<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from _________ to __________
COMMISSION FILE NUMBER 0-14324
MOORE-HANDLEY, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 63-0819773
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
3140 PELHAM PARKWAY, PELHAM, ALABAMA 35124
- ---------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
(205) 663-8011
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securi ties Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.10 par value 2,154,543 shares
- --------------------------------------- ----------------------------
Class Outstanding at July 10, 1997
<PAGE> 2
MOORE-HANDLEY, INC.
INDEX
<TABLE>
<CAPTION>
Item No. Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
1. Financial Statements - Unaudited
Balance Sheets -
June 30, 1997 and 1996
and December 31, 1996............................................................................ 3
Statements of Operations -
Three Months and Six Months Ended
June 30, 1997 and 1996........................................................................... 4
Statements of Cash Flows -
Six Months Ended June 30, 1997
and 1996......................................................................................... 5
Note to Financial Statements......................................................................... 6
2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................................................................... 7-11
PART II. OTHER INFORMATION
4. Submission of Matters to a Vote of
Security Holders................................................................................. 11-12
6. Exhibits and Reports on Form 8-K..................................................................... 12
Signature.................................................................................................... 12
Exhibit 10 (ii).............................................................................................. 14-40
Financial Data Schedule (for SEC purposes only).............................................................. 41
</TABLE>
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<PAGE> 3
MOORE-HANDLEY, INC.
BALANCE SHEETS
JUNE 30, 1997 AND 1996 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------------------------- ------------
1997 1996 1996
------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents .................. $ 647,000 $ 351,000 $ 596,000
Trade receivables, net ..................... 21,683,000 20,031,000 21,995,000
Other receivables .......................... 1,672,000 2,068,000 1,969,000
Merchandise inventory ...................... 14,695,000 15,338,000 17,693,000
Prepaid expenses ........................... 476,000 344,000 243,000
Refundable income tax ...................... 1,037,000 221,000 870,000
Deferred income taxes ...................... 510,000 470,000 510,000
------------ ------------ ------------
Total current assets .................. 40,720,000 38,823,000 43,876,000
Prepaid pension cost .......................... 853,000 719,000 789,000
Property and equipment ........................ 19,666,000 18,349,000 19,019,000
Less accumulated depreciation .............. (10,878,000) (9,671,000) (10,248,000)
------------ ------------ ------------
Net property and equipment ............ 8,788,000 8,678,000 8,771,000
Deferred charges, net ......................... 32,000 40,000 36,000
------------ ------------ ------------
$ 50,393,000 $ 48,260,000 $ 53,472,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans ................................. $ 9,800,000 $ 6,000,000 $ 10,450,000
Accounts payable ........................... 16,803,000 16,766,000 18,134,000
Accrued payroll ............................ 529,000 535,000 453,000
Other accrued liabilities .................. 2,012,000 1,813,000 1,690,000
Long-term debt due in one year ............. 1,151,000 1,189,000 1,133,000
------------ ------------ ------------
Total current liabilities ............. 30,295,000 26,303,000 31,860,000
Long-term debt ................................ 4,539,000 4,775,000 5,111,000
Deferred income taxes ......................... 1,129,000 1,059,000 1,129,000
Stockholders' equity:
Common stock, $.10 par value;
10,000,000 shares authorized,
2,510,040 shares issued ............... 251,000 251,000 251,000
Other stockholders' equity ................. 14,179,000 15,872,000 15,121,000
------------ ------------ ------------
Total stockholders' equity ............ 14,430,000 16,123,000 15,372,000
------------ ------------ ------------
$ 50,393,000 $ 48,260,000 $ 53,472,000
============ ============ ============
</TABLE>
See accompanying notes.
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<PAGE> 4
MOORE-HANDLEY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales .................. $ 35,424,000 $ 35,843,000 $ 73,266,000 $ 74,523,000
Cost of merchandise sold ... 30,030,000 30,028,000 62,361,000 62,795,000
Warehouse and delivery
expense ................. 2,470,000 2,595,000 4,764,000 4,798,000
------------ ------------ ------------ ------------
Cost of sales .............. 32,500,000 32,623,000 67,125,000 67,593,000
------------ ------------ ------------ ------------
Gross profit ............... 2,924,000 3,220,000 6,141,000 6,930,000
Selling and administrative
expense ................. 3,528,000 3,732,000 7,025,000 7,071,000
------------ ------------ ------------ ------------
Operating loss ............. (604,000) (512,000) (884,000) (141,000)
Interest expense, net ...... 217,000 176,000 498,000 375,000
------------ ------------ ------------ ------------
Loss before provision
for income tax (benefit). (821,000) (688,000) (1,382,000) (516,000)
Income tax (benefit) ....... (260,000) (259,000) (440,000) (195,000)
------------ ------------ ------------ ------------
Net loss ................... $ (561,000) $ (429,000) $ (942,000) (321,000)
============ ============ ============ ============
Net loss per
common share ............ $ (.26) $ (.20) $ (.44) $ (.15)
============ ============ ============ ============
Weighted average common
shares outstanding ...... 2,154,000 2,165,000 2,154,000 2,165,000
============ ============ ============ ============
</TABLE>
See accompanying notes.
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<PAGE> 5
MOORE-HANDLEY, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
--------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................ $ (942,000) $ (321,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization.................................................. 630,000 592,000
Provision for doubtful accounts................................................ 60,000 60,000
Gain on sale of equipment...................................................... (20,000) ---
Change in assets and liabilities:
Trade and other receivables............................................... 549,000 906,000
Merchandise inventory..................................................... 2,998,000 (7,000
Accounts payable and accrued expenses..................................... (933,000) 1,516,000
Other assets.............................................................. (460,000 7,000
---------- ----------
Total adjustments......................................................... 2,824,000 3,074,000
---------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES................................................... 1,882,000 2,753,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................................... (647,000) (1,849,000)
Proceeds from sale of equipment......................................................... 20,000 ---
---------- ----------
NET CASH USED IN
INVESTING ACTIVITIES........................................................... (627,000) (1,849,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments of bank loans.............................................................. (650,000) (1,750,000)
Principal (payments) borrowings
of long-term debt...................................................................... (554,000) (1,000,000)
---------- ----------
NET CASH USED IN
FINANCING ACTIVITIES........................................................... (1,204,000) (750,000)
---------- ----------
Net increase in cash and
cash equivalents........................................................................ 51,000 154,000
Cash and cash equivalents
at beginning of period.................................................................. 596,000 197,000
---------- ----------
Cash and cash equivalents
at end of period........................................................................ $ 647,000 $ 351,000
========== ==========
</TABLE>
See accompanying notes.
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<PAGE> 6
MOORE-HANDLEY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE SIX MONTHS
ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
1. BASIS OF PRESENTATION.
The financial statements included herein have been prepared by Moore-
Handley, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K filed with the Commission on March 27, 1997.
The financial information presented herein reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair statement of the results of the interim periods.
The results for interim periods are not necessarily indicative of results to be
expected for the year.
The Financial Accounting Standards Board has issued Statement No. 128,
Earnings per Share. This must be adopted by the Company on December 31, 1997 at
which time it must restate all prior periods. The impact, if any, of Statement
128 on the calculation of earings per share for the first quarter of 1997 and
1996 is not expected to be material.
2. LINES OF CREDIT
On August 7, 1997 the Company entered into a credit agreement under
which it may borrow up to 85% of eligible receivables up to a maximum of
$15,000,000. The borrowings bear interest at the prime interest rate or, at the
Company's option, 2 1/2 % over LIBOR, and are secured by the Company's trade
receivables. This credit facility replaces the Company's lines of credit with
banks totaling $10,000,000 of which $9,800,000 was outstanding as of June 30,
1997 and one of which was amended in the second quarter to avoid a violation of
a debt covenant.
- 6 -
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
NET SALES
Net sales for the quarter ended June 30, 1997 were down 1% compared to
the same quarter in the prior year. Warehouse shipments were down $1,725,000, or
7%, which was largely offset by a 13% increase in factory direct shipments. The
increase in factory direct shipments was due to increased sales of lumber and
building materials.
The following table sets forth the major elements of net sales:
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------------
1997 1996
------------------ -------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net Sales:
Warehouse shipments............................................... $23,871 67.4% $25,596 71.4%
Factory direct shipments.......................................... 11,553 32.6 10,247 28.6
------- ----- ------- -----
Net Sales..................................................... $35,424 100.0% $35,843 100.0%
======= ===== ======= =====
<CAPTION>
Six Months Ended June 30,
---------------------------------------------
1997 1996
------------------ -------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net Sales:
Warehouse shipments............................................... $48,193 65.8% $51,582 69.2%
Factory direct shipments.......................................... 25,073 34.2 22,941 30.8
------- ----- ------- -----
Net Sales..................................................... $73,266 100.0% $74,523 100.0%
======= ===== ======= =====
</TABLE>
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<PAGE> 8
OPERATIONS
The following table sets forth certain financial data as a percentage of
net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
1997 1996 1997 1996
----- ------ ------ -----
<S> <C> <C> <C> <C>
Net sales............................................................ 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Gross margin......................................................... 15.2 16.2 14.9 15.7
Warehouse and delivery expense....................................... 6.9 7.2 6.5 6.4
----- ----- ----- -----
Gross profit......................................................... 8.3 9.0 8.4 9.3
Selling and administrative expenses.................................. 10.0 10.4 9.6 9.5
----- ----- ----- -----
Operating income (loss).............................................. (1.7) (1.4) (1.2) (.2)
Interest expense, net................................................ .6 .5 .7 .5
----- ----- ----- -----
Income (loss) before provision
for income tax (benefit).......................................... (2.3)% (1.9)% (1.9)% (.7)%
===== ===== ===== =====
</TABLE>
GROSS MARGIN
The gross margin percentage for the quarter ended June 30, 1997 was down
1.0% compared to the same quarter last year and for the six months decreased by
.8% compared to the prior year. About half of the decrease was due to the
increase in factory direct shipments as a percent of total sales and the balance
of the decrease is due to more competitive pricing.
The following table shows the gross margin trend in 1996 and the first
and second quarters of 1997:
<TABLE>
<CAPTION>
Increase (Decrease)
vs. Same Quarter
Gross Margin in Previous Year
- ---------------------------------------------------------------------- -------------------------------------
Amount Percentage Amount Percentage
Quarter (in thousands) of Sales (in thousands) Points
- ---------------- -------------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
1996 - 1st $5,913 15.3 $ 84 (1.0)
2nd 5,815 16.2 (109) --
3rd 5,955 15.2 148 (.3)
4th 5,681 17.8 293 1.0
1997 - 1st 5,511 14.6 $ (402) (.7)
2nd 5,394 15.2 (421) (1.0)
</TABLE>
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<PAGE> 9
WAREHOUSE AND DELIVERY EXPENSES
The aftereffects of the major warehouse construction project of last
year continued to be felt through the second quarters. Warehouse and delivery
expenses were down $125,000 compared to the same period last year. However, as a
percentage of warehouse shipments, these expenses increased to 10.3% compared to
10.1% for the same quarter last year.
The following table shows the trend in warehouse and delivery expenses
in 1996 and the first and second quarters of 1997:
<TABLE>
<CAPTION>
Increase (Decrease)
Warehouse and Delivery vs. Same Quarter
Expenses in Previous Year
- ------------------------------------------------------------------------ -------------------------------
Percentage
Amount of Warehouse Amount Percentage
Quarter (in thousands) Sales (in thousands) Points
- ---------------- -------------------- ------------- -------------- ----------
<C> <C> <C> <C> <C>
1996 - 1st $2,203 8.5 $ 221 .5
2nd 2,595 10.1 576 2.1
3rd 2,703 10.3 668 2.2
4th 2,407 10.5 576 2.8
1997 - 1st 2,294 9.4 $ 91 .9
2nd 2,470 10.3 (125) .2
</TABLE>
SELLING AND ADMINISTRATIVE EXPENSES
During the quarter the Company undertook further reductions in selling
and administrative personnel and, as a result, accrued $175,000 for severance
pay and expenses. These personnel and other expense reductions made during the
first half of the year will reduce expenses by about $1,000,000 annually. Some
of these cost reductions began to be recognized in the second quarter and the
remainder will begin to be recognized in the balance of the current calendar
year. Excluding severance pay in both quarters, selling and administrative
expense is down $139,000 for the second quarter of 1997 compared to the same
quarter last year.
The following table shows the trend in selling and administrative
expenses in 1996 and the first and second quarters of 1997.
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<PAGE> 10
<TABLE>
<CAPTION>
Increase (Decrease)
Selling and Administrative vs. Same Quarter
Expenses in Previous Year
- -------------------------------------------------------------- ----------------------------------------
Amount Percentage Amount Percentage
Quarter (in thousands) of Sales (in thousands) Points
- --------- ------------ ---------- --------------- ----------------
<S> <C> <C> <C> <C>
1996 - 1st $3,339 8.6 $ 194 (.2)
2nd 3,732 10.4 332 1.1
3rd 3,593 9.1 211 .1
4th 3,476 10.9 309 1.0
1997 - 1st $3,497 9.2 $ 159 .7
2nd 3,528 10.0 (204) (.3)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures of $647,000 were made during the six months ended
June 30, 1997. Largely due to the elimination of excess stock,inventories were
down $2,998,000 from December, 1996.
On August 7, 1997 the Company entered into a credit agreement under
which it may borrow up to 85% of eligible receivables up to a maximum of
$15,000,000. The borrowings bear interest at the prime interest rate or, at the
Company's option, 2 1/2 % over LIBOR, and are secured by the Company's trade
receivables. This credit facility replaces the Company's lines of credit with
banks totaling $10,000,000 of which $9,800,000 was outstanding as of June 30,
1997 and one of which was amended in the second quarter to avoid a violation of
a debt covenant. The Company believes this new credit facility will be adequate
to finance its working capital needs.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report (other than the finan
cial statements and other statements of historical fact) are forward-looking
statements. There can be no assurance that future developments will be in
accordance with management's expectations or that the affect of future develop
ments on the Company will be those anticipated by management. Among the factors
that could cause actual results to differ materially from estimates reflected in
such forward-looking statements are the following:
- competitive pressures on sales and pricing, including those from
other wholesale distributors and those from retailers in competition
with the Company's customers;
- the Company's ability to achieve projected cost savings from its
warehouse modernization program and ongoing cost reduction efforts;
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<PAGE> 11
- changes in cost of goods and the effect of differential terms
and conditions available to larger competitors of the Company;
- uncertainties associated with any acquisition the Company may
seek to implement; and
- changes in general economic conditions.
While the Company periodically reassesses material trends and
uncertainties affecting the Company's results of operations and financial
condition in connection with its preparation of management's discussion and
analysis of results of operations and financial condition contained in its
quarterly and annual reports, the Company does not intend to review or revise
any particular forward-looking statement referenced in light of future events.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the Registrant was held on Thursday, April 21,
1997 at 10:00 a.m. At the meeting, each of Messrs. William Riley, Pierce E.
Marks, Jr., L. Ward Edwards, Michael B. Stubbs and Ronald J. Juvonen was
re-elected as a director of the Registrant.
The following table sets forth the distribution of votes cast with
regard to each of the nominees:
<TABLE>
<CAPTION>
Votes Cast Votes
Nominee for Nominee Withheld
------- ----------- --------
<S> <C> <C>
William Riley 2,106,657 16,005
----------- ---------
Pierce E. Marks, Jr. 2,106,657 16,005
----------- ---------
L. Ward Edwards 2,106,657 16,005
----------- ---------
Michael B. Stubbs 2,106,657 16,005
----------- ---------
Ronald J. Juvonen 2,106,657 16,005
----------- ---------
</TABLE>
Also at the meeting, the proposal to increase the number of shares autho
rized for issuance under the Corporation's 1991 Incentive Compensation Plan was
approved. The following table sets forth the distribution of votes cast with
regard to the proposal:
<TABLE>
<CAPTION>
Number of Votes
---------------
<S> <C>
For 1,172,823
------------
Against 36,005
------------
Abstain 10,450
------------
</TABLE>
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<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits --
10 (ii) Financing Agreement, dated August 7, 1997, between the
Company and The CIT Group/Business Credit, Inc.
27 Financial Data Schedule (FOR SEC USE ONLY)
(b) There were no reports on Form 8-K filed by the Company during the
six month period ended June 30, 1997.
SIGNATURE
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.
MOORE-HANDLEY, INC.
-------------------------------
(Registrant)
Date: August 14, 1997 /S/ L. Ward Edwards
-------------------- -------------------------------
Vice President, Treasurer
and Secretary
(Principal Accounting and
Financial Officer)
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<PAGE> 1
EXHIBIT 10 (ii)
---------------
EXECUTION COPY
FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS LENDER)
AND
MOORE-HANDLEY, INC.
(as Borrower)
DATED: AUGUST 7, 1997
- 14 -
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Definitions...........................................................................................................3
SECTION 2. Conditions Precedent..................................................................................................9
SECTION 3. Revolving Loans......................................................................................................11
SECTION 4. Intentionally Omitted................................................................................................13
SECTION 5. Letters of Credit....................................................................................................13
SECTION 6. Collateral...........................................................................................................15
SECTION 7. Representations, Warranties and Covenants............................................................................16
SECTION 8. Interest, Fees and Expenses..........................................................................................20
SECTION 9. Powers...............................................................................................................23
SECTION 10. Events of Default and Remedies.......................................................................................23
SECTION 11. Termination..........................................................................................................25
SECTION 12. Miscellaneous........................................................................................................26
</TABLE>
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<PAGE> 3
THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation,
(hereinafter "CITBC") with offices located at 900 Ashwood Parkway, Atlanta, GA
30338, is pleased to confirm the terms and conditions under which CITBC shall
make a term loan and revolving loans, advances and other financial
accommodations to MOORE- HANDLEY, INC.(herein the "Company"), a Delaware
corporation with a principal place of business at 3140 Pelham Parkway, Pelham,
Alabama 35124.
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Company's now existing and future: (A) accounts
receivable, (whether or not specifically listed on schedules furnished to
CITBC), and any and all instruments, documents, contract rights, chattel paper,
evidencing, securing or otherwise arising out of such accounts receivable,
including, without limitation, all accounts created by or arising from all of
the Company's sales of goods or rendition of services to its customers, and all
accounts arising from sales or rendition of services made under any of the
Company's trade names or styles, or through any of the Company's divisions; (B)
unpaid seller's rights (including rescission, replevin, reclamation and stoppage
in transit) relating to the foregoing or arising therefrom; (C) rights to any
goods represented by any of the foregoing, including rights to returned or
repossessed goods; (D) reserves and credit balances arising hereunder; (E)
guarantees or collateral for any of the foregoing; (F) insurance policies or
rights relating to any of the foregoing; and (G) cash and non-cash proceeds of
any and all the foregoing. Notwithstanding the foregoing, "Accounts" shall not
include identifiable accounts receivable arising solely from the sale by the
Company of Inventory purchased from, or consigned by, Deutsche Financial
Services, General Electric and/or General Cable Corporation until such time as
Deutsche Financial Services, General Cable Industries and/or General Electric
Corporation acknowledge, or consent to, CITBC's security interest in such
identifiable accounts receivable.
ANNIVERSARY DATE shall mean the date occurring one (1) year from the date hereof
and the same date in every year thereafter.
AVAILABILITY shall mean at any time the excess of the sum of Eligible Accounts
Receivable multiplied by the percentage provided for in paragraph 1 of Section 3
of this Financing Agreement over the sum of x) the outstanding aggregate amount
of all Obligations of the Company and y) the Availability Reserve.
AVAILABILITY RESERVE shall mean, at any time of determination, the sum of the
then outstanding amount of a) all Letters of Credit; and b) obligations of the
Company to General Electric Company, Deutsche Financial Services Corporation
and/or General Cable Industries for Inventory sold to, or consigned to, the
Company and until such time as the lien or consignment arrangement is
terminated, or CITBC and the holder of such lien have entered into an
Intercreditor Agreement, reasonably satisfactory to CITBC.
BUSINESS DAY shall mean any day on which both CITBC and Chase Bank are open for
business.
CAPITAL EXPENDITURES for any period shall mean the aggregate of all expenditures
of the Company during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the Company.
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<PAGE> 4
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of the Company.
CHASE BANK RATE shall mean the rate of interest per annum announced by Chase
Manhattan Bank from time to time as its prime rate in effect at its principal
office in the City of New York. (The prime rate is not intended to be the lowest
rate of interest charged by Chase Manhattan Bank to its borrowers).
COLLATERAL shall mean all present and future Accounts and Documents of Title of
the Company.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for the
Company and its consolidated subsidiaries eliminating all inter-company
transactions and prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet plus
individual balance sheets for the Company and its subsidiaries showing all
eliminations of inter-company transactions and prepared in accordance with GAAP
and including a balance sheet for the Company exclusively.
CURRENT ASSETS shall mean, wherever used throughout this Financing Agreement,
those assets of the Company which in accordance with GAAP are classified as
"current".
CURRENT LIABILITIES shall mean, wherever used through out this Financing
Agreement, those liabilities of the Company which in accordance with GAAP, are
classified as "current", provided, however, that notwithstanding GAAP, the
Revolving Loans and the current portion of Permitted Indebtedness shall be
considered "current liabilities".
CUSTOMARILY PERMITTED LIENs shall mean
(a) liens of local or state authorities for franchise or other like taxes
provided the aggregate amounts of such liens shall not exceed $100,000.00 in the
aggregate at any one time;
(b) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen and other like liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary course of business
(including, without limitation, security deposits for leases, surety bonds and
appeal bonds) in connection with workers' compensation, unemployment insurance
and other types of social security benefits or to secure the performance of
tenders, bids, contracts (other than for the repayment or guarantee of borrowed
money or purchase money obligations), statutory obligations and other similar
obligations arising as a result of progress payments under government contracts;
and
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<PAGE> 5
(d) easements (including, without limitation, reciprocal easement agreements
and utility agreements), mortgages, liens, encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate.
DEFAULT shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal to the
sum of: a) four percent (4%) and b) the Chase Bank Rate, which CITBC shall be
entitled to charge the Company on all Obligations due CITBC by the Company to
the extent provided in paragraph 2 of Section 10 of this Financing Agreement.
DEPOSITORY ACCOUNTS shall mean those accounts owned by CITBC and designated for
the deposit of proceeds of Collateral.
DOCUMENTATION FEE shall mean I) the sum of $2,500.00 intended to compensate
CITBC for the use of CITBC's in-house Legal Department and facilities in
documenting, in whole or in part, the initial transaction solely on behalf of
CITBC, exclusive of Out-of-Pocket Expenses, and II) CITBC's standard fees
relating to any and all modifications, waivers, releases, amendments or
additional collateral with respect to this Financing Agreement, the Collateral
and/or the Obligations.
DOCUMENTS OF TITLE shall mean all present and future warehouse receipts, bills
of lading, shipping documents, chattel paper, instruments and similar documents,
all whether negotiable or not and all goods and inventory relating thereto and
all cash and non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Company terminates this
Financing Agreement or the Line of Credit which date is prior to the second
Anniversary Date.
EARLY TERMINATION FEE shall: I) mean the fee CITBC is entitled to charge the
Company in the event the Company terminates the Line of Credit or this Financing
Agreement on a date prior to the second Anniversary Date; and II) be determined
by calculating the average daily loan balance under the Revolving Loan for the
period from the date of this Financing Agreement to the Early Termination Date
and multiplying that number by two percent (2%) per annum for the number of days
from the Early Termination Date to the second Anniversary Date.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean the gross amount of the Company's
accounts receivable that conform to the warranties contained herein and at all
times continue to be acceptable to CITBC in the exercise of its reasonable
business judgment, less, without duplication, the sum of a) any returns,
discounts, claims, credits and allowances of any nature (whether issued, owing,
granted or outstanding) and b) reserves for: i) sales to the United States of
America or to any agency, department or division thereof; ii) foreign sales
other than sales x) secured by stand-by letters of credit (in form and substance
satisfactory to CITBC) issued or confirmed by, and payable at, banks having a
place of business in the United States of America and payable in United States
currency, or insured under credit
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<PAGE> 6
insurance policies (in form and substance satisfactory to CITBC) issued by
insurance carriers acceptable to CITBC, the proceeds of which have been assigned
to CITBC and which assignment has been confirmed by the insurance carrier, or y)
to customers residing in Canada provided such sales otherwise comply with all of
the other criteria for eligibility hereunder, are payable in United States
currency and such sales do not exceed $20,000.00 in the aggregate at any one
time; iii) accounts that remain unpaid more than ninety (90) days from invoice
date; iv) contras; v) sales to any subsidiary, or to any company affiliated with
the Company in any way; vi) bill and hold (deferred shipment) or consignment
sales; vii) sales to any customer which is a) insolvent, b) the debtor in any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law, c) negotiating, or has called a
meeting of its creditors for purposes of negotiating, a compromise of its debts
or d) financially unacceptable to CITBC or has a credit rating unacceptable to
CITBC; viii) all sales to any customer if fifty percent (50%) or more
of either x) all outstanding invoices or y) the aggregate dollar amount of all
outstanding invoices, are unpaid more than ninety (90) days from invoice date;
ix) any other reasons deemed necessary by CITBC in its reasonable business
judgment and which are customary either in the commercial finance industry or in
the lending practices of CITBC; and x) an amount representing, historically,
returns, discounts, claims, credits and allowances.
EQUIPMENT shall mean all present and hereafter acquired machinery, equipment,
furnishings and fixtures, and all additions, substitutions and replacements
thereof, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto and all proceeds
of whatever sort.
ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
EXCESS AVAILABILITY shall mean the amount by which i) Availability on any date
of determination exceeds ii) all past due or then due debts, obligations and
payables of the Company.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of money
(borrowed or otherwise) or for the deferred purchase price of property, services
or assets, other than Inventory, or (b) lease obligations which, in accordance
with GAAP, have been, or which should be capitalized.
INVENTORY shall mean all of the Company's present and hereafter acquired
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same; in all
stages of production- from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
ISSUING BANK shall mean the bank issuing Letters of Credit for the Company.
LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
CITBC by the Issuing Bank for or on behalf of the Company.
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<PAGE> 7
LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by CITBC to the
Issuing Bank of the Company's reimbursement obligation under the Issuing Bank's
Reimbursement Agreement, Application for Letter of Credit or other like
document.
LETTER OF CREDIT GUARANTY FEE shall mean the fee CITBC may charge the Company
under paragraph 3 of Section 8 of this Financing Agreement for: i) issuing the
Letter of Credit Guaranty or ii) otherwise aiding the Company in obtaining
Letters of Credit.
LIBOR shall mean, at any time of determination, and subject to availability, the
London Interbank Offered Rate paid in London on one month, two month, three
month or six month dollar deposits, as quoted by Chase Bank, or if there is no
such quotation as to Libor, then in any publication used in the New York City
financial community.
LIBOR LOAN shall mean the loans for which the Company has elected to use Libor
for interest rate computations.
LIBOR PERIOD shall mean the Libor for one month, two month, three month or six
month dollar deposits, as selected by the Company.
LIBOR PROCESSING FEE shall mean the sum of $500.00 which CITBC shall be entitled
to charge the Company in accordance with, but subject to, the provisions of
Section 8 of this Financing Agreement upon the election of a Libor Loan.
LINE OF CREDIT shall mean the commitment of CITBC to make loans and advances
pursuant to Section 3 of this Financing Agreement, to the Company in the amount
of $15,000,000.
LINE OF CREDIT FEE shall: I) mean the fee due CITBC at the end of each month
for the Line of Credit, and II) be determined by multiplying the difference
between the Line of Credit, and the sum of a) the average daily Revolving Loans
of the Company for said month and b) the average daily balance of outstanding
Letters of Credit for said month, by one-half of one percent (1/2 of 1%) per
annum for the number of days in said month.
OBLIGATIONS shall mean all loans and advances made or to be made by CITBC
hereunder to the Company or to others for the Company's account; any and all
indebtedness and obligations which may at any time be owing by the Company to
CITBC hereunder howsoever arising, whether now in existence or incurred by the
Company from time to time hereafter; whether secured by pledge, lien upon or
security interest in any of the Company's assets or property or the assets or
property of any other person, firm, entity or corporation; whether such
indebtedness is absolute or contingent, joint or several, matured or unmatured,
direct or indirect and whether the Company is liable to CITBC for such
indebtedness as principal, surety, endorser, guarantor or otherwise; Obligations
shall also include indebtedness or obligations incurred by, or imposed on, CITBC
as a result of environmental claims (other than as a result of actions of CITBC)
arising out of the Company's operation, premises or waste disposal practices or
sites; the Company's liability to CITBC as maker or endorser on any promissory
note or other instrument for the payment of money arising hereunder; the
Company's liability to CITBC under any instrument of guaranty or indemnity, or
arising under any guaranty, endorsement or undertaking which CITBC may make or
issue to others for the Company's
- 20 -
<PAGE> 8
account hereunder, including any accommodation extended with respect to
applications for Letters of Credit, CITBC's acceptance of drafts or CITBC's
endorsement of notes or other instruments for the Company's account and benefit.
OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
OUT-OF-POCKET EXPENSES shall mean all of CITBC's present and future expenses
incurred relative to this Financing Agreement, whether incurred heretofore or
hereafter, which expenses shall include, without being limited to, the cost of
record searches, all costs and expenses incurred by CITBC in opening bank
accounts, depositing checks, receiving and transferring funds, and any charges
imposed on CITBC due to "insufficient funds" of deposited checks and CITBC's
standard fee relating thereto, any amounts paid by CITBC, incurred by or charged
to CITBC by the Issuing Bank under the Letter of Credit Guaranty or the
Company's Reimbursement Agreement, Application for Letter of Credit or other
like document which pertain either directly or indirectly to such Letters of
Credit, and CITBC's standard fees relating to the Letters of Credit and any
drafts thereunder, local counsel fees, fees and taxes relative to the filing of
financing statements, and all expenses, costs and fees set forth in paragraph 3
of Section 10 of this Financing Agreement.
PERMITTED ENCUMBRANCES shall mean: I) liens expressly permitted, or consented
to, by CITBC; II) Purchase Money Liens; III) Customarily Permitted Liens; IV)
liens granted CITBC by the Company; V) liens of judgment creditors provided such
liens do not exceed, in the aggregate, at any time, $50,000.00 (other than liens
bonded or insured to the reasonable satisfaction of CITBC); VI) liens for taxes
not yet due and payable or which are being diligently contested in good faith by
the Company by appropriate proceedings and which liens are not x)senior to the
liens of CITBC or y) for taxes due the United States of America; VII) liens on
assets purchased by the Company under the Deutsche Financial Services Agreement,
provided the holder of such lien on Inventory has entered into an Intercreditor
Agreement with CITBC releasing its claims to the proceeds of such Inventory
VIII) liens on Inventory (and the proceeds thereof) consigned to the Company by
General Electric Company and/or General Cable Industries; and IX) liens on
Equipment and/or Real Estate to secure the obligations described in clause vii
of the definition of Permitted Indebtedness.
PERMITTED INDEBTEDNESS shall mean: I) current Indebtedness maturing in less than
one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, taxes or labor; II) the Indebtedness secured by
the Purchase Money Liens; III)Indebtedness of the Company which is subordinated
to the prior payment and satisfaction of the Company's Obligations to CITBC by
means of a subordination agreement in form and substance satisfactory to CITBC;
IV)Indebtedness arising under the Letters of Credit and this Financing
Agreement; V) deferred taxes and other expenses incurred in the ordinary course
of business; VI) other Indebtedness existing on the date of execution of this
Financing Agreement and listed in the most recent financial statement delivered
to CITBC or otherwise disclosed to CITBC in writing; VII) Capital Leases or term
debt incurred to finance or refinance Capital Expenditures; and VIII) other
Indebtedness not to exceed $100,000 at any one time outstanding.
PURCHASE MONEY LIENS shall mean liens on any item of Equipment provided that
each such lien shall attach only to the property to so acquired.
REAL ESTATE shall mean the Company's fee and/or leasehold interests in real
property.
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<PAGE> 9
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Company by CITBC pursuant to Section 3 of this Financing
Agreement.
WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities.
SECTION 2. CONDITIONS PRECEDENT
The obligation of CITBC to make loans hereunder is subject to the satisfaction
of, or waiver of, immediately prior to or concurrently with the making of such
loans, the following conditions precedent:
A) LIEN SEARCHES - CITBC shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to CITBC for all locations presently
occupied or used by the Company.
B) CASUALTY INSURANCE - The Company shall have delivered to CITBC evidence
satisfactory to CITBC that casualty insurance policies are in full force and
effect, all as set forth in Section 7, paragraph 5 of this Financing Agreement.
C) INTENTIONALLY OMITTED
D) UCC FILINGS - Any documents (including without limitation, financing
statements) required to be filed in order to create, in favor of CITBC, a first
and exclusive perfected security interest in the Collateral with respect to
which a security interest may be perfected by a filing under the Uniform
Commercial Code shall have been properly filed in each office in each
jurisdiction required in order to create in favor of CITBC a perfected lien on
the Collateral. CITBC shall have received acknowledgment copies of all such
filings (or, in lieu thereof, CITBC shall have received other evidence
satisfactory to CITBC that all such filings have been made); and CITBC shall
have received evidence that all necessary filing fees and all taxes or other
expenses related to such filings have been paid in full.
E) INTENTIONALLY OMITTED
F) INTENTIONALLY OMITTED
G) EXAMINATION & VERIFICATION - CITBC shall have completed to the
satisfaction of CITBC an examination and verification of the Accounts, books
and records of the Company.
H) INTENTIONALLY OMITTED
I) OPINIONS - Counsel for the Company shall have delivered to CITBC opinions
satisfactory to CITBC opining, inter alia, that, subject to the i) filing,
priority and remedies provisions of the Uniform Commercial Code, ii) the
provisions of the Bankruptcy Code, insolvency statutes or other like laws, iii)
the equity powers of a court of law and iv) such other matters as may be agreed
upon with CITBC, all documents of the Company are x) valid, binding and
enforceable according to their terms, y) are duly authorized and z) do not
violate any terms, provisions, representations or covenants in the charter or
by-laws of the Company or, to the best knowledge of such counsel, of any loan
agreement, mortgage, deed of trust, note, security or pledge agreement or
indenture to which the Company is a signatory or by which the Company or its
assets are bound.
J) INTENTIONALLY OMITTED
K) ADDITIONAL DOCUMENTS - The Company shall have executed and delivered to
CITBC all loan documents necessary to consummate the lending arrangement
contemplated between the Company and CITBC.
L) INTENTIONALLY OMITTED
M) INTENTIONALLY OMITTED
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<PAGE> 10
N) CITBC COMMITMENT LETTER - The Company has fully complied, to the
satisfaction of CITBC, with all of the terms and conditions of the commitment
letter, dated July 14, 1997, issued by CITBC to, and accepted by, the Company.
O) INTENTIONALLY OMITTED
P) BOARD RESOLUTION - CITBC shall have received a copy of the resolutions of
the Board of Directors of the Company authorizing the execution, delivery and
performance of (i) this Financing Agreement, and (ii) any related agreements, in
each case certified by the Secretary or Assistant Secretary of the Company as of
the date hereof, together with a certificate of the Secretary or Assistant
Secretary of the Company as to the incumbency and signature of the officers of
the Company executing this Financing Agreement and any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
Q) CORPORATE ORGANIZATION - CITBC shall have received (i) a copy of the
Certificate of Incorporation of the Company certified by the Secretary of State
of its incorporation, and (ii) a copy of the By-Laws (as amended through the
date hereof) of the Company and certified by the Secretary or Assistant
Secretary of the Company.
R) OFFICER'S CERTIFICATE - CITBC shall have received an executed Officer's
Certificate of the Company, satisfactory in form and substance to CITBC,
certifying that (i) the representations and warranties contained herein are true
and correct in all material respects on and as of the date hereof; (ii) the
Company is in compliance with all of the terms and provisions set forth herein;
and (iii) no Event of Default, or any event which, with the giving of notice or
the passage of time or both would constitute an Event of Default, has occurred.
S) ABSENCE OF DEFAULT - No Default, Event of Default or material adverse
change in the financial condition, business, prospects, profits, operations or
assets of the Company shall have occurred since June 30, 1997.
T) INTENTIONALLY OMITTED
U) INTENTIONALLY OMITTED
V) LEGAL RESTRAINTS/LITIGATION - At the date of execution of this Financing
Agreement, there shall be no x) injunction, writ or restraining order
restraining or prohibiting the consummation of the financing arrangements
contemplated under this Financing Agreement, y) litigation, investigation or
proceeding (judicial or administrative) pending or threatened against the
Company or its assets, by any agency, division or department of any county,
city, state or federal government arising out of this Financing Agreement or
otherwise, or z) suit, action, investigation or proceeding (judicial or
administrative) pending or threatened against the Company or its assets, which,
in each case referred to in clauses y or z above, in the opinion of CITBC, if
adversely determined could have a material adverse effect on the business,
operation, assets, financial condition or Collateral of the Company.
W) DISBURSEMENT AUTHORIZATION - The Company shall have delivered to CITBC all
information necessary for CITBC to issue wire transfer instructions on behalf of
the Company for the initial and subsequent loans and/or advances to be made
under this Agreement including, but not limited to, disbursement authorizations
in form acceptable to CITBC.
Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as the Company and CITBC shall otherwise agree herein or in a
separate writing.
SECTION 3. REVOLVING LOANS
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<PAGE> 11
1. CITBC agrees, subject to the terms and conditions of this Financing
Agreement from time to time, and within x) the Availability and y) the Line of
Credit, but subject to CITBC's right to make "overadvances", to make loans and
advances to the Company on a revolving basis (i.e. subject to the limitations
set forth herein, the Company may borrow, repay and re-borrow Revolving Loans).
Such loans and advances shall be in amounts up to eighty five percent (85%) of
the outstanding Eligible Accounts Receivable of the Company. All requests for
loans and advances must be received by an officer of CITBC no later than 1:00
p.m., New York time, of the Business Day on which such loans and advances are
required. Should CITBC for any reason honor requests for advances in excess of
the limitations set forth herein, such advances shall be considered
"overadvances" and shall be made in CITBC's sole discretion, subject to any
additional terms CITBC deems necessary.
2. In furtherance of the continuing assignment and security interest in the
Company's Accounts, the Company will, upon the creation of Accounts, execute and
deliver to CITBC in such form and manner as CITBC may reasonably require, solely
for CITBC's convenience in maintaining records of Collateral, such confirmatory
schedules of Accounts as CITBC may reasonably request, and such other
appropriate reports designating, identifying and describing the Accounts as
CITBC may reasonably require. In addition, upon CITBC's request the Company
shall provide CITBC with copies of agreements with, or purchase orders from, the
Company's customers, and copies of invoices to customers, proof of shipment or
delivery and such other documentation and information relating to said Accounts
and other collateral as CITBC may reasonably require. Failure to provide CITBC
with any of the foregoing shall in no way affect, diminish, modify or otherwise
limit the security interests granted herein. The Company hereby authorizes CITBC
to regard the Company's printed name or rubber stamp signature on assignment
schedules or invoices as the equivalent of a manual signature by one of the
Company's authorized officers or agents.
3. The Company hereby represents and warrants that: each Account is based
on an actual and bona fide sale and delivery of Inventory or rendition
of services to customers, made by the Company in the ordinary course of its
business; the Inventory being sold and the Accounts created are the exclusive
property of the Company and are not and shall not be subject to any lien,
consignment arrangement, encumbrance, security interest or financing statement
whatsoever, other than the Permitted Encumbrances; the invoices evidencing such
Accounts are in the name of the Company; and the customers of the Company have
accepted the goods or services, owe and are obligated to pay the full amounts
stated in the invoices according to their terms, without dispute, offset,
defense, counterclaim or contra, except for disputes and other matters arising
in the ordinary course of business of which the Company has advised CITBC
pursuant to paragraph 5 of this Section 3. The Company confirms to CITBC that
any and all taxes or fees relating to its business, its sales, the Accounts or
goods relating thereto, are its sole responsibility and that same will be paid
by the Company when due and that none of said taxes or fees represent a lien on
or claim against the Accounts except for the Permitted Encumbrances. The Company
also warrants and represents that it is a duly and validly existing corporation
and is qualified in all states where the failure to so qualify would have a
adverse effect on the business of the Company or the ability of the Company to
enforce collection of Accounts due from customers residing in that state. The
Company agrees to maintain such books and records regarding Accounts as CITBC
may reasonably require and agrees that the books and records of the Company will
reflect CITBC's interest in the Accounts. All of the books and records of the
Company will be available to CITBC at normal business hours, including any
records handled or maintained for the Company by any other company or entity.
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<PAGE> 12
4. Until CITBC has advised the Company to the contrary after the occurrence of
an Event of Default, the Company may and will enforce, collect and receive all
amounts owing on the Accounts for CITBC's benefit and on CITBC's behalf, but at
the Company's expense; such privilege shall terminate automatically upon the
institution by or against the Company of any proceeding under any bankruptcy or
insolvency law or, at the election of CITBC, upon the occurrence of any other
Event of Default and until such Event of Default is waived. Any checks, cash,
notes or other instruments or property received by the Company with respect to
any Accounts shall be held by the Company in trust for CITBC, separate from the
Company's own property and funds, and immediately turned over to CITBC with
proper assignments or endorsements by deposit to the Depository Accounts. All
amounts received by CITBC in payment of Accounts will be credited to the
Company's accounts upon CITBC's receipt of "collected funds" at CITBC's bank
account in New York, New York on the Business Day of receipt if received no
later than 1:00 pm or on the next succeeding Business Day if received after 1:00
pm. No checks, drafts or other instruments received by CITBC shall constitute
final payment to CITBC unless and until such instruments have actually been
collected.
5. The Company agrees to notify CITBC promptly of any matters materially
affecting the value, enforceability or collectibility of any Account and of all
material customer disputes, offsets, defenses, counterclaims, returns,
rejections and all reclaimed or repossessed Inventory. The Company agrees to
issue credit memoranda promptly (with duplicates to CITBC upon request after the
occurrence of an Event of Default) upon accepting returns or granting
allowances, and may continue to do so until CITBC has notified the Company that
an Event of Default has occurred and that all future credits or allowances are
to be made only after CITBC's prior written approval. Upon the occurrence of an
Event of Default and until such time as such Event of Default is waived and on
notice from CITBC, the Company agrees that all returned, reclaimed or
repossessed Inventory shall be set aside by the Company, marked with CITBC's
name and held by the Company for CITBC's account as owner and assignee.
6. CITBC shall maintain a separate account on its books in the Company's name
in which the Company will be charged with loans and advances made by CITBC to
it or for its account, and with any other Obligations, including any and all
costs, expenses and reasonable attorney's fees which CITBC may incur in
connection with the exercise by or for CITBC of any of the rights or powers
herein conferred upon CITBC, or in the prosecution or defense of any action or
proceeding to enforce or protect any rights of CITBC in connection with this
Financing Agreement or the Collateral assigned hereunder, or any
Obligations owing to CITBC by the Company. The Company will be credited with all
amounts received by CITBC from the Company or from others for the Company's
account, including, as above set forth, all amounts received by CITBC in payment
of assigned Accounts and such amounts will be applied to payment of the
Obligations. In no event shall prior recourse to any Accounts or other security
granted to or by the Company be a prerequisite to CITBC's right to demand
payment of any Obligation. Further, it is understood that CITBC shall have no
obligation whatsoever to perform in any respect any of the Company's contracts
or obligations relating to the Accounts.
7. After the end of each month, CITBC shall promptly send the Company a
statement showing the accounting for the charges, loans, advances and other
transactions occurring between CITBC and the Company during that month. The
monthly statements shall be deemed correct and binding between the Company and
CITBC and shall constitute an account stated between the Company and CITBC
unless CITBC or the Company, as the case may be, receives a written statement of
the exceptions within thirty (30) days of the date of the monthly statement.
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<PAGE> 13
SECTION 4. INTENTIONALLY OMITTED
SECTION 5. LETTERS OF CREDIT
In order to assist the Company in establishing or opening Letters of
Credit with an Issuing Bank to cover the purchase of inventory, equipment or
otherwise, the Company has requested CITBC to join in the applications for such
Letters of Credit, and/or guarantee payment or performance of such Letters of
Credit and any drafts or acceptances thereunder through the issuance of the
Letters of Credit Guaranty, thereby lending CITBC's credit to the Company and
CITBC has agreed to do so. These arrangements shall be handled by CITBC subject
to the terms and conditions set forth below.
1. The amount, purpose and extent of the Letters of Credit and changes or
modifications thereof by the Company and/or the Issuing Bank of the terms and
conditions thereof shall in all respects be subject to the prior approval of
CITBC in the exercise of its reasonable discretion provided however, that: a) in
no event may the aggregate amount of all such outstanding Letters of Credit
exceed, in the aggregate, at any one time $3,000,000.00, and b) the Letter of
Credit and all documentation in connection therewith shall be in form and
substance satisfactory to the Company, CITBC and the Issuing Bank.
2. CITBC shall have the right, without notice to the Company, to charge the
Company's account on CITBC's books with the amount of any and all indebtedness,
liability or obligation of any kind incurred by CITBC under the Letters of
Credit Guaranty at the earlier of a) payment by CITBC under the Letters of
Credit Guaranty, or b) the occurrence of an Event of Default. Any amount charged
to Company's loan account shall be deemed a Revolving Loan hereunder and shall
incur interest at the rate provided in Section 8, paragraph 1 of this Financing
Agreement.
3. The Company unconditionally indemnifies CITBC and holds CITBC harmless from
any and all loss, claim or liability incurred by CITBC arising from any
transactions or occurrences relating to Letters of Credit established or opened
for the Company's account, the collateral relating thereto and any drafts or
acceptances thereunder, and all Obligations thereunder, including any such loss
or claim due to any action taken by any Issuing Bank, other than for any such
loss, claim or liability arising out of the gross negligence or willful
misconduct by CITBC under the Letters of Credit Guaranty. The Company further
agrees to hold CITBC harmless from any errors or omission, negligence or
misconduct by the Issuing Bank. The Company's unconditional obligation to CITBC
hereunder shall not be modified or diminished for any reason or in any manner
whatsoever, other than as a result of CITBC's gross negligence or willful
misconduct. The Company agrees that any charges incurred by CITBC for the
Company account by the Issuing Bank shall be conclusive on CITBC and may be
charged to the Company's account.
4. CITBC shall not be responsible for: the existence, character, quality,
quantity, condition, packing, value or delivery of the goods purporting to be
represented by any documents; any difference or variation in the character,
quality, quantity, condition, packing, value or delivery of the goods from that
expressed in the documents; the validity, sufficiency or genuineness of any
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
the time, place, manner or order in which shipment is made; partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or
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<PAGE> 14
anyone else in connection with the Collateral or the shipping thereof; or any
breach of contract between the shipper or vendors and the Company. Furthermore,
without being limited by the foregoing, CITBC shall not be responsible for any
act or omission with respect to or in connection with any Collateral.
5. The Company agrees that any action taken by CITBC, if taken in good faith
and without gross negligence, or any action taken by any Issuing Bank, under or
in connection with the Letters of Credit, the guarantees, the drafts or
acceptances, or the Collateral, shall be binding on the Company and shall not
put CITBC in any resulting liability to the Company. In furtherance thereof, but
subject to paragraph 6 below, CITBC shall have the full right and authority to
clear and resolve any questions of non-compliance of documents; to give any
instructions as to acceptance or rejection of any documents or goods; to execute
any and all steamship or airways guaranties (and applications therefore),
indemnities or delivery orders; to grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances, or
documents; and to agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit, drafts or acceptances; all in CITBC's sole
name, and the Issuing Bank shall be entitled to comply with and honor any and
all such documents or instruments executed by or received solely from CITBC, all
without any notice to or any consent from the Company.
6. Without CITBC's express consent and endorsement in writing, the Company
agrees: a) not to execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders; to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; and b) after the
occurrence of an Event of Default which is not waived by CITBC, not to i) clear
and resolve any questions of non-compliance of documents, or ii) give any
instructions as to acceptances or rejection of any documents or goods.
7. The Company agrees that any necessary import, export or other licenses or
certificates for the import or handling of the Collateral will have been
promptly procured; all foreign and domestic governmental laws and regulations in
regard to the shipment and importation of the Collateral, or the financing
thereof will have been promptly and fully complied with; and any certificates in
that regard that CITBC may at any time request will be promptly furnished. In
this connection, the Company warrants and represents that all shipments made
under any such Letters of Credit are in accordance with the laws and regulations
of the countries in which the shipments originate and terminate, and are not
prohibited by any such laws and regulations. The Company assumes all risk,
liability and responsibility for, and agrees to pay and discharge, all present
and future local, state, federal or foreign taxes, duties, or levies. Any
embargo, restriction, laws, customs or regulations of any country, state, city,
or other political subdivision, where the Collateral is or may be located, or
wherein payments are to be made, or wherein drafts may be drawn, negotiated,
accepted, or paid, shall be solely the Company's risk, liability and
responsibility.
8. Upon any payments made to the Issuing Bank under the Letter of Credit
Guaranty, CITBC shall acquire by subrogation, any rights, remedies, duties or
obligations granted or undertaken by the Company to the Issuing Bank in any
application for Letters of Credit, any standing agreement relating to Letters of
Credit or otherwise, all of which shall be deemed to have been granted to CITBC
and apply in all respects to CITBC and shall be in addition to any rights,
remedies, duties or obligations contained herein.
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\
SECTION 6. COLLATERAL
1. As security for the prompt payment in full of all loans and advances made
and to be made to the Company from time to time by CITBC pursuant hereto, as
well as to secure the payment in full of the other Obligations, the Company
hereby pledges and grants to CITBC a continuing general lien upon and security
interest in all of its:
(A) present and future Accounts; and
(B) present and future Documents of Title.
2. The security interests granted hereunder shall extend and attach to:
(A) All Collateral which is presently in existence and which is owned by the
Company or in which the Company has any interest, whether held by the Company or
others for its account; and
(B) All Inventory returned, rejected, reclaimed or repossessed by either CITBC
or the Company from the customers obligated on the Accounts until such time as
such Inventory is returned to the general finished goods Inventory of the
Company in the ordinary course of the Company's business and not in violation of
the notice given pursuant to the last sentence of paragraph 5 of Section 3 of
this Financing Agreement.
3. The Company agrees to safeguard and protect all Inventory and make no
disposition thereof except in the regular course of the business of the Company
as herein provided. All proceeds of all sales of Inventory on open account
(including cash, accounts receivable, checks, notes, instruments for the payment
of money and similar proceeds)will be forthwith transferred, endorsed, and
turned over and delivered to CITBC in accordance with paragraph 4 of Section 3
of this Financing Agreement. Cash sales or sales of Inventory in which a lien
upon, or security interest in, Inventory is retained by the Company may be made
by the Company provided the Company gives concurrent notice to CITBC of any sale
in excess of $25,000.00.
4. Intentionally Omitted
5. The rights and security interests granted to CITBC hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the account maintained in the Company's
name on the books of CITBC may from time to time be temporarily in a credit
position, until the final payment in full to CITBC of all Obligations and the
termination of this Financing Agreement. Any delay, or omission by CITBC to
exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such waiver be in writing and signed by
CITBC. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any future occasion.
6. To the extent that the Obligations are now or hereafter secured by any
assets or property other than the Collateral or by the guarantee, endorsement,
assets or property of any other person, then CITBC shall have the right in its
sole discretion to determine which rights, security, liens, security interests
or remedies CITBC shall at any time pursue,
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<PAGE> 16
foreclose upon, relinquish, subordinate, modify or take any other action with
respect to, without in any way modifying or affecting any of them, or any of
CITBC's rights hereunder.
7. Any reserves or balances to the credit of the Company and any other
property or assets of the Company in the possession of CITBC may be held by
CITBC as security for any Obligations and applied in whole or partial
satisfaction of such Obligations when due. The liens and security interests
granted herein and any other lien or security interest CITBC may have in any
other assets of the Company, shall secure payment and performance of all now
existing and future Obligations. CITBC may in its discretion charge any or all
of the Obligations to the account of the Company when due.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
1. The Company hereby warrants and represents and/or covenants that: i) the
fair value of the Company's assets exceeds the book value of the Company's
liabilities; ii) the Company is generally able to pay its debts as they become
due and payable; and iii) the Company does not have unreasonably small capital
to carry on its business as it is currently conducted absent extraordinary and
unforeseen circumstances. The Company further warrants and represents that
except for the Permitted Encumbrances, the security interests granted herein
constitute and shall at all times constitute the first and only liens on the
Collateral; that, except for the Permitted Encumbrances, the Company is or will
be at the time additional Collateral is acquired by it, the absolute owner of
the Collateral with full right to pledge, sell, consign, transfer and create a
security interest therein, free and clear of any and all claims or liens in
favor of others; that the Company will at its expense forever warrant and, at
CITBC's request, defend the same from any and all claims and demands of any
other person other than the Permitted Encumbrances; and that the Company will
not grant, create or permit to exist, any lien upon or security interest in the
Collateral, or any proceeds thereof, in favor of any other person other than the
holders of the Permitted Encumbrances.
2. The Company agrees to maintain books and records pertaining to the
Collateral in such detail, form and scope as CITBC shall reasonably require. The
Company agrees that CITBC or its agents may enter upon the Company's premises at
any time during normal business hours, and from time to time, for the purpose of
inspecting the Collateral, and any and all records pertaining thereto. The
Company agrees to afford CITBC prior written notice of any change in the
location of any Collateral, other than to locations, that as of the date hereof,
are known to CITBC and at which CITBC has filed financing statements and
otherwise fully perfected its liens thereon. The Company is also to advise CITBC
promptly, in sufficient detail, of any material adverse change relating to the
type, quantity or quality of the Collateral or on the security interests granted
to CITBC therein.
3. The Company agrees to: execute and deliver to CITBC, from time to time,
solely for CITBC's convenience in maintaining a record of the Collateral, such
written statements, and schedules as CITBC may reasonably require, designating,
identifying or describing the Collateral pledged to CITBC hereunder. The
Company's failure, however, to promptly give CITBC such statements, or schedules
shall not affect, diminish, modify or otherwise limit CITBC's security interests
in the Collateral.
4. The Company agrees to comply with the requirements of all state and federal
laws in order to grant to CITBC valid and perfected first security interests in
the Collateral, subject only to the Permitted Encumbrances. CITBC is
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<PAGE> 17
hereby authorized by the Company to file any financing statements covering the
Collateral whether or not the Company's signature appears thereon. The Company
agrees to do whatever CITBC may reasonably request, from time to time, by way
of: filing notices of liens, financing statements, amendments, renewals and
continuations thereof; cooperating with CITBC's agents and employees;
transferring proceeds of Collateral to CITBC's possession; and performing such
further acts as CITBC may reasonably require in order to effect the purposes of
this Financing Agreement.
5. The Company agrees to maintain insurance on the Real Estate, Equipment and
Inventory under such policies of insurance, with such insurance companies, in
such reasonable amounts and covering such insurable risks as are at all times
reasonably satisfactory to CITBC.
6. The Company agrees to pay, when due, all taxes, assessments, claims and
other charges (herein "taxes") lawfully levied or assessed upon the Company or
the Collateral unless such taxes are being diligently contested in good faith by
the Company by appropriate proceedings. Notwithstanding the foregoing, if any
lien shall be claimed thereunder x) for taxes due the United States of America
or y) which in CITBC's opinion might create a valid obligation having priority
over the rights granted to CITBC herein, such lien shall not be a Permitted
Encumbrance and the Company shall immediately pay such tax and remove the lien
of record. If the Company fails to do so, then CITBC may, on the Company's
behalf, pay such taxes, and the amount thereof shall be an Obligation secured
hereby and due to CITBC on demand.
7. The Company: (a) agrees to comply with all acts, rules, regulations and
orders of any legislative, administrative or judicial body or official, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the Company's
business; provided that the Company may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will not, in CITBC's reasonable opinion, materially and adversely effect CITBC's
rights or priority in the Collateral; (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the ownership and/or use
of its real property and operation of its business, which the failure to comply
with would have a material and adverse impact on the Collateral, or any material
part thereof, or on the operation of the business of the Company. The Company
hereby indemnifies CITBC and agrees to defend and hold CITBC harmless from and
against any and all loss, damage, claim, liability, injury or expense which
CITBC may sustain or incur (other than as a result of actions of CITBC) in
connection with: any claim or expense asserted against CITBC as a result of any
environmental pollution, hazardous material or environmental clean-up of the
Company's Real Estate; or any claim or expense which results from the Company's
operations (including, but not limited to, the Company's off-site disposal
practices) and the Company further agrees that this indemnification shall
survive termination of this Financing Agreement as well as the payment of all
Obligations or amounts payable hereunder; and (c) shall not be deemed to have
breached any provision of this paragraph 7 if (i) the failure to comply with the
requirements of this paragraph 7 resulted from good faith error or innocent
omission, and (ii) the Company promptly commences and diligently pursues a cure
of such breach.
8. Until termination of the Financing Agreement and payment and satisfaction
of all Obligations due hereunder, the Company agrees that, unless CITBC shall
have otherwise consented in writing, the Company will furnish to CITBC, within
one hundred and twenty (120) days after the end of each fiscal year of the
Company, an audited
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<PAGE> 18
Consolidated Balance Sheet and an audited Consolidating of profit and loss, cash
flow and reconciliation of surplus of the Company and all subsidiaries for
such year, audited by independent public accountants selected by the Company and
satisfactory to CITBC; within sixty (60) days after the end of each fiscal
quarter a Consolidated Balance Sheet and Consolidating Balance Sheet as at the
end of such period and statements of profit and loss, cash flow and surplus of
the Company and all subsidiaries, certified by an authorized financial or
accounting officer of the Company; and within thirty (30) days after the end of
each month a Consolidated Balance Sheet as at the end of such period and
statements of profit and loss, cash flow and surplus of the Company and all
subsidiaries for such period, certified by an authorized financial or accounting
officer of the Company; and from time to time, such further information
regarding the business affairs and financial condition of the Company as CITBC
may reasonably request, including, without limitation, annual cash flow
projections in form satisfactory to CITBC. Each financial statement which the
Company is required to submit hereunder must be accompanied by an officer's
certificate, signed by the President, Vice President, Controller, or Treasurer,
pursuant to which any one such officer must certify that: (i) the financial
statement(s) present(s) fairly in all material respects the Company's financial
condition at the end of the particular accounting period, as well as the
Company's operating results during such accounting period, subject to year-end
audit adjustments; (ii) during the particular accounting period: (x) there has
been no Default or Event of Default under this Financing Agreement, provided,
however, that if any such officer has knowledge that any such Default or Event
of Default, has occurred during such period, the existence of and a detailed
description of same shall be set forth in such officer's certificate; and (y)
the Company has not received any notice of cancellation with respect to its
property insurance policies; and (iii) the exhibits attached to such financial
statement(s) constitute detailed calculations showing compliance with all
financial covenants contained in this Financing Agreement.
9. Intentionally Omitted
10. Until termination of the Financing Agreement and payment and satisfaction
of all Obligations due hereunder, the Company agrees that, without the prior
written consent of CITBC, except as otherwise herein provided, the Company will
not:
A. Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment, (whether as a
result of a purchase money or title retention transaction, or other
security interest, or otherwise) to exist on any of its assets or
goods, whether real, personal or mixed, whether now owned or hereafter
acquired, except for the Permitted Encumbrances;
B. Incur or create any Indebtedness other than the Permitted Indebtedness;
C. Borrow any money on the security of the Company's Collateral or
Inventory from sources other than CITBC;
D. Sell, lease, assign, transfer or otherwise dispose of i) Collateral,
except as otherwise specifically permitted by this Financing
Agreement, or ii) either all or substantially all of the Company's
assets, which do not constitute Collateral;
E. Merge, consolidate or otherwise alter or modify its corporate name,
principal place of business, structure, qualification or enter into or
engage in any operation or activity materially different from that
presently being conducted by the Company;
F. Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except i) by
the endorsement of negotiable instruments for deposit or collection or
similar
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<PAGE> 19
transactions in the ordinary course of business, and ii) guarantees by
the Company of loans or advances provided such loans or advances would
be otherwise permitted under sub-paragraph H below and further
provided that the aggregate outstanding amount of such guarantees
hereunder and the loans and advances permitted under sub-paragraph H
below do not exceed $250,000.00 outstanding at any one time.
G. Declare or pay any dividend of any kind on, or purchase, acquire,
redeem or retire, any of the capital stock or equity interest, of any
class whatsoever, whether now or hereafter outstanding, except that the
Company may declare and pay dividends on, or purchase, acquire, redeem
or retire, its capital stock in an amount not to exceed $1,500,000.00
in the aggregate in any fiscal year provided that, I) the Company is
not then in breach or violation of this Financing Agreement, II) after
giving effect to such payment, no Event of Default has occurred
hereunder, and iii) after giving effect to such payment, the Company
has an Excess Availability of not less than $2,000,000.00; or
H. Make any advance or loan to, or any investment in, any firm, entity,
person or corporation except for loans or advances to employees and
subsidiaries provided such loans and advances i) are consistent with
the practices of the Company in effect on the date hereof and ii) do
not exceed $250,000.00 in the aggregate outstanding at any one time.
11. Intentionally Omitted
12. Intentionally Omitted
13. Intentionally Omitted
14. Intentionally Omitted
15. Intentionally Omitted
16. Intentionally Omitted
17. Intentionally Omitted
18. The Company agrees to advise CITBC in writing of: a) all expenditures
(actual or anticipated) in excess of $150,000.00 for x) environmental
clean-up, y) environmental compliance or z) environmental testing and the
impact of said expenses on the Company's Working Capital; and b) any notices
the Company receives from any local, state or federal authority advising the
Company of any environmental liability (real or potential) stemming from the
Company's operations, its premises, its waste disposal practices, or waste
disposal sites used by the Company and to provide CITBC with copies of all such
notices if so required.
19. Without the prior written consent of CITBC, the Company agrees that it
will not enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with any subsidiary or
affiliate of the Company other than transactions x) in the ordinary course of
business of the Company and y) on terms no less beneficial to the Company than
the Company could have obtained from any entity that was not related to the
Company.
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SECTION 8. INTEREST, FEES AND EXPENSES
1. Interest on the Revolving Loans shall be payable monthly in arrears as of
the end of each month and shall be an amount equal to a) the Chase Bank Rate, on
a per annum basis, on the average of the balances of the Revolving Loans owing
by the Company to CITBC at the close of each day during such month on the
than Libor Loans and b) two and one-half percent (2 1/2%) plus Libor on any
Libor Loan as to any then outstanding Revolving Loans which are Libor Loans, on
a per annum basis, on the average of the net balances of such Libor Loans owing
by the Company to CITBC at the close of each day during such month for the Libor
Period. The Company may elect to use Libor as to any then outstanding Revolving
Loans provided x) there is then no Event of Default, y) the Company advised
CITBC of its election to use Libor and the Libor Period selected no later than
three (3) Business Days preceding the first day of a Libor Period and z) the
election of Libor shall be effective, provided there is then no Event of
Default, on the fourth Business Day following said notice. The Libor elections
must be for $1,000,000.00 or more and there shall be no more than three (3)
elections to use Libor to compute interest at any one time. If no such election
is timely made or can be made or Libor cannot be determined, then CITBC shall
use the Chase Bank Rate to compute interest. In the event of any change in said
Chase Bank Rate, the rate hereunder shall change, as of the first of the month
following any change. The rates hereunder shall be calculated based on a 360 day
year. CITBC shall be entitled to charge the Company's account the rate provided
for herein when due until all Obligations have been paid in full.
2. Intentionally Omitted
3. In consideration of the Letter of Credit Guaranty of CITBC, the Company
shall pay CITBC the Letter of Credit Guaranty Fee which shall be an amount equal
to a) two percent (2%) per annum, payable monthly, on the face amount of each
standby Letter of Credit less the amount of any and all amounts previously drawn
under the Letter of Credit; and b) two percent (2%) of the face amount of each
documentary Letter of Credit, payable on date of issuance.
4. Any charges, fees, commissions, costs and expenses charged to CITBC for the
Company's account by any Issuing Bank in connection with or arising out of
Letters of Credit issued pursuant to this Financing Agreement or out of
transactions relating thereto will be charged to the Company's account in full
when charged to or paid by CITBC and when made by any such Issuing Bank shall be
conclusive on CITBC.
5. The Company shall reimburse or pay CITBC, as the case may be, for: i) all
Out-of-Pocket Expenses of CITBC and b) any applicable Documentation Fee.
6. Upon the last Business Day of each month, commencing with August 31, 1997,
the Company shall pay CITBC the Line of Credit Fee.
7. Immediately upon the advise to CITBC by the Company of the Company's
election of a Libor Loan, the Company shall pay to CITBC the Libor Processing
Fee which shall be non-refundable.
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8. The Company shall pay to CITBC, upon the request of CITBC, such amount or
amounts as shall compensate CITBC for any loss, costs or expenses incurred by
CITBC (as reasonably determined by CITBC) as a result of: (i) any payment or
prepayment on a date other than the last day of a Libor Period for such Libor
Loan, or (ii) any failure of the Company to borrow a Libor Loan on the date for
such borrowing specified in the relevant notice; such compensation to include,
without limitation, an amount equal to any loss or expense suffered by CITBC
during the period from the date of receipt of such payment or prepayment to the
last day of such Libor Period if the rate of interest obtained by CITBC upon the
reemployment of an amount of funds equal to the amount of such payment,
prepayment or failure to borrow is less than the rate of interest applicable to
such Libor Loan for such Libor Period. The determination by CITBC of the amount
of any such loss or expense, when set forth in a written notice to the
Company, containing CITBC's calculations thereof in reasonable detail, shall be
conclusive, in the absence of manifest error and such determination must be made
within sixty (60) days after the end of the Libor Period.
9. The Company shall pay CITBC's standard charges for, and the fees and
expenses of, the CITBC personnel used by CITBC for reviewing the books and
records of the Company and for verifying, testing protecting, safeguarding,
preserving or disposing of all or any part of the Collateral.
10. The Company hereby authorizes CITBC to charge the Company's accounts with
CITBC with the amount of all payments due hereunder as such payments become due.
The Company confirms that any charges which CITBC may so make to the Company's
account as herein provided will be made as an accommodation to the Company and
solely at CITBC's discretion.
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SECTION 9. POWERS
The Company hereby constitutes CITBC or any person or agent CITBC may
designate as its attorney-in-fact, at the Company's cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all of the Company's Obligations to CITBC have been
paid in full:
(A) To receive, take, endorse, sign, assign and deliver, all in the name of
CITBC or the Company, any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral;
(B) To receive and open all mail addressed to the Company and to notify postal
authorities to change the address for delivery thereof to such address as CITBC
may designate;
(C) To request from customers indebted on Accounts at any time, in the name of
the Company or that of CITBC's designee as of the date hereof, or such future
designee as may be reasonably acceptable to the Company, information concerning
the amounts owing on the Accounts;
(D) To request from customers indebted on Accounts at any time, in the name of
CITBC, information concerning the amounts owing on the Accounts;
(E) To transmit to customers indebted on Accounts notice of CITBC's interest
therein and to notify customers indebted on Accounts to make payment directly to
CITBC for the Company's account; and
(F) To take or bring, in the name of CITBC or the Company, all steps, actions,
suits or proceedings deemed by CITBC necessary or desirable to enforce or effect
collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the powers set
forth in (b), (d), (e) and (f) above may only be exercised after the occurrence
of an Event of Default and until such time as such Event of Default is waived.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
1. Notwithstanding anything hereinabove to the contrary, CITBC may terminate
this Financing Agreement immediately upon the occurrence of any of the following
(herein "Events of Default"):
A) cessation of the business of the Company or the calling of a meeting of
the creditors of the Company for purposes of compromising the debts and
obligations of the Company;
B) the failure of the Company to generally meet debts as they mature;
C) the commencement by the Company of any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under
any federal or state law;
D) the commencement against the Company of any bankruptcy, insolvency,
arrangement reorganization, receivership or similar proceedings under
any federal or state law, provided, however, that such Default shall not
constitute an Event of Default if such proceeding is dismissed within
thirty (30) days of such commencement or filing;
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<PAGE> 23
E) breach by the Company of any warranty, representation or covenant
contained herein (other than those referred to in sub-paragraph f below)
or in any other written agreement between the Company or CITBC,
provided that such Default by the Company of any of the warranties,
representations or covenants referred in this clause e shall not be
deemed to be an Event of Default unless and until such Default shall
remain unremedied to CITBC's satisfaction for a period of ten (10) days
from the date of such Default;
F) breach by the Company of any warranty, representation or covenant of
Section 3, Paragraphs 3 (other than the third sentence of paragraph 3)
and 4; Section 6, Paragraphs 3 and 4 (other than the first sentence of
paragraph 4); Section 7, Paragraphs 1,5,6, and 9 through 16;
G) failure of the Company to pay any of the Obligations within five (5)
herein shall prohibit CITBC from charging such amounts to the Company's
account on the due date thereof; or
H) the Company shall i) engage in any "prohibited transaction" as defined
in ERISA, ii) have any "accumulated funding deficiency" as defined
in ERISA, iii) have any Reportable Event as defined in ERISA, iv)
terminate any Plan, as defined in ERISA or v) be engaged in any
proceeding in which the Pension Benefit Guaranty Corporation shall seek
appointment, or is appointed, as trustee or administrator of any Plan,
as defined in ERISA, and with respect to this sub-paragraph h such event
or condition x) remains uncured for a period of thirty (30) days from
date of occurrence and y) could, in the reasonable opinion of CITBC,
subject the Company to any tax, penalty or other liability material to
the business, operations or financial condition of the Company.
2. Upon the occurrence of a Default and/or an Event of Default, at the option
of CITBC, all loans and advances provided for in paragraph 1 of Section 3 of
this Financing Agreement shall be thereafter in CITBC's sole discretion and the
obligation of CITBC to make revolving loans and/or open Letters of Credit shall
cease unless such Default is cured to CITBC's satisfaction or Event of Default
is waived, and at the option of CITBC upon the occurrence of an Event of
Default: I) all Obligations shall become immediately due and payable; ii) CITBC
may charge the Company the Default Rate of Interest on all then outstanding or
thereafter incurred Obligations in lieu of the interest provided for in
paragraph one of Section 8 of this Financing Agreement provided a) CITBC has
given the Company written notice of the Event of Default, provided, however,
that no notice is required if the Event of Default is the event listed in
paragraph 1(c) or 1 (d) of this Section 10 and b) the Company has failed to cure
the Event of Default within ten (10) days after x) CITBC deposited such notice
in the United States mail or y) the occurrence of the Event of Default listed in
paragraph 1(c) or 1 (d) of this Section 10; and III) CITBC may immediately
terminate this Financing Agreement upon notice to the Company, provided,
however, that no notice of termination is required if the Event of Default is
the event listed in paragraph 1(c) or 1 (d) of this Section 10. The exercise of
any option is not exclusive of any other option which may be exercised at any
time by CITBC.
3. Immediately upon the occurrence of any Event of Default, CITBC may to the
extent permitted by law: (A) remove from any premises where same may be located
any and all documents, instruments, files and records, and any receptacles or
cabinets containing same, relating to the Accounts, or CITBC may use, at the
Company's expense, such of the Company's personnel, supplies or space at the
Company's places of business or otherwise, as may be necessary to properly
administer and control the Accounts or the handling of collections and
realizations thereon; (B) bring suit, in the name of the Company or CITBC, and
generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in
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<PAGE> 24
part any amounts owing on any Accounts and issue credits in the name of the
Company or CITBC; (C) sell, assign and deliver the Collateral and any returned,
reclaimed or repossessed merchandise, with or without advertisement, at
public or private sale, for cash, on credit or otherwise, at CITBC's sole option
and discretion, and CITBC may bid or become a purchaser at any such sale, free
from any right of redemption, which right is hereby expressly waived by the
Company; (D) foreclose the security interests created herein by any available
judicial procedure, or to take possession of any or all of the Inventory
constituting returned, reclaimed or repossessed Inventory without judicial
process, and to enter any premises where any Inventory constituting returned,
reclaimed or repossessed Inventory may be located for the purpose of taking
possession of or removing the same and (E) exercise any other rights and
remedies provided in law, in equity, by contract or otherwise. CITBC shall have
the right, without notice or advertisement, to sell, lease, or otherwise dispose
of all or any part of the Collateral whether in its then condition or after
further preparation or processing, in the name of the Company or CITBC, or in
the name of such other party as CITBC may designate, either at public or private
sale or at any broker's board, in lots or in bulk, for cash or for credit, with
or without warranties or representations, and upon such other terms and
conditions as CITBC in its sole discretion may deem advisable, and CITBC shall
have the right to purchase at any such sale. If any Inventory constituting
returned, reclaimed or repossessed Inventory shall require rebuilding,
repairing, maintenance or preparation, CITBC shall have the right, at its
option, to do such of the aforesaid as is necessary, for the purpose of putting
such Inventory in such saleable form as CITBC shall deem appropriate. The
Company agrees, at the request of CITBC, to assemble the Inventory constituting
returned, reclaimed or repossessed Inventory and to make it available to CITBC
at premises of the Company or elsewhere and to make available to CITBC the
premises and facilities of the Company for the purpose of CITBC's taking
possession of, removing or putting such Inventory in saleable form. However, if
notice of intended disposition of any Collateral is required by law, it is
agreed that ten (10) days notice shall constitute reasonable notification and
full compliance with the law. The net cash proceeds resulting from CITBC's
exercise of any of the foregoing rights, (after deducting all charges, costs and
expenses, including reasonable attorneys' fees) shall be applied by CITBC to the
payment of the Company's Obligations, whether due or to become due, in such
order as CITBC may elect, and the Company shall remain liable to CITBC for any
deficiencies, and CITBC in turn agrees to remit to the Company or its successors
or assigns, any surplus resulting therefrom. The enumeration of the foregoing
rights is not intended to be exhaustive and the exercise of any right shall not
preclude the exercise of any other rights, all of which shall be cumulative.
SECTION 11. TERMINATION
Except as otherwise permitted herein, CITBC may terminate this Financing
Agreement and the Line of Credit only as of the second or any subsequent
Anniversary Date and then only by giving the Company at least ten (10) days
prior written notice of termination. Notwithstanding the foregoing, CITBC may
terminate the Financing Agreement immediately upon the occurrence of an Event of
Default, provided, however, that if the Event of Default is an event listed in
paragraph 1(c) or 1 (d) of Section 10 of this Financing Agreement, CITBC may
regard the Financing Agreement as terminated and notice to that effect is not
required. This Financing Agreement, unless terminated as herein provided, shall
automatically continue from Anniversary Date to Anniversary Date. The Company
may terminate this Financing Agreement and the Line of Credit at any time upon
ten (10) days' prior written notice to CITBC, provided, however, that if the
Early Termination Date is prior to the second Anniversary Date that the Company
pays to CITBC, immediately on demand, an Early Termination Fee. All Obligations
shall become due and payable as of any termination hereunder or under Section 10
hereof and, pending a final accounting, CITBC may
- 37 -
<PAGE> 25
withhold any balances in the Company's account (unless supplied with an
indemnity satisfactory to CITBC) to cover all of the Company's Obligations,
whether absolute or contingent. All of CITBC's rights, liens and security
interests shall continue after any termination until all Obligations have been
paid and satisfied in full.
SECTION 12. MISCELLANEOUS
1. Except as otherwise provided in this Financing Agreement, the Company
hereby waives diligence, demand, presentment and protest and any notices thereof
as well as notice of nonpayment. No delay or omission of CITBC or the Company to
exercise any right or remedy hereunder, whether before or after the happening of
any Event of Default, shall impair any such right or shall operate as a
waiver thereof or as a waiver of any such Event of Default. No single or partial
exercise by CITBC of any right or remedy precludes any other or further exercise
thereof, or precludes any other right or remedy.
2. This Financing Agreement and the documents executed and delivered in
connection therewith constitute the entire agreement between the Company and
CITBC; supersedes any prior agreements; can be changed only by a writing signed
by both the Company and CITBC; and shall bind and benefit the Company and CITBC
and their respective successors and assigns.
3. In no event shall the Company, upon demand by CITBC for payment of any
indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, CITBC shall never be entitled to receive, charge or apply,
as interest on any indebtedness relating hereto, any amount in excess of the
maximum amount of interest permissible under applicable law. If CITBC ever
receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Company. This paragraph shall
control every other provision hereof and of any other agreement made in
connection herewith.
4. If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.
5. THE COMPANY AND CITBC EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF THIS FINANCING AGREEMENT. THE COMPANY AND
CITBC EACH HEREBY IRREVOCABLY WAIVE PERSONAL SERVICE OF PROCESS AND CONSENT TO
SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED.
6. Except as otherwise herein provided, any notice or other communication
required hereunder shall be in writing, and shall be deemed to have been validly
served, given or delivered when hand delivered or sent by facsimile, or three
- 38 -
<PAGE> 26
days after deposit in the United State mails, with proper first class postage
prepaid and addressed to the party to be notified as follows:
(A) if to CITBC, at:
The CIT Group/Business Credit, Inc.
900 Ashwood Parkway
Atlanta, GA 30338
Attn: Regional Credit Manager
(B) if to the Company at:
3140 Pelham Parkway
Pelham, Alabama 35124
Attn: President
with a copies to:
Moore-Handley, Inc.
133 Peachtree Street, Suite 4810
Atlanta, Georgia 30303
Attn: Ward Edwards
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attn: Steven Ostner, Esq.
or to such other address as any party may designate for itself by like notice,
provided, however, that the failure to give notice to Debevoise & Plimpton
and/or Ward Edwards shall not give any rights, defenses or claims to the
Company.
7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA.
- 39 -
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Financing Agreement to
be executed and delivered in Atlanta, Georgia by their proper and duly
authorized officers as of the date set forth above.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
By /s/ Robert Bernier
------------------
Vice President
MOORE-HANDLEY, INC.
By /s/ L. Ward Edwards
-------------------
Vice President
- 40 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MOORE HANDLEY, INC. FOR THE PERIOD ENDED JUNE 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 647
<SECURITIES> 0
<RECEIVABLES> 21,683
<ALLOWANCES> 0
<INVENTORY> 14,695
<CURRENT-ASSETS> 40,720
<PP&E> 19,666
<DEPRECIATION> (10,878)
<TOTAL-ASSETS> 50,393
<CURRENT-LIABILITIES> 30,295
<BONDS> 4,539
0
0
<COMMON> 251
<OTHER-SE> 14,179
<TOTAL-LIABILITY-AND-EQUITY> 50,393
<SALES> 73,266
<TOTAL-REVENUES> 73,266
<CGS> 62,361
<TOTAL-COSTS> (67,125)
<OTHER-EXPENSES> 7,025
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 498
<INCOME-PRETAX> (1,382)
<INCOME-TAX> (440)
<INCOME-CONTINUING> (942)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (942)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
</TABLE>
