank. These loans require payments of $210,000 per
month plus accrued interest. In April 1995, the Company
completed negotiations with its principal bank to extend the
working capital facility to December 31, 1995 and continue the
term loan monthly principal payments of $210,000. The maximum
amount available under the working capital facility is limited
to the total of eligible accounts receivable plus eligible
inventory less outstanding term loans. The amounts borrowed
under the new agreement bear interest at the prime rate plus
2%.
At April 30, 1995, the Company had borrowed $5,222,000 under
the working capital facility, including $91,000 for letters of
credit.
Long-term debt at April 30, 1995 and July 31, 1994 consisted
of (in thousands):
<TABLE>
<CAPTION>
April 30, July 31,
1995 1994
------ ------
<S> <C> <C>
Term Loans $ 4,778 $ 6,668
Subordinated Debt 1,054 1,054
------ ------
5,832 7,722
Capital leases and other 957 1,193
------ ------
6,789 8,915
Less current portion (2,921) (3,153)
------ ------
Long-term debt $ 3,868 $ 5,762
====== ======
</TABLE>
The amended credit facility requires the Company to maintain a
ratio of adjusted earnings to interest expense of 1.5 to 1 at
April 30, 1995 and 2.0 to 1 thereafter, a ratio of adjusted
earning to fixed charges of 1.5 to 1 beginning July 31, 1995
and a debt to equity ratio of 1.2 to 1.
5 <PAGE>
<PAGE>
As part of the amended credit agreement, Datability, Inc., a
wholly-owned subsidiary of the Company, was required to amend
the subordinated debt agreement. This amendment reduced the
principal payment due May 6, 1995 to $75,775, with additional
principal payments allowed only after the term loans have been
reduced by $3,000,000. All other terms remain unchanged.
4. In February 1995, Henry D. Epstein exercised 80,000 Class B
warrants which were issued in March 1987. These warrants were
issued with a per share exercise price of $2.34, the fair
market value of the Company's common shares on the date the
warrants were issued. Mr. Epstein exercised the warrants by
remitting 62,400 shares with a fair market value of $3.00 on
the date of the exercise.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of fiscal 1995, the Company generated
cash of $1,548,000 from operating activities. Non-cash expenses of
$3,059,000 (including depreciation and amortization of $3,776,000)
plus a reduction in accounts receivable of $2,933,000 and an increase
in accounts payable of approximately $1,048,000 offset an operating
loss of $3,810,000 and an increase in inventory of $982,000. The
decrease in accounts receivable is the result of normal collection of
earlier sales and lower sales volume. The increase in accounts
payable is the result of better management of payments to vendors.
The increase in inventories of $982,000 for the first nine months of
fiscal year 1995 is due to lower than expected sales in April 1995.
The increase is partially offset by a reduction in inventories of
products being phased out. The Company regularly provides a reserve
for products which are obsolete and no unusual write-offs are expected
as a result of the phase out of older products.
The Company has renegotiated its credit agreement with its principal
bank. As described in the Notes to Condensed Consolidated Financial
Statements, the working capital facility provides a maximum of
$5,500,000 and is scheduled to expire on December 31, 1995. At April
30, 1995 the Company had borrowed $5,222,000.
The Company is also attempting to sell the variable autotransformer
and power supply product lines which are part of the Company's
Technipower subsidiary. If the transactions occur, some portion of
the cash generated will be used to reduce the amount borrowed from its
principal bank.
The ability of the Company to generate adequate cash for operational
and capital needs is dependent on the success of the Company to
increase sales of its data communications products, of which several
have been introduced in fiscal 1995, along with the sale of the
Technipower product lines.
RESULTS OF OPERATIONS
During the third quarter of fiscal 1995, the Company's net revenues
were $14,835,000 compared to $18,448,000 in the third quarter of 1994,
or a decrease of $3,613,000 (19%). Revenues for the first nine months
of fiscal 1995 were $45,477,000 compared to $55,768,000 for the same
period in fiscal 1994, a decrease of $10,291,000 (18%). Revenues for
both the three and nine months of fiscal 1995 are lower than the prior
year's comparable revenues because customers have been holding orders
awaiting the release of the newer V.34 modems and because there were
lower than expected shipments of new wide area networking technology
products. The Company began shipping, in limited quantities, V.34
modems during the third quarter.
6<PAGE>
<PAGE>
Gross margins for the third quarter of fiscal 1995 decreased to 42%
from 44% in the second quarter. Gross margins for the nine months of
fiscal 1995 were 44% compared to 47% for the nine months of fiscal
1994. The decline in margins is the result of lower production
volumes which generated higher unfavorable manufacturing variances in
fiscal 1995 compared to fiscal 1994 and in the fiscal 1995 third
quarter, start-up manufacturing costs on the newer V.34 modems along
with lower margins on products being phased out.
Selling, general and administrative costs decreased by $440,000 (8%)
to $5,077,000 in the third quarter of fiscal 1995 from $5,517,000 in
the third quarter of fiscal 1994. For the first nine months, selling,
general and administrative expenses were $15,642,000 compared to
$16,572,000 for the first nine months of fiscal 1994, or a decrease of
$930,000 (6%). The decrease was the result of eliminating several
administrative functions in the Carlstadt, New Jersey facility during
the first quarter of fiscal 1994, and the result of lower commissions
expense due to lower sales volume. These were partially offset by the
addition of international sales personnel.
Product development and engineering expenses for the third quarter of
1995 were $2,228,000 compared to $2,687,000 for the third quarter of
fiscal 1994, or a decrease of $459,000 (17%). For the first nine
months of fiscal 1995, product development and engineering expenses
were $6,850,000 compared to $7,706,000 or a decrease of $856,000
(11%). During fiscal 1994, the Company consolidated several
engineering tasks in Gaithersburg which resulted in overall savings
and reduced total payroll costs by approximately $200,000 per quarter.
Additional reductions in payroll costs were made during the third
quarter of fiscal 1995.
Interest expense for the first nine months of fiscal 1995 was $908,000
compared to $636,000 for the same period in fiscal 1994. The increase
in the prime interest rate from 7.0% in fiscal 1994 to 9.0% in the
third quarter of fiscal 1995 combined with the increase in the rate
charged by the Company's principal bank from prime plus 1/2% to prime
plus 2% has been the reason for the increased interest expense for
both three and nine month periods.
For the first six months of fiscal 1995, the Company has recorded a
tax benefit of $528,000 as a result of the loss before income taxes of
$2,640,000. The benefit is based on the annualized effective tax rate
projected for the full fiscal year including the effect of state taxes
and foreign taxes. In the first six months of fiscal 1994, the
Company recorded a tax benefit of $253,000 as a result of a review of
the reserve requirements under SFAS 109, Accounting for Income Taxes.
A review in the third quarter of fiscal 1995 indicates no additional
benefit was available for the three months ending April 30, 1995.
7<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On December 24, 1994 the Company filed a complaint against
Network Systems Corporation of Minneapolis, Minnesota ("NSC") in the
Circuit Court for Montgomery County, Maryland. The litigation arises
out of a contract in which the Company agreed to develop certain
computer hardware and software to NSC's specifications. The Company
alleges breach of contract, fraudulent inducement and defamation and
is seeking specific performance, compensatory damages of $2,000,000
and punitive damages of $5,000,000. On March 28, 1995 NSC filed an
answer and counterclaim in which NSC alleges negligent
misrepresentation, fraud, and breach of the contract by the Company.
NSC is seeking recession of the contract, restitution of monies paid
by NSC to the Company, compensatory damages of $5,000,000 and punitive
damages in an unspecified amount. The Company believes the
counterclaim of NSC is without merit.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of the Company was held on
March 22, 1995, at which time the shareholders elected two Class II
directors listed in the proxy statement. The vote was:
<TABLE>
<CAPTION>
Directors IN FAVOR WITHHELD
--------- ---------- ----------
<S> <C> <C>
John P. Lowe, Jr. 6,813,269 83,634
Michael H. Newlin 6,840,116 56,787
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
Exhibits
--------
4.01 Second Amended and Restated Credit Agreement dated
as of April 25, 1995 to the Amended and Restated
Credit Agreement dated as of May 6, 1993 between
Penril Datacomm Networks, Inc. and Signet
Bank/Maryland
4.02 Amendment No. 1 dated as of April 25, 1995 to the
Subordination Agreement dated as of May 6, 1993,
among Howard International Corporation, John
Howard, Signet Bank/Maryland, and Datability, Inc.
Reports on Form 8-K
-------------------
None
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Penril DataComm Networks, Inc.
-------------------------------------------
(Registrant)
DATE: June 14, 1995 BY:/s/ Henry D. Epstein
-----------------------------------
Henry D. Epstein
Chief Executive Officer and
Chairman of the Board of Directors
DATE: June 14, 1995 BY:/s/ Richard D. Rose
-----------------------------------------
Richard D. Rose
Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> APR-30-1995
<CASH> 1,161
<SECURITIES> 0
<RECEIVABLES> 16,352
<ALLOWANCES> 1,037
<INVENTORY> 17,626
<CURRENT-ASSETS> 2,258
<PP&E> 20,679
<DEPRECIATION> 16,789
<TOTAL-ASSETS> 49,189
<CURRENT-LIABILITIES> 19,018
<BONDS> 0
<COMMON> 75
0
0
<OTHER-SE> 25,489
<TOTAL-LIABILITY-AND-EQUITY> 49,189
<SALES> 45,477
<TOTAL-REVENUES> 45,477
<CGS> 25,617
<TOTAL-COSTS> 48,808
<OTHER-EXPENSES> 99
<LOSS-PROVISION> 380
<INTEREST-EXPENSE> 908
<INCOME-PRETAX> (4,338)
<INCOME-TAX> (528)
<INCOME-CONTINUING> (3,810)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,810)
<EPS-PRIMARY> (.51)
<EPS-DILUTED> (.51)
</TABLE>
[EXECUTION COPY]
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of April 25, 1995
between
PENRIL DATACOMM NETWORKS, INC.
and
SIGNET BANK/MARYLAND
<PAGE> TABLE OF CONTENTS
Page
Number
ARTICLE I
GENERAL DEFINITIONS
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Accounting Terms and Determinations. . . . . . . . . 18
Section 1.3. Borrowing Base Calculations. . . . . . . . . . . . . 18
ARTICLE II
THE CREDIT
Section 2.1. Continuation of Outstanding Loans and
Letters of Credit on the Effective Date. . . . . . 19
Section 2.2. Revolving Commitment . . . . . . . . . . . . . . . . 19
Section 2.3. The Foreign Exchange Contracts . . . . . . . . . . . 20
Section 2.4. Method of Borrowing. . . . . . . . . . . . . . . . . 20
Section 2.5. Method of Issuance . . . . . . . . . . . . . . . . . 20
Section 2.6. Letter of Credit Reimbursements and Other
Payments . . . . . . . . . . . . . . . . . . . . . 21
Section 2.7. Notes. . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.8. Interest . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.9. Fees . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.10. Scheduled Amortization Payments;
Mandatory Prepayments. . . . . . . . . . . . . . . 22
Section 2.11. Mandatory Termination of the Commitments . . . . . . 25
Section 2.12. Optional Termination or Reduction of the
Commitments. . . . . . . . . . . . . . . . . . . . 25
Section 2.13. Optional Prepayments . . . . . . . . . . . . . . . . 26
Section 2.14. General Provisions as to Payments. . . . . . . . . . 26
Section 2.15. Late Charge. . . . . . . . . . . . . . . . . . . . . 26
Section 2.16. Computation of Interest and Commitment
Fees . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE III
CONDITIONS
Section 3.1. Conditions to Effectiveness. . . . . . . . . . . . . 26
Section 3.2. Conditions to All Credit Events. . . . . . . . . . . 29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Corporate Existence and Power. . . . . . . . . . . . 30
Section 4.2. Corporate and Governmental Authorization;
Contravention. . . . . . . . . . . . . . . . . . . 30
Section 4.3. Binding Effect . . . . . . . . . . . . . . . . . . . 31
Section 4.4. Financial Information. . . . . . . . . . . . . . . . 31
Section 4.5. Litigation . . . . . . . . . . . . . . . . . . . . . 32
Section 4.6. Marketable Title . . . . . . . . . . . . . . . . . . 32
Section 4.7. Filings. . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.8. Regulation U . . . . . . . . . . . . . . . . . . . . 32
Section 4.9. Subsidiaries . . . . . . . . . . . . . . . . . . . . 32
Section 4.10. Disclosure . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE V
FINANCIAL COVENANTS
Section 5.1. Certain Definitions. . . . . . . . . . . . . . . . . 33
Section 5.2. Current Ratio. . . . . . . . . . . . . . . . . . . . 35
Section 5.3. Consolidated Debt to Consolidated Net
Worth. . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.4. Consolidated Debt to Consolidated
Tangible Net Worth . . . . . . . . . . . . . . . . 35
Section 5.5. Consolidated EBITDA to Consolidated
Interest Expense . . . . . . . . . . . . . . . . . 35
Section 5.6. Consolidated EBITDA to Adjusted Fixed
Charges. . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VI
OTHER COVENANTS
Section 6.1. Information. . . . . . . . . . . . . . . . . . . . . 36
Section 6.2. Compliance with Laws . . . . . . . . . . . . . . . . 39
Section 6.3. Accounting; Inspection of Property, Books
and Records. . . . . . . . . . . . . . . . . . . . 39
Section 6.4. Restriction on Liens . . . . . . . . . . . . . . . . 39
Section 6.5. Consolidations, Mergers and Sales of
Assets . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.6. Dividends. . . . . . . . . . . . . . . . . . . . . . 41
Section 6.7. Transactions with Other Persons. . . . . . . . . . . 41
Section 6.8. Use of Proceeds. . . . . . . . . . . . . . . . . . . 41
Section 6.9. Independence of Covenants. . . . . . . . . . . . . . 41
Section 6.10. Restrictions with Respect to
Subsidiaries . . . . . . . . . . . . . . . . . . . 41
Section 6.11. Debt . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.12. Advances, Investments and Loans. . . . . . . . . . . 42
Section 6.13. Subordinated Debt. . . . . . . . . . . . . . . . . . 43
Section 6.14. Transaction with Affiliates. . . . . . . . . . . . . 43
ARTICLE VII
EMPLOYEE BENEFIT PLANS
Section 7.1. Certain Definitions. . . . . . . . . . . . . . . . . 44
Section 7.2. Compliance with ERISA. . . . . . . . . . . . . . . . 45
Section 7.3. Prohibited Transactions. . . . . . . . . . . . . . . 45
Section 7.4. Information. . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VIII
DEFAULTS
Section 8.1. Events of Default. . . . . . . . . . . . . . . . . . 46
ARTICLE IX
CHANGE IN CIRCUMSTANCES
Section 9.1. Increased Cost and Reduced Return. . . . . . . . . . 49
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices. . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.2. No Waivers . . . . . . . . . . . . . . . . . . . . . 51
Section 10.3. Expenses . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.4. Right of Set-Off . . . . . . . . . . . . . . . . . . 52
Section 10.5. Amendments and Waivers . . . . . . . . . . . . . . . 52
Section 10.6. Successors and Assigns . . . . . . . . . . . . . . . 52
Section 10.7. Maryland Law . . . . . . . . . . . . . . . . . . . . 54
Section 10.8. Counterparts; Effectiveness. . . . . . . . . . . . . 54
Section 10.9. Waiver of Jury Trial; Submission to
Jurisdiction . . . . . . . . . . . . . . . . . . . 54
Section 10.10. Entire Amended Agreement . . . . . . . . . . . . . . 55
Exhibit A - Form of Revolving Note
Exhibit B - Form of Term Note
Exhibit C - Form of Acquisition Note
Exhibit D - Form of Amendment No. 1 to Borrower Security
Agreement
Exhibit E - Form of Amendment No. 1 to Subsidiary Security
Agreements
Exhibit F - Form of Guarantor Consent
Exhibit G - Form of Amendment No. 1 to Subordination Agreement
Exhibit H - Form of Borrowing Base Certificate
Exhibit I - Form of Facsimile Agreement
Exhibit J - Form of Subsidiary Guaranty
Exhibit K - Form of Subsidiary Security Agreement
Exhibit L - Loan repayment schedule
Schedule 4.1 Good Standing
Schedule 4.5 Litigation
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT (as
amended, supplemented or modified from time to time, this "Amended
Agreement") is dated as of April 25, 1995 and is between PENRIL
DATACOMM NETWORKS, INC., a Delaware corporation (the "Borrower"),
and SIGNET BANK/MARYLAND, a Maryland banking corporation (the
"Bank").
The Borrower and the Bank are parties to an Amended and
Restated Credit Agreement dated as of May 6, 1993, as amended by
Amendment No. 1 dated as of January 31, 1994 and by Amendment
No. 2 dated on June 23, 1994, and as further amended by letter
agreements dated June 30, 1994, December 14, 1994, January 13,
1995 and February 22, 1995 (the "1993 Credit Agreement"). The
Borrower and the Bank desire to amend and restate the 1993 Credit
Agreement, all on the terms and conditions set forth in this
Amended Agreement. Accordingly, the parties agree as follows:
ARTICLE I
GENERAL DEFINITIONS
Section 1.1. Definitions. The following terms, as
used herein, have the following meanings:
"Acquisition Loan" means the Outstanding Acquisition
Loan, as continued as the Acquisition Loan pursuant to
Section 2.1(iii) hereof.
"Acquisition Note" means a promissory note of the
Borrower, substantially in the form of Exhibit C hereto,
evidencing the obligation of the Borrower to repay the Acquisition
Loan.
"Affiliate" means (i) any Person that directly, or
indirectly through one or more intermediaries, controls the
Borrower (a "Controlling Person") or (ii) any Person (other than
the Borrower or a Subsidiary) which is controlled by or is under
common control with a Controlling Person. As used herein, the
term "control" means possession, directly or indirectly, of the
power to direct, or cause the direction of the management or
policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
"Amendment Documents" has the meaning set forth in
Section 3.1(c).
"Application" means an Application and Agreement for the
issuance of a standby or documentary letter of credit in the
Bank's standard form or in such other form as the Bank may specify
from time to time.
"Applied Facility Amount" means at any date the
collective amount of (i) the aggregate unpaid principal amount of
all Revolving Loans, (ii) all unpaid Reimbursement Amounts,
(iii) the aggregate face amount of all undrawn Letters of Credit,
(iv) the aggregate unpaid principal amount of the Term Loans and
(v) the aggregate unpaid principal amount of the Acquisition Loan.
"Applied Revolving Amount" means at any date the
collective amount of (i) the aggregate unpaid principal amount of
all Revolving Loans, (ii) all unpaid Reimbursement Amounts and
(iii) the aggregate face amount of all undrawn Letters of Credit
(other than the 1995 Appeal Bond LC).
"Appraisal" means, at any date, the inventory report
dated January 16, 1995 entitled "Penril Datacomm Networks, Inc.
Orderly Liquidation Value" delivered by the Appraiser to the Bank,
as most recently updated pursuant to Section 6.1(vii) hereof.
"Appraiser" means MB Valuation Services or such other
reasonably equivalent inventory appraisal service selected by the
Bank after consultation with the Borrower.
"Authorized Officer" means the Chairman and President or
the Chief Financial Officer of the Borrower.
"Bank" means Signet Bank/Maryland, a Maryland banking
corporation, and its successors and assigns.
"Borrower" means Penril DataComm Networks, Inc., a
Delaware corporation, and its successors.
"Borrower's 1994 Form 10-K" means the Borrower's annual
report on Form 10-K for the fiscal year ended July 31, 1994, as
filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934.
"Borrower Security Agreement" means the Security
Agreement dated as of May 6, 1993 between the Borrower and the
Bank, as amended by Amendment No. 1 thereto dated as of the date
hereof, and as the same may be further amended, supplemented or
modified from time to time.
"Borrower Stock Pledge Agreement" means the Stock Pledge
Agreement dated as of May 6, 1993 between the Borrower and the
Bank, as the same may be amended, supplemented or modified from
time to time.
"Borrowing Base" means, at any date, the sum of the Loan
Values determined pursuant to Section 1.3 hereof.
"Borrowing Base Certificate" means a Borrowing Base
Certificate (together with supporting reports and schedules),
properly completed in compliance with Section 1.3 hereof and
substantially in the form of Exhibit H hereto, delivered pursuant
to Section 3.1 or Section 6.1(v) hereof.
"Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in Bethesda, Maryland are
authorized by law to close.
"Cash Equivalents" means (i) direct obligations of the
United States or any agency thereof or obligations guaranteed by
the United Sates or any agency thereof (ii) commercial paper
issued by a Person other than a Restricted Subsidiary or an
Affiliate to the Borrower rated as investment grade by a
nationally recognized credit rating agency or (iii) time deposits
with, including certificates of deposit issued by, any office
located in the United States of any bank or trust company
organized under the laws of the United States or any State thereof
which has capital, surplus and undivided profits aggregating at
least $150,000,000, provided in each case that such instrument
matures within one year from the date of acquisition thereof by
the Borrower or a Restricted Subsidiary.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Collateral" means all of the property which is subject
or is to be subject to the Liens granted by the Collateral
Documents.
"Collateral Documents" means a collective reference to
the Borrower Security Agreement, the Borrower Stock Pledge
Agreement, the Subsidiary Security Agreements, the PEI Stock
Pledge Agreement and all supplemental assignments, mortgages,
deeds of trust and other documents delivered or to be delivered
pursuant thereto.
"Commitment" means the Revolving Commitment or the
Exchange Contract Commitment, and "Commitments" means both of them
collectively.
"Components" means Inventory of the Borrower, EMI and
TPI consisting of materials acquired from vendors (such as
resistors, integrated circuits, capacitors, cords and terminal
blocks) to be utilized as raw materials in the manufacture of
products.
"Consolidated Subsidiary" means at any date any
Subsidiary or other entity, the accounts of which would be
consolidated with those of the Borrower in its consolidated
financial statements as of such date.
"Credit Event" means the borrowing of a Revolving Loan,
the issuance by the Bank of a Letter of Credit or the entry by the
Bank into an Exchange Contract pursuant hereto.
"Datability" means Datability, Inc., a Delaware
corporation and a direct, Wholly-Owned Consolidated Subsidiary of
the Borrower, and its successors.
"Datability Guaranty" means the Guaranty dated as of
May 6, 1993 between Datability and the Bank, as the same may be
amended, supplemented or modified from time to time.
"Datability Security Agreement" means the Security
Agreement dated as of May 6, 1993 between Datability and the Bank,
as amended by Amendment No. 1 thereto dated as of the date hereof,
and as the same may be further amended, supplemented or modified
from time to time.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable arising in
the ordinary course of business), (iv) all obligations of such
Person as lessee under Capital Leases, (v) all obligations of such
Person to purchase securities or other property which arise out of
or in connection with the sale of the same or substantially
similar securities or property, (vi) all non-contingent
obligations of such Person to reimburse any bank or other person
in respect of amounts paid under a letter of credit or similar
instrument, (vii) all obligations of others secured by a Lien on
any asset of such Person, whether or not such obligation is
assumed by such Person and (viii) all obligations of others
Guaranteed by such Person.
"Default" means any condition or event which constitutes
an Event of Default or which with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of
Default.
"Dividend" with respect to any Person means that such
Person has declared or paid a dividend or returned any equity
capital to its stockholders, partners or other Persons holding
ownership interests in such Person or authorized or made any other
distribution, payment or delivery of property (other than capital
stock of such Person) or cash to its stockholders, partners or
other Persons holding ownership interests in such Person in their
capacities as such, or redeemed, retired, purchased or otherwise
acquired, directly or indirectly, for a consideration any shares
of any class of its capital stock, partnership interests or other
ownership interests outstanding on or after the Effective Date (or
any options or warrants issued by such Person with respect to its
capital stock, partnership interests or other ownership
interests), or set aside any funds for any of the foregoing
purposes or shall have permitted any of its Subsidiaries to
purchase or otherwise acquire for consideration any shares of any
class of the capital stock, partnership interests or other
ownership interests of such Person outstanding on or after the
Effective Date (or any options or warrants issued by such Person
with respect to its capital stock, partnership interests or other
ownership interests).
"Effective Date" means the date on which the last of the
conditions to the effectiveness of this Amended Agreement set
forth in Section 3.1 hereof is satisfied.
"EMI" means Electro-Metrics Inc., a Delaware corporation
and a direct, Wholly-Owned Consolidated Subsidiary of the
Borrower, and its successors.
"EMI Guaranty" means the Guaranty dated as of May 6,
1993 between EMI and the Bank, as the same may be amended,
supplemented or modified from time to time.
"EMI Security Agreement" means the Security Agreement
dated as of May 6, 1993 between EMI and the Bank, as amended by
Amendment No. 1 thereto dated as the date hereof, and as the same
may be further amended, supplemented or modified from time to
time.
"Eligible Inventory" means, at any date of
determination, the aggregate of the FIFO cost of all Components,
Sub-Assemblies and Finished Goods of the Borrower, EMI and TPI
(each an "Inventory Credit Party" and collectively the Inventory
Credit Parties") as to which the following requirements have been
fulfilled to the satisfaction of the Bank:
(i) an Inventory Credit Party has lawful
and absolute title to such inventory;
(ii) an Inventory Credit Party has the full
and unqualified right to grant the Bank a security
interest in such inventory;
(iii) all such inventory is subject to a
fully perfected security interest in favor of the
Bank pursuant to the Borrower Security Agreement or a
Subsidiary Security Agreement, prior to the rights
of, and enforceable as such against, any other
Person;
(iv) none of such inventory is subject to
any security interest or other Lien in favor of any
Person other than the Bank;
(v) all such inventory is held by an
Inventory Credit Party only for resale in the
ordinary course of its business;
(vi) all of such inventory is located in a
city or county listed on the appropriate schedule to
the Borrower Security Agreement or a Subsidiary
Security Agreement as applicable and at premises
owned by an Inventory Credit Party or leased by an
Inventory Credit Party for which the Bank has
received satisfactory landlord and other waivers;
(vii) none of such inventory is obsolete,
unsalable, damaged or otherwise unfit for sale as
determined by the Bank in its discretion; and
(viii) none of such inventory has been
declared by the Bank in its sole discretion as being
ineligible.
"Eligible Receivables" means such billed accounts for
goods delivered or services rendered owing to the Borrower, EMI,
TPI or Penril England (each a "Receivables Credit Party" and
collectively, the "Receivables Credit Parties") as to which the
following requirements have been fulfilled to the satisfaction of
the Bank:
(i) a Receivables Credit Party has lawful
and absolute title to each of such accounts;
(ii) each of such accounts is a valid,
legally enforceable obligation of the Person who is
obligated on such account (the "Account Debtor");
(iii) a Receivables Credit Party has the
full and unqualified right to grant the Bank a
security interest in such account;
(iv) such accounts are those in which the
Borrower Security Agreement or a Subsidiary Security
Agreement has created valid and perfected first
priority Lien in favor of the Bank;
(v) each of such accounts is evidenced by
an invoice rendered to the Account Debtor and is not
evidenced by any instrument or chattel paper;
(vi) each of such accounts arises out of
sales that are in the ordinary course of the business
of a Receivables Credit Party;
(vii) such accounts are on terms which are
normal or customary in the business of a Receivables
Credit Party;
(viii) delivery of the goods sold or services
to be rendered underlying such account has been
completed;
(ix) such accounts are not owing from any
person that is an Affiliate of a Receivables Credit
Party unless arising in the ordinary course of
business conducted on an arm's-length basis;
(x) none of the accounts are unpaid more
than 90 days past original invoice date;
(xi) such accounts are not owing from any
Account Debtor if more than 50% of the accounts owing
from such Account Debtor are more than 90 days past
original invoice date;
(xii) such accounts are not those with
respect to which return, rejection or repossession
has occurred or the liability for which has been
disputed by the Account Debtor or the related goods
or services have not been finally accepted without
dispute, offset or counterclaim;
(xiii) such accounts are not owing from any
Person that shall take or be the subject of any
action or proceeding of the type described in
Section 8.1(vii) or (viii) hereof or the credit
standing of which is unsatisfactory to the Bank in
relation to the amount of credit extended;
(xiv) such accounts are not owing from any
Person that is also a supplier to or creditor of a
Receivables Credit Party (except to the extent that
such Person has irrevocably waived any right that
such Person has or may have to offset against
accounts owing by such Person to such Receivables
Credit Party amounts owed by them to such Person);
(xv) such accounts do not arise out of
sales on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval or consignment
basis or subject to any right of return, set-off or
charge-back;
(xvi) such accounts are not such that the
Bank believes their full and timely collection to be
doubtful;
(xvii) such accounts are not owing from an
Account Debtor that is an agency, department or
instrumentality of the United States or any state or
governmental authority in the United States unless a
Receivables Credit Party shall have satisfied the
requirements of the Assignment of Claims Act of 1940,
as amended, and any similar state legislation in
respect thereof and the Bank is satisfied as to the
absence of set-offs, counterclaims and other defenses
to payment on the part of the United States or such
state governmental authority; and
(xviii) such accounts do not arise out of
sales where the account debtor is located in a
country or foreign jurisdiction that the Bank may
choose to exclude from time to time.
"Event of Default" has the meaning set forth in
Section 8.1.
"Exchange Contract" means a forward foreign exchange
contract for a period of not more than 90 days (unless otherwise
agreed by the Bank) issued by the Bank under the 1991 Credit
Agreement, the 1993 Credit Agreement or this Amended Agreement.
"Exchange Contract Commitment" means the Bank's
agreement to continue its Outstanding Exchange Contracts pursuant
to Section 2.1(iv) hereof and to enter into additional Exchange
Contracts pursuant to Section 2.3 hereof in an aggregate principal
amount for all such Exchange Contracts not to exceed $1,000,000 at
any one time outstanding.
"Facsimile Agreement" means a letter agreement,
substantially in the form of Exhibit I hereto, between the
Borrower and the Bank with respect to the execution of
Applications.
"Finished Goods" means all of the Borrower's, EMI's and
TPI's Inventory commonly considered to be finished goods ready for
sale in the ordinary course of its business.
"Funded Debt" means at any date, with respect to any
Person, all Debt of such Person which is not a current liability
as of such date.
"GAAP" means generally accepted accounting principles in
the United States.
"Governmental Authority" means any federal, state or
local government, authority, agency, central bank, quasi-
governmental authority, court or other body or entity, and any
arbitrator with authority to bind a party at law.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term Guarantee shall not
include endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantors" means a collective reference to Datability,
PEI, Penril Technologies, TPI, EMI and each other Restricted
Subsidiary, and Guarantor means any such Guarantor.
"Intra Month Over Formula" means at any date in a
calendar month the circumstance where the Applied Facility Amount
exceeds the Borrowing Base determined as of the second or third
Thursdays in such calendar month by virtue of (i) the receipt by a
Receivables Credit Party of collections in respect of Eligible
Receivables comprising a portion of the Borrowing Base determined
as of the fourth Thursday of the preceding calendar month or as of
the first Thursday of such calendar month and/or (ii) the receipt
by a Receivables Credit Party of orders and the shipment of
Finished Goods in the last two weeks of such calendar month.
"Inventory" has, with respect to the Borrower, the
meaning set forth in the Borrower Security Agreement and, with
respect to any Subsidiary, the meaning set forth in the Subsidiary
Security Agreement executed and delivered by such Subsidiary.
"Inventory Advance Percentage" means (i) 21.33% with
respect to Components, (ii) 55.50% with respect to Finished Goods
and (iii) 19.74% with respect to Sub-Assemblies, as any such
percentage may be adjusted from time to time by the Bank.
"Inventory Credit Party" has the meaning set forth in
the definition of Eligible Inventory.
"Letter of Credit" means a commercial or standby letter
of credit issued by the Bank under the 1991 Credit Agreement, the
1993 Credit Agreement or this Amended Agreement for the account of
the Borrower in accordance with the Bank's customary practices and
procedures, including the 1995 Appeal Bond LC.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind
in respect of such asset. For the purposes of this Amended
Agreement, a Person shall be deemed to own subject to a Lien any
asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Loan" means a Revolving Loan, a Term Loan or the
Acquisition Loan, and "Loans" means all of them collectively.
"Loan Documents" means a collective reference to this
Amended Agreement, the Notes, the Collateral Documents, the
Subsidiary Guaranties, the Subrogation and Contribution Agreement,
the Subordination Agreement and all supplemental assignments,
mortgages, deeds of trust and other documents delivered or to be
delivered pursuant thereto.
"Loan Value" means, with respect to Eligible Receivables
or Eligible Inventory, the amount derived from the calculations
described in Section 1.3.
"Net Sale Proceeds" means, with respect to any
disposition of assets by the Borrower or any Subsidiary, the gross
cash proceeds (including any cash received by way of deferred
payment pursuant to a promissory note, receivable or otherwise,
but only as and when received) received from such disposition of
assets, net of out-of-pocket transaction costs, the amount of such
cash proceeds required to repay any Debt (other than under this
Amended Agreement) secured by the respective assets which were
sold and the taxes paid or payable as a result of such sale, by
the Borrower or any Subsidiary as a result of such sale.
"1991 Credit Agreement" means the Credit Agreement dated
as of December 31, 1991 between the Borrower and the Bank.
"1993 Credit Agreement" has the meaning set forth in the
introductory paragraphs of this Amended Agreement.
"1995 Appeal Bond LC" means the Letter of Credit issued
by the Bank in the initial stated amount of approximately $412,000
for the account of the Borrower in favor of Aetna Life & Casualty
Insurance Company or similar surety company.
"Note" means the Revolving Note, a Term Note or the
Acquisition Note, and "Notes" means all of such Notes,
collectively.
"Notice of Borrowing" has the meaning set forth in
Section 2.4.
"Outstanding Acquisition Loan" means the Loan borrowed
on May 6, 1993 as the "Acquisition Loan" under the 1993 Credit
Agreement which is outstanding immediately prior to the Effective
Date in the amount of $2,125,000.00.
"Outstanding Exchange Contracts" means those Exchange
Contracts issued pursuant to the 1991 Credit Agreement or the 1993
Credit Agreement which are outstanding immediately prior to the
Effective Date.
"Outstanding Letters of Credit" means all Letters of
Credit issued under the 1991 Credit Agreement of the 1993 Credit
Agreement which are outstanding immediately prior to the Effective
Date.
"Outstanding Term Loan" means each of the three separate
Loans borrowed on December 21, 1992, July 27, 1993 and
September 7, 1993, respectively, as "Term Loans" under the 1991
Credit Agreement or the 1993 Credit Agreement which are
outstanding immediately prior to the Effective Date in the
respective amounts of $875,000.18 (for the Term A Loan),
$875,000.00 (for the Term B Loan) and $1,112,499.88 (for the
Term C Loan), and "Outstanding Term Loans" means all of such Term
Loans, collectively.
"Outstanding Working Capital Loans" means the aggregate
unpaid principal of the Loans borrowed as "Working Capital Loans"
under the 1991 Credit Agreement or the 1993 Credit Agreement which
are outstanding immediately prior to the Effective Date.
"PEI" means Penril Electronics, Inc., a Delaware
corporation, and its successors.
"PEI Guaranty" means the Guaranty dated as of May 6,
1993 between PEI and the Bank, as the same may be amended,
supplemented or modified from time to time.
"PEI Security Agreement" means the Security Agreement
dated as of May 6, 1993 between PEI and the Bank, as amended by
Amendment No. 1 thereto dated as of the date hereof, and as the
same may be further amended, supplemented or modified from time to
time.
"PEI Stock Pledge Agreement" means the Stock Pledge
Agreement dated as of May 6, 1993 between PEI and the Bank, as the
same may be amended, supplemented or modified from time to time.
"Penril Caribbean" means Penril International, Ltd., a
corporation organized under the laws of the United States Virgin
Islands, and its successors.
"Penril Caribbean Guaranty" means the Guaranty dated as
of October 27, 1993 between Penril Caribbean and the Bank, as the
same may be amended, modified or supplemented from time to time.
"Penril Caribbean Security Agreement" means the Security
Agreement dated as of October 27, 1993 between Penril Caribbean
and the Bank, as the same may be amended, modified or supplemented
from time to time.
"Penril England" means Penril DataComm, Ltd., a
corporation organized under the laws of England, and its
successors.
"Penril England Debenture" means the Debenture dated
October 15, 1993 between Penril England and the Bank, as the same
may be amended, modified or supplemented from time to time.
"Penril England Guaranty" means the Guaranty dated as of
October 15, 1993 between Penril England and the Bank, as the same
may be amended, modified or supplemented from time to time.
"Penril Hong Kong" means Penril (Far East) Limited, a
corporation organized under the laws of Hong Kong, and its
successors.
"Penril Hong Kong Guaranty" means the Guaranty dated as
of December 22, 1993 between Penril Hong Kong and the Bank, as the
same may be amended, modified or supplemented from time to time.
"Penril Hong Kong Security Agreement" means the Security
Agreement dated as of December 22, 1993 between Penril Hong Kong
and the Bank, as the same may be amended, supplemented or modified
from time to time.
"Penril Technologies" means Penril Technologies Inc., a
Delaware corporation, and its successors.
"Penril Technologies Guaranty" means the Guaranty dated
as of May 6, 1993 between Penril Technologies and the Bank, as the
same may be amended, supplemented or modified from time to time.
"Penril Technologies Security Agreement" means the
Security Agreement dated as of May 6, 1993 between Penril
Technologies and the Bank, as amended by Amendment No. 1 thereto
dated as of the date hereof, and as the same may be further
amended, supplemented or modified from time to time.
"Permitted Liens" means the Liens referred to in clauses
(i) through (vi) of Section 6.4.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or
an agency or instrumentality thereof.
"Receivables Credit Party" has the meaning set forth in
the definition of Eligible Receivables.
"Reimbursement Amount" means, with respect to any amount
drawn under a Letter of Credit, the amount so drawn plus any and
all reasonable charges and expenses that the Bank may pay or incur
relative to such drawing.
"Restricted Subsidiaries" means, at any date,
collectively, PEI, Penril Technologies, TPI, EMI, Datability,
Penril England, Penril Hong Kong and Penril Caribbean and all
other Consolidated Subsidiaries that have complied with the
following:
(i) such Consolidated Subsidiary and its
shareholders shall have duly executed and delivered a
Restricted Subsidiary Collateral Package and its
shareholders shall have delivered all certificates
representing the shares of stock pledged under the
Restricted Subsidiary Stock Pledge Agreement
delivered as a part of such Restricted Subsidiary
Collateral Package, duly endorsed in blank or
accompanied by a stock power duly executed in blank;
(ii) the Bank shall have received (1) a
copy of such Consolidated Subsidiary's articles of
incorporation, certified as of a recent date by the
governmental agency having authority to issue
certificates or articles of incorporation by the
jurisdiction of such Consolidated Subsidiary's
incorporation, (2) a long-form certificate of such
governmental agency, dated as of a recent date, as to
the good standing and charter documents of such
Consolidated Subsidiary on file and (3) a certificate
of the Secretary or an Assistant Secretary of such
Consolidated Subsidiary dated the date that such
Consolidated Subsidiary becomes a Restricted
Subsidiary certifying (a) that the certificate of
incorporation of such Consolidated Subsidiary has not
been amended since the date of the last amendment
thereto indicated on the certificate furnished
pursuant to clause (2) above, (b) the absence of
dissolution or liquidation proceedings by or against
such Consolidated Subsidiary, that attached thereto
is a true and complete copy of the bylaws of such
Consolidated Subsidiary as in effect on the date of
such certificate, (c) that attached thereto is a
true, correct and complete copy of the resolutions
adopted by the Board of Directors of such
Consolidated Subsidiary authorizing the execution,
delivery and performance by it of the applicable
Restricted Subsidiary Guaranty and Restricted
Subsidiary Security Agreement and that such
resolutions have not been amended and are in full
force and effect on the date of such certificate and
(d) as to the incumbency and specimen signatures of
each officer of such Consolidated Subsidiary
executing the Restricted Subsidiary Guaranty and the
Restricted Subsidiary Security Agreement;
(iii) each document (including, without
limitation, each Uniform Commercial Code financing
statement) required by law or reasonably requested by
the Bank to be filed, registered or recorded in order
to create in favor of the Bank a perfected first
priority security interest in the collateral subject
to the applicable Subsidiary Security Agreement shall
have been properly filed, registered or recorded in
each jurisdiction in which the filing, registration
or recordation thereof is so required or requested,
and the Bank shall have received the acknowledgement
copy, or other evidence satisfactory to it, of such
filing registration or recordation; and
(iv) receipt by the Bank of reports from
InfoSearch, Inc. or other independent search service
satisfactory to the Bank listing all effective
financing statements that name such Consolidated
Subsidiary (under its present name and any previous
names) as debtor or seller and that are filed in the
jurisdictions referred to in clause (iii) above,
together with copies of such other financing
statements (none of which shall cover the collateral
which is subject to applicable Subsidiary Security
Agreement, except as otherwise disclosed in writing
to, and accepted by, the Bank).
"Restricted Subsidiary Collateral Package" means (i) a
Subsidiary Guaranty, (ii) a Subsidiary Security Agreement and if
applicable (iii) a Subsidiary Pledge Agreement, in each case
executed and delivered by the Restricted Subsidiary or its
shareholders, as applicable, in favor of the Bank.
"Restricted Subsidiary Guaranty" means the Guaranty
between a Consolidated Subsidiary and the Bank, substantially in
the form of Exhibit J hereto, as the same may be amended or
modified from time to time.
"Restricted Subsidiary Security Agreement" means a
Security Agreement between a Consolidated Subsidiary and the Bank,
substantially in the form of Exhibit K hereto, as the same may be
amended or modified from time to time.
"Restricted Subsidiary Stock Pledge Agreement" means the
Borrower Stock Pledge Agreement, the PEI Stock Pledge Agreement
or, with respect to any other Consolidated Subsidiary, a Stock
Pledge Agreement between the owner or owners of all outstanding
shares of capital stock of such Consolidated Subsidiary and the
Bank, substantially in the form of the Borrower Stock Pledge
Agreement or the PEI Stock Pledge Agreement, as applicable, as the
same may be amended, modified or supplemented from time to time.
"Revolving Commitment" means the Bank's agreement to
continue its Outstanding Working Capital Loans as Revolving Loans
under this Amended Agreement, to continue Outstanding Letters of
Credit as Letters of Credit under this Amended Agreement and to
make additional Revolving Loans and issue additional Letters of
Credit such that the Applied Revolving Amount does not exceed at
any one time outstanding the Revolving Commitment Amount.
"Revolving Commitment Amount" means, at any date, an
amount equal to $5,500,000, as such amount may be reduced from
time to time pursuant to Section 2.12.
"Revolving Loan" means (i) an Outstanding Working
Capital Loan which is continued as a Revolving Loan hereunder or
(ii) a Loan made by the Bank to the Borrower pursuant to Section
2.2, and "Revolving Loans" means all of such Loans, collectively.
"Revolving Note" means a promissory note of the
Borrower, substantially in the form of Exhibit A hereto,
evidencing the obligation of the Borrower to repay the Revolving
Loans.
"Signet Rate" means the rate of interest publicly
announced by Signet Bank/Maryland in Bethesda, Maryland from time
to time as its prime rate. It is a rate set by Signet
Bank/Maryland based upon various factors, including its costs and
desired return, general economic conditions and other factors, and
is used by Signet Bank/Maryland as a reference point for pricing
some loans, which may be priced at, above or below the Signet
Rate. Any change in the Signet Rate shall take effect on the
opening of business on the day specified in the announcement of
such change.
"Sub-Assemblies" means parts manufactured by an
Inventory Credit Party utilized in the construction of Finished
Goods.
"Subordinated Debt" means (i) the subordinated
promissory note issued by Datability and payable to Howard
International Corporation in the original principal amount of
$909,126 and (ii) the subordinated promissory note issued by
Datability and payable to John Howard in the original principal
amount of $395,374, each subordinated to the Borrower's
Obligations (as defined in the Collateral Documents) to the Bank
pursuant to the Subordination Agreement.
"Subordination Agreement" means the Subordination
Agreement dated as of May 6, 1993 among Howard International
Corporation, John Howard, Datability and the Bank, as amended by
Amendment No. 1 thereto dated as of the date hereof, and as the
same may be further amended, supplemented or modified from time to
time.
"Subrogation and Contribution Agreement" means the
Subrogation and Contribution Agreement dated as of May 6, 1993
among the Borrower, PEI, Penril Technologies, TPI, EMI and
Datability, as amended, modified or supplemented from time to
time.
"Subsidiary" means any corporation or other entity of
which securities or other ownership interests having ordinary
voting power to elect a majority of the Board of Directors or
other persons performing similar functions are at the time
directly or indirectly owned by the Borrower.
"Subsidiary Guaranties" means a collective reference to
the PEI Guaranty, the Penril Technologies Guaranty, the TPI
Guaranty, the EMI Guaranty, the Datability Guaranty, the Penril
England Guaranty, the Penril Hong Kong Guaranty, the Penril
Caribbean Guaranty and all Restricted Subsidiary Guaranties, if
applicable.
"Subsidiary Security Agreements" means a collective
reference to the PEI Security Agreement, the Penril Technologies
Security Agreement, the TPI Security Agreement, the EMI Security
Agreement, the Datability Security Agreement, the Penril England
Debenture, the Penril Hong Kong Security Agreement, the Penril
Caribbean Security Agreement and all Restricted Subsidiary
Security Agreements.
"Tax" means any fee (including license, filing and
registration fee), tax (including any income, gross receipts,
franchise, sales, use or real, personal, tangible or intangible
property tax), interest equalization or stamp tax, assessment,
levy, impost, duty, charge or withholding of any kind or nature
whatsoever, imposed or assessed by any Governmental Authority,
together with any penalty, fine or interest thereon.
"TPI" means Technipower Inc., a Delaware corporation,
and its successors.
"TPI Guaranty" means the Guaranty dated as of May 6,
1993 between TPI and the Bank, as the same may be amended,
supplemented or modified from time to time.
"TPI Security Agreement" means the Security Agreement
dated as of May 6, 1993 between TPI and the Bank, as amended by
Amendment No. 1 thereto dated as of the date hereof, and as the
same may be further amended, supplemented or modified from time to
time.
"Term A Loan" means the Outstanding Term Loan in the
amount of $875,000.18 which is continued as a Term Loan pursuant
to Section 2.1(ii) hereof.
"Term B Loan" means the Outstanding Term Loan in the
amount of $875,000.00 which is continued as a Term Loan pursuant
to Section 2.1(ii) hereof.
"Term C Loan" means the Outstanding Term Loan in the
amount of $1,112,499.88 which is continued as a Term Loan pursuant
to Section 2.1(ii) hereof.
"Term Loan" means the Term A Loan, the Term B Loan or
the Term C Loan, and "Term Loans" means all of them, collectively.
"Term A Note" means a promissory note of the Borrower,
substantially in the form of Exhibit B-1 hereto, evidencing the
obligation of the Borrower to repay the Term A Loan.
"Term B Note" means a promissory note of the Borrower,
substantially in the form of Exhibit B-2 hereto, evidencing the
obligation of the Borrower to repay the Term B Loan.
"Term C Note" means a promissory note of the Borrower,
substantially in the form of Exhibit B-3 hereto, evidencing the
obligation of the Borrower to repay the Term C Loan.
"Term Note" means the Term A Note, the Term B Note or
the Term C Note, and "Term Notes" means all of them, collectively.
"Unapplied Revolving Amount" means at any date the
excess (if any) of the then Revolving Commitment Amount over the
Applied Revolving Amount.
"Unrestricted Subsidiary" means a Subsidiary other than
a Restricted Subsidiary, and "Unrestricted Subsidiaries" means all
such Subsidiaries.
"Wholly-Owned Consolidated Subsidiary" means any
Restricted Subsidiary all of the shares of capital stock or other
ownership interests of which (except directors' qualifying shares)
are at the time directly or indirectly owned by the Borrower.
Section 1.2. Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared, in accordance with GAAP
as in effect from time to time, applied on a basis consistent
(except for changes concurred in by the Borrower's independent
public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Bank.
Section 1.3. Borrowing Base Calculations.
(a) Characterization Inventory. Each item of Eligible
Inventory of the Borrower, TPI and EMI shall be reported on a
Borrowing Base Certificate as Components, Sub-Assemblies or
Finished Goods in accordance with the definitions thereof in this
Amended Agreement.
(b) Loan Value of Eligible Inventory. The Loan Value
of Eligible Inventory shall equal (i) while any portion of any
Term Loan or the Acquisition Loan remains unpaid, the product of
the Eligible Inventory of each category multiplied by the
applicable Inventory Advance Percentage for such category and
(ii) once the Term Loans and the Acquisition Loan have been repaid
in full, 0%.
(c) Loan Value of Eligible Receivables. The Loan Value
of Eligible Receivables shall equal 75% of the net unpaid balance
(not including unearned finance changes, late payment charges or
other similar charges or extension, service or collection fees in
respect thereof) of all Eligible Receivables.
ARTICLE II
THE CREDIT
Section 2.1. Continuation of Outstanding Loans and
Letters of Credit on the Effective Date. On the Effective Date:
(i) all Outstanding Working Capital Loans
shall be continued as Revolving Loans under this
Amended Agreement;
(ii) all Outstanding Term Loans shall be
continued as Term Loans (of the related type) under
this Amended Agreement;
(iii) the Outstanding Acquisition Loan shall
be continued as the Acquisition Loan under this
Amended Agreement;
(iv) all Outstanding Exchange Contracts
shall be continued as Exchange Contracts under this
Amended Agreement; and
(v) all Outstanding Letters of Credit
shall be continued as Letters of Credit under this
Amended Agreement.
Section 2.2. Revolving Commitment.
(a) Revolving Loans. The Bank agrees, on the terms and
conditions set forth in this Amended Agreement, to make Revolving
Loans to the Borrower from time to time on and after the Effective
Date and to but excluding December 31, 1995 in an aggregate
principal amount such that the Applied Revolving Amount at any one
time outstanding does not exceed the Revolving Commitment Amount.
Subject to the foregoing, the Borrower may borrow, prepay and
reborrow Revolving Loans under this Amended Agreement.
(b) Letters of Credit. The Bank agrees, on the terms
and conditions set forth in this Amended Agreement, from time to
time on and after the Effective Date and to but excluding December
15, 1995, to issues Letters of Credit for the account of the
Borrower in an aggregate stated amount (in each case after giving
effect on the date of issuance to any repayment, prepayment or
borrowing of Revolving Loans, to the expiration without a drawing
of any outstanding Letters of Credit and to the repayment of any
outstanding Reimbursement Amounts owing in respect of drawn
Letters of Credit) such that the Applied Revolving Amount does not
exceed the Revolving Commitment Amount. No Letter of Credit may
have an expiration date later than December 31, 1995 (or such
later date to which the Revolving Commitment may have been
extended by the Bank pursuant to Section 2.2(c)).
(c) Extensions of Commitment Period. The Bank may,
upon the request of the Borrower, but in its sole discretion,
extend the Revolving Commitment and Exchange Contract Commitment
from time to time. The Bank shall have the unconditional right
not to extend such commitment periods, notwithstanding that no
Default or Event of Default may then exist under this Amended
Agreement.
Section 2.3. The Foreign Exchange Contracts. The Bank
agrees, on the terms and conditions set forth in this Amended
Agreement, to enter into Exchange Contracts with the Borrower from
time to time from and including the Effective Date to but
excluding December 31, 1995 (or such later date to which the
Exchange Contract Commitment may have been extend by the Bank
pursuant to Section 2.2(c)) in an aggregate amount which, together
with all Outstanding Exchange Contracts continued as Exchange
Contracts under this Amended Agreement pursuant to Section 2.1(iv)
hereof does not exceed $1,000,000.
Section 2.4. Method of Borrowing. (a) The Borrower
shall give the Bank notice (which may be oral if promptly
confirmed in writing) (a "Notice of Borrowing") one Business Day
before each Revolving Loan, specifying the amount and date (which
shall be a Business Day) of such Loan. Unless the Bank determines
that any applicable condition specified in this Amended Agreement
has not been satisfied, the Bank will credit the amount of each
requested Revolving Loan to the general deposit account of the
Borrower with the Bank or, at the Borrower's request delivered in
writing not later than contemporaneously with the related Notice
of Borrowing, the Bank will wire transfer immediately available
funds in the amount of such Loan to such other bank account of the
Borrower within the continental United States as may be specified
in such request.
Section 2.5. Method of Issuance of Letters of Credit.
The Borrower may request the Bank to issue a Letter of Credit by
delivering a duly executed Application (which may be delivered by
telecopier if a Facsimile Agreement is in effect) not later than
11:00 A.M. (Eastern Time) at least two Business Days before the
requested date of issuance to the Bank at 7 St. Paul Street,
Baltimore, Maryland 21202 or at such other address as the Bank may
from time to time specify for the purpose of such notices to the
Borrower. Not later than 2:00 P.M. (Eastern time) on the date so
specified, the Bank shall (unless it determines that any
applicable condition specified in this Amended Agreement has not
been satisfied) send a Letter of Credit conforming to the terms
specified in the related Application to the Borrower or, if so
instructed by the Borrower, the Letter of Credit or an authorized
written advice of its issuance to the beneficiary named therein.
Section 2.6. Letter of Credit Reimbursements and Other
Payments. In addition to (but without duplication of) the
payments required by the Terms and Conditions of any Application,
the Borrower agrees to pay to the Bank: (i) on each date that any
amount is drawn under any Letter of Credit a sum equal to such
amount so drawn plus any and all reasonable charges and expenses
which the Bank may pay or incur relative to such drawing;
(ii) upon each transfer of any Letter of Credit in accordance with
its terms a sum in such amount as shall be necessary to cover the
costs and expenses of the Bank incurred in connection with such
transfer; or (iii) if any Reimbursement Amount cannot be repaid in
full through the borrowing of a Revolving Loan, upon demand
interest on such Reimbursement Amount for each day from the date
on which a draft under a Letter of Credit is paid until payment in
full at a rate per annum equal to the rate applicable to Revolving
Loans for such day.
Section 2.7. Notes.
(a) The Revolving Loans shall be evidenced by a single
promissory note of the Borrower, substantially in the form of
Exhibit A hereto and appropriately completed.
(b) The Term Loans shall be evidenced by separate
promissory notes of the Borrower, substantially in the applicable
form of Exhibit B hereto and appropriately completed.
(c) The Acquisition Loan shall be evidenced by a single
promissory note of the Borrower payable to the order of the Bank,
substantially in the form of Exhibit C hereto and appropriately
completed.
(d) The Bank shall record, and prior to any transfer of
its Revolving Note shall endorse on the schedule forming a part
thereof appropriate notations to evidence, the date and amount of
each Revolving Loan and the date and amount of each payment of
principal made by the Borrower with respect thereto; provided,
however, that any failure by the Bank to make such a notation or
any error therein shall not in any manner affect the obligation of
the Borrower to repay the Revolving Loans in accordance with the
terms hereof and of the Revolving Note. The Bank is hereby
irrevocably authorized by the Borrower so to endorse the Revolving
Note and to attach to and make a part of the Revolving Note a
continuation of any such schedule as and when required.
Section 2.8. Interest. Interest shall accrue on the
outstanding principal amount of each Loan, for each day from the
date of this Amended Agreement until such Loan becomes due, at a
rate per annum equal to the sum of 2% plus Signet Rate for such
date. Such interest shall be payable in arrears on the last day
of each calendar month. From and after the occurrence of an Event
of Default, the outstanding principal amount of each Loan and, to
the extent permitted by law, accrued interest thereon shall bear
interest for each day until such Event of Default is cured or
waived at a rate per annum equal to 2% plus the otherwise
applicable rate for such day.
Section 2.9. Fees.
(a) The Borrower shall pay to the Bank a commitment fee
at the rate of 37.5 basis points per annum on the Unapplied
Revolving Amount. Such commitment fee shall accrue from and
including the Effective Date to and including December 31, 1995
and shall be payable quarterly in arrears on June 30, September 30
and December 31, 1995.
(b) The Borrower shall pay to the Bank a fee equal to
3% of the initial stated amount of each Letter of Credit on the
date of its issuance.
Section 2.10. Scheduled Amortization Payments;
Mandatory Prepayments.
(a) Scheduled Amortization of Acquisition Loan and Term
Loans. In addition to any other mandatory prepayments required
pursuant to this Section 2.10, the Borrower shall repay (and there
shall become due and payable) on each date set forth below under
the caption "Scheduled Repayment Date" (each a "Scheduled
Repayment Date"), the principal amount of the Acquisition Loan and
each Term Loan which is set forth below opposite such Scheduled
Repayment Date (each such repayment being herein referred to as a
Scheduled Repayment"):
(a) See Exhibit L
(b) Revolving Loans. Unless extended by the Bank
pursuant to Section 2.2(c), all Revolving Loans shall be due and
payable (together with accrued interest thereon) on December 31,
1995.
(c) Mandatory Repayment from Asset Sales. In addition
to any other required payments pursuant to this Section 2.10, on
each date on which the Borrower or any Subsidiary receives
proceeds from any sale of assets (excluding (A) sales of inventory
or products or other services in the ordinary course of business
and (B) sales of equipment in the ordinary course of business, the
Net Sale Proceeds of which are used to purchase replacement
equipment within 120 days from the sale date so long as the
aggregate amount of Net Sale Proceeds excluded pursuant to this
clause (B) does not exceed $100,000 in the aggregate in any one
fiscal year of the Borrower) the Net Sale Proceeds shall be
applied as follows:
(i) to prepay such amount, if any, of the
Revolving Loans as may be necessary so that the
Applied Revolving Amount does not exceed the
Revolving Commitment Amount;
(ii) if the Net Sale Proceeds are less than
the then unpaid principal balance of any of the
Acquisition Loan or the Term Loans, to prepay the
Scheduled Repayments of the Term Loans and the
Acquisition Loan in the following order of priority
(each such prepayment to be applied to the Scheduled
Repayments of the applicable Note in the inverse
order of their maturities):
first, to prepay the Term A Loan;
second, once the Term A Loan is repaid in
full, to prepay the Term B Loan;
third, once the Term B Loan is repaid in
full, to prepay the Term C Loan; and
fourth, once the Term C Loan is repaid in
full, to prepay the Acquisition Loan;
(iii) if the Net Sale Proceeds equal or
exceed the then unpaid principal balance of any of
the Term Loans or the Acquisition Loan, to prepay in
full such unpaid principal balance in the following
order of priority:
first, to prepay the Term A Loan;
second, once the Term A Loan is repaid in
full, to prepay the Term B Loan;
third, once the Term B Loan is repaid in
full, to prepay the Term C Loan; and
fourth, once the Term C Loan is repaid in
full, to prepay the Acquisition Loan;
provided, however, that (A) none of the Term Loans or
the Acquisition Loan shall be prepaid under this
clause (iii) unless there are sufficient Net Sale
Proceeds to prepay such Loan in full and (B) a Loan
having a lower order of priority shall be prepaid in
preference to a Loan having a higher order of
priority if the Net Sale Proceeds are insufficient to
prepay in full the Loan having the higher order of
priority but are sufficient to prepay in full the
Loan having the lower order of priority;
(iv) any Net Sale Proceeds remaining after
application as set forth in clause (iii) above, shall
be applied to prepay the Scheduled Repayments of the
Term Loans and the Acquisition Loan in the order of
priority set forth in clause (ii) above (each such
prepayment to be applied to the Scheduled Repayments
of the applicable Loan in the inverse order of their
maturities); and
(v) once the Term Loans and the
Acquisition Loan are repaid in full, to prepay the
Revolving Loans.
(d) Borrowing Base Over Formula. In addition to any
other required payments pursuant to this Section 2.10, (i) on each
date on which the Applied Facility Amount exceeds the Borrowing
Base, the Borrower shall prepay (and there shall become due and
payable) such principal amount of the Loans as is equal to such
excess and (ii) on each date when the Applied Revolving Amount
exceeds the Revolving Commitment Amount, the Borrower shall prepay
(and there shall become due and payable) such principal amount of
the Revolving Loans as is equal to such excess; provided, however,
that a prepayment otherwise required under this paragraph
(d) which arises solely because of an Intra Month Over Formula
shall only be required to the extent it exceeds $750,000, but any
Intra Month Over Formula must be prepaid (and shall become due and
payable) on or before the last day of the calendar month in which
it arises.
Section 2.11. Mandatory Termination of the Commitments.
Unless extended by the Bank pursuant to Section 2.2(c), the
Revolving Commitment and the Exchange Contract Commitment shall
terminate on December 31, 1995. The Revolving Commitment shall
not be reduced by the amount of any required prepayment of the
Revolving Loans pursuant to Section 2.10(c)(v).
Section 2.12. Optional Termination or Reduction of the
Commitments. The Borrower may, upon at least three Business Days'
notice to the Bank, terminate at any time, or reduce from time to
time by an aggregate amount of $250,000 or any larger multiple of
$100,000, the unused portions of the Revolving Commitment or the
Exchange Commitment. If the Revolving Commitment is terminated in
its entirety, any accrued commitment fee shall be payable on the
effective date of such termination.
Section 2.13. Optional Prepayments. The Borrower may,
upon at least one Business Day's notice to the Bank, prepay the
Loans in whole or in part by paying the principal amount to be
prepaid together with accrued interest thereon to the date of
prepayment. Each optional prepayment of the Acquisition Loan or
of the Term Loans pursuant to this Section 2.13 shall be applied
to the Scheduled Repayments thereof in the inverse order of their
maturities.
Section 2.14. General Provisions as to Payments. The
Borrower shall make each payment of principal of and interest on,
the Loans and of the commitment and issuance fees hereunder, not
later than 1:00 P.M. (local time in Bethesda, Maryland) on the
date when due, in Federal or other funds immediately available in
Bethesda, Maryland, to the Bank at its address referred to in
Section 10.1. Whenever any payment of principal of, or interest
on, the Loans or of the commitment or issuance fees shall be due
on a day which is not a Business Day, the date for payment thereof
shall be extended to the next succeeding Business Day. If the
date for any payment of principal of is extended by operation of
law or otherwise, interest thereon shall be payable for such
extended time.
Section 2.15. Late Charge. The Borrower shall pay to
the Bank a late charge of 5% of the amount of any payment due
hereunder which is not paid within seven days of the due date
thereof.
Section 2.16. Computation of Interest and Commitment
Fees. Interest and the commitment fee hereunder shall be computed
on the basis of a year of 365 days (or 366 days in a leap year)
and paid for the actual number of days elapsed.
ARTICLE III
CONDITIONS
Section 3.1. Conditions to Effectiveness. This
Amended Agreement will become effective on and as of the date (the
"Effective Date") when the last of the following conditions shall
have been satisfied:
(a) Execution and Delivery of this Amended
Agreement. On or prior to the Effective Date, the Bank shall
have received duly executed counterparts of this Amended
Agreement signed on behalf of itself and the Borrower.
(b) Replacement Notes. On or prior to the Effective
Date, the Bank shall have received duly executed Notes,
substantially in the forms of Exhibit A, B and C hereto, which
Notes shall be issued to the Bank in lieu of and in
substitution for the Notes issued under the 1993 Credit
Agreement.
(c) Corporate Documents. On or prior to the
Effective Date, the Bank shall have received: (i) a certificate
of the Secretary of State or similar official having
jurisdiction over corporations in the jurisdiction of
incorporation of the Borrower, each Guarantor and each other
Restricted Subsidiary, as applicable, dated as of a recent
date, as to the good standing of the Borrower, each Guarantor
and each other Restricted Subsidiary (other than for Penril
England, Penril Caribbean and Penril Hong Kong); and (ii) a
certificate of the Secretary or an Assistant Secretary of the
Borrower, each Guarantor and each other Restricted Subsidiary
dated the Effective Date and certifying (1) that the articles
of incorporation (or analogous charter documents previously
delivered to the Bank on May 6, 1993 remain true, correct and
complete and have not been amended since that date or, in the
case of Penril Caribbean and Penril Hong Kong, attaching true,
correct and complete copies of their articles of incorporation
(or analogous charter documents), (2) as to the absence of
dissolution or liquidation proceedings by or against the
Borrower, such Guarantor or such other Restricted Subsidiary,
as applicable, (3) that the by-laws previously delivered to the
Bank on May 6, 1993 remain true, correct and complete on the
date of such certification or, in the case of Penril Caribbean
and Penril Hong Kong, attached thereto are true, correct and
complete copies of its by-laws as then in effect, (4) that
attached thereto is a true, correct and complete copy of
resolutions adopted by the board of directors of the Borrower,
such Guarantor or such other Restricted Subsidiary, as
applicable, authorizing the execution, delivery and performance
of this Amended Agreement and each of the other documents
entered into as conditions precedent to the effectiveness of
this Amended Agreement (the "Amendment Documents") to which the
Borrower, such Guarantor or such other Restricted Subsidiary is
a party and that said resolutions have not been amended and are
in full force and effect on the date of such certificate and
(5) as to the incumbency and specimen signatures of each
officer of the Borrower, such Guarantor or such other
Restricted Subsidiary executing this Amended Agreement or any
other Amendment Document or other document delivered in
connection herewith or therewith.
(d) Amendments to Security Agreements. On or prior
to the Effective Date, the Borrower, each Guarantor (other than
Penril England, Penril Caribbean and Penril Hong Kong) and each
other Restricted Subsidiary shall have duly authorized,
executed and delivered to the Bank an Amendment No. 1 to the
Borrower Security Agreement and an Amendment No. 1 to the
Subsidiary Security Agreement, as applicable, granting the Bank
security interests in all of the Borrower's, each Guarantor's
and each other Restricted Subsidiary's equipment, fixed assets
and the proceeds thereof (each a "Security Agreement Amendment"
and collectively the "Security Agreement Amendments"),
substantially in the form of Exhibit D and Exhibit E,
respectively, to this Amended Agreement, and the Bank shall
have received:
(i) appropriate Financing Statements (Form
UCC-1), amendments to the existing Financing
Statements (Form UCC-3) filed by the Borrower, each
Guarantor and each other Restricted Subsidiary, as
debtor, in favor of the Bank or such other financing
statements or similar notices as shall be required by
local law) fully executed for filing under the
Uniform Commercial Code or other applicable local law
of each jurisdiction in which the filing of a
financing statement or giving of notice may be
required, or reasonably requested by the Bank, to
perfect the security interests purported to be
created by the Security Agreement Amendments;
(ii) copies of reports from Prentice-Hall
Financial Services or other independent search
service reasonably satisfactory to the Bank listing
all effective financing statements that name the
Borrower, any Guarantor or any other Restricted
Subsidiary (under its present name and any previous
name and, if requested by the Bank, under any trade
names) as debtor or seller that are filed in any
jurisdiction in which the filing of a financing
statement or giving of notice may be required, or
reasonably requested by the Bank, to perfect the
security interests purported to be created by the
Borrower Security Agreement or any Subsidiary
Security Agreement, in each case as amended by the
Security Agreement Amendments, together with copies
of such other financing statements (none of which
shall cover the Collateral subject to any such
Security Agreement, as so amended, except to the
extent evidencing Permitted Liens or for which the
Bank shall have received termination statements
(Form UCC-3) or such other termination statements as
shall be required by local law) fully executed for
filing; and
(iii) evidence of the completion of all
other filings and recordings of, or with respect to,
the Security Agreement Amendments as may be necessary
or, in the opinion of the Bank, reasonably desirable
to perfect the security interests intended to be
created by the Security Agreement Amendments.
(e) Guarantor and Restricted Subsidiary Consents. On
or prior to the Effective Date, each Guarantor and each other
Restricted Subsidiary shall have duly authorized, executed and
delivered to the Bank a consent (the "Consent") substantially in
the form of Exhibit F to this Amended Agreement.
(f) Amendment to Subordination Agreement. On or prior
to the Effective Date, each of Howard International Corporation,
John Howard and Datability shall have duly authorized, executed
and delivered to the Bank Amendment No. 1 to the Subordination
Agreement substantially in the form of Exhibit G to this Amended
Agreement.
(g) Legal Matters. All legal matters incident to this
Amended Agreement and the other Amendment Documents and the
transactions contemplated hereby and thereby shall be reasonably
satisfactory to McGuire, Woods, Battle & Boothe, L.L.P., counsel
for the Bank.
On the Effective Date, the 1993 Credit Agreement will be
automatically amended and restated in its entirety to read as set
forth herein. Once the Effective Date has occurred, the rights
and obligations of the parties hereto shall be governed by this
Amended Agreement. The Working Capital Note, the Term Note and
the Acquisition Note delivered to the Bank under the 1993 Credit
Agreement shall become void on the Effective Date and, upon
receiving the new Revolving Note, the new Term Notes and
Acquisition Note delivered pursuant to paragraph (b) of this
Section 3.1, the Bank will return the Working Capital Note, the
Term Note and the Acquisition Note delivered to it under the 1993
Credit Agreement to the Borrower. No failure by the Bank so to
return any Note delivered to it under the 1993 Credit Agreement
shall affect the validity of any Note delivered to it under this
Amended Agreement.
Section 3.2. Conditions to All Credit Events. The
obligation of the Bank to make each Revolving Loan, to issue each
Letter of Credit and to enter into each Exchange Contract is
subject to the satisfaction of the following conditions:
(i) in the case of a Revolving Loan,
receipt by the Bank of Notice of Borrowing as
required by Section 2.4;
(ii) in the case of a Letter of Credit,
receipt by the Bank of an Application as required by
Section 2.5;
(iii) the fact that, no Default has and is
continuing or would result from such Credit Event;
(iv) the fact that the representations and
warranties of the Borrower contained in the Loan
Documents shall be true in all material respects on
and as of the date of such Credit Event; and
(v) the fact that, after giving effect to
such Credit Event and the application of the proceeds
thereof, (A) the Applied Facility Amount will not
exceed the Borrowing Base and (B) the Applied
Revolving Amount will not exceed the Revolving
Commitment Amount.
Each Credit Event hereunder shall be deemed to be a representation
and warranty by the Borrower on the date thereof that the facts
hereinabove set forth in clauses (iii) and (iv) of this Section
are true as of such date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 4.1. Corporate Existence and Power. The
Borrower is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, and has
all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted. The Borrower and, except as disclosed
on Schedule 4.1, each Subsidiary is duly qualified as a foreign
corporation and in good standing in each jurisdiction where
qualification or licensing is required by the nature of its
business or the character and location of its property, business
or customers and in which the failure to so qualify or be
licensed, as the case may be, in the aggregate, would have a
material adverse effect on the business, financial position,
results of operations, properties or prospects of the Borrower and
its Consolidated Subsidiaries considered as a whole.
Section 4.2. Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by the
Borrower of this Amended Agreement, the Notes and the other Loan
Documents to which it is a party are within its corporate power,
have been duly authorized by all necessary corporate action,
require no action by or in respect of, or filing with, any
Governmental Authority and do not contravene, or constitute (with
or without the giving of notice or lapse of time or both) a
default under, any provision of applicable law or of the
certificate of incorporation or by-laws of the Borrower or of any
agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or result in the creation or imposition
of any Lien on any of its assets (other than those created
pursuant to the Collateral Documents).
Section 4.3. Binding Effect. This Amended Agreement
and the other Loan Documents to which the Borrower is a party
constitute valid and binding agreements of the Borrower, and the
Notes, when executed and delivered in accordance with this Amended
Agreement, will constitute valid and binding obligations of the
Borrower, in each case enforceable against the Borrower in
accordance with their terms, except as (i) the enforceability
hereof and thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
Section 4.4. Financial Information. (a) The
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of July 31, 1994 and the related consolidated
statements of income and cash flows for the fiscal year then
ended, reported on by Deloitte and Touche, as set forth in the
Borrower's 1994 Form 10-K, a copy of which has been delivered to
the Bank, fairly present, in conformity with GAAP, the
consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their results of
operations and changes in financial position for such fiscal year.
As of the date of such financial statements, the Borrower and its
Consolidated Subsidiaries did not have any material contingent
obligation, contingent liability or liability for Taxes, long-term
lease or unusual forward or long-term commitment, which was not
reflected in any of such financial statements or notes thereto.
(b) The unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of January 31, 1995
and the related unaudited consolidated statements of income and
cash flows for the six months then ended, set forth in the
Borrower's quarterly report for the fiscal quarter ended January
31, 1995 as filed with the Securities and Exchange Commission on
Form 10-Q, a copy of which has been delivered to the Bank, fairly
present, in conformity with GAAP applied on a basis consistent
with the financial statements referred to in clause (a) of this
Section, the consolidated financial position of the Borrower and
its Consolidated Subsidiaries as of such date and their results of
operations and changes in financial position for such six-month
period (subject to normal year-end adjustments).
(c) Except as disclosed in the Borrower's 1994
Form 10-K or Forms 10-Q for the fiscal quarters ended October 31,
1994 and January 31, 1995 or as disclosed in writing to the Bank
prior to the Effective Date, since July 31, 1994 there has been no
material adverse change in the business, financial position,
results of operations or prospects of the Borrower and its
Consolidated Subsidiaries considered as a whole.
Section 4.5. Litigation. Except as disclosed on
Schedule 4.5, there is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or
affecting, the Borrower or any Consolidated Subsidiary before any
Governmental Authority in which there is a reasonable possibility
of an adverse decision which could materially adversely affect the
business, financial position or results of operations of the
Borrower and its Consolidated Subsidiaries considered as a whole
or which in any manner draws into question the validity of this
Amended Agreement, the Notes or other Loan Document and there is
no basis known to the Borrower for any such action, suit or
proceeding.
Section 4.6. Marketable Title. The Borrower has good
and marketable title to all its properties and assets subject to
no Lien, except Permitted Liens.
Section 4.7. Filings. All actions by or in respect
of, and all filing with, any Governmental Authority required in
connection with the execution, delivery and performance of this
Amended Agreement, the Notes and the other Loan Documents, or
necessary for the validity or enforceability thereof or for the
protection or perfection of the rights and interests of the Bank
thereunder, will, prior to the date of delivery thereof, have been
duly taken or made, as the case may be, and will at all times
thereafter remain in full force and effect.
Section 4.8. Regulation U. The Borrower does not own
any "margin stock" as such term is defined in Regulation U of the
Board of Governors of the Federal Reserve System. The proceeds of
the Loans will be used by the Borrower only for the purposes set
forth in Article II hereof. None of the Loan proceeds will be
used, directly or indirectly, for the purpose of purchasing or
carrying any margin stock or for the purpose of reducing or
retiring any indebtedness which was originally incurred to
purchase or carry margin stock or for any other purpose which
might constitute the Loans a "purpose credit" within the meaning
of Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System.
Section 4.9. Subsidiaries. Each of the Borrower's
corporate Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction
of incorporation, and has all corporate power and all material
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
Section 4.10. Disclosure. None of this Amended
Agreement or other Loan Documents or any schedule or exhibit
thereto or document, certificate, report, statement or other
information furnished to the Bank in connection herewith or
therewith or with the consummation of the transactions
contemplated hereby or thereby contains any material misstatement
of fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading. There is
no fact materially adversely affecting the assets, business,
financial position, results of operations or prospects of the
Borrower or any Consolidated Subsidiary which has not been set
forth in a footnote included in the financial statements referred
to in Section 4.4 or in exhibit or schedule thereto.
ARTICLE V
FINANCIAL COVENANTS
The Borrower agrees that so long as the Bank is
committed to make Loans, enter into Exchange Contracts or issue
Letters of Credit hereunder or any amount payable hereunder
remains unpaid:
Section 5.1. Certain Definitions. As used in this
Article V and hereafter in this Amended Agreement, the following
terms have the following meanings:
"Adjusted Current Maturities of Consolidated Funded
Debt" means, as of the last day of any fiscal quarter, the product
of (i) the aggregate amount of principal payments (including,
without limitation, the portion of any obligation under Capital
Leases allocable to amortization under GAAP) in respect of
Consolidated Funded Debt which are current liabilities as of the
last day of such quarter multiplied by (ii) the Annualization
Percentage for such quarter.
"Adjusted Fixed Charges" means, for any fiscal quarter,
the sum of (i) Consolidated Interest Expense for such quarter plus
(ii) Adjusted Current Maturities of Consolidated Funded Debt as of
the last day of such quarter (exclusive of Revolving Loans and all
Subordinated Debt).
"Annualization Percentage" means (i) 25% with respect to
a fiscal quarter ending on October 31, (ii) 50% with respect to a
fiscal quarter ending on January 31, (iii) 75% with respect to a
fiscal quarter ending on April 30 and (iv) 100% with respect to a
fiscal quarter ending on July 31.
"Capital Lease" means a lease that should be capitalized
on the balance sheet of the lessee prepared in accordance with
GAAP.
"Consolidated Amortization" means, for any period, the
consolidated amortization expense of the Borrower and its
Consolidated Subsidiaries for such period, determined in
conformity with GAAP.
"Consolidated Current Assets" means at any date the
consolidated current assets of the Borrower and its Consolidated
Subsidiaries determined at such date.
"Consolidated Current Liabilities" means at any date
(i) the consolidated current liabilities of the Borrower and its
Consolidated Subsidiaries plus (ii) the current liabilities of any
Person (other than the Borrower or a Consolidated Subsidiary) that
are Guaranteed by the Borrower or a Consolidated Subsidiary, all
determined at such date.
"Consolidated Debt" means at any date the Debt of the
Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis as of such date.
"Consolidated Depreciation" means, for any period, the
consolidated depreciation expense of the Borrower and its
Consolidated Subsidiaries for such period, determined in
conformity with GAAP.
"Consolidated EBITDA" means, for any period, the sum of
(i) Consolidated Net Income plus (ii) to the extent deducted in
determining Consolidated Net Income for such period,
(A) Consolidated Interest Expense, (B) all provisions for federal,
state or other taxes based on income of the Borrower and its
Consolidated Subsidiaries, (C) Consolidated Amortization and
(D) Consolidated Depreciation.
"Consolidated Funded Debt" means at any date all
Consolidated Debt which is not a current liability at such date.
"Consolidated Intangible Assets" means at any date the
amount of (i) all write-ups (other than write-ups resulting from
write-ups of assets of a going concern business made within 12
months after the acquisition of such business) subsequent to July
31, 1994 and the book value of any asset owned by the Borrower or
a Consolidated Subsidiary, (ii) all unamortized debt discount and
expense, unamortized deferred charges, capitalized start-up costs,
goodwill, patents, licenses, trademarks, trade names, copyrights,
organization or developmental expenses, covenants not to compete
and other intangible items and (iii) all funds owed to the
Borrower or a Consolidated Subsidiary by an Affiliate, all the
term on a consolidated basis as of such date.
"Consolidated Interest Expense" means for any period the
aggregate interest expense of the Borrower and its Consolidated
Subsidiaries for such period including, without limitation, the
portion of any obligation under Capital Leases allocable to
interest expense in accordance with GAAP.
"Consolidated Net Income" means, for any period, the
consolidated net income (or loss) of the Borrower and its
Consolidated Subsidiaries for such period, determined in
conformity with GAAP.
"Consolidated Net Worth" means at any date the excess of
the total consolidated assets of the Borrower and its Consolidated
Subsidiaries over their total consolidated liabilities.
"Consolidated Tangible Net Worth" means at any date the
excess of the total consolidated assets of the Borrower and its
Consolidated Subsidiaries over their total consolidated
liabilities, less their total Consolidated Intangible Assets.
Section 5.2. Current Ratio. The ratio of Consolidated
Current Assets to Consolidated Current Liabilities on the last day
of each fiscal quarter will not be less than 1.60 to 1.0.
Section 5.3. Consolidated Debt to Consolidated Net
Worth. The ratio of Consolidated Debt to Consolidated Net Worth
will not exceed 1.0 to 1.0 on the last day of any fiscal quarter.
For purposes of this Section 5.3 any preferred stock of a
Restricted Subsidiary held by a Person other than the Borrower or
a Wholly-Owned Restricted Subsidiary shall be included, at the
higher of its voluntary or involuntary liquidation value, in
"Consolidated Debt".
Section 5.4. Consolidated Debt to Consolidated
Tangible Net Worth. The ratio of Consolidated Debt to
Consolidated Tangible Net Worth will not exceed 1.2 to 1.0 on the
last day of any fiscal quarter. For purposes of this Section 5.4
any preferred stock of a Restricted Subsidiary held by a Person
other than the Borrower or a Wholly-Owned Restricted Subsidiary
shall be included, at the higher of its voluntary or involuntary
liquidation value, in "Consolidated Debt".
Section 5.5. Consolidated EBITDA to Consolidated
Interest Expense. The ratio of Consolidated EBITDA to
Consolidated Interest Expense on the last day of each fiscal
quarter, in each case computed for the four consecutive fiscal
quarters ending on such date, will not be less than the ratio set
forth below for such fiscal quarter.
Fiscal Quarter Ended Minimum Ratio
April 30, 1995 1.50 to 1.0
July 31, 1995 and 2.00 to 1.0
each fiscal quarter thereafter
Section 5.6. Consolidated EBITDA to Adjusted Fixed
Charges. The ratio of Consolidated EBITDA (determined without
adding to Consolidated Net Income Consolidated Interest Expense in
respect of Revolving Loans and in respect of Subordinated Debt) to
Adjusted Fixed Charges (determined without adding the amount of
the payment required under Section 2.10(c)) on the last day of
each fiscal quarter set forth below (computed for that quarter
alone) will not be less than the ratio set forth below for such
fiscal quarter:
Fiscal Quarter Ended Minimum Ratio
July 31, 1995 and each 1.50 to 1.0
fiscal quarter thereafter
ARTICLE VI
OTHER COVENANTS
The Borrower agrees that so long as the Bank is
committed to make Loans hereunder or any amount payable hereunder
or under the Notes remains unpaid:
Section 6.1. Information. The Borrower will deliver
or cause to be delivered to the Bank:
(i) as soon as available and in any event
within 90 days after the end of each fiscal year of
the Borrower, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the
end of such fiscal year and the related statements of
income and cash flows for such fiscal year, setting
forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable
detail and accompanied by an opinion thereon by
Deloitte & Touche or other similar nationally-
recognized independent public accountants reasonably
satisfactory to the Bank;
(ii) as soon as available and in any event
within 45 days after the end of each of the first
eleven calendar months of each fiscal year of the
Borrower, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries and the
related consolidated income statement for such month
and for the portion of the Borrower's fiscal year
ended at the end of such month, setting forth for
each month coinciding with the end of a fiscal
quarter in comparative form the figures for the
corresponding quarter and the corresponding portion
of the Borrower's previous fiscal year, all certified
(subject to normal year-end audit adjustments) as
complete and correct by the chief financial officer
or chief accounting officer of the Borrower;
(iii) simultaneously with the delivery of
each set of financial statements referred to in
clause (i) and after the end of each of the first
three quarters of each fiscal year of the Borrower, a
certificate of the chief financial officer or chief
accounting officer of the Borrower, (A) setting forth
in reasonable detail the calculations required to
establish whether the Borrower was in compliance with
the requirements of Sections 5.2 through 5.6,
inclusive, on the date of such financial statements,
(B) stating whether there exists on the date of such
certificate any Default and, if any Default then
exists, setting forth the details thereof and the
action which the Borrower is taking or proposes to
take with respect thereto and (C) stating whether,
since the date of the most recent previous delivery
of financial statements pursuant to clause (i) or
(ii) of this Section, there has been any material
adverse change in the business, financial position or
results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole,
and, if so, the nature of such material adverse
change;
(iv) as soon as available and in any event
within 90 days after the end of each fiscal year of
the Borrower, a copy of the annual pro-forma
projections for the current fiscal year, together
with updated projections at such times, and for such
periods, as the Bank may reasonably request;
(v) no later than 12:00 noon (local time
in Baltimore, Maryland) on Monday of each calendar
week, a Borrowing Base Certificate computing the Loan
Value of all Eligible Receivables and Eligible
Inventory in the form supplied by the Bank's
Commercial Support Group, in the case of Eligible
Receivables, as of the close of business on the
preceding Thursday and, in the case of Eligible
Inventory, as the close of business as of the last
day of the immediately preceding calendar month (or,
if such Borrowing Base is delivered during the first
15 days of a calendar month, as of the close of
business of the second immediately preceding calendar
month), certified by the Chief Financial Officer of
the Borrower;
(vi) as soon as available and in any event
within 30 days after the end of each calendar month,
a summary report, in form satisfactory to the Bank,
showing an aging of all billed accounts for goods
delivered or services rendered owing to the Borrower
or any of its Subsidiaries and an aging of the
Borrower's or any Subsidiary's accounts payable;
(vii) if so requested by the Bank, a copy of
the annual management letter from the auditors of the
Borrower;
(viii) forthwith upon the occurrence of any
Default, a certificate of the chief financial officer
or chief accounting officer of the Borrower setting
forth the details thereof and the action which the
Borrower is taking or proposes to take with respect
thereto;
(ix) as soon as reasonably practicable
after obtaining knowledge of the commencement of an
action, suit or proceeding against the Borrower or
any of its Subsidiaries which could materially
adversely affect the business, properties, financial
position or results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole,
or which in any manner questions the validity of this
Amended Agreement, the Notes or any of the other
transactions contemplated hereby or thereby, the
nature of such pending action, suit or proceeding and
such additional information as may be reasonably
requested by the Bank;
(x) promptly upon transmission thereof,
copies of all press releases and other statements
made available generally by the Borrower or its
Subsidiaries to the public concerning material
developments in the results of operations, financial
condition or business of the Borrower or its
Subsidiaries; and
(xi) from time to time such additional
information regarding the financial position, results
of operations or business of the Borrower or any of
its Subsidiaries as the Bank may reasonably request;
Section 6.2. Compliance with Laws. The Borrower will
comply, and will cause each of its Subsidiaries to comply, with
all applicable laws, ordinances, rules, regulations, and
requirements of Governmental Authorities (including, without
limitation, ERISA and the rules and regulations thereunder) except
where the necessity of compliance therewith is contested in good
faith by appropriate proceedings.
Section 6.3. Accounting; Inspection of Property, Books
and Records. (a) The Borrower will keep, and will cause each of
its Subsidiaries to keep, proper books of record and account in
which full, true and correct entries in conformity with GAAP shall
be made of all dealings and transactions in relation to their
respective businesses and activities, will maintain, and will
cause each of its Subsidiaries to maintain, their respective
fiscal reporting periods on the present basis and will permit, and
will cause each of its Subsidiaries to permit, representatives of
the Bank and, for purposes reasonably related to providing the
Appraisal and all updates thereof, the Appraiser to visit and
inspect any of their respective properties, to examine and make
copies of any of their respective books and records and to discuss
their respective affairs, finances and accounts with their
officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be desired on
reasonable notice.
(b) The Borrower will permit the Bank (the Commercial
Support Group) to visit and inspect any of its properties, to
examine and make copies of any of its books and records and to
discuss its affairs, finances and accounts with its officers,
employees and independent public accountants, at the Borrower's
expense and conducted from time to time as the Bank may reasonably
determine.
Section 6.4. Restriction on Liens. The Borrower will
not, and will not permit any of its Subsidiaries to at any time
create, assume or suffer to exist any Lien on any property or
asset now owned or hereafter acquired by the Borrower or any of
its Subsidiaries or assign or subordinate any present or future
right to receive assets except:
(i) Liens arising under the Collateral
Documents or otherwise in favor of the Bank;
(ii) any purchase money security interest
on any capital asset of the Borrower or any of its
Subsidiaries if such purchase money security interest
attaches to such capital asset concurrently with the
acquisition thereof and if the Debt secured by such
purchase money security interest does not exceed the
lesser of the cost or fair market value as of the
time of acquisition of the asset covered thereby to
the Borrower or such Subsidiary; provided, that the
aggregate amount of Debt secured by all such Liens
does not exceed $250,000 in the aggregate at any one
time outstanding and provided, that no such purchase
money security interest shall extend to or cover any
property or asset of the Borrower or such Subsidiary
other than the related asset;
(iii) Liens imposed by law (exclusive of
ERISA Liens) (A) which are incurred in the ordinary
course of business (such as carriers, warehousemen's
and mechanics' Liens, other similar Liens arising in
the ordinary course of business and Liens securing
Taxes, assessments or governmental charges) and
(x) which do not in the aggregate materially detract
from the value of the property or assets to which
they attach or materially impair the use thereof in
the operation of the Borrower's or a Subsidiary's
business or (y) which are being contested in good
faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale
of the property or asset subject to such Lien or
(B) which do not relate to material liabilities of
the Borrower or any Subsidiary and do not in the
aggregate detract from the value of the property and
assets of the Borrower and its Subsidiaries
considered as a whole;
(iv) Liens (exclusive of ERISA Liens) not
securing Debt which are incurred in the ordinary
course of business in connection with workmen's
compensation, unemployment insurance, social security
and other like laws;
(v) any Lien arising pursuant to any order
of attachment, distraint or similar legal process
arising in connection with court proceedings so long
as the execution or other enforcement thereof is
effectively stayed and the claims secured thereby are
being contested in good faith by appropriate
proceedings; and
(vi) Liens incurred by the Unrestricted
Subsidiaries, provided, that the aggregate amount of
Debt secured by all such Liens permitted under this
clause (vi) does not exceed $100,000 in the aggregate
at any one time outstanding.
Section 6.5. Consolidations, Mergers and Sales of
Assets. The Borrower will not (i) consolidate or merge with or
into any other Person or (ii) sell, lease or otherwise transfer
all or any substantial part of its assets to any other Person.
The Borrower will not permit any of its Subsidiaries to
consolidate or merge with or into, or transfer all or any
substantial part of its assets to, any Person other than the
Borrower or a Wholly-Owned Consolidated Subsidiary.
Section 6.6. Dividends. The Borrower will not declare
or pay any Dividends.
Section 6.7. Transactions with Other Persons. The
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, enter into any agreement with any Person whereby
any of them shall agree to any restriction on the Borrower's or
such Restricted Subsidiary's right to amend or waive any of the
provisions of this Amended Agreement or any other Loan Document to
which they are a party, other than as provided in the proviso to
Section 10.5.
Section 6.8. Use of Proceeds. None of the proceeds of
the Loans will be used, 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 Board of Governors of the Federal Reserve System. The
proceeds of Revolving Loans shall be used for the Borrower's and
the Restricted Subsidiaries' general working capital requirements
(including payment of Reimbursement Amounts). The Borrower will
advance a not insubstantial amount of the proceeds of the
Revolving Loans to the Restricted Subsidiaries.
Section 6.9. Independence of Covenants. All covenants
contained herein shall be given independent effect so that if a
particular action or condition is not permitted by any of such
covenants, the fact that such action or condition would be
permitted by an exception to, or otherwise be within the
limitations of another covenant shall not avoid the occurrence of
a Default if such action is taken or condition exists.
Section 6.10. Restrictions with Respect to
Subsidiaries.
(a) The Borrower will not, and will not permit any of
its Subsidiaries to, sell, assign, transfer or otherwise dispose
of (except to the Borrower or to a Wholly-Owned Consolidated
Subsidiary) any shares of stock of any class of such Subsidiary
unless all of the capital stock and the entire Debt of such
Subsidiary at the time owing to the Borrower and to all other
Subsidiaries shall be sold, assigned, transferred or otherwise
disposed of at the same time if permissible under Section 6.5.
(b) The Borrower will not permit any of its
Subsidiaries (i) to issue or sell any shares of preferred stock
except to the Borrower or to a Wholly-Owned Consolidated
Subsidiary or (ii) to issue or sell any shares of its common stock
(except to directors for the purpose of qualifying them as
directors, if required) unless, after such issue or sale, the
Borrower and its Subsidiaries, taken together, shall retain the
same proportionate interest in such Subsidiary.
Section 6.11. Debt. Neither the Borrower nor any of
its Restricted Subsidiaries will incur or at any time be liable
with respect to any Debt except (i) Debt outstanding under this
Amended Agreement, the Notes and the Loan Documents, (ii) Debt
secured by a lien permitted under Section 6.4(i) or (ii) and
(iii) the Subordinated Debt.
Section 6.12. Advances, Investments and Loans. The
Borrower will not, and will not permit any of its Restricted
Subsidiaries to, lend money or credit or make advances of money or
other assets to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make
any capital contribution to any Person, except:
(i) the Borrower or any of its Restricted
Subsidiaries may invest in cash and Cash Equivalents;
(ii) the Borrower and its Restricted
Subsidiaries may acquire and hold receivables owing
to them and make advances to customers, in each case
if created, acquired or made in the ordinary course
of business and payable or dischargeable in
accordance with customary trade terms;
(iii) the Borrower and its Restricted
Subsidiaries may make loans and advances to employees
and officers of the Borrower and its Restricted
Subsidiaries (for business-related travel expenses,
moving and relocation expenses and other similar
expenses) in each case incurred in the ordinary
course of business and consistent with past
practices;
(iv) the Borrower and its Restricted
Subsidiaries may acquire and hold investments in
Persons other than Restricted Subsidiaries in an
aggregate principal amount (valuing non-cash
investments at the fair market value of the asset or
other property so invested as determined in good
faith by the Board of Directors or Executive
Committee of such Board of the Borrower or Restricted
Subsidiary making such investment) not exceeding
$100,000 at any one time outstanding; and
(v) the Borrower or any of its Restricted
Subsidiaries may acquire and own investments
(including Debt obligations) received in connection
with the bankruptcy or reorganization of suppliers
and customers or in settlement of delinquent
obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of
business.
Section 6.13. Subordinated Debt. (a) The Borrower
will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, make any principal or interest payments in
respect of the Subordinated Debt, except, that (i) the Borrower
may make the scheduled payment in May 1995 in respect of principal
of the Subordinated Debt in an aggregate amount not to exceed
$75,775, (ii) the Borrower may make payments in respect of the
Subordinated Debt (on account of principal and/or interest as may
be determined by the holders of the Subordinated Debt and the
Borrower) on the dates, and in amounts not exceeding, the
respective dates and amounts specified under the terms of the
Subordinated Debt as in effect on the Effective Date as the dates
and amounts for payment of interest on the Subordinated Debt and
(iii) from and after the date on which the principal of the Term
Loans and the Acquisition Loan outstanding as of the Effective
Date has been reduced by $3,000,000, the Borrower may make
payments of principal and interest in respect of the Subordinated
Debt on the dates, in the amounts and (in respect of interest) at
the rate or rates specified in the Subordinated Debt; provided,
however, that such payment at such time may be paid to, and
retained by, the holders of the Subordinated Debt under the
Subordination Agreement.
(b) The Borrower shall pay regularly scheduled payments
of principal and interest on the Subordinated Debt if, at the time
it is paid, such payment would otherwise be permitted to be made
to, and retained by, the holders of the Subordinated Debt under
the Subordination Agreement.
Section 6.14. Transaction with Affiliates. The
Borrower will not, and will not permit any Restricted Subsidiary
to, transfer any equipment or fixed assets having an aggregate
book value exceeding $100,000 to Penril Caribbean or Penril Hong
Kong. The Borrower will not, and will not permit any Restricted
Subsidiary to directly or indirectly, pay any funds to or for the
account of, make any investment in, engage in any transaction with
or effect any transaction in connection with any joint enterprise
or other joint arrangement with, any Affiliate of the Borrower,
except that the Borrower and its Restricted Subsidiaries may make
payment and provide compensation (including without limitation the
establishment of customary employee benefit plans), for personal
services rendered by employees and other persons on terms fair and
reasonable in light of the circumstances under which such services
which or are to be rendered.
Nothing in the second sentence of this Section 6.14
shall prohibit the Borrower or a Restricted Subsidiary from making
sales to or purchases from any Affiliate and, in connection
therewith, extending credit from making payments or from making
payments for services rendered by any Affiliate, as such sales and
purchases are made or such services are rendered in the ordinary
course of business and on the terms and conditions at least as
favorable to the Borrower or Restricted Subsidiaries as the terms
and conditions which would prohibit the Borrower from
participating in, or effecting any transactions in connection
with, any joint enterprise or other joint arrangement with any
Affiliate of the Borrower participating in the ordinary course of
its business and on a basis advantageous and on the basis on which
such Affiliate participates.
ARTICLE VII
EMPLOYEE BENEFIT PLANS
Section 7.1. Certain Definitions. As used in this
Article VII and hereafter in this Amended Agreement, the following
terms have the following meanings:
"Controlled Group" means all members of a controlled
group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or
414(c) of the Code.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"PBGC" means the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Plan" means at any time an employee pension benefit
plan which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and is
either (i) maintained by a member of the Controlled Group for
employees of a member or members of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or
any other arrangement under which more than one employer makes
contributions and to which a member of the Controlled Group is
then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions.
"Unfunded Vested Liabilities" means, with respect to any
Plan at any time, the amount (if any) by which (i) the present
value of all vested nonforfeitable benefits under such Plan
exceeds (ii) the fair market value of all Plan assets allocable to
such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled
Group to the PBGC or the Plan under Title IV of ERISA.
Section 7.2. Compliance with ERISA. Each member of
the Controlled Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Code with respect to
each Plan and is in compliance in all material respects with
provisions of ERISA and the Code presently applicable to each
Plan. No member of the Controlled Group has incurred any
liability, or has entered into any transaction that is likely to
cause any liability to be incurred, to the PBGC or any Plan under
Title IV of ERISA. No Lien has been attached and no Person has
threatened to attach a Lien on any property of the Borrower as a
result of the Borrower's failure to comply with ERISA.
Section 7.3. Prohibited Transactions. The Borrower
will not at any time permit any Plan to:
(i) engage in any "prohibited transac-
tion", as such term is defined in Section 4975 of the
Code or in Section 406 of ERISA;
(ii) incur any "accumulated funding
deficiency", as such term is defined in Section 302
of ERISA, whether or not waived; or
(iii) be terminated in a manner which could
result in the imposition of a Lien on the property of
the Borrower pursuant to Section 4068 of ERISA.
Section 7.4. Information. The Borrower agrees that so
long as the Bank is committed to make Loans or enter into Exchange
Contracts hereunder, or any Note or Reimbursement Amount remains
unpaid, the Borrower will deliver or cause to be delivered to the
Bank if and when any member of the Controlled Group (i) gives or
is required to give notice to the PBGC of any "reportable event"
(as defined in Section 4043 of ERISA) with respect to any Plan
which might constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event
given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA,
a copy of such notice; or (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate or appoint a
trustee to administer any Plan, a copy of such notice.
ARTICLE VIII
DEFAULTS
Section 8.1. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be
continuing:
(i) the Borrower shall fail to pay when
due any principal of or interest on any Loan, any fee
or any other amount payable hereunder, or under the
Notes or any Loan Document;
(ii) the Borrower shall fail to observe or
perform any covenant contained in Article V or in
Section 6.4, 6.5, 6.6, 6.7, 6.8, 6.10, 6.11, 6.12 or
6.13;
(iii) the Borrower shall fail to observe or
perform any covenant or agreement contained in this
Amended Agreement or other Loan Document (other than
those covered by clauses (i) or (ii) above) for
30 days after written notice thereof has been given
to the Borrower by the Bank;
(iv) any representation, warranty,
certification or statement made by the Borrower in
this Amended Agreement or other Loan Document in any
certificate, financial statement or other document
delivered pursuant hereto shall prove to have been
incorrect in any material respect when made;
(v) the Borrower or any Restricted
Subsidiary shall fail to make any payment in respect
of any Debt (other than the Notes and other than a
failure to make a payment of Subordinated Debt which
would have been made but for the provisions of the
Subordination Agreement) when due or within any
applicable grace period;
(vi) any event or condition shall occur
which results in the acceleration of the maturity of
any Debt of the Borrower or any Restricted Subsidiary
or enables (or, with the giving of notice or lapse of
time or both, would enable) the holder of such Debt
or any Person acting on such holder's behalf to
accelerate the maturity thereof;
(vii) the Borrower or any Restricted
Subsidiary shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part
of its property, or shall consent to any such relief
or to the appointment of or taking possession by any
such official in an involuntary case or other
proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become
due, or shall take any corporation action to
authorize any of the foregoing;
(viii) an involuntary case or other
proceeding shall be commenced against the Borrower or
any Restricted Subsidiary seeking liquidation,
reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property, and such
involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or
an order for relief shall be entered against the
Borrower or any Subsidiary of the Borrower under the
federal bankruptcy laws as now or hereafter in
effect;
(ix) any member of the Controlled Group
shall fail to pay when due an amount or amounts
aggregating in excess of $750,000 which it shall have
become liable to pay to the PBGC, any Plan or any
Plan trustee under Title IV of ERISA or 412 of the
Code; or notice of intent to terminate a Plan or
Plans having aggregate Unfunded Vested Liabilities in
excess of $2,000,000 (collectively, a "Material
Plan") shall be provided under Title IV of ERISA by
any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV
of ERISA to terminate or to cause a trustee to be
appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any
Material Plan against any member of the Controlled
Group to enforce Section 515 of ERISA and such
proceeding shall not have been dismissed within
30 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain
a decree adjudicating that any Material Plan must be
terminated;
(x) a judgment or order for the payment of
money in excess of $1,250,000 shall be rendered
against the Borrower or any Subsidiary of the
Borrower and such judgment or order shall continue
unsatisfied and unstayed for a period of 21 days; or
(xi) any certificate or opinion covering
the financial statements of the Borrower and its
Consolidated Subsidiaries shall contain a
qualification (an "Avoidable Qualification") to such
certificate or opinion (such as a "subject to" or
"except for" statement therein) (A) resulting from a
limitation on the scope of examination of such
financial statements or the underlying data, (B) as
to the capability of the Person whose financial
statements are certified to continue operations as a
going concern or (C) which could be eliminated by
changes in financial statements or notes thereto
covered by such certificate or opinion (such as, by
the creation of or increase in a reserve or a
decrease in the carrying value of assets) and which,
if so eliminated by the making of any such change and
after giving effect thereto, would occasion an Event
of Default or a Default hereunder; provided, however,
that neither of the following shall constitute an
Avoidable Qualification: (x) a consistency exception
relating to a change in the accounting principles
with which the independent public accountants for the
Person the statements of which are being certified
have concurred or (y) a qualification relating to the
outcome or disposition of threatened litigation,
pending litigation being contested in good faith,
pending or threatened claims or other contingencies,
the impact of which cannot be determined with
sufficient certainty to permit qualification in such
financial statements;
then, and in every such event, the Bank, at its option, may by
notice to the Borrower terminate the Commitments and they shall
thereupon terminate, and may, at its option, by notice to the
Borrower declare the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become, immediately
due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the
Borrower; provided that in the case of any of the Events of
Default specified in paragraph (vii) or (viii) above, without any
notice to the Borrower or any other act by the Bank, the
Commitments shall thereupon terminate and the Notes (together with
accrued interest thereon) shall become immediately due and payable
without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
In addition, the Bank, at its option, may by notice to
the Borrower require the Borrower to pay, and there shall be
immediately due and payable hereunder, an amount (the
"LC Liquidated Payment") equal to the face amount of all undrawn
Letters of Credit then issued and outstanding. Such payment shall
represent liquidated damages resulting from the Event of Default
and not a penalty and when made shall thereby automatically
discharge the Borrower from its obligation to reimburse the Bank
for any future payments made by the Bank under Letters of Credit.
Upon the termination of the last outstanding Letter of Credit, the
Bank shall pay to the Borrower as an adjustment to the
LC Liquidated Payment an amount equal to (i) the LC Liquidated
Payment previously paid minus (ii) all amounts drawn under Letters
of Credit which were the basis for the LC Liquidated Payment (and
not otherwise reimbursed) on or prior to the date of such
adjustment.
ARTICLE IX
CHANGE IN CIRCUMSTANCES
Section 9.1. Increased Cost and Reduced Return.
(a) If after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any
change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
by the Bank with any request or directive (whether or not having
the force of law) of any such authority, central bank or
comparable agency:
(i) shall subject the Bank to any tax,
duty or other charge with respect to the Loans, the
Notes, its obligation to make Loans or any Letter of
Credit, or shall change the basis of taxation of
payments to the Bank of the principal of or interest
on Loans or in respect of Letters of Credit or
Reimbursement Amounts with respect thereto or any
other amounts due under this Amended Agreement in
respect of its Loans, its obligation to make Loans or
any Letter of Credit (except for changes in the rate
of tax on the overall net income of the Bank imposed
by the jurisdiction in which the Bank's principal
executive office is located); or
(ii) shall impose, modify or deem
applicable any reserve, special deposit or similar
requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the
Federal Reserve System) against assets of, deposits
with or for the account of, or credit extended by,
the Bank or shall impose on the Bank any other
condition affecting the Loans, the Notes, its
obligation to make Loans or any Letter of Credit, and
the result of any of the foregoing is to increase the
cost to the Bank or making or maintaining any Loan or
issuing or maintaining any Letter of Credit, or to
reduce the amount of any sum received or receivable
by the Bank under this Amended Agreement or under the
Notes with respect thereto, by an amount deemed by
the Bank to be material;
then, within 15 days after demand by the Bank, the Borrower shall
pay to the Bank such additional amount or amounts as will
compensate the Bank for such increased cost or reduction. The
Bank will promptly notify the Borrower of any event of which it
has knowledge, occurring after the date hereof, which will entitle
the Bank to compensation pursuant to this Section. A certificate
of the Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. In
determining such amount, the Bank may use any reasonable averaging
and attribution methods.
(b) If the Bank shall determine that the adoption after
the date hereof of any generally-applicable law, rule, regulation
or guideline regarding capital adequacy, or any change in any of
the foregoing or in the interpretation or administration
applicable law, role, regulation or guideline (whether adopted
before or after the date hereof) by any Governmental Authority,
central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by the Bank with any
request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the
rate of return on the Bank's capital or the capital of any Person
controlling the Bank (but only to the extent of such Person's
interest in the Bank) as a consequence of the Bank's obligations
hereunder to a level below that which the Bank or such controlling
Person could have achieved but for such law, adoption, change or
compliance (taking into consideration the Bank's policies with
respect to capital adequacy) by an amount deemed by the Bank to be
material, then from time to time, within ten days after demand by
the Bank, the Borrower shall pay to the Bank such additional
amount or amounts as will compensate the Bank for such reduction.
A certificate of the Bank claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to
it hereunder shall be conclusive in the absence of manifest error.
In determining any such amount, the Bank may use any reasonable
averaging and attribution methods. If the Bank fails to notify
the Borrower that it intends to claim compensation for such
reduction within 30 days after the Bank has knowledge of such
reduction, the Borrower shall not be obligated to compensate the
Bank for such reduction accruing prior to the date on which the
Bank first notifies the Borrower that it intends to claim such
compensation.
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices. All notices, requests and other
communications to a party hereunder shall be in writing and shall
be given to such party at its address set forth on the signature
pages hereof or such other address as such party may hereafter
specify for the purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) if given by
mail, 48 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or
(ii) if given by any other means, when delivered at the address
specified in this Section; provided that notices to the Bank under
Article II or Article IX shall not be effective until received.
Section 10.2. No Waivers. No failure or delay by the
Bank in exercising any right, power or privilege hereunder or
under the Notes or the Applications shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 10.3. Expenses. The Borrower shall pay (i) all
reasonable out-of-pocket expenses of the Bank, including the
reasonable monitoring fees of the Bank's Commercial Support Group
and all reasonable fees and disbursements of the Appraiser and the
reasonable fees and disbursements of special counsel for the Bank,
in connection with the preparation of this Amended Agreement and
the other Amendment Documents, any waiver or consent hereunder or
any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all out-of-pocket expenses
incurred by the Bank, including reasonable fees and disbursements
of counsel, in connection with such Event of Default and
collection and other enforcement proceedings resulting therefrom.
The Borrower shall indemnify the Bank against any transfer taxes,
documentary taxes, assessments or charges made by any Governmental
Authority by reason of the execution and delivery of this Amended
Agreement, the Letters of Credit, the Exchange Contracts or the
Notes.
Section 10.4. Right of Set-Off. Upon the occurrence
and during the continuance of any Event of Default, the Bank is
hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing
by the Bank to or for the credit or the account of the Borrower
against any and all of the obligations now or hereafter existing
under this Amended Agreement, the Notes or the Exchange Contracts,
irrespective of whether or not the Bank shall have made any demand
hereunder or under the Notes and although such obligations may be
unmatured. The rights of the Bank under this Section 10.4 are in
addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Bank may have. The
Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in the
Notes, the Letters of Credit or the Exchange Contracts may
exercise rights of set-off or counterclaim or other rights with
respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount
of such participation. The Bank agrees to notify the Borrower
promptly after it exercises any such right of set-off.
Section 10.5. Amendments and Waivers. Any provision of
this Amended Agreement or of the Notes may be amended or waived
if, but only if, such amendment or waiver is in writing and is
signed by the Borrower and the Bank; provided, however, that the
covenant of the Borrower set forth in Section 6.13(b) of this
Amended Agreement may not be amended without the consent of the
holders of a majority in principal amount of the Subordinated
Debt.
Section 10.6. Successors and Assigns. (a) The
provisions of this Amended Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights under this Amended Agreement
without the prior written consent of the Bank, which consent shall
not be unreasonably withheld.
(b) The Bank may at any time grant to one or more banks
or other institutions (each a "Participant") participating
interests in the Commitments or in any or all of the Loans, the
Notes, the Letters of Credit or the Exchange Contracts. In the
event of any such grant by the Bank of a participating interest to
a Participant, whether or not upon notice to the Borrower, the
Bank shall remain responsible for the performance of its
obligations hereunder, and the Bank shall continue to deal solely
and directly with the Borrower in connection with the Bank's
rights and obligations under this Amended Agreement. Any
agreement pursuant to which the Bank may grant such a
participating interest shall provide that the Bank shall retain
the sole right and responsibility to enforce the obligations of
the Borrower hereunder including, without limitation, the right to
approve any amendment, modification or waiver of any provision of
this Amended Agreement; provided that such participation agreement
may provide that the Bank will not agree to any modification,
amendment or waiver of this Amended Agreement which would have the
effect of (i) increasing, decreasing or extending the Commitments,
(ii) reducing the principal of or rate of interest on any Loan,
(iii) postponing the date fixed for any payment of principal of or
interest on any Loan or fees hereunder or under the Notes or the
Letters of Credit, (iv) extending the Line of Credit Commitment
Period or the Term Loan Commitment Period without the consent of
the Participant. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for
purposes of this Amended Agreement only to the extent of a
participating interest granted in accordance with this
subsection (b).
(c) The Bank may at any time assign to one or more
banks or other institutions (each an "Assignee") all, or a
proportionate part of all, of its rights and obligations under
this Amended Agreement, the Notes, the Letters of Credit and the
Exchange Contracts, and such Assignee shall assume such rights and
obligations, pursuant to an instrument executed by such Assignee
and the Bank, with (and subject to) the consent of the Borrower;
provided that if an Assignee is an affiliate of the Bank, no such
consent shall be required. Upon execution and delivery of such an
instrument and payment by such Assignee to the Bank of an amount
equal to the purchase price agreed between the Bank and such
Assignee, such Assignee shall become a Bank party to this Amended
Agreement and shall have all the rights and obligations of a Bank
as set forth in such instrument of assumption, and the transferor
Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank and the
Borrower shall make appropriate arrangements so that, if required,
a new Note is issued to the Assignee. If the Assignee is not
incorporated under the laws of the United States of America or a
state thereof, it shall, prior to the first date on which interest
or fees are payable hereunder for its account deliver to the
Borrower certification as to exemption from deduction or
withholding of any United States federal income taxes.
(d) The Bank may at any time assign all or any portion
of its rights under this Amended Agreement, the Notes, the Letters
of Credit and the Exchange Contracts to a Federal Reserve Bank.
No such assignment shall release the Bank from its obligations
hereunder.
(e) The Bank may furnish any information concerning the
Borrower in its possession from time to time to Assignees and
Participants (including prospective Assignees and Participants)
and may furnish such information in response to credit inquiries
consistent with general banking practice.
(f) No assignee or other transferee of the Bank's
rights shall be entitled to receive any greater payment under
Section 9.1 than the Bank would have been entitled to receive with
respect to the rights assigned or otherwise transferred, unless
such assignment or transfer is made with the Borrower's prior
written consent or at a time when the circumstances giving rise to
such greater payment did not exist.
Section 10.7. Maryland Law. This Amended Agreement,
the Notes, the Letters of Credit and the Exchange Contracts shall
be governed by and construed in accordance with the laws of the
State of Maryland.
Section 10.8. Counterparts; Effectiveness. This
Amended Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This
Amended Agreement shall become effective when the Bank shall have
received counterparts hereof (which may be by facsimile) signed by
both parties.
Section 10.9. Waiver of Jury Trial; Submission to
Jurisdiction. The Borrower hereby irrevocably and unconditionally
waives all right to trial by jury in any action, proceeding, or
counterclaim arising out of or related to this Amended Agreement,
the Notes, the Letters of Credit and the Exchange Contracts or any
of the transactions contemplated hereby or thereby. Any legal
action or proceeding with respect to this Amended Agreement, the
Notes, the Letters of Credit and the Exchange Contracts or any
document related hereto or thereto shall be brought in the courts
of the State of Maryland in Baltimore, Maryland or of the United
States of America for the District of Maryland, and by execution
and delivery of this Amended Agreement the Borrower hereby accepts
for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid
courts. The Borrower hereby irrevocably and unconditionally
waives any objection, including without limitation, any objection
to the laying of venue or based on the grounds of the forum non
conveniens which it now or hereafter may have to the bringing of
any action or proceeding in such respective jurisdictions.
Section 10.10. Entire Amended Agreement. This Amended
Agreement, the Notes and the Exchange Contracts set forth the
entire agreement of the parties with respect to the subject matter
hereof and thereof and supersede all previous understandings,
written or oral, in respect thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Amended Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
PENRIL DATACOMM NETWORKS, INC.
By
Title:
1300 Quince Orchard Blvd.
Gaithersburg, Maryland 20878
Telecopier Number: (301) 948-5761
with a copy (which shall not
constitute notice) to:
Richard D. Margolis, Esq.
Benesch, Friedlander, Coplan &
Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Telephone Number: (216) 363-4500
Telecopier Number: (216) 363-4588
SIGNET BANK/MARYLAND
By
Title: Vice President
7799 Leesburg Pike, Suite 500
Falls Church, Virginia 22043
Telecopier Number: (703) 503-9712
with copy (which shall not
constitute notice) to:
Brian D. Murphy, Esq.
McGuire, Woods, Battle & Boothe,
L.L.P.
One James Center
Richmond, Virginia 23219
Telephone Number: (804) 775-4332
Telecopier Number: (804) 775-1062
<PAGE>
Schedule 4.1
Good Standing
Datability, Inc., a Delaware corporation, qualified to
do business in New Jersey under the name Datability-N.J., Inc., is
not in good standing in the State of New Jersey for failure to
file annual reports for 1992, 1993 and 1994. In addition to
filing these annual reports, it will be necessary to obtain a tax
clearance. The Company is in the process of completing the annual
reports and obtaining the tax clearance.
<PAGE>
<PAGE> EXHIBIT A
FORM OF REVOLVING NOTE
April 25, 1995
$5,500,000 Washington, D.C.
For value received, PENRIL DATACOMM NETWORKS, INC., a
Delaware corporation (the "Borrower"), promises to pay to the
order of SIGNET BANK/MARYLAND (the "Bank") on December 31, 1995
the principal amount of FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($5,500,000) or, if less, the aggregate unpaid principal amount of
all Revolving Loans made by the Bank to the Borrower pursuant to,
or continued under, the Second Amended and Restated Credit
Agreement dated as of April 25, 1995 between the Borrower and the
Bank (as the same may be amended, modified or supplemented from
time to time, the "Amended Agreement"). The Borrower promises to
pay interest on the aggregate unpaid principal amount of such
Loans on the dates and at the rate or rates provided for in the
Amended Agreement. All payments of principal and interest shall
be made in lawful money of the United States in immediately
available funds at the office of Signet Bank/Maryland, 7799
Leesburg Pike, Suite 500, Falls Church, Virginia 22043.
All Revolving Loans made by the Bank to the Borrower
pursuant to the Amended Agreement and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any
transfer hereof endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made
a part hereof; provided, that any failure by the Bank to make such
a notation or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Revolving Loans in
accordance with the terms hereof.
This Note is the Revolving Note referred to in the
Amended Agreement. Terms defined in the Amended Agreement are
used herein with the same meanings. Reference is made to the
Amended Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
PENRIL DATACOMM NETWORKS, INC.
By____________________________
Title:
<PAGE>
<PAGE>
EXHIBIT B-1
FORM OF TERM A NOTE
April 25, 1995
$875,000.18 Washington, D.C.
For value received, PENRIL DATACOMM NETWORKS, INC., a
Delaware corporation (the "Borrower"), promises to pay to the
order of SIGNET BANK/MARYLAND (the "Bank") the principal amount of
EIGHT HUNDRED SEVENTY-FIVE THOUSAND AND 18/100 DOLLARS
($875,000.18) in installments as provided below. The Borrower
promises to pay interest on the aggregate unpaid principal amount
hereof on the dates and at the rate or rates provided for in the
Second Amended and Restated Credit Agreement dated as of April 25,
1995 between the Borrower and the Bank (as the same may be
amended, modified or supplemented from time to time, the "Amended
Agreement"). All payments of principal and interest shall be made
in lawful money of the United States in immediately available
funds at the office of Signet Bank/Maryland, 7799 Leesburg Pike,
Suite 500, Falls Church, Virginia 22043.
In addition to any other mandatory repayments required
pursuant to Section 2.10 of the Amended Agreement, the Borrower
shall repay (and there shall become due and payable), on each date
set forth below under the caption "Scheduled Repayment Date", the
principal amount of the Term A Loan evidenced hereby set forth
below opposite such Scheduled Repayment Date:
Scheduled Scheduled
Repayment Dates Amounts
---------------- -----------
April 30, 1995 $41,666.66
May 31, 1995 41,666.66
June 30, 1995 41,666.66
July 31, 1995 41,666.66
August 31, 1995 41,666.66
September 30, 1995 41,666.66
October 31, 1995 41,666.66
November 30, 1995 41,666.66
December 31, 1995 41,666.66
January 31, 1996 41,666.66
February 28, 1996 41,666.66
March 31, 1996 41,666.66
April 30, 1996 41,666.66
May 31, 1996 41,666.66
June 30, 1996 41,666.66
July 31, 1996 41,666.66
August 31, 1996 41,666.66
September 30, 1996 41,666.66
October 31, 1996 41,666.66
November 30, 1996 41,666.66
December 31, 1996 41,666.98
This Note is the Term A Note referred to in the Amended
Agreement. Terms defined in the Amended Agreement are used herein
with the same meanings. Reference is made to the Amended
Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
PENRIL DATACOMM NETWORKS, INC.
By____________________________
Title:
<PAGE>
EXHIBIT B-2
FORM OF TERM B NOTE
April 25, 1995
$875,000 Washington, D.C.
For value received, PENRIL DATACOMM NETWORKS, INC., a
Delaware corporation (the "Borrower"), promises to pay to the
order of SIGNET BANK/MARYLAND (the "Bank") the principal amount
of EIGHT HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($875,000) in
installments as provided below. The Borrower promises to pay
interest on the aggregate unpaid principal amount hereof on the
dates and at the rate or rates provided for in the Second Amended
and Restated Credit Agreement dated as of April 25, 1995 between
the Borrower and the Bank (as the same may be amended, modified
or supplemented from time to time, the "Amended Agreement"). All
payments of principal and interest shall be made in lawful money
of the United States in immediately available funds at the office
of Signet Bank/Maryland, 7799 Leesburg Pike, Suite 500, Falls
Church, Virginia 22043.
In addition to any other mandatory repayments required
pursuant to Section 2.10 of the Amended Agreement, the Borrower
shall repay (and there shall become due and payable), on each
date set forth below under the caption "Scheduled Repayment
Date", the principal amount of the Term B Loan evidenced hereby
set forth below opposite such Scheduled Repayment Date:
Scheduled Scheduled
Repayment Dates Amounts
---------------- -----------
April 30, 1995 $31,250.00
May 31, 1995 31,250.00
June 30, 1995 31,250.00
July 31, 1995 31,250.00
August 31, 1995 31,250.00
September 30, 1995 31,250.00
October 31, 1995 31,250.00
November 30, 1995 31,250.00
December 31, 1995 31,250.00
January 31, 1996 31,250.00
February 28, 1996 31,250.00
March 31, 1996 31,250.00
April 30, 1996 31,250.00
May 31, 1996 31,250.00
June 30, 1996 31,250.00
July 31, 1996 31,250.00
August 31, 1996 31,250.00
September 30, 1996 31,250.00
October 31, 1996 31,250.00
November 30, 1996 31,250.00
December 31, 1996 31,250.00
January 31, 1997 31,250.00
February 28, 1997 31,250.00
March 31, 1997 31,250.00
April 30, 1997 31,250.00
May 31, 1997 31,250.00
June 30, 1997 31,250.00
July 31, 1997 31,250.00
This Note is the Term B Note referred to in the Amended
Agreement. Terms defined in the Amended Agreement are used
herein with the same meanings. Reference is made to the Amended
Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
PENRIL DATACOMM NETWORKS, INC.
By____________________________
Title:
<PAGE>
EXHIBIT B-3
FORM OF TERM C NOTE
April 25, 1995
$1,112,499.88 Washington, D.C.
For value received, PENRIL DATACOMM NETWORKS, INC., a
Delaware corporation (the "Borrower"), promises to pay to the
order of SIGNET BANK/MARYLAND (the "Bank") the principal amount
of ONE MILLION ONE HUNDRED TWELVE THOUSAND FOUR HUNDRED NINE-NINE
AND 88/100 DOLLARS ($1,112,499.88) in installments as provided
below. The Borrower promises to pay interest on the aggregate
unpaid principal amount hereof on the dates and at the rate or
rates provided for in the Second Amended and Restated Credit
Agreement dated as of April 25, 1995 between the Borrower and the
Bank (as the same may be amended, modified or supplemented from
time to time, the "Amended Agreement"). All payments of
principal and interest shall be made in lawful money of the
United States in immediately available funds at the office of
Signet Bank/Maryland, 7799 Leesburg Pike, Suite 500, Falls
Church, Virginia 22043.
In addition to any other mandatory repayments required
pursuant to Section 2.10 of the Amended Agreement, the Borrower
shall repay (and there shall become due and payable), on each
date set forth below under the caption "Scheduled Repayment
Date", the principal amount of the Term C Loan evidenced hereby
set forth below opposite such Scheduled Repayment Date:
Scheduled Scheduled
Repayment Dates Amounts
---------------- -----------
April 30, 1995 $37,083.34
May 31, 1995 37,083.34
June 30, 1995 37,083.34
July 31, 1995 37,083.34
August 31, 1995 37,083.34
September 30, 1995 37,083.34
October 31, 1995 37,083.34
November 30, 1995 37,083.34
December 31, 1995 37,083.34
January 31, 1996 37,083.34
February 28, 1996 37,083.34
March 31, 1996 37,083.34
April 30, 1996 37,083.34
May 31, 1996 37,083.34
June 30, 1996 37,083.34
July 31, 1996 37,083.34
August 31, 1996 37,083.34
September 30, 1996 37,083.34
October 31, 1996 37,083.34
November 30, 1996 37,083.34
December 31, 1996 37,083.34
January 31, 1997 37,083.34
February 28, 1997 37,083.34
March 31, 1997 37,083.34
April 30, 1997 37,083.34
May 31, 1997 37,083.34
June 30, 1997 37,083.34
July 31, 1997 37,083.34
August 31, 1997 37,083.34
September 30, 1997 37,083.02
This Note is the
Term C Note referred to in the Amended Agreement. Terms defined
in the Amended Agreement are used herein with the same meanings.
Reference is made to the Amended Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof.
PENRIL DATACOMM
NETWORKS, INC.
By____________________________
Title:
<PAGE>
EXHIBIT C
FORM OF ACQUISITION NOTE
April 25, 1995
$2,125,000 Washington, D.C.
For value received, PENRIL DATACOMM NETWORKS, INC., a
Delaware corporation (the "Borrower"), promises to pay to the
order of SIGNET BANK/MARYLAND (the "Bank") the principal amount
of TWO MILLION ONE HUNDRED TWENTY-FIVE THOUSAND DOLLARS
($2,125,000) in installments as provided below. The Borrower
promises to pay interest on the aggregate unpaid principal amount
hereof on the dates and at the rate or rates provided for in the
Second Amended and Restated Credit Agreement dated as of April
25, 1995 between the Borrower and the Bank (as the same may be
amended, modified or supplemented from time to time, the "Amended
Agreement"). All payments of principal and interest shall be
made in lawful money of the United States in immediately
available funds at the office of Signet Bank/Maryland, 7799
Leesburg Pike, Suite 500, Falls Church, Virginia 22043.
In addition to any other mandatory repayments required
pursuant to Section 2.10 of the Amended Agreement, the Borrower
shall repay (and there shall become due and payable), on each
date set forth below under the caption "Scheduled Repayment
Date", the principal amount of the Acquisition Loan evidenced
hereby set forth below opposite such Scheduled Repayment Date:
Scheduled Scheduled
Repayment Dates Amounts
---------------- -----------
April 30, 1995 $100,000.00
May 31, 1995 100,000.00
June 30, 1995 100,000.00
July 31, 1995 100,000.00
August 31, 1995 100,000.00
September 30, 1995 100,000.00
October 31, 1995 100,000.00
November 30, 1995 100,000.00
December 31, 1995 100,000.00
January 31, 1996 100,000.00
February 28, 1996 100,000.00
March 31, 1996 100,000.00
April 30, 1996 100,000.00
May 31, 1996 100,000.00
June 30, 1996 100,000.00
July 31, 1996 100,000.00
August 31, 1996 100,000.00
September 30, 1996 100,000.00
October 31, 1996 100,000.00
November 30, 1996 100,000.00
December 31, 1996 100,000.00
January 31, 1997 25,000.00
This Note is the Acquisition Note referred to in the
Amended Agreement. Terms defined in the Amended Agreement are
used herein with the same meanings. Reference is made to the
Amended Agreement for provisions for the prepayment hereof and
the acceleration of the maturity hereof.
PENRIL DATACOMM NETWORKS, INC.
By____________________________
Title:
<TABLE>
<CAPTION>
EXHIBIT L
Scheduled Acquisition
Repayment Date Loan Term A Loan Term B Loan Term C Loan Total Payments
- ------------------ ------------ ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
April 30, 1995 $100,000.00 $41,666.66 $31,250.00 $37,083.34 $210,000.00
May 31, 1995 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
June 30, 1995 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
July 31, 1995 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
August 31, 1995 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
September 30, 1995 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
October 31, 1995 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
November 30, 1995 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
December 31, 1995 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
January 31, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
February 28, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
March 31, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
April 30, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
May 31, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
June 30, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
July 31, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
August 31, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
September 30, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
October 31, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
November 30, 1996 100,000.00 41,666.66 31,250.00 37,083.34 210,000.00
December 31, 1996 100,000.00 41,666.98 31,250.00 37,083.34 210,000.32
January 31, 1997 25,000.00 31,250.00 37,083.34 93,333.34
February 28, 1997 31,250.00 37,083.34 68,333.34
March 31, 1997 31,250.00 37,083.34 68,333.34
April 30, 1997 31,250.00 37,083.34 68,333.34
May 31, 1997 31,250.00 37,083.34 68,333.34
June 30, 1997 31,250.00 37,083.34 68,333.34
July 31, 1997 31,250.00 37,083.34 68,333.34
August 31, 1997 37,083.34 37,083.34
September 30, 1997 37,083.02 37,083.02
<S> <C> <C> <C> <C> <C>
Total $2,125,000.00 $875,000.18 $875,000.00 $1,112,499.88 $4,987,500.06
</TABLE>
[EXECUTION COPY]
AMENDMENT NO. 1
dated as of April 25, 1995
to the
SUBORDINATION AGREEMENT
dated as of May 6, 1993,
among
HOWARD INTERNATIONAL CORPORATION,
JOHN HOWARD,
SIGNET BANK/MARYLAND,
and
DATABILITY
TABLE OF CONTENTS
Page
Section 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Amendments to the Subordination Agreement. . . . . . . . . 2
Section 3. Effectiveness. . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Integration; Confirmation. . . . . . . . . . . . . . . . . 4
Section 5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 4
Section 6. Successors and Assigns . . . . . . . . . . . . . . . . . . 5
Section 7. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 5
<PAGE>
AMENDMENT NO. 3
This AMENDMENT NO. 1 (this "Amendment") is dated as of
April 25, 1995 and is among HOWARD INTERNATIONAL CORPORATION and
JOHN HOWARD (each a "Junior Creditor" and, collectively, the
"Junior Creditors"), SIGNET BANK/MARYLAND, a Maryland banking
corporation (the "Bank"), and DATABILITY, INC., a Delaware
corporation (the "Company").
Penril Datacomm Networks, Inc., a Delaware corporation
("Penril"), and the Company entered into an Agreement and Plan of
Merger among Penril, the Company, all of the holders of the
Company's capital stock (the "C/S Holders") and PD Acquisition
Corp., a wholly-owned subsidiary of Penril, dated as of May 1,
1993 pursuant to which (i) all C/S Holders received common stock
of Penril and (ii) PD Acquisition Corp. was merged into the
Company which survived as a direct, wholly-owned subsidiary of
Penril.
To effect the merger, Penril entered into an Amended
and Restated Credit Agreement dated as of May 6, 1993 with the
Bank, as amended by Amendment No. 1 dated as of January 31, 1994
and by Amendment No. 2 dated on June 23, 1994, and as further
amended by a letter agreement dated December 14, 1994 and a
second letter agreement dated January 13, 1995 (the "Credit
Agreement"). Penril is obligated under the Credit Agreement to
use the proceeds of all Working Capital Loans available
thereunder for its and its Restricted Subsidiary's general
working capital requirements and to advance a not insubstantial
portion of the proceeds of Working Capital Loans to its
Restricted Subsidiaries. The Company was and is a Restricted
Subsidiary of Penril. A portion of the loans under the Credit
Agreement were advanced or contributed by Penril to the Company
to enable the Company to repay all of its outstanding
indebtedness to National Westminster Bank, PLC and to reduce the
amount of the Company's trade indebtedness. The Junior Creditors
were shareholders of the Company immediately prior to its
acquisition by Penril, and remain creditors of the Company.
To induce the Bank to enter into the Credit Agreement,
the Company guaranteed to the Bank the full payment and
performance of all of Penril's obligations under the Credit
Agreement pursuant to a Guaranty dated as of May 6, 1993 (the
"Guaranty"), and secured its guaranty with the grant of a
security interest in favor of the Bank in all of the Company's
tangible and intangible personal property pursuant to a Security
Agreement dated as of May 6, 1993 (the "Security Agreement"),
each between the Company and the Bank. Concurrently with the
execution of the Credit Agreement and the Company's Guaranty and
Security Agreement, the Junior Creditors, the Company and the
Bank entered into a Subordination Agreement (the "Subordination
Agreement") pursuant to which the Junior Creditors subordinated
in right of payment all indebtedness from time to time owing to
them by the Company to the prior payment and performance of all
of the Company's obligations in favor of the Bank under the
Guaranty.
By reason of the violation of the covenant in Section
5.6 of the Credit Agreement for its fiscal quarter ended January
31, 1995, Penril is in Default under the Credit Agreement.
Penril has requested the Bank to waive this Default, to modify
Section 5.6 of the Credit Agreement to conform to Penril's
current financial projections, to issue a Standby Letter of
Credit for the account of Penril in the approximate amount of
$412,000 to enable Penril to post an appeal bond relating to
certain litigation involving Penril and to make certain other
changes to the Credit Agreement. The Bank is agreeable thereto,
all on the terms and conditions set forth in the Second Amended
and Restated Credit Agreement dated as of April 25, 1995 (as the
same may be amended, supplemented or modified from time to time
and including any agreement extending the maturity of,
refinancing or otherwise restructuring of all or any portion of
the obligations under such Agreement or any successor agreement,
the "Amended Agreement").
In connection with the Amended Agreement, the Bank is
also agreeable to Penril's request that the Subordination
Agreement be amended so as to allow the Company to make certain
limited payments of principal in respect of subordinated
indebtedness which are now prohibited under the Subordination
Agreement as a result of Penril's Default under the Credit
Agreement, all as set forth in this Amendment. Accordingly, the
parties hereto agree as follows:
Section 1. Definitions. Terms used herein and not
defined which are defined in the Amended Agreement shall have for
the purposes hereof the respective meanings set forth therein.
Section 2. Amendments to the Subordination
Agreement.
(a) The definition of "Senior Debt" in Section 1.1 is
hereby amended to read in full as follows:
"Senior Debt" means (i) all amounts now or
hereafter payable by Penril to the Bank on the Notes,
(ii) all other obligations or liabilities now or
hereafter payable by Penril pursuant to the Amended
Agreement, (iii) all obligations and liabilities now or
hereafter payable by Penril under, arising out of or in
connection with the Loan Documents, (iv) all amounts
now or hereafter payable by the Company pursuant to the
Guaranty or the Security Agreement and (iv) all other
indebtedness, obligations and liabilities of Penril or
the Company to the Bank, now existing or hereafter
arising or incurred, whether or not evidenced by notes
or other instruments, and whether such indebtedness,
obligations and liabilities are direct or indirect,
fixed or contingent, liquidated or unliquidated, due or
to become due, secured or unsecured, joint, several or
joint and several, related or unrelated to the Loans,
similar or dissimilar to the indebtedness arising out
of or in connection with the Amended Agreement or the
Guaranty or of the same or a different class of
indebtedness as the indebtedness arising out of the
Amended Agreement or the Guaranty, including, without
limitation, any overdrafts in any deposit accounts
maintained by Penril or the Company with the Bank, all
obligations of Penril or the Company with respect to
letters of credit, if any, issued by the Bank for the
account of Penril or the Company, any indebtedness of
Penril or the Company that is purchased by or assigned
to the Bank and any indebtedness of Penril or the
Company to any assignee of all or a portion of the
Notes or any other obligation referred to above,
together with all renewals, modifications,
consolidations and extensions thereof.
(b) The first paragraph of Section 2.4 of the
Subordination Agreement is hereby amended to read as follows:
Section 2.4. Payments on Subordinated Debt
Suspended. No payment (including any payment which may
be payable by reason of the payment of any other
indebtedness of the Company which is subordinated to
the payment of the Subordinated Debt) shall be made by
the Company on account of the principal of or interest
on the Subordinated Debt or on account of the purchase
or other acquisition by it of the Subordinated Debt
until the full, final and irrevocable payment of all
Senior Debt. Notwithstanding the foregoing, (i) the
Company may make the scheduled payment in May 1995 in
respect of principal of the Subordinated Debt in an
aggregate amount not to exceed $75,775, (ii) the
Company may make payments in respect of the
Subordinated Debt (on account of principal and/or
interest as may be determined by the holders of the
Subordinated Debt and the Company) on the dates, and in
amounts not exceeding, the respective dates and amounts
specified under the terms of the Subordinated Debt as
in effect on the Effective Date of the Amended
Agreement as the dates and amounts for payment of
interest on the Subordinated Debt and (iii) from and
after the date on which the principal of the Term Loans
and the Acquisition Loan outstanding as of the
Effective Date of the Amended Agreement has been
reduced by $3,000,000, the Company may make payments of
principal and interest in respect of the Subordinated
Debt on the dates, in the amounts and (in respect of
interest) at the rate or rates specified in the
Subordinated Debt; provided, however, that in the event
and during the continuation of any default in the
payment of principal of or interest on any Senior Debt
beyond any applicable grace period with respect thereto
or, in the event that any other event of default with
respect to any Senior Debt shall have occurred and be
continuing which would permit the holders of the Senior
Debt (or a Person or Persons acting on their behalf) to
declare such Senior Debt to become due and payable
prior to the date on which it would otherwise have
become due and payable, then unless and until such
event of default shall have been cured or waived or
shall have ceased to exist and such acceleration shall
have been rescinded or annulled, or in the event any
judicial proceeding shall be pending with respect to
any such default, then no payment otherwise allowed
pursuant to this sentence shall be made by the Company
on account of the principal of or interest on the
Subordinated Debt or on account of the purchase or
other acquisition by it of the Subordinated Debt.
Section 3. Effectiveness. This Amendment shall
become effective as of the date hereof on the Effective Date (as
defined in the Amended Agreement). On the Effective Date, the
Subordination Agreement will be automatically amended as set
forth herein. On and after the Effective Date, the rights and
obligations of the parties hereto shall be governed by the
Subordination Agreement as amended by this Amendment; provided,
that the rights and obligations of the parties hereto with
respect to the period prior to the Effective Date shall continue
to be governed by the terms of the Subordination Agreement.
Section 4. Integration; Confirmation. On and after
the Effective Date, each reference in the Subordination Agreement
to "this Agreement", "this Subordination Agreement", "herein",
"hereunder" or words of similar import, and each reference to any
other document delivered in connection with the Subordination
Agreement to the "Subordination Agreement" shall be deemed to be
a reference to the Subordination Agreement as amended by this
Amendment, all other terms and provisions of the Subordination
Agreement shall continue in full force and effect and unchanged
and are hereby confirmed in all respects.
Section 5. Counterparts. This Amendment may be
signed in any number of counterparts, each of which shall be an
original, all of which taken together shall constitute a single
integrated agreement with the same effect as if the signatures
thereto and hereto were upon the same instrument. Complete sets
of counterparts shall be lodged with the Junior Creditors, the
Company and the Bank.
Section 6. Successors and Assigns. The provisions
of this Amendment shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns, including any successor or assignee arising by operation
of law.
Section 7. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the
State of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date and year first above
written.
DATABILITY, INC.
By_________________________________
Title:
One Palmer Terrace
Carlstadt, New Jersey 07072
Telecopier Number: (201) 438-2688
SIGNET BANK/MARYLAND
By_________________________________
Title:
7700 Wisconsin Avenue, Suite 400
Bethesda, Maryland 20841
Telecopier Number: (301) 652-1175
with a copy to:
Brian D. Murphy
McGuire, Woods, Battle & Boothe,
LLP
One James Center
Richmond, Virginia 23219
Telecopier Number: (804) 775-1061
HOWARD INTERNATIONAL CORPORATION
By_____________________________
Title:
_______________________________
John Howard
7727:\4332\SIGNET.MD\PENRIL\PENRIL95\SUBORDAM.XEQ
