FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to ____________
Commission file number 1-9389
C&D TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its Charter)
State or other jurisdiction of incorporation or organization: DELAWARE
I.R.S. Employer Identification Number: 13-3314599
Address of principal executive offices: 1400 Union Meeting Road
Blue Bell, Pennsylvania 19422
Registrant's telephone number, including area code: (215) 619-2700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Class Name of each exchange
-------------- on which registered
COMMON STOCK -----------------------
PAR VALUE, $.01 PER SHARE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes ( x ) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
Aggregate market value of the voting stock held by nonaffiliates of the
Registrant, based on the closing price on April 16, 1998: $312,583,116
Number of shares outstanding of each of the Registrant's classes of common
stock as of April 16, 1998: 6,168,562 shares of Common Stock, par value $.01 per
share.
DOCUMENTS INCORPORATED BY REFERENCE:
Registrant's Proxy Statement to be filed PART III
pursuant to Regulation 14A within 120 -----------------------------
days after the end of Registrant's fiscal (Part of Form 10-K into which
year covered by this Form 10-K Document is incorporated.)
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TABLE OF CONTENTS
PAGE
PART I
Item 1 Business.............................................. 1
Item 2 Properties............................................ 11
Item 3 Legal Proceedings..................................... 12
Item 4 Submission of Matters to a Vote of
Security Holders............................... 12
PART II
Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters................ 12
Item 6 Selected Financial Data............................... 14
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 16
Item 8 Financial Statements and Supplementary Data........... 21
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure......... 21
PART III
Item 10 Directors and Executive Officers of the Registrant.... 21
Item 11 Executive Compensation................................ 21
Item 12 Security Ownership of Certain Beneficial
Owners and Management.......................... 21
Item 13 Certain Relationships and Related Transactions........ 21
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................ 22
SIGNATURES............................................................ 26
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE........ F-1
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C&D TECHNOLOGIES, INC.
PART I
ITEM 1. BUSINESS
GENERAL
C&D TECHNOLOGIES, INC. (together with its operating subsidiaries, the
"Company") is a leading North American producer of integrated reserve power
systems for telecommunications, electronic information and industrial
applications. The Company is also a leading producer of embedded high frequency
switching power supplies for use in telecommunications equipment, advanced
office electronics and sophisticated computer systems and of motive power
systems for electric industrial vehicles. The Company's integrated reserve power
systems are comprised of industrial lead acid batteries, as well as power
rectifiers, power control and distribution equipment and related accessories.
The Company sells these products both as individual components and as integrated
power systems.
In June 1997, the Company changed its name from Charter Power Systems, Inc.
to C&D TECHNOLOGIES, INC.
The Company was organized in November 1985 to acquire all the assets of the
eighty-year old C&D Power Systems division (the "Division") of Allied
Corporation ("Allied"). The Division's business essentially was unchanged by the
acquisition, which was completed on January 28, 1986. Shares of Common Stock,
par value $.01 per share ("Common Stock"), of the Company were first issued to
the public in February 1987.
In October 1992, the Company purchased substantially all of the assets and
assumed certain liabilities of the manufacturing division of Ratelco, Inc.
("Ratelco"), a Seattle, Washington based manufacturer and distributor of power
electronics equipment, used primarily in the regulated telecommunications power
market. Ratelco also markets a nonregulated range of alarm and monitoring
equipment for use with telecommunications power systems.
In March 1994, the Company purchased substantially all of the assets and
assumed certain liabilities of the PowerSystems Division of ITT, a Tucson,
Arizona based company which designs and manufactures custom power supplies. The
power supplies are used in the telecommunications power market and the office
equipment market in such applications as telecommunication systems, copiers,
computers and work stations.
In January 1995, the Company purchased certain assets and assumed certain
liabilities from the switching power supply division of Basler Electric Company,
a Highland, Illinois based manufacturer of electrical components. These power
supplies are used for office electronics and communications applications.
In November 1995, the Company sold 50,000 shares of Common Stock in a
public offering.
In February 1996, the Company purchased certain equipment and inventory of
LH Research, Inc. ("LH"), a Costa Mesa, California based manufacturer of
standard power supply systems for the electronics industry. The power supplies
are used in telecommunications, computer, medical, process control and other
industrial applications.
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In March 1996, the Company acquired from Burr-Brown Corporation its entire
interest in Power Convertibles Corporation ("PCC") consisting of 1,044,418
shares of PCC common stock and all outstanding preferred stock. In addition the
Company acquired or repaid the indebtedness of PCC. In April 1996, the Company
acquired 190,000 shares of PCC common stock from the former chief executive
officer of PCC which together with the shares previously acquired represented in
excess of 99.6% of the outstanding PCC common stock. In May 1996, the Company
purchased all remaining shares of PCC common stock and shares of PCC common
stock issuable upon exercise of stock options. Tucson, Arizona based PCC
produces DC-to-DC converters used in communications, computer, medical and
industrial and instrumentation markets and also produces battery chargers for
cellular phones.
In January 1998, the acquired businesses of the PowerSystems Division of
ITT, the switching power supply division of Basler Electric Company, LH and PCC
were combined into the Power Electronics Division of C&D TECHNOLOGIES, INC.
References to a fiscal year mean the Company's fiscal year ended in the
January of the year mentioned.
FORWARD LOOKING STATEMENTS
Certain information contained in this Annual Report on Form 10-K,
including, without limitation, information appearing under Item 1, "Business,"
and Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," are forward-looking statements (within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934). Factors that appear with the forward-looking statements,
or in the Company's other Securities and Exchange Commission filings, could
affect the Company's actual results and could cause the Company's actual results
to differ materially from those expressed in any forward-looking statements made
by the Company in this Annual Report on Form 10-K.
MARKETS
The Company manufactures and markets products in three general categories:
(i) integrated reserve power systems and components for the standby power
market; (ii) custom, standard and modified standard embedded high frequency
AC-to-DC and DC-to-DC switching power supplies; and (iii) motive power systems.
For fiscal 1998, 1997 and 1996 sales of standby power products accounted
for 52.2%, 51.6% and 52.5% of the Company's sales (see "Business - Products and
Customers"), respectively. For fiscal 1998, 1997 and 1996, sales of power
supplies accounted for 25.3%, 24.4% and 17.9% of the Company's sales,
respectively. For fiscal 1998, 1997 and 1996 sales of motive power products
accounted for 22.5%, 24.0% and 29.6% of the Company's sales, respectively. The
percentage of the Company's sales related to power supplies has increased as a
result of aforementioned acquisitions.
The majority of the Company's standby power products are used in
telecommunications applications such as central telephone exchanges, microwave
relay stations, private branch exchange ("PBX") systems and cellular mobile
telephone systems. Other applications for the Company's standby power batteries
include uninterruptible power supplies ("UPS"), principally for computers
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and computer-controlled equipment. In addition, the Company supplies batteries
and power electronics equipment for switchgear and instrumentation control
systems for electric utilities.
The majority of the Company's power supply products are sold to original
equipment manufacturers ("OEMs") of electronic products on either a custom,
standard or modified standard basis. Power supplies are embedded in almost all
electronic products and are used to convert incoming AC or DC voltage to the
required level and quality of DC voltage.
The majority of the Company's motive power products are used to provide the
primary power source for forklift trucks and other material handling vehicles.
The balance are used in a variety of other applications, such as automated
guided vehicle systems and airline ground support equipment. A significant
portion of these sales include products and systems to recharge motive power
batteries.
The Company supplies certain of its standard standby power and motive power
products to the U.S. Government. Company sales directly to the government have
accounted for less than 5% of its sales during each of its last three fiscal
years.
PRODUCTS AND CUSTOMERS
RESERVE POWER SYSTEMS
The Company is a leading producer of fully integrated reserve power
systems, which monitor and regulate electric power flow and provide backup power
in the event of a primary power loss or interruption. The Company also produces
the individual components of these systems, including power rectifiers, system
monitors, power boards, chargers and reserve batteries. The Company's standby
battery products are sold under the "C&D Powercom" name.
The Company manufactures lead acid batteries for use in reserve power
systems. These batteries are sold in a wide range of sizes and configurations in
two broad categories: flooded and valve-regulated. Flooded batteries require
periodic watering and maintenance. Valve-regulated batteries require less
maintenance and are often smaller. Customer demand for valve-regulated batteries
has increased over the past several years.
The Company manufactures and markets a wide range of power electronics to
meet the needs of its customers. The Company's power electronics products
consist principally of power rectifiers and distribution and monitoring
equipment. The Company's power rectifiers convert or "rectify" external AC power
into DC power at the required level and quality of voltage and apply the DC
power to constantly charge the reserve battery and operate the user's equipment.
For installations with end applications that require varied power levels, the
Company's power control and distribution equipment distributes the rectified
power at the appropriate power level for each of the applications.
TELECOMMUNICATIONS. The Company's major telecommunications customers
include national long distance companies, Regional Bell Operating Companies,
cellular system operators, personal communications services ("PCS") equipment
and service providers, paging systems and PBX telephoning locations using fiber
optic cable, microwave transmission or traditional copper-wired systems.
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The Company's products include several modular power plants, which are a
type of integrated reserve power system. These products, which are referred to
as the Liberty AGM Series Power Plant and the Liberty ACM Series Power Plant,
integrate advanced rectifiers with maintenance free valve-regulated batteries.
The Company recently introduced the Maximizer, a major enhancement to its
flagship valve-regulated product, the Liberty 2000. This product provides for
state-of-the-art life enhancing technology through the use of a catalyst which
is available exclusively from the Company through the end of the second quarter
of fiscal 1999, and on a non-exclusive basis thereafter.
The Company also introduced a Front Access FA-125 battery which has been
specifically designed for one of the most popular cabinets in the
telecommunications market.
One of the Company's historically important telecommunications products has
been the Round Cell reserve power battery, a flooded product which was
originally designed and patented by the Bell Laboratories of AT&T for use in
AT&T's own facilities and customer installations. AT&T spun off its equipment
manufacturing operations into an independent company named "Lucent Technologies,
Inc.," which began operations on October 1, 1996. The Company or its predecessor
has manufactured Round Cells for AT&T or Lucent Technologies, Inc. since 1972
and has been the exclusive manufacturer since 1982. Lucent Technologies, Inc.
accounted for 13.5% of sales for the year ended January 31, 1998. No other
customer accounted for more than 6% of the Company's sales during fiscal 1998.
UNINTERRUPTIBLE POWER SUPPLIES. The Company produces batteries for UPS
systems, which provide instant battery backup in the event of primary power loss
or interruption on sensitive equipment, thereby permitting an orderly shutdown
of the equipment or continued operation until the primary source comes back on
line. Large UPSs are used principally for mainframe computers, minicomputers,
networks, workstations and computer-controlled equipment.
EQUIPMENT FOR ELECTRIC UTILITIES AND INDUSTRIAL CONTROL APPLICATIONS. The
Company produces rectifiers and batteries used in reserve power systems for
switchgear and instrumentation control systems used in electric utilities and
industrial control applications. These power systems enable fossil fuel, hydro
and nuclear power generating stations, switching substations and industrial
control facilities to be shut down in an orderly fashion during emergencies or
power failures by providing auxiliary power.
EMBEDDED HIGH FREQUENCY SWITCHING POWER SUPPLIES
The Company, through its Power Electronics Division, designs, manufactures
and distributes custom, standard and modified standard electronic power supply
systems built for large OEMs of telecommunications equipment, office products,
computers and workstations. In addition, the Company's Power Electronics
Division manufactures rectifiers for reserve power applications that are sold by
the Company's Powercom Division. The Company's Power Electronics Division also
manufactures battery chargers for cellular phones. The Company's power supplies
are sold under the brand names LH Research, Power Convertibles, and
International Power Systems.
The Company's power supply systems incorporate advanced technology and are
designed for dependable operation of the host equipment. The Company's power
supply products include AC-to-
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DC power supplies, DC-to-DC converters and high voltage power supplies for use
in a large number of industrial applications, with outputs ranging from several
watts to several kilowatts. AC-to-DC power supplies convert alternating current,
the form in which virtually all power is delivered by electric utilities to end
users, into precisely controlled direct current of the constant voltage required
by sensitive electronic applications. DC-to-DC converters convert one constant
voltage into another constant voltage. DC-to-DC converters are widely used in
distributed power systems where power is delivered within the equipment at a
high voltage and is converted to a lower voltage to permit the operation of
microelectronics components such as microprocessors.
In the telecommunications industry, the Company's power supplies are
broadly used in voice and data telecommunications. The Company also produces
power supplies for office copiers, workstations and sophisticated computers.
MOTIVE POWER SYSTEMS
The Company produces complete systems and individual components (including
power electronics and batteries) to power, monitor, charge and test the
batteries used in electric industrial vehicles, including fork-lift trucks,
automated guided vehicles and airline ground support equipment. The Company's
customers include end users in a broad array of industries, dealers of fork-lift
trucks and other material handling vehicles and, to a lesser extent, OEMs. The
Company's motive power products are sold by the Company's Motive Power Division.
The Company offers a broad line of motive power equipment including the
C-Line, which the Company believes is the industry standard for long life; the
V-Line for general material handling applications; and the high density Suprema
line, designed for narrow aisle warehousing applications requiring high energy.
In addition, in fiscal 1998, the Company introduced the low maintenance Liberty
Eclipse battery and charger which dramatically reduces the customer's cost of
operation.
SALES, INSTALLATION AND SERVICING
The sales, installation and servicing of the Company's power systems
products are performed through several networks of independent manufacturer's
representatives located throughout the United States and Canada. Each
independent manufacturer's representative operates under a contract with the
Company providing for compensation on a commission basis or as a distributor
with product purchases for independent resale. The Company also provides
engineering, furnishing and installation ("EF&I") to certain accounts through
its network of independent manufacturer's representatives.
In addition to these networks of independent manufacturer's
representatives, the Company maintains an internal sales management force
consisting of regional sales managers and product/market specialists. The
regional managers are each responsible for managing a number of independent
manufacturer's representatives and for developing longer-term supplier
relationships with large OEMs and national accounts. The Company also maintains
a separate sales force that works with the network of independent manufacturer's
representatives and certain large customers.
The Company also maintains several internal marketing departments in both
the battery and electronics businesses. These departments manage the development
of new products from the initial concept definition and management approval
stage through the engineering, production and sales
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processes. These departments are also responsible for applications engineering
and technical training of sales representatives.
The Company maintains branch sales offices in the United States, Canada,
Europe and Asia, with the support of the Company's headquarters and service
personnel, and has relationships with sales representatives or distributors in
the Far East, the Middle East, Europe, Mexico and Central and South America.
The Company's products typically are sold upon terms requiring payment in
full within 30 to 60 days. The Company warrants its products to perform as rated
for specified periods of time, ranging from one to twenty years depending on the
type of product and its application, in an amount that decreases over the life
of the product. The lengthiest warranties generally are applicable to standby
power batteries.
BACKLOG
The level of unfilled orders at any given date during the year may be
materially affected by the timing and product mix of the Company's receipt of
orders and, taking into account considerations of manufacturing capacity and
flexibility, the speed with which those orders are filled. Accordingly, the
Company's backlog at any particular date is only indicative of expected future
shipments, and period-to-period comparisons may not be meaningful. Orders for
the Company's products are subject to cancellation by the customer prior to
shipment.
The Company normally ships standby power products within two weeks to two
months after order and motive power products within two days to four weeks after
order. Power supplies are normally shipped one week to three months after order.
The Company's order backlog at March 31, 1998 was $58,522,000 and at March 31,
1997 was $47,977,000. The majority of the March 31, 1998 backlog is expected to
be filled during fiscal 1999.
MANUFACTURING AND RAW MATERIALS
The Company manufactures its products at eight domestic plants, two plants
in Mexico and one plant in Europe. Most key product lines are manufactured at a
single focused plant in order to optimize manufacturing efficiency, asset
management and quality control.
The Company is continuing the process of capacity expansion at several of
its plants. During fiscal 1997 the Company completed the process of moving
product lines from the Seattle, Washington facility to the Dunlap, Tennessee and
Nogales, Mexico facilities that was started in fiscal 1995. As a result, the
Seattle, Washington manufacturing facility was closed during fiscal 1997.
When the Company acquired the PowerSystems Division of ITT in fiscal 1995,
it entered into an agreement pursuant to which a third party "shelter company"
provides to the Company the Nogales, Mexico facility and employs Mexican staff
and labor to assemble the Company's products. This agreement was terminated
during fiscal 1998.
The principal raw materials used in the manufacture of the Company's
products include lead, steel, copper, plastics and electronic components, all of
which are generally available from multiple suppliers. Other than the required
use of two suppliers of lead for the production of Round Cell
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batteries for Lucent Technologies, Inc., the Company uses a number of suppliers
to satisfy its raw materials needs.
During fiscal 1998 the Company has continued its program of ISO recognition
and has received ISO 9001 certification at its Dunlap, Tennessee facility. The
Company is also ISO 9001 certified at its Blue Bell, Pennsylvania headquarters,
Leola, Pennsylvania, Tucson, Arizona, Mexican and Irish facilities.
COMPETITION
The Company competes with respect to all of its products on the basis of
reputation, product quality and reliability, service capability and technology.
The Company also competes on the basis of price and its relationships with large
customers.
The Company is a leading North American producer of integrated reserve
power systems and power electronics equipment and believes that it is one of the
four largest producers of reserve power systems in North America. In motive
power, the Company believes that one competitor, Yuasa, Inc., has a
significantly larger market share than the Company, and that the Company, along
with two other manufacturers, occupies a second tier of the market in which they
have a significantly larger market share than their smaller competitors.
In addition, the Company believes that it has certain competitive
advantages in specific product lines. In reserve power systems, the Company
believes that it is one of only two major North American companies that
manufactures complete, integrated reserve power systems consisting of both
electronics and batteries, its other major competitors manufacturing either
electronics or batteries, but not both. In motive power, all the Company's major
competitors supply integrated power systems, but only the Company and one major
competitor manufacture both electronics and batteries. For both reserve and
motive power systems, the Company believes that the ability to provide a single
source for design, engineering, manufacturing and service is an important
element in its competitive position. With respect to power supplies, the Company
believes that it is among a small group of larger competitors in this fragmented
industry.
When lead prices rise, certain of the Company's competitors that own
smelting operations may have lower lead costs than the Company. However, when
lead prices decline, the high fixed costs associated with these operations may
provide the Company with a cost advantage.
RESEARCH AND DEVELOPMENT
The Company maintains extensive technology departments concentrating on
electrochemical and electronics technologies. Their focus is on the development
of new, standard and custom products, the ongoing development and improvement of
existing products, sustaining engineering, production engineering (including
quality testing and managing the expansion of production capacity) and the
evaluation of competitive products. The Company's research and development
facilities in North America and Europe feature advanced computer-aided design
and testing equipment. Technology and engineering personnel coordinate all
activities closely with operations, sales and marketing areas in order to better
meet the needs of customers.
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The Company continues to develop new products in all areas of its business.
During fiscal 1998, the Company's Motive Power Division introduced the low
maintenance Liberty Eclipse battery and charger which dramatically reduces the
customer's cost of operation. During fiscal 1997, the Company extended its range
of telecom products with the introduction of a family of medium powered high
frequency rectifiers. The Company also introduced several families of high
density DC-to-DC converters during fiscal 1997.
INTERNATIONAL OPERATIONS
The Company sells the full range of its motive and standby power products
in Canada through its network of independent Canadian representatives and one
branch office. Sales through these independent Canadian representatives and
branch office accounted for less than 5% of the Company's sales for the last
three fiscal years.
In addition, the Company manufacturers a large portion of its power
supplies in Nogales, Sonora, Mexico and in Agua Prieta, Sonora, Mexico for
ultimate sale in the United States and Europe. The Company has no significant
sales in Mexico. Power supplies are also manufactured by the Company in Shannon,
Ireland. Operations in Ireland accounted for less than 5% of the Company's sales
for the last three fiscal years.
PATENTS AND TRADEMARKS
The Company follows a policy of applying for patents on new inventions and
designs and actively pursuing pending and future patent applications. The
Company would aggressively assert infringement claims when, in the judgment of
the Company, this is warranted. The Company believes that the growth of its
business will depend primarily upon the quality of its products and its
relationships with its customers, rather than the extent of its patent
protection. While the Company believes that patents are important to its
business operations, the loss of any single or several patents would not have a
material adverse effect on the Company. During fiscal 1998, the Company
continued to prosecute United States and foreign applications which had been
previously filed.
The Company regards its trademarks C&D, C&D POWERCOM, LIBERTY, LIBERTY
SERIES, and POWER CONVERTIBLES as being of substantial value in the marketing of
its products. The Company has registered its C&D, C&D POWERCOM, LIBERTY, LIBERTY
SERIES, and POWER CONVERTIBLES trademarks in the United States Patent and
Trademark Office and the Company also has applications pending for registrations
of other trademarks in the United States. The Company's trademarks include
COMPUCHARGE, FERRO FIVE, GUARDIAN, GUARDSMAN, RANGER, RANGERNET and SCOUT.
EMPLOYEES
At March 31, 1998 the Company had approximately 2,596 employees. Of these
employees, 2,204 were employed in manufacturing and 392 were employed in field
sales, technical, manufacturing support, sales support, marketing and
administrative activities.
The Company's management considers its employee relations to be
satisfactory. Employees in eight plants are not represented by a union.
Employees at the other three plants are represented by three different unions
under collective bargaining agreements.
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ENVIRONMENTAL REGULATION
The Company's operations are subject to extensive and evolving
environmental laws and regulations regarding the clean-up and protection of the
environment and worker health and safety. These laws and regulations include
requirements relating to the handling, storage, use and disposal of hazardous
materials and solid wastes, recordkeeping and periodic reporting to governmental
entities regarding the use of hazardous substances and disposal of hazardous
wastes, monitoring and permitting of air and water emissions and monitoring and
protecting workers from exposure to hazardous substances, including lead used in
the Company's manufacturing processes.
The Company operates under what it believes is a comprehensive
environmental, health and safety compliance program, which is headed by an
environmental director and staffed with trained environmental professionals. As
part of its program, the Company has prepared written environmental and health
and safety practice manuals, conducts regular employee training seminars,
undertakes internal and external audits of its operations and environmental and
health and safety programs and practices and engages in sampling and monitoring
of employee air, blood lead levels and other chemical exposures. The Company
also has installed certain pollution abatement equipment to minimize or reduce
emissions of regulated pollutants into the environment. The Company has
instituted a hazardous materials recapture and recycling program at each of its
facilities and for its customers. In addition, the Company monitors and seeks to
address known or potential environmental conditions resulting from or which may
arise from current and historic hazardous materials handling and waste disposal
practices.
While the Company believes that it is in material compliance with the
applicable environmental requirements, it has received, and in the future may
receive, citations and notices from governmental regulatory authorities that
certain of its operations are not in compliance with its permits or applicable
environmental requirements. Occasionally the Company is required to pay a
penalty or fine, to install control technology or to make equipment or process
changes (or a combination thereof) as a result of the non-compliance or changing
legal or regulatory requirements. When the Company receives a notice of a
non-compliance, it undertakes to achieve compliance and to work with the
authorities to resolve satisfactorily the issues raised. The associated costs of
such compliance efforts have not had a material effect on the Company's
business, financial condition or results of operations.
Notwithstanding the Company's efforts to maintain compliance with
applicable environmental requirements, if damage to persons or the environment
arises from hazardous substances used, generated or disposed of in the conduct
of the Company's business (or that of its predecessors to the extent the Company
is not indemnified therefor), the Company may be held liable for the damage and
for the costs of the environmental investigation and remediation, which could
have a material adverse effect on the Company's business, financial condition or
results of operations.
In view of the potential financial effect such environmental liabilities
could have, when the Company acquired the assets of its predecessor from Allied
in January 1986, it secured an obligation from Allied to indemnify the Company
from undisclosed environmental liabilities resulting from conditions existing as
of the closing date. With the exception of four sites disclosed by Allied at the
time of the acquisition, Allied has accepted indemnification responsibility for
the Company's potential liabilities at those third party owned or operated sites
with respect to which the Company has been named as a potentially responsible
party by the United States Environmental Protection Agency or
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state environmental agencies under the federal Superfund law or comparable state
environmental laws.
With respect to the four sites not being covered by the Allied indemnity,
based upon the most currently available information, the Company believes that
its share of liability at these sites will not have a material adverse effect on
the Company's business, financial condition or results of operations. Moreover,
the Company has accrued reserves for these and other immaterial potential
environmental liabilities in its consolidated financial statements and
periodically reevaluates, and changes as it deems appropriate, the reserved
amounts for these liabilities in view of the most current information available
to it.
The Company also is aware of the existence of potential contamination at
two of its properties which may require expenditures for further investigation
and remediation. At the Company's Huguenot, New York facility, fluoride
contamination in an inactive lagoon exceeding the state's groundwater standards,
which existed prior to the Company's acquisition of the site, has resulted in
the site being listed on the registry of inactive hazardous waste disposal sites
maintained by the New York State Department of Environmental Conservation. The
prior owner of the site, Avnet, Inc., ultimately may bear some, as yet
undetermined, share of the costs associated therewith.
The Company's Conyers, Georgia facility was listed on the Georgia State
Hazardous Sites Inventory. Soil at the site, which was likely contaminated from
a leaking underground acid neutralization tank and possibly stormwater runoff,
has been excavated and disposed of by the Company, and a hydrogeologic study was
undertaken to assess the impact to groundwater. That study did not reveal any
groundwater impact, and assessment and remediation of off-site contamination has
been completed and the final remediation report was submitted to the state on
June 1, 1997. The state environmental agency may request further information and
additional investigation or remediation may be necessary before the site may be
removed from its Hazardous Sites Inventory.
With respect to each of the properties described in the preceding two
paragraphs, the Company has accrued a reserve in its consolidated financial
statements for its estimate of the potential costs and liabilities associated
with the potential contamination. The Company believes that the costs and
potential liabilities for these matters are not likely to have a material effect
on the Company's business, financial condition or results of operations.
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ITEM 2. PROPERTIES
Set forth below is certain information, as of March 31, 1998, with respect
to the Company's principal properties. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources."
Square Products Manufactured
Location Footage at or Use of Facility
-------- ------- ---------------------
United States Properties
------------------------
Manufacturing:
- -------------
Attica, Indiana................ 207,000 Large standby power batteries
and motive power batteries
Conshohocken, Pennsylvania..... 130,000 Metal trays, metal racks and
cabinets, battery R&D
laboratories, distribution
center
Conyers, Georgia............... 161,000 Small standby power batteries
Dunlap, Tennessee.............. 73,000 Motive power and standby power
electronics products, cabinets
and metal racks
Huguenot, New York............. 148,000 Motive power batteries
Leola, Pennsylvania............ 187,000 Large standby power batteries
Tucson, Arizona................ 41,000 Power converters, cellular
phone battery chargers
Costa Mesa, California......... 33,000 Power supplies
Other:
- -----
Blue Bell, Pennsylvania........ 33,000 World headquarters
Tucson, Arizona................ 40,000 Headquarters of Power
Electronics
Division and electronics
R&D laboratories
International Properties
------------------------
Manufacturing:
- -------------
Agua Prieta, Sonora, Mexico.... 24,000 Power converters
Nogales, Sonora, Mexico........ 83,000 Power supplies, cellular phone
battery chargers
Shannon, Ireland............... 19,000 Power converters and
electronics R&D laboratories
Other:
- -----
Mississauga, Ontario, Canada.. 20,000 Canadian branch headquarters,
sales office and distribution
center
11
<PAGE>
The Company owns its Attica, Conyers, Leola and Conshohocken properties.
The Huguenot property is leased under an industrial revenue bond financing
arrangement entitling the Company to purchase the property for a nominal amount
at the end of the term of the related financing occurring in the fourth quarter
of fiscal 1999. In connection with the Acquisition, Allied agreed to pay the
principal and interest due under this financing arrangement. The Blue Bell,
Dunlap, Mississauga, Tucson, Costa Mesa, Shannon, Agua Prieta and Nogales
facilities and the Company's branch sales offices are leased. The lease of the
Dunlap property terminates in January 2004. The Company has an option to
purchase the Dunlap property during the lease term for $1,160,000.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in ordinary routine litigation incidental to the
conduct of its business. None of such routine litigation, individually or in the
aggregate, is material to its financial condition or results of operations in
any year. See "Business - Environmental Regulation" for a description of certain
administrative proceedings in which the Company is involved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock began trading on The New York Stock Exchange on
December 20, 1996 under the symbol CHP. From October 27, 1995 through December
19, 1996, the Common Stock was traded on the Nasdaq National Market under the
symbol CHTR. Prior to October 27, 1995 the Common Stock was listed and
principally traded on the American Stock Exchange under the symbol CHP. The
approximate number of beneficial and registered record holders of the Company's
Common Stock on April 16, 1998 was 2,256.
The following table sets forth, for the periods indicated, the high and low
sales prices for the Company's Common Stock as reported by the Nasdaq National
Market through December 19, 1996, and The New York Stock Exchange thereafter.
These prices represent actual transactions, but do not reflect adjustment for
retail markups, markdowns or commissions.
Year Ended
-------------------
January 31, 1998 January 31, 1997
---------------- ----------------
Fiscal Quarter High Low High Low
-------------- ---- --- ---- ---
First Quarter..... $34 3/4 $25 7/8 $29 3/4 $25
Second Quarter.... 38 7/8 28 3/8 36 17 1/4
Third Quarter..... 49 1/8 37 1/2 26 1/4 20
Fourth Quarter.... 49 5/8 42 35 24
12
<PAGE>
The Company began paying quarterly cash dividends on its Common Stock in
April 1987. The dividend declared in each quarter since then has been $.0275 a
share.
The Company's bank loan agreement permits quarterly dividends to be paid on
the Company's Common Stock so long as there is no default under that agreement.
Subject to such restriction and the provisions of Delaware law, the Board of
Directors currently intends to continue paying quarterly dividends in the future
at the rate currently paid. There can be no assurance, however, as to the
payment or amount of future dividends, since they will depend on the Company's
earnings and financial condition and other factors.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected historical financial data for the periods indicated
have been derived from the Company's consolidated financial statements, which
have been audited by Coopers & Lybrand L.L.P., independent accountants. The
information below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements for fiscal 1998, 1997 and 1996, which appear
elsewhere herein.
<TABLE>
<CAPTION>
Fiscal Year
------------------------------------------------------------
1998 1997(4) 1996 1995(3) 1994
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................. $308,054 $286,907 $242,422 $200,009 $162,005
Cost of sales......................... 226,880 219,819 185,808 154,464 123,560
------- ------- ------- ------- -------
Gross profit........................ 81,174 67,088 56,614 45,545 38,445
Selling, general and
administrative expenses............. 39,333 34,499 27,781 24,796 23,121
Research and development
expenses............................ 8,610 8,143 6,196 5,284 2,746
------- ------- ------- ------- -------
Operating income.................... 33,231 24,446 22,637 15,465 12,578
Interest expense, net................. 1,129 1,396 1,063 1,222 1,003
Other expense (income), net........... 1,058 (8) 423 310 809
------- ------- ------- ------- -------
Income before income taxes ........ 31,044 23,058 21,151 13,933 10,766
Provision for income taxes............ 11,359 8,121 7,107 4,556 4,359
------- ------- ------- ------- -------
Net income ........................... $ 19,685 $ 14,937 $ 14,044 $ 9,377 $ 6,407
======= ======= ======= ======= =======
Net income per common share (1)....... $ 3.22 $ 2.39 $ 2.33 $ 1.59 $ 1.11
======= ======= ======= ======= =======
Net income per common share -
assuming dilution (2)............... $ 3.12 $ 2.32 $ 2.18 $ 1.51 1.08
======= ======= ======= ======= =======
Dividends per common share............ $ .11 $ .11 $ .11 $ .11 $ .11
======= ======= ======= ======= =======
BALANCE SHEET DATA:
Working capital....................... $ 47,342 $ 45,436 $ 50,302 $ 27,746 $ 18,556
Total assets.......................... 166,498 159,973 130,827 112,137 93,255
Short-term debt (exclusively current
portion of long-term debt)......... 321 476 200 3,670 3,121
Long-term debt........................ 10,267 29,351 15,417 14,183 11,149
Stockholders' equity.................. 97,305 74,906 68,926 51,722 41,031
- ----------
</TABLE>
(footnotes begin on the following page)
14
<PAGE>
(1) Based on 6,110,685, 6,258,554, 6,039,452, 5,906,311 and 5,784,429
weighted average shares outstanding for fiscal 1998, 1997, 1996, 1995 and 1994,
respectively.
(2) Based on 6,315,912, 6,439,165, 6,451,289, 6,210,793 and 5,922,511
weighted average shares outstanding and the effect of shares issuable under
stock options based on the treasury stock method for fiscal 1998, 1997, 1996,
1995 and 1994, respectively.
(3) In March 1994, the Company acquired for cash, certain assets and
assumed certain liabilities of the custom power supply business of ITT
PowerSystems Corporation. In January 1995, the Company purchased certain assets
and assumed certain liabilities from the switching power supply business of
Basler Electric Company, a Highland, Illinois based manufacturer of electrical
components.
(4) In February 1996, the Company acquired substantially all the assets of
LH, a producer and marketer of standard power supply systems for the electronics
industry. In March 1996, the Company acquired from Burr-Brown Corporation, its
entire interest in PCC consisting of 1,044,418 shares of PCC common stock and
all outstanding preferred stock. In addition the Company acquired or repaid the
indebtedness of PCC. In April 1996, the Company acquired 190,000 shares of PCC
common stock from the former chief executive officer of PCC which together with
the shares previously acquired represented in excess of 99.6% of the outstanding
PCC common stock. In May 1996, the Company purchased all remaining shares of PCC
common stock and shares of PCC common stock issuable upon exercise of stock
options. PCC produces battery chargers for cellular phones and DC-to-DC
converters used on communications, computer, medical, industrial and
instrumentation markets. See notes to consolidated financial statements.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
IMPACT OF ECONOMY AND SHIFT IN CUSTOMER DEMAND
During fiscal 1998 continued improved economic conditions resulted in
higher demand for the Company's standby power products over the prior year. In
the telecommunications market, continued growth in the demand for
valve-regulated batteries was reflected in the growth in sales of Liberty 2000,
a premium valve-regulated battery. During fiscal 1998 demand also increased for
flooded batteries over the prior year.
RAW MATERIAL PRICING AND PRODUCTIVITY
Lead, steel, copper, plastics and electronic components are the major raw
materials used in the manufacture of the Company's industrial batteries and
electronics products and, accordingly, represent a significant portion of the
Company's materials costs. During fiscal 1998, 1997 and 1996, the average North
American producer price of lead has been $.48, $.50 and $.44 /lb., respectively.
The Company has undertaken a long-term cost containment program to maximize
manufacturing efficiency and continues as a matter of course to allocate a
significant amount of its normal annual capital expenditures to cost containment
and productivity improvement projects.
INFLATION
The Company's costs of manufacturing materials and labor and most other
operating costs are affected by inflationary pressures. The Company's ability to
pass along inflationary cost increases through higher prices may be limited
during periods of stable or declining lead prices because of industry pricing
practices that tend to link product prices and lead prices. The Company believes
that, over recent years, it generally has been able to offset inflationary cost
increases by effective raw materials purchasing programs, price increases of its
products, increases in labor productivity and improvements in overall
manufacturing efficiency.
16
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth selected items in the Company's consolidated
statements of income as a percentage of sales for the periods indicated.
Fiscal Year
------------------------
1998 1997 1996
---- ---- ----
Net sales...................................... 100.0% 100.0% 100.0%
Cost of sales.................................. 73.6 76.6 76.6
----- ----- -----
Gross profit................................. 26.4 23.4 23.4
Selling, general and administrative expenses... 12.8 12.0 11.5
Research and development expenses.............. 2.8 2.9 2.6
----- ----- -----
Operating income............................. 10.8 8.5 9.3
Interest expense, net ......................... 0.4 0.5 0.4
Other expense, net............................. 0.3 0.0 0.2
----- ----- -----
Income before income taxes................... 10.1 8.0 8.7
Provision for income taxes..................... 3.7 2.8 2.9
----- ----- -----
Net income................................... 6.4% 5.2% 5.8%
===== ===== =====
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales for fiscal 1998 increased $21,147,000 or seven percent to
$308,054,000 from $286,907,000 in fiscal 1997. This increase was a result of a
15 percent increase in telecommunications-related sales and a six percent
increase in both non-telecommunications-related power conversion sales and UPS
sales, partially offset by lower government and control sales. A portion of the
fiscal 1998 sales increase resulted from the recording of a full year's sales
versus a partial year in fiscal 1997 due to the acquisition of a power
conversion company during the first quarter of fiscal 1997. On a company-wide
basis, telecommunications-related sales were approximately 49 percent of total
Company sales during fiscal 1998 versus 46 percent in fiscal 1997.
Gross profit for fiscal 1998 increased $14,086,000 or 21 percent to
$81,174,000 from $67,088,000 in the prior fiscal year, resulting in a gross
margin of 26.4 percent versus 23.4 percent in the prior year. Gross margins
increased primarily as a result of lower material costs, a shift in product mix
and operating efficiencies associated with the higher sales volumes.
Selling, general and administrative expenses for fiscal 1998 increased
$4,834,000 or 14 percent over the prior year primarily as a result of the
accelerated write-off of goodwill and intangible assets
17
<PAGE>
associated with LH (due to impairment), higher payroll related costs, warranty,
due diligence costs, and the resolution of legal disputes, partially offset by
lower variable selling expense.
Research and development expense remained proportional to sales as a
relative percentage for both fiscal 1998 and fiscal 1997 at approximately three
percent of sales.
Interest expense, net, decreased 19 percent from fiscal 1997 to fiscal 1998
primarily due to lower debt balances outstanding, partially offset by lower
capitalized interest related to plant expansions and lower interest income.
Other expense, net, increased $1,066,000 from fiscal 1997 to fiscal 1998 as
a result of higher amortization expense associated with the write-off of
capitalized debt acquisition costs related to the Company's credit facility and
the Development Authority of Rockdale County Industrial Revenue Bonds ("Georgia
Bonds"). This increase was also due to lower nonoperating income during fiscal
1998 coupled with a foreign exchange loss in fiscal 1998 versus a slight foreign
exchange gain in fiscal 1997.
Income tax expense increased $3,238,000 from fiscal 1997 to fiscal 1998,
primarily due to higher levels of income before income taxes coupled with a
smaller favorable tax effect from foreign operations.
As a result of the above, for fiscal 1998, net income rose 32 percent from
fiscal 1997 to $19,685,000 or $3.22 per common share and $3.12 per common share
- - assuming dilution.
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for fiscal 1997 increased $44,485,000 or 18 percent to
$286,907,000 from $242,422,000 in fiscal 1996. Approximately $29,000,000 of this
increase was related to sales recorded by the Company's PCC and LH subsidiaries
which were both acquired during the first quarter of fiscal 1997. The balance of
the increase was primarily due to higher telecommunications and UPS sales,
partially offset by lower motive power sales and lower power supply sales by the
Company's IPS subsidiary. On a company-wide basis, fiscal 1997
telecommunication-related sales were approximately 46 percent of total Company
sales versus 44 percent for fiscal 1996. Motive power sales were down four
percent due to lower volumes partially offset by higher prices.
Gross profit increased $10,474,000 or 19 percent to $67,088,000 from
$56,614,000 in the prior fiscal year, primarily as a result of higher sales
volumes. Gross margins for fiscal 1997 and 1996 were flat at 23.4 percent.
Selling, general and administrative expenses increased $6,718,000 primarily
as a result of the acquisition of PCC and LH, including the amortization of
goodwill and other intangible assets related to the acquisitions. In addition,
non-acquisition selling expenses increased primarily due to higher payroll
costs, warranty, advertising, rental and consulting expenses.
Research and development expenses increased $1,947,000 to $8,143,000 for
fiscal 1997 primarily as a result of the acquisition of PCC and LH, and remained
proportional to sales at approximately three percent of sales for fiscal 1997
and fiscal 1996.
18
<PAGE>
Interest expense, net, increased 31 percent from fiscal 1996 to fiscal 1997
due to higher debt balances related to the above acquisitions and a stock
repurchase program, partially offset by lower effective rates and higher
capitalized interest related to the plant expansions at the Company's Conyers,
Georgia and Leola, Pennsylvania locations.
Other expense, net, decreased $431,000 from fiscal 1996 to fiscal 1997
primarily as a result of higher nonoperating income.
Income tax expense increased $1,014,000 due to higher operating income and
the absence in fiscal 1997 of a decrease in the valuation allowance, partially
offset by the favorable tax effect of the Company's foreign operations. The
fiscal 1996 decrease in the valuation allowance related to the revaluation of
the stock option compensation deferred tax asset due to increases in the price
of the Company's common stock.
As a result of the above, net income increased six percent from fiscal 1996
to $14,937,000 or $2.39 per common share and $2.32 per common share - assuming
dilution.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased 24 percent to
$31,972,000 in fiscal 1998 compared to $25,737,000 in fiscal 1997. This increase
was primarily due to a smaller increase in accounts receivable in fiscal 1998
than in fiscal 1997, coupled with higher net income and depreciation in fiscal
1998. These changes resulting in higher cash flows from operations were
partially offset by an increase in inventories and a decrease in accounts
payable in fiscal 1998 versus a decrease in inventory and an increase in
accounts payable in the prior year.
Net cash used by investing activities totaled $13,598,000 for fiscal 1998,
resulting in a decrease of $17,053,000 versus the prior year which included the
purchase by the Company of PCC and certain equipment and inventory of LH, as
well as higher capital spending. In fiscal 1997, the change in restricted cash
resulted from the use of proceeds obtained from the Development Authority of
Rockdale County Industrial Development Revenue Bonds, obtained in fiscal 1996,
to finance the Company's expansion of the Conyers, Georgia plant. The Company
exercised its option to redeem the Georgia Bonds during the second quarter of
fiscal 1998.
Net cash used by financing activities was $18,139,000 for fiscal 1998
compared to net cash provided by financing activities of $385,000 in the prior
year. The additional borrowings in the prior year were used primarily for the
funding of the acquisitions of PCC and LH and the purchase of stock in a stock
repurchase program.
The Company's availability under the current loan agreement is expected to
be sufficient to meet its ongoing cash needs for working capital requirements,
debt service, capital expenditures and possible strategic acquisitions. The
Company's bank loan agreement permits quarterly dividends to be paid on the
Company's Common Stock so long as there is no default under that agreement.
Capital expenditures during fiscal 1998 were incurred primarily to fund capacity
expansion, new product development, a continuing series of cost reduction
programs, normal maintenance capital, and regulatory compliance. Fiscal 1999
capital expenditures are expected to be approximately $22,000,000 for similar
purposes.
19
<PAGE>
The Company has been notified that it is a potentially responsible party
and has responded to requests for information relating to various Third Party
Facilities (see note 8[B] of the notes to consolidated financial statements).
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are utilized by the Company to reduce
foreign exchange and interest rate risks. The Company has established a control
environment which includes policies and procedures for risk assessment and the
approval, reporting and monitoring of derivative financial instrument
activities. The Company does not hold or issue financial instruments for trading
purposes and it prohibits the use of derivatives for speculative purposes.
Derivative financial instruments are accounted for on an accrual basis. Income
and expense are recorded in the same category as that arising from the related
asset or liability being hedged.
The Company selectively uses foreign currency forward and option contracts
to offset the effects of exchange rate changes on cash flows denominated in
foreign currencies, primarily the Canadian dollar and Mexican peso.
The Company uses interest rate swap agreements to reduce the impact of
interest rate changes on its debt. The interest rate swap agreements involve the
exchange of variable for fixed rate interest payments without the exchange of
the underlying notional amount.
READINESS FOR YEAR 2000
The Company has taken actions to understand the nature and extent of the
work required to make its computer systems Year 2000 compliant. The Company has
completed its assessment of its requirements to become Year 2000 compliant, has
developed an action plan and currently has resources dedicated to carry out the
Company's Year 2000 action plan which the Company expects to complete by
December 31, 1998. The Company continues to evaluate the estimated future costs
associated with its Year 2000 action plan but does not currently anticipate that
such costs will have a material impact on the Company's results of operations or
financial position. The Company has received inquires from its major customers
and has initiated formal communications with its significant suppliers to
determine the extent to which the Company might be impacted by those third
parties' failure to be Year 2000 compliant.
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" which is effective for years beginning after December 15,
1997. This statement establishes standards for the reporting and display of
comprehensive income and its components. Comprehensive income is defined to
include all changes in equity during a period except those resulting from
investments by owners and distributions to owners. The Company will adopt SFAS
No. 130 and begin reporting comprehensive income in the first quarter of fiscal
1999.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is effective for
fiscal years beginning after December 15, 1997. This statement establishes
standards for the disclosure of segment results. It requires that
20
<PAGE>
segments be determined using the "management approach," which means the way
management organizes the segments within the enterprise for making operating
decisions and assessing performance. The Company has not yet determined the
impact of the implementation of SFAS No. 131.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." This statement significantly
changes current financial statement disclosure requirements from those that were
required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Some of the more
significant effects of SFAS No. 132 are that it: (i) standardizes the disclosure
requirements for pensions and other postretirement benefits and presents them in
one footnote; (ii) requires that additional information be disclosed regarding
changes in the benefit obligation and fair values of plan assets; (iii)
eliminates certain disclosures that are no longer considered useful, including
general descriptions of the plans; (iv) permits the aggregation of information
about certain plans; (v) provides reduced disclosure requirements for nonpublic
entities; (vi) revises disclosures about defined contribution plans; and (vii)
changes disclosures relating to multi-employer plans. SFAS No. 132 does not
change the existing measurement or recognition provisions of SFAS Nos. 87, 88 or
106. SFAS No. 132 is effective for fiscal years beginning after December 15,
1997. The Company has not yet determined the impact of the implementation of
SFAS No. 132.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 requires costs of start-up activities and organization
costs to be charged to expense as incurred. SOP 98-5 is effective for financial
statements for years beginning after December 15, 1998. The Company believes
that the adoption of this SOP will not have a material effect on its financial
position or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in Item 14(a)(1)
hereof are incorporated herein by reference and are filed as part of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
The information required by Part III (Items 10 through 13) is incorporated
herein by reference to the captions "Principal Stockholders," "Election of
Directors," "Management" and "Certain Relationships and Related Transactions" in
the Company's definitive Proxy Statement to be filed pursuant to Regulation 14A
within 120 days after the end of the Company's fiscal year covered by this
report.
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
(1) THE FOLLOWING FINANCIAL STATEMENTS ARE INCLUDED IN THIS REPORT ON FORM
10-K:
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
Report of Independent Accountants
Consolidated Balance Sheets as of January 31, 1998, and 1997
Consolidated Statements of Income for the years ended January 31,
1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the years ended
January 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended January 31,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
(2) THE FOLLOWING FINANCIAL STATEMENT SCHEDULE IS INCLUDED IN THIS REPORT
ON FORM 10-K:
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES for the years ended January
31, 1998, 1997 and 1996
Report of Independent Accountants on Schedule
II. Valuation and Qualifying Accounts
(3) EXHIBITS:
3.1 Composite Certificate of Incorporation of the Company, as
amended (incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1997).
3.2 By-laws of the Company, as amended (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1996).
4.1 Amended and Restated Financing and Security Agreement dated
as of January 30, 1998 among NationsBank, N.A., CoreStates
Bank, N.A., The Chase Manhattan Bank, and PNC Bank,
National Association and C&D TECHNOLOGIES, INC.
and its subsidiaries (filed herewith).
22
<PAGE>
10.1 Purchase Agreement dated November 27, 1985, among Allied,
Allied Canada Inc. and the Company; Amendments thereto
dated January 28 and October 8, 1986 (incorporated by
reference to Exhibit 10.1 to the Company's Registration
Statement on Form S-1, No. 33-10889).
10.2 Agreement dated December 15, 1986, between the Company and
Allied (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement on Form S-1, No.
33-10889).
10.3 Lease Agreement dated February 15, 1994 by and between
Sequatchie Associates, Incorporated and C&D Charter Power
Systems, Inc. (incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended April 30, 1994).
10.4 C&D TECHNOLOGIES, INC. Savings Plan (October 1, 1997
Restatement) (filed herewith).
10.5 C&D Charter Power Systems, Inc. Pension Plan for Salaried
Employees (as of January 27, 1998 the name was changed to
C&D TECHNOLOGIES, INC. Pension Plan for Salaried Employees)
as restated and amended (incorporated by reference to
Exhibit 10.10 to the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1995); First and
Second Amendments thereto dated December 20, 1995
(incorporated by reference to Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the fiscal year ended
January 31, 1996); Third Amendment thereto dated February
18, 1997 (filed herewith); Fourth Amendment thereto dated
January 27, 1998 (filed herewith).
10.6 Charter Power Systems, Inc. Incentive Compensation Plan
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July
31, 1997).
10.7 Registration Rights Agreement dated May 30, 1989, between
Alfred Weber and the Company (incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1995); Employment Agreement,
dated as of April 1, 1996, and Pledge and Security
Agreement and Reimbursement Agreement, each dated April 30,
1996, between Alfred Weber and the Company; Secured
Promissory Note and Option Secured Promissory Note, each
dated April 30, 1996, by Alfred Weber in favor of the
Company (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1996).
10.8 Employment Agreement dated January 26, 1990, between Leslie
Holden and the Company (incorporated by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1995); Amendment thereto
dated April 3, 1995 (incorporated by reference to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended April 30, 1995).
23
<PAGE>
10.9 Agreement dated March 28, 1994, between C&D Charter Power
Systems, Inc. and AT&T (incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1994).
10.10 Employment Agreement dated March 1, 1994 between A. Gordon
Goodyear and the Company (incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended April 30, 1994); Amendment thereto
dated April 3, 1995 (incorporated by reference to Exhibit
10.4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended April 30, 1995).
10.11 Employment Agreement dated April 3, 1995 between Stephen E.
Markert, Jr. and the Company (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended April 30, 1995).
10.12 Employment Agreement dated April 3, 1995 between A. T.
(Paul) Kambouroglou and the Company (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended April 30, 1995).
10.13 Employment Agreement dated August 15, 1995 between Stephen
Weglarz, Esq. and the Company (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1995).
10.14 Employment Agreement dated August 1, 1997 between Larry M.
Moore and the Company (incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended July 31, 1997).
10.15 Employment Agreement dated September 30, 1997 between John
J. Murray, Jr. and the Company (incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended October 31, 1997).
10.16 Charter Power Systems, Inc. 1996 Stock Option Plan
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July
31, 1996).
10.17 Supplemental Executive Retirement Plan dated December 11,
1997 (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended October 31, 1997).
10.18 Supplemental Executive Retirement Plan for Alfred Weber
dated December 11, 1997 (incorporated by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1997).
21 Subsidiaries of the Company (filed herewith).
23 Consent of Independent Accountants (filed herewith).
27 Financial Data Schedule (filed herewith).
24
<PAGE>
99.1 Additional undertaking in connection with the Company's
Registration Statement on Form S-8 No. 33-31978 (filed
November 7, 1989), the Company's Registration Statement on
Form S-8, No. 33-71390 (filed October 27, 1993), the
Company's Registration Statement on Form S-8, No. 33-86672
(filed November 23, 1994), the Company's Registration
Statement on Form S-8 No. 333-17979 (filed December 16,
1996), and the Company's Registration Statement on Form S-8
No. 333-38891 (filed October 27, 1997).
The registrant undertakes to furnish the Commission with a copy of certain
agreements which are not being filed in accordance with Item 601(b)(4)(iii) of
Regulation S-K.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Company during the last
quarter of the period covered by this report.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
C&D TECHNOLOGIES, INC.
April 29, 1998 By: /s/ALFRED WEBER
-----------------------
Alfred Weber
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ALFRED WEBER Chairman, President and April 29, 1998
- --------------------------
Alfred Weber Chief Executive Officer
/s/ STEPHEN E. MARKERT, JR Vice President Finance April 29, 1998
- --------------------------
Stephen E. Markert, Jr (Principal Financial and
Accounting Officer)
/s/ KEVIN P. DOWD Director April 29, 1998
- --------------------------
Kevin P. Dowd
/s/ GLENN M. FEIT Director April 29, 1998
- --------------------------
Glenn M. Feit
/s/ WILLIAM HARRAL, III Director April 29, 1998
- --------------------------
William Harral, III
/s/ WARREN A. LAW Director April 29, 1998
- --------------------------
Warren A. Law
/s/ ALAN G. LUTZ Director April 29, 1998
- --------------------------
Alan G. Lutz
/s/ JOHN A. H. SHOBER Director April 29, 1998
- --------------------------
John A. H. Shober
26
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
FINANCIAL STATEMENTS
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
PAGE
----
Report of Independent Accountants.................. F-2
Consolidated Balance Sheets as of
January 31, 1998 and 1997........................ F-3
Consolidated Statements of Income
for the years ended January 31, 1998, 1997
and 1996......................................... F-4
Consolidated Statements of
Stockholders' Equity for the years
ended January 31, 1998, 1997 and 1996............ F-5
Consolidated Statements of Cash Flows
for the years ended January 31, 1998, 1997
and 1996......................................... F-6
Notes to Consolidated Financial Statements......... F-8
FINANCIAL STATEMENT SCHEDULE
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
For the years ended January 31, 1998, 1997 and 1996
Report of Independent Accountants on Schedule...... S-1
Schedule II. Valuation and Qualifying Accounts.... S-2
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
C&D TECHNOLOGIES, INC.
We have audited the accompanying consolidated balance sheets of C&D
TECHNOLOGIES, INC. and Subsidiaries (formerly Charter Power Systems, Inc.) as of
January 31, 1998 and 1997, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended January 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of C&D
TECHNOLOGIES, INC. and Subsidiaries as of January 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 31, 1998, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 10, 1998
F-2
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31,
(DOLLARS IN THOUSANDS)
1998 1997*
---- ----
ASSETS
Current assets:
Cash and cash equivalents ............................ $ 1,167 $ 952
Restricted cash and cash equivalents.................. - 1
Accounts receivable, less allowance for doubtful
accounts of $1,701 in 1998 and $1,414 in 1997..... 42,742 41,682
Inventories........................................... 40,735 38,943
Deferred income taxes................................. 7,871 7,315
Other current assets.................................. 885 437
------- -------
Total current assets.............................. 93,400 89,330
Property, plant and equipment, net...................... 57,058 52,469
Intangible and other assets, net........................ 5,339 6,208
Goodwill, net........................................... 10,701 11,966
------- -------
Total assets...................................... $166,498 $159,973
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt..................... $ 321 $ 476
Accounts payable...................................... 22,791 23,730
Accrued liabilities................................... 16,012 14,468
Income taxes.......................................... 3,689 939
Other current liabilities............................. 3,245 4,281
------- -------
Total current liabilities......................... 46,058 43,894
Deferred income taxes................................... 2,376 3,923
Long-term debt.......................................... 10,267 29,351
Other liabilities....................................... 10,492 7,899
------- -------
Total liabilities................................. 69,193 85,067
------- -------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 10,000,000 shares
authorized; 6,614,449 and 6,547,476 shares
issued in 1998 and 1997, respectively............. 66 65
Additional paid-in capital............................ 41,430 39,326
Minimum pension liability adjustment.................. - (136)
Treasury stock, at cost, 452,551 and 470,551
shares in 1998 and 1997, respectively............. (10,819) (11,232)
Notes receivable from stockholder, net of discount of
$28 and $85 in 1998 and 1997 respectively......... (1,029) (1,636)
Cumulative translation adjustment..................... (248) (374)
Retained earnings .................................... 67,905 48,893
------- -------
Total stockholders' equity........................ 97,305 74,906
------- -------
Total liabilities and stockholders' equity........ $166,498 $159,973
======= =======
* Reclassified for comparative purposes
See notes to consolidated financial statements.
F-3
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JANUARY 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1998 1997 1996
---- ---- ----
Net sales............................... $308,054 $286,907 $242,422
Cost of sales........................... 226,880 219,819 185,808
------- ------- -------
Gross profit...................... 81,174 67,088 56,614
Selling, general and administrative
expenses.......................... 39,333 34,499 27,781
Research and development expenses....... 8,610 8,143 6,196
------- ------- -------
Operating income.................. 33,231 24,446 22,637
Interest expense, net................... 1,129 1,396 1,063
Other expense (income), net............. 1,058 (8) 423
------- ------- -------
Income before income taxes........ 31,044 23,058 21,151
Provision for income taxes.............. 11,359 8,121 7,107
------- ------- -------
Net income ....................... $ 19,685 $ 14,937 $ 14,044
======= ======= =======
Net income per common share............. $ 3.22 $ 2.39 $ 2.33
Net income per common share -
assuming dilution................. $ 3.12 $ 2.32 $ 2.18
See notes to consolidated financial statements.
F-4
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Minimum Notes
Common Stock Additional Pension Treasury Stock Receivable Cumulative
------------ Paid-In Liability ---------------- From Translation Retained
Shares Amount Capital Adjustment Shares Amount Stockholders Adjustment Earnings
------ ------ ------- ---------- ------ ------ ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
January 31,1995............ 5,971,041 $60 $32,053 $(1,656) $21,265
Net income................... 14,044
Dividends to stockholders,
$.11 per share............. (665)
Principal payments on stock-
holder notes............... 1,656
Tax effect relating to stock
options exercised.......... 1,426
Minimum pension liability
adjustment................. $(760)
Purchase of common stock..... (57,400) $(1,304)
Issuance of common stock..... 50,000 667
Stock options exercised...... 305,135 3 2,137
--------- -- ------ ---- -------- ------- ------ ---- ------
Balance as of
January 31, 1996........... 6,326,176 63 36,283 (760) (57,400) (1,304) - 34,644
Net income................... 14,937
Dividends to stockholders,
$.11 per share............. (688)
Notes receivable
from stockholder........... (1,721)
Discount on notes receivable
from stockholder........... 137
Amortization of discount on
stockholder notes.......... (52)
Tax effect relating to stock
options exercised.......... 1,151
Minimum pension liability
adjustment................. 624
Cumulative translation
adjustment................. $(374)
Purchase of common stock..... (464,569) (11,092)
Issuance of common stock..... 44 51,418 1,164
Stock options exercised...... 221,300 2 1,848
--------- -- ------ ---- -------- ------- ------ ---- ------
Balance as of
January 31, 1997........... 6,547,476 65 39,326 (136) (470,551) (11,232) (1,636) (374) 48,893
Net Income................... 19,685
Dividends to stockholders,
$.11 per share............. (673)
Principal payments on
stockholder notes.......... 664
Amortization of discount on
stockholder notes.......... (57)
Tax effect relating to stock
options exercised.......... 564
Minimum pension liability
adjustment................. 136
Cumulative translation
adjustment................. 126
Issuance of common stock..... 434 18,000 413
Stock options exercised...... 66,973 1 1,106
--------- -- ------ ---- -------- ------- ------ ---- ------
Balance as of
January 31, 1998.......... 6,614,449 $66 $41,430 $ - (452,551) $(10,819) $(1,029) $(248) $67,905
========= == ====== ==== ======== ======= ====== ==== ======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31,
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997* 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows provided (used) by operating activities:
Net income............................................. $ 19,685 $ 14,937 $ 14,044
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.......................... 11,824 8,494 6,109
Deferred income taxes ................................. (2,338) (302) (1,237)
Loss on disposal of assets............................. 175 80 428
Changes in:
Accounts receivable.............................. (1,182) (7,188) (1,570)
Inventories...................................... (1,856) 2,898 (8,341)
Other current assets............................. (450) 163 (56)
Accounts payable................................. (933) 2,943 3,405
Accrued liabilities.............................. 1,566 (802) 1,600
Income taxes payable............................. 3,447 3,004 670
Other current liabilities........................ (1,036) 1,257 (794)
Other liabilities................................ 2,593 667 1,143
Other, net............................................. 477 (414) (426)
------- ------- -------
Net cash provided by operating activities................ 31,972 25,737 14,975
------- ------- -------
Cash flows provided (used) by investing activities:
Acquisition of businesses, net......................... - (19,739) -
Acquisition of property, plant and equipment........... (13,640) (16,322) (7,937)
Proceeds from disposal of property,
plant and equipment.................................. 41 9 2,579
Change in restricted cash.............................. 1 5,401 (5,327)
------- ------- -------
Net cash used by investing activities.................... (13,598) (30,651) (10,685)
------- ------- -------
Cash flows provided (used) by financing activities:
Repayment of long-term debt............................ (19,239) (8,291) (8,669)
Proceeds from new borrowings........................... - 20,333 6,500
Financing costs of long-term debt...................... - - (257)
Issuance of note receivable to stockholder............. - (1,057) -
Repayment of notes receivable from stockholders........ 664 - 1,656
Proceeds from issuance of common stock, net............ 1,107 1,186 2,807
Purchase of treasury stock............................. - (11,092) (1,304)
Payment of common stock dividends...................... (671) (694) (657)
------- ------- -------
Net cash (used) provided by financing activities......... (18,139) 385 76
------- ------- -------
Effect of exchange rate changes on cash.................. (20) 9 9
------- ------- -------
Increase (decrease) in cash and cash equivalents......... 215 (4,520) 4,375
Cash and cash equivalents at beginning of year........... 952 5,472 1,097
------- ------- -------
Cash and cash equivalents at end of year................. $ 1,167 $ 952 $ 5,472
======= ======= =======
</TABLE>
* Reclassified for comparative purposes
See notes to consolidated financial statements.
F-6
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED JANUARY 31,
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the year for:
Interest paid, net.............................. $ 1,599 $ 1,593 $1,419
Income taxes paid............................... $10,251 $ 5,378 $7,674
SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Acquired businesses:
Estimated fair value of assets acquired......... $ - $ 13,544 $ -
Goodwill and identifiable intangible assets..... - 12,655 -
Purchase price obligations...................... - (1,358) -
Cash paid, net of cash acquired................. - (19,739) -
------ ------- -----
Liabilities assumed............................. $ - $ 5,102 $ -
====== ======= =====
Dividends declared but not paid...................... $ 169 $ 167 $ 172
Note receivable from stockholder in connection
with issuance of common stock...................... $ - $ 664 $ -
Fair market value of treasury stock issued to
pension plans...................................... $ 847 $ 1,208 $ -
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
C&D TECHNOLOGIES, INC. was incorporated in November 1985. The Company
manufactures battery power systems and their components for commercial,
industrial and government use in the North American and export standby power and
motive power markets. The Company also manufactures embedded high frequency
switching power supplies for use in telecommunication equipment, advanced office
electronics and sophisticated computer systems. On January 28, 1986, the Company
purchased substantially all of the assets of the C&D Power Systems division of
Allied Corporation ("Allied") (the "Acquisition").
The consolidated financial statements include the accounts of C&D
TECHNOLOGIES, INC. and its wholly owned subsidiaries (collectively the
"Company"). All significant intercompany accounts and transactions have been
eliminated.
ACCOUNTING ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities in foreign currencies are translated into U.S.
dollars at the rate of exchange prevailing at the balance sheet date. Revenue
and expenses are translated at the average rate of exchange for the period.
Gains and losses on foreign currency transactions are included in non-operating
expenses.
DERIVATIVE FINANCIAL INSTRUMENTS:
Derivative financial instruments are utilized by the Company to reduce
foreign exchange and interest rate risks. The Company has established a control
environment which includes policies and procedures for risk assessment and the
approval, reporting and monitoring of derivative financial instrument
activities. The Company does not hold or issue financial instruments for trading
purposes and it prohibits the use of derivatives for speculative purposes.
Derivative financial instruments are accounted for on an accrual basis. Income
and expense are recorded in the same category as that arising from the related
asset or liability being hedged.
F-8
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company selectively uses foreign currency forward and option contracts
to offset the effects of exchange rate changes on cash flows denominated in
foreign currencies, primarily the Canadian dollar and Mexican peso.
The Company uses interest rate swap agreements to reduce the impact of
interest rate changes on its debt. The interest rate swap agreements involve the
exchange of variable for fixed rate interest payments without the exchange of
the underlying notional amount (see Note 11).
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The Company's cash
management program utilizes zero balance accounts. Accordingly, all book
overdraft balances have been reclassified to accounts payable and amounted to
$6,204 and $7,577 at January 31, 1998 and 1997, respectively.
REVENUE RECOGNITION:
Revenue is recognized when products are shipped and title is passed to the
customer.
INVENTORIES:
Inventories are stated at the lower of cost or net realizable value. Cost
is generally determined by the last-in, first-out method for financial statement
and federal income tax purposes.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment acquired as of the Acquisition was recorded
at the then fair value. Property, plant and equipment acquired subsequent to the
Acquisition is recorded at cost or fair market value if part of an acquisition.
Plant and equipment, including capital leases, are depreciated on the
straight-line method for financial reporting purposes over estimated useful
lives which range from 3 to 10 years for machinery and equipment, and 10 to 40
years for buildings and improvements. The Company's policy is to capitalize
interest during the period of construction.
The cost of maintenance and repairs is charged to expense as incurred.
Renewals and betterments are capitalized. Upon retirement or other disposition
of items of plant and equipment, the cost of the item and related accumulated
depreciation are removed from the accounts and any gain or loss is included in
income.
The Company capitalizes purchased software, including certain costs
associated with its installation. The cost of software capitalized is amortized
over its estimated useful life, generally three to five years, using the
straight-line method.
F-9
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE AND OTHER ASSETS, NET:
Intangible and other assets, net, includes assets acquired resulting from
business acquisitions (see Note 14) and are being amortized on the straight-line
method over their estimated periods of benefit, primarily five to ten years.
Accumulated amortization as of January 31, 1998 and 1997 was $1,936 and $1,687,
respectively.
GOODWILL, NET:
Goodwill represents the excess of cost over the fair value of net assets
acquired and is being amortized on the straight-line method over 10 to 40 years.
The recoverability of goodwill is periodically reviewed by the Company. In
assessing recoverability, many factors are considered, including operating
results and future undiscounted cash flows. The Company believes that no
impairment of goodwill existed at January 31, 1998. Accumulated amortization as
of January 31, 1998 and 1997 was $1,851 and $1,356, respectively.
IMPAIRMENT OF ASSETS:
An impairment loss is recognized when expected future cash flows are less
than the asset's carrying value. Accordingly, when indicators of impairment are
present, the Company evaluates the carrying value of property, plant and
equipment and intangibles in relation to the operating performance and future
undiscounted cash flows of the underlying business. The Company's policy is to
record an impairment loss when it is determined that the carrying amount of the
asset may not be recoverable.
ACCRUED LIABILITIES:
Included in accrued liabilities as of January 31, 1998 and 1997 are $2,722
and $2,413 of accrued vacation, $2,345 and $1,405 of accrued bonus and $1,925
and $3,042 of accrued workers compensation insurance, respectively.
OTHER LIABILITIES:
The Company provides for estimated warranty costs at the time of sale.
Accrued warranty obligations of $2,443 and $3,106 are included in other current
liabilities and $5,793 and $4,215 are included in other liabilities as of
January 31, 1998 and 1997, respectively.
ENVIRONMENTAL MATTERS:
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are also expensed. The Company records
F-10
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
liabilities for environmental costs when environmental assessments and/or
remedial efforts are probable and the costs can be reasonably estimated. The
liability for future environmental remediation costs is evaluated on a quarterly
basis by management.
INCOME TAXES:
The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires recognition of deferred
tax liabilities and assets for the expected future tax consequences of events
that have been included in the financial statements or tax returns using tax
rates in effect for the year in which the differences are expected to reverse.
NET INCOME PER SHARE:
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share". This statement establishes standards for
computing and presenting earnings per share and requires restatement of prior
periods. Net income per common share for the years ended January 31, 1998, 1997
and 1996 is based on the weighted average number of shares of Common Stock
outstanding. Net income per common share - assuming dilution reflects the
potential dilution that could occur if stock options were exercised. The Company
adopted SFAS No. 128 in the fourth quarter of the fiscal year ended January 31,
1998. Weighted average common shares and common shares - assuming dilution were
as follows:
January 31,
--------------------------------
1998 1997 1996
---- ---- ----
Net income (A)................. $19,685 $14,937 $14,044
Weighted average
shares of common stock
outstanding (B).............. 6,110,685 6,258,554 6,039,452
Assumed conversion of
stock options, net of shares
assumed reacquired........... 205,227 180,611 411,837
--------- --------- ---------
Weighted average common
shares - assuming
dilution (C)................. 6,315,912 6,439,165 6,451,289
Net income per common
share (A/B).................. $3.22 $2.39 $2.33
Net income per common
share - assuming
dilution (A/C)............... $3.12 $2.32 $2.18
F-11
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED:
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which is effective for years beginning after December 15, 1997. This
statement establishes standards for the reporting and display of comprehensive
income and its components. Comprehensive income is defined to include all
changes in equity during a period except those resulting from investments by
owners and distributions to owners. The Company will adopt SFAS No. 130 and
begin reporting comprehensive income in the first quarter of fiscal 1999.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is effective for
fiscal years beginning after December 15, 1997. This statement establishes
standards for the disclosure of segment results. It requires that segments be
determined using the "management approach," which means the way management
organizes the segments within the enterprise for making operating decisions and
assessing performance. The Company has not yet determined the impact of the
implementation of SFAS No. 131.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." This statement significantly
changes current financial statement disclosure requirements from those that were
required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Some of the more
significant effects of SFAS No. 132 are that it: (i) standardizes the disclosure
requirements for pensions and other postretirement benefits and presents them in
one footnote; (ii) requires that additional information be disclosed regarding
changes in the benefit obligation and fair values of plan assets; (iii)
eliminates certain disclosures that are no longer considered useful, including
general descriptions of the plans; (iv) permits the aggregation of information
about certain plans; (v) provides reduced disclosure requirements for nonpublic
entities; (vi) revises disclosures about defined contribution plans; and (vii)
changes disclosures relating to multi-employer plans. SFAS No. 132 does not
change the existing measurement or recognition provisions of SFAS Nos. 87, 88 or
106. SFAS No. 132 is effective for fiscal years beginning after December 15,
1997. The Company has not yet determined the impact of the implementation of
SFAS No. 132.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 requires costs of start-up activities and organization
costs to be charged to expense as incurred. SOP 98-5 is effective for financial
statements for years beginning after December 15, 1998. The Company believes
that the adoption of this SOP will not have a material effect on its financial
position or results of operations.
F-12
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
2. RESTRICTED CASH AND CASH EQUIVALENTS
At January 31, 1998 and 1997, the Company had debt proceeds of $0 and $1
which were available solely for the acquisition and installation of equipment at
the Company's existing industrial battery manufacturing facility located in
Conyers, Georgia (see Note 5).
3. INVENTORIES
Inventories consisted of the following:
January 31,
--------------------
1998 1997
---- ----
Raw materials................... $17,099 $17,506
Work-in-progress ............... 9,990 11,599
Finished goods.................. 13,646 9,838
------ ------
$40,735 $38,943
====== ======
If the first-in, first-out method of inventory accounting had been used
(which approximates current cost), inventories would have been $1,902 and $3,027
higher than reported as of January 31, 1998 and 1997, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net, consisted of the following:
January 31,
----------------------
1998 1997
---- ----
Land................................. $ 487 $ 487
Buildings and improvements........... 19,214 18,099
Furniture, fixtures and equipment.... 92,146 82,825
Construction in progress............. 4,017 2,794
------- -------
115,864 104,205
Less:
Accumulated depreciation....... 58,806 51,736
------- -------
$ 57,058 $ 52,469
======= =======
For the years ended January 31, 1998, 1997 and 1996, depreciation charged
to operations amounted to $8,831, $7,281 and $5,555; maintenance and repair
costs expensed totaled $7,399 $6,268 and $5,939; and interest capitalized
amounted to $166, $304 and $60, respectively.
F-13
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
January 31,
-----------
1998 1997
---- ----
<S> <C> <C>
Revolving credit facility ("Revolving Credit"); maximum commitment of
$65,000 at January 31, 1998 and 1997 bearing interest at Prime minus .50% or
LIBOR plus .52% and at Prime minus 0.25% or LIBOR plus 0.75%, respectively
(effective rate on a weighted average basis, 6.20% as of January 31, 1998 and
6.41% as of January 31, 1997)....................................................... $ 8,000 $20,333
Pennsylvania Economic Development Financing Authority ("PEDFA") Taxable
Development Revenue Bonds, 1991 Series B2, supported by a letter of credit,
bearing interest at a rate set on a weekly basis which approximates the
commercial paper rate (effective rate on a weighted average basis, 5.60% as of
January 31, 1998 and 5.45% as of January 31, 1997), principal payable in monthly
installments of $8 from December 1993 through November 1999 and of $108
from December 1999 through November 2000............................................ 1,484 1,584
PEDFA Economic Development Revenue Bonds, 1991 Series D6, supported by a
letter of credit, bearing interest at a rate set on a weekly basis which
approximates the commercial paper rate for high-grade tax-exempt borrowers
(effective rate on a weighted average basis, 3.70% as of January 31, 1998 and
3.70% as of January 31, 1997), principal payable in monthly installments of $8
from December 1993 through November 1999 and of $67 from
December 1999 through November 2000................................................ 983 1,083
Development Authority of Rockdale County Industrial Development Revenue
Bonds, Series 1995, ("Georgia Bonds"), supported by a letter of credit ("Georgia
L/C"), bearing interest at a rate set on a weekly basis which approximates tax
exempt A+ rated debt securities (effective rate on weighted average basis, 3.70%
as of January 31, 1997), principal payable at maturity December 1, 2005. The
Georgia Bonds were repaid in full on June 16, 1997................................. - 6,500
Capital lease obligations, bearing interest at 10.5% ......................... 121 327
------ -------
10,588 29,827
Less current portion 321 476
------ -------
$10,267 $29,351
====== ======
</TABLE>
F-14
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
5. LONG-TERM DEBT (CONTINUED)
On September 26, 1994 the Company entered into a three-bank credit facility
consisting of a $45,000 revolving credit facility and a $15,000 term loan. On
January 26, 1996 the Revolving Credit facility was increased from $45,000 to
$65,000.
On January 30, 1998 the facility was amended and restated. During fiscal
1998 the related unamortized deferred debt acquisition costs were charged to
expense. The bank group now consists of four institutions: NationsBank,
CoreStates Bank, Chase Manhattan Bank and PNC Bank. The facility was changed to
an unsecured credit, the maturity was extended to February 1, 2001, and the
pricing and certain covenants were modified.
The Company has the right to use up to $8,000 of the availability under the
Revolving Credit to provide for the issuance of letters of credit, including the
letters of credit covering the $2,500 PEDFA loans (the "PEDFA L/C"), for the
account of the Company. The Georgia L/C was issued independently of the
Revolving Credit and did not impair the $8,000 availability. At January 31, 1997
$6,575 was outstanding on the Georgia L/C. On June 16, 1997 the Georgia Bonds
were paid in full. During fiscal 1998 the related unamortized deferred debt
acquisition costs were charged to expense. The aggregate value of the letters of
credit outstanding was $4,922 and $11,923 at January 31, 1998 and 1997
respectively. The availability under the Revolving Credit was $52,078 and
$39,319 at January 31, 1998 and 1997 respectively. A letter of credit fee of
between 1% and 1.125% per annum on the aggregate face amount of any outstanding
letters of credit is payable quarterly. A commitment fee of .125% per annum on
the amount of remaining availability is payable quarterly.
The interest rates are based on a financial coverage ratio. The available
rates after January 30, 1998 are in the following ranges: Prime minus .5% to
Prime plus .5% or LIBOR plus .52% to LIBOR plus 1.55%. The available interest
rates prior to January 30, 1998 were in the following ranges: Prime minus .4% to
Prime plus .6% or LIBOR plus .6% to LIBOR plus 1.6%
The maximum aggregate amounts of loans outstanding under the Revolving
Credit were $26,765, $28,915 and $7,237 during the years ended January 31, 1998,
1997 and 1996, respectively. For those years the outstanding loans (excluding
the PEDFA L/C guarantees) under the Revolving Credit computed on a monthly basis
averaged $19,024, $21,494 and $2,204 at a weighted average interest rate of
6.47%, 6.79% and 8.53%, respectively.
The Revolving Credit is unsecured. The agreement contains certain
restrictive covenants, including certain cash flow and financial ratio
requirements and a restriction on capital expenditures. The agreement permits
payment of dividends on the Company's Common Stock so long as there is no
default under the agreement.
The PEDFA Bonds are subject to mandatory redemption upon the occurrence of
certain events, including the termination of the corresponding L/C. The tax
exempt bonds are subject to mandatory redemption if they lose their tax exempt
status.
F-15
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
5. LONG-TERM DEBT (CONTINUED)
The Company was in compliance with its lending agreement covenants at
January 31, 1998 and 1997, respectively.
As of January 31, 1998, the required minimum annual principal reduction of
long-term debt and capital lease obligations for each of the next five fiscal
years is as follows:
1999......................... $ 321
2000 ........................ 516
2001......................... 1,751
2002......................... 8,000
2003......................... -
Thereafter................... -
------
$10,588
======
F-16
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
6. STOCKHOLDERS' EQUITY
(A) STOCK OPTION PLAN:
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." This standard permits the continued use of accounting methods
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," or use of the fair value based method of
accounting for employee stock options. Under APB No. 25, no compensation expense
is recognized when the exercise price of the Company's employee stock options
equals the market price of the underlying stock at the date of grant. The
Company has elected to continue using APB No. 25.
At January 31, 1998, the Company had options outstanding under its Stock
Option Plans. The 1996 Stock Option Plan was approved by the stockholders on
July 25, 1996 and replaces the previous plan which expired on January 28, 1996.
New options can be granted only under the 1996 plan, which reserved 500,000
shares of Common Stock for such use. Incentive stock options are to be granted
at no less than 100% of the fair market value on the date of grant with a term
of no more than ten years after the date of grant. Nonqualified stock options
are to be granted at such price as the Compensation Committee of the Board of
Directors deems appropriate with a term of no more than ten years and one day
after the date of grant. The options are exercisable upon vesting as determined
by the Compensation Committee at the time the options are granted.
A summary of stock option activity related to the Company's plan is as
follows:
<TABLE>
<CAPTION>
Beginning Granted Exercised Canceled Ending
Balance During During During Balance
Outstanding Year Year Year Outstanding Exercisable
----------- ---- ---- ---- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended
January 31, 1998
Number of shares.............. 431,500 141,525 66,973 22,351 483,701 198,171
Weighted average option
price per share............. $17.78 $45.03 $16.52 $25.32 $25.98 $12.99
Year ended
January 31, 1997
Number of shares.............. 301,800 253,000 111,300 12,000 431,500 190,500
Weighted average option
price per share............. $10.19 $24.00 $10.66 $24.00 $17.78 $9.92
Year ended
January 31, 1996
Number of shares.............. 403,600 - 94,125 7,675 301,800 187,300
Weighted average option
price per share............. $9.96 - $9.20 $10.39 $10.19 $9.06
</TABLE>
F-17
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
6. STOCKHOLDERS' EQUITY (CONTINUED)
There were 139,826 and 259,000 shares available for future grants of
options as of January 31, 1998 and 1997, respectively. The following table
summarizes information about the stock options outstanding at January 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------- ---------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
--------------- ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$5.25 - $8.25 73,000 4.6 years $ 7.02 73,000 $ 7.02
$10.13 - $12.00 77,500 6.2 years $11.85 77,500 $11.85
$24.00 193,026 8.8 years $24.00 47,671 $24.00
$34.50 10,500 9.0 years $34.50 - -
$45.88 129,675 9.7 years $45.88 - -
------- -------
$5.25 - $45.88 483,701 8.0 years $25.58 198,171 $12.99
======= =======
</TABLE>
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of SFAS No.
123. The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 1998 and 1997.
1998 1997
---- ----
Risk-free interest rate........... 6.44% 6.58%
Expected dividend yield........... .44% .46%
Expected volatility factor........ 0.409 0.400
Weighted average expected life.... 5.28 years 6.00 years
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
F-18
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
6. STOCKHOLDERS' EQUITY (CONTINUED)
If the Company had elected, beginning in fiscal 1997, to recognize
compensation cost based on fair value of the options granted at grant date as
prescribed by SFAS No. 123, net income and net income per common share would
have approximated the pro forma amounts shown below:
1998 1997
---- ----
Net income - as reported..................... $19,685 $14,937
Net income - pro forma....................... 18,953 14,795
Net income per common share - as reported.... 3.22 2.39
Net income per common share - pro forma...... 3.10 2.36
Net income per common share -
assuming dilution - as reported............ 3.12 2.32
Net income per common share -
assuming dilution - pro forma.............. 3.00 2.30
Weighted average fair value of options
granted during the year.................... 17.96 11.24
The pro forma disclosures are not likely to be representative of the
effects on net income and net income per common share in future years, because
they do not take into consideration pro forma compensation expense related to
grants made prior to the Company's fiscal year 1997. No options were granted
during fiscal 1996.
(B) GRANT OF OPTIONS:
In May 1989 and June 1988, the Company granted options to purchase 110,000
and 237,386 shares, respectively, of Common Stock to certain executives for
terms expiring April 30, 1994 and 1993, respectively, at $6.04 per share. In
June 1991: (i) a certain executive vested in his options to purchase 26,376
shares of common stock; and (ii) the agreements regarding the remaining options
were amended whereby certain vesting criteria were eliminated and the expiration
dates changed, so that these options vested on April 30, 1994 and would expire
on April 30, 1996 and October 31, 1995 for options to purchase 110,000 and
211,010 shares, respectively. During the year ended January 31, 1994, the option
to purchase 26,376 shares expired prior to exercise. During the year ended
January 31, 1996 the option to purchase 211,010 shares was exercised. During the
year ended January 31, 1997 the option to purchase 110,000 shares was exercised.
The Company has recorded no compensation expense related to these options in the
three years ended January 31, 1998.
F-19
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
----------
7. INCOME TAXES
The provisions for income taxes as shown in the accompanying consolidated
statements of income consisted of the following:
January 31,
-----------------------------
1998 1997 1996
---- ---- ----
Currently payable:
Federal...................... $11,579 $7,196 $ 7,156
Foreign...................... 59 94 -
State........................ 1,853 960 1,068
Foreign Sales Corporation.... 206 173 120
------ ----- -------
13,697 8,423 8,344
------ ----- -------
Deferred:
Federal...................... (2,039) (285) (1,052)
State........................ (299) (17) (185)
------ ----- -------
(2,338) (302) (1,237)
------ ----- ------
$11,359 $8,121 $ 7,107
====== ===== ======
The components of the deferred tax asset and liability as of January 31,
1998 and 1997 were as follows:
1998 1997
---- ----
Deferred tax asset:
Vacation and compensation accruals............ $ 3,746 $ 3,537
Restructuring reserves........................ 443 307
Postretirement benefits....................... 741 682
Warranty reserves............................. 3,261 2,903
Bad debt, inventory and return allowances..... 2,306 1,471
Environmental reserves........................ 570 593
Other accruals................................ 754 277
------- ------
Total deferred tax asset...................... 11,821 9,770
------ -----
Deferred tax liability:
Depreciation and amortization................. (5,901) (5,773)
Pension obligation............................ (306) (388)
Other......................................... (119) (217)
------- ------
Total deferred tax liability.................. (6,326) (6,378)
------ ------
Net deferred tax asset........................ $ 5,495 $ 3,392
====== ======
F-20
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
7. INCOME TAXES (CONTINUED)
Reconciliations of the provisions for income taxes at the U. S. Federal
statutory rate to the effective tax rates for the years ended January 31, 1998,
1997 and 1996, respectively, are as follows:
January 31,
-----------------------------
1998 1997 1996
---- ---- ----
U.S. statutory income tax........... $10,865 $8,070 $7,403
Tax effect of foreign operations.... (35) (234) -
State tax, net of federal
income tax benefit................ 1,010 613 574
Reduction in valuation allowance.... - - (792)
Foreign sales corporation........... (388) (325) (150)
Other............................... (93) (3) 72
------ ----- -----
$11,359 $8,121 $7,107
====== ===== =====
The decrease in the valuation allowance of $792 during the year ended
January 31, 1996 relates to revaluation of the stock option compensation
deferred tax asset due to increases in the price of the Company's common stock.
8. COMMITMENTS AND CONTINGENCIES
(A) OPERATING LEASES:
The Company leases certain manufacturing and office facilities and certain
equipment under operating lease agreements. Certain leases contain renewal
options and some have purchase options, and generally provide that the Company
shall pay for insurance, taxes and maintenance. As of January 31, 1998, the
Company had future minimum annual lease obligations under leases with
noncancellable lease terms in excess of one year as follows:
Fiscal Year
-----------
1999........................ $ 2,286
2000........................ 1,870
2001........................ 1,356
2002........................ 1,152
2003........................ 963
Thereafter.................. 4,766
------
$12,393
======
Total rent expense for all operating leases for the years ended January 31,
1998, 1997 and 1996 was $3,319, $3,289 and $1,800, respectively.
F-21
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
-------
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
(B) CONTINGENT LIABILITIES:
Because the Company uses lead and other hazardous substances in its
manufacturing processes, it is subject to numerous federal, Canadian, Mexican,
Irish, state and local laws and regulations that are designed to protect the
environment and employee health and safety.
These laws and regulations include requirements relating to the handling,
storage, use and disposal of hazardous materials and solid wastes, recordkeeping
and periodic reporting to governmental entities regarding the use of hazardous
substances and disposal of hazardous wastes, monitoring and permitting of air
and water emissions and monitoring and protecting workers from exposure to
hazardous substances, including lead used in the Company's manufacturing
processes. In the opinion of the Company, the Company complies in all material
respects with these laws and regulations.
Notwithstanding such compliance, if damage to persons or the environment
has been or is caused by hazardous substances used, generated or disposed of in
the conduct of the Company's business (or that of a predecessor to the extent
the Company is not indemnified therefore), the Company may be held liable for
the damage and be required to pay the cost of investigating and remedying the
same, and the amount of any such liability could be material to the results of
operations or financial condition. However, under the terms of the purchase
agreement with Allied for the Acquisition of the Company (the "Acquisition
Agreement"), Allied is obligated to indemnify the Company for any liabilities of
this type resulting from conditions existing at January 28, 1986 that were not
disclosed by Allied to the Company in the schedules to the Acquisition
Agreement.
The Company, along with numerous other parties, has been requested to
provide information to the United States Environmental Protection Agency (the
"EPA") in connection with investigations of the source and extent of
contamination at several lead smelting facilities (the "Third Party Facilities")
to which the Company had made scrap lead shipments for reclamation prior to the
date of the Acquisition. As of January 16, 1989, the Company entered into an
agreement with other potentially responsible parties ("PRPs") relating to
remediation of a portion of one of the Third Party Facilities, the former NL
Industries ("NL"), facility in Pedricktown, New Jersey (the "NL Site"), which
agreement provides for their joint funding on a proportionate basis of certain
remedial investigation and feasibility study activities with respect to that
site.
In fiscal 1993 in accordance with an EPA order, a group comprised of the
Company and 30 other parties commenced work on the cleanup of a portion of the
NL Site based on a specified remedial approach which is now completed. The
Company did not incur costs in excess of the amount previously reserved.
F-22
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
-------
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
With regard to the remainder of the NL Site, the EPA is pursuing
negotiations with NL and the other PRPs, including the Company, regarding the
conduct and funding of the remedial work plan. The EPA has proposed a cost
allocation plan, however, the allocation percentages between parties and the
basis for allocation of cost are not defined in the plan or elsewhere.
Therefore, a reliable range of the potential cost to the Company of this phase
of the clean-up cannot currently be determined. Accordingly, the Company has not
established any reserve for this potential exposure.
The remedial investigation and feasibility study at a second Third Party
Facility, the former Tonolli Incorporated facility at Nesquehoning, Pennsylvania
(the "Tonolli Site"), was completed in fiscal 1993. The EPA and the PRPs are
continuing to evaluate the draft remedial design work plan for the site. Based
on the estimated cost of the remedial approach selected by the EPA, the Company
believes that the potential cost of remedial action at the Tonolli Site is
likely to range between $16,000 and $17,000. The Company's allocable share of
this cost has not been finally determined, and will depend on such variables as
the financial capability of various other PRPs to fund their respective
allocable shares of the remedial cost. Based on currently available information,
however, the Company believes that its most likely exposure with respect to the
Tonolli Site will be the approximately $579 previously reserved, the majority of
which is expected to be paid over the next two years. The Company expects to
recover a portion of its monetary obligations for the remediation of the Tonolli
site through litigation against third parties and recalcitrant PRPs.
The Company has responded to requests for information from the EPA with
regard to three other Third Party Facilities, one in September 1991, one (the
"Chicago Site") in October 1991, and the third (the "ILCO Site") in October
1993. Of the three sites, the Company has been identified as a PRP at the ILCO
and Chicago Sites only.
Based on currently available information, the Company believes that the
potential cost of remediation at the ILCO Site is likely to range between
$54,000 and $59,000 (based on the estimated costs of the remedial approach
selected by the EPA). The Company's allocable share of this cost has not been
finally determined and will depend on such variables as the financial capability
of various other PRPs to fund their respective allocable shares of the remedial
cost. However, on October 31, 1995 the Company received confirmation from the
EPA that it is a de minimis PRP at the ILCO Site. Based on currently available
information, however, the Company believes that its most likely exposure with
respect to the ILCO Site is an immaterial amount which has been previously
reserved, the majority of which is expected to be paid over the next year.
Based on currently available information, the Company believes that the
potential cost of the remediation at the Chicago Site is likely to range between
$8,000 and $10,500 (based on the preliminary estimated costs of the remediation
approach negotiated with the EPA). Sufficient information is not available to
determine the Company's allocable share of this cost. Based on currently
available information, however, the Company believes that its most likely
exposure with respect to the Chicago Site will be the approximately $283
previously reserved, the majority of which is expected to be paid over the next
two to five years.
F-23
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
-------
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Allied has accepted responsibility under the Acquisition Agreement for
potential liabilities relating to all Third Party Facilities other than the
aforementioned Sites. Based on currently available information, management of
the Company believes that the foregoing will not have a material adverse effect
on the Company's business, financial condition or results of operations.
(C) PURCHASE COMMITMENTS:
The Company has long-term relationships pertaining to the purchase of
certain raw materials with various suppliers through December 31, 1998. These
purchase commitments are not expected to exceed usage requirements.
9. MAJOR CUSTOMER
Lucent Technologies accounted for 13.5% and 4.0% of net sales for the years
ended January 31, 1998 and 1997. AT&T accounted for 0.7%, 11.1% and 11.4% of net
sales for the years ended January 31, 1998, 1997 and 1996. Lucent Technologies
was spun off from AT&T and became an operating entity on October 1, 1996. Had
Lucent Technologies been an operating company for the full fiscal year, Lucent
Technologies would have accounted for 12.0% of net sales and AT&T would have
accounted for 3.1% of net sales for the year ended January 31, 1997.
10. CONCENTRATION OF CREDIT RISK
Financial instruments which subject the Company to potential concentration
of credit risk consist principally of trade receivables and temporary cash
investments. The Company places its temporary cash investments with various
financial institutions and, generally, limits the amount of credit exposure to
any one financial institution. Except as discussed in Note 9, concentrations of
credit risk with respect to trade receivables is limited by a large customer
base and its geographic dispersion. The Company performs ongoing credit
evaluations of its customers' financial condition and requires collateral, such
as letters of credit, in certain circumstances.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and cash equivalents - the carrying amount approximates fair value
because of the short maturity of these instruments.
Debt (excluding capital lease obligations) - the carrying value of the
Company's long term debt, including the current portion, approximates fair
value based on the incremental borrowing rates currently available to the
Company for loans with similar terms, maturity and tax exempt status.
F-24
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Company's financial instruments at January
31, 1998 and 1997 were as follows:
1998 1997
--------------------- ----------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
Cash and cash equivalents ...... $ 1,167 $ 1,167 $ 952 $ 952
Restricted cash and cash
equivalents ................. - - 1 1
Debt (excluding capital
lease obligations) .......... 10,467 10,467 29,500 29,500
The fair value of accounts receivable, accounts payable and accrued
liabilities consistently approximate the carrying value due to the relatively
short maturity of these instruments and are excluded from the above table.
On December 20, 1995 the Company entered into an interest rate swap
agreement with a notional amount of $6,500. This swap agreement effectively
fixed the interest rate on a like amount of the Company's floating rate debt at
6.01% plus the Company's LIBOR spread in effect at any time. The effective rate
was 6.53% and 6.76% at January 31, 1998 and 1997, respectively. The swap expires
on December 20, 2002.
On June 24, 1997 the Company entered into a cross currency interest rate
swap agreement with a notional amount of US $1,293. This swap agreement
effectively exchanges US Dollar debt for Canadian Dollar debt and fixes the
interest rate at 4.72%. The maturity date for this instrument is June 24, 1999.
On June 24, 1997 the Company entered into a cross currency interest rate
swap agreement with a notional amount of US $1,221. The swap agreement
effectively exchanges US Dollar debt for Canadian Dollar debt and establishes
floating interest rates equivalent to three months Canadian Bank Acceptances
plus .18%. At January 31, 1998 the effective rate was 5.13%. The maturity date
for this instrument is June 24, 1998.
The Company had a foreign exchange contract on hand at January 31, 1998
hedging Mexican Peso requirements in the amount of $2,739.
The estimated fair value of the aforementioned interest rate swaps and
foreign exchange contract is not material. The estimates of fair value are based
on market prices or current rates offered for interest rate swaps and foreign
exchange contracts with similar terms and maturities. The ultimate amounts paid
or received under these interest rate swaps and foreign currency contract,
however, depend on future interest rates and exchange rates.
F-25
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
12. RELATED PARTY TRANSACTIONS
In connection with the Acquisition, the Company entered into a consulting
agreement with an affiliate of certain of the Company's major stockholders.
Effective January 1, 1992, the agreement was amended to eliminate the Company's
obligation to pay regular periodic consulting fees and to substitute therefore
an obligation to pay certain fees in connection with potential acquisitions by
the Company. The agreement was terminated on November 1, 1995. No payments were
made under this agreement for the years ended January 31, 1998, 1997 and 1996.
In May 1988, the Company entered into an agreement with a former executive
providing for (i) the purchase of 316,515 shares of Common Stock at $4.20 a
share, payable in cash in the amount of $.01 a share and the balance of $4.19 a
share in a noninterest bearing note and (ii) the grant of certain options (see
Note 6). The note matured on October 31, 1995 and was repaid. For financial
reporting purposes, the note was discounted to present value as of the date of
issuance.
In May 1989, the Company entered into an agreement with another executive
providing for (i) the purchase of 60,000 shares of Common Stock at $5.50 a
share, payable in cash in the amount of $.01 a share and an interest bearing
note at 12.5% (6.0% per annum effective July 1, 1992) maturing April 30, 1998
(subject to acceleration under certain circumstances), and (ii) the grant of
certain options (see Note 6). The note was repaid during the fiscal year ended
January 31, 1996. The option was exercised on April 30, 1996. Under the terms of
the Option Agreement, this executive paid the exercise price with an
interest-free promissory note in the original principal amount of $664 that was
collateralized by the shares received on exercise. The note matured on October
31, 1997 and was repaid. The Company loaned this executive $1,057 to pay the tax
withholding on the exercise of such option, evidenced by a promissory note (the
"Tax Note"), bearing interest at 5.33% per annum payable annually, and due on
April 29, 1997, subject to extension until April 29, 1999 at the option of this
executive. On April 28, 1997 this executive extended the Tax Note until April
29, 1999. The Tax Note is collateralized by 90,000 of the shares received on
exercise of such option. The Company further agreed to make payments to the
executive in an amount sufficient to reimburse the executive, on an after-tax
basis, for all interest on the Tax Note incurred through the earlier of April
29, 1997 or the prepayment of the Tax Note.
The consolidated statements of income for the years ended January 31, 1998,
1997 and 1996 include executive contract expenses of $1, $238 and $0,
respectively.
F-26
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
13. EMPLOYEE BENEFIT PLANS
(A) The Company has various noncontributory defined benefit pension plans,
which cover certain employees.
The Company's funding policy is to contribute annually an amount that can
be deducted for federal income tax purposes using a different actuarial cost
method and different assumptions than those used for financial reporting
purposes. Pension benefits for the Company's defined benefit plans are generally
based on employee's years of service and qualifying compensation during the
years of employment. Plan assets are invested in commingled trust funds
consisting primarily of equity and U.S. Government securities.
The following table represents the funded status of the Company's plans and
amounts included in the Company's balance sheets:
<TABLE>
<CAPTION>
January 31, 1998 January 31, 1997
---------------- ----------------
Over- Under- Over- Under-
funded funded funded funded
Plans Plans Plans Plans
----- ----- ----- -----
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.................... $4,957 $22,146 $3,679 $20,116
===== ====== ===== ======
Accumulated benefit obligation............... $5,646 $24,146 $4,107 $21,506
===== ====== ===== ======
Projected benefit obligation................. $5,646 $29,169 $4,107 $25,581
Plan assets at fair value.................... 6,336 27,565 4,243 24,771
----- ------ ----- ------
Projected benefit obligation less than
(in excess of) plan assets................ 690 (1,604) 136 (810)
Unrecognized net loss........................ 1,048 784 702 855
Prior service cost not yet recognized
in net periodic pension cost.............. 9 (11) 8 (10)
Adjustment required to recognize
minimum liability......................... - - - (240)
----- ------ ----- ------
Prepaid (accrued) pension cost .............. $1,747 $ (831) $ 846 $ (205)
===== ====== ===== ======
</TABLE>
As required by SFAS No. 87, "Employers' Accounting for Pensions," for plans
where the accumulated benefit obligation exceeds the fair value of the plan
assets, the Company has recognized in the accompanying consolidated balance
sheets the minimum liability of the unfunded accumulated benefit obligation as a
long-term liability with an offsetting intangible asset and equity adjustment,
net of tax impact. As of January 31, 1997, this minimum liability amounted to
$240 and the reduction in equity amounted to $136.
F-27
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
13. EMPLOYEE BENEFIT PLANS (CONTINUED)
For the years ended January 31, 1998, 1997 and 1996, the actuarially
computed net pension expense included the following components:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost .................................. $ 1,176 $ 1,257 $ 733
Interest cost.................................. 2,246 2,100 1,906
Actual return on plan assets................... (5,438) (3,314) (6,216)
Net amortization and deferrals................. 2,946 1,179 4,506
------ ------ ------
Net pension expense............................ $ 930 $ 1,222 $ 929
====== ====== ======
</TABLE>
Actuarial assumptions used in accounting for the plans for the years ended
January 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate:
Pension expense......................... 7.80% 7.25% 9.25%
Benefits obligations.................... 7.00% 7.80% 7.25%
Weighted average rates of increase in
compensation levels..................... 4.6% to 8.6% 4.6% to 8.6% 4.6% to 8.6%
Weighted average expected long-term
rate of return on assets................ 8.75% 8.75% 8.75%
</TABLE>
(B) The Company provides certain health care and life insurance benefits
for retired employees who meet certain service requirements under a frozen plan
(the "Plan"). Under the Plan, the Company contributes a fixed amount and
requires the retiree to fund the remaining cost. As the Company's contribution
is frozen, the change in future health care costs should not materially impact
the accumulated postretirement benefit obligation.
The components of net postretirement benefit expense follow:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost of benefits earned................... $ 59 $ 58 $ 49
Interest cost on liability........................ 109 106 111
Net amortization.................................. (24) (16) (37)
--- --- ---
Net postretirement benefit costs.................. $144 $148 $123
=== === ===
</TABLE>
F-28
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
13. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the Plan's postretirement benefit liability
as of January 31, 1998 and 1997:
1998 1997
---- ----
Accumulated postretirement benefit obligation:
Current retirees............................. $ 698 $ 600
Fully eligible actives....................... 578 582
Other actives................................ 358 293
----- -----
Total accumulated postretirement
benefit obligation........................... 1,634 1,475
Unrecognized net gain............................ (217) (322)
----- -----
Accrued postretirement benefit liability..... $1,851 $1,797
===== =====
The accumulated postretirement benefit obligation was determined using a
weighted average discount rate of 7.0% and 7.8% for the years ended January 31,
1998 and 1997, respectively.
(C) Certain salaried employees are eligible to participate in various
defined contribution retirement plans. The Company's contributions under the
plans are based on specified percentages of employee contributions. The
Company's cost was $725, $684 and $633 for the years ended January 31, 1998,
1997 and 1996, respectively.
14. ACQUISITIONS
In February 1996, the Company acquired certain equipment and inventory of
LH Research, Inc. used in its power supply business, along with all rights to
the name "LH Research" for $4,428 of which $892 was recorded as current portion
of long-term debt and paid during the year. The Company used available cash to
finance the acquisition.
The acquisition was recorded using the purchase method of accounting and
the net purchase price has been allocated on the basis of the estimated fair
market values of the assets acquired and liabilities assumed. The excess of the
aggregate purchase price over the estimated fair market values of the net assets
acquired was recognized as goodwill. During the fiscal year ended January 31,
1998 the goodwill and intangible assets were written off in accordance with the
Company's Impairment of Assets policy (see Note 1).
F-29
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
14. ACQUISITIONS (CONTINUED)
In March 1996, the Company acquired from Burr-Brown Corporation its entire
interest in Power Convertibles Corporation ("PCC") consisting of 1,044,418
shares of PCC common stock and all outstanding preferred stock. In addition the
Company acquired or repaid $5,158 of indebtedness of PCC. In April 1996, the
Company acquired 190,000 shares of PCC common stock from the former chief
executive officer of PCC which together with the shares previously acquired
represented in excess of 99.6% of the outstanding PCC common stock. In May 1996,
the Company purchased all remaining shares of PCC common stock and shares of PCC
common stock issuable upon exercise of stock options.
The source of funds for the acquisition was advances under the Company's
existing credit facility. PCC is engaged in the business of designing and
manufacturing DC-to-DC converters used in communications, computer, medical and
industrial and instrumentation markets and also produces battery chargers for
cellular phones.
The acquisition has been recorded using the purchase method of accounting.
The aggregate purchase price was $16,932 of which $466 was recorded as current
portion of long-term debt and paid during the year. The purchase price has been
allocated on the basis of the estimated fair market values of the assets
acquired and liabilities assumed. The excess of the aggregate purchase price
over the estimated fair market values of the net assets acquired was recognized
as goodwill and is being amortized over a period of 20 years. The results of
operations are included in the Company's consolidated financial statements from
the date of acquisition.
F-30
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
14. ACQUISITIONS (CONTINUED)
The following unaudited pro forma financial information combines the
consolidated results of operations as if both acquisitions had occurred as of
the beginning of the periods presented. Pro forma adjustments include only the
effects of events directly attributed to a transaction that are factually
supportable and expected to have a continuing impact. The pro forma adjustments
contained in the table below include amortization of intangibles, interest
expense on the acquisition debt, elimination of interest expense on debt not
acquired, reduction of certain selling, general and administrative expenses and
the related income tax effects.
January 31,
----------------------
1997 1996
---- ----
Net sales............................ $288,830 $278,309
Net income........................... $ 14,683 $ 12,938
Net income per common share.......... $ 2.35 $ 2.14
Net income per common share -
assuming dilution.................. $ 2.28 $ 2.00
The pro forma financial information does not necessarily reflect the
operating results that would have occurred had the acquisitions been consummated
as of the above dates, nor is such information indicative of future operating
results. In addition, the pro forma financial results contain estimates since
the acquired businesses did not maintain information on a period comparable with
the Company's fiscal year-end.
F-31
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years ended January 31, 1998 and 1997
follow:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
For the year ended January 31, 1998:
Net sales............................. $73,346 $75,375 $81,381 $77,952
Gross profit.......................... 18,983 19,474 20,656 22,061
Operating income...................... 7,652 7,738 8,822 9,019
Net income............................ 4,135 4,704 5,319 5,527
Net income per common share........... .68 .77 .87 .90
Net income per common share -
assuming dilution.................. .66 .75 .84 .87
For the year ended January 31, 1997:
Net sales............................. $62,429 $71,748 $76,576 $76,154
Gross profit.......................... 15,121 15,281 18,262 18,424
Operating income...................... 5,804 4,466 6,857 7,319
Net income............................ 3,646 2,650 4,130 4,511
Net income per common share........... .58 .41 .66 .74
Net income per common share -
assuming dilution................... .56 .40 .65 .72
</TABLE>
F-32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Stockholders of
C&D TECHNOLOGIES, INC.
Our report on the consolidated financial statements of C&D TECHNOLOGIES, INC.
and Subsidiaries (formerly Charter Power Systems, Inc.) is included on page F-2
of this Form 10-K. In connection with our audits of such financial statements,
we have also audited the related financial statement schedule listed in item
14(a) (2) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 10, 1998
S-1
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE II.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Additions
Charged Additions Balance
Balance at (Credited) Charged at
Beginning to Costs & to Other End of
of Period Expenses Accounts(b) Deductions(a) Period
--------- -------- ----------- ------------- ------
Deducted From Assets
- --------------------
Allowance for Doubtful Accounts:
<S> <C> <C> <C> <C> <C>
Year ended January 31, 1998............... $1,414 $ 401 - $114 $1,701
Year ended January 31, 1997............... 1,421 128 $109 244 1,414
Year ended January 31, 1996............... 1,404 136 - 119 1,421
- ---------
</TABLE>
(a) Amounts written-off, net of recoveries.
(b) Additions related to business acquisitions.
S-2
<PAGE>
EXHIBIT 4.1
AMENDED AND RESTATED
FINANCING AGREEMENT
By and Among
C&D Technologies, Inc., Ratelco
Electronics, Inc., C&D/Charter Holdings, Inc.,
Charter Power F.S. Ltd., Mexico S.A. DE C.V.,
Power Convertibles Ireland Limited,
C&D Technologies De Mexico S.A. De C.V.,
PCC Mexican Holdings, Inc.
and
NationsBank, N.A., CoreStates Bank, N.A.,
The Chase Manhattan Bank,
PNC Bank, National Association
Date: January 30, 1998
-1-
<PAGE>
ARTICLE 1
DEFINITIONS ............................................. 3
SECTION 1.1 Certain Defined Terms........................ 3
SECTION 1.2 Accounting Terms and Other Definitional
Provisions................................... 26
ARTICLE 2
THE CREDIT FACILITIES.......................................... 27
SECTION 2.1 The Revolving Credit Facility................ 27
2.1.1 Revolving Credit Facility.................... 27
2.1.2 Procedure for Making Advances Under the
Revolving Loan............................... 28
2.1.3 Lender Protection Loans...................... 30
2.1.4 Revolving Credit Notes....................... 30
2.1.5 Optional Prepayments of Revolving Loan....... 30
2.1.6 Revolving Loan Account....................... 31
2.1.7 Revolving Credit Unused Line Fee............. 31
2.1.8 Optional Reduction of Total Revolving
Credit Committed Amount...................... 32
SECTION 2.2 The Letter of Credit Facility................ 33
2.2.1 Letters of Credit............................ 33
2.2.2 Letter of Credit Fees........................ 33
2.2.3 Terms of Letters of Credit................... 34
2.2.4 Procedures for Issuance of Letters of
Credit....................................... 34
2.2.5 Payment of Reimbursement Obligations......... 36
2.2.6 Letter of Credit Reserves.................... 38
2.2.7 Indemnification and Assumption of Risk....... 38
2.2.8 Participations in the Letters of Credit,
PEDFA Obligations............................ 41
2.2.9 Payments by the Lenders to the Agent......... 42
2.2.10 Post-Termination Date Letters of Credit...... 43
SECTION 2.3 Interest..................................... 45
2.3.1 Available Interest Rates..................... 45
2.3.2 Selection of Interest Rates.................. 46
2.3.3 Adjustment of Interest Rates................. 48
2.3.4 Inability to Determine LIBOR Rate............ 49
2.3.5 Indemnity.................................... 49
2.3.6 Payment of Interest.......................... 50
SECTION 2.4 General Financing Provisions................. 51
2.4.1 Borrowers' Representatives................... 51
2.4.2 Use of Proceeds of the Loans and Letters
of Credit.................................... 54
2.4.3 Computation of Interest and Fees............. 54
-1-
<PAGE>
2.4.4 Liens; Setoff................................ 54
2.4.5 Requirements of Law.......................... 55
2.4.6 Pro Rata Treatment and Payments.............. 56
2.4.7 Mandatory Prepayments........................ 57
2.4.8 Settlement Among Lenders..................... 59
ARTICLE 3
REPRESENTATIONS AND WARRANTIES................................. 59
SECTION 3.1 Representations and Warranties............... 59
3.1.1 Subsidiaries................................. 59
3.1.2 Good Standing................................ 60
3.1.3 Power and Authority.......................... 60
3.1.4 Binding Agreements........................... 60
3.1.5 No Conflicts................................. 60
3.1.6 No Defaults, Violations...................... 61
3.1.7 Compliance with Laws......................... 61
3.1.8 Margin Stock................................. 61
3.1.9 Investment Company Act; Margin
Securities................................... 61
3.1.10 Litigation................................... 62
3.1.11 Financial Condition.......................... 62
3.1.12 Projected Financial Statements............... 62
3.1.13 Full Disclosure.............................. 63
3.1.14 Indebtedness for Borrowed Money.............. 63
3.1.15 Taxes........................................ 63
3.1.16 ERISA........................................ 63
3.1.17 Title to Properties.......................... 64
3.1.18 Presence of Hazardous Materials or
Hazardous Materials Contamination............ 64
3.1.19 Places of Business........................... 64
3.1.20 Business Names and Addresses................. 64
3.1.21 Securities Acts.............................. 65
3.1.22 Governmental Regulation...................... 65
3.1.23 Solvency..................................... 65
3.1.24 Employee Relations........................... 65
3.1.25 Proprietary Rights........................... 66
SECTION 3.2 Survival..................................... 66
ARTICLE 4
CONDITIONS PRECEDENT........................................... 66
SECTION 4.1 Conditions to Effectiveness of this
Agreement.................................... 66
4.1.1 Good Standing etc. ......................... 66
4.1.2 Corporate Proceedings of the Borrowers....... 66
4.1.3 Notes........................................ 67
-2-
<PAGE>
4.1.4 Financing Documents.......................... 67
4.1.5 Opinion of Borrower's Counsel................ 67
4.1.6 Other Documents, Etc......................... 67
4.1.7 Payment of Fees.............................. 67
4.1.8 Additional Matters........................... 67
4.1.9 Commitment Fees.............................. 68
SECTION 4.2. Conditions to all Extensions of Credit....... 68
4.2.1 Compliance................................... 68
4.2.2 Default...................................... 68
4.2.3 Representations and Warranties............... 68
4.2.4 Adverse Change............................... 69
4.2.5 Legal Matters................................ 69
ARTICLE 5
COVENANTS OF THE BORROWERS..................................... 69
SECTION 5.1 Affirmative Covenants........................ 69
5.1.1 Financial Statements......................... 69
5.1.2 Reports to SEC and to Stockholders........... 71
5.1.3 Recordkeeping, Rights of Inspection,
Field Examination, Etc....................... 71
5.1.4 Corporate Existence.......................... 73
5.1.5 Compliance with Laws......................... 73
5.1.6 Preservation of Properties................... 73
5.1.7 Line of Business............................. 73
5.1.8 Insurance.................................... 74
5.1.9 Taxes........................................ 74
5.1.10 ERISA........................................ 75
5.1.11 Notification of Events of Default and
Adverse Developments......................... 75
5.1.12 Hazardous Materials; Contamination........... 76
5.1.13 Disclosure of Significant Transactions....... 78
5.1.14 Net Worth.................................... 78
5.1.15 Liabilities to Tangible Net Worth Ratio...... 78
5.1.16 Current Ratio................................ 79
5.1.17 Fixed Charge Coverage Ratio.................. 79
5.1.18 Funded Debt to EBITDA........................ 79
5.1.19 Business Names; Locations.................... 79
SECTION 5.2 Negative Covenants........................... 79
5.2.1 Merger, Acquisition or Sale of Assets........ 79
5.2.2 Subsidiaries................................. 80
5.2.3 Issuance of Stock............................ 81
5.2.4 Purchase or Redemption of Securities,
Dividend Restrictions........................ 81
5.2.5 Indebtedness................................. 82
5.2.6 Investments, Loans and Other
Transactions ................................ 84
5.2.7 Capital Expenditures......................... 85
-3-
<PAGE>
5.2.8 Stock of Subsidiaries........................ 85
5.2.9 Liens........................................ 86
5.2.10 Transactions with Affiliates................. 86
5.2.11 ERISA Compliance............................. 86
5.2.12 Prohibition on Hazardous Materials........... 86
5.2.13 Method of Accounting......................... 86
5.2.14 Sale and Leaseback........................... 86
ARTICLE 6
DEFAULT AND RIGHTS AND REMEDIES................................ 87
SECTION 6.1 Events of Default............................ 87
6.1.1 Failure to Pay............................... 87
6.1.2 Breach of Representations and
Warranties................................... 87
6.1.3 Failure to Comply with Covenants............. 87
6.1.4 Other Covenants.............................. 87
6.1.5 Default Under Other Financing Documents
or Obligations............................... 87
6.1.6 Receiver; Bankruptcy......................... 87
6.1.7 Involuntary Bankruptcy, etc.................. 88
6.1.8 Judgment..................................... 88
6.1.9 Default Under Other Borrowings............... 89
6.1.10 Liquidation, Termination, or
Dissolution.................................. 89
SECTION 6.2 Remedies..................................... 89
6.2.1 Acceleration................................. 89
6.2.2 Further Advances............................. 89
6.2.3 Performance by Agent......................... 90
6.2.4 Other Remedies............................... 90
ARTICLE 7
THE AGENT...................................................... 91
SECTION 7.1 Appointment, Powers and Immunities........... 91
SECTION 7.2 Rights as Lender............................. 93
SECTION 7.3 No Liability of Agent; Indemnity............. 93
SECTION 7.4 Non-Reliance on Agent and other Lenders...... 93
SECTION 7.5 Agents, Employees, Representatives........... 94
SECTION 7.6 Reliance by Agent; Reliance on Agent......... 95
SECTION 7.7 Successor Agent.............................. 95
SECTION 7.8 Agency Fee................................... 96
SECTION 7.9 Actions after Default, etc................... 96
SECTION 7.10 Circumstances Where Consent of all of the
Lenders is Required.......................... 97
-4-
<PAGE>
ARTICLE 8
MISCELLANEOUS.................................................. 98
SECTION 8.1 Notices...................................... 98
SECTION 8.2 Amendments; Waivers..........................100
SECTION 8.3 Cumulative Remedies..........................101
SECTION 8.4 Severability.................................101
SECTION 8.5 Assignments by Lenders.......................102
SECTION 8.6 Participations by Lenders....................103
SECTION 8.7 Disclosure of Information by Lenders.........103
SECTION 8.8 Successors and Assigns.......................103
SECTION 8.9 Continuing Agreements........................103
SECTION 8.10 Enforcement Costs............................104
SECTION 8.11 Applicable Law; Jurisdiction.................104
8.11.1 .............................................104
8.11.2 .............................................104
8.11.3 .............................................105
8.11.4 .............................................105
SECTION 8.12 Duplicate Originals and Counterparts.........105
SECTION 8.13 Headings.....................................106
SECTION 8.14 No Agency....................................106
SECTION 8.15 Entire Agreement.............................106
SECTION 8.16 Waiver of Trial by Jury......................106
SECTION 8.17 Liability of the Agent and the Lenders.......106
SECTION 8.18 Arbitration..................................107
SECTION 8.19 Confidentiality..............................108
-5-
<PAGE>
AMENDED AND RESTATED FINANCING AGREEMENT
THIS AMENDED AND RESTATED FINANCING AGREEMENT (this "Agreement") is
made this 30th day of January, 1998, by and among C&D TECHNOLOGIES, INC., a
corporation organized and existing under the laws of the State of Delaware,
formerly known as Charter Power Systems, Inc., and successor by merger to C&D
Charter Power Systems, Inc. (the "Parent"), RATELCO ELECTRONICS, INC., a
corporation organized and existing under the laws of the State of Delaware
("Ratelco"), C&D/CHARTER HOLDINGS, INC., a corporation organized and existing
under the laws of the State of Delaware ("Charter Holdings"), CHARTER POWER F.S.
LTD., a corporation organized and existing under the laws of Bermuda ("C&D FS"),
PCC DE MEXICO S.A. DE C.V. ("PCC Mexico"), a corporation organized and existing
under the laws of the Republic of Mexico, POWER CONVERTIBLES IRELAND LIMITED
("PCC Ireland"), C&D TECHNOLOGIES DE MEXICO S.A. DE C.V., a corporation
organized and existing under the laws of the Republic of Mexico ("C&D Mexico")
PCC MEXICAN HOLDINGS, INC., a corporation organized and existing under the laws
of the State of Delaware ("Mexican Holdings") (the Parent, Ratelco, Charter
Holdings, C&D FS, PCC Mexico, PCC Ireland, C&D Mexico and Mexican Holdings and
such other "Additional Borrowers" (as hereinafter defined) as may be parties to
this Agreement at any time and from time to time, are herein collectively
referred to as the "Borrowers" and individually as a "Borrower"); and
NATIONSBANK, N.A., a national banking association ("NationsBank"), CORESTATES
BANK, N.A., a national banking association ("CoreStates"), THE CHASE MANHATTAN
BANK, a banking corporation organized and existing under the laws of the State
of New York ("Chase"), and PNC BANK, NATIONAL ASSOCIATION, a national banking
association ("PNC") (NationsBank, CoreStates, Chase, PNC and such other lenders
as may be parties to this Agreement at any time and from time to time are herein
collectively referred to as the "Lenders" and individually, as a "Lender"); and
NATIONSBANK, N.A., a national banking association (the "Agent").
RECITALS
A. Certain of the Borrowers, the Agent, NationsBank, CoreStates and
Fleet Bank, National Association, a national banking association and successor
in interest to NatWest Bank, N.A., being formerly known as National Westminster
Bank, NJ ("Fleet") (NationsBank, CoreStates and Fleet are herein collectively
referred to as the "Original Lenders") are parties to that certain Financing and
Security Agreement dated as of September 26, 1994 by and among such Borrowers,
the Agent and the Original Lenders, as amended by (i) that certain First
Amendment to Financing and Security Agreement dated as of December 13, 1995,
(ii) that certain Second Amendment to Financing and Security Agreement dated as
of January 26, 1996, (iii) that certain Third Amendment to Financing and
Security Agreement dated as of March 13, 1996, (iv) that certain
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Fourth Amendment to Financing and Security Agreement dated as of September 3,
1996 and (v) that certain Fifth Amendment to Financing and Security Agreement
dated as of October 8, 1996 (as amended, restated, supplemented or otherwise
modified, the "Original Credit Agreement"). Pursuant to the provisions of the
Original Credit Agreement, such Borrowers jointly and severally applied to the
Original Lenders for credit facilities consisting of (i) a revolving credit
facility (the "Revolving Credit Facility") in the maximum principal amount of
$65,000,000 (the "Revolving Credit Committed Amount"), (ii) a letter of credit
facility, as part of the Revolving Credit Facility, in the maximum principal
amount of $8,000,000 (the "Letter of Credit Facility") and (iii) a term loan
facility in the maximum principal amount of $15,000,000 (the "Term Loan"), all
to be used by the Borrowers for the "Permitted Uses" as defined in the Original
Credit Agreement, which Term Loan has been repaid in full.
B. The Parent has advised the Agent and the Lenders that (i) effective
June 24, 1997, the Parent changed its name from Charter Power Systems, Inc. to
C&D Technologies, Inc., (ii) effective June 25, 1997, C&D Charter Power Systems,
Inc., a former subsidiary of the Parent, merged into the Parent with the Parent
as the surviving corporation (the "Parent Merger"), (iii) effective July 3,
1997, International Power Systems, Inc. ("International") formed C&D Mexico as a
wholly-owned subsidiary of International, (iv) the Parent established a branch
office in Kuala Lumpur, Malaysia (the "Malaysian Branch Office"), (v) on or
before January 31, 1998 Power Convertibles Corporation formed Mexican Holdings
as a wholly-owned subsidiary of Power Convertibles Corporation, and (vi)
effective January 31, 1998, LH Research, Inc. and Power Convertibles Corporation
were each merged into International and International and Charter Power of
California ("Charter California") were each then merged into the Parent, with
the Parent as the sole surviving corporation.
C. The Borrowers have requested that the Agent and the Lenders (i)
consent and agree to (1) the name change of the Parent, (2) the Parent Merger,
(3) the creation of C&D Mexico, (4) the establishment of the Malaysian Branch
Office, and (5) the removal of Fleet as a "Lender" and the addition of Chase and
PNC as "Lenders" and (ii) agree to amend and restate the terms and conditions of
the Original Credit Agreement. Subject to the terms and conditions of this
Agreement, the Lenders and the Agent hereby consent and agree to each of the
foregoing; provided that the Original Credit Agreement is amended and restated
in its entirety as follows:
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ARTICLE 1
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the terms
defined in the Preamble shall have the respective meanings specified therein,
and the following terms shall have the following meanings:
"Adjustment Date" has the meaning described in Section 8.5.
"Additional Borrower" shall mean each Subsidiary of any of the
Borrowers which has executed and delivered an Additional Borrower Joinder
Supplement and has otherwise complied with the provisions of Section 5.2.2;
"Additional Borrowers" shall mean the collective reference to each Additional
Borrower.
"Additional Borrower Joinder Supplement" shall mean an
Additional Borrower Joinder Supplement in substantially the form attached hereto
as EXHIBIT G, with the blanks appropriately completed and executed and delivered
by each Additional Borrower and accepted by the Agent on behalf of all of the
Borrowers.
"Affiliate" means, with respect to a Person, (a) any partner,
officer, shareholder (if holding more than ten percent (10%) of the outstanding
shares of capital stock of such Person), director, employee, or managing agent
of such Person, (b) any other Person (other than a Subsidiary) that (i) directly
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person, (ii) directly or indirectly
beneficially owns or holds ten percent (10%) or more of any class of voting
stock or partnership or other voting interests of such Person or any Subsidiary
of such Person, or (iii) ten percent (10%) or more of the voting stock or
partnership or other voting interest of which is directly or indirectly
beneficially owned or held by such Person or a Subsidiary of such Person, or (c)
a Subsidiary of such Person. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of voting securities or
partnership or other voting interest, by contract or otherwise.
"Agent" means NationsBank, N.A., a national banking
association, and any successor agent appointed pursuant to Section 7.7.
"Agency Fee" and "Agency Fees" have the meanings
described in 7.8.
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"Agent's Obligations" means any and all Obligations payable
solely to, and for the exclusive benefit of, the Agent by the Borrowers under
the terms of this Agreement and/or any of the other Financing Documents,
including, without limitation, any and all Agency Fees.
"Agent's Office" means the office of the Agent specified in or
determined in accordance with the provisions of Section 8.1.
"Agreement" means this Financing Agreement, any and all
schedules, exhibits and other attachments hereto, and all amend ments,
modifications and supplements hereto and thereto which may from time to time
become effective in accordance with the provi sions of Section 8.2.
"Applicable Margin" has the meaning set forth in Section
2.3.1(b).
"Asset Disposition" means the sale, transfer or other
disposition of any asset or property of any of the Borrowers, other than sales
of inventory in the ordinary course of business and dispositions of worn, used
or obsolete equipment in the ordinary course of business.
"Assets" means, as of any date of determination, all assets
that should, in accordance with GAAP consistently applied, be classified as
assets on a Consolidated balance sheet of the Borrowers and their Subsidiaries.
"Assignee" means any Person to which any Lender assigns all or
any portion of its interests under this Agreement, any Commitment, and any Loan,
in accordance with the provisions of Section 8.5, together with any and all
successors and assigns of such Person; "Assignees" means the collective
reference to all Assignees.
"Bankruptcy Code" means the United States Bankruptcy Code, as
amended from time to time.
"Base Rate" means the floating and fluctuating per annum prime
commercial lending rate of interest of NationsBank, N.A., as established and
declared by NationsBank, N.A. at any time or from time to time. The Base Rate
shall be adjusted automatically, without notice, on the effective date of any
change in such prime commercial lending rate. The Base Rate does not necessarily
represent the lowest rate of interest charged by NationsBank, N.A., the Agent or
any of the Lenders to borrowers.
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"Business Day" means a day on which the Agent and all of the
Lenders are open for the transaction of business at the addresses stated after
their names on the signature pages of this Agreement, excluding Saturdays and
Sundays.
"Capital Expenditures" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of Assets which
are not, in accordance with GAAP, treated as expense items for such Person in
the year made or incurred or as a prepaid expense applicable to a future year or
years. Capital Expenditures shall not include, however, any expenditures made or
liabilities incurred in the replacement or restoration of any Assets which may
have suffered a casualty, loss or condemnation to the extent that any such
expenditures or liabilities were funded with the insurance or condemnation
proceeds received as a result of any such casualty, loss or condemnation. The
term also includes, when required by GAAP, the entering into of any Capital
Lease.
"Capital Lease" means a lease of real or personal property,
for which the related Lease Obligations have been or should be capitalized on
the balance sheet or other financial reporting purposes in accordance with GAAP
consistently applied.
"Cash Equivalents" means (a) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed or insured
by the United States Government or any agency thereof, (b) certificates of
deposit or banker's acceptances issued in Dollar denominations with maturities
of one (1) year or less from the date of acquisition of, or money market or
checking accounts maintained with, any of the Lenders or any other commercial
bank having capital and surplus in excess of One Hundred Million Dollars
($100,000,000.00) or such other financial institutions or brokerage houses to
the extent disclosed to, and approved by, the Agent, (c) commercial paper of a
domestic issuer rated at least either A-1 by Standard & Poor's Corporation or
P-1 by Moody's Investors Service, Inc. with maturities of nine (9) months or
less from the date of acquisition and (d) cash deposits in foreign currencies
with offshore financial institutions, but only to the extent necessary to enable
each non-domestic Borrower to pay its ordinary course working capital expenses.
"Closing Date" means the Business Day on which the Agent shall
be satisfied that the conditions precedent set forth in Section 4.1 have been
fulfilled.
"Commitment" means, with respect to each Lender, such Lender's
Revolving Credit Commitment or Letter of Credit Commitment, as the case may be,
and "Commitments" means the
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collective reference to the Revolving Credit Commitments and the Letter of
Credit Commitments of all of the Lenders.
"Committed Amount" means, with respect to each Lender, such
Lender's Revolving Credit Committed Amount or Letter of Credit Committed Amount,
as the case may be, and "Committed Amounts" means collectively the Revolving
Credit Committed Amount and the Letter of Credit Committed Amount of all of the
Lenders.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with any of the Borrowers within the
meaning of Section 414(b) or (c) of the Internal Revenue Code.
"Consolidated" shall mean the collective and combined
reference to all of the Borrowers and their Subsidiaries, as consolidated after
elimination of intercompany items by and among Borrowers and Subsidiaries.
"Current Assets" means, as of any date or for any period of
determination, the amount which, in accordance with GAAP consistently applied,
would be set forth opposite the caption "total current assets" (or any like
caption) on a Consolidated balance sheet of the Borrowers and their
Subsidiaries.
"Current Letter of Credit Obligations" has the meaning
described in Section 2.2.5.
"Current Liabilities" means, as of any date or for any period
of determination, the amount which, in accordance with GAAP consistently
applied, would be set forth opposite the caption "total current liabilities" (or
any like caption) on a Consolidated balance sheet of the Borrowers and their
Subsidiaries.
"Current Maturities" means, when used in connection with
Long-Term Liabilities, as of any date of determination, the principal amount of
such Liabilities coming due on such date or during the twelve-month period
following such date in accordance with the terms of any instrument or agreement
evidencing such Liabilities or relating thereto.
"Current Ratio" means, as of any date or for any period of
determination, the ratio of (a) Current Assets to (b) Current Liabilities,
excluding Current Maturities of Long-Term Liabilities.
"Default" means an event which, with the giving of notice or
lapse of time, or both, could or would constitute an Event of Default.
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"Dollar" and "$" means freely transferable United States
dollars.
"EBITDA" means as to the Borrowers, as of any date or for any
period of determination, the sum of (a) the Borrowers' combined earnings as of
such date or for such period, before deduction of interest expenses and income
Taxes, plus (b) depreciation and amortization of Assets for such period, all as
calculated in accordance with GAAP consistently applied, and on a Consolidated
basis.
"Enforcement Costs" means all reasonable, out of pocket
expenses, charges, costs and fees whatsoever (including, without limitation,
attorney's fees and expenses) of any nature whatsoever paid or incurred by or on
behalf of the Agent and/or any of the Lenders in connection with (a) any or all
of the Obligations, this Agreement and/or any of the other Financing Documents,
including, without limitation, any amendments, restatements or supplements to
this Agreement and/or any of the other Financing Documents. Notwithstanding the
foregoing, Enforcement Costs shall not include any expenses, charges, costs or
fees (including, without limitation, attorney's fees and expenses) incurred by
the Agent or any Lender in connection with any actual or proposed assignment of
any of the Commitments or Obligations in accordance with Section 8.5 of this
Agreement or any actual or proposed sale of a participation in any of the
Commitments or Obligations in accordance with Section 8.6 of this Agreement,
except to the extent the Borrowers request that a Lender so assign or sell a
participation in any such Commitments or Obligations.
"Environmental Laws" means all Federal, state, local and
foreign Laws in effect at any time during the term of this Agreement relating to
pollution or protection of the environment or of human health, (including laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment (including, without limitation, natural resource,
wildlife, the indoor or outdoor environment, ambient air, surface water, ground
water, or land), noise pollution, or otherwise relating to the Borrower's
operations, including without limitation manufacturing, processing,
distribution, use, treatment, storage, disposal, removal, transport, packing, or
handling of Hazardous Materials) and any and all regulations, notices or demand
letters issued, entered, promulgated, or approved thereunder; such laws and
regulations include but are not limited to the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Toxic Substances Control Act, the Clean Air Act, the Clean
Water Act, the Safe Drinking Water Act, the Oil Pollution Act, the Occupational
Safety and Health Act, the Emergency Planning and Community Right to Know
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Act, the National Environmental Policy Act and other state and Federal
environmental regulatory, environmental lien and environmental cleanup programs,
all as may be amended at any time and from time to time during the term of this
Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Eurodollar Business Day" means any Business Day on which
dealing in Dollar deposits are carried out on the London interbank market and on
which commercial banks are open for domestic and international business
(including dealings in Dollar deposits) in London, England.
"Eurodollar Lending Office" means with respect to the Agent
and each Lender such branch or office of the Agent and each such Lender
designated by the Agent and such Lender, as applicable, from time to time as the
branch or office at which its LIBOR Rate Loans are to be made or maintained.
"Event of Default" has the meaning described in Article 7.
"Excess Proceeds" has the meaning described in Section 2.4.7.
"Facilities" means the collective reference to the loan,
letter of credit and other credit facilities and/or accommodations now or
hereafter provided to the Borrowers by the Agent and/or any or all of the
Lenders under or in connection with this Agreement.
"Federal Funds Rate" means, for any day of determination, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of Richmond or, if such rate
is not so published for any day that is a Business Day, the average of
quotations for such day on such transactions received by the Agent from three
(3) Federal fund brokers of recognized standing selected by the Agent.
"Fees" means the collective reference to each fee payable to
the Agent, for its own account or for the ratable benefit of the Lenders, under
the terms of this Agreement or under the terms of any of the other Financing
Documents, including, without limitation, Revolving Credit Unused Line Fees,
Letter of Credit Fees, and Agency Fees.
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"Financial Officer" means the chief financial officer or
treasurer of the Parent.
"Financing Documents" means at any time collectively this
Agreement, the Notes, the Letter of Credit Documents, the PEDFA Reimbursement
Agreement, and any other instrument, agreement or document previously,
simultaneously or hereafter executed and delivered by any or all of the
Borrowers and/or any other Person, singly or jointly with another Person or
Persons, evidencing, securing, guarantying or in connection with any or all of
the Obligations and/or in connection with this Agreement, any Note, any of the
Facilities, and/or any of the Obligations.
"Fixed Charge Coverage Ratio" means, for any period of
determination, as to the Borrowers and the Subsidiaries the ratio of (a) EBITDA
to (b) the sum of (i) all aggregate cash payments of interest on account of the
Obligations during such period, plus (ii) current portion of Capital Lease cash
payments (including principal and interest payments) during such period, plus
(iii) cash dividends declared and paid during such period, plus (iv) income
Taxes paid in cash during such period, plus (v) Current Maturities of Long-Term
Liabilities (excluding Capital Leases). The Fixed Charge Coverage Ratio shall be
calculated on a Consolidated basis and as of the end of each fiscal quarter on a
rolling four (4) quarter basis.
"Funded Debt" means, as of any date and for any period of
determination, the sum of (i) the aggregate unpaid principal balance of the
Revolving Loan as of such date or for such period, plus (ii) the aggregate face
amount of all Letters of Credit issued and outstanding as of such date or during
such period plus (iii) the amount of the PEDFA Obligations.
"GAAP" means generally accepted accounting principles in the
United States of America consistently applied and maintained throughout the
period indicated and, when used with reference to any Borrower and/or any
Subsidiary, consistent with the prior financial practice of such Borrower, as
reflected on the financial statements most recently furnished to the Agent and
the Lenders; provided, however, that in the event that changes shall be mandated
by the Financial Accounting Standards Board or any similar accounting authority
of comparable standing, or shall be recommended by the Borrowers' independent
public accountants, such changes shall be included in GAAP as applicable to the
Borrowers, only from and after such date as the Borrower, the Required Lenders
and the Agent shall have amended this Agreement to the extent necessary to
reflect any such changes in the financial covenants set forth in Article 6.
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"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any department, agency or instrumentality thereof.
"Hazardous Materials" means (a) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976, as amended from
time to time, and regulations promulgated thereunder; (b) any "hazardous
substance" as defined by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, and regulations
promulgated thereunder; (c) any pollutant, chemical or other industrial, toxic
or hazardous substance or waste the presence of which on any property now or
hereafter owned, operated or acquired by any of the Borrowers is prohibited or
otherwise regulated by any Environmental Law; and/or (d) any other substance
which by any Environmental Law is regulated with respect to handling in its
collection, storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination
(whether presently existing or occurring after the date of this Agreement) by
Hazardous Materials of any property owned, operated or controlled by any of the
Borrowers or for which any of the Borrowers has responsibility, including,
without limitation, improvements, facilities, soil, ground water, air or other
elements on, or of, any property now or hereafter owned, operated or acquired by
any of the Borrowers during the term of this Agreement, and any other
contamination by Hazardous Materials for which any of the Borrowers is, or is
claimed to be, responsible.
"Indebtedness" of any Person means, without duplication and as
of any date of determination, all Liabilities of such Person, and to the extent
not otherwise included in Liabilities, the following:
(a) all obligations for Indebtedness for Borrowed Money or for
the deferred purchase price of property or services,
(b) all obligations (including, during the noncancellable term
of any lease in the nature of a title retention agreement, all future
payment obligations under such lease discounted to their present value
in accordance with GAAP) secured by any Lien to which any property or
asset owned or held by such Person is subject, whether or not the
obligation secured thereby shall have been assumed by such Person,
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(c) all obligations of other Persons constituting indebtedness
of such other Persons, to the extent such Person guaranteed,
indemnified or otherwise agreed to become contingently, secondarily or
primarily liable therefor, including, but not limited to, all
obligations of such Person consisting of recourse liability with
respect to accounts receivable sold or otherwise disposed of by such
Person,
(d) all obligations of such Person in respect of any interest
rate or foreign exchange swap, cap or collar agreement or similar
agreement between any Person and a financial institution providing for
the transfer or mitigation of interest and/or foreign exchange risks
either generally or under specific contingencies, and
(e) all of the Obligations to the extent then owing.
"Indebtedness for Borrowed Money" of any Person means, without
duplication and as of any date of determination, the sum at such time of the
following, to the extent they arise other than between Borrowers:
(a) all indebtedness for borrowed money or for the deferred
purchase price of property,
(b) all obligations of such Person in respect of any letters
of credit, banker's or other acceptances or similar obligations issued
or created for the account of such Person, excluding, however the PEDFA
Obligations,
(c) all Lease Obligations of such Person with respect to
Capital Leases,
(d) all indebtedness, whether or not in any such case the same
was for money borrowed,
(i)represented by notes payable, and drafts accepted,
that represent extensions of credit,
(ii) constituting obligations evidenced by bonds,
debentures, notes or similar instruments, or
(iii) upon which interest charges are customarily
paid or that was issued or assumed as full or partial payment
for property;
but excluding trade and other accounts payable in the ordinary course of
business in accordance with customary trade terms and which are not overdue (as
determined in accordance with customary
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trade practices) or which are being disputed in good faith by such Person and
for which adequate reserves are being provided on the books of such Person in
accordance with GAAP and excluding inter-Borrower indebtedness to the extent
eliminated in consolidation, as reflected in the Consolidated financial
statements of the Borrowers and the Subsidiaries furnished to the Agent and the
Lenders in accordance with the provisions of this Agreement.
"Interest Rate Election Notice" has the meaning described
in Section 2.3.2(d).
"Interest Period" means as to any LIBOR Loan, the period
commencing on and including the date such LIBOR Loan is made (or on the
effective date of the Borrowers' election to convert any Prime Loan to a LIBOR
Loan in accordance with the provisions of this Agreement) and ending on and
including the day which is 30, 60, 90 or 180 days thereafter, as selected by the
Borrowers in accordance with the provisions of this Agreement, and thereafter,
each period commencing on the last day of the then preceding Interest Period for
such LIBOR Loan and ending on and including the day which is 30, 60, 90 or 180
days thereafter, as selected by the Borrowers in accordance with the provisions
of this Agreement; provided, however that:
(a) the first day of any Interest Period shall be a Eurodollar
Business Day;
(b) if any Interest Period would end on a day that shall not
be a Eurodollar Business Day, such Interest Period shall be extended to
the next succeeding Eurodollar Business Day unless such next succeeding
Eurodollar Business Day would fall in the next calendar month, in which
case, such Interest Period shall end on the next preceding Eurodollar
Business Day; and
(c) no Interest Period shall extend beyond the Revolving
Credit Expiration Date.
"Interest Rate" means the Prime Rate or the LIBOR Rate, as
applicable.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the income tax regulations issued
thereunder.
"Laws" means all ordinances, statutes, rules, regulations,
orders, injunctions, writs, permits, approvals, authorizations or decrees of any
Governmental Authority or
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political subdivision or agency thereof, or of any court or similar entity
established by any thereof or of common law.
"Lease Obligations" of any Person means, as of any date of
determination, the rental commitments of such Person for such period under
leases for real and/or personal property (net of rent from subleases thereof,
but including Taxes, insurance, maintenance and similar expenses which such
Person is obligated to pay under the terms of said leases, except to the extent
that such Taxes, insurance, maintenance and similar expenses are payable by
sublessees), including rental commitments under Capital Leases.
"Lender" means (a) NationsBank in its capacity as a Lender,
CoreStates, Chase and PNC and (b) each Person that becomes an Assignee pursuant
to the provisions of Section 8.5.
"Letter of Credit" and "Letters of Credit" shall have the
meanings described in Section 2.2.1 hereof and shall also include the PEDFA
Obligations.
"Letter of Credit Agreement" means, as of any date of
determination, each letter of credit application and agreement substantially in
the form of the Agent's then standard form of application for letter of credit
or such other form or forms as may be approved by the Agent, executed and
delivered by the Borrowers in connection with the issuance of a Letter of
Credit, as the same may from time to time be amended, restated, supplemented or
modified and includes the PEDFA Reimbursement Agreement; and "Letter of Credit
Agreements" means the collective reference to each Letter of Credit Agreement
and the PEDFA Reimbursement Agreement in effect at any time and from time to
time.
"Letter of Credit Cash Collateral Account" has the meaning
described in Section 2.2.10.
"Letter of Credit Commitment" means the agreement of the
Agent, in its capacity as a Lender, to issue Letters of Credit in accordance
with the provisions of this Agreement and the Letter of Credit Agreements and to
assume liability for the PEDFA Obligations in accordance with the provisions of
the PEDFA Participation and Reimbursement Agreements, and the agreement of each
Lender to purchase undivided participation interests in such Letters of Credit
and in the PEDFA Obligations in accordance with the provisions of this
Agreement; "Letter of Credit Commitments" means the collective reference to the
Letter of Credit Commitments of the Agent and the Lenders.
"Letter of Credit Committed Amount" has the meaning described
in Section 2.2.1.
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"Letter of Credit Documents" means any and all drafts under or
purporting to be under a Letter of Credit, any Letter of Credit Agreement, and
any other instrument, document or agreement executed and/or delivered by any or
all of the Borrowers and/or any other Person under, pursuant to or in connection
with a Letter of Credit or any Letter of Credit Agreement.
"Letter of Credit Facility" means the facility established by
the Agent, in its capacity as a Lender, pursuant to Section 2.2 of this
Agreement.
"Letter of Credit Fee" and "Letter of Credit Fees" have the
meanings described in Section 2.2.2 hereof.
"Letter of Credit Obligations" means all Obligations of the
Borrowers under and with respect to the Letters of Credit and the Letter of
Credit Agreements, including, the PEDFA Obligations, and the PEDFA Reimbursement
Agreement.
"Liabilities" means, as of any date or for any period of
determination, all liabilities that should, in accordance with GAAP consistently
applied, be classified as liabilities on a Consolidated balance sheet of the
Borrowers and their Subsidiaries.
"LIBOR Base Rate" means for any Interest Period with respect
to any LIBOR Loan, the per annum interest rate (rounded upward, if necessary, to
the nearest next 1/16 of 1%) quoted to the Agent, on an immediately available
funds basis, at or about 11:00 a.m. (London time) on the date that is two (2)
Eurodollar Business Days prior to the first day of such Interest Period, for the
offering by leading banks in the London interbank Eurodollar market of Dollar
deposits with the Agent for a period comparable in time to the duration of such
Interest Period and in amounts comparable to the amount of such LIBOR Loan as to
which the LIBOR Base Rate is to be determined.
"LIBOR Loan" means any Loan for which interest is to be
computed with reference to the LIBOR Rate.
"LIBOR Rate" means for any Interest Period with respect to any
LIBOR Loan, the per annum rate of interest calculated pursuant to the following
formula:
LIBOR Rate = LIBOR BASE RATE + Applicable Margin
-------------------------
100% - Reserve Percentage
"Lien" means any mortgage, deed of trust, deed to secure debt,
grant, pledge, security interest, assignment, encumbrance, judgment, lien, claim
or charge of any kind, whether perfected or
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unperfected, avoidable or unavoidable, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Laws of any jurisdiction, excluding the precautionary filing of any
financing statement by any lessor in a true lease transaction, by any bailor in
a true bailment transaction or by any consignor in a true consignment
transaction under the Laws of any jurisdiction or the agreement to give any
financing statement by any lessee in a true lease transaction, by any bailee in
a true bailment transaction or by any consignee in a true consignment
transaction.
"Loan" means each advance under the Revolving Loan and "Loans"
means the collective reference to all advances under the Revolving Loan.
"Loan Notice" has the meaning described in Section 2.1.2.
"Long-Term Liabilities" means, with respect to any Person, the
aggregate amount of all Liabilities of such Person other than Current
Liabilities.
"Mandatory Prepayment" and "Mandatory Prepayments" has
the meaning described in Section 2.4.7.
"Materially Adverse Effect" means an effect, singly or in the
aggregate on the business, assets, liabilities, condition (financial or
otherwise), results of operations or business prospects of any or all of the
Borrowers (taken as a whole) that would result in the Borrowers violating any of
the covenants set forth in Sections 5.1.14 through 5.1.18 of this Agreement.
"Maximum Rate" has the meaning described in Section 2.3.6.
"Minimum Net Worth Amount" has the meaning described in
Section 5.1.14.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which any or all of the Borrowers and/or any
Commonly Controlled Entity is required to contribute or has contributed within
the immediately preceding five (5) years.
"Net Proceeds" means proceeds or other consideration received
by any Borrower from any Asset Disposition (including, without limitation, notes
or other debt or equity securities, assumption of any Liabilities or other
tangible or intangible economic benefits received by such Borrower in connection
with any
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Asset Disposition), net of customary and reasonable settlement costs, fees and
expenses of such Asset Disposition.
"Net Outstandings" of any Lender means, as of any date of
determination, the sum of (i) all amounts paid by such Lender (other than
pursuant to Section 2.4.8) to the Agent with respect to the Revolving Loan or
otherwise under this Agreement, minus (ii) all amounts paid by the Agent to such
Lender which are received by the Agent and which, pursuant to this Agreement,
are paid over to such Lender for application in reduction of the outstanding
principal balance of the Revolving Loan.
"Net Worth" means, as to the Borrowers and Subsidiaries and as
of any date or for any period of determination, the excess of (a) Assets, over
(b) Liabilities, as calculated on a Consolidated basis.
"Non-Ratable Loan" has the meaning described in Section
2.1.2(d).
"Note" means a Revolving Credit Note; and "Notes" means
collectively the Revolving Credit Notes and all other promissory notes which may
from time to time evidence all or any portion of the Obligations.
"Obligations" means all present and future indebtedness,
obligations, and liabilities, whether now existing or contemplated or hereafter
arising, of any or all of the Borrowers to the Agent and/or any or all of the
Lenders under, arising pursuant to, in connection with and/or on account of the
provisions of this Agreement, each Note, and any of the other Financing
Documents, the Loans, and any of the Facilities including, without limitation,
the principal of, and interest on, each Note, late charges, the Fees and
Enforcement Costs.
"Original Closing Date" shall mean September 26, 1994.
"Outstanding Letter of Credit Obligations" means the aggregate
face amount of all Letters of Credit at any one time outstanding and issued by
the Agent pursuant to the provisions of this Agreement, plus the aggregate face
amount of the PEDFA Obligations, plus the amount of any unpaid Letter of Credit
Fees accrued or scheduled to accrue on such Letters of Credit, less the
aggregate amount of all drafts issued under or purporting to have been issued
under such Letters of Credit and/or the PEDFA Letters of Credit that have been
paid by the Agent and for which the Agent has been reimbursed by the Borrowers
in full in accordance with Section 2.2.5 and the Letter of Credit Agreements,
and for which
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the Agent has no further obligation or commitment to restore all or any portion
of the amounts drawn and reimbursed.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PEDFA $1,400,000 Letter of Credit" means that certain
irrevocable letter of credit issued by PNC Bank, National Association as
security for the $1,400,000 Pennsylvania Economic Development Financing
Authority Economic Development Revenue Bonds, 1990 Series D6 (C&D Charter Power
Systems, Inc.), as the same may be amended, restated, reissued, renewed,
supplemented or otherwise modified at any time and from time to time.
"PEDFA $1,900,000 Letter of Credit" means that certain
irrevocable letter of credit issued by PNC Bank, National Association as
security for the $1,900,000 Pennsylvania Economic Development Financing
Authority Economic Development Revenue Bonds, 1990 Series B2 (C&D Charter Power
Systems, Inc., as the same may be amended, restated, reissued, renewed,
supplemented or otherwise modified at any time and from time to time.
"PEDFA Letters of Credit" means collectively the PEDFA
$1,400,000 Letter of Credit and the PEDFA $1,900,000 Letter of Credit.
"PEDFA Loans" means those loans previously made by the
Pennsylvania Economic Development Financing Authority to C&D Charter on or about
December 1, 1991 in the original aggregate principal amount of Three Million
Three Hundred Thousand Dollars
($3,300,000).
"PEDFA Obligations" means any and all primary and contingent
obligations, indebtedness and liabilities of the Agent under and in connection
with either or both of the PEDFA Participation and Reimbursement Agreements,
including, without limitation, the Agent's obligation to reimburse PNC Bank,
National Association for any amounts drawn under either or both of the Letters
of Credit and to pay certain fees and other amounts as provided in the PEDFA
Participation and Reimbursement Agreements and the Agent's obligation to pay
fees, costs and charges.
"PEDFA $1,400,000 Participation and Reimbursement Agreement"
means that certain participation and reimbursement agreement dated as of
September 1, 1994 by and between the Agent and PNC Bank, National Association
pursuant to which the Agent agreed to reimburse PNC Bank, National Association
for any amounts drawn under the PEDFA $1,400,000 Letter of Credit and to pay
certain fees and other amounts due with respect to the PEDFA $1,400,000 Letter
of Credit, as the same may be amended, restated,
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supplemented or otherwise modified at any time and from time to time.
"PEDFA $1,900,000 Participation and Reimbursement Agreement"
means that certain participation and reimbursement agreement dated as of
September 1, 1994 by and between the Agent and PNC Bank, National Association
pursuant to which the Agent agreed to reimburse PNC Bank, National Association
for any amounts drawn under the PEDFA $1,900,000 Letter of Credit and to pay
certain fees and other amounts due with respect to the PEDFA $1,900,000 Letter
of Credit, as the same may be amended, restated, supplemented or otherwise
modified at any time and from time to time.
"PEDFA Participation and Reimbursement Agreements" means
collectively the PEDFA $1,900,000 Participation and Reimbursement Agreement and
the PEDFA $1,400,000 Participation and Reimbursement Agreement.
"PEDFA Reimbursement Agreement" means that certain
reimbursement agreement dated September 26, 1994 by and among the Agent and the
Borrowers pursuant to which the Borrowers jointly and severally agreed to
reimburse the Agent for any amounts paid by the Agent on account of the PEDFA
Obligations, as the same may be amended, restated, supplemented or otherwise
modified at any time and from time to time.
"Permitted Acquisitions" means the acquisition or purchase of,
or investment in, any Person, any operating division or unit of any Person, or
the stock or assets of any Person or the combination with any Person regardless
of the structure of the transaction (provided that such combination would not
otherwise result in a Default or Event of Default), engaged principally in the
lines of business set forth in Section 5.1.7; provided, however that (i) the
aggregate purchase price of, investment in, expenditures relating to (excluding
customary and reasonable transaction costs), and assumed Liabilities in
connection with, any given acquisition, purchase, or investment cannot exceed
Fifteen Million Dollars ($15,000,000), (ii) the total purchase prices of,
investments in, expenditures relating to (excluding customary and reasonable
transaction costs), and assumed Liabilities in connection with, all such
acquisitions, purchases and/or investments made on or after the Closing Date
cannot exceed the Total Revolving Credit Committed Amount in effect from time to
time, (iii) such acquisition, purchase, assumption of liabilities or investment
cannot otherwise constitute or give rise to a Default or an Event of Default,
(iv) the Borrowers have furnished financial projections in form and content
reasonably acceptable to the Agent and the Required Lenders which give effect to
such acquisition,
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purchase or investment and which indicate that such acquisition, purchase,
assumption of Liabilities and/or investment would not cause a Default or Event
of Default, and (v) a Phase I environmental assessment of any real property to
be acquired or purchased by any of the Borrowers or owned by any Person to be
acquired or purchased by any of the Borrowers or owned by any Person in which
any of the Borrowers intend to make an investment, has been performed by a
reputable and recognized environmental consulting firm engaged by the Agent and
reasonably acceptable to the Required Lenders and has revealed no material
Hazardous Materials Contamination or material violations of any Environmental
Laws, the remediation of or compliance with which could result in a material
Liability not reflected in the purchase price. The Agent agrees to obtain
competitive bids from at least three (3) environmental consulting firms prior to
selecting an environmental consultant to prepare the required Phase I
environmental assessments.
"Permitted Asset Disposition" means a sale, lease, transfer or
other disposition of any asset or property of any of the Borrowers which
satisfies the following conditions:
(a) the Net Proceeds to be paid or received with respect to
such sale, lease, transfer or other disposition are less than or equal
to One Million Dollars ($1,000,000),
(b) the sum of (i) the Net Proceeds to be paid or received
with respect to such sale, lease, transfer or other disposition of any
asset or property of any of the Borrowers, plus (ii) the Net Proceeds
paid or received with respect to all other sales, leases, transfers or
other dispositions made during the then current fiscal year, is less
than or equal to Two Million Dollars ($2,000,000), and
(c) there does not exist a Default or an Event of Default at
the time of such sale, lease, transfer or other disposition.
"Permitted Dividends" means (i) cash dividends paid or to be
paid by the Parent which are no greater than $3,175,000 during any fiscal year,
(ii) any dividend declared by a Wholly Owned Subsidiary of the Parent and (iii)
any stock dividend declared by the Parent or any Wholly Owned Subsidiary of the
Parent.
"Permitted Liens" means:
(a) Liens securing Taxes (excluding any Lien imposed by the
PBGC pursuant to any of the provisions of ERISA), which are not
delinquent or which the Agent has determined in the
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exercise of its reasonable discretion (i) are being diligently contested in good
faith and by appropriate proceedings, (ii) the Borrowers have set aside adequate
reserves in accordance with GAAP to pay any such Taxes or otherwise have
sufficient availability under the Revolving Credit Facility to cover any such
Taxes, and (iii) are not, and will not be with appropriate filing, the giving of
notice and/or the passage of time, entitled to priority over any Lien of the
Agent and the Lenders,
(b) Liens consisting of deposits or pledges made in the
ordinary course of business in connection with, or to secure payment
of, obligations under workers' compensation, social security,
unemployment insurance or similar Laws or under payment or performance
bonds,
(c) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use
of real property owned by a Borrower (i) in existence as of the Closing
Date, (ii) which arise after the Closing Date, but which remain in
effect for less than one hundred twenty (120) days after any Borrower
learns of such Liens, or (iii) which arise after the Closing Date, but
which do not prevent the Agent and the Lenders from realizing on the
full value of any such real property which is collateral for any of the
Obligations, as determined by the Agent and the Required Lenders in
their good faith, reasonable discretion,
(d) Liens securing Permitted Preferred Indebtedness; provided
that such Liens at all times encumber only the assets or property, the
purchase price of which was financed with the Permitted Preferred
Indebtedness or any other assets or property of any of the Borrowers,
(e) Liens in favor of the Agent for the ratable benefit of the
Lenders,
(f) judgment Liens to the extent the entry of such judgment
does not constitute a Default or an Event of Default under the terms of
this Agreement,
(g) purchase money Liens upon Assets acquired after the
Closing Date securing Indebtedness for Borrowed Money permitted by
Section 5.2.5(h),
(h) Capital Leases if and to the extent permitted by
Section 5.2.5,
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(i) Liens in favor of any of the Lenders securing Indebtedness
permitted by Section 5.2.5(g).
(j) Statutory Liens of materialmen, merchants, carriers,
workers, repairers or similar Persons incurred in the ordinary course
of business for sums not overdue or for sums being contested in good
faith by appropriate proceedings, provided that the Borrowers shall
have set aside on their books adequate reserves therefor in accordance
with GAAP.
(k) such other Liens, if any, as are set forth on EXHIBIT "B"
attached hereto and made a part hereof.
"Permitted Preferred Indebtedness" means Indebtedness for
Borrowed Money incurred by any or all of the Borrowers on or after the Closing
Date (x) to finance the acquisition of Assets or property or the Capital Lease
of Assets or property, which Indebtedness for Borrowed Money has below-market
interest rates, tax-exempt interest, or other terms which, taken as a whole, are
more advantageous to the Borrowers than those contained herein and (y) which the
Lenders declined to extend to the Borrowers after having been offered the
opportunity by the Borrowers to provide such Indebtedness for Borrowed Money.
The Agent and the Lenders agree that the Borrowers may assume that the Lenders
have declined to extend the requested Indebtedness for Borrowed Money unless the
Agent or any of the Lenders have notified the Borrowers in writing to the
contrary within fifteen (15) days of their receipt of all proposed material
terms and conditions of the proposed Indebtedness for Borrowed Money in writing.
"Permitted Uses" means:
(a) with respect to the Letters of Credit (i) to secure
obligations of any of the Borrowers under any workers' compensation
Laws or insurance and (ii) for such other purposes as the Agent shall
approve in its sole and absolute discretion, subject to the provisions
of 2.2. In addition, the Agent's agreement to assume liability for the
PEDFA Obligations shall constitute a Permitted Use of the Letter of
Credit Facility.
(b) with respect to the Revolving Loan (i) the payment of
ordinary course, working capital expenses of any or all of the
Borrowers (including ordinary course operational expenses), (ii)
Capital Expenditures (excluding Capital Leases) if and to the extent
permitted by Section 5.2.7, and (iii) Permitted Acquisitions. Permitted
Uses do not include investments in any securities or similar
instruments or investments made for arbitrage purposes. Notwithstanding
the foregoing, the
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Borrowers may deposit or invest Revolving Loan proceeds in accounts or other
short-term investments having maturities of not more than one hundred twenty
(120) days; provided, that (i) such deposits or investments are intended to be
maintained in such accounts or other investments by the Borrowers for not more
than one hundred twenty (120) days, (ii) the Borrowers intend to use the
Revolving Loan proceeds so deposited or invested for Permitted Uses within such
one hundred twenty (120) day period, and (iii) the Borrowers intended to
temporarily defer using such Revolving Loan proceeds for Permitted Uses for
legitimate and beneficial tax or other economic reasons, as disclosed to the
Agent and the Lenders promptly upon request.
(c) the purchase of Stock if and to the extent such purchase
is expressly permitted by the provisions of this Agreement.
"Person" means and includes an individual, a corporation, a
partnership, a limited liability company, a joint venture, a trust, an
unincorporated association, a government or political subdivision or agency
thereof or any other organization or entity.
"Plan" means any pension plan which is covered by Title IV of
ERISA and in respect of which any of the Borrowers or a Commonly Controlled
Entity is an "employer" as defined in Section 3 of ERISA, except that the term
"Plan" shall not include a Multiemployer Plan.
"Post-Default Rate" means with respect to all of the
Obligations, as of any date of determination, the highest Interest Rate then in
effect, plus three percent (3%) per annum.
"Post-Termination Date Letter of Credit" and "Post-Termination
Date Letters of Credit" have the meaning described in Section 2.2.10.
"Prepayment" means a Revolving Loan Optional Prepayment or a
Mandatory Prepayment, as the case may be; and "Prepayments" mean collectively
Revolving Loan Optional Prepayments and Mandatory Prepayments.
"Prime Loan" means any Loan for which interest is to be
computed with reference to the Prime Rate.
"Prime Rate" means the Base Rate in effect at any time and
from time to time, plus the Applicable Margin.
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"Proprietary Rights" means all of each Borrower's now owned
and hereafter arising or acquired patents, copyrights, trademarks, and all other
rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing, and
all rights to sue for past, present and future infringement of any of the
foregoing.
"Proportionate Share" means at any time and as to any Lender,
the percentage derived by dividing the unpaid principal amount of the Loans and
Letter of Credit Obligations (including, the PEDFA Obligations) owing to that
Lender by the aggregate unpaid principal amount of all Loans and Letter of
Credit Obligations (including, the PEDFA Obligations) then outstanding; or if no
Loans or Letter of Credit Obligations are outstanding, by dividing the total
amount of such Lender's Commitments by the total amount of the Commitments of
the Agent and all of the Lenders.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, but excluding reportable
events with respect to which the thirty (30) day notice requirement has been
waived by the PGBC.
"Required Lenders" means at any time of determination one or
more of the Lenders holding at least sixty-six and two/thirds (66-2/3%) of the
Commitments.
"Reserve Percentage" means, at any time, the then current
maximum rate for which reserves (including any basic, supplemental, marginal and
emergency reserves) are required to be maintained by member banks of the Federal
Reserve System under Regulation D of the Board of Governors of the Federal
Reserve System against "Eurocurrency liabilities", as that term is defined in
Regulation D. The LIBOR Rate with respect to each LIBOR Loan shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Percentage applicable thereto.
"Responsible Officer" means the chief executive officer of the
Parent or the president of the Parent or, with respect to financial matters, the
Financial Officer.
"Revolving Credit Commitment" means the agreement of a Lender
relating to the making of the Revolving Loan and advances thereunder subject to
and in accordance with the provisions of this Agreement; "Revolving Credit
Commitments" means the collective reference to the Revolving Credit Commitment
of each of the
Lenders.
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"Revolving Credit Commitment Period" means the period of time
from the Closing Date to the Business Day preceding the Revolving Credit
Termination Date.
"Revolving Credit Committed Amount" has the meaning
described in Section 2.1.1.
"Revolving Credit Expiration Date" means February 1, 2001.
"Revolving Credit Facility" means the facility established by
the Lenders pursuant to Section 2.1 of this Agreement.
"Revolving Credit Note" and "Revolving Credit Notes" have the
meanings described in Section 2.1.4.
"Revolving Credit Optional Reduction" and "Revolving Credit
Optional Reductions" have the meanings described in Section 2.1.8.
"Revolving Credit Proportionate Share" has the meaning
described in Section 2.1.1.
"Revolving Credit Termination Date" means the earlier of (a)
the Revolving Credit Expiration Date, or (b) the date on which the Revolving
Credit Commitments are terminated pursuant to Section 6.2.2.
"Revolving Credit Unused Line Fee" and "Revolving Credit
Unused Line Fees" have the meanings described in Section 2.1.7.
"Revolving Loan" has the meaning described in Section 2.1.1.
"Revolving Loan Account" has the meaning described in
Section 2.1.6.
"Revolving Loan Optional Prepayment" and "Revolving Loan
Optional Prepayments" have the meanings described in Section 2.1.5.
"Settlement Date" means each Business Day after the Closing
Date on which settlement is to be made among the Lenders in accordance with the
provisions of Section 2.4.8.
"Settlement Report" means each report, substantially in the
form attached hereto as EXHIBIT C, prepared by the Agent and delivered to each
Lender and setting forth, among other things, as of the Settlement Date
indicated thereon and as of the next
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preceding Settlement Date, the aggregate principal balance of the Revolving Loan
outstanding, each Lender's Proportionate Share of the Revolving Loan and each
Lender's Net Outstandings, and all payments of principal, interest and Fees
received by the Agent from the Borrowers for the ratable benefit of the Lenders
during the period beginning on such next preceding Settlement Date and ending on
such Settlement Date.
"State" means the State of Maryland.
"Stock" means the issued and outstanding common stock of
the Parent.
"Subordinated Indebtedness" means any Indebtedness incurred at
any time by any or all of the Borrowers, the repayment of which is subordinated
to the Obligations by a written agreement in form and substance satisfactory to
the Agent in its sole and absolute discretion.
"Subsidiary" means any corporation the majority of the voting
shares of which at the time are owned directly by any of the Borrowers and/or by
one or more Subsidiaries of any of the Borrowers.
"Tangible Net Worth" means, as to the Borrowers and the
Subsidiaries and as of any date or for any period of determination, the sum at
such time or during such period of:
(a) Net Worth; less
(b) the total of (i) all Assets which would be classified as
intangible assets under GAAP consistently applied, (ii) applicable
reserves, allowances and other similar properly deductible items to the
extent deductible in accordance with GAAP when calculating Net Worth,
(iii) goodwill, (iv) the amount of all accounts receivable and notes
receivable from stockholders, officers, directors and/or employees,
which in any individual case or in the aggregate, exceed Two Hundred
Fifty Thousand Dollars ($250,000) and (v) the aggregate principal
amount of any and all Subordinated Indebtedness to the extent included
in Net Worth; all as calculated on a Consolidated basis.
"Taxes" means all taxes and assessments whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character (including all penalties or interest thereon), which at any time may
be assessed, levied, confirmed or imposed by any Governmental Authority on any
of the Borrowers or any of their
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properties or assets or any part thereof or in respect of any of their
franchises, businesses, income or profits.
"Total Net Proceeds" has the meaning described in Section
2.4.7.
"Total Revolving Credit Committed Amount" has the meaning
described in Section 2.1.1.
"Wholly Owned Subsidiary" means any Subsidiary all the shares
of stock of all classes of which (other than directors' (or their nominees)
qualifying shares) at the time are owned directly or indirectly by any of the
Borrowers and/or by one or more Wholly Owned Subsidiaries of any of the
Borrowers.
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS. Unless
otherwise defined herein, as used in this Agreement and in any certificate,
report or other document made or delivered pursuant hereto, accounting terms not
otherwise defined herein, and accounting terms only partly defined herein, to
the extent not defined, shall have the respective meanings given to them under
GAAP. The words "hereof", "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and article, section, subsection,
schedule and exhibit references are references to articles, sections or
subsections of, or schedules or exhibits to, as the case may be, this Agreement
unless otherwise specified. As used herein, the singular number shall include
the plural, the plural the singular and the use of the masculine, feminine or
neuter gender shall include all genders, as the context may require. Without
implying any limitation on the foregoing, any reference to the "Borrowers" in
any provision of this Agreement or any of the other Financing Documents shall be
deemed to refer to each and any one or more of the Borrowers, jointly and
severally. Reference to any one or more of the Financing Documents shall mean
the same as the foregoing may from time to time be amended, restated,
substituted, extended, renewed, supplemented or otherwise modified, so long as
and to the extent such amendment, supplement, modification or replacement is
either not prohibited by the terms of this Agreement or is consented to as
required under the terms of this Agreement. References to any Person include its
permitted successors and assigns.
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ARTICLE 2
THE CREDIT FACILITIES
SECTION 2.1 THE REVOLVING CREDIT FACILITY.
2.1.1 REVOLVING CREDIT FACILITY. Subject to and
upon the provisions of this Agreement, and in reliance upon the representations
and warranties contained herein and/or in any of the Financing Documents, the
Lenders collectively establish a revolving credit facility jointly and severally
in favor of the Borrowers. The aggregate of all advances under the Revolving
Credit Facility are sometimes referred to in this Agreement collectively as the
"Revolving Loan". Advances repaid may be readvanced and reborrowed in accordance
with the provisions of this Agreement. Advances may only be used for Permitted
Uses.
The amount set forth below opposite each Lender's name is herein called
such Lender's "Revolving Credit Committed Amount" and the total of each Lender's
Revolving Credit Committed Amount is herein called the "Total Revolving Credit
Committed Amount". The proportionate share set forth below opposite each
Lender's name is herein called such Lender's "Revolving Credit Proportionate
Share":
Revolving Credit Revolving Credit
Lender Committed Amount Proportionate Share
- ------ ---------------- -------------------
NationsBank $27,950,000 43%
CoreStates $19,500,000 30%
Chase $ 8,775,000 13.5%
PNC $ 8,775,000 13.5%
Total Revolving
Credit Committed
Amount: $65,000,000 100%
Neither the Agent nor any of the Lenders shall be responsible for the Revolving
Credit Commitment of any other Lender, nor will the failure of any Lender to
perform its obligations under its Revolving Credit Commitment in any way relieve
any other Lender from performing its obligations under its Revolving Credit
Commitment.
During the Revolving Credit Commitment Period, the Borrowers may
request advances under the Revolving Credit Facility in accordance with the
provisions of this Agreement; provided that after giving effect to the
Borrowers' request:
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(i) the outstanding principal balance of each
Lender's Proportionate Share of the Revolving Loan and of the Letter of
Credit Obligations (including, the PEDFA Obligations) would not exceed
such Lender's Revolving Credit Committed Amount, and
(ii) the aggregate outstanding principal balance of
the Revolving Loan and all Letter of Credit Obligations (including, the
PEDFA Obligations) would not exceed the Total Revolving Credit
Committed Amount.
2.1.2 PROCEDURE FOR MAKING ADVANCES UNDER THE
REVOLVING LOAN. (a) (i) The Borrowers may jointly and severally borrow under the
Revolving Credit Facility on any Eurodollar Business Day if the borrowing is a
LIBOR Loan or on any Business Day if the borrowing is a Prime Loan. Each
borrowing under the Revolving Credit Facility which is a Prime Loan shall be in
a minimum principal amount of Five Hundred Thousand Dollars ($500,000) and each
borrowing under the Revolving Credit Facility which is a LIBOR Loan shall be in
a minimum principal amount of Two Million Dollars ($2,000,000).
(ii) The Borrowers shall give the Agent oral or written notice
(a "Loan Notice") not later than 12:00 p.m (Baltimore Time) on the Business Day
of the requested date for the making of a Prime Loan, and not later than 12:00
p.m (Baltimore Time) on the third Eurodollar Business Day before the requested
date for the making of a LIBOR Loan. Each Loan Notice shall be in the form of
EXHIBIT D, shall be accompanied by or include an Interest Rate Election Notice,
and shall specify (1) the requested date for the making of an advance, which
shall be, in the case of a LIBOR Loan, a Eurodollar Business Day, and, in the
case of a Prime Loan, a Business Day, (2) the amount of the requested advance,
and (3) if requested by the Agent, the purpose of the requested borrowing.
(iii) Any oral Loan Notice shall be confirmed in writing by
the Borrowers within three (3) Business Days after the making of the requested
advance under the Revolving Loan. Each Loan Notice shall be irrevocable. A
Financial Officer of the Parent may from time to time designate in writing one
or more other Persons authorized to submit Loan Notices and Interest Rate
Election Notices.
(b) All advances of the Revolving Loan shall be disbursed by the Agent
on the requested borrowing date, in funds immediately available to one or more
of the Borrowers, by credit to an account of any of the Borrowers at the Agent's
Office or in such other manner as may have been specified in the applicable Loan
Notice and as shall be acceptable to the Agent in its sole and absolute
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discretion. The Agent shall only disburse those advances made available to the
Agent by the Lenders in accordance with Section 2.1.2(c).
(c) Upon the Agent's receipt of a Loan Notice, the Agent shall promptly
notify each Lender of the amount of each advance to be made by such Lender on
the requested borrowing date under such Lender's Revolving Credit Commitment and
the Interest Rate applicable to such advance. Not later than 2:00 p.m.
(Baltimore Time) on each requested borrowing date, each Lender shall, if it has
received timely notice from the Agent of the Borrowers' request for an advance,
make available to the Agent, in funds immediately available to the Agent at the
Agent's Office, such Lender's Proportionate Share of the advance to be made on
such date.
(d) Unless the Agent shall have received notice from a Lender prior to
2:00 p.m. (Baltimore Time) on the requested date for the making of an advance
under the Revolving Loan that such Lender will make available to the Agent, such
Lender's Revolving Credit Proportionate Share of the advance requested to be
made on such date, the Agent will assume that such Lender will not make such
amount available to the Agent on such date in accordance with Section 2.1.2(c)
and such Lender's Revolving Credit Proportionate Share of the requested advance
shall not be made to the Borrowers. The failure of any Lender to fund its
Revolving Credit Proportionate Share of any requested advance shall not relieve
any other Lender of its obligation to fund its Revolving Credit Proportionate
Share of such advance. If, however, such other Lenders fund their Revolving
Credit Proportionate Share of the requested advance (each a "Non-Ratable Loan",
and collectively, the "Non-Ratable Loans") based on the determination of the
Agent and such Lenders that they are in fact obligated to fund such requested
advance pursuant to the terms of this Agreement, the Obligations due and payable
with respect to such Non-Ratable Loans shall have a first priority claim with
respect to any payments or collections received on account of the Revolving Loan
and any and all such payments or collections shall be shared between the Lenders
which elected to make the Non-Ratable Loans, on a pro-rata basis,
notwithstanding any other provision of this Agreement. If and to the extent the
Lenders fund their Revolving Credit Proportionate Share of any requested advance
as provided herein, the Agent shall fund the requested advance prior to 3:00
p.m. (Baltimore time) to the extent of the funds made available by the Lenders.
The Agent shall promptly notify the Borrowers of any Lender's refusal
to fund its Revolving Credit Proportionate Share of any requested advance.
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2.1.3 LENDER PROTECTION LOANS. The Borrowers
hereby irrevocably authorize the Lenders at any time and from time to time after
and during the continuance of a Default or an Event of Default, without further
request from or notice to the Borrowers, to make advances under the Revolving
Loan which the Agent, in its sole and absolute discretion, deems necessary or
appropriate to protect the interests of the Agent and/or any or all of the
Lenders under this Agreement, including, without limitation, advances under the
Revolving Loan made to cover (i) unpaid debit balances in the Revolving Loan
Account, (ii) past due payments of principal and/or interest on account of any
Loan, (iii) any other Obligations (including any Letter of Credit Obligations)
not paid as and when due and payable, and (iv) any unpaid Enforcement Costs
which remain outstanding for more than ten (10) days after the giving of notice
by the Agent to the Borrowers. Each such advance shall be made as a Prime Loan.
The Borrowers acknowledge and agree that the Agent and the Lenders shall be
entitled, at their option, to reduce the availability under the Revolving Loan
by the amount of any Enforcement Costs not paid by the Borrowers immediately
upon demand, notwithstanding the fact that the Lenders cannot make advances
under this Section 2.1.3 until such Enforcement Costs have been outstanding for
at least ten (10) days after the giving of notice by the Agent to the Borrowers.
2.1.4 REVOLVING CREDIT NOTES. The joint and
several obligations of the Borrowers to pay each and every Lender's
Proportionate Share of the Revolving Loan, with interest, shall be evidenced by
a series of promissory notes (as from time to time extended, amended, restated,
supplemented or otherwise modified, collectively the "Revolving Credit Notes"
and individually a "Revolving Credit Note") substantially in the form of EXHIBIT
A attached hereto and made a part hereof, with appropriate insertions. Each
Lender's Revolving Credit Note shall be dated as of the Closing Date, shall be
payable to the order of such Lender at the times provided in the Revolving
Credit Note, and shall be in the maximum principal amount of such Lender's
Revolving Credit Commitment. The Borrowers acknowledge and agree that, if the
unpaid principal balance of the Revolving Loan outstanding from time to time
exceeds the aggregate face amount of the Revolving Credit Notes, the excess
shall bear interest at the Post-Default Rate and shall be payable, with
interest, ON DEMAND.
2.1.5 OPTIONAL PREPAYMENTS OF REVOLVING LOAN.
Subject to the provisions of Section 2.3.5, the Borrowers may, at their option,
at any time and from time to time prepay (each a "Revolving Loan Optional
Prepayment" and collectively the "Revolving Loan Optional Prepayments") the
Revolving Loan, in whole or in part without premium or penalty. Partial
Revolving Loan Optional Prepayments shall be in amounts not less than One
Hundred Thousand
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Dollars ($100,000). Revolving Loan Optional Prepayments shall be made following
a written notice to the Agent specifying the date and amount of any intended
Revolving Loan Optional Prepayment. The amount to be prepaid shall be paid by
the Borrowers to the Agent on the date specified for such prepayment in the
notice, which notice shall be irrevocable.
2.1.6 REVOLVING LOAN ACCOUNT. The Agent will
establish and maintain a loan account on its books (the "Revolving Loan
Account") to which the Agent will (a) DEBIT (i) the principal amount of each
advance under the Revolving Loan made by the Lenders as of the date made, (ii)
the amount of any interest accrued on the Revolving Loan as and when due, and
(iii) any other amounts due and payable by the Borrowers to the Agent and/or the
Lenders from time to time under the provisions of this Agreement in connection
with the Revolving Loan, including, without limitation, Enforcement Costs, Fees
and late charges, all as and when due and payable, and (b) CREDIT all payments
made by the Borrowers to the Agent on account of the Revolving Loan as of the
date made. All credit entries to the Revolving Loan Account are conditional and
shall be readjusted as of the date made if final payment is not received by the
Agent in cash or collected funds. The Borrowers hereby promise to pay to the
order of the Agent for the ratable benefit of the Lenders, on the Revolving
Credit Termination Date, an amount equal to the excess, if any, of all debit
entries over all credit entries recorded in the Revolving Loan Account. Any and
all periodic or other statements or reconciliations of the Revolving Loan
Account, and the information contained in those statements or reconciliations,
shall be presumed conclusively to be correct, absent manifest error, and shall
constitute an account stated between the Lenders and the Borrowers unless the
Agent receives specific written objection from any of the Borrowers within
thirty (30) Business Days after such statement or reconciliation shall have been
sent by the Agent to the Borrowers. The Agent and the Lenders acknowledge and
agree that the Borrowers' obligation to pay the Obligations evidenced by the
Revolving Credit Notes constitutes the same, and is not in duplication of, the
obligation to pay the Obligations as provided in this Section.
2.1.7 REVOLVING CREDIT UNUSED LINE FEE. The
Borrowers shall jointly and severally pay to the Agent, in arrears, for the
ratable benefit of the Lenders, a quarterly revolving credit unused line fee
(collectively, the "Revolving Credit Unused Line Fees" and individually, a
"Revolving Credit Unused Line Fee") in an amount to be determined based upon the
ratio of Funded Debt to EBITDA for the rolling four (4) quarter month period
covered by the then most recent financial statements furnished or required to be
furnished to the Agent pursuant to and in the form required by Section 5.1.1(a)
and Section 5.1.1(c). Within three (3) Business
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Days of the Agent's receipt of such financial statements in the form required,
the Agent shall calculate the ratio of Funded Debt to EBITDA for the then
rolling four (4) quarter period covered by such financial statements, and shall
notify the Borrowers and the Lenders of the Agent's determination. If such
financial statements are not furnished as and when required, the Borrowers may
not be permitted to select or change an Interest Rate or an Interest Period.
Following, the Agent's determination of the Funded Debt to EBITDA ratio, the
Revolving Credit Unused Line Fee shall be equal to the per annum "Fee Percentage
Amount" as set forth below multiplied by the difference between (a) the Total
Revolving Credit Committed Amount in effect from time to time and (b) the sum of
(i) the average daily outstanding principal balance of the Revolving Loan during
the then preceding quarterly period and (ii) the average daily face amount of
all Letters of Credit outstanding during such quarterly period:
Funded Debt to EBITDA Ratio Fee Percentage Amount
--------------------------- ---------------------
Less than 1.0 to 1.0 .125%
Greater than or equal to .125%
1.0 to 1.0, but less than
1.75 to 1.0
Greater than or equal to .16%
1.75 to 1.0, but less than
2.25 to 1.0
Greater than or equal to .19%
2.25 to 1.0, but less than
2.75 to 1.0
Greater than or equal to .23%
2.75 to 1.0, but less
than 3.0 to 1.0
Greater than or equal to
3.0 to 1.0 .50%
2.1.8 OPTIONAL REDUCTION OF TOTAL REVOLVING
CREDIT COMMITTED AMOUNT. The Borrowers shall have the right to reduce
permanently (each a "Revolving Credit Optional Reduction" and collectively the
"Revolving Credit Optional Reductions") the Total Revolving Credit Committed
Amount in effect from time to time in amounts not less than Five Million Dollars
($5,000,000) and in integral multiples of Five Hundred Thousand Dollars
($500,000), upon at least five (5) Business Days prior written notice to the
Agent specifying the date and amount of such Revolving Credit
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Optional Reduction. No Revolving Credit Optional Reduction shall be permitted
if, after giving effect to such reduction, the then outstanding principal
balance of the Revolving Loan and any and all then Outstanding Letter of Credit
Obligations exceeds the Total Revolving Credit Committed Amount as so reduced.
Such notice shall be irrevocable as to the amount and date of such Revolving
Credit Optional Reduction. After each such Revolving Credit Optional Reduction,
the Revolving Credit Unused Line Fee provided for in Section 2.1.7 hereof shall
be calculated at the times set forth in such section with respect to the Total
Revolving Credit Committed Amount as reduced. The Revolving Credit Committed
Amount of each Lender shall be reduced by such Lender's Proportionate Share of
each Revolving Credit Optional Reduction.
SECTION 2.2 THE LETTER OF CREDIT FACILITY.
2.2.1 LETTERS OF CREDIT. Subject to and upon the
provisions of this Agreement, and as a part of the Revolving Credit Commitments,
the Borrowers may, upon the prior approval of the Agent, obtain letters of
credit (as the same may from time to time be amended, supplemented or otherwise
modified, each a "Letter of Credit" and collectively the "Letters of Credit")
from the Agent from time to time from the Closing Date until the Business
Day preceding the Revolving Credit Termination Date. In addition, subject
to and upon the provisions of this Agreement, and as part of the Revolving
Credit Commitments, the Agent shall agree to assume liability for the PEDFA
Obligations in accordance with the provisions of the PEDFA Participation and
Reimbursement Agreements. The Borrowers will not be entitled to obtain a Letter
of Credit unless (a) the Borrowers are then able to obtain an advance under
the Revolving Loan from the Lenders in an amount not less than the amount of
the Letter of Credit requested by the Borrowers, and (b) the sum of the then
Outstanding Letter of Credit Obligations (including the aggregate face amount of
the PEDFA Obligations and the amount of the requested Letter of Credit) does not
exceed Eight Million Dollars ($8,000,000) (the "Letter of Credit Committed
Amount"). The Letters of Credit shall be available only for Permitted Uses.
2.2.2 LETTER OF CREDIT FEES. Prior to or
simultaneously with the opening of each Letter of Credit and the Agent's
execution and delivery of the PEDFA Participation and Reimbursement Agreements,
the Borrowers shall pay to the Agent for the ratable benefit of the Lenders, a
letter of credit fee (each a "Letter of Credit Fee" and collectively the "Letter
of Credit Fees") as follows:
(a) with respect to the PEDFA Obligations and any Letter of Credit
issued to secure any obligations of any of the Borrowers
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under or in connection with any workers' compensation Laws or insurance, a
Letter of Credit Fee in an amount equal to one percent (1%) per annum of the
face amount of the aggregate face amount of the PEDFA Obligations and/or such
Letter of Credit, as appropriate, which the Borrowers acknowledge and agree
shall be in addition to any fees payable by the Agent under or as part of the
PEDFA Participation and Reimbursement Agreements,
(b) with respect to any other standby Letter of Credit (other than the
PEDFA Obligations), a Letter of Credit Fee in an amount equal to one and
one-eighth percent (1-1/8%) per annum of the face amount of such Letter of
Credit, and
(c) with respect to any other commercial Letter of Credit (other than
the PEDFA Obligations), a Letter of Credit Fee in an amount equal to one and
one-eighth percent (1-1/8%) per annum of the face amount of such Letter of
Credit.
Letter of Credit Fees shall be paid upon the opening of the Letter of
Credit, upon the Agent's execution and delivery of the PEDFA Participation and
Reimbursement Agreements and upon each anniversary date, if any. In addition,
the Borrowers shall pay to the Agent, for its own account, any and all
additional issuance, negotiation, processing, transfer or other fees to the
extent and as and when required by the provisions of any Letter of Credit
Agreement; such additional fees are included in and a part of the "Fees" payable
by the Borrowers under the provisions of this Agreement and are for the
exclusive benefit of the Agent and are a part of the Agent's Obligations.
2.2.3 TERMS OF LETTERS OF CREDIT. Unless
otherwise agreed by the Lenders in writing, each Letter of Credit (a) shall be
opened pursuant to a Letter of Credit Agreement, (b) shall expire on a date not
later than the Business Day preceding the Revolving Credit Expiration Date and
(c) shall be issued for a Permitted Use. Neither the Agent nor any of the
Lenders shall have any obligation or commitment to consent to the renewal,
extension or amendment to either or both of the PEDFA Letters of Credit.
2.2.4 PROCEDURES FOR ISSUANCE OF LETTERS OF
CREDIT. (a) The Borrowers shall give the Agent oral or written notice at least
two (2) Business Days prior to the date on which the Borrower desires the Agent
to issue a Letter of Credit. Any oral notice shall be confirmed in writing by
the Borrowers within three (3) Business Days after the issuance of the requested
Letter of Credit. Such notice shall be irrevocable and shall be accompanied by a
duly executed Letter of Credit Agreement specifying: (a) the name and address of
the intended beneficiary of the Letter of Credit, (b) the requested original
face amount of the
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Letter of Credit, (c) whether the Letter of Credit is to be revocable or
irrevocable, (d) the Business Day on which the Letter of Credit is to be opened
and the date on which the Letter of Credit is to expire, (e) the terms of
payment of any draft or drafts which may be drawn under the Letter of Credit,
(g) any other terms or provisions the Borrowers desire to be contained in the
Letter of Credit, and (h) the purpose for which such Letter of Credit is to be
issued. Such notice shall also be accompanied by such other information,
certificates, confirmations, and other items as the Agent may require to assure
that the Letter of Credit is to be issued in accordance with the provisions of
this Agreement and a Letter of Credit Agreement. The Borrowers shall attach to
such notice the form of the Letter of Credit that the Borrowers request be
issued. The Agent and the Lenders agree that if there is any express conflict
between the provisions of this Agreement and the provisions of any Letter of
Credit Agreement regarding the Agent's duties and obligations, the provisions of
this Agreement shall prevail.
(b) The Agent shall determine, as of the Business Day immediately
preceding the requested effective date of issuance of the Letter of Credit as
set forth in a notice from the Borrowers pursuant to Section 2.2.4(a), the
amount of the unused Letter of Credit Facility. If (i) the form of Letter of
Credit delivered by the Borrowers to the Agent, if any, is acceptable to the
Agent in its sole and absolute discretion, (ii) the undrawn face amount of the
requested Letter of Credit is less than or equal to the unused Letter of Credit
Facility, (iii) the Letter of Credit complies with the conditions set forth in
Section 2.2.3, (iv) the notice provided by the Borrowers to the Agent is given
in accordance with Section 2.2.4(a), (v) the Agent has received a certificate
from the Borrowers stating that the conditions set forth in Section 4.2 have
been satisfied, (vi) the Borrowers have paid all Letter of Credit Fees and other
Fees (including customary issuance and negotiation fees) payable in connection
with the issuance of such Letter of Credit, and (vii) the Borrowers have
executed and delivered to the Agent a Letter of Credit Agreement, then the Agent
will issue the Letter of Credit in accordance with its customary procedures.
Promptly upon issuance of a Letter of Credit, the Agent shall give each Lender
written or telephonic notice of the issuance of such Letter of Credit, and
within five (5) Business Days of the issuance of such Letter of Credit, the
Agent shall furnish to the Lenders a photocopy of such Letter of Credit.
(c) No Letter of Credit shall be extended or amended unless the
requirements of this Section 2.2.4 are met as though a new Letter of Credit were
being requested and issued.
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(d) The Agent shall have no obligation to issue any Letter of Credit,
if as of the date of issuance of such Letter of Credit, there exists any order
of any court, arbitrator or Governmental Authority having jurisdiction or
authority over the Agent, which shall purport by its terms to enjoin or restrain
banks generally from issuing letters of credit of the type and in the amount of
the proposed Letter of Credit, or if there exists any Law, rule or regulation
applicable to banks generally or any request or directive (whether or not having
the force of law) from any Governmental Authority with jurisdiction over banks
generally, which shall prohibit, or request that the Agent refrain from, the
issuance of letters of credit generally or the issuance of such Letter of
Credit.
(e) In the event of any conflict between the provisions of this
Agreement and the provisions of a Letter of Credit Agreement, the provisions of
this Agreement shall prevail and control unless otherwise expressly provided in
the Letter of Credit Agreement.
2.2.5 PAYMENT OF REIMBURSEMENT OBLIGATIONS. (a)
The Borrowers hereby promise to pay to the Agent, ON DEMAND and in Dollars, the
following which are herein collectively referred to as the "Current Letter of
Credit Obligations":
(i) the amount which the Agent has paid under each draft or
draw on a Letter of Credit or under either or both of the PEDFA
Participation and Reimbursement Agreements;
(ii) any and all reasonable charges and expenses which the
Agent may pay or incur relative to the Letter of Credit, the PEDFA
Obligations and/or such draws or drafts; and
(iii) interest on the amounts described in (i) and (ii) above
not paid by the Borrowers as and when due and payable under the
provisions of (i) and (ii) above from the day the same are due and
payable until paid in full at a rate per annum equal to the then
current highest rate of interest on the Revolving Loan, or if no
advances are outstanding under the Revolving Loan, the Prime Rate, plus
one percent (1%) per annum.
In addition, the Borrowers hereby promise to pay any and all other Letter of
Credit Obligations as and when due and payable in accordance with the provisions
of this Agreement and the Letter of Credit Agreements. Notwithstanding the
foregoing, the Agent shall be entitled to use and apply funds on deposit in the
Letter of Credit Cash Collateral Account to pay any draft or draw on a
Post-Expiration Letter of Credit, without prior notice to or consent of,
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the Borrowers and/or the Lenders, in accordance with the provisions
of Section 2.2.10.
(b) The obligation of the Borrowers to pay Current Letter of Credit
Obligations and all other Letter of Credit Obligations shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which any or all of the Borrowers or any
other account party may have or have had against any beneficiary of such Letter
of Credit, any beneficiary of the PEDFA Letters of Credit, the Agent, any of the
Lenders, or any other Person, including, without limitation, any defense based
on the failure of any draft or draw to conform to the terms of such Letter of
Credit (except if such draft or draw fails to substantially comply with such
terms), any draft or other document proving to be forged, fraudulent or invalid,
or the legality, validity, regularity or enforceability of such Letter of
Credit, any draft or other documents presented with any draft, any Letter of
Credit Agreement, this Agreement, or any of the other Financing Documents, all
whether or not the Agent or any of the Lenders had actual or constructive
knowledge of the same, and irrespective of any security or guarantee therefor or
right of offset with respect thereto and irrespective of any other circumstances
whatsoever which constitutes, or might be construed to constitute, an equitable
or legal discharge of any of the Borrowers for any Letter of Credit Obligations,
in bankruptcy or otherwise; PROVIDED, HOWEVER, that the Borrowers shall not be
obligated to reimburse the Agent for any wrongful payment under such Letter of
Credit made as a result of the Agent's willful misconduct or gross negligence.
(c) The obligation of the Borrowers to pay the Letter of Credit
Obligations shall not be conditioned or contingent upon the pursuit by the Agent
or any other Person at any time of any right or remedy against any Person which
may be or become liable in respect of all or any part of such obligation or
against any security or guarantee therefor or right of offset with respect
thereto.
(d) The Letter of Credit Obligations shall continue to be effective, or
be reinstated, as the case may be, if at any time payment of all or any portion
of the Letter of Credit Obligations is rescinded or must otherwise be restored
or returned by the Agent or any of the Lenders upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Person, or upon or as a result
of the appointment of a receiver, intervenor, or conservator of, or trustee or
similar officer for, any Person, or any substantial part of such Person's
property, all as though such payments had not been made.
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(e) If any Laws, order of court and/or ruling or regulation of any
Governmental Authority of the United States (or any state thereof) and/or any
country other than the United States permits a beneficiary under a Letter of
Credit to require the Agent, the Lenders and/or any of their respective
branches, Affiliates and/or correspondents to pay drafts under or purporting to
be under a Letter of Credit after the expiration date of the Letter of Credit,
the Borrowers shall reimburse the Agent and the Lenders, as appropriate, for any
such payment pursuant to the provisions of this Section 2.2.5.
2.2.6 LETTER OF CREDIT RESERVES. If any change
in any Law or regulation, or in the interpretation thereof by any court or other
Governmental Authority charged with the administration thereof, shall either (a)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against Letters of Credit issued by the Agent and/or the Agent's
agreement to assume liability for the PEDFA Obligations, or (b) impose on the
Agent any other condition regarding any Letter of Credit and/or the PEDFA
Obligations, and the result of any event referred to in clauses (a) or (b) above
shall be to increase the cost to the Agent of issuing, maintaining or extending
the Letter of Credit or of continuing its agreement to assume liability for the
PEDFA Obligations or the cost to any of the Lenders of funding any obligation
under or in connection with the Letter of Credit and/or the PEDFA Obligations
(which increase in cost shall be the result of the Agent's reasonable allocation
of the aggregate of such cost increases resulting from such events), then,
within ten (10) days of the Agent's written invoice therefor, the Borrowers
shall pay to the Agent from time to time as specified by the Agent, additional
amounts which shall be sufficient to compensate the Agent and the Lenders for
such increased cost, together with interest on each such amount from the date
demanded until payment in full thereof at a rate per annum equal to the then
highest current rate of interest on the Revolving Loan. The Agent agrees to
furnish to the Borrowers, upon written request, a certificate as to the Agent's
calculation of any such increased cost, together with such supporting
documentation for such calculation as the Borrowers may reasonably request.
2.2.7 INDEMNIFICATION AND ASSUMPTION OF RISK.
(a) The Borrowers hereby instruct the Agent to pay any draft complying
with the terms of any Letter of Credit irrespective of any instructions of any
of the Borrowers to the contrary. The Borrowers further hereby instruct the
Agent, at the Agent's option, to pay any amounts demanded by PNC under either or
both of the PEDFA Participation and Reimbursement Agreements in accordance with
the provisions of the PEDFA Participation and Reimbursement
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Agreements, irrespective of any instructions of any of the Borrowers to the
contrary.
(b) The Agent, the Lenders and each of their respective branches,
Affiliates and/or correspondents shall not be responsible for, and the Borrowers
hereby indemnify and hold the Agent, the Lenders and their respective branches,
Affiliates and/or correspondents harmless from and against all liability, loss
and out of pocket expense (including reasonable attorney's fees and costs)
incurred by the Agent, any of the Lenders and/or any of their respective
branches, Affiliates and/or correspondents relative to and/or as a consequence
of:
(i) any failure by any of the Borrowers to perform any
obligations under this Section 2.2 or under any Letter of Credit
Agreement,
(ii) the issuance of any Letter of Credit and any draft, draw
and/or acceptance under or purported to be under any Letter of Credit,
other than as a result of the Agent's willful misconduct or gross
negligence,
(iii) any action taken or omitted by the Agent, any of the
Lenders and/or any of their respective branches, Affiliates and/or
correspondents at the request of any of the Borrowers,
(iv) any failure or inability of the Agent to perform in
accordance with the terms of any Letter of Credit or in accordance with
the terms of either or both of the PEDFA Participation and
Reimbursement Agreements, by reason of any control or restriction
rightfully or wrongfully exercised by any DE FACTO or DE JURE
Governmental Authority, group or individual asserting or exercising
governmental or paramount powers,
(v) any consequences arising from causes beyond the reasonable
control of the Agent, the Lenders and/or their respective branches,
Affiliates and/or correspondents, or
(vi) the Agent's agreement to assume liability for the PEDFA
Obligations and any demand for payment under either or both of the
PEDFA Participation and Reimbursement Agreements, other than as a
result of the Agent's willful misconduct or gross negligence, as
determined by a court of competent jurisdiction.
(c) As among the Borrowers, the Lenders and the Agent, the
Borrowers hereby assume all risks of (1) the acts and omissions of,
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or misuses of, any of the Letters of Credit by any beneficiary and/or by any
other users of the Letters of Credit, (2) the acts or omissions of, or misuses
of, either of the PEDFA Letters of Credit by any beneficiary and/or by any other
user of the PEDFA Letters of Credit, and (3) the acts and omissions of, or
misuses of, any rights or remedies of PNC Bank, National Association under or in
connection with the PEDFA Obligations. In furtherance and not in limitation of
the foregoing, the Agent, the Lenders and their respective branches, Affiliates
and/or correspondents, shall not be liable or responsible in any respect for:
(i) any error, omission, interruption or delay in
transmission, dispatch or delivery of any one or more messages or
advices in connection with any Letter of Credit and/or the PEDFA
Obligations, whether transmitted by cable, telegraph, telex, mail or
otherwise and despite any cipher or code which may be employed,
(ii) any action, inaction or omission which may be taken or
suffered by the Agent, any of the Lenders, and any of their respective
branches, Affiliates and/or correspondents, in good faith or through
inadvertence in identifying or failing to identify any beneficiary or
otherwise in connection with any Letter of Credit and/or any of the
PEDFA Obligations, if taken or omitted in the absence of willful
misconduct or gross negligence,
(iii) the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any Person in connection
with the application for and issuance of and presentation of drafts
with respect to any of the Letters of Credit or of demands for payment
under the PEDFA Participation and Reimbursement Agreements, even if it
should prove to be in any respect or all respects invalid,
insufficient, inaccurate, fraudulent or forged,
(iv) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any
Letter of Credit, any of the PEDFA Obligations, or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason,
(v) the failure of any beneficiary of any Letter of Credit to
comply with conditions required in order to draw upon such Letter of
Credit; provided that the beneficiary has substantially complied with
such conditions,
(vi) errors in interpretation of technical terms,
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(vii) any loss or delay in the transmission or otherwise of
any document required in order to make a drawing under any Letter of
Credit or of the proceeds thereof or a demand for payment of the PEDFA
Obligations, except as may arise from the Agent's willful misconduct or
gross negligence,
(viii) the misapplication by the beneficiary of any Letter of
Credit or of the proceeds of any drawing under such Letter of Credit or
by PNC Bank, National Association of the PEDFA Obligations or any
amounts paid by the Agent on account of the PEDFA Obligations, or
(ix) any consequences arising from causes beyond the control
of the Agent, including, without limitation, any acts by any
Governmental Authority.
(d) Any action taken or omitted to be taken by the Agent under or in
connection with any Letter of Credit and/or any of the PEDFA Obligations, if
taken or omitted in the absence of willful misconduct or gross negligence, shall
not result in any liability of the Agent to any Lender or relieve any Lender of
its obligations to the Agent under Section 2.2.8. In determining whether to pay
any draft under a Letter of Credit, the Agent shall have no obligation to any
Lender other than to confirm that any documents required to be delivered under
such Letter of Credit in connection with such draw have been presented and
appear on their face to comply substantially with the requirements of such
Letter of Credit. In determining whether to pay any demand under the PEDFA
Obligations, the Agent shall have no obligation to any Lender other than to
confirm that the demand was made in accordance with the provisions of the PEDFA
Participation and Reimbursement Agreements.
2.2.8 PARTICIPATIONS IN THE LETTERS OF CREDIT,
PEDFA OBLIGATIONS. Each Lender hereby irrevocably authorizes the Agent to assume
liability for the PEDFA Obligations in accordance with the provisions of the
PEDFA Participation and Reimbursement Agreements. Each Lender further hereby
irrevocably authorizes the Agent to issue Letters of Credit in accordance with
the provisions of this Agreement. As of the date the Agent executes and delivers
the PEDFA Participation and Reimbursement Agreements, each Lender shall be
deemed, automatically and without notice to or consent of any Person, to have
irrevocably and unconditionally purchased and received from the Agent, without
recourse or warrant, an undivided interest and participation in the PEDFA
Obligations (including, without limitation, any and all obligations of the
Borrowers under the PEDFA Reimbursement Agreement and related Letter of Credit
Obligations), equal to such Lender's Revolving Credit Proportionate Share of the
face amount of the PEDFA Obligations. As of the date each Letter of Credit is
opened or issued by the Agent pursuant to
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the provisions of this Agreement, each Lender shall be deemed, automatically and
without notice to or consent of any Person, to have irrevocably and
unconditionally purchased and received from the Agent, without recourse or
warranty, an undivided interest and participation in such Letter of Credit
(including, without limitation, any and all obligations of the Borrowers under
and with respect to such Letter of Credit and the related Letter of Credit
Obligations), equal to such Lender's Revolving Credit Proportionate Share of the
face amount of such Letter of Credit.
2.2.9 PAYMENTS BY THE LENDERS TO THE AGENT.
(a) If the Borrowers fail to pay to the Agent any Current Letter of
Credit Obligations as and when due and payable, the Agent shall promptly notify
each of the Lenders and each of the Lenders shall make an advance under the
Revolving Loan to the Agent for the account of the Borrowers in accordance with
the provisions of Section 2.1.3 in an amount equal to such Lender's Revolving
Credit Proportionate Share of such unpaid Current Letter of Credit Obligations.
If the Lenders are unable to make such an advance for the account of the
Borrowers because any or all of the Borrowers are the subject of a bankruptcy
case, the Agent shall demand payment from each of the Lenders of such Lender's
Revolving Credit Proportionate Share of the unpaid Current Letter of Credit
Obligations and said unpaid Current Letter of Credit Obligations shall be deemed
and shall remain Obligations of the Borrowers hereunder until paid in full. In
addition, if any amount paid to the Agent on account of any Current Letter of
Credit Obligations is rescinded or is required to be restored or turned over by
the Agent to any of the Borrowers or any other Person upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of any of the Borrowers
or any other Person or upon or as a result of the appointment of a receiver,
intervenor, trustee, conservator or similar officer for any of the Borrowers or
any other Person, or is otherwise not indefeasibly covered by an advance under
the Revolving Loan, the Agent shall promptly notify each of the Lenders and each
of the Lenders shall make an advance under the Revolving Loan to the Agent for
the account of the Borrowers in accordance with Section 2.1.4 in an amount equal
to such Lender's Revolving Credit Proportionate Share of its portion of the
Current Letter of Credit Obligations which the Agent so returned, restored or
remitted.
(b) Each of the Lenders irrevocably and unconditionally agrees to honor
any such demands for payment under this Section 2.2.9 and promises to pay to the
Agent's account on the same Business Day as demanded the amount of its Revolving
Credit Proportionate Share of the outstanding Current Letter of Credit
Obligations in immediately available funds, without any setoff,
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counterclaim or deduction of any kind or nature whatsoever. Any payment by a
Lender hereunder shall in no way release, discharge or lessen the joint and
several obligations of the Borrowers to pay Current Letter of Credit Obligations
to the Agent in accordance with the provisions of this Agreement.
(c) The obligation of each of the Lenders to remit the amounts of its
Revolving Credit Proportionate Share of outstanding Current Letter of Credit
Obligations for the account of the Agent pursuant to this Section 2.2.9 shall be
unconditional and irrevocable under any and all circumstances and may not be
terminated, suspended or delayed for any reason whatsoever, provided that all
payments of such amounts by each of the Lenders shall be without prejudice to
the rights of each of the Lenders with respect to the Agent's alleged willful
misconduct or gross negligence. Any claim any Lender may have against the Agent
as a result of the Agent's alleged willful misconduct or gross negligence may be
brought by such Lender in a separate action against the Agent but may not be
used as a defense to payment under the provisions of this Section 2.2.9.
(d) No failure of any Lender to remit the amount of its Revolving
Credit Proportionate Share of outstanding Current Letter of Credit Obligations
to the Agent pursuant to this Section 2.2.9 shall affect the obligations of the
Agent under any Letter of Credit, and if any Lender does not remit to the Agent
the amount of its Revolving Credit Proportionate Share of Current Letter of
Credit Obligations on the same day as demanded, then without limiting such
Lender's obligation to transmit funds on the same Business Day as demanded, such
Lender shall be obligated to pay, on demand of the Agent and without setoff,
counterclaim or deduction of any kind whatsoever interest on the unpaid amount
at the Federal Funds Rate for each day from the date such amount shall be due
and payable to the Agent until the date such amount shall have been paid in full
to the Agent by such Lender.
2.2.10 POST-TERMINATION DATE LETTERS OF CREDIT.
If any Letter of Credit has an expiration date later than the Business Day
preceding the Revolving Credit Termination Date (each a "Post-Termination Date
Letter of Credit" and collectively, the "Post-Termination Date Letters of
Credit"), advances under the Revolving Loan shall be made by the Lenders for the
account of the Borrowers as of the Business Day preceding the Revolving Credit
Termination Date, such advances to be in the aggregate face amount of all such
Post-Termination Date Letters of Credit. The amount of each Lender's advance
shall be equal to its Revolving Credit Proportionate Share of the aggregate face
amount of all such Post-Termination Date Letters of Credit. The Agent shall
deposit the proceeds of such advances into one or more interest bearing
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accounts with and in the name of the Agent and over which the Agent shall have
exclusive power of access and withdrawal (collectively, the "Letter of Credit
Cash Collateral Account"); provided, that (i) the Agent shall have no obligation
or commitment to deposit or invest the proceeds of such advances into any
account or other investment which would impose restrictions or limitations on
the Agent's ability to withdraw or otherwise access funds on deposit immediately
upon demand and (ii) the Agent shall have no obligation or commitment to deposit
the proceeds of such advances into an account which bears interest at a rate
greater than the then current maximum Interest Rate. The Letter of Credit Cash
Collateral Account is to be held by the Agent, for the ratable benefit of the
Lenders, as additional collateral and security for any Letter of Credit
Obligations relating to the Post-Termination Date Letters of Credit. The
Borrowers hereby assign, pledge, grant and set over to the Agent, for the
ratable benefit of the Lenders, a first priority security interest in, and Lien
on, all of the funds on deposit in the Letter of Credit Cash Collateral Account,
together with any and all proceeds (cash and non-cash) thereof as additional
collateral and security for the Letter of Credit Obligations relating to the
Post-Termination Date Letters of Credit and for all of the other Obligations.
The Borrowers acknowledge and agree that the Agent shall be entitled to fund any
draw or draft on any Post-Termination Date Letter of Credit from the monies on
deposit in the Letter of Credit Cash Collateral Account without notice to or
consent of any of the Borrowers or any of the Lenders. The Borrowers further
acknowledge and agree that the Agent's election to fund any draw or draft on any
Post-Termination Date Letter of Credit from the Letter of Credit Cash Collateral
Account shall in no way limit, impair, lessen, reduce, release or otherwise
adversely affect the Borrowers' joint and several obligations to pay any Letter
of Credit Obligations under or relating to the Post-Termination Date Letters of
Credit. At such time as all Post-Termination Date Letters of Credit have expired
and all Letter of Credit Obligations relating to the Post-Termination Date
Letters of Credit have been paid in full, the Agent agrees to apply the amount
of any remaining funds on deposit in the Letter of Credit Cash Collateral
Account to the then unpaid balance of the Obligations under the Revolving Credit
Facility in such order and manner as the Agent shall determine in its sole and
absolute discretion. The Agent and the Lenders acknowledge and agree that the
Agent's ability to fund any draw or draft on any Post-Termination Date Letter of
Credit from the Letter of Credit Cash Collateral Account shall not be construed
to obligate the Borrowers to pay all or any portion of the Letter of Credit
Obligations more than once. The PEDFA Obligations shall be deemed a
Post-Termination Date Letter of Credit for purposes of this Agreement, at the
Agent's option, if the Agent continues to be liable, either contingently or
primarily, for any of the PEDFA Obligations, at any time on or after the
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Revolving Credit Termination Date. The Agent, however, shall have no obligation
or commitment to consent to any such extension or renewal of the PEDFA
Obligations.
SECTION 2.3 INTEREST.
2.3.1 AVAILABLE INTEREST RATES.
(a) Each Loan shall bear interest until maturity (whether by
acceleration, declaration, extension or otherwise) at either the Prime Rate or
the LIBOR Rate, as selected and specified by the Borrowers in an Interest Rate
Election Notice furnished to the Agent in accordance with the provisions of
Section 2.3.2(d), or as otherwise determined in accordance with the provisions
of this Section 2.3, and as may be adjusted from time to time in accordance with
the provisions of Section 2.3.3. Notwithstanding the foregoing, following the
occurrence and during the continuance of an Event of Default, at the option of
the Required Lenders, all Loans and all other Obligations shall bear interest at
the Post-Default Rate.
(b) The percentage to be added when calculating the available Interest
Rates for Loans (the "Applicable Margin") shall vary from time to time and as
between Loans, and shall be determined from time to time based upon the ratio of
Funded Debt to EBITDA for the twelve (12) month period covered by the then most
recent financial statements furnished or required to be furnished to the Agent
pursuant to and in the form required by Section 5.1.1(a) and Section 5.1.1(c).
Within three (3) Business Days of the Agent's receipt of such financial
statements in the form required, the Agent shall calculate the ratio of Funded
Debt to EBITDA for the then twelve (12) month period covered by such financial
statements, and shall notify the Borrowers and the Lenders of its determination.
If such financial statements are not furnished as and when required, the
Borrowers may not be permitted to select or change an Interest Rate or an
Interest Period. Following the Agent's determination of the Funded Debt to
EBITDA ratio, the Applicable Margin for available Interest Rates shall be as
follows:
(i) with respect to advances under the Revolving Loan, the
Applicable Margin to be added when calculating the available Interest Rates
shall be as follows:
Funded Debt to EBITDA Ratio Applicable Margin
--------------------------- -----------------
Less than 1.0 to 1.0 LIBOR Loans: .52%
Prime Loans: -.50%
Greater than or equal to LIBOR Loans: .64%
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1.0 to 1.0, but less than Prime Loans: -.30%
1.75 to 1.0
Greater than or equal to LIBOR Loans: .84%
1.75 to 1.0, but less than Prime Loans: -.10%
2.25 to 1.0
Greater than or equal to LIBOR Loans: 1.15%
2.25 to 1.0, but less than Prime Loans: .25%
2.75 to 1.0
Greater than or equal to LIBOR Loans: 1.55%
2.75 to 1.0, but less than Prime Loans: .50%
3.0 to 1.0
(ii) If the ratio of Funded Debt to EBITDA at any time equals
or exceeds 3.0 to 1.0 all Loans shall bear interest at the Post-Default Rate.
(c) At any time and from time to time, upon the Borrowers' request, the
Agent agrees to advise the Borrowers of the then current Base Rate.
2.3.2 SELECTION OF INTEREST RATES.
(a) By an Interest Rate Election Notice furnished to the Agent in
accordance with the provisions of Section 2.3.2(d), the Borrowers may select the
initial Interest Rate or Interest Rates to be charged on the Loans disbursed on
the Closing Date. From time to time after the Closing Date as provided in this
Section 2.3.2, by an Interest Rate Election Notice furnished to the Agent in
accordance with the provisions of Section 2.3.2(d), the Borrowers may select an
initial Interest Rate or Interest Rates for any Loans made after the Closing
Date or may convert the Interest Rate and, when applicable, the Interest Period,
for any existing Loan to any other Interest Rate or, when applicable, any other
Interest Period.
(b) The Borrowers' selection of an Interest Rate and/or an Interest
Period, the Borrowers' election to convert an Interest Rate and/or an Interest
Period to another Interest Rate or Interest Period, and any other adjustments in
an Interest Rate, including, without limitation, any adjustments made in
accordance with Section 2.3.3, are subject to the following limitations:
(i) with respect to advances under the Revolving
Loan, the Borrowers shall not at any time select or change to an
Interest Period that extends beyond the Revolving Credit Expiration
Date,
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(ii) except as otherwise provided in Section 2.3.5,
no change from the LIBOR Rate to the Prime Rate shall become effective
on a day other than a Business Day and on a day which is the last day
of the then current Interest Period, no change of an Interest Period
shall become effective on a day other than the last day of the then
current Interest Period, and no change from the Prime Rate to the LIBOR
Rate shall become effective on a day other than a Eurodollar Business
Day,
(ii) any Interest Rate change for any Loan to be
effective on a date on which any principal payment on account of such
Loan is scheduled to be paid shall be made only after such payment
shall have been made,
(iv) with respect to the Revolving Loan, no more than
four (4) Interest Rates may be in effect from time to time,
(v) the first day of each Interest Period shall be a
Eurodollar Business Day,
(vi) as of the effective date of a selection, there
shall not exist a Default or an Event of Default,
(viii) as required by the provisions of Section
2.3.1(b), the Agent shall have determined the ratio of Funded Debt to
EBITDA for the twelve (12) month period covered by the financial
statements furnished or required to be furnished to the Agent as of the
date of determination and as and when required by the provisions of
Section 5.1.1(a) and Section 5.1.1(c), and
(ix) the minimum principal amount of a LIBOR Loan
shall be Two Million Dollars ($2,000,000).
The Agent may elect to charge interest at the Post-Default Rate on any
Obligations after the occurrence and during the continuance of an Event of
Default. The Borrowers acknowledge and agree that any increase in the interest
rate shall be retroactive to the occurrence of a Default if such Default becomes
an Event of Default.
(c) If a Loan Notice is not accompanied by an Interest Rate Election
Notice or does not otherwise include a selection of an Interest Rate and, if
applicable, an Interest Period, or if, after having made a selection of an
Interest Rate and, if applicable, an Interest Period, the Borrowers fail or are
not otherwise entitled under the provisions of this Agreement to continue such
Interest
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Rate or Interest Period, the Borrowers shall be deemed to have selected the
Prime Rate as the Interest Rate until such time as the Borrowers have selected a
different Interest Rate and specified an Interest Period in accordance with, and
subject to, the provisions of this Section 2.3.
(d) The Lenders will not be obligated to make Loans, to convert the
Interest Rate on Loans to another Interest Rate, or to change Interest Periods,
unless the Agent shall have received an irrevocable written or telephonic notice
(an "Interest Rate Election Notice") from the Borrowers at the times and
specifying the following information:
(i) the amount to be borrowed or converted,
(ii) a selection of the Prime Rate or the LIBOR Rate,
(iii) the length of the Interest Period if the Interest Rate
selected is the LIBOR Rate, and
(iv) the requested date on which such election is to be
effective.
Any telephonic notice must be confirmed in writing within three (3) Business
Days. Each Interest Rate Election Notice must be received by the Agent not later
than 10:00 a.m. (Baltimore Time) on the Business Day of any requested borrowing
or conversion in the case of a selection of the Prime Rate and not later than
10:00 a.m. (Baltimore Time) on the third Business Day before the effective date
of any requested borrowing or conversion in the case of a selection of the LIBOR
Rate.
2.3.3 ADJUSTMENT OF INTEREST RATES. The
Interest Rate on the Loans shall be subject to adjustment quarterly if,
following the Agent's receipt and review of the Borrowers' then most recent
financial statements furnished to the Agent as and when required by the
provisions of Section 5.1.1(a) and Section 5.1.1(c), the ratio of Funded Debt to
EBITDA for the twelve (12) month period covered by such financial statements has
changed from the ratio previously calculated by the Agent at the time of the
Agent's receipt and review of the Borrowers' last financial statements
previously furnished to the Agent in accordance with Section 5.1.1(a) and
5.1.1(c), and that the change in the ratio would result in a change in the
Applicable Margin. The Interest Rate or Interest Rates shall be adjusted,
upwards or downwards, as appropriate, to the corresponding Interest Rate or
Interest Rates which reflect the change in the Applicable Margin. In the case of
a Loan for which the Interest Rate is the previous Prime Rate, the Interest Rate
shall be changed to the then available Prime Rate,
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and in the case of a Loan for which the Interest Rate is the previous LIBOR
Rate, the Interest Rate shall be changed to the available LIBOR Rate for the
applicable Interest Period. In the case of a Prime Loan, any adjustment in the
Interest Rate shall be effective as of the first day of the first calendar month
following the Agent's calculation of the most recent Borrowers' Funded Debt to
EBITDA ratio which resulted in a change in the Applicable Margin. In the case of
a LIBOR Loan, any adjustment in the Interest Rate shall be effective as of the
end of the Interest Period for such LIBOR Loan. Interest Rate adjustments under
this Section 2.3.3 shall be made not more frequently than once quarterly.
2.3.4 INABILITY TO DETERMINE LIBOR RATE.
In the event that (i) the Agent shall have determined that, by reason of
circumstances affecting the London interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining the LIBOR Rate for any requested
Interest Period with respect to a Loan the Borrowers have requested to be made
or to be converted to a LIBOR Loan or (ii) the Required Lenders shall determine
and notify the Agent that the rates quoted by the Agent for the purpose of
computing the LIBOR Rate for any requested Interest Period with respect to a
Loan the Borrowers have requested to be made or to be converted to a LIBOR Loan
do not adequately and fairly reflect the cost to the Required Lenders of funding
or converting such Loan, the Agent shall give notice of such determination to
the Borrowers and the Lenders at least one (1) day prior to the proposed date
for funding or converting such Loan. If such notice is given, any request for a
LIBOR Loan shall be made or converted to a Prime Loan or withdrawn, at the
Borrowers' election. Until such notice has been withdrawn by the Agent, the
Borrowers will not request that any Loan be made or converted to a LIBOR Loan.
2.3.5 INDEMNITY. The Borrowers jointly and
severally agree to indemnify and reimburse each Lender and to hold each Lender
harmless from any loss or reasonable, out of pocket cost or expense which such
Lender may sustain or incur as a consequence of (a) a default by the Borrowers
in payment when due of the principal amount of or interest on any LIBOR Loan,
(b) the failure of the Borrowers to make, or convert the Interest Rate of, a
Loan after the Borrowers have given a Loan Notice or an Interest Rate Election
Notice, (c) the failure of the Borrowers to make any Prepayment after the
Borrowers have given notice of such intention to make a Prepayment, and/or (d)
the making by the Borrowers of a Prepayment of a LIBOR Loan on a day which is
not the last day of the Interest Period for such LIBOR Loan, including, without
limitation, any such loss or expense arising from the reemployment of funds
obtained by such Lender to maintain its Proportionate Share of any LIBOR Loan or
from fees payable to terminate the
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deposits from which such funds were obtained; provided, however, that such
Lender will use its best efforts to redeploy such funds in a commercially
reasonable manner. This agreement and covenant of the Borrowers shall survive
termination or expiration of this Agreement and the Commitments and the payment
and performance of all of the Obligations.
2.3.6 PAYMENT OF INTEREST. (a) Unpaid and
accrued interest on any advance of the Revolving Loan which consists of a Prime
Loan shall be paid monthly, in arrears, on the first day of each calendar month,
commencing on the first such date after the Closing Date, and on the first day
of each calendar month thereafter, and at maturity (whether by acceleration,
declaration, extension or otherwise). Notwithstanding the foregoing, any and all
unpaid and accrued interest on any Prime Loan converted to a LIBOR Loan or
prepaid shall be paid immediately upon such conversion and/or prepayment, as
appropriate.
(b) Unpaid and accrued interest on any LIBOR Loan shall be paid on the
last Business Day of each Interest Period for such LIBOR Loan and at maturity
(whether by acceleration, declaration, extension or otherwise) in arrears;
provided, however that any and all unpaid and accrued interest on any LIBOR Loan
prepaid prior to expiration of the then current Interest Period for such LIBOR
Loan shall be paid immediately upon prepayment.
(c) It is not intended by the Agent or any of the Lenders, and nothing
contained in this Agreement or in any of the Notes, shall be deemed, to
establish or require the payment of a rate of interest in excess of the maximum
rate permitted by applicable Laws (the "Maximum Rate"). If, in any month or in
any Interest Period, the effective Interest Rate charged on any of the
Obligations would exceed the Maximum Rate, then such Interest Rate with respect
to those Obligations for that month or Interest Period, as applicable, shall be
the Maximum Rate, and, if in future months or Interest Periods, such Interest
Rate would otherwise be less than the Maximum Rate, then such Interest Rate
shall remain at the Maximum Rate until such time as the amount of interest paid
on account of such Obligations equals the amount of interest which would have
been paid if the same had not been limited by the Maximum Rate. In the event,
upon payment in full of all of the Obligations and termination or expiration of
the Commitments, the total amount of interest paid or accrued during the term of
this Agreement is less than the total amount of interest which would have been
paid or accrued if the effective Interest Rate or Interest Rates had at all
times been and remained in effect, then the Borrowers shall, to the extent
permitted by applicable Laws, jointly and severally pay to the Agent for the
ratable benefit of the Lenders an amount equal to the excess, if any, of (i) the
lesser of (a) the amount of interest
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which would have been charged if the Maximum Rate had, at all times, been in
effect and (b) the amount of interest which would have accrued had the effective
Interest Rate or Interest Rates, at all times, been in effect and (ii) the
amount of interest actually paid or accrued under this Agreement. In the event
the Lenders receive, collect or apply as interest any sum in excess of the
Maximum Rate, such excess amount shall be applied to the reduction of the
principal balance of the Obligations, and if no such principal is then
outstanding, such excess or part thereof remaining, shall be returned to the
Borrowers.
SECTION 2.4 GENERAL FINANCING PROVISIONS.
2.4.1 BORROWERS' REPRESENTATIVES.
(a) The Lenders are hereby irrevocably authorized by the Borrowers to
make Loans to any or all of the Borrowers and the Agent is hereby irrevocably
authorized by the Borrowers to issue Letters of Credit for the account of any or
all of the Borrowers, pursuant to the provisions of this Agreement upon the
written, oral or telephone request of any one of the Persons who is from time to
time a Responsible Officer of the Parent under the provisions of the most recent
"Certificate" of corporate resolutions and/or incumbency for the Parent on file
with the Agent. Neither the Agent nor any of the Lenders assumes any
responsibility or liability for any errors, mistakes, and/or discrepancies in
the oral, telephonic, written or other transmissions of any instructions,
orders, requests and confirmations between the Agent and any of the Borrowers or
the Agent and any of the Lenders in connection with the Facilities, any Loan,
any Letter of Credit, the PEDFA Obligations, or any other transaction in
connection with the provisions of this Agreement, except as may arise from the
willful misconduct or gross negligence of the Agent or any of the Lenders, as
appropriate.
(b) The Borrowers in the discretion of their respective managements are
to agree among themselves as to the allocation of the benefits of Letters of
Credit and the proceeds of Loans, and the purposes for which such benefits and
proceeds will be used so long as any such allocation or purpose is not in
violation of this Agreement. The Borrowers hereby represent and warrant to the
Agent and the Lenders that each of them will derive benefits, directly and
indirectly, from each Letter of Credit and from each Loan, both in their
separate capacity and as a member of the integrated group to which each of the
Borrowers belong, because the successful operation of the integrated group is
dependent upon the continued successful performance of the functions of the
integrated group as a whole. For administrative convenience the Parent is hereby
irrevocably appointed by each of the Borrowers as agent for each of
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the Borrowers for the purpose of requesting Letters of Credit and Loans,
receiving the benefits of such Letters of Credits and the proceeds of Loans, and
disbursing the proceeds of Loans as between the Borrowers. By reason thereof,
the Parent is hereby irrevocably appointed by each of the Borrowers as the
attorney-in-fact of each of the Borrowers with power and authority through its
duly authorized officer or officers to (a) endorse any check (if any) for the
proceeds of any Loan for and on behalf of each of the Borrowers and in the name
of each of the Borrowers and (b) instruct the Agent to credit the proceeds of
any Loan directly to an account of any of the Borrowers which shall evidence the
making of such Loan and shall constitute the acknowledgement by each of the
Borrowers of the receipt of the proceeds of such Loan.
(c) Each of the Borrowers is accepting joint and several liability
hereunder in consideration of the financial accommodations to be provided by the
Lenders and the Agent under this Agreement, for the mutual benefit, directly and
indirectly, of each of the Borrowers, and in consideration of the undertakings
of each of the Borrowers to accept joint and several liability for the
obligations of each of them.
(d) Each of the Borrowers jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with each other Borrower, with respect to the payment and
performance of all of the Obligations arising under this Agreement, it being the
intention of the parties hereto that all of the Obligations shall be the joint
and several obligations of all of the Borrowers without preferences or
distinctions among them.
(e) If and to the extent that any of the Borrowers shall fail to make
any payment with respect to any of the Obligations as and when due or to perform
any of covenant or agreement in accordance with the terms hereof, then in such
event the other Borrowers will make such payment with respect to, or perform,
such Obligation, covenant and/or agreement.
(f) The obligations of each Borrower hereunder constitute full recourse
obligations of such Borrower enforceable against it to the full extent of its
properties and assets, irrespective of the validity, regularity or
enforceability of this Agreement or any other circumstance whatsoever.
(g) Except as otherwise expressly provided herein, each Borrower hereby
waives notice of acceptance of its joint and several liability, notice of any
and all Loans, notice of occurrence of any Default or Event of Default, or of
any demand for any payment under this Agreement, notices of any action at any
time
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taken or omitted by the Lenders or the Agent under or in respect of any of the
Obligations, any requirement of diligence and, generally, all demands, notices
and other formalities of every kind in connection with this Agreement. Each
Borrower hereby assents to, and waives notice of, any extensions or postponement
of the time for the payment of any of the Obligations hereunder, the acceptance
of any partial payment thereon, any waiver, consent, or other action or
acquiescence by the Lenders or the Agent at any time or times in respect of any
default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by the Lenders or the Agent in respect of any of the
Obligations. The obligations of each Borrower hereunder shall not be diminished
or rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Borrower,
the Lenders or the Agent. The joint and several liability of the Borrowers
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
membership, constitution or place of formation of any Borrower, the Lenders or
the Agent.
(h) The provisions of this Section are made for the benefit of the
Lenders and the Agent and their successors and assigns, and may be enforced by
them in accordance with the terms of this Agreement from time to time against
any of the Borrowers as often as occasion therefor may arise and without
requirement on the part of the Lenders or the Agent first to marshall any of
their claims or to exercise any of their rights against the other Borrowers or
to exhaust any remedies available to them against the other Borrowers or to
resort to any other source or means of obtaining payment of any of the
Obligations or to elect any other remedy. The provisions of this Section shall
remain in effect until all of the Obligations shall have been paid in full or
otherwise fully satisfied. If at any time, any payment, or any part thereof,
made
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in respect of any of the Obligations, is rescinded or must otherwise be restored
or returned by the Lenders or the Agent upon the insolvency, bankruptcy or
reorganization of any of the Borrowers, or otherwise, the provisions of this
Section will forthwith be reinstated in effect, as though such payment had not
been made.
2.4.2 USE OF PROCEEDS OF THE LOANS AND LETTERS
OF CREDIT. The proceeds of each Loan and each Letter of Credit shall be used by
the Borrowers for Permitted Uses, and for no other purposes except as may
otherwise be agreed by the Agent in writing.
2.4.3 COMPUTATION OF INTEREST AND FEES. All
applicable Fees and interest shall be calculated on the basis of a year of 360
days for the actual number of days elapsed. Any change in the interest rate on
any of the Obligations resulting from a change in the Base Rate shall become
effective as of the opening of business on the day on which such change in the
Base Rate is announced.
2.4.4 LIENS; SETOFF.
(a) The Borrowers hereby grant to the Agent and to the Lenders a
continuing Lien for all of the Obligations (including, without limitation, the
Agent's Obligations) upon any and all monies, securities, and other property of
each of the Borrowers and the proceeds thereof, now or hereafter on deposit
with, held or received by, or in transit to, the Agent, any of the Lenders,
and/or any Affiliate of the Agent and/or any of the Lenders, and also upon any
and all deposit accounts (general or special) and credits of any of the
Borrowers, if any, with the Agent, any of the Lenders or any Affiliate of the
Agent or any of the Lenders, at any time existing, excluding any deposit
accounts held by any of the Borrowers in their capacity as trustee for Persons
who are not Affiliates of any of the Borrowers. Without implying any limitation
on any other rights the Agent and/or the Lenders may have under the Financing
Documents or applicable Laws, during the continuance of an Event of Default, the
Agent is hereby authorized by the Borrowers at any time and from time to time,
without prior notice to the Borrowers, to set off, appropriate and apply any or
all items hereinabove referred to against any or all of the Obligations
(including, without limitation, the Agent's Obligations) then outstanding, first
to payment of the Agent's Obligations and then to the remaining Obligations in
such order and manner as shall be determined by the Agent in its sole and
absolute discretion, subject to the provisions of Section 2.4.6. The Agent
agrees to give the Borrowers notice of any such set off promptly following the
occurrence thereof, but any failure to give such notice as and when required
shall not invalidate the set off or
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obligate the Agent or any of the Lenders to return or restore any amounts set
off.
(b) Each Lender agrees for the benefit of each other Lender, that if it
shall through the exercise of a right of banker's lien, setoff, or counterclaim
against any or all of the Borrowers or though a secured claim the security for
which is a debt owed by such Lender to any or all of the Borrowers, or other
security or interest arising from, or in lieu of, such secured claim, received
by such Lender under any applicable bankruptcy, insolvency, or other similar
laws or otherwise obtain payment, of all or any part of its Proportionate Share
of the Obligations as a result of which the unpaid amount of such Lender's
Proportionate Share of the Obligations is proportionately less than the unpaid
amount of the Proportionate Share of the Obligations owed to any other Lender,
(i) such Lender shall purchase (which it shall be deemed to have done
simultaneously upon the receipt of such payment) from such other Lenders a
participation in the Proportionate Share of the Obligations owed to such other
Lenders so that the aggregate unpaid amount of the Proportionate Share of all
Obligations of such Lender shall be proportionately the same as the
Proportionate Shares of the other Lenders in the unpaid amount of the
Obligations then outstanding; provided, however, that if such purchase is made
pursuant to this Agreement and the payment giving rise thereto is thereafter
recovered, such purchase shall be rescinded and the purchase price restored
without interest, and (ii) such other adjustments shall be made as shall be
equitable to ensure that all of the Lenders share each such payment pro rata
according to their respective Proportionate Shares. Notwithstanding the
foregoing, no Lender shall be required or permitted to make a purchase of such a
participation and no other adjustments shall be made during any period in which
such Lender is insolvent or under receivership, and nothing herein contained
shall in any way affect the right of any Lender to obtain payment (whether by
exercise of right of banker's lien, setoff or counterclaim or otherwise) of
Indebtedness other than the Obligations.
2.4.5 REQUIREMENTS OF LAW. In the event that
any Lender shall have determined in good faith that (a) the adoption of any Laws
regarding capital adequacy, or (b) any change therein or in the interpretation
or application thereof or (c) compliance by such Lender or any corporation
controlling such Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or Governmental
Authority, does or shall have the effect of reducing the rate of return on the
capital of such Lender or any corporation controlling such Lender, as a
consequence of the obligations of the such Lender hereunder to a level below
that which such Lender or any corporation controlling such Lender would have
achieved but for
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such adoption, change or compliance (taking into consideration the policies of
such Lender and the corporation controlling such Lender, with respect to capital
adequacy) by an amount deemed by such Lender to be material, then from time to
time, after submission by such Lender to the Borrowers of a written request
therefor and a statement of the basis for such determination, the Borrowers
shall pay to such Lender such additional amount or amounts in order to
compensate for such reduction. For purposes of this Section 2.4.5, "material "
shall mean an amount equal to or greater than Fifty Thousand Dollars ($50,000).
2.4.6 PRO RATA TREATMENT AND PAYMENTS.
(a) Each borrowing by the Borrowers under the Commitments, including
the issuance of any Letter of Credit, each conversion by the Borrowers of an
Interest Rate, each Prepayment and any reduction in the Revolving Credit
Commitments shall be made pro rata in accordance with each Lender's
Proportionate Share. Unless otherwise specifically set forth among the
provisions of this Agreement, all payments to be made by the Borrowers on
account of the Obligations (except any and all payments on account of the
Agent's Obligations) shall be made and/or applied pro rata in accordance with
each Lender's Proportionate Share.
(b) All payments of the Obligations, including, without limitation,
principal, interest, Prepayments, and Fees, shall be paid by the Borrowers
without setoff or counterclaim to the Agent (except as otherwise provided
herein) at the Agent's office specified in Section 8.1 in immediately available
funds not later than 12:00 p.m. (Baltimore Time) on the due date of such
payment. All payments received by the Agent after such time shall be deemed to
have been received by the Agent for purposes of computing interest and Fees as
of the next Business Day. The Agent shall remit to each Lender its Proportionate
Share of any payment received on the same day in the event such payment is
received prior to 12:00 p.m. (Baltimore Time) and, on the next succeeding
Business Day, in the event such payment is received after such time. Payments
shall not be considered received by the Agent until such payments are paid to
the Agent in immediately available funds.
(c) Unless the Agent shall have received notice from the Borrowers
prior to the date on which any payment is due to the Agent that the Borrowers
will not make such payment in full, the Agent may assume that the Borrowers have
made such payment in full to the Agent on such date and the Agent in its sole
discretion may, in reliance upon such assumption, cause to be distributed to
each Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent the Borrowers shall not have so made
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such payment in full to the Agent and the Agent shall have distributed to any
Lender all or any portion of such amount, such Lender shall repay to the Agent
on demand the amount so distributed to such Lender, together with interest
thereon at the Federal Funds Rate, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to the
Agent.
(d) Each of the Borrowers hereby irrevocably authorizes the Agent, each
Lender and each Affiliate of the Agent and/or any of the Lenders to charge any
account of any of the Borrowers maintained with the Agent, any Lender and/or any
Affiliate of the Agent or any of the Lenders with such amounts as may be
necessary from time to time to pay any of the Obligations (whether or not owed
to the Agent, such Lender or such Affiliate) which are not paid within ten (10)
days of the date when due. In addition, each of the Borrowers hereby authorizes
and directs the Agent to charge any account of any of the Borrowers maintained
with the Agent to pay any and all unpaid and accrued interest on the
Obligations, including any PEDFA Obligations, as and when due and payable. The
Agent and each Lender agrees to give the Borrowers notice of any charge to any
account promptly after any such charge is made by the Agent and/or any Lender,
as appropriate.
(e) If any payment under this Agreement or under any Note shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day and such extension of time
shall, in such case, be included in computing interest and Fees, if applicable.
2.4.7 MANDATORY PREPAYMENTS. The Borrowers
shall be required to make mandatory prepayments (each a "Mandatory Prepayment"
and collectively, the "Mandatory Prepayments") at the times and in the amounts
as provided in this Section 2.4.7.
(a) Immediately upon receipt by any of the Borrowers of the Net
Proceeds of any Asset Disposition, such Borrower shall make a Mandatory
Prepayment to the Agent; provided, however that the Borrowers shall not be
required to make a Mandatory Prepayment as a result of an Asset Disposition if
either (i) the Net Proceeds for such Asset Disposition are less than or equal to
One Million Dollars ($1,000,000) or (ii) the Net Proceeds for all Asset
Dispositions of all of the Borrowers during the then current fiscal year, plus
the Net Proceeds for such intended Asset Disposition are less than or equal to
Two Million Dollars ($2,000,000). Each such Mandatory Prepayment shall be in an
amount equal to the Excess Proceeds. The term "Excess Proceeds" shall mean:
(i) with respect to any Asset Disposition for which the Net
Proceeds exceeds One Million Dollars ($1,000,000), the
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excess of (x) the Net Proceeds for such Asset Disposition, over (y) One
One Million Dollars ($1,000,000), and
(ii) with respect to any Asset Disposition for which the sum
of (1) the Net Proceeds for such Asset Disposition, plus (2) the sum of
the Net Proceeds for all other Asset Dispositions made by any or all of
the Borrowers during the then current fiscal year, exceeds Two Million
Dollars ($2,000,000) (the sum of (1) and (2) are herein referred to as
the "Total Net Proceeds"), the excess of (x) Total Net Proceeds, over
(y) Two Million Dollars ($2,000,000).
Concurrently with the making of any such Mandatory Prepayment, the Borrowers
shall furnish to the Agent a certificate of the Financial Officer of the Parent
demonstrating the calculations of the amount of the Excess Proceeds.
(b) Except as set forth in subsection (c) below, all Mandatory
Prepayments made pursuant to this Section 2.4.7 shall be applied first to any
unpaid and accrued Enforcement Costs, second to any and all unpaid and accrued
Fees, third to any and all unpaid and accrued interest on the Obligations,
fourth to the unpaid principal balance of the Revolving Loan, and then to such
other Obligations, if any, in such order and manner as the Agent shall determine
in its sole and absolute discretion.
(c) Notwithstanding the foregoing, the Borrowers shall not be obligated
to make a Mandatory Prepayment pursuant to this Section 2.4.7 as a result of an
Asset Disposition to the extent the Excess Proceeds of such Asset Disposition
are used by the Borrowers or are intended in good faith to be used by the
Borrowers within the next six (6) months following the Asset Disposition to
replace the specific assets or properties which are the subject of such Asset
Disposition; provided, that (i) the Borrowers shall notify the Agent in writing
prior to any Asset Disposition if the Borrowers intend to use all or any portion
of the Excess Proceeds to so replace any such assets or properties, which notice
shall specify the expected date, cost and nature of the replacement, (ii) any
Excess Proceeds not used immediately to replace any such assets or properties
shall be used to make a Mandatory Prepayment of the Revolving Loan or shall be
deposited in an account or other investment held by the Agent or any of the
Lenders, and (iii) the Borrowers furnish to the Agent, if requested, evidence
satisfactory to the Agent which verifies that Excess Proceeds have been used to
replace assets or properties which were the subject of an Asset Disposition
which gave rise to the Excess Proceeds. If and to the extent any such Excess
Proceeds are deposited in an account or other investment with the Agent or any
of the Lenders, the Borrowers agree that no withdrawals from any such account or
other
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investment shall be permitted except to fund replacement of the assets or
properties which gave rise to such Excess Proceeds, all as verified to the
Agent's satisfaction. Any Excess Proceeds not used to so replace any such assets
or properties shall be paid to the Agent as a Mandatory Prepayment under this
Section 2.4.7.
2.4.8 SETTLEMENT AMONG LENDERS.
(a) It is agreed that each Lender's Net Outstandings are intended by
the Lenders to be equal at all times to such Lender's Revolving Credit
Proportionate Share of the unpaid principal balance of the Revolving Loan.
(b) To the extent and in the manner provided in this Section 2.4.8,
settlement among the Lenders as to the Revolving Loan shall occur on each
Business Day (each a "Settlement Date"). On each Settlement Date payments shall
be made by or to the Agent and the other Lenders in the manner provided in this
Section 2.4.8 in accordance with the Settlement Report delivered by the Agent to
the Lenders pursuant to the provisions of this Section 2.4.8 with respect to
such Settlement Date so that as of each Settlement Date, and after giving effect
to the transactions to take place on such Settlement Date, each Lender's Net
Outstandings shall equal such Lender's Revolving Credit Proportionate Share of
all advances under the Revolving Loan then outstanding.
(c) The Agent shall deliver to each Lender a Settlement Report not
later than 3:00 p.m. (Baltimore Time) on each Settlement Date, which Settlement
Report will be in the form of EXHIBIT C attached hereto and made a part hereof
and shall cover the period beginning on the next preceding Settlement Date and
ending on such designated Settlement Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES. Each of the Borrowers
represent and warrant to the Agent and each of the Lenders as follows:
3.1.1 SUBSIDIARIES. The Borrowers have the Sub-
sidiaries listed on Schedule 3.1.1. All of the Subsidiaries are "Borrowers".
Each of the Subsidiaries is a Wholly Owned Subsidiary, except as shown on
Schedule 3.1.1, which correctly indicates the nature and amount of each
Borrower's ownership interests in such Subsidiaries.
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3.1.2 GOOD STANDING. Each of the Borrowers (a)
is a corporation duly organized, existing and in good standing under the laws of
the jurisdiction of its incorporation, (b) has the corporate power to own its
property and to carry on its business as now being conducted, and (c) is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned by it therein or in which the transaction
of its business makes such qualification necessary, except where the failure to
do so could or would have a Materially Adverse Effect.
3.1.3 POWER AND AUTHORITY. Each of the
Borrowers has full corporate power and authority to execute and deliver this
Agreement and the other Financing Documents to which it is a party, to make the
borrowings under this Agreement, and to incur and perform the Obligations
whether under this Agreement, the other Financing Documents or otherwise, all of
which have been duly authorized by all proper and necessary corporate action. No
consent or approval of shareholders or any creditors of any of the Borrowers,
and no consent, approval, filing or registration with or notice to any
Governmental Authority on the part of any of the Borrowers, is required as a
condition to the execution, delivery, validity or enforceability of this
Agreement or the other Financing Documents or the performance by any of the
Borrowers of any or all of the Obligations, except as has been obtained or made,
and except for the filings required to perfect the Liens of the Agent and the
Lenders required by this Agreement.
3.1.4 BINDING AGREEMENTS. This Agreement and
the other Financing Documents executed and delivered by any or all of the
Borrowers have been properly executed and delivered and constitute the valid and
legally binding obligations of such Borrowers and are fully enforceable against
such Borrowers in accordance with their respective terms (subject to limitations
as to enforceability which might result from bankruptcy, reorganization,
arrangement, insolvency or other similar laws affecting creditor's rights
generally and subject to limitations as to principles of equity).
3.1.5 NO CONFLICTS. Neither the execution,
delivery and performance of the terms of this Agreement or of any of the other
Financing Documents executed and delivered by any of the Borrowers nor the
consummation of the transactions contemplated by this Agreement will conflict
with, violate or be prevented by (a) any Borrower's charter, articles of
incorporation or bylaws, (b) any existing mortgage, indenture, contract or
agreement binding on any of the Borrowers or affecting any of its property, or
(c) any Laws.
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3.1.6 NO DEFAULTS, VIOLATIONS.
(a) No Default or Event of Default has
occurred and is continuing.
(b) None of the Borrowers nor any of its
Subsidiaries is in default under or with respect to any obligation under any
existing mortgage, indenture, contract or agreement binding on it or affecting
its property, in any respect which could have a Materially Adverse Effect.
3.1.7 COMPLIANCE WITH LAWS. Except as set forth
in the Schedules attached to this Agreement, none of the Borrowers nor any of
its Subsidiaries is in violation of any applicable Laws (including, without
limitation, any Environmental Laws, any Laws relating to employment practices
and occupational or health standards and controls) or order, writ, injunction,
decree or demand of any court, arbitrator, or any Governmental Authority
affecting any of the Borrowers or any of its Subsidiaries or any of its or their
properties, the violation of which, considered in the aggregate, could have a
Materially Adverse Effect.
3.1.8 MARGIN STOCK. None of the proceeds of the
Loans or Letters of Credit will be used, directly or indirectly, by any of the
Borrowers or any Subsidiary for the purpose of purchasing or carrying, or for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry, any "margin security" within the meaning of
Regulation G (12 CFR Part 207), or "margin stock" within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve
System or for any other purpose which might make the transactions contemplated
in this Agreement a "purpose credit" within the meaning of said Regulation G or
Regulation U, or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities Exchange Act
of 1934, as amended, or any rules or regulations promulgated under any of such
statutes. None of the proceeds of the Loans or Letters of Credit will be used,
directly or indirectly, by any of the Borrowers or any Subsidiary, for any
purpose which violates, or which is inconsistent with, the provisions of
Regulation X of the Board of Governors.
3.1.9 INVESTMENT COMPANY ACT; MARGIN SECURITIES.
None of the Borrowers nor any of its or their Subsidiaries is an investment
company within the meaning of the Investment Company Act of 1940, as amended,
nor is it, directly or indirectly, controlled by or acting on behalf of any
Person which is an investment company within the meaning of said Act. None of
the Borrowers nor any of its or their Subsidiaries is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying "margin security" within the
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meaning of Regulation G (12 CFR Part 207), or "margin stock" within the meaning
of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System.
3.1.10 LITIGATION. Except as otherwise disclosed
to the Agent and the Lenders on Schedule 3.1.10 attached to and made a part of
this Agreement, there are no proceedings, actions or investigations pending or,
so far as any of the Borrowers know, threatened before or by any court,
arbitrator or any Governmental Authority which, in any one case or in the
aggregate, the foreseeable outcome of which would reasonably be expected to have
a Materially Adverse Effect.
3.1.11 FINANCIAL CONDITION. The Consolidated
financial statements of the Borrowers and all of their respective Subsidiaries
as at October 31, 1997 and for the nine (9) month period then ended fairly
present the financial condition of the Borrowers and all such Subsidiaries and
the results of their operations as of the date and for the period referred to
and have been prepared in accordance with GAAP applied on a consistent basis
throughout the period involved. There are no liabilities, direct or indirect,
fixed or contingent, of any of the Borrowers or any of their respective
Subsidiaries as of the date of such financial statements which are not reflected
therein or in the notes thereto as required by GAAP. There has been no
materially adverse change in the financial condition or operations of any of the
Borrowers or any of their respective Subsidiaries (taken as whole) since the
date of such financial statements and to the Borrowers' knowledge no such
materially adverse change is pending or threatened, in either case, the
foreseeable outcome of which would reasonably be expected to have a Materially
Adverse Effect. None of the Borrowers nor any Subsidiary has guaranteed the
obligations of, or made any investment in or advances to, any Person that is not
a Borrower, except as disclosed in such financial statements or as otherwise
permitted by the provisions of this Agreement.
3.1.12 PROJECTED FINANCIAL STATEMENTS. As a
condition of any Permitted Acquisition, the Borrowers are obligated to furnish
to the Agent financial projections in form and content reasonably acceptable to
the Agent and the Required Lenders which give effect to the proposed
acquisition. The Borrowers represent and warrant as of the date of delivery of
such financial projections, that they represent the Borrowers' good faith
estimate of the future Consolidated financial condition of the Borrowers after
giving effect to such proposed acquisition and are based on assumptions included
therein, which the Borrowers believe in good faith to be reasonable.
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3.1.13 FULL DISCLOSURE. This Agreement, together
with the financial statements referred to in Section 3.1.11 of this Agreement,
all other certificates furnished under the provisions of this Agreement and the
schedules to this Agreement (a) do not contain any untrue statement of a
material fact and (b) when taken in their entirety, do not omit any material
fact necessary to make the statements contained therein not misleading. In
addition, to the knowledge, information and belief of the Borrowers, the annual
budgets furnished to the Agent as required under the provisions of this
Agreement (a) do not contain any untrue statement of a material fact and (b)
when taken in their entirety, do not omit any material fact necessary to make
the statements contained therein not misleading, as of the date such annual
budgets were furnished to the Agent.
3.1.14 INDEBTEDNESS FOR BORROWED MONEY. Except
for the Obligations and except as set forth in the most current financial
statements furnished to the Agent in accordance with the provisions of Section
3.1.11 or Section 5.1.1 or as set forth in Schedule 3.1.14 attached to and made
a part of this Agreement, the Borrowers have no Indebtedness for Borrowed Money.
3.1.15 TAXES. Each of the Borrowers and its
Subsidiaries has filed all returns, reports and forms (or duly obtained
extensions for the filing thereof) for Taxes which, to the knowledge of the
Borrowers, are required to be filed, and has paid all Taxes as shown on such
returns or on any assessment received by it, to the extent that such Taxes have
become due, unless and to the extent only that such Taxes, assessments and
governmental charges are currently contested in good faith and by appropriate
proceedings by such Borrower or Subsidiary, such Taxes are not the subject of
any Liens other than Permitted Liens, and adequate reserves therefor have been
established as required under GAAP. All tax liabilities of the Borrowers and
Subsidiaries were as of the date of audited financial statements referred to in
Section 3.1.11 above, and are now, adequately provided for on the books of the
Borrowers or their Subsidiaries, as appropriate under GAAP. No tax liability has
been asserted by the Internal Revenue Service or any state or local authority
against any of the Borrowers for Taxes in excess of those already paid for
periods covered by prior returns.
3.1.16 ERISA. With respect to any Plan, and if
the Borrowers would be exposed to a material liability (as determined by the
Agent and the Required Lenders in their good faith, reasonable discretion) as a
result: (a) no "accumulated funding deficiency" as defined in Code ss.412 or
ERISA ss.302 has occurred, whether or not that accumulated funding deficiency
has been waived; (b) no Reportable Event has occurred; and (c) no
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termination of any plan subject to Title IV of ERISA has occurred with respect
to any Multiemployer Plan and within the immediately preceding five (5) years,
and if the Borrowers would be exposed to a material liability as a result (i)
none of the Borrowers nor any Commonly Controlled Entity has incurred a
"complete withdrawal" within the meaning of ERISA ss.4203 from any Multiemployer
Plan or (ii) none of the Borrowers nor any Commonly Controlled Entity has
incurred a "partial withdrawal" within the meaning of ERISA ss.4205 with respect
to any Multiemployer Plan; or (iii) to the best knowledge of the Borrowers,
after due and diligent inquiry, no Multiemployer Plan is in "reorganization"
within the meaning of ERISA ss.4241 nor has notice been received by any of the
Borrowers or any commonly controlled entity that such a multiemployer plan will
be placed in "reorganization".
3.1.17 TITLE TO PROPERTIES. Each of the
Borrowers has good title to all of its properties, including, without
limitation, the properties and assets reflected in the balance sheets described
in Section 3.1.11 above. Each of the Borrowers has legal, enforceable and
uncontested rights to use freely such property and assets.
3.1.18 PRESENCE OF HAZARDOUS MATERIALS OR
HAZARDOUS MATERIALS CONTAMINATION. To the best of each Borrower's knowledge
after due and diligent inquiry and except as set forth in Schedule 3.1.18, (a)
no Hazardous Materials are located on any real property owned, controlled or
operated by such Borrower or for which any of the Borrowers are responsible in
concentrations which would violate any applicable Environmental Laws or impose
liability or obligations on the Borrowers under any Environmental Laws for any
investigation, corrective action, remediation or monitoring of Hazardous
Materials and, except for supplies for use by such Borrower in the ordinary
course of its business and stored, used and disposed in accordance with
applicable Environmental Laws; and (b) no property owned, controlled or operated
by any of the Borrowers has ever been used as a manufacturing, storage, or dump
site for Hazardous Materials nor is affected by Hazardous Materials
Contamination on or from any other property which could or would have a
Materially Adverse Effect.
3.1.19 PLACES OF BUSINESS. Schedule 3.1.19
completely and accurately identifies the address of (a) each Borrower's chief
executive office, (b) any and each other place of business of each Borrower, and
(c) the location of all books and records pertaining to its properties and
assets.
3.1.20 BUSINESS NAMES AND ADDRESSES. Except as
disclosed in Schedule 3.1.20, since 1986 with respect to the Parent, and since
acquisition by the Parent of C&D Charter, as
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appropriate, none of Borrowers has changed its name, identity or corporate
structure, has not conducted business under any name other than its current
name, and has not conducted its business in any jurisdiction other than those
disclosed on Schedule 3.1.20, except that (i) the Parent has changed its name
from Charter Power Systems, Inc. to C&D Technologies, Inc. effective June 24,
1997, (ii) C&D Charter Power Systems, Inc., International and Charter
California, former subsidiaries of the Parent, have each been merged into the
Parent, with the Parent being the surviving corporation, and (iii) the Parent
has established a branch office in Kuala Lumpur, Malaysia.
3.1.21 SECURITIES ACTS. None of the Borrowers
has issued any unregistered securities in violation of the registration
requirements of Section 5 of the Securities Act of 1933, as amended, or any
other Law, and is not in violation of any rule, regulation, or requirement under
the Securities Act of 1933, as amended, or the Securities and Exchange Act of
1934, as amended. None of the Borrowers are required to qualify any indenture
under the Trust Indenture Act of 1939, as amended, in connection with the
execution and delivery of any of the Notes.
3.1.22 GOVERNMENTAL REGULATION. None of the
Borrowers nor any of its or their Subsidiaries is subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act or the
Interstate Commerce Act or to any Federal or state Laws limiting its or their
ability to incur Indebtedness for Borrowed Money.
3.1.23 SOLVENCY. In each case after giving
effect to the Indebtedness for Borrowed Money represented by the Obligations
outstanding and/or to be incurred and the transactions contemplated by this
Agreement, the Borrowers, on a consolidated basis, are solvent, having assets of
a fair salable value which exceed the amount required to pay their debts as they
become absolute and matured (including contingent, subordinated, unmatured and
unliquidated Liabilities), and the Borrowers, on a consolidated basis, are able
to and anticipate that they will be able to meet their debts as they mature and
have adequate capital to conduct the business in which they are or propose to be
engaged.
3.1.24 EMPLOYEE RELATIONS. None of the Borrowers,
except as set forth in Schedule 3.1.24, is a party to any collective bargaining
agreement nor has any labor union been recognized as the representative of such
Borrower's employees, and no such Borrower knows of any actual or threatened
strikes or work stoppage involving such Borrower's employees.
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3.1.25 PROPRIETARY RIGHTS. The Proprietary Rights
possessed by the Borrowers or otherwise available to the Borrowers by virtue of
being in the public domain constitute all of the property of such type necessary
to the conduct of each Borrower's past practices. Any and all obligations to pay
royalties or other charges with respect to such properties and assets are
reflected in accordance with GAAP on the financial statements described in
Section 3.1.11.
SECTION 3.2 SURVIVAL. All representations and warranties contained in
or made under or in connection with this Agreement and the other Financing
Documents shall survive the Closing Date, the making of any advance under the
Loans, the issuance of any Letter of Credit, the extension of credit hereunder,
and the incurring of any other Obligations.
ARTICLE 4
CONDITIONS PRECEDENT
SECTION 4.1 CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT. This
Agreement shall not be effective until fulfillment of the following conditions
precedent in a manner satisfactory to the Agent on or before the Closing Date:
4.1.1 GOOD STANDING ETC. The Agent shall have
received a certificate of good standing for each of the Borrowers certified by
the Secretary of State, or other appropriate Governmental Authority, of the
state of incorporation for such Borrowers. The Agent shall have received a
certificate of qualification to do business for each of the Borrowers certified
by the Secretary of State or other Governmental Authority of each state in which
such Borrower conducts business.
4.1.2 CORPORATE PROCEEDINGS OF THE BORROWERS.
The Agent shall have received a certificate dated as of the Closing Date by the
Secretary or an Assistant Secretary of each of the Borrowers covering:
(a) true and complete copies of such
Borrower's corporate charter, bylaws, and all amendments thereto if and
to the extent amended since the Original Closing Date;
(b) true and complete copies of the
resolutions of its Board of Directors authorizing (i) the execution,
delivery and performance of this Agreement and the other Financing
Documents to which such Borrower is a party and (ii) the borrowings by
the Borrowers
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hereunder (including the issuance of any Letters of Credit);
(c) the incumbency, authority and
signatures of the officers of such Borrower authorized to sign this
Agreement and the other Financing Documents to which such Borrower is a
party; and
(d) the identity of such Borrower's
current officers and management, and with respect to the Parent, to the
best knowledge of the Parent based on forms 13D and 13G filed with the
Securities and Exchange Commission, the identity of the common stock
holders of the Parent having a percentage ownership interest greater
than or equal to ten percent (10%) of the Parent's current outstanding
stock and their respective percentage ownership interests.
4.1.3 NOTES. The Agent shall have received the
Revolving Credit Notes, each conforming to the requirements hereof and executed
by a Responsible Officer of each of the Borrowers and attested by a duly
authorized representative of each of the Borrowers.
4.1.4 FINANCING DOCUMENTS. Each of the Borrowers
shall have executed and delivered the Financing Documents to be executed by it.
4.1.5 OPINION OF BORROWER'S COUNSEL. The Agent
shall have received the favorable opinion of counsel for the Borrowers addressed
to the Agent and the Lenders in form satisfactory to the Agent, the Lenders and
their respective counsel.
4.1.6 OTHER DOCUMENTS, ETC. The Agent shall have
received such other certificates, opinions, documents and instruments
confirmatory of or otherwise relating to the transactions contemplated hereby as
may have been reasonably requested by the Agent.
4.1.7 PAYMENT OF FEES. The Agent shall have
received payment of any Fees due on or before the Closing Date.
4.1.8 ADDITIONAL MATTERS. All other documents and
legal matters in connection with the transactions contemplated by this Agreement
and the other Financing Documents shall be reasonably satisfactory in form and
substance to the Agent and its counsel.
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4.1.9 COMMITMENT FEES. The Borrowers shall pay
to the Agent, for the ratable benefit of the Lenders, commitment fees equal to
the following amounts at the following times (each a "Commitment Fee" and
collectively, the "Commitment Fees"):
Date Amount
- ---- ------
Closing Date $30,000
First anniversary date
of Closing Date $20,000
Second anniversary date
of Closing Date $ 5,000
Each Commitment Fee shall constitute a Fee for purposes of this Agreement and
shall be deemed fully earned and non-refundable as of the date due and payable.
SECTION 4.2. CONDITIONS TO ALL EXTENSIONS OF CREDIT. The making of all
advances under the Loans and the issuance of all Letters of Credit is subject to
the fulfillment of the following conditions precedent in a manner satisfactory
to the Agent:
4.2.1 COMPLIANCE. The Borrowers shall have
complied and shall then be in compliance with all terms, covenants, conditions
and provisions of this Agreement and the other Financing Documents which are
binding upon it.
4.2.2 DEFAULT. There shall exist no Event of
Default or Default. The Borrowers acknowledge and agree that the failure of the
Borrowers to comply with any of the financial covenants set forth in Sections
5.1.14 through 5.1.18 shall constitute a Default and that the Agent shall not be
entitled to waive any Event of Default or Default without the prior consent of
the Required Lenders.
4.2.3 REPRESENTATIONS AND WARRANTIES. All of
the representations and warranties contained in this Agreement shall be true,
correct and complete for the initial extension of credit hereunder. The
representations and warranties contained in Sections 3.1.1 through 3.1.11,
3.1.12, 3.1.15, and 3.1.19, 3.1.21 through 3.1.23 hereof shall be true as of the
date of each subsequent extension of credit or issuance of a Letter of Credit;
provided, that representations and warranties as to financial statements shall
be deemed to refer to the most recent financial statements delivered to the
Agent. In addition, such representations and warranties may be updated in
writing in connection with a proposed subsequent extension of credit or issuance
of a Letter of Credit, but no such update shall be binding upon the Agent or the
Lenders without the consent of the Agent and
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the Required Lenders (which shall be deemed given if the Agent or any of the
Required Lenders do not reject a proposed amendment within fifteen (15) days of
its submission to them respectively; and provided that neither the Agent nor any
of the Required Lenders shall have any obligation to agree to any such update).
Updates of Section 3.1.3 shall be made by compliance with the provisions of
Section 5.2.2 hereof and shall require no consent of the Agent or Lenders.
4.2.4 ADVERSE CHANGE. No adverse change shall
have occurred in the financial condition of the Borrowers which would, in the
reasonable good faith judgment of the Agent and the Required Lenders, have a
Materially Adverse Effect.
4.2.5 LEGAL MATTERS. All legal documents
incident to each advance under the Loans and each of the Letters of Credit shall
be reasonably satisfactory to counsel for the Agent.
ARTICLE 5
COVENANTS OF THE BORROWERS
SECTION 5.1 AFFIRMATIVE COVENANTS. So long as any of the Obligations
and/or any of the Commitments shall be outstanding, the Borrowers jointly and
severally agree with the Agent and the Lenders as follows:
5.1.1 FINANCIAL STATEMENTS.
(a) ANNUAL STATEMENTS AND CERTIFICATES. The
Borrowers shall furnish to the Agent and the Lenders as soon as available, but
in no event more than one hundred twenty (120) days after the close of the
Parent's fiscal year, (i) a copy of the annual Consolidated financial statements
in reasonable detail satisfactory to the Agent relating to all of the Borrowers
and their respective Subsidiaries, prepared in accordance with GAAP and examined
and certified by independent certified public accountants satisfactory to the
Agent, which financial statements shall include a Consolidated balance sheet of
all of the Borrowers and their respective Subsidiaries, as of the end of such
fiscal year and Consolidated statements of income, cash flows and changes in
shareholders equity of each of the Borrowers and their respective Subsidiaries
for such fiscal year, in each case setting forth in comparative form the figures
for the then previous fiscal year, and in each case without qualification as to
the scope of the audit or the status of any of the Borrowers as a "going
concern", (ii) a detailed computation of each financial covenant in this
Agreement which is applicable for the period reported, including, without
limitation, the ratio of Funded Debt to EBITDA, all as prepared by
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the Financial Officer of the Parent in a format reasonably acceptable to the
Agent and (iii) any and all form 10Ks required to be filed by any of the
Borrowers with the Securities and Exchange Commission with respect to the
relevant fiscal year. The Agent and the Lenders acknowledge and agree that if
and to the extent the financial statements required by this subsection (a) are
in accordance with the requirements of the "EDGAR Rules" promulgated by the
Securities and Exchange Commission as of the date of this Agreement, that such
financial statements shall be deemed to be in a form acceptable to the Agent and
the Lenders if such financial statements are in all respects at least comparable
to the financial statements previously furnished to the Agent and the Lenders as
to scope, information and format.
(b) ANNUAL STATEMENT OF ACCOUNTANT. If the
Parent shall cease to be a reporting company under the Securities Exchange Act
of 1934, as amended, then thereafter the Borrowers shall furnish to the Agent
and the Lenders as soon as available, but in no event more than one hundred
twenty (120) days after the close of the Parent's fiscal year, a letter of the
accountant who examined and certified the annual financial statement relating to
the Borrowers and their Subsidiaries stating whether anything in such
accountant's examination has revealed the occurrence of a Default or an Event of
Default, and, if so, stating the facts with respect thereto.
(c) QUARTERLY STATEMENTS AND CERTIFICATES.
The Borrowers shall furnish to the Agent and the Lenders as soon as available,
but in no event more than sixty (60) days after the close of the Parent's fiscal
quarters, (i) a Consolidated balance sheet of the Borrowers and their
Subsidiaries as of the close of such period, (ii) Consolidated statements of
income, cash flows and changes in shareholders equity statements for such
period, (iii) a detailed computation of each financial covenant in this
Agreement which is applicable for the period reported, including, without
limitation the ratio of Funded Debt to EBITDA, all as prepared and certified by
the Financial Officer of the Parent and accompanied by a certificate of that
officer stating whether any event has occurred which constitutes a Default or an
Event of Default, and, if so, stating the facts with respect thereto, (iv) any
and all form 10Qs required to be filed by any of the Borrowers with the
Securities and Exchange Commission, and (v) a quarterly aging report of all
accounts receivable in summary form reasonably acceptable to the Agent and the
Lenders.
(d) ANNUAL BUDGETS. The Borrowers shall
furnish to the Agent and the Lenders as soon as available, but in no event more
than forty-five (45) days after the close of each of the Parent's fiscal years,
annual budget statements for all of the
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Borrowers and their respective Subsidiaries on a Consolidated basis, detailed by
fiscal quarters, in form and content substantially similar to those provided to
the Board of Directors of the Parent for its most recent fiscal year, and all as
prepared and certified by the Financial Officer of the Parent.
(e) ADDITIONAL REPORTS AND INFORMATION. The
Borrowers shall furnish to the Agent and the Lenders promptly, such additional
information, reports or statements as the Agent and/or any of the Lenders may
from time to time reasonably request.
(f) ENVIRONMENTAL COMPLIANCE CERTIFICATES.
The Borrowers shall furnish to the Agent within forty-five (45) days after the
close of each of the Parent's fiscal quarters, an Environmental Compliance
Certificate in form attached hereto as EXHIBIT E with respect to each of the
Borrowers, which demonstrate to the Agent's reasonable satisfaction that none of
the Borrowers is or is likely to be in violation of any Environmental Laws which
would constitute a Material Adverse Effect.
(g) MANAGEMENT LETTER. The Borrowers shall
furnish to the Agent and the Lenders as soon as available, but in no event more
than one hundred eighty (180) days after the close of the Parent's fiscal year,
a copy of a management letter prepared by the Parent's independent certified
public accountants to be reasonably acceptable to the Agent and the Lenders.
5.1.2 REPORTS TO SEC AND TO STOCKHOLDERS. The
Borrowers will furnish to the Agent and the Lenders, promptly upon the filing or
making thereof, at least one (l) copy of all financial statements, reports,
notices and proxy statements sent by the Parent to its stockholders, and of all
regular and other reports filed by the Parent with any securities exchange or
with the Securities and Exchange Commission.
5.1.3 RECORDKEEPING, RIGHTS OF INSPECTION, FIELD
EXAMINATION, ETC.
(a) Each of the Borrowers shall, and shall
cause each of its Subsidiaries to, maintain (i) a standard system of accounting
in accordance with GAAP, and (ii) proper books of record and account in which,
in all material respects, full, true and correct entries are made of all
dealings and transactions in relation to its properties, business and
activities. The Agent and the Lenders acknowledge and agree that the Borrowers
and Subsidiaries may not reflect and document all intercompany transactions
among Borrowers and Subsidiaries in accordance with GAAP; the Borrowers covenant
and agree, however to handle such intercompany transactions in accordance with
their current
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practices if and to the extent not otherwise handled in accordance with GAAP.
(b) Each of the Borrowers shall, and shall
cause each of its Subsidiaries to, permit authorized representatives of the
Agent to visit and inspect the properties of any and all of the Borrowers and
its or their Subsidiaries, to review, audit, check and inspect each Borrower's
other books of record at any time with or without notice and to make abstracts
and photocopies thereof, and to discuss the affairs, finances and accounts of
any or all of the Borrowers and its or their Subsidiaries, with the management,
officers, directors, employees designated by a Responsible Officer and other
representatives of any or all of the Borrowers and its or their Subsidiaries and
its or their respective accountants as and to the extent designated by a
Responsible Officer, all at such times during normal business hours and other
reasonable times and as often as the Agent may reasonably request.
Notwithstanding the foregoing, the Agent and the Lenders agree to give the
Borrowers prior reasonable notice of any such review, audit, check or inspection
in the event there does not exist a Default or an Event of Default. The
Borrowers acknowledge and agree that if no member of the Borrowers' management
is employed by any of the Borrowers at the time of any requested inspection, the
Agent and the Lenders shall be permitted to discuss the affairs, finances and
accounts of any or all of the Borrowers with any employees or other
representatives of any or all of the Borrowers, including accountants.
(c) Following the occurrence of a Default or
an Event of Default, each of the Borrowers hereby irrevocably authorizes and
directs all accountants and auditors employed by any or all of the Borrowers
and/or any of its or their Subsidiaries at any time during the term of this
Agreement to exhibit and deliver to the Agent and the Lenders copies of any and
all of the financial statements, trial balances, management letters, or other
accounting records of any nature of any or all of the Borrowers and/or any or
all of its or their Subsidiaries in the accountant's or auditor's possession,
and to disclose to the Agent and any of the Lenders any information they may
have concerning the financial status and business operations of any or all of
the Borrowers and/or any of its or their Subsidiaries. Further, each of the
Borrowers hereby authorizes all Governmental Authorities to furnish to the Agent
and the Lenders copies of reports or examinations relating to any or all of the
Borrowers and/or any or all of its or their Subsidiaries, whether made by any of
the Borrowers or otherwise.
(d) Any and all costs and expenses incurred
by, or on behalf of, the Agent in connection with the conduct of any of the
foregoing shall be part of the Enforcement Costs and
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shall be payable to the Agent within ten (10) days of the Agent's written
request therefor. Each of the Borrowers acknowledges and agrees that such
expenses may include, but shall not be limited to, any and all reasonable
out-of-pocket costs and expenses of the Agent's employees and agents in, and
when, travelling to any of the Borrowers' facilities.
5.1.4 CORPORATE EXISTENCE. Except as otherwise
permitted under Section 5.2.1, each of the Borrowers shall maintain, and shall
cause each of its Subsidiaries to maintain, its corporate existence in good
standing in the jurisdiction in which it is incorporated and in each other
jurisdiction where it is required to register or qualify to do business if the
failure to do so in such other jurisdiction could or would have a Materially
Adverse Effect.
5.1.5 COMPLIANCE WITH LAWS. Each of the Borrowers
shall comply, and shall cause each of its Subsidiaries to comply, with all
applicable Laws (including, without limitation Environmental Laws) and to
observe the valid requirements of Governmental Authorities, the noncompliance
with or the nonobservance of which might have a Materially Adverse Effect.
5.1.6 PRESERVATION OF PROPERTIES. Each of the
Borrowers will, and will cause each of its Subsidiaries to, at all times (a)
maintain, preserve, protect and keep its properties, whether owned or leased, in
reasonably good operating condition, working order and repair (ordinary wear and
tear and casualty excepted), and from time to time will make all proper repairs,
maintenance, replacements, additions and improvements thereto as are
commercially reasonable and needed to maintain such properties in good operating
condition, working order and repair, in all material respects, and (b) use all
commercially reasonable efforts to do or cause to be done all things necessary
to preserve and to keep in full force and effect its material franchises, leases
of real and personal property, Proprietary Rights and permits which are
necessary for the orderly continuance of its business.
5.1.7 LINE OF BUSINESS. The Borrowers will
continue to engage principally in the business of manufacturing, assembling,
distributing, selling and exporting power systems and their related components
for commercial, industrial and government use in the world-wide standby power,
motive power, power electronics and power supply markets generally. The
Borrowers' battery power systems are comprised principally of industrial lead
acid and nickel-cadmium batteries as well as power rectifiers, power inverters,
sensing and alarm systems, power control and distribution equipment and related
accessories. The Borrowers'
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products are sold as individual components and as integrated power systems.
5.1.8 INSURANCE. Each of the Borrowers will, and
will cause each of its Subsidiaries to, at all times maintain with A-rated
insurance companies such insurance as is required by applicable Laws and such
other insurance, in such amounts, of such types and against such risks, hazards,
liabilities, casualties and contingencies as are usually insured against in the
same geographic areas by business entities engaged in the same or similar
business. Without limiting the generality of the foregoing, each of the
Borrowers will, and will cause each of its Subsidiaries to, keep adequately
insured all of its and their property against loss or damage resulting from fire
or other risks insured against by extended coverage and maintain public
liability insurance against claims for personal injury, death or property damage
occurring upon, in or about any properties occupied or controlled by it, or
arising in any manner out of the businesses carried on by it, all in such
amounts as are reasonable and customary in the lines of business set forth in
Section 5.1.7 and are in amounts at least equal to the market value or
replacement value of any assets or property covered. Each of the Borrowers shall
deliver to the Agent on each date there is a material change in the insurance
coverage and on each renewal date of any insurance a certificate of insurance
from a Responsible Officer of the Borrowers containing a detailed list of the
insurance then in effect and stating the names of the insurance companies, the
types, the amounts and rates of the insurance, dates of the expiration thereof
and the properties and risks covered thereby. Within thirty (30) days after
notice in writing from the Agent, the Borrowers will obtain such additional
insurance with respect to the Borrowers and the Subsidiaries as the Agent may
reasonably request. The Agent and the Lenders agree that all proceeds of
insurance shall be paid to the Borrowers, which shall determine within thirty
(30) days of their receipt of such proceeds whether to apply the proceeds of
insurance either to the repair, replacement or restoration of the property
damaged or destroyed or to the repayment of the Obligations. The Borrowers shall
notify the Agent in writing as to their determination with respect to insurance
proceeds within such thirty (30) day period. If and to the extent the Borrowers
elect to use insurance proceeds to repair, replace or restore the property
damaged or destroyed, the Borrowers covenant to use such proceeds for the
repair, replacement or restoration in good faith and promptly following any
Borrower's receipt thereof.
5.1.9 TAXES. Except to the extent that the
validity or amount thereof is being contested in good faith and by appropriate
proceedings, each of the Borrowers will, and will cause each of their
Subsidiaries to, pay and discharge all Taxes as and
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when due and payable. The Borrowers shall furnish to the Agent at such times as
the Agent may require proof satisfactory to the Agent of the making of payments
or deposits required by applicable Laws including, without limitation, payments
or deposits with respect to amounts withheld by any of the Borrowers from wages
and salaries of employees and amounts contributed by any of the Borrowers on
account of federal and other income or wage taxes and amounts due under the
Federal Insurance Contributions Act, as amended.
5.1.10 ERISA. Each of the Borrowers will, and will
cause each of its Subsidiaries to, comply with the minimum funding requirements
of the Code with respect to employee Plans for its respective employees. None of
the Borrowers will permit with respect to any Plan (a) any prohibited
transaction or transactions under ERISA or the Internal Revenue Code, which
results, or may result, in any material liability of any of the Borrowers and
their Subsidiaries, as determined by the Agent and the Required Lenders in their
good faith, reasonable discretion, or (b) any Reportable Event if, upon
termination of the Plan with respect to which one or more such Reportable Events
shall have occurred, there is or would be any material liability of any of the
Borrowers and/or any of their Subsidiaries to the PBGC, as determined by the
Agent and the Required Lenders in their good faith, reasonable discretion. Upon
the Agent's reasonable request, the Borrowers will deliver to the Agent a copy
of the most recent actuarial report, financial statements and annual report
completed with respect to any Plan of a Borrower or Subsidiary that is a
"defined benefit plan", as defined in ERISA.
5.1.11 NOTIFICATION OF EVENTS OF DEFAULT AND
ADVERSE DEVELOPMENTS. The Borrowers shall promptly notify the Agent upon
obtaining knowledge of the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation instituted or overtly
threatened against any of the Borrowers or any of its or their
Subsidiaries and of the entry of any judgment or Lien against any of
the assets or properties of any of the Borrowers or any Subsidiary
where the claims against any of the Borrowers or any Subsidiary exceed
One Million Dollars ($1,000,000) and are not covered by insurance;
(d) any event, development or circumstance
whereby the financial statements furnished hereunder which, subsequent
to their issuance, prove to have failed in any material respect to
present fairly, in accordance with GAAP,
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the financial condition and operational results of the Borrowers and
their Subsidiaries, on a Consolidated basis as of the date of such
financial statements;
(e) any judicial, administrative or arbitral
proceeding pending against any of the Borrowers or any of its or their
Subsidiaries and any judicial or administrative proceeding known by any
of the Borrowers to be threatened against it or them or any of its or
their Subsidiaries, the reasonably foreseeable outcome of which the
Borrowers' determine, in good faith could have a Materially Adverse
Effect; and
(f) the receipt by any of the Borrowers or
any Subsidiary of any notice, claim or demand from any Governmental
Authority which alleges that any of the Borrowers or any Subsidiary is
in violation of any of the terms of, or has failed to comply with any
applicable Laws regulating its operation and business, including, but
not limited to, the Occupational Safety and Health Act, ERISA and
Environmental Laws, which failure could, in the Borrowers' good faith
determination, have a Materially Adverse Effect; in each case
describing in detail satisfactory to the Agent the nature thereof and
the action the Borrowers propose to take with respect thereto.
5.1.12 HAZARDOUS MATERIALS; CONTAMINATION. Each of
the Borrowers agrees to:
(a) give notice to the Agent within two
(2) Business Days after any Borrower's acquiring knowledge of the
presence of any Hazardous Materials in concentrations which would
violate any applicable Environmental Laws or impose liability or
obligations on the Borrowers under any Environmental Laws for any
investigation, corrective action, remediation or monitoring of the
Hazardous Materials on any property owned, operated or controlled by
such Borrower or any Subsidiary of such Borrower or for which any of
the Borrowers or any Subsidiaries of any of the Borrowers are
responsible (provided that such notice shall not be required for
Hazardous Materials placed or stored on such property in accordance
with applicable Laws in the ordinary course of the Borrowers' lines of
business expressly described in this Agreement) or of any Hazardous
Materials Contamination with a full description thereof;
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(b) promptly comply with any Environmental
Laws requiring the removal, treatment or disposal of Hazardous
or Hazardous Materials Contamination and provide the Agent with
satisfactory evidence of such compliance; provided, however, that
the Borrowers may contest or defend, in good faith, against any
purported requirement or the imposition of any potential liability
under the Environmental Laws in any reasonable manner available
to the Borrowers, and during the pendency of any such contest or
defense defer compliance with and payment in respect of such
purported requirements or potential liability;
(c) if the Agent determines in the
exercise of its good faith, reasonable discretion, that there is a
reasonable likelihood that any liability, duty or obligation resulting
from or relating to any Hazardous Materials or Hazardous Materials
Contamination affecting any property owned, controlled or operated by
any of the Borrowers or any of their respective Subsidiaries, may be
imposed on the Agent and/or any of the Lender, provide the Agent,
within thirty (30) days after a demand by the Agent, with a bond,
letter of credit or similar financial assurance evidencing to the
Agent's satisfaction that the necessary funds are available to pay the
cost of removing, treating, and disposing of such Hazardous Materials
or Hazardous Materials Contamination and discharging any Lien which may
be established as a result thereof on any property owned, operated or
controlled by any of the Borrowers or any Subsidiary of any of the
Borrowers or for which any of the Borrowers or any Subsidiary of any of
the Borrowers are responsible (the Agent agrees not to make such demand
for a bond, letter of credit or similar financial assurance unless the
Borrowers have failed to remedy the Hazardous Materials Contamination
or otherwise take such other action as shall be reasonably acceptable
to the Agent and the Lenders to address such Hazardous Materials
Contamination, in a time frame considered reasonable by the Agent given
the facts and circumstances of the Hazardous Materials Contamination);
and
(d) as part of the Obligations, defend,
indemnify and hold harmless the Agent, each of the Lenders and each of
their respective agents, employees, trustees, successors and assigns
from any and all claims which may now or in the future (whether before
or after the termination of this Agreement) be asserted as a result of
the presence of any Hazardous Materials on any
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property owned, operated or controlled by any of the Borrowers or any
Subsidiary of any of the Borrowers for any Hazardous Materials
Contamination for which any of the Borrowers or any Subsidiary of any
of the Borrowers are actually or potentially responsible. The Borrowers
acknowledge and agree that this indemnification shall survive the
termination of this Agreement and the Commitments and the payment and
performance of all of the other Obligations.
5.1.13 DISCLOSURE OF SIGNIFICANT TRANSACTIONS.
Each of the Borrowers shall deliver to the Agent a written notice describing in
detail each transaction by it involving the sale, lease, or loss or casualty to
or disposition of an interest in any fixed or capital Assets which, as
reasonably determined by the Borrowers, exceeds One Million Dollars
($1,000,000), said notices to be delivered to the Agent within thirty (30) days
of the occurrence of each such transaction.
5.1.14 NET WORTH. The Borrowers and the
Subsidiaries, at all times during the first fiscal quarter ending on or after
the Closing Date, tested as of the end of such first fiscal quarter, shall
maintain a Net Worth of not less than the sum of (i) Fifty-eight Million Dollars
($58,000,000), plus (ii) forty percent (40%) of the Borrowers' and the
Subsidiaries' Consolidated earnings (as defined in accordance with GAAP) and
calculated as net profit after Taxes) for such fiscal quarter. The Borrowers and
the Subsidiaries, at all times for all fiscal quarters thereafter, tested as of
the end of each such fiscal quarter, shall maintain a Net Worth of not less than
the sum of (i) the Minimum Net Worth Amount for the then preceding fiscal
quarter, plus (ii) forty percent (40%) of the Borrowers' and the Subsidiaries'
Consolidated earnings for the then current fiscal quarter. As used herein, the
term "Minimum Net Worth Amount" shall mean for any fiscal quarter of the
Borrowers and the Subsidiaries, the minimum Net Worth required by this Section
5.1.14 for such fiscal quarter. All increases in the Minimum Net Worth Amount
shall be cumulative, such that the Minimum Net Worth Amount required for any
given fiscal quarter shall at least be equal to the sum of Minimum Net Worth
Amount for the then preceding fiscal quarter, plus forty percent (40%) of the
Borrowers' and the Subsidiaries' Consolidated earnings for the then current
fiscal quarter. Notwithstanding the foregoing, the Borrowers acknowledge and
agree that the Minimum Net Worth Amount for any fiscal quarter shall always be
at least equal to the Minimum Net Worth Amount for the then preceding fiscal
quarter.
5.1.15 LIABILITIES TO TANGIBLE NET WORTH RATIO.
The Borrowers and the Subsidiaries, on a Consolidated basis and as
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of the end of each fiscal quarter, commencing with the first such fiscal quarter
ending on or after the Closing Date, shall have a ratio of Liabilities to
Tangible Net Worth of not more than 2.25 to 1.0.
5.1.16 CURRENT RATIO. The Borrowers and the
Subsidiaries, on a Consolidated basis and as of the end of each fiscal quarter,
commencing with the first such fiscal quarter ending on or after the Closing
Date, shall have a Current Ratio of not less than 1.5 to 1.0.
5.1.17 FIXED CHARGE COVERAGE RATIO. The
Borrowers and the Subsidiaries, on a Consolidated basis and as of the end of
each fiscal quarter, commencing with the first such fiscal quarter ending on or
after the Closing Date, shall have a Fixed Charge Coverage Ratio of not less
than 1.5 to 1.0. The Fixed Charge Coverage Ratio shall be calculated on a
rolling four (4) quarter basis.
5.1.18 FUNDED DEBT TO EBITDA. The Borrowers and
the Subsidiaries, on a Consolidated basis and as of the end of each fiscal
quarter, commencing with the first such fiscal quarter ending on or after the
Closing Date, shall have a ratio of Funded Debt to EBITDA of not more than 3.5
to 1.0. EBITDA shall be calculated on a rolling four (4) quarter basis.
5.1.19 BUSINESS NAMES; LOCATIONS. Each Borrower
will notify and will cause each of its Subsidiaries to notify the Agent not less
than thirty (30) days prior to (a) any change in the name under which such
Borrower or Subsidiary conducts its business, (b) any change of the location of
the chief executive office of such Borrower or Subsidiary, and (c) the opening
of any new place of business or the closing of any existing place of business,
and any change in the location of the places where the books and records, or any
part thereof, are kept.
SECTION 5.2 NEGATIVE COVENANTS. So long as any of the Obligations or
Commitments or Letters of Credit shall be outstanding, the Borrowers agree with
the Agent and the Lenders that without the prior written consent of the Agent:
5.2.1 MERGER, ACQUISITION OR SALE OF ASSETS.
None of the Borrowers will, or will permit any Subsidiary to, (i) enter into any
merger or consolidation or amalgamation, (ii) windup or dissolve (or suffer any
liquidation or dissolution), (iii) acquire all or substantially all of the
assets of any Person, except for Permitted Acquisitions, or (iv) sell, lease or
otherwise dispose of any of its Assets, except (1) Inventory disposed of in the
ordinary course of business prior to an Event of Default, (2)
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Permitted Asset Dispositions, (3) intercompany sales, leases or other
dispositions among and between Borrowers and Subsidiaries, or mergers,
consolidations, restructurings, or stock transfers among and between Borrowers
or mergers, consolidations, restructurings or stock transfers among and between
Subsidiaries, and (4) the disposition of worn or obsolete equipment in the
ordinary course of business. The Agent and the Lenders agree to review all
financial projections furnished by the Borrowers in connection with a proposed
Permitted Acquisition promptly upon receipt of such projections and in any event
to complete such review within fifteen (15) days of having received projections
in the form required.
5.2.2 SUBSIDIARIES. None of the Borrowers will
create or acquire, or will permit any Subsidiaries to create or acquire, any
Subsidiaries other than (i) the Subsidiaries existing on the date hereof and
(ii) Permitted Acquisitions. Notwithstanding the foregoing, the Borrowers shall
be permitted to create Subsidiaries at any time and from time to time without
the prior consent of the Agent or the Lenders; provided, that (a) there does not
exist a Default or an Event of Default at the time of such creation, (b) the
creation of any such Subsidiary shall not otherwise cause or result in the
occurrence of a Default or an Event of Default, and (c) within thirty (30) days
of any such Subsidiary's formation by execution and delivery of an Additional
Borrower Joinder Agreement in the form attached hereto as EXHIBIT G, the
Borrowers shall cause such Subsidiary to become a "Borrower" under this
Agreement, and thus jointly and severally liable for payment and performance of
all of the Obligations. In addition, if and to the extent deemed reasonably
necessary by the Agent or any of the Lenders, such Subsidiary and the Borrowers
shall take any and all actions reasonably required by the Agent and the Lenders
to effect and consummate the foregoing, including, without limitation, the
execution and deliver of amended and restated promissory notes and such other
Financing Documents as the Agent may reasonably require. The Borrowers further
covenant and agree to cause each Subsidiary which constitutes a Permitted
Acquisition within thirty (30) days of its acquisition (1) to execute and
deliver an Additional Borrower Joinder Agreement, and thereby become a
"Borrower" under this Agreement, and thus jointly and severally liable for
payment and performance of all of the Obligations and (2) to take any and all
actions reasonably required by the Agent and the Lenders to effect and
consummate the foregoing, including, without limitation, the execution and
deliver of amended and restated promissory notes and such other Financing
Documents as the Agent may reasonably require. The Borrowers covenant and agree
that all Subsidiaries of any Borrower or any Subsidiary will become "Borrowers"
under this Agreement as and when required by the provisions of this Section.
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5.2.3 ISSUANCE OF STOCK. None of the Borrowers
(except for the Parent) will issue, or grant, or will permit any Subsidiary to
issue or grant, any option or right to purchase, any of their capital stock,
except for the issuance of stock or options to purchase stock to employees in
the ordinary course of business and except for the issuance of stock or options
to any or all of the Borrowers which is pledged and delivered to the Agent and
the Lenders.
5.2.4 PURCHASE OR REDEMPTION OF SECURITIES,
DIVIDEND RESTRICTIONS. None of the Borrowers will, or will permit any Subsidiary
to, (i) purchase, redeem or otherwise acquire any shares of its capital stock or
warrants now or hereafter outstanding, except the Parent shall be permitted to
purchase Stock, to the extent the Parent determines in the exercise of its
prudent and commercially reasonable discretion that the price to be paid for
such purchase and/or redemption is economically advantageous and financially
sound for the Parent; provided that (1) any such purchase would not or could not
reasonably be expected to cause an Event of Default or a Default, (2) no Event
of Default or Default shall exist at the time of any such proposed purchase, (3)
the aggregate purchase price of all Stock purchased at any time since the
Closing Date does not exceed Eighteen Million Dollars ($18,000,000) and (4) the
aggregate purchase price of Stock purchased in any fiscal year shall not exceed
Seven Million Dollars ($7,000,000), (ii) declare or pay any dividends or other
distributions, except for Permitted Dividends, (iii) apply any of its property
or assets to the purchase, redemption or other retirement of any shares of any
class of capital stock of any of the Borrowers or Subsidiaries, except as set
forth in clause (i) above, (iv) set apart any sum for the payment of any
dividends on any shares of any class of capital stock of any of the Borrowers or
Subsidiaries or for the purchase, redemption, or other retirement of on any
shares of any class of capital stock of any of the Borrowers or Subsidiaries,
except as set forth in clauses (i) and (ii) above, (v) effect any distribution
by a reduction of capital contribution obligations with respect to any shares of
any class of capital stock of any of the Borrowers or Subsidiaries or any
warrants, (vi) permit any Subsidiary that is not a Borrower or Subsidiary to
purchase or acquire any shares of any class of capital stock of or warrants
issued by any Borrower or any Subsidiary, and (vii) following the occurrence of
a Default or an Event of Default, not prepay, purchase or redeem any
Indebtedness for Borrowed Money other than the Obligations. No dividends,
including Permitted Dividends, may be paid following the occurrence and during
the continuance of a Default or an Event of Default. Notwithstanding the
foregoing, the Borrowers' failure to comply with Section 5.1.14 for any given
fiscal quarter shall not prevent or prohibit any Borrower from declaring or
paying Permitted
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Dividends as of the end of such fiscal quarter; provided that there does not
exist any other Default or Event of Default at the time of such declaration or
payment and provided that the Borrowers are in compliance with Section 5.1.14 as
of the end of the fiscal year which includes such fiscal quarter calculated on a
cumulative basis. Notwithstanding anything to the contrary contained in this
Agreement, the Agent and any one Lender (other than NationsBank) may consent to
the Parent's purchase of Stock having an aggregate purchase price in any fiscal
year in excess of Seven Million Dollars ($7,000,000).
5.2.5 INDEBTEDNESS. None of the Borrowers nor
any Subsidiary will create, incur, assume or suffer to exist any Indebtedness
for Borrowed Money, except:
(a) the Obligations;
(b) current accounts payable arising in the
ordinary course of business;
(c) Indebtedness secured by Permitted Liens;
(d) the PEDFA Loans;
(e) Indebtedness existing on the date of this
Agreement and reflected on the financial
statements furnished pursuant to Section
3.1.11;
(f) Permitted Preferred Indebtedness;
(g) Unsecured letters of credit, banker's
acceptances and/or (1) secured foreign
exchange or interest rate swaps, collars
or caps or similar agreements between a
Borrower (or a Subsidiary) and any of the
Lenders and/or (2) unsecured foreign
exchange or interest rate swaps, collars
or caps or similar agreements between a
Borrower (or a Subsidiary) and any other
financial institution, providing for the
transfer or mitigation of foreign
exchange risks or interest rate risks
either generally or under specific
contingencies;
(h) Indebtedness for Borrowed Money incurred
after the date of this Agreement;
provided, that (i) such Indebtedness for
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Borrowed Money is incurred on
account of purchase money or finance
lease arrangements of Assets (other
than real property) acquired by a
Borrower after the date of this
Agreement, and (ii) each such
purchase money or finance lease
arrangement does not exceed the cost
or fair market value of the Assets
acquired or leased and does not
extend to any Assets or property
other than that purchased or leased;
(i) Capital Leases;
(j) Indebtedness for Borrowed Money incurred
by any Borrower or Subsidiary to any
other Borrower or Subsidiary; provided,
that all financial statements to be
furnished to the Agent as required by
Section 5.1.1 at any time after and
during the continuance of such
Indebtedness for Borrowed Money are both
Consolidated and consolidating, except
that any such consolidating statements
shall not be audited; and
(k) Subordinated Indebtedness incurred by any
Borrower or Subsidiary in consideration,
in whole or in part, for a Permitted
Acquisition; provided that such
Subordinated Indebtedness is to the
seller or other party to any merger,
acquisition or other business
combination, regardless of the structure
of the transaction, comprising or
relating to such Permitted Acquisition
and provided further that such
Subordinated Indebtedness is unsecured
and is fully subordinated to payment and
performance of the Obligations in
accordance with a written subordination
agreement in form and content reasonably
acceptable to the Agent and the Required
Lenders.
Notwithstanding the foregoing, the amount of Indebtedness for Borrowed Money
permitted under clauses (f), (g), (h) and (i) shall not at any time,
individually or in the aggregate, equal or exceed Fifteen Million Dollars
($15,000,000). In calculating the amount
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of Indebtedness for Borrowed Money relating to interest rate swaps, collars,
caps or similar agreements permitted under subsection (g), the Agent and the
Lenders acknowledge and agree that it is not appropriate to consider the full
notional amount of the swap, collar, cap or similar agreement as Indebtedness
for Borrowed Money; instead, the appropriate amount to be deemed Indebtedness
for Borrowed Money shall be based on the risk amount attributable to the Lender
or other financial institution providing such swap, collar, cap or similar
agreement, which risk amount shall be determined by the Agent in its good faith,
reasonable discretion based on the amount and maturity of the swap, collar, cap
or similar agreement and in accordance with the Agent's customary procedures and
practices in calculating risk amounts for similar swaps, collars, caps or
agreements then available from the Agent. Similarly, in calculating the amount
of Indebtedness for Borrowed Money relating to foreign exchange swaps and
similar agreements permitted under subsection (g), the amount to be considered
Indebtedness for Borrowed Money may be less than the full notional amount of the
swap or similar agreement; but, instead shall be equal to the risk amount
attributed to a similar swap or similar agreement then available from the Agent,
as determined by the Agent in its good faith, reasonable discretion based on the
term of the swap or similar agreement and the foreign currency involved.
5.2.6 INVESTMENTS, LOANS AND OTHER TRANSACTIONS.
None of the Borrowers nor any Subsidiary will (a) make, assume, acquire or
continue to hold any investment in any real property (unless used in connection
with their business and treated as a capital asset) or any Person, whether by
stock purchase, capital contribution, equity investment, grants, gifts or other
transfers of assets, properties (including cash and non-cash) which are not
expected or required to be repaid, acquisition of Indebtedness of such Person or
otherwise (including, without limitation, investments in any joint venture or
partnership), except for capital contributions to any other Borrower (leasehold
improvements to any facility leased by any of the Borrowers or any Subsidiary
shall not be construed as an "investment" for purposes of this Section), (b)
guaranty or otherwise become contingently liable for the Indebtedness or
obligations of any Person, or (c) make any loans or advances, or otherwise
extend credit to any Person, except:
(a) i) the extensions of credit set forth in
Schedule 5.2.6, as the same may be renewed or extended at any time and
from time to time, and (ii) any other advance to an officer or employee
of any of the Borrowers or of any Subsidiary for travel or other
business expenses in the ordinary course of business;
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(b) the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary
course of business;
(c) any investment in Cash Equivalents;
(d) trade credit extended to customers in the
ordinary course of business;
(e) ordinary working capital and other
advances among and between the Borrowers and guaranties by one Borrower
of obligations of another Borrower in the ordinary course of business;
(f) payments of royalties and interest to
Charter Holdings; and
(g) credit extended to manufacturer
representatives of the Borrowers to permit or support such
representatives to expand or reinforce the Borrowers' markets and/or
business opportunities; provided, that such credit shall be extended in
accordance with the Borrowers' past practices and in a prudent and
commercially reasonable manner.
Notwithstanding the foregoing, the amount of loans and advances permitted under
clauses (a) and (g) above shall not at any time, individually or in the
aggregate, equal or exceed One Million Dollars ($1,000,000).
5.2.7 CAPITAL EXPENDITURES. Except for Permitted
Acquisitions, none of the Borrowers nor any Subsidiary will, directly or
indirectly (by way of the acquisition of the securities of a Person or
otherwise), make any Capital Expenditures in the aggregate for the Borrowers and
their Subsidiaries (taken as a whole) for fiscal years 1999, 2000 and 2001
exceeding, in the aggregate, Sixty Million Dollars ($60,000,000); provided that
(i) in any given fiscal year the aggregate amount of Capital Expenditures shall
not exceed Twenty-five Million Dollars ($25,000,000) and (ii) the making of such
Capital Expenditure could not reasonably be expected to give rise to a Default
or an Event of Default.
5.2.8 STOCK OF SUBSIDIARIES. Except as otherwise
expressly permitted by Section 5.2.1, none of the Borrowers will sell or
otherwise dispose of any shares of capital stock of any Subsidiary (except in
connection with a merger or consolidation of a Wholly Owned Subsidiary into any
of the other Borrowers) or permit any Subsidiary to issue any additional shares
of its capital stock except PRO RATA to its stockholders.
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5.2.9 LIENS. None of the Borrowers nor any
Subsidiary will create, incur, assume or suffer to exist any Lien upon any of
its or their properties or assets, whether now owned or hereafter acquired,
except for Liens securing the Obligations and Permitted Liens.
5.2.10 TRANSACTIONS WITH AFFILIATES. None of the
Borrowers nor any Subsidiary will enter into or participate in any transaction
with any Affiliate (other than a Borrower) with terms which would not otherwise
be available in a transaction negotiated in good faith between independent
third-parties having equal bargaining power, except for transactions among any
Borrower and any Subsidiary, other than a Subsidiary in which an Affiliate
(other than a Borrower or another Subsidiary) has an equity or other ownership
interest.
5.2.11 ERISA COMPLIANCE. None of the Borrowers
nor any Subsidiary shall: (a) engage in or permit any "prohibited transaction"
(as defined in the Internal Revenue Code); (b) cause any "accumulated funding
deficiency" as defined in the Internal Revenue Code and/or the Internal Revenue
Code; (c) terminate any pension plan in a manner which could result in the
imposition of a Lien by PGBC on the property of any of the Borrowers pursuant to
the Internal Revenue Code; (d) terminate or consent to the termination of any
Multiemployer Plan; or (e) incur a complete or partial withdrawal with respect
to any Multiemployer Plan.
5.2.12 PROHIBITION ON HAZARDOUS MATERIALS. None
of the Borrowers shall place, manufacture or store or permit to be placed,
manufactured or stored any Hazardous Materials on any property owned, operated
or controlled by any of the Borrowers or for which any of the Borrowers are
responsible other than Hazardous Materials placed or stored on such property in
accordance with all applicable Laws (including Environmental Laws) in the
ordinary course of any Borrower's business.
5.2.13 METHOD OF ACCOUNTING. The Borrowers shall
not change the method of accounting employed in the preparation of the financial
statements furnished prior to the date of this Agreement to the Agent, unless
required to conform to GAAP and on the condition that the Borrowers' accountants
shall furnish such information as the Agent may request to reconcile the changes
with the Borrowers' prior financial statements.
5.2.14 SALE AND LEASEBACK. Without the prior
written consent of the Agent and the Required Lenders, none of the Borrowers nor
any Subsidiary will directly or indirectly enter into any arrangement to sell or
transfer all or any substantial part of
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its fixed assets and thereupon or within one year thereafter rent or lease the
assets so sold or transferred.
ARTICLE 6
DEFAULT AND RIGHTS AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under the provisions of
this Agreement:
6.1.1 FAILURE TO PAY. The failure of the
Borrowers to pay any of the Obligations as and when due and payable in
accordance with the provisions of this Agreement, the Notes and/or any of the
other Financing Documents, and such failure to pay shall remain uncured for a
period of ten (10) days;
6.1.2 BREACH OF REPRESENTATIONS AND WARRANTIES.
Any representation or warranty made in this Agreement or in any report,
statement, schedule, certificate, opinion (including any opinion of counsel for
the Borrowers), financial statement or other document furnished in connection
with this Agreement, any of the other Financing Documents, or the Obligations,
shall prove to have been false or misleading when made (or, if applicable, when
reaffirmed) in any material respect.
6.1.3 FAILURE TO COMPLY WITH COVENANTS. The
failure of the Borrowers to perform, observe or comply with any covenant,
condition or agreement contained in Section 5.1.3(b), Section 5.1.4, Section
5.1.8, or Section 5.2 of this Agreement.
6.1.4 OTHER COVENANTS. The failure of the
Borrowers to perform, observe or comply with any covenant, condition or
agreement contained in this Agreement, other than those set forth in Section
6.1.1, Section 6.1.2 and 6.1.3 above, which default shall remain unremedied for
thirty (30) days after written notice thereof to the Borrowers by the Agent.
6.1.5 DEFAULT UNDER OTHER FINANCING DOCUMENTS OR
OBLIGATIONS. A default shall occur under any of the other Financing Documents or
under any other Obligations, including, without limitation, the PEDFA
Obligations, and such default is not cured within any applicable grace period
provided therein.
6.1.6 RECEIVER; BANKRUPTCY. Any Borrower or any
Subsidiary shall (a) apply for or consent to the appointment of a receiver,
trustee or liquidator of itself or any of its property, (b) admit in writing its
inability to pay its debts as they mature, (c) make a general assignment for the
benefit of creditors, (d) be
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adjudicated a bankrupt or insolvent, (e) file a voluntary petition in bankruptcy
or a petition or an answer seeking or consenting to reorganization or an
arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or an answer admitting the material allegations of a petition filed
against it in any proceeding under any such law, or take corporate action for
the purposes of effecting any of the foregoing, or (f) by any act to indicate
its consent to, approval of or acquiescence in any such proceeding or the
appointment of any receiver of or trustee for any of its property, or suffer any
such receivership, trusteeship or proceeding to continue undischarged and
unappealed for a period of sixty (60) days, or (g) by any act indicate its
consent to, approval of or acquiescence in any order, judgment or decree by any
court of competent jurisdiction or any Governmental Authority enjoining or
otherwise prohibiting the operation of a material portion of any Borrower's or
any Subsidiary's business or the use or disposition of a material portion of any
Borrower's or any Subsidiary's assets, all as determined by the Agent and the
Required Lenders in their good faith, reasonable discretion.
6.1.7 INVOLUNTARY BANKRUPTCY, ETC. (a) An order
for relief shall be entered in any involuntary case brought against any Borrower
or any Subsidiary under the Bankruptcy Code, or (b) any such case shall be
commenced against any Borrower or any Subsidiary and shall not be dismissed or
stayed within sixty (60) days after the filing of the petition, or (c) an order,
judgment or decree under any other Law is entered by any court of competent
jurisdiction or by any other Governmental Authority on the application of a
Governmental Authority or of a Person other than any Borrower or any Subsidiary
(i) adjudicating any Borrower or any Subsidiary bankrupt or insolvent, or (ii)
appointing a receiver, trustee or liquidator of any Borrower or of any
Subsidiary, or of a material portion of any Borrower's or any Subsidiary's
assets, as determined by the Agent and the Required Lenders in their good faith,
reasonable discretion or (iii) enjoining, prohibiting or otherwise limiting the
operation of a material portion of any Borrower's or any Subsidiary's business
or the use or disposition of a material portion of any Borrower's or any
Subsidiary's assets, as determined by the Agent and the Required Lenders in
their good faith, reasonable discretion, and such order, judgment or decree
continues unstayed and in effect for a period of sixty (60) days from the date
entered.
6.1.8 JUDGMENT. Unless adequately insured in the
opinion of the Agent, the entry of a judgment against any or all of the
Borrowers and/or any Subsidiaries, which individually or taken as a whole with
any other judgments against any or all of the Borrowers and/or any Subsidiaries,
exceeds Five Hundred Thousand
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Dollars ($500,000), and the failure by the Borrowers or Subsidiaries to
discharge the same, or cause it to be discharged, within thirty (30) days from
the date of the order, decree or process under which or pursuant to which such
judgment was entered (including all extensions), or to secure a stay of
execution pending appeal of such judgment.
6.1.9 DEFAULT UNDER OTHER BORROWINGS. Default
shall be made with respect to any Indebtedness for Borrowed Money (other than
the Obligations and after expiration of any applicable notice and cure periods,
if any) of any of the Borrowers, the principal amount of which Indebtedness for
Borrowed Money, singly or in the aggregate equals or exceeds One Million Dollars
($1,000,000), if the effect of such default is to accelerate the maturity of
such evidence of the Indebtedness for Borrowed Money or to permit the holder or
obligee thereof or other party thereto to cause any indebtedness to become due
prior to its stated maturity.
6.1.10 LIQUIDATION, TERMINATION, OR DISSOLUTION.
Except as permitted by Section 5.2.1, if any of the Borrowers shall liquidate,
dissolve or terminate its existence, without the prior written consent of the
Agent, except in the case of Borrowers which are Subsidiaries of the Parent, for
liquidation into another Borrower which does not otherwise cause an Event of
Default or a Default.
SECTION 6.2 REMEDIES. Upon the occurrence of any Event of Default, the
Agent, at the direction of the Required Lenders, may at any time thereafter
exercise any one or more of the following rights, powers or remedies:
6.2.1 ACCELERATION. The Agent may declare any
or all of the Obligations to be immediately due and payable, notwithstanding
anything contained in this Agreement or in any of the other Financing Documents
to the contrary, without presentment, demand, protest, notice of protest or of
dishonor, or other notice of any kind, all of which the Borrowers hereby waive.
THE OCCURRENCE OR NON-OCCURRENCE OF A DEFAULT OR AN EVENT OF DEFAULT UNDER THIS
AGREEMENT OR UNDER ANY OF THE OTHER FINANCING DOCUMENTS SHALL IN NO WAY AFFECT
OR CONDITION THE AGENT'S RIGHT, UPON THE DIRECTION OF THE REQUIRED LENDERS, TO
DEMAND IMMEDIATE PAYMENT AT ANY TIME OF ANY OF THE OBLIGATIONS WHICH ARE PAYABLE
ON DEMAND REGARDLESS OF WHETHER OR NOT A DEFAULT OR AN EVENT OF DEFAULT HAS
OCCURRED.
6.2.2 FURTHER ADVANCES. The Agent may from time
to time without notice to the Borrowers suspend, terminate or limit any further
advances, Loans, Letters of Credit or other extensions of credit under this
Agreement and/or under any of the other
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Financing Documents. Further, upon the occurrence of an Event of Default
specified in Sections 6.1.6 (Receiver; Bankruptcy) or 6.1.7 (Involuntary
Bankruptcy, etc.) above, the Revolving Credit Commitments, the Letter of Credit
Commitments and any agreement in any of the Financing Documents to provide
additional credit and/or to issue Letters of Credit shall immediately and
automatically terminate and the unpaid principal amount of the Notes (with
accrued interest thereon) and all other Obligations then outstanding, shall
immediately become due and payable without further action of any kind and
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by each of the Borrowers.
6.2.3 PERFORMANCE BY AGENT. If the Borrowers
shall fail to pay the Obligations or otherwise fail to perform, observe or
comply with any of the conditions, covenants, terms, stipulations or agreements
contained in this Agreement or any of the other Financing Documents, the Agent
without notice to or demand upon the Borrowers and without waiving or releasing
any of the Obligations or any Default or Event of Default, may (but shall be
under no obligation to) at any time thereafter make such payment or perform such
act for the account and at the expense of the Borrowers, and may enter upon the
premises of any or all of the Borrowers for that purpose and take all such
action thereon as the Agent may consider necessary or appropriate for such
purpose and each of the Borrowers hereby irrevocably appoints the Agent as its
attorney-in-fact to do so, with power of substitution, in the name of the Agent
or in the name of any or all of the Borrowers or otherwise, for the use and
benefit of the Agent, but at the cost and expense of the Borrowers and without
notice to the Borrowers. All sums so paid or advanced by the Agent together with
interest thereon from the date of payment, advance or incurring until paid in
full at the Post-Default Rate and all costs and expenses, shall be deemed part
of the Enforcement Costs, shall be paid by the Borrowers to the Agent on demand,
and shall constitute and become a part of the Agent's Obligations.
6.2.4 OTHER REMEDIES. The Agent may from time
to time proceed to protect or enforce the rights of the Agent and/or any of the
Lenders by an action or actions at law or in equity or by any other appropriate
proceeding, whether for the specific performance of any of the covenants
contained in this Agreement or in any of the other Financing Documents, or for
an injunction against the violation of any of the terms of this Agreement or any
of the other Financing Documents, or in aid of the exercise or execution of any
right, remedy or power granted in this Agreement, the Financing Documents,
and/or applicable Laws. The Agent and each of the Lenders is authorized to
offset and apply to all or any part of the Obligations all moneys, credits and
other
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property of any nature whatsoever of any or all of the Borrowers now or at any
time hereafter in the possession of, in transit to or from, under the control or
custody of, or on deposit with, the Agent, any of the Lenders or any Affiliate
of the Agent or any of the Lenders.
ARTICLE 7
THE AGENT
SECTION 7.1 APPOINTMENT, POWERS AND IMMUNITIES. In order to expedite
the various transactions contemplated by this Agreement, each of the Lenders
hereby irrevocably appoints and authorizes NationsBank to act as their agent
under this Agreement and each of the other Financing Documents and to serve as
their representative within the meaning of Section 9-105(1)(m) of the Uniform
Commercial Code. NationsBank hereby consents to such appointment and agrees to
perform the duties of Agent as specified herein. Each of the Lenders authorizes
and directs the Agent to take such action in their name and on their behalf
under the terms and provisions of this Agreement and the other Financing
Documents and to exercise such rights and powers thereunder as are specifically
delegated to or required of the Agent by the terms of this Agreement and each of
the other Financing Documents, together with such other rights and powers as are
reasonably incidental thereto. The Agent is hereby expressly and irrevocably
authorized by each of the Lenders, as agent on behalf of itself and the other
Lenders:
(a) To receive on behalf of each of the Lenders any payment or
collection on account of the Obligations and to distribute to each Lender its
Proportionate Share of all such payments and collections so received as provided
in this Agreement;
(b) To receive all documents and items to be furnished to the Lenders
under the Financing Documents (nothing contained herein shall relieve the
Borrowers of any obligation to deliver any item directly to the Lenders to the
extent expressly required by the provisions of this Agreement);
(c) To act as nominee for and on behalf of the Lenders in and under
this Agreement and the other Financing Documents;
(d) To arrange for the means whereby the funds of the Lenders are to
be made available to the Borrowers;
(e) To distribute promptly to the Lenders, if required by the terms of
this Agreement, all written information, requests, notices, Loan Notices,
Interest Rate Election Notices, payments,
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Prepayments, documents and other items received from any of the Borrowers or any
other Person;
(f) To deliver to the Borrowers and other Persons, all requests,
demands, approvals, notices, and consents received from any of the Lenders;
(g) To the extent permitted by this Agreement and/or any of the other
Financing Documents, to exercise on behalf of each Lender all rights and
remedies of the Lenders upon the occurrence of any Event of Default and/or
Default specified in this Agreement and/or in any of the other Financing
Documents;
(h) To execute any documents on behalf of the Lenders as the secured
party for the benefit of itself and the Lenders; and
(i) To take such other actions as may be requested by the Required
Lenders.
The Agent (i) shall have no duties or responsibilities to the Lenders except
those expressly set forth in this Agreement and the other Financing Documents,
and shall not by reason of this Agreement or any other Financing Document be a
fiduciary or trustee for any Lender, (ii) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or under any other
Financing Document except to the extent instructed by the Required Lenders,
(iii) shall not be responsible for any action taken or omitted to be taken by it
or by any of its officers, directors, agents or employees hereunder or under any
other Financing Document, except for its own willful misconduct and gross
negligence and that of its officers, directors, agents or employees while acting
within the scope of their employment or agency, (iv) shall not be required under
any circumstances to take any action that, in its judgment, is contrary to the
provisions of this Agreement and/or any of the other Financing Documents and/or
applicable Laws or which would or could expose the Agent to any liability or
expense against which it has not been indemnified to its satisfaction. The
duties of the Agent shall be mechanical and administrative in nature. As to any
matters not expressly provided for by this Agreement, the Agent shall in all
cases be fully protected in acting or in refraining from acting, hereunder in
accordance with instructions signed by the Required Lenders, and such
instructions of the Required Lenders in any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. Where any provision of
this Agreement requires the consent, agreement or other action of the Lenders,
the Agent shall act only upon the consent or instructions of the Required
Lenders except as provided in Section 7.10.
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SECTION 7.2 RIGHTS AS LENDER. The Agent in its capacity as a Lender and
not as Agent shall have the same rights and powers under this Agreement as the
other Lenders and may exercise the same as though it were not Agent for the
Lenders, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include the Agent in its individual capacity as a Lender. The Agent
and its Affiliates may (without having to account therefor to any other Lender)
accept deposits from, lend money to, provide financial advisory or other
business to any of the Borrowers, any Affiliate of any of the Borrowers or any
of their respective officers, directors and employees as if it were not acting
as Agent, and the Agent may accept fees and other consideration from any of the
Borrowers, any Affiliate of any of the Borrowers or any of their respective
officers, directors and employees (in addition to the Agency Fees or other
arrangements fees heretofore agreed to between the Borrowers and the Agent) for
services in connection with this Agreement or otherwise without having to
account for or share the same with the Lenders.
SECTION 7.3 NO LIABILITY OF AGENT; INDEMNITY. Neither the Agent nor any
of its Affiliates, officers, directors, employees, or agents shall be liable to
any of the Lenders for any action taken or omitted to be taken by it or them
hereunder or otherwise in connection with this Agreement, except for its or
their willful misconduct and/or gross negligence. The Lenders hereby agree to
indemnify the Agent (to the extent not reimbursed by the Borrowers), ratably on
the basis of their respective Proportionate Shares, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including attorneys' fees), and disbursements of any kind or
nature whatsoever imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of this Agreement, any of the other Financing
Documents or any of the Obligations or the enforcement of any of the terms of
this Agreement and/or any of the other Financing Documents; provided that no
such Lender shall be liable for any of the foregoing to the extent they arise
from willful misconduct or gross negligence by the Agent.
SECTION 7.4 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, or Affiliates has made any representations or
warranties to it and that no act by any of the foregoing hereafter taken,
including any review or audit of the affairs of the Borrower shall be deemed to
constitute a representation or warranty to any Lender. Each Lender agrees that
it has, independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrowers and decision to enter into this Agreement
and that it will
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independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Financing Documents, including, without
limitation, the financial condition or solvency of the Borrowers or any other
Person. Each Lender represents and warrants to the Agent and the other Lenders
that it has received from the Agent a copy of each of the Financing Documents
executed on or before the date it enters into this Agreement and has examined or
has had an opportunity to examine each of such Financing Documents. Each Lender
represents and warrants to the Agent and the other Lenders that such Lender has
the full right, power and authority to enter into this Agreement and make its
Proportionate Share of the Loans and to purchase participations in the Letters
of Credit without notice to, or consent of, any Person and has taken all action,
corporate or otherwise, necessary to authorize it to enter into and execute this
Agreement. The Agent shall not be responsible to the Lenders for any recitals,
statements, representations, or warranties contained in this Agreement, or in
any other Financing Document, or of the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of this Agreement or any other
Financing Document or for any failure by any Borrower or any other Person to
perform any of its obligations under this Agreement or any other Financing
Document. The Agent shall not be required to keep itself informed as to the
performance or observance by the Borrowers of this Agreement or any other
Financing Document or as to the existence or possible existence of any Event of
Default or Default or to inspect the properties or books of Borrowers. Except as
expressly provided herein, the Agent has no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect to the operations, business, property, condition
(financial or otherwise) or creditworthiness of the Borrowers or any other
Person.
SECTION 7.5 AGENTS, EMPLOYEES, REPRESENTATIVES. The Agent may execute
any and all duties under this Agreement and the Financing Documents by or
through representatives, agents or employees, and in such event the
representatives, agents and employees shall be entitled to the benefit of all
rights of indemnification under this Agreement and/or any of the Financing
Documents to which the Agent would be entitled if the Agent had executed such
duties. In addition, the Agent may consult with legal counsel selected by it.
The Agent shall not be liable for any action taken or suffered in good faith by
it in accordance with advice of such counsel.
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SECTION 7.6 RELIANCE BY AGENT; RELIANCE ON AGENT. The Agent shall be
entitled to rely, and shall be fully protected in relying, upon any notice,
consent, writing, resolution, certificate, schedule, affidavit, letter,
cablegram, telecopy, telex, telegram, teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the Agent. The
Agent may deem and treat the original Lenders as the owners of the respective
Notes for all purposes until receipt by the Agent of a written notice of
assignment, negotiation or transfer of any interest therein by the Lenders. Any
interest, authority or consent of any holder of any of the Notes shall be
conclusive and binding on any subsequent holder, transferee, or assignee of such
Notes.
The Borrowers shall be entitled to rely and shall be fully protected in
relying upon any notice, consent or communication from the Agent which purports
to be from and on behalf of the Agent and the Lenders.
SECTION 7.7 SUCCESSOR AGENT. Subject to the appointment and acceptance
of a successor Agent as provided herein, the Agent may not resign at any time
without the prior written consent of the Required Lenders. If the Agent shall
resign as Agent under this Agreement as permitted by this Section 7.7, the
Required Lenders shall, with the prior consent of the Borrowers not to be
reasonably withheld, appoint from among the Lenders a successor agent, whereupon
such successor agent shall succeed to the rights, powers, and duties of the
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to the Agreement. If no successor Agent shall have
been appointed hereunder within thirty (30) days after the Agent's notice of
resignation or removal, then the resigning or removed Agent may, on behalf of
the Lenders, appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States or any State thereof and having a
combined capital and surplus of at least $100,000,000.00. Upon the acceptance of
its appointment as successor Agent, such successor Agent shall thereupon succeed
to and become vested with all rights, powers, privileges, immunities, and duties
of the resigning or removed Agent, and the resigning or removed Agent shall be
discharged from its duties and obligations under this Agreement and the other
Financing Documents. After any Agent's resignation or removal as Agent, the
provisions of this Article shall continue in
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effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was Agent.
SECTION 7.8 AGENCY FEE. The Borrowers shall pay to the Agent, for its
sole and exclusive benefit, (i) a fee equal to Thirty Thousand Dollars ($30,000)
on or before the Closing Date and (ii) annually thereafter, a loan
administration and agency fee (collectively, the "Agency Fees" and individually,
an "Agency Fee"), in the amount of Forty-five Thousand Dollars ($45,000). The
initial Agency Fee shall be payable in advance on the Closing Date, and each
Agency Fee thereafter shall be payable in advance on each anniversary date of
the Closing Date. Each Agency Fee shall be fully earned and non-refundable upon
the date paid. The Agent shall retain all of the Agency Fees for its own account
and shall have no obligation to remit or pay any portion thereof to any of the
Lenders.
SECTION 7.9 ACTIONS AFTER DEFAULT, ETC. In the event that the Agent
shall have been notified in writing by any of the Borrowers or any Lender of any
Default or Event of Default, the Agent and the Lenders agree that the Agent:
(a) shall immediately notify the Lenders;
(b) shall take such action and assert such rights under this Agreement
as it is expressly required to do pursuant to the terms of this Agreement;
(c) may, unless otherwise directed by the Required Lenders, take such
other actions and assert such other rights as it deems advisable, in its sole
discretion, for the protection of the Agent's and the Lenders' interests
pursuant to applicable Laws and/or any of the Financing Documents;
(d) shall, upon the written request of the Required Lenders, as
expeditiously and effectively as is reasonably practicable, enforce or attempt
to enforce the Financing Documents; provided, however, (i) the Agent shall be
guided by the Required Lenders as to the action to be taken in enforcing or
attempting to enforce the Financing Documents; and (ii) the Agent,
notwithstanding indemnification, need not take any action which it believes,
upon advice of counsel, is prohibited by this Agreement or applicable Law; and
(e) shall inform the Lenders of taking of action or assertion of rights
pursuant to this Section.
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Each Lender agrees with the Agent and the other Lenders that the decisions and
determinations of the Required Lenders in enforcing the Notes and the other
Financing Documents and in guiding the Agent in those matters shall be binding
upon all the Lenders, including, without limitation, authorizing the Agent at
the pro rata expense of all the Lenders (to the extent not reimbursed by the
Borrowers) to retain attorneys to seek judgment on the Notes and to foreclose
upon or exercise other rights under any of the Financing Documents. Each Lender
similarly agrees with the other Lenders and covenants with the Borrowers that it
will not seek to separately institute any legal action on its Notes or the other
Financing Documents. All rights of action under the Financing Documents may be
enforced by the Agent only, for the benefit of itself and the Lenders, and any
suit or proceeding instituted by the Agent for the benefit of itself and the
Lenders in furtherance of such enforcement may be brought in its name as Agent
for the benefit of itself and the Lenders without the necessity of joining as
plaintiffs or defendants any Lender, and the recovery of any judgment shall be
for the benefit of the Agent and the Lenders, subject to the expenses of the
Agent.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default or Default unless the Agent has received
notice from a Lender or the Borrowers referring to this Agreement, describing
such Event of Default or Default, and stating that such notice is a "notice of
default".
SECTION 7.10 CIRCUMSTANCES WHERE CONSENT OF ALL OF THE LENDERS IS
REQUIRED. Notwithstanding anything to the contrary contained herein, no
amendment, modification, change or waiver shall be effective without the consent
of all of the Lenders to:
(a) extend the maturity of the principal of, or interest
on, any Note or of any of the other Obligations;
(b) reduce the principal amount of any Note or of any of the
other Obligations or the rate of interest thereon, except as expressly permitted
herein or therein;
(c) change the date of payment of principal of, or
interest on, any Note or of any of the other Obligations;
(d) change the method of calculation utilized in connection
with the computation of interest and Fees;
(e) change the manner of pro rata application by the Agent of
payments made by the Borrowers, or any other payments required hereunder or
under the other Financing Documents, except as provided with respect to the
payment of Non-Ratable Loans;
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(f) modify this Section or the definition of "Required
Lenders"; or
(g) increase or decrease the amount of, or extend, any
Lender's Committed Amount.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 NOTICES. All notices, requests and demands to or upon the
parties to this Agreement shall be in writing and shall be deemed to have been
given or made when delivered by hand on a Business Day, when sent when delivered
by confirmed telecopy, or three (3) days after the date when deposited in the
mail, postage prepaid by registered or certified mail, return receipt requested,
or on the Business Day next following the day on which the notice is delivered
to nationally recognized overnight courier, addressed as follows:
Borrowers: c/o C&D Technologies, Inc.
1400 Union Meeting Road
P.O.Box 3053
Blue Bell, Pennsylvania 11422-0858
Attn: Treasurer
Telecopy No: (215) 619-7811
with a copy to:
Proskauer, Rose, Goetz & Mendelsohn
1585 Broadway
New York, New York 10036
Attn: Steven L. Kirshenbaum, Esquire
Telecopy No: (212) 969-2900
Agent: NationsBank, N.A.
10 Light Street
Baltimore, Maryland 21202
Attn: Mr. Patrick M. Moore
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Telecopy No: (410) 528-1657
with a copy to:
Shaun F. Carrick, Esquire
Miles & Stockbridge
10 Light Street
Baltimore, Maryland 21202
Telecopy No: (410) 385-3700
CoreStates: CoreStates Bank, N.A.
Regional/PA Division
FC 3-90-1-1
Suite 300
2240 Butler Pike
Plymouth Meeting, Pennsylvania 19462
Attn: Karl F. Schultz
Telecopy No: (610) 834-2069
Chase: The Chase Manhattan Bank
One Riverfront Plaza
Newark, New Jersey 07102
Attn: Thomas F. Conroy, Jr.
Vice President
Telecopy No.: (973) 353-6158
PNC: PNC Bank, National Association
Valley Forge Regional Banking Center
Suite 200
1000 Westlakes Drive
Berwyn, Pennsylvania 19312
Attn: Warren Engle
Vice President
Telecopy No.: (610) 725-5799
with a copy to:
PNC Bank, National Association
1600 Market Street
28th Floor
F2-F070-28-4
Philadelphia, Pennsylvania 19103
Attn: Sharon Coghlan, Esquire
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By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
SECTION 8.2 AMENDMENTS; WAIVERS. This Agreement and the other Financing
Documents may not be amended, modified, or changed in any respect except by an
agreement in writing signed by the Agent, the Required Lenders and the
Borrowers, and to the extent provided in Section 7.10 by an agreement in writing
signed by all of the Lenders and the Borrowers. No waiver of any provision of
this Agreement or of any of the other Financing Documents, nor consent to any
departure by the Borrowers therefrom, shall in any event be effective unless the
same shall be in writing. No course of dealing between the Borrowers and the
Agent and/or any of the Lenders and no act or failure to act from time to time
on the part of the Agent and/or any of the Lenders shall constitute a waiver,
amendment or modification of any provision of this Agreement or any of the other
Financing Documents or any right or remedy under this Agreement, under any of
the other Financing Documents or under applicable Laws.
Without implying any limitation on the foregoing, and subject to the
provisions of Section 7.10:
(a) Any waiver or consent shall be effective
only in the specific instance, for the terms and purpose for which given,
subject to such conditions as the Agent may specify in any such instrument.
(b) No waiver of any Default or Event of
Default shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereto.
(c) No notice to or demand on any of the
Borrowers in any case shall entitle the Borrowers to any other or further notice
or demand in the same, similar or other circumstance.
(d) No failure or delay by the Agent or any
of the Lenders to insist upon the strict performance of any term, condition,
covenant or agreement of this Agreement or of any of the other Financing
Documents, or to exercise any right, power or remedy consequent upon a breach
thereof, shall constitute a waiver, amendment or modification of any such term,
condition, covenant or agreement or of any such breach or preclude the Agent
from exercising any such right, power or remedy at any time or times.
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(e) By accepting payment after the due date
of any amount payable under this Agreement or under any of the other Financing
Documents, the Agent shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under this Agreement or
under any of the other Financing Documents, or to declare a default for failure
to effect such prompt payment of any such other amount.
SECTION 8.3 CUMULATIVE REMEDIES. The rights, powers and remedies
provided in this Agreement and in the other Financing Documents are cumulative,
may be exercised concurrently or separately, may be exercised from time to time
and in such order as the Agent shall determine, subject to the provisions of
this Agreement, and are in addition to, and not exclusive of, rights, powers and
remedies provided by existing or future applicable Laws. In order to entitle the
Agent to exercise any remedy reserved to it in this Agreement, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Agreement. Without limiting the generality of the foregoing and
subject to the terms of this Agreement, the Agent may:
(a) proceed against any one or more of the
Borrowers with or without proceeding against any one or more of the
other Borrowers or any other Person who may be liable for all or any
part of the Obligations;
(b) proceed against any one or more of the
Borrowers with or without proceeding under any of the other Financing
Documents or any collateral and security for all or any part of the
Obligations;
(c) without reducing or impairing the joint
and several obligation of the Borrowers and without notice, release or
compromise with any guarantor or other Person liable for all or any
part of the Obligations under the Financing Documents or otherwise;
(d) without reducing or impairing the joint
and several obligations of the Borrowers and without notice thereof:
(i) approve the making of advances under the Revolving Loan under this
Agreement, (ii) waive any provision of this Agreement or the other
Financing Documents, (iii) exercise or fail to exercise rights of
set-off or other rights, or (iv) accept partial payments or extend from
time to time the maturity of all or any part of the Obligations.
SECTION 8.4 SEVERABILITY. In case one or more provisions, or part
thereof, contained in this Agreement or in the other Financing Documents shall
be invalid, illegal or unenforceable in
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any respect under any Law, then without need for any further agreement, notice
or action:
(a) the validity, legality and enforceability
of the remaining provisions shall remain effective and binding
on the parties thereto and shall not be affected or impaired
thereby;
(b) the obligation to be fulfilled shall be
reduced to the limit of such validity;
(c) if such provision or part thereof pertains
to repayment of the Obligations, then, at the sole and absolute
discretion of the Agent, all of the Obligations of the Borrowers to the
Agent and the Lenders shall become immediately due and payable; and
(d) if affected provision or part thereof does
not pertain to repayment of the Obligations, but operates or would
prospectively operate to invalidate this Agreement in whole or in part,
then such provision or part thereof only shall be void, and the
remainder of this Agreement shall remain operative and in full force
and effect.
SECTION 8.5 ASSIGNMENTS BY LENDERS. Any Lender may, with the prior
written consent of the Agent, and with prior notice to the Borrowers, but
without the consent of the Borrowers, assign to any Person reasonably acceptable
to the Borrowers (each an "Assignee" and collectively, the "Assignees") all or a
portion of such Lender's Commitments. Any Lender which elects to make such an
assignment shall pay to the Agent, for the exclusive benefit of the Agent, an
administrative fee for processing each such assignment in the amount of Three
Thousand Dollars ($3,000.00). Such Lender and its Assignee shall notify the
Agent and the Borrowers in writing of the date on which the assignment is to be
effective (the "Adjustment Date"). On or before the Adjustment Date, the
assigning Lender, the Agent, the Borrowers and the respective Assignee shall
execute and deliver a written assignment agreement in the form attached hereto
as EXHIBIT F, which shall constitute an amendment to this Agreement to the
extent necessary to reflect such assignment. Upon the request of any assigning
Lender following an assignment made in accordance with this Section 8.5, the
Borrowers shall issue new Notes to the assigning Lender and its Assignee
reflecting such assignment, in exchange for the existing Notes held by the
assigning Lender.
In addition, notwithstanding the foregoing, any Lender may at any time
pledge all or any portion of such Lender's rights under
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this Agreement, any of the Commitments or any of the Obligations to a Federal
Reserve Bank.
SECTION 8.6 PARTICIPATIONS BY LENDERS. Any Lender may at any time sell
to one or more financial institutions participating interests in any of such
Lender's Obligations or Commitments; provided, however, that (a) after giving
effect to such assignment, such Lender must continue to hold a Proportionate
Share of the Commitments at least equal to Five Million Dollars ($5,000,000),
(b) no such participation shall relieve such Lender from its obligations under
this Agreement or under any of the other Financing Documents to which it is a
party, (c) such Lender shall remain solely responsible for the performance of
its obligations under this Agreement and under all of the other Financing
Documents to which it is a party, and the Borrowers, the Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Financing Documents. Each Lender agrees to give the Borrowers prior
notice of the sale of any participating interest in such Lender's Obligations or
Commitments, which notice shall identify the proposed participant.
SECTION 8.7 DISCLOSURE OF INFORMATION BY LENDERS. In connection with
any sale, transfer, assignment or participation by any Lender in accordance with
Section 8.5 or Section 8.6, each Lender shall have the right to disclose to any
actual or potential purchaser, assignee, transferee or participant all financial
records, information, reports, financial statements and documents obtained in
connection with this Agreement and/or any of the other Financing Documents or
otherwise; provided that such persons shall agree, for the benefit of the
Borrowers, to be bound by the provisions of Section 8.19, whether or not such
sale, transfer, assignment or participation is consummated.
SECTION 8.8 SUCCESSORS AND ASSIGNS. This Agreement and all other
Financing Documents shall be binding upon and inure to the benefit of the
Borrowers, the Agent and the Lenders and their respective heirs, personal
representatives, successors and assigns, except that the Borrowers shall not
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Agent and the Required Lenders.
SECTION 8.9 CONTINUING AGREEMENTS. All covenants, agreements,
representations and warranties made by the Borrowers in this Agreement, in any
of the other Financing Documents, and in any certificate delivered pursuant
hereto or thereto shall survive the making by the Lenders of the Loans, the
issuance of Letters of Credit by the Agent and the execution and delivery of the
Notes, shall be binding upon the Borrowers regardless of how long before
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or after the date hereof any of the Obligations were or are incurred, and shall
continue in full force and effect so long as any of the Obligations are
outstanding and unpaid.
SECTION 8.10 ENFORCEMENT COSTS. The Borrowers agree to pay to the Agent
on demand all Enforcement Costs to the extent due and payable, together with
interest thereon from the date incurred or advanced until paid in full at a per
annum rate of interest equal at all times to the Post-Default Rate. Enforcement
Costs shall be immediately due and payable within ten (10) days of written
invoice therefor. Without implying any limitation on the foregoing, the
Borrowers agree, as part of the Enforcement Costs, to pay upon demand any and
all stamp and other Taxes and fees payable or determined to be payable in
connection with the execution and delivery of this Agreement and the other
Financing Documents and to save the Agent and the Lenders harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay any Taxes or fees referred to in this Section. The
provisions of this Section shall survive the execution and delivery of this
Agreement, the repayment of the other Obligations and shall survive the
termination of this Agreement.
SECTION 8.11 APPLICABLE LAW; JURISDICTION.
8.11.1 As a material inducement to the Agent and
the Lenders to enter into this Agreement, the Borrowers acknowledge and agree
that the Financing Documents, including, this Agreement, shall be governed by
the Laws of the State, as if each of the Financing Documents and this Agreement
had each been executed, delivered, administered and performed solely within the
State even though for the convenience and at the request of the Borrowers, one
or more of the Financing Documents may be executed elsewhere. The Agent and the
Lenders acknowledge, however, that remedies under certain of the Financing
Documents which relate to property outside the State may be subject to the laws
of the state in which the property is located.
8.11.2 Each of the Borrowers irrevocably submit to
the jurisdiction of any state or federal court sitting in the State over any
suit, action or proceeding arising out of or relating to this Agreement or any
of the other Financing Documents. Each of the Borrowers irrevocably waive, to
the fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum. Final judgment in
any such suit, action or proceeding brought in any such court shall be
conclusive and
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binding upon the Borrowers, jointly and severally, and may be enforced in any
court in which any of the Borrowers are subject to jurisdiction, by a suit upon
such judgment, PROVIDED that service of process is effected upon the Borrowers
in one of the manners specified in this Section or as otherwise permitted by
applicable Laws.
8.11.3 Each of the Borrowers hereby irrevocably
designates and appoints The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202, as such Borrower's authorized agent to receive on
such Borrowers' behalf service of any and all process that may be served in any
suit, action or proceeding of the nature referred to in this Section, including,
but not limited to, any demands for arbitration, in any state or federal court
sitting in the State or before Judicial Arbitration and Mediation Services, Inc.
or the American Arbitration Association. If such agent shall cease so to act,
each of the Borrowers shall irrevocably designate and appoint without delay
another such agent in the State satisfactory to the Agent and shall promptly
deliver to the Agent evidence in writing of such other agent's acceptance of
such appointment and its agreement that such appointment shall be irrevocable.
8.11.4 Each of the Borrowers hereby consents to
process being served in any suit, action or proceeding of the nature referred to
in this Section by (i) the mailing of a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to any of the Borrowers at such
Borrower's address designated in or pursuant to Section 8.1 hereof, and (ii)
serving a copy thereof upon in accordance with applicable law, the agent, if
any, designated and appointed by the Borrowers as the Borrowers' agent for
service of process by or pursuant to this Section. Each of the Borrowers
irrevocably agrees that such service (i) shall be deemed in every respect
effective service of process upon all of the Borrowers in any such suit, action
or proceeding, and (ii) shall, to the fullest extent permitted by law, be taken
and held to be valid personal service upon all of the Borrowers to the extent
the action is located in Maryland. Nothing in this Section shall affect the
right of the Agent to serve process in any manner otherwise permitted by law or
limit the right of the Agent otherwise to bring proceedings against any of the
Borrowers in the courts of any jurisdiction or jurisdictions.
SECTION 8.12 DUPLICATE ORIGINALS AND COUNTERPARTS. This Agreement may
be executed in any number of duplicate originals or counterparts, each of such
duplicate originals or counterparts shall be deemed to be an original and all
taken together shall constitute but one and the same instrument.
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SECTION 8.13 HEADINGS. The headings in this Agreement are included
herein for convenience only, shall not constitute a part of this Agreement for
any other purpose, and shall not be deemed to affect the meaning or construction
of any of the provisions hereof.
SECTION 8.14 NO AGENCY. Nothing herein contained shall be construed to
constitute any of the Borrowers as the agent of the Agent or any of the Lenders
for any purpose whatsoever or to permit any of the Borrowers to pledge any of
the credit of the Agent or any of the Lenders. Neither the Agent nor any of the
Lenders shall, by anything herein or in any of the Financing Documents or
otherwise, assume any of the Borrowers' obligations under any contract or
agreement assigned to the Agent and/or the Lenders, and neither the Agent nor
any of the Lenders shall be responsible in any way for the performance by any of
the Borrowers of any of the terms and conditions thereof.
SECTION 8.15 ENTIRE AGREEMENT. This Agreement is intended by the Agent,
the Lenders and the Borrowers to be a complete, exclusive and final expression
of the agreements contained herein. Neither the Agent, the Lenders nor the
Borrowers shall hereafter have any rights under any prior agreements pertaining
to the matters addressed by this Agreement but shall look solely to this
Agreement for definition and determination of all of their respective rights,
liabilities and responsibilities under this Agreement.
SECTION 8.16 WAIVER OF TRIAL BY JURY. THE BORROWERS, THE AGENT AND THE
LENDERS HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH ANY OF THEM MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY
PERTAINING TO (A) THIS AGREEMENT OR (B) ANY OF THE FINANCING DOCUMENTS. THIS
WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES
TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT
PARTIES TO THIS AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by
the Borrowers, the Agent and the Lenders, and the Borrowers, the Agent and the
Lenders hereby represent that no representations of fact or opinion have been
made by any individual to induce this waiver of trial by jury or to in any way
modify or nullify its effect. The Borrowers, the Agent and the Lenders further
represent that they have been represented in the signing of this Agreement and
in the making of this waiver by independent legal counsel, selected of their own
free will, and that they have had the opportunity to discuss this waiver with
counsel.
SECTION 8.17 LIABILITY OF THE AGENT AND THE LENDERS. The Borrowers
hereby agree that neither the Agent nor any of the
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Lenders shall be chargeable for any negligence, mistake, act or omission of any
accountant, examiner, agency or attorney employed by the Agent and/or any of the
Lenders in making examinations, investigations or collections, or otherwise in
perfecting, maintaining, protecting or realizing upon any Lien or security
interest or any other interest in any security for the Obligations.
By inspecting any other properties of any of the Borrowers or
by accepting or approving anything required to be observed, performed or
fulfilled by any of the Borrowers or to be given to the Agent and/or any of the
Lenders pursuant to this Agreement or any of the other Financing Documents,
neither the Agent nor any of the Lenders shall be deemed to have warranted or
represented the condition, sufficiency, legality, effectiveness or legal effect
of the same, and such acceptance or approval shall not constitute any warranty
or representation with respect thereto by the Agent and/or the Lenders.
SECTION 8.18 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING, BUT NOT LIMITED TO THOSE ARISING OUT OF THIS AGREEMENT
OR THE OTHER FINANCING DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM
AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH
THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE ACT),
THE RULES OF PRACTICE AND PROCEDURE FOR ARBITRATION OF COMMERCIAL DISPUTES OF
THE JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.) AND THE
"SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF AN INCONSISTENCY, THE SPECIAL
RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT OR ANY OTHER FINANCING
DOCUMENT MAY BRING ANY ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT OR ANY
OTHER FINANCING DOCUMENT RELATES IN ANY COURTS HAVING JURISDICTION OVER SUCH
ACTION.
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF
AGENT'S DOMICILE AT THE TIME OF EXECUTION OF THIS NOTE AND ADMINISTERED BY
J.A.M.S. WHO WILL APPOINT AN ARBITRATOR. IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCING OF SUCH HEARING FOR AN
ADDITIONAL 60 DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT OR OTHER FINANCING
DOCUMENTS SHALL BE DEEMED TO: (I) LIMIT OR EXPAND THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED
IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY THE AGENT OR
ANY OF THE LENDERS OF THE PROTECTION AFFORDED TO ANY OF THEM BY 12 U.S.C. ss.91
OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT OR
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EXPAND THE RIGHT OF THE AGENT OR ANY OF THE LENDERS (A) TO EXERCISE SELF HELP
REMEDIES SUCH AS (BUT NOT LIMITED TO) SET OFF, OR (B) TO FORECLOSE AGAINST ANY
REAL OR PERSONAL PROPERTY, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR
ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF
POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE AGENT MAY EXERCISE SUCH SELF
HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT OR ANOTHER FINANCING DOCUMENT.
NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF
ANY ACTION FOR FORECLOSURE OR FOR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN SUCH
ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT
TO SUCH REMEDIES.
SECTION 8.19 CONFIDENTIALITY. The Agent and the Lenders hereby agree to
exercise reasonable efforts to keep any non-public information delivered or made
available to the Agent and/or any of the Lenders pursuant to this Agreement or
any of the Financing Documents, confidential from any Person except (a) Persons
employed or retained by the Agent and/or any of the Lenders who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Obligations, (b) with the prior written consent of Borrowers,
(c) as is permitted under and in connection with Section 8.5 or Section 8.6, (d)
as would be reasonably required in connection with the exercise of any remedy
under this Agreement or any of the Financing Documents after and during the
continuance of an Event of Default or a Default or (e) as may be required by
law; provided that in the event that the Agent or any of the Lenders or its or
their representatives are requested or compelled (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process) to disclose any of the non-public
information delivered or made available to Agent and/or any of the Lenders
pursuant to this Agreement or any of the Financing Documents, the Agent, the
Lenders and its and their representatives agree, to the extent legally
permissible, to provide the Borrowers with prompt notice of such request.
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IN WITNESS WHEREOF, each of the parties hereto have executed and
delivered this Agreement under their respective seals as of the day and year
first written above.
ATTEST: C&D TECHNOLOGIES, INC.
/s/ROBERT E. MARLEY By:/s/STEPHEN E. MARKERT, JR. (Seal)
Name:Stephen E. Markert, Jr.
Title:VP-CFO
ATTEST: RATELCO ELECTRONICS, INC.
/s/ROBERT E. MARLEY By:/s/STEPHEN E. MARKERT, JR. (Seal)
Name:Stephen E. Markert, Jr.
Title:VP-CFO
ATTEST: C&D/CHARTER HOLDINGS, INC.
/s/STEPHEN E. MARKERT, JR. By: /s/ ROBERT E. MARLEY (Seal)
Name:Robert E. Marley
Title:VP
ATTEST: CHARTER POWER F.S., LTD.
/s/ROBERT E. MARLEY By:/s/STEPHEN E. MARKERT, JR. (Seal)
Name:Stephen E. Markert, Jr.
Title:VP-CFO
ATTEST: PCC DE MEXICO S.A. DE C.V.
/s/ROBERT E. MARLEY By:/s/STEPHEN E. MARKERT, JR. (Seal)
Name:Stephen E. Markert, Jr.
Title:VP-CFO
ATTEST: POWER CONVERTIBLES IRELAND LIMITED
/s/ROBERT E. MARLEY By:/s/STEPHEN E. MARKERT, JR. (Seal)
Name:Stephen E. Markert, Jr.
Title:VP-CFO
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ATTEST: CD TECHNOLOGIES DE MEXICO S.A.
DE C.V.
/s/ROBERT E. MARLEY By:/s/STEPHEN E. MARKERT, JR. (Seal)
Name:Stephen E. Markert, Jr.
Title:VP-CFO
ATTEST: PCC MEXICAN HOLDINGS, INC.
/s/ROBERT E. MARLEY By:/s/STEPHEN E. MARKERT, JR. (Seal)
Name:Stephen E. Markert, Jr.
Title:VP-CFO
WITNESS: NATIONSBANK, N.A.
in its capacity as Agent
/s/ ROBERT P. BOULLE By: /s/ PATRICK M. MOORE (Seal)
Name: Patrick M. Moore
Title: Vice President
WITNESS: NATIONSBANK, N.A.
in its capacity as a Lender
/s/ ROBERT P. BOULLE By: /s/ PATRICK M. MOORE (Seal)
Name: Patrick M. Moore
Title: Vice President
WITNESS: CORESTATES BANK, N.A.
in its capacity as a Lender
_________________________ By:/s/ KARL F. SCHULTZ (Seal)
Name:Karl F. Schultz
Title:
WITNESS: THE CHASE MANHATTAN BANK
in its capacity as a Lender
/s/ RAY E. GORDANO By: /s/ THOMAS F. CONROY, JR.(Seal)
Name: Thomas F. Conroy, Jr.
Title: Vice President
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WITNESS: PNC BANK, NATIONAL ASSOCIATION
in its capacity as a Lender
/s/ HEIDI S. BABMUELLER By:/s/WARREN C. ENGLE (Seal)
Banking Officer Name: Warren C. Engle
Title: Vice President
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LIST OF EXHIBITS
A. Form of Revolving Credit Note
B. Permitted Liens
C. Settlement Report
D. Form of Loan Notice
E. Form of Environmental Compliance Certificate
F. Form of Assignment Agreement
G. Form of Additional Borrower Joinder Supplement
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SCHEDULES
Schedule 3.1.1 - Subsidiaries
Schedule 3.1.10 - Litigation
Schedule 3.1.14 - Indebtedness for Borrowed Money
Schedule 3.1.18 - Hazardous Materials or Hazardous Material
Contamination
Schedule 3.1.19 - Places of Business
Schedule 3.1.20 - Changes in Names of Borrowers
Schedule 3.1.24 - Labor Matters
Schedule 5.2.6 - Extension of Credit
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SCHEDULE 3.1.1
SUBSIDIARIES OF C&D TECHNOLOGIES, INC.
C&D/Charter Holdings, Inc., a Delaware corporation
Ratelco Electronics, Inc., a Delaware corporation
Charter Power F.S. Ltd., a Bermuda corporation
PCC Mexican Holdings, Inc., a Delaware corporation
PCC de Mexico, S.A. de C.V., a Mexican corporation
C&D TECHNOLOGIES de Mexico, S.A., de C.V., a Mexican corporation
Power Convertibles Corporation Ireland Ltd., an Irish corporation
<PAGE>
Schedule 3.1.10: LEGAL ISSUES
PENDING LITIGATION
o Lawrence B. Sayers Enterprises (Effective Transportation
Services)
o Bruce Blacklock (Eastern Battery)
o John Gennarelli v. C&D Charter Power Systems, Inc. and Onan
Corporation
o Apollo Graphics v. C&D Charter Power Systems, Inc.
o Chicago-Dubuque Foundry Corp. v. Exide Electronics Corp. et al
THREATENED LITIGATION
o Mr. Sheldon Bailey
o Olympian Trademark
o Vancouver D.C. Power Enterprises, Inc.
o Novatec
o Conyer's Clean Up
o J. M. Shaefer
o Conley Equipment Company Declaratory Judgement Action
<PAGE>
SCHEDULE 3.1.14 INDEBTEDNESS FOR BORROWED MONEY
Capitalized Leases in the aggregate amount of $143,974 as of December
31, 1997.
<PAGE>
Schedule 3.1.18 - Hazardous Materials
I. The Borrower has been named as a potentially responsible party ("PRP") by the
United States Environmental Protection Agency ("EPA") with respect to the
following third party owned or operated facilities to which scrap batteries
and/or lead containing or lead contaminated waste had been shipped from
Borrower's facilities for reclamation and/or disposal.
A. The former Tonolli Incorporated Site at Nesquehoning, Pennsylvania:
The remedial investigation and feasibility study at this site was completed in
fiscal 1993. Although the Borrower's final allocable share of the costs of the
investigation and remediation of this site has not yet been determined, the
waste-in lists prepared by the EPA attribute 2.1107% to the Borrower. Based upon
the remedial approach selected by the EPA for this matter the Borrower has
accrued $90,000 as a reserve on Borrower's consolidated financial statements.
B. National Lead Industries Site at Pedricktown, New Jersey: The
Borrower, along with other PRPs, completed the remediation of the first operable
unit for which it was named as a PRP, i.e. the removal of waste piles,
stormwater controls and demolition of site buildings. According to waste-in
lists prepared by the EPA the Borrower contributed 3.5489% of the waste at the
site. The Borrower has expended approximately $129,000 in connection with the
investigation and remedial work on the first available information on the
remaining remediation at the site, an accrued reserve of $153,599 remains on the
Borrower's consolidated financial statements for this matter.
C. U.S.S. Lead Refinery Site in East Chicago, Indiana: The Borrower has
recently received a PRP notice from the EPA. Based on the preliminary waste-in
volumetric ranking for the site prepared by the EPA the Borrower contributed
2.695% of the waste. Based on currently available information, the Borrower has
accrued $283,500 as a reserve on its consolidated financial statements for this
matter.
D. ILCO Smelter Site in Leeds, Alabama: The Borrower has been
identified as a PRP at the site and was classified by EPA as a DE MINIMIS party
in 1997. The Borrower has entered into an agreement with EPA allowing it to
"cash out" its liability for this matter pending approval of the agreement by
the major members of the PRP group. While the Borrower's allocable share of the
cost of the remediation has not been finally determined, the Borrower has
accrued $40,000 as a reserve for this matter.
II. With respect to the third party owned or operated site known as the Crown
Industrial Site in Lackawaxen Township, Pennsylvania, in 1991 the Borrower was
asked by the Pennsylvania Department of Environmental Resources ("PADER") for
information relating to Borrower's potential liability at the site. Information
was provided which generally indicated that Borrower had no information
<PAGE>
to evidence its use of the site. Since that information was provided, the
Borrower has received no further communication from PADER and has not been asked
to participate in the costs of the investigation or cleanup of the site. Based
on information available to it, the Borrower believes that any liability it may
ave at the site would be small.
III. The Borrower has been named a PRP in other third party owned or operated
sites not listed above. However, pursuant to the Acquisition Agreement between
the Borrower and Allied Corporation ("Allied") pursuant to which the Borrower
acquired the assets of the C&D Power Systems division of Allied, Allied is
obligated to indemnify the Borrower for any liabilities relating to those third
part owned or operated facilities at which the Borrower has been named a PRP
(other than those set forth above) and Allied has accepted responsibility for
the potential liabilities relating to those third party facilities other than
those sites specified above.
IV. The Borrower is aware of the following potential Hazardous Materials
Contamination which may exist on the Borrower's principal properties:
A. Huguenot, New York: Fluoride contamination exceeding the state's
groundwater standards in an inactive lagoon which existed prior to the
Borrower's acquisition of the site. The site is currently listed on the New York
State Department of Environmental Conservations's Inactive Hazardous Waste
Disposal List. The Borrower has accrued $185,000 as a reserve on its
consolidated financial statements for this potential liability.
B. Conyers, Georgia: In or about 1981, the site was listed on the
Georgia State Hazardous Sites Inventory. Contaminated soil, likely from a
leaking underground acid neutralization tank and possibly stormwater runoff, has
been exhumed and disposed of and a hydrogeologic study has been undertaken to
assess the impact, if any, to groundwater. The study did not reveal any impact
on the groundwater. The State has recently requested a status report on the site
from Borrower. This report was submitted to the state in May 1997.
<PAGE>
SCHEDULE 3.1.19 PLACES OF BUSINESS
1400 Union Meeting Rd. 1661 Route 22 West
Blue Bell, Pa. 19422 Bound Brook, NJ 08805
200 W. Main St. 1825 Summit Ave. Suite 206
Attica Indiana 47918-0279 Plano, TX 75074
7701 W. 79th St. 41 Cedar Ave. BOXHM 1179
Bridgeview, Il 60455 Hamilton HM EX Bermuda
Washington & Cherry Street 1105 N. Market Street Suite 1300
Conshohocken, Pa 19428 Wilmington, DE 19899
1835 Industrial Blvd Unit 9 Distribution Centre
Conyers, Ga. 30012 Shannon, Ireland
18 Industrial Park Rd. Calle Internationa, Avenida 17 S/N
Dunlap, TN 37327 Agua Prieta Sonora Mexico
Route 209 Internat. Hwy KM612/2Blg 271-2
Huguenot, NY 12746-0430 Sonora Nogales, Mexico
82 E. Main Street No 55-4 The Highway Centre, Jalan
Leola, Pa 17540-1996 51/205, Petaling, Selengor Darul
Malaysia
3400 E. Britannia Dr. Suite 1222 General Warehouse 1000 Naperville
Tucson AZ. 85706 Suite B Bolingbrook, IL 60813
7430 Pacific Circle Std Warehouse 1335 Old Norcross
Mississauga, Ontario Canada L5T 2A3 Lawrenceville, GA 30245
2211 American Ave. Broadmont Rd
Hayward, Ca 94545 Tucson AZ 85706
9220 Norwalk Boulevard
Santa Fe Springs, Ca 90670
345 Baker St
Costa Mesa, Ca 92626
<PAGE>
SCHEDULE 3.1.20 CHANGES IN NAMES OF BORROWERS
Please refer to the preamble section of this amended and restated agreement for
a list of current names of borrowers. Former names of borrowers that have since
been merged or remain as trade styles are:
C&D Power Systems, Inc.
C&D Charter Power Systems, Inc.
C&D Batteries, Inc.
C&D
Charter Power Systems, Inc.
PowerCom Division
Motive Power Division
Charter Power of California DBA Calpacific
Power Electronics Division
LH Research Inc.
Power Convertibles Corporation
PCC
International Power Systems, Inc.
Ratelco Electronics, Inc.
Cactus Holdings, Inc.
C&D Charter Power Systems Canada, Inc.
<PAGE>
Schedule 3.1.24 LABOR MATTERS
The Borrowers are parties to the following collective bargaining agreements:
CONSHOHOCKEN
AMERICAN FEDERATION OF GRAINMILLERS
Local #367
Contract: 10/7/96 - 10/6/2000
ATTICA
I.U.E.
Local #950
Contract: 9/15/95 - 9/15/99
CONYERS
U.A.W.
Local #1726
Contract: 3/1/96 - 3/1/2000
No Borrower knows of any actual or threatened strikes or work stoppages
involving such Borrower's employees.
<PAGE>
SCHEDLUE 5.2.6 EXTENSION OF CREDIT
Aggregate of Loan to:
Pentatech Holdings, Malaysia - $13,084.97
Instant Power Systems, Inc. - $68,671.70
<PAGE>
EXHIBIT 10.4
C&D TECHNOLOGIES SAVINGS PLAN
(October 1, 1997 Restatement)
Fidelity Management Trust Company, its affiliates and employees may not provide
you with legal or tax advice in connection with the execution of this document.
It should be reviewed by your attorney and/or accountant prior to execution.
CORPORATEplan for RETIREMENT
VOLUME SUBMITTER
PLAN DOCUMENT SYSTEMS
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 - Plan Definitions
1.2 - Interpretation
ARTICLE II
SERVICE
2.1 - Definitions
2.2 - Crediting of Hours of Service
2.3 - Crediting of Continuous Service
2.4 - Eligibility Service
2.5 - Vesting Service
2.6 - Crediting of Service on Transfer or Amendment
ARTICLE III
ELIGIBILITY
3.1 - Eligibility
3.2 - Transfers of Employment
3.3 - Reemployment
3.4 - Notification Concerning New Eligible Employees
3.5 - Effect and Duration
ARTICLE IV
TAX-DEFERRED CONTRIBUTIONS
4.1 - Tax-deferred Contributions
4.2 - Amount of Tax-Deferred Contributions
4.3 - Changes in Reduction Authorization
4.4 - Suspension of Tax-Deferred Contributions
4.5 - Resumption of Tax-Deferred Contributions
4.6 - Delivery of Tax-Deferred Contributions
4.7 - Vesting of Tax-Deferred Contributions
ARTICLE V
AFTER-TAX AND ROLLOVER CONTRIBUTIONS
5.1 - After-Tax Contributions
5.2 - Amount of After-Tax Contributions by Payroll Withholding
5.3 - Changes in Payroll Withholding Authorization
5.4 - Suspension of After-Tax Contributions by Payroll Withholding
5.5 - Resumption of After-Tax Contributions by Payroll Withholding
5.6 - Rollover Contributions
5.7 - Delivery of After-Tax Contributions
5.8 - Vesting of After-Tax Contributions and Rollover Contributions
(i)
<PAGE>
ARTICLE VI
EMPLOYER CONTRIBUTIONS
6.1 - Contribution Period
6.2 - Profit-Sharing Contributions
6.3 - Allocation of Profit-Sharing Contributions
6.4 - Qualified Nonelective Contributions
6.5 - Allocation of Qualified Nonelective Contributions
6.6 - Matching Contributions
6.7 - Allocation of Matching Contributions
6.8 - Verification of Amount of Employer Contributions by the Sponsor
6.9 - Payment of Employer Contributions
6.10 - Eligibility to Participate in Allocation
6.11 - Vesting of Employer Contributions
6.12 - Election of Former Vesting Schedule
6.13 - Forfeitures to Reduce Employer Contributions
ARTICLE VII
LIMITATIONS ON CONTRIBUTIONS
7.1 - Definitions
7.2 - Code Section 402(g) Limit
7.3 - Distribution of Excess Deferrals
7.4 - Limitation on Tax-Deferred Contributions of Highly
Compensated Employees
7.5 - Distribution of Excess Tax-deferred Contributions
7.6 - Limitation on Matching Contributions and After-Tax
Contributions of Highly Compensated Employees
7.7 - Forfeiture or Distribution of Excess Contributions
7.8 - Multiple Use Limitation
7.9 - Determination of Income or Loss
7.10 - Code Section 415 Limitations on Crediting of Contributions
and Forfeitures
7.11 - Coverage Under Other Qualified Defined Contribution Plan
7.10 - Coverage Under Qualified Defined Benefit Plan
7.11 - Scope of Limitations
ARTICLE VIII
TRUST FUNDS AND SEPARATE ACCOUNTS
8.1 - General Fund
8.2 - Investment Funds
8.3 - Loan Investment Fund
8.4 - Income On Trust
8.5 - Separate Accounts
8.6 - Sub-accounts
ARTICLE IX
LIFE INSURANCE CONTRACTS
9.1 - No Life Insurance Contracts
(ii)
<PAGE>
ARTICLE X
DEPOSIT AND INVESTMENT OF CONTRIBUTIONS
10.1 - Future Contribution Investment Elections
10.2 - Deposit of Contributions
10.3 - Election to Transfer Between Funds
ARTICLE XI
CREDITING AND VALUING SEPARATE ACCOUNTS
11.1 - Crediting Separate Accounts
11.2 - Valuing Separate Accounts
11.3 - Plan Valuation Procedures
11.4 - Finality of Determinations
11.5 - Notification
ARTICLE XII
LOANS
12.1 - Application for Loan
12.2 - Reduction of Account Upon Distribution
12.3 - Requirements to Prevent a Taxable Distribution
12.4 - Administration of Loan Investment Fund
12.5 - Default
12.6 - Special Rules Applicable to Loans
12.7 - Loans Granted Prior to Amendment
ARTICLE XIII
WITHDRAWALS WHILE EMPLOYED
13.1 - Withdrawals of After-Tax Contributions
13.2 - Withdrawals of Rollover Contributions
13.3 - Withdrawals of Employer Contributions
13.4 - Withdrawals of Tax-Deferred Contributions
13.5 - Limitations on Withdrawals Other Than Hardship Withdrawals
13.6 - Conditions and Limitations on Hardship Withdrawals
13.7 - Order of Withdrawal From a Participant's Sub-Accounts
ARTICLE XIV
TERMINATION OF EMPLOYMENT AND SETTLEMENT DATE
14.1 - Termination of Employment and Settlement Date
14.2 - Separate Accounting for Non-Vested Amounts
14.3 - Disposition of Non-Vested Amounts
14.4 - Recrediting of Forfeited Amounts
ARTICLE XV
DISTRIBUTIONS
15.1 - Distributions to Participants
15.2 - Distributions to Beneficiaries
15.3 - Cash Outs and Participant Consent
15.4 - Required Commencement of Distribution
15.5 - Reemployment of a Participant
(iii)
<PAGE>
15.6 - Restrictions on Alienation
15.7 - Facility of Payment
15.8 - Inability to Locate Payee
15.9 - Distribution Pursuant to Qualified Domestic Relations Orders
ARTICLE XVI
FORM OF PAYMENT
16.1 - Definitions
16.2 - Normal Form of Payment
16.3 - Optional Forms of Payment
16.4 - Change of Option Election
16.5 - Form of Annuity Requirements
16.6 - Qualified Preretirement Survivor Annuity Requirements
16.7 - Direct Rollover
16.8 - Notice Regarding Forms of Payment
16.9 - Reemployment
ARTICLE XVII
BENEFICIARIES
17.1 - Designation of Beneficiary
17.2 - Spousal Consent Requirements
ARTICLE XVIII
ADMINISTRATION
18.1 - Authority of the Sponsor
18.2 - Action of the Sponsor
18.3 - Claims Review Procedure
18.4 - Qualified Domestic Relations Orders
18.5 - Indemnification
18.6 - Actions Binding
ARTICLE XIX
AMENDMENT AND TERMINATION
19.1 - Amendment
19.2 - Limitation on Amendment
19.3 - Termination
19.4 - Reorganization
19.5 - Withdrawal of An Employer
ARTICLE XX
ADOPTION BY OTHER ENTITIES
20.1 - Adoption by Related Companies
20.2 - Effective Plan Provisions
ARTICLE XXI
MISCELLANEOUS PROVISIONS
21.1 - No Commitment as to Employment
21.2 - Benefits
(iv)
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21.3 - No Guarantees
21.4 - Expenses
21.5 - Precedent
21.6 - Duty to Furnish Information
21.7 - Withholding
21.8 - Merger, Consolidation, or Transfer of Plan Assets
21.9 - Back Pay Awards
21.10- Condition on Employer Contributions
21.11- Return of Contributions to an Employer
21.12- Validity of Plan
21.13- Trust Agreement
21.14- Parties Bound
21.15- Application of Certain Plan Provisions
21.16- Leased Employees
21.17- Transferred Funds
ARTICLE XXII
TOP-HEAVY PROVISIONS
22.1 - Definitions
22.2 - Applicability
22.3 - Minimum Employer Contribution
22.4 - Adjustments to Section 415 Limitations
22.5 - Accelerated Vesting
ARTICLE XXIII
EFFECTIVE DATE
23.1 - Effective Date of Amendment and Restatement
(v)
<PAGE>
PREAMBLE
The C&D Technologies Savings Plan, originally effective as of February 1, 1986,
is hereby amended and restated in its entirety. The Plan, as amended and
restated hereby, is intended to qualify as a profit-sharing plan under Section
401(a) of the Code, and includes a cash or deferred arrangement that is intended
to qualify under Section 401(k) of the Code. The Plan is maintained for the
exclusive benefit of eligible employees and their beneficiaries.
Notwithstanding any other provision of the Plan to the contrary, a Participant's
vested interest in his Separate Account under the Plan on and after the
effective date of this amendment and restatement shall be not less than his
vested interest in his account on the day immediately preceding the effective
date. In addition, notwithstanding any other provision of the Plan to the
contrary, the forms of payment and other Plan provisions that were available
under the Plan immediately prior to the later of the effective date of this
amendment and restatement or the date this amendment and restatement is adopted
and that may not be eliminated under Section 411(d)(6) of the Code shall
continue to be available to Participants who had an account under the Plan on
the day immediately preceding the later of the effective date or the date this
amendment and restatement is adopted.
The Plan is intended to constitute an "individual account plan" eligible,
effective as of October 1, 1997, to hold "qualifying employer securities",
within the meaning of ERISA.
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ARTICLE I
DEFINITIONS
1.1 - PLAN DEFINITIONS
As used herein, the following words and phrases have the meanings hereinafter
set forth, unless a different meaning is plainly required by the context:
The "ADMINISTRATOR" means the Sponsor unless the Sponsor designates another
person or persons to act as such.
An "AFTER-TAX CONTRIBUTION" means any after-tax employee contribution made by a
Participant as may be permitted under Article V.
The "BENEFICIARY" of a Participant means the person or persons entitled under
the provisions of the Plan to receive distribution hereunder in the event the
Participant dies before receiving distribution of his entire interest under the
Plan.
The "CODE" means the Internal Revenue Code of 1986, as amended from time to
time. Reference to a section of the Code includes such section and any
comparable section or sections of any future legislation that amends,
supplements, or supersedes such section.
"COMPANY STOCK" means common stock of C&D Technologies, Inc., $.01 par value.
"COMPANY STOCK FUND" means the C&D Technologies, Inc. Stock Fund, a fund
invested in Company Stock pursuant to the Plan.
The "COMPENSATION" of a Participant for any period means the wages as defined in
Section 3401(a) of the Code, determined without regard to any rules that limit
compensation included in wages based on the nature or location of the employment
or services performed, and all other payments made to him for such period for
services as an Employee for which his Employer is required to furnish the
Participant a written statement under Sections 6041(d), 6051(a)(3), and 6052 of
the Code, and excluding reimbursements or other expense allowances, fringe
benefits, moving expenses, deferred compensation, and welfare benefits, but
determined prior to any exclusions for amounts deferred under Section 125,
402(e)(3), 402(h)(1)(B), 403(b), or 457(b) of the Code or for certain
contributions described in Section 414(h)(2) of the Code that are picked up by
the employing unit and treated as employer contributions.
2
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Notwithstanding the foregoing, Compensation shall not include the value of any
qualified or non-qualified stock option granted to the Participant by his
Employer to the extent such value is includible in the Participant's taxable
income.
In no event, however, shall the Compensation of a Participant taken into account
under the Plan for any Plan Year exceed (1) $200,000 for Plan Years beginning
prior to January 1, 1994, or (2) $150,000 for Plan Years beginning on or after
January 1, 1994 (subject to adjustment annually as provided in Section
401(a)(17)(B) and Section 415(d) of the Code; provided, however, that the dollar
increase in effect on January 1 of any calendar year, if any, is effective for
Plan Years beginning in such calendar year). If the Compensation of a
Participant is determined over a period of time that contains fewer than 12
calendar months, then the annual compensation limitation described above shall
be adjusted with respect to that Participant by multiplying the annual
compensation limitation in effect for the Plan Year by a fraction the numerator
of which is the number of full months in the period and the denominator of which
is 12; provided, however, that no proration is required for a Participant who is
covered under the Plan for less than one full Plan Year if the formula for
allocations is based on Compensation for a period of at least 12 months. In
determining the Compensation, for purposes of applying the annual compensation
limitation described above, of a Participant who is a five percent owner or
among the ten Highly Compensated Employees receiving the greatest Compensation
for the Plan Year, the Compensation of the Participant's spouse and of his
lineal descendants who have not attained age 19 as of the close of the Plan Year
shall be included as Compensation of the Participant for the Plan Year. If as a
result of applying the family aggregation rule described in the preceding
sentence the annual compensation limitation would be exceeded, the limitation
shall be prorated among the affected family members in proportion to each
member's Compensation as determined prior to application of the family
aggregation rules.
A "CONTRIBUTION PERIOD" means the period specified in Article VI for which
Employer Contributions shall be made.
An "ELIGIBLE EMPLOYEE" means any Employee who has met the eligibility
requirements of Article III to have Tax-Deferred Contributions made to the Plan
on his behalf.
The "ELIGIBILITY SERVICE" of an employee means the period or periods of service
credited to him under the provisions of Article II for purposes of determining
his eligibility to participate in the Plan as may be required under Article III
or Article VI.
3
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An "EMPLOYEE" means any employee of an Employer who is employed on a salaried
basis other than a leased employee or an employee who is covered by a collective
bargaining agreement to the extent that benefits were the subject of good faith
bargaining unless the collective bargaining agreement provides otherwise.
An "EMPLOYER" means the Sponsor and any entity which has adopted the Plan as may
be provided under Article XX.
An "EMPLOYER CONTRIBUTION" means the amount, if any, that an Employer
contributes to the Plan as may be provided under Article VI or Article XXII.
An "ENROLLMENT DATE" means the first day of each calendar month of the Plan
Year.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time. Reference to a section of ERISA includes such section and any
comparable section or sections of any future legislation that amends,
supplements, or supersedes such section.
"FAIR MARKET VALUE" means, with respect to a specified date, the closing price
of a share of Company Stock as reported for the preceding trading day on the
principal national securities exchange in the United States on which it is then
traded, or, if Company Stock is not traded on any national securities exchange,
as quoted on an automated quotation system sponsored by the National Association
of Securities Dealers, or if the sales of the Company Stock shall not have been
reported on such date, on the first day prior thereto on which the Company Stock
was reported or quoted. With respect to investments other than investments in
Company Stock, Fair Market Value shall be determined by the entity maintaining
the applicable Investment Fund, in accordance with generally accepted valuation
methods and practices.
The "GENERAL FUND" means a Trust Fund maintained by the Trustee as required to
hold and administer any assets of the Trust that are not allocated among any
separate Investment Funds as may be provided in the Plan or the Trust Agreement.
No General Fund shall be maintained if all assets of the Trust are allocated
among separate Investment Funds.
A "HIGHLY COMPENSATED EMPLOYEE" means an Employee or former Employee who is a
highly compensated active employee or highly compensated former employee as
defined hereunder.
4
<PAGE>
A "highly compensated active employee" includes any Employee who performs
services for an Employer during the determination year and who (i) was a five
percent owner at any time during the determination year or the look back year,
(ii) received compensation from an Employer during the look back year in excess
of $75,000 (subject to adjustment annually at the same time and in the same
manner as under Section 415(d) of the Code), (iii) was in the top paid group of
employees for the look back year and received compensation from an Employer
during the look back year in excess of $50,000 (subject to adjustment annually
at the same time and in the same manner as under Section 415(d) of the Code),
(iv) was an officer of an Employer during the look back year and received
compensation during that year in excess of 50 percent of the dollar limitation
in effect for that year under Section 415(b)(1)(A) of the Code or, if no officer
received compensation in excess of that amount for the look back year or the
determination year, received the greatest compensation for the look back year of
any officer, or (v) was one of the 100 employees paid the greatest compensation
by an Employer for the determination year and would be described in (ii), (iii),
or (iv) above if the term "determination year" were substituted for "look back
year".
A "highly compensated former employee" includes any Employee who separated from
service from an Employer and all Related Companies (or is deemed to have
separated from service from an Employer and all Related Companies) prior to the
determination year, performed no services for an Employer during the
determination year, and was a highly compensated active employee for either the
separation year or any determination year ending on or after the date the
Employee attains age 55.
The determination of who is a Highly Compensated Employee hereunder, including
determinations as to the number and identity of employees in the top paid group,
the 100 employees receiving the greatest compensation from an Employer, the
number of employees treated as officers, and the compensation considered, shall
be made in accordance with the provisions of Section 414(q) of the Code and
regulations issued thereunder. For purposes of this definition, the following
terms have the following meanings:
(a) The "determination year" means the Plan Year or, if the
Administrator makes the election provided in paragraph (b)
below, the period of time, if any, which extends beyond
the look back year and ends on the last day of the Plan
Year for which testing is being performed (the "lag
period"). If the lag period is less than 12 months long,
the dollar amounts specified in (ii), (iii), and (iv)
above shall be prorated based upon the number of months in
the lag period.
5
<PAGE>
(b) The "look back year" means the 12-month period immediately
preceding the determination year; provided, however, that the
Administrator may elect instead to treat the calendar year ending
with or within the determination year as the "look back year".
An "HOUR OF SERVICE" with respect to a person means each hour, if any, that may
be credited to him in accordance with the provisions of Article II.
An "INVESTMENT FUND" means any separate investment Trust Fund maintained by the
Trustee as may be provided in the Plan or the Trust Agreement or any separate
investment fund maintained by the Trustee, to the extent that there are
Participant Sub-Accounts under such funds, to which assets of the Trust may be
allocated and separately invested.
A "MATCHING CONTRIBUTION" means any Employer Contribution made to the Plan on
account of a Participant's Tax-Deferred Contributions as provided in Article VI.
The "NORMAL RETIREMENT DATE" of an employee means the date he attains age 65.
A "PARTICIPANT" means any person who has a Separate Account in the Trust.
The "PLAN" means C&D Technologies Savings Plan, as from time to time in effect.
A "PLAN YEAR" means the 12-consecutive-month period ending on December 31.
A "PROFIT-SHARING CONTRIBUTION" means any Employer Contribution made to the Plan
as provided in Article VI, other than Matching Contributions and Qualified
Nonelective Contributions.
A "QUALIFIED NONELECTIVE CONTRIBUTION" means any Employer Contribution made to
the Plan as provided in Article VI that may be taken into account to satisfy the
limitations on contributions by Highly Compensated Employees under Article VII.
A "RELATED COMPANY" means any corporation or business, other than an Employer,
which would be aggregated with an Employer for a relevant purpose under Section
414 of the Code.
A "ROLLOVER CONTRIBUTION" means any rollover contribution to the Plan made by a
Participant as may be permitted under Article V.
6
<PAGE>
A "SEPARATE ACCOUNT" means the account maintained by the Trustee in the name of
a Participant that reflects his interest in the Trust and any Sub-Accounts
maintained thereunder, as provided in Article VIII.
The "SETTLEMENT DATE" of a Participant means the date on which a Participant's
interest under the Plan becomes distributable in accordance with Article XV.
The "SPONSOR" means C&D Technologies, Inc., and any successor thereto.
A "SUB-ACCOUNT" means any of the individual sub-accounts of a Participant's
Separate Account that is maintained as provided in Article VIII.
A "TAX-DEFERRED CONTRIBUTION" means the amount contributed to the Plan on a
Participant's behalf by his Employer in accordance with his reduction
authorization executed pursuant to Article IV.
The "TRUST" means the trust maintained by the Trustee under the Trust Agreement.
The "TRUST AGREEMENT" means the agreement entered into between the Sponsor and
the Trustee relating to the holding, investment, and reinvestment of the assets
of the Plan, together with all amendments thereto.
The "TRUSTEE" means the trustee or any successor trustee which at the time shall
be designated, qualified, and acting under the Trust Agreement. The Sponsor may
designate a person or persons other than the Trustee to perform any
responsibility of the Trustee under the Plan, other than trustee
responsibilities as defined in Section 405(c)(3) of ERISA, and the Trustee shall
not be liable for the performance of such person in carrying out such
responsibility except as otherwise provided by ERISA. The term Trustee shall
include any delegate of the Trustee as may be provided in the Trust Agreement.
A "TRUST FUND" means any fund maintained under the Trust by the Trustee.
A "VALUATION DATE" means the date or dates designated by the Sponsor and
communicated in writing to the Trustee for the purpose of valuing the General
Fund and each Investment Fund and adjusting Separate Accounts and Sub-Accounts
hereunder, which dates need not be uniform with respect to the General Fund,
each Investment Fund, Separate Account, or Sub-Account; provided, however, that
the General Fund and each Investment Fund shall be
7
<PAGE>
valued and each Separate Account and Sub-Account shall be adjusted no less often
than once annually.
The "VESTING SERVICE" of an employee means the period or periods of service
credited to him under the provisions of Article II for purposes of determining
his vested interest in his Employer Contributions Sub-Account, if Employer
Contributions are provided for under either Article VI or Article XXII.
1.2 - INTERPRETATION
Where required by the context, the noun, verb, adjective, and adverb forms of
each defined term shall include any of its other forms. Wherever used herein,
the masculine pronoun shall include the feminine, the singular shall include the
plural, and the plural shall include the singular.
8
<PAGE>
ARTICLE II
SERVICE
2.1 - DEFINITIONS
For purposes of this Article, the following terms have the following meanings:
(a) The "continuous service" of an employee means the service
credited to him in accordance with the provisions of Section 2.3
of the Plan.
(b) The "employment commencement date" of an employee means the date
he first completes an Hour of Service.
(c) A "maternity/paternity absence" means a person's absence from
employment with an Employer or a Related Company because of the
person's pregnancy, the birth of the person's child, the
placement of a child with the person in connection with the
person's adoption of the child, or the caring for the person's
child immediately following the child's birth or adoption. A
person's absence from employment will not be considered a
maternity/paternity absence unless the person furnishes the
Administrator such timely information as may reasonably be
required to establish that the absence was for one of the
purposes enumerated in this paragraph and to establish the number
of days of absence attributable to such purpose.
(d) The "reemployment commencement date" of an employee means the
first date following a severance date on which he again completes
an Hour of Service.
(e) The "severance date" of an employee means the earlier of (i) the
date on which he retires, dies, or his employment with an
Employer and all Related Companies is otherwise terminated, or
(ii) the first anniversary of the first date of a period during
which he is absent from work with an Employer and all Related
Companies for any other reason; provided, however, that if he
terminates employment with or is absent from work with an
Employer and all Related Companies on account of service with the
armed forces of the United States, he shall not incur a severance
date if he is eligible for reemployment rights under the
Uniformed Services Employment and Reemployment Rights Act of 1994
and he returns to work with an Employer or a Related Company
within the period during which he retains such reemployment
rights.
9
<PAGE>
2.2 - CREDITING OF HOURS OF SERVICE
A person shall be credited with an Hour of Service for each hour for which he is
paid, or entitled to payment, for the performance of duties for an Employer or
any Related Company.
2.3 - CREDITING OF CONTINUOUS SERVICE
A person shall be credited with continuous service for the aggregate of the
periods of time between his employment commencement date or any reemployment
commencement date and the severance date that next follows such employment
commencement date or reemployment commencement date; provided, however, that an
employee who has a reemployment commencement date within the
12-consecutive-month period following the earlier of the first date of his
absence or his severance date shall be credited with continuous service for the
period between such severance date and reemployment commencement date.
2.4 - ELIGIBILITY SERVICE
An employee shall be credited with Eligibility Service equal to his continuous
service.
2.5 - VESTING SERVICE
Years of Vesting Service shall be determined in accordance with the following
provisions:
(a) An employee shall be credited with years of Vesting Service equal
to his period of continuous service.
(b) Notwithstanding the provisions of paragraph (a), continuous
service completed by an employee prior to a severance date shall
not be included in determining the employee's years of Vesting
Service unless the employee had a nonforfeitable right to any
portion of his Separate Account, excluding that portion of his
Separate Account that is attributable to After-Tax or Rollover
Contributions, as of the severance date, or the period of time
between the severance date and his reemployment commencement date
is less than the greater of five years or his period of
continuous service determined as of the severance date; and
provided, however, that solely for purposes of applying this
paragraph, if a person is on a maternity/paternity absence beyond
the first anniversary of the first day of such absence, his
severance date shall be the second anniversary of the first day
of such maternity/paternity absence.
10
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2.6 - CREDITING OF SERVICE ON TRANSFER OR AMENDMENT
Notwithstanding any other provision of the Plan to the contrary, if an Employee
is transferred from employment covered under a qualified plan maintained by an
Employer or a Related Company for which service is credited based on Hours of
Service and computation periods in accordance with Department of Labor
Regulations ss2530.200 through 2530.203 to employment covered under the Plan
or, prior to amendment, the Plan provided for crediting of service on the basis
of Hours of Service and computation periods, an affected Employee shall be
credited with Eligibility Service and Vesting Service hereunder equal to:
(a) the Employee's years of service credited to him under the Hours
of Service method before the computation period in which the
transfer or the effective date of the amendment occurs, plus
(b) the greater of (i) the period of service that would be credited
to the Employee under the elapsed time method provided hereunder
for his employment during the entire computation period in which
the transfer or the effective date of the amendment occurs or
(ii) the service taken into account under the Hours of Service
method for such computation period as of the transfer date or the
effective date of the amendment, plus
(c) the service credited to such Employee under the elapsed time
method provided hereunder for the period of time beginning on the
day after the last day of the computation period in which the
transfer or the effective date of the amendment occurs.
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ARTICLE III
ELIGIBILITY
3.1 - ELIGIBILITY
Each Employee who was an Eligible Employee immediately prior to the effective
date of this amendment and restatement shall continue to be an Eligible
Employee. Each other Employee shall become an Eligible Employee for purposes of
electing to make Tax-Deferred Contributions under the Plan as of the Enrollment
Date next following his date of hire. Each other Employee shall become an
Eligible Employee for purposes of the Profit-Sharing Contribution and Matching
Contribution portions of the Plan as of the Enrollment Date coinciding with or
next following the date he completes one year of Eligibility Service.
3.2 - TRANSFERS OF EMPLOYMENT
If a person is transferred directly from employment with an Employer or with a
Related Company in a capacity other than as an Employee to employment as an
Employee, he shall become an Eligible Employee as of the date he is so
transferred if prior to an Enrollment Date preceding such transfer date he has
met the eligibility requirements of Section 3.1. Otherwise, the eligibility of a
person who is so transferred shall be determined in accordance with Section 3.1.
3.3 - REEMPLOYMENT
If a person who terminated employment with an Employer and all Related Companies
is reemployed as an Employee and if he had been an Eligible Employee prior to
his termination of employment, he shall again become an Eligible Employee on the
date he is reemployed. Otherwise, the eligibility of a person who terminated
employment with an Employer and all Related Companies and who is reemployed by
an Employer or a Related Company shall be determined in accordance with Section
3.1 or 3.2.
3.4 - NOTIFICATION CONCERNING NEW ELIGIBLE EMPLOYEES
Each Employer shall notify the Administrator as soon as practicable of Employees
becoming Eligible Employees as of any date.
3.5 - EFFECT AND DURATION
Upon becoming an Eligible Employee, an Employee shall be bound by all the terms
and conditions of the Plan and the Trust Agreement.
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A person shall continue as an Eligible Employee only so long as he continues in
employment as an Employee.
13
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ARTICLE IV
TAX-DEFERRED CONTRIBUTIONS
4.1 - TAX-DEFERRED CONTRIBUTIONS
Effective as of the date he becomes an Eligible Employee, or any subsequent
Enrollment Date, each Eligible Employee may elect in writing in accordance with
rules prescribed by the Administrator to have Tax-Deferred Contributions made to
the Plan on his behalf by his Employer as hereinafter provided. An Eligible
Employee's written election shall include his authorization for his Employer to
reduce his Compensation and to make Tax-Deferred Contributions on his behalf and
his election as to the investment of his contributions in accordance with
Article X. Tax-Deferred Contributions on behalf of an Eligible Employee shall
commence with the first payment of Compensation made on or after the date on
which his election is effective.
4.2 - AMOUNT OF TAX-DEFERRED CONTRIBUTIONS
The amount of Tax-Deferred Contributions to be made to the Plan on behalf of an
Eligible Employee by his Employer shall be an integral percentage of his
Compensation of not less than 1 percent nor more than 15 percent, subject to the
overall limitation described in Section 7.10. In the event an Eligible Employee
elects to have his Employer make Tax-Deferred Contributions on his behalf, his
Compensation shall be reduced for each payroll period by the percentage he
elects to have contributed on his behalf to the Plan in accordance with the
terms of his currently effective reduction authorization.
4.3 - CHANGES IN REDUCTION AUTHORIZATION
An Eligible Employee may change the percentage of his future Compensation that
his Employer contributes on his behalf as Tax-Deferred Contributions at such
time or times during the Plan Year as the Administrator may prescribe by filing
an amended reduction authorization with his Employer such number of days prior
to the date such change is to become effective as the Administrator shall
prescribe. An Eligible Employee who changes his reduction authorization shall be
limited to selecting a percentage of his Compensation that is otherwise
permitted hereunder. Tax-Deferred Contributions shall be made on behalf of such
Eligible Employee by his Employer pursuant to his amended reduction
authorization filed in accordance with this Section commencing with Compensation
paid to the Eligible Employee on or after the date such filing is effective,
until otherwise altered or terminated in accordance with the Plan.
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4.4 - SUSPENSION OF TAX-DEFERRED CONTRIBUTIONS
An Eligible Employee on whose behalf Tax-Deferred Contributions are being made
may have such contributions suspended at any time by giving such number of days
advance written notice to his Employer as the Administrator shall prescribe. Any
such voluntary suspension shall take effect commencing with Compensation paid to
such Eligible Employee on or after the expiration of the required notice period
and shall remain in effect until Tax-Deferred Contributions are resumed as
hereinafter set forth.
4.5 - RESUMPTION OF TAX-DEFERRED CONTRIBUTIONS
An Eligible Employee who has voluntarily suspended his Tax-Deferred
Contributions may have such contributions resumed at such time or times during
the Plan Year as the Administrator may prescribe, by filing a new reduction
authorization with his Employer such number of days prior to the date as of
which such contributions are to be resumed as the Administrator shall prescribe.
4.6 - DELIVERY OF TAX-DEFERRED CONTRIBUTIONS
As soon after the date an amount would otherwise be paid to an Employee as it
can reasonably be separated from Employer assets, each Employer shall cause to
be delivered to the Trustee in cash all Tax-Deferred Contributions attributable
to such amounts.
4.7 - VESTING OF TAX-DEFERRED CONTRIBUTIONS
A Participant's vested interest in his Tax-Deferred Contributions Sub-Account
shall be at all times 100 percent.
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ARTICLE V
AFTER-TAX AND ROLLOVER CONTRIBUTIONS
5.1 - AFTER-TAX CONTRIBUTIONS
An Eligible Employee may elect in writing in accordance with rules prescribed by
the Administrator to make After-Tax Contributions to the Plan. After-Tax
Contributions may be made either by payroll withholding and/or by delivery of a
cash amount to an Eligible Employee's Employer, as determined by the
Administrator. If the Eligible Employee does not already have an investment
election on file with the Administrator, his election to make After-Tax
Contributions to the Plan shall include his election as to the investment of his
contributions in accordance with Article X. An Eligible Employee's election to
make After-Tax Contributions by payroll withholding may be made effective as of
any Enrollment Date occurring on or after the date on which he becomes an
Eligible Employee. After-Tax Contributions by payroll withholding shall commence
with the first payment of Compensation made on or after the Enrollment Date on
which the Eligible Employee's election is effective.
5.2 - AMOUNT OF AFTER-TAX CONTRIBUTIONS BY PAYROLL WITHHOLDING
The amount of After-Tax Contributions made by an Eligible Employee by payroll
withholding shall be an integral percentage of his Compensation of not less than
1 percent nor more than 10 percent, subject to the overall limitation described
in Section 7.10.
5.3 - CHANGES IN PAYROLL WITHHOLDING AUTHORIZATION
An Eligible Employee may change the percentage of his future Compensation that
he contributes to the Plan as After-Tax Contributions by payroll withholding at
such time or times during the Plan Year as the Administrator may prescribe by
filing an amended payroll withholding authorization with his Employer such
number of days prior to the date such change is to become effective as the
Administrator shall prescribe. An Eligible Employee who changes his payroll
withholding authorization shall be limited to selecting a percentage of his
Compensation that is otherwise permitted under Section 5.2. After-Tax
Contributions shall be made pursuant to an Eligible Employee's amended payroll
withholding authorization filed in accordance with this Section commencing with
Compensation paid to the Eligible Employee on or after the date such filing is
effective, until otherwise altered or terminated in accordance with the Plan.
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5.4 - SUSPENSION OF AFTER-TAX CONTRIBUTIONS BY PAYROLL
WITHHOLDING
An Eligible Employee who is making After-Tax Contributions by payroll
withholding may have such contributions suspended at any time by giving such
number of days advance written notice to his Employer as the Administrator shall
prescribe. Any such voluntary suspension shall take effect commencing with
Compensation paid to such Eligible Employee on or after the expiration of the
required notice period and shall remain in effect until After-Tax Contributions
are resumed as hereinafter set forth.
5.5 - RESUMPTION OF AFTER-TAX CONTRIBUTIONS BY PAYROLL
WITHHOLDING
An Eligible Employee who has voluntarily suspended his After-Tax Contributions
made by payroll withholding in accordance with Section 5.4 may have such
contributions resumed at such time or times during the Plan Year as the
Administrator may prescribe by filing a new payroll withholding authorization
with his Employer such number of days prior to the date as of which such
contributions are to be resumed as the Administrator shall prescribe.
5.6 - ROLLOVER CONTRIBUTIONS
An Employee who was a participant in a plan qualified under Section 401 or 403
of the Code and who is entitled to a cash distribution from such plan that he
elects (i) to roll over directly to a qualified retirement plan, (ii) to roll
over to a qualified retirement plan within 60 days of receipt of such
distribution or (iii) to roll over into a conduit IRA from which he receives a
later cash distribution, may elect to make a Rollover Contribution to the Plan
if he is entitled under Section 402(c), Section 403(a)(4), or Section
408(d)(3)(A) of the Code to roll over such distribution to another qualified
retirement plan. The Administrator may require an Employee to provide it with
such information as it deems necessary or desirable to show that he is entitled
to roll over such distribution to another qualified retirement plan. An Employee
shall make a Rollover Contribution to the Plan by delivering, or causing to be
delivered, to the Trustee the cash that constitutes the Rollover Contribution
amount within 60 days of receipt of the distribution from the plan or from the
conduit IRA in the manner prescribed by the Administrator. If the Employee does
not already have an investment election on file with the Administrator, the
Employee shall also deliver to the Administrator his election as to the
investment of his contributions in accordance with Article X.
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5.7 - DELIVERY OF AFTER-TAX CONTRIBUTIONS
As soon after the date an amount would otherwise be paid to an Employee as it
can reasonably be separated from Employer assets or as soon as reasonably
practicable after an amount has been delivered to an Employer by an Employee,
the Employer shall cause to be delivered to the Trustee in cash the After-Tax
Contributions attributable to such amount.
5.8 - VESTING OF AFTER-TAX CONTRIBUTIONS AND ROLLOVER
CONTRIBUTIONS
A Participant's vested interest in his After-Tax Contributions Sub-Account and
his Rollover Contributions Sub-Account shall be at all times 100 percent.
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ARTICLE VI
EMPLOYER CONTRIBUTIONS
6.1 - CONTRIBUTION PERIOD
The Contribution Period for Employer Contributions under the Plan shall be each
Plan Year.
6.2 - PROFIT-SHARING CONTRIBUTIONS
Each Employer may, in its discretion, make a Profit-Sharing Contribution to the
Plan for the Contribution Period in an amount determined by the Sponsor.
6.3 - ALLOCATION OF PROFIT-SHARING CONTRIBUTIONS
Any Profit-Sharing Contribution made for a Contribution Period shall be
allocated among the Employees who are eligible to participate in the allocation
of Profit-Sharing Contributions for the Contribution Period, as determined under
this Article. The allocable share of each such Employee shall be in the ratio
which his Compensation from the Employers for the Contribution Period bears to
the aggregate of such Compensation for all such Employees. Notwithstanding any
other provision of the Plan to the contrary, Compensation with respect to any
period ending prior to the date on which an Employee first became eligible to
participate in the allocation of Profit-Sharing Contributions shall be
disregarded in determining the amount of the Employee's allocable share.
6.4 - QUALIFIED NONELECTIVE CONTRIBUTIONS
Each Employer may, in its discretion, make a Qualified Nonelective Contribution
to the Plan for the Contribution Period in an amount determined by the Sponsor.
6.5 - ALLOCATION OF QUALIFIED NONELECTIVE CONTRIBUTIONS
Any Qualified Nonelective Contribution made by an Employer for the Contribution
Period shall be allocated among its Employees during the Contribution Period who
are eligible to participate in the allocation of Qualified Nonelective
Contributions for the Contribution Period, as determined under this Article,
other than any such Employee who is a Highly Compensated Employee. The allocable
share of each such Employee shall be either (i) in the ratio which his
Compensation from the Employer for the Contribution Period bears to the
aggregate of such Compensation for all such Employees or (ii) a flat dollar
amount, as determined by the Sponsor for the Contribution Period.
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Notwithstanding any other provision of the Plan to the contrary, Compensation
with respect to any period ending prior to the date on which an Employee first
became eligible to participate in the allocation of Qualified Nonelective
Contributions shall be disregarded in determining the amount of the Employee's
allocable share.
6.6 - MATCHING CONTRIBUTIONS
Each Employer may make a Matching Contribution to the Plan for each Contribution
Period in an amount equal to the percentage, determined by the Sponsor, in its
discretion, for the Contribution Period, of the Tax-Deferred Contributions for
the Contribution Period made on behalf of its Employees during the Contribution
Period who are eligible to participate in the allocation of Matching
Contributions for the Contribution Period as determined under this Article.
6.7 - ALLOCATION OF MATCHING CONTRIBUTIONS
Any Matching Contribution made by an Employer for the Contribution Period shall
be allocated among its Employees during the Contribution Period who are eligible
to participate in the allocation of Matching Contributions for the Contribution
Period, as determined under this Article. The allocable share of each such
Employee shall be an amount equal to the percentage determined by the Sponsor of
the Tax-Deferred Contributions made on his behalf for the Contribution Period.
6.8 - VERIFICATION OF AMOUNT OF EMPLOYER CONTRIBUTIONS BY THE
SPONSOR
The Sponsor shall verify the amount of Employer Contributions to be made by each
Employer in accordance with the provisions of the Plan. Notwithstanding any
other provision of the Plan to the contrary, the Sponsor shall determine the
portion of the Employer Contribution to be made by each Employer with respect to
an Employee who transfers from employment with one Employer as an Employee to
employment with another Employer as an Employee.
6.9 - PAYMENT OF EMPLOYER CONTRIBUTIONS
Employer Contributions made for a Contribution Period shall be paid in cash or
in qualifying employer securities, as defined in Section 407(d)(5) of ERISA, to
the Trustee within the period of time required under the Code in order for the
contribution to be deductible by the Employer in determining its Federal income
taxes for the Plan Year.
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6.10 - ELIGIBILITY TO PARTICIPATE IN ALLOCATION
Each Employee shall be eligible to participate in the allocation of Employer
Contributions beginning on the date he becomes, or again becomes, an Eligible
Employee in accordance with the provisions of Article III. Notwithstanding any
other provision of the Plan to the contrary, no person shall be eligible to
participate in the allocation of Profit-Sharing Contributions for a Contribution
Period unless (i) he is employed by an Employer or a Related Company on the last
day of the Contribution Period and (ii) he has completed at least 1,000 Hours of
Service during the Plan Year; provided, however, that if the Plan would not
otherwise meet the minimum coverage requirements of Section 410(b) of the Code
in any Plan Year, the group of Employees eligible to participate in the
allocation of Profit-Sharing Contributions shall be expanded to include the
minimum number of Employees who would be eligible to participate except for
their failure to complete the required number of Hours of Service during the
Plan Year that is necessary to meet the minimum coverage requirements. The
Employees who become eligible to participate under the provisions of the
immediately preceding clause shall be those Employees who have completed the
greatest number of Hours of Service during the Plan Year. If the Plan still
would not meet the minimum coverage requirements of Section 410(b) of the Code,
the group of Employees shall be expanded further to include the minimum number
of Employees who are not employed by an Employer or a Related Company on the
last day of the Contribution Period that is necessary to meet the minimum
coverage requirements. The Employees who become eligible to participate under
the provisions of the immediately preceding sentence shall be those Employees
who have completed the greatest number of Hours of Service during the
Contribution Period.
6.11 - VESTING OF EMPLOYER CONTRIBUTIONS
A Participant's vested interest in his Qualified Nonelective Contributions
Sub-Account shall be at all times 100 percent. A Participant's vested interest
in his Profit-Sharing and Matching Contributions Sub-Accounts shall be
determined in accordance with the following schedule:
YEARS OF VESTING SERVICE VESTED INTEREST
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
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<PAGE>
Notwithstanding the foregoing, if a Participant is employed by an Employer or a
Related Company on his Normal Retirement Date, the date he becomes physically or
mentally disabled such that he can no longer continue in the service of his
Employer and is eligible to receive a disability benefit under the terms of the
Social Security Act, the date his employment terminates due to a reduction in
workforce as determined by the Employer, or the date he dies, his vested
interest in his Profit-Sharing and Matching Contributions Sub-Accounts shall be
100 percent.
6.12 - ELECTION OF FORMER VESTING SCHEDULE
If the Sponsor adopts an amendment to the Plan that directly or indirectly
affects the computation of a Participant's vested interest in his Employer
Contributions Sub-Account, any Participant with three or more years of Vesting
Service shall have a right to have his vested interest in his Employer
Contributions Sub-Account continue to be determined under the vesting provisions
in effect prior to the amendment rather than under the new vesting provisions,
unless the vested interest of the Participant in his Employer Contributions
Sub-Account under the Plan as amended is not at any time less than such vested
interest determined without regard to the amendment. A Participant shall
exercise his right under this Section by giving written notice of his exercise
thereof to the Administrator within 60 days after the latest of (i) the date he
receives notice of the amendment from the Administrator, (ii) the effective date
of the amendment, or (iii) the date the amendment is adopted. Notwithstanding
the foregoing, a Participant's vested interest in his Employer Contributions
Sub-Account on the effective date of such an amendment shall not be less than
his vested interest in his Employer Contributions Sub-Account immediately prior
to the effective date of the amendment.
6.13 - FORFEITURES TO REDUCE EMPLOYER CONTRIBUTIONS
Notwithstanding any other provision of the Plan to the contrary, the amount of
the Employer Contribution required under this Article for a Plan Year shall be
reduced by the amount of any forfeitures occurring during the Plan Year that are
not used to pay Plan expenses.
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<PAGE>
ARTICLE VII
LIMITATIONS ON CONTRIBUTIONS
7.1 - DEFINITIONS
For purposes of this Article, the following terms have the following meanings:
(a) The "actual deferral percentage" with respect to an Eligible
Employee for a particular Plan Year means the ratio of the
Tax-Deferred Contributions made on his behalf for the Plan Year
to his test compensation for the Plan Year, except that, to the
extent permitted by regulations issued under Section 401(k) of
the Code, the Sponsor may elect to take into account in computing
the numerator of each Eligible Employee's actual deferral
percentage the qualified nonelective contributions made to the
Plan on his behalf for the Plan Year; provided, however, that
contributions made on a Participant's behalf for a Plan Year
shall be included in determining his actual deferral percentage
for such Plan Year only if the contributions are made to the Plan
prior to the end of the 12-month period immediately following the
Plan Year to which the contributions relate. The determination
and treatment of the actual deferral percentage amounts for any
Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(b) The "aggregate limit" means the sum of (i) 125 percent of the
greater of the average contribution percentage for eligible
participants other than Highly Compensated Employees or the
average actual deferral percentage for Eligible Employees other
than Highly Compensated Employees and (ii) the lesser of 200
percent or two plus the lesser of such average contribution
percentage or average actual deferral percentage, or, if it would
result in a larger aggregate limit, the sum of (iii) 125 percent
of the lesser of the average contribution percentage for eligible
participants other than Highly Compensated Employees or the
average actual deferral percentage for Eligible Employees other
than Highly Compensated Employees and (iv) the lesser of 200
percent or two plus the greater of such average contribution
percentage or average actual deferral percentage.
(c) The "annual addition" with respect to a Participant for a
limitation year means the sum of the Tax-Deferred Contributions,
Employer Contributions, and After-Tax Contributions allocated to
his Separate Account for the
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<PAGE>
limitation year (including any excess contributions that are
distributed pursuant to this Article), the employer
contributions, employee contributions, and forfeitures allocated
to his accounts for the limitation year under any other qualified
defined contribution plan (whether or not terminated) maintained
by an Employer or a Related Company concurrently with the Plan,
and amounts described in Sections 415(l)(2) and 419A(d)(2) of the
Code allocated to his account for the limitation year; provided,
however, that the annual addition for limitation years beginning
prior to January 1, 1987 shall not be recalculated to treat all
After-Tax Contributions and employee contributions as annual
additions.
(d) The "Code Section 402(g) limit" means the dollar limit imposed by
Section 402(g)(1) of the Code or established by the Secretary of
the Treasury pursuant to Section 402(g)(5) of the Code in effect
on January 1 of the calendar year in which an Eligible Employee's
taxable year begins.
(e) The "contribution percentage" with respect to an eligible
participant for a particular Plan Year means the ratio of the sum
of the matching contributions made to the Plan on his behalf and
the After-Tax Contributions made by him for the Plan Year to his
test compensation for such Plan Year, except that, to the extent
permitted by regulations issued under Section 401(m) of the Code,
the Sponsor may elect to take into account in computing the
numerator of each eligible participant's contribution percentage
the Tax-Deferred Contributions and/or qualified nonelective
contributions made to the Plan on his behalf for the Plan Year;
provided, however, that any Tax-Deferred Contributions and/or
qualified nonelective contributions that were taken into account
in computing the numerator of an eligible participant's actual
deferral percentage may not be taken into account in computing
the numerator of his contribution percentage; and provided,
further, that contributions made by or on a Participant's behalf
for a Plan Year shall be included in determining his contribution
percentage for such Plan Year only if the contributions are made
to the Plan prior to the end of the 12-month period immediately
following the Plan Year to which the contributions relate. The
determination and treatment of the contribution percentage
amounts for any Participant shall satisfy such other requirements
as may be prescribed by the Secretary of the Treasury.
(f) An "elective contribution" means any employer contribution made
to a plan maintained by an Employer or any Related
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<PAGE>
Company on behalf of a Participant in lieu of cash compensation
pursuant to his written election to defer under any qualified
CODA as described in Section 401(k) of the Code, any simplified
employee pension cash or deferred arrangement as described in
Section 402(h)(1)(B) of the Code, any eligible deferred
compensation plan under Section 457 of the Code, or any plan as
described in Section 501(c)(18) of the Code, and any contribution
made on behalf of the Participant by an Employer or a Related
Company for the purchase of an annuity contract under Section
403(b) of the Code pursuant to a salary reduction agreement.
(g) An "eligible participant" means any Employee who is eligible to
make After-Tax Contributions or to have Tax-Deferred
Contributions made on his behalf (if Tax-Deferred Contributions
are taken into account in computing contribution percentages) or
to participate in the allocation of matching contributions.
(h) An "excess deferral" with respect to a Participant means that
portion of a Participant's Tax-Deferred Contributions that when
added to amounts deferred under other plans or arrangements
described in Sections 401(k), 408(k), or 403(b) of the Code,
would exceed the Code Section 402(g) limit and is includable in
the Participant's gross income under Section 402(g) of the Code.
(i) A "family member" of an Employee means the Employee's spouse, his
lineal ascendants, his lineal descendants, and the spouses of
such lineal ascendants and descendants.
(j) A "limitation year" means the calendar year.
(k) A "matching contribution" means any employer contribution
allocated to an Eligible Employee's account under the Plan or any
other plan of an Employer or a Related Company solely on account
of elective contributions made on his behalf or employee
contributions made by him.
(l) A "qualified nonelective contribution" means any employer
contribution made on behalf of a Participant that the Participant
could not elect instead to receive in cash, that is a qualified
nonelective contribution as defined in Section 401(k) and Section
401(m) of the Code and regulations issued thereunder, is
nonforfeitable when made, and is distributable only as permitted
in regulations issued under Section 401(k) of the Code.
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<PAGE>
(m) The "test compensation" of an Eligible Employee for a Plan Year
means compensation as defined in Section 414(s) of the Code and
regulations issued thereunder, limited, however, to (1) $200,000
for Plan Years beginning prior to January 1, 1994, or (2)
$150,000 for Plan Years beginning on or after January 1, 1994
(subject to adjustment annually as provided in Section
401(a)(17)(B) and Section 415(d) of the Code; provided, however,
that the dollar increase in effect on January 1 of any calendar
year, if any, is effective for Plan Years beginning in such
calendar year). If the test compensation of a Participant is
determined over a period of time that contains fewer than 12
calendar months, then the annual compensation limitation
described above shall be adjusted with respect to that
Participant by multiplying the annual compensation limitation in
effect for the Plan Year by a fraction the numerator of which is
the number of full months in the period and the denominator of
which is 12; provided, however, that no proration is required for
a Participant who is covered under the Plan for less than one
full Plan Year if the formula for allocations is based on
Compensation for a period of at least 12 months. In determining
the test compensation, for purposes of applying the annual
compensation limitation described above, of a Participant who is
a five percent owner or among the ten Highly Compensated
Employees receiving the greatest test compensation for the
limitation year, the test compensation of the Participant's
spouse and of his lineal descendants who have not attained age 19
as of the close of the limitation year shall be included as test
compensation of the Participant for the limitation year. If as a
result of applying the family aggregation rule described in the
preceding sentence the annual compensation limitation would be
exceeded, the limitation shall be prorated among the affected
family members in proportion to each member's test compensation
as determined prior to application of the family aggregation
rules.
7.2 - CODE SECTION 402(G) LIMIT
In no event shall the amount of the Tax-Deferred Contributions made on behalf of
an Eligible Employee for his taxable year, when aggregated with any elective
contributions made on behalf of the Eligible Employee under any other plan of an
Employer or a Related Company for his taxable year, exceed the Code Section
402(g) limit. In the event that the Administrator determines that the reduction
percentage elected by an Eligible Employee will result in his exceeding the Code
Section 402(g) limit, the Administrator may adjust the reduction authorization
26
<PAGE>
of such Eligible Employee by reducing the percentage of his Tax-Deferred
Contributions to such smaller percentage that will result in the Code Section
402(g) limit not being exceeded. If the Administrator determines that the
Tax-Deferred Contributions made on behalf of an Eligible Employee would exceed
the Code Section 402(g) limit for his taxable year, the Tax-Deferred
Contributions for such Participant shall be automatically suspended for the
remainder, if any, of such taxable year.
If an Employer notifies the Administrator that the Code Section 402(g) limit has
nevertheless been exceeded by an Eligible Employee for his taxable year, the
Tax-Deferred Contributions that, when aggregated with elective contributions
made on behalf of the Eligible Employee under any other plan of an Employer or a
Related Company, would exceed the Code Section 402(g) limit, plus any income and
minus any losses attributable thereto, shall be distributed to the Eligible
Employee no later than the April 15 immediately following such taxable year. Any
Tax-Deferred Contributions that are distributed to an Eligible Employee in
accordance with this Section shall NOT be taken into account in computing the
Eligible Employee's actual deferral percentage for the Plan Year in which the
Tax-Deferred Contributions were made, unless the Eligible Employee is a Highly
Compensated Employee. If an amount of Tax-Deferred Contributions is distributed
to a Participant in accordance with this Section, matching contributions that
are attributable solely to the distributed Tax-Deferred Contributions, plus any
income and minus any losses attributable thereto, shall be forfeited by the
Participant. Any such forfeited amounts shall be treated as a forfeiture under
the Plan in accordance with the provisions of Article XIV as of the last day of
the month in which the distribution of Tax-Deferred Contributions pursuant to
this Section occurs.
7.3 - DISTRIBUTION OF EXCESS DEFERRALS
Notwithstanding any other provision of the Plan to the contrary, if a
Participant notifies the Administrator in writing no later than the March 1
following the close of the Participant's taxable year that excess deferrals have
been made on his behalf under the Plan for such taxable year, the excess
deferrals, plus any income and minus any losses attributable thereto, shall be
distributed to the Participant no later than the April 15 immediately following
such taxable year. Any Tax-Deferred Contributions that are distributed to a
Participant in accordance with this Section shall nevertheless be taken into
account in computing the Participant's actual deferral percentage for the Plan
Year in which the Tax-Deferred Contributions were made. If an amount of
Tax-Deferred Contributions is distributed to a Participant in accordance with
this Section, matching contributions that are
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<PAGE>
attributable solely to the distributed Tax-Deferred Contributions, plus any
income and minus any losses attributable thereto, shall be forfeited by the
Participant. Any such forfeited amounts shall be treated as a forfeiture under
the Plan in accordance with the provisions of Article XIV as of the last day of
the month in which the distribution of Tax-Deferred Contributions pursuant to
this Section occurs.
7.4 - LIMITATION ON TAX-DEFERRED CONTRIBUTIONS OF HIGHLY
COMPENSATED EMPLOYEES
Notwithstanding any other provision of the Plan to the contrary, the
Tax-Deferred Contributions made with respect to a Plan Year on behalf of
Eligible Employees who are Highly Compensated Employees may not result in an
average actual deferral percentage for such Eligible Employees that exceeds the
greater of:
(a) a percentage that is equal to 125 percent of the average actual
deferral percentage for all other Eligible Employees; or
(b) a percentage that is not more than 200 percent of the average actual
deferral percentage for all other Eligible Employees and that is not
more than two percentage points higher than the average actual
deferral percentage for all other Eligible Employees.
In order to assure that the limitation contained herein is not exceeded with
respect to a Plan Year, the Administrator is authorized to suspend completely
further Tax-Deferred Contributions on behalf of Highly Compensated Employees for
any remaining portion of a Plan Year or to adjust the projected actual deferral
percentages of Highly Compensated Employees by reducing their percentage
elections with respect to Tax-Deferred Contributions for any remaining portion
of a Plan Year to such smaller percentages that will result in the limitation
set forth above not being exceeded. In the event of any such suspension or
reduction, Highly Compensated Employees affected thereby shall be notified of
the reduction or suspension as soon as possible and shall be given an
opportunity to make a new Tax-Deferred Contribution election to be effective the
first day of the next following Plan Year. In the absence of such an election,
the election in effect immediately prior to the suspension or adjustment
described above shall be reinstated as of the first day of the next following
Plan Year.
For purposes of applying the limitation contained in this Section, the
Tax-Deferred Contributions, qualified nonelective contributions (to the extent
that such qualified nonelective contributions are taken into account in
computing actual deferral
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<PAGE>
percentages), and test compensation of any Eligible Employee who is a family
member of another Eligible Employee who is a five percent owner or among the ten
Highly Compensated Employees receiving the greatest test compensation for the
Plan Year shall be aggregated with the Tax-Deferred Contributions, qualified
nonelective contributions, and test compensation of such other Eligible
Employee, and such family member shall not be considered an Eligible Employee
for purposes of determining the average actual deferral percentage for all other
Eligible Employees.
In determining the actual deferral percentage for any Eligible Employee who is a
Highly Compensated Employee for the Plan Year, elective contributions and
qualified nonelective contributions (to the extent that qualified nonelective
contributions are taken into account in computing actual deferral percentages)
made to his accounts under any other plan of an Employer or a Related Company
shall be treated as if all such contributions were made to the Plan; provided,
however, that if such a plan has a plan year different from the Plan Year, any
such contributions made to the Highly Compensated Employee's accounts under the
plan for the plan year ending with or within the same calendar year as the
Plan Year shall be treated as if such contributions were made to the Plan.
Notwithstanding the foregoing, such contributions shall not be treated as if
they were made to the Plan if regulations issued under Section 401(k) of the
Code do not permit such plan to be aggregated with the Plan.
If one or more plans of an Employer or Related Company are aggregated with the
Plan for purposes of satisfying the requirements of Section 401(a)(4) or 410(b)
of the Code, then actual deferral percentages under the Plan shall be calculated
as if the Plan and such one or more other plans were a single plan. For Plan
Years beginning after December 31, 1991, plans may be aggregated to satisfy
Section 401(k) of the Code only if they have the same plan year.
The Administrator shall maintain records sufficient to show that the limitation
contained in this Section was not exceeded with respect to any Plan Year and the
amount of the qualified nonelective contributions taken into account in
computing actual deferral percentages for any Plan Year.
7.5 - DISTRIBUTION OF EXCESS TAX-DEFERRED CONTRIBUTIONS
Notwithstanding any other provision of the Plan to the contrary, in the event
that the limitation contained in Section 7.4 is exceeded in any Plan Year, the
Tax-Deferred Contributions made with respect to a Highly Compensated Employee
that exceed the maximum amount permitted to be contributed to the Plan on his
behalf under Section 7.4, plus any income and minus any losses
29
<PAGE>
attributable thereto, shall be distributed to the Highly Compensated Employee
prior to the end of the next succeeding Plan Year. If excess amounts are
attributable to Participants aggregated under the family aggregation rules
described in Section 7.4, the excess shall be allocated among family members in
proportion to the Tax-Deferred Contributions made with respect to each family
member. If such excess amounts are distributed more than 2 1/2 months after the
last day of the Plan Year for which the excess occurred, an excise tax may be
imposed under Section 4979 of the Code on the Employer maintaining the Plan with
respect to such amounts.
The maximum amount permitted to be contributed to the Plan on a Highly
Compensated Employee's behalf under Section 7.4 shall be determined by reducing
Tax-Deferred Contributions made on behalf of Highly Compensated Employees in
order of their actual deferral percentages beginning with the highest of such
percentages. The determination of the amount of excess Tax-Deferred
Contributions shall be made after application of Section 7.3, if applicable.
If an amount of Tax-Deferred Contributions is distributed to a Participant in
accordance with this Section, matching contributions that are attributable
solely to the distributed Tax-Deferred Contributions, plus any income and minus
any losses attributable thereto, shall be forfeited by the Participant. Any such
forfeited amounts shall be treated as a forfeiture under the Plan in accordance
with the provisions of Article XIV as of the last day of the month in which the
distribution of Tax-Deferred Contributions pursuant to this Section occurs.
7.6 - LIMITATION ON MATCHING CONTRIBUTIONS AND AFTER-TAX
CONTRIBUTIONS OF HIGHLY COMPENSATED EMPLOYEES
Notwithstanding any other provision of the Plan to the contrary, the matching
contributions and After-Tax Contributions made with respect to a Plan Year by or
on behalf of eligible participants who are Highly Compensated Employees may not
result in an average contribution percentage for such eligible participants that
exceeds the greater of:
(a) a percentage that is equal to 125 percent of the average contribution
percentage for all other eligible participants; or
(b) a percentage that is not more than 200 percent of the average
contribution percentage for all other eligible participants and that
is not more than two percentage points higher than the average
contribution percentage for all other eligible participants.
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For purposes of applying the limitation contained in this Section, the matching
contributions, After-Tax Contributions, qualified nonelective contributions and
Tax-Deferred Contributions (to the extent that such qualified nonelective
contributions and Tax-Deferred Contributions are taken into account in computing
contribution percentages), and test compensation of any eligible participant who
is a family member of another eligible participant who is a five percent owner
or among the ten Highly Compensated Employees receiving the greatest test
compensation for the Plan Year shall be aggregated with the matching
contributions, After-Tax Contributions, qualified nonelective contributions,
Tax-Deferred Contributions, and test compensation of such other eligible
participant, and such family member shall not be considered an eligible
participant for purposes of determining the average contribution percentage for
all other eligible participants.
In determining the contribution percentage for any eligible participant who is a
Highly Compensated Employee for the Plan Year, matching contributions, employee
contributions, qualified nonelective contributions, and elective contributions
(to the extent that qualified nonelective contributions and elective
contributions are taken into account in computing contribution percentages) made
to his accounts under any other plan of an Employer or a Related Company shall
be treated as if all such contributions were made to the Plan; provided,
however, that if such a plan has a plan year different from the Plan Year, any
such contributions made to the Highly Compensated Employee's accounts under the
plan for the plan year ending with or within the same calendar year as the Plan
Year shall be treated as if such contributions were made to the Plan.
Notwithstanding the foregoing, such contributions shall not be treated as if
they were made to the Plan if regulations issued under Section 401(m) of the
Code do not permit such plan to be aggregated with the Plan.
If one or more plans of an Employer or a Related Company are aggregated with the
Plan for purposes of satisfying the requirements of Section 401(a)(4) or 410(b)
of the Code, the contribution percentages under the Plan shall be calculated as
if the Plan and such one or more other plans were a single plan. For Plan Years
beginning after December 31, 1989, plans may be aggregated to satisfy Section
401(m) of the Code only if they have the same plan year.
The Administrator shall maintain records sufficient to show that the limitation
contained in this Section was not exceeded with respect to any Plan Year and the
amount of the elective contributions and qualified nonelective contributions
taken into account in computing contribution percentages for any Plan Year.
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7.7 - FORFEITURE OR DISTRIBUTION OF EXCESS CONTRIBUTIONS
Notwithstanding any other provision of the Plan to the contrary, in the event
that the limitation contained in Section 7.6 is exceeded in any Plan Year, the
matching contributions and After-Tax Contributions made by or on behalf of a
Highly Compensated Employee that exceed the maximum amount permitted to be
contributed to the Plan by or on behalf of such Highly Compensated Employee
under Section 7.6, plus any income and minus any losses attributable thereto,
shall be forfeited, to the extent forfeitable, or distributed to the Participant
prior to the end of the next succeeding Plan Year as hereinafter provided. If
excess amounts are attributable to Participants aggregated under the family
aggregation rules described in Section 7.5, the excess shall be allocated among
family members in proportion to the matching contributions and After-Tax
Contributions and qualified nonelective contributions (to the extent that
qualified nonelective contributions are taken into account in computing
contribution percentages) made with respect to each family member. If such
excess amounts are distributed more than 2 1/2 months after the last day of the
Plan Year for which the excess occurred, an excise tax may be imposed under
Section 4979 of the Code on the Employer maintaining the Plan with respect to
such amounts.
The maximum amount permitted to be contributed to the Plan by or on behalf of a
Highly Compensated Employee under Section 7.6 shall be determined by reducing
matching contributions and After-Tax Contributions made by or on behalf of
Highly Compensated Employees in order of their contribution percentages
beginning with the highest of such percentages. The distribution or forfeiture
requirement of this Section shall be satisfied by reducing contributions made by
or on behalf of the Highly Compensated Employee to the extent necessary in the
following order:
After-Tax Contributions made by the Highly Compensated Employee, if
any, shall be distributed.
Matching contributions attributable to Tax-Deferred Contributions
shall be distributed or forfeited, as appropriate.
Any amounts forfeited with respect to a Participant pursuant to this Section
shall be treated as a forfeiture under the Plan in accordance with the
provisions of Article XIV as of the last day of the month in which the
distribution of contributions pursuant to this Section occurs. The amount of
excess After-Tax Contributions of a Participant shall in all cases be
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distributable; the excess matching contributions shall be distributable to the
extent the Participant has a vested interest in his Employer Contributions
Sub-Account that is attributable to matching contributions. The determination of
the amount of excess matching contributions and After-Tax Contributions shall be
made after application of Section 7.3, if applicable, and after application of
Section 7.5, if applicable.
7.8 - MULTIPLE USE LIMITATION
Notwithstanding any other provision of the Plan to the contrary, the following
multiple use limitation as required under Section 401(m) of the Code shall
apply: the sum of the average actual deferral percentage for Eligible Employees
who are Highly Compensated Employees and the average contribution percentage for
eligible participants who are Highly Compensated Employees may not exceed the
aggregate limit. In the event that, after satisfaction of Section 7.5 and
Section 7.7, it is determined that contributions under the Plan fail to satisfy
the multiple use limitation contained herein, the multiple use limitation shall
be satisfied by further reducing the actual deferral percentages of Eligible
Employees who are Highly Compensated Employees (beginning with the highest such
percentage) to the extent necessary to eliminate the excess, with such further
reductions to be treated as excess Tax-Deferred Contributions and disposed of as
provided in Section 7.5, or in an alternative manner, consistently applied, that
may be permitted by regulations issued under Section 401(m) of the Code.
7.9 - DETERMINATION OF INCOME OR LOSS
The income or loss attributable to excess contributions that are distributed
pursuant to this Article shall be determined for the preceding Plan Year under
the method otherwise used for allocating income or loss to Participant's
Separate Accounts.
7.10 - CODE SECTION 415 LIMITATIONS ON CREDITING OF CONTRIBUTIONS
AND FORFEITURES
Notwithstanding any other provision of the Plan to the contrary, the annual
addition with respect to a Participant for a limitation year shall in no event
exceed the lesser of (i) $30,000 (adjusted as provided in Section 415(d) of the
Code, with the first adjustment being made for limitation years beginning on or
after January 1, 1996) or (ii) 25 percent of the Participant's compensation, as
defined in Section 415(c)(3) of the Code and regulations issued thereunder, for
the limitation year. If the annual addition to the Separate Account of a
Participant in any limitation year would otherwise exceed the amount that may be
applied for his benefit under the limitation
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contained in this Section, the limitation shall be satisfied by reducing
contributions made by or on behalf of the Participant to the extent necessary in
the following order:
After-Tax Contributions made by the Participant for the limitation
year, if any, shall be reduced.
Tax-Deferred Contributions made on the Participant's behalf for the
limitation year that have not been matched, if any, shall be
reduced.
Tax-Deferred Contributions made on the Participant's behalf for the
limitation year that have been matched and the matching
contributions attributable thereto, if any, shall be reduced pro
rata.
Employer Contributions (other than matching contributions and
qualified nonelective contributions) otherwise allocable to the
Participant's Separate Account for the limitation year shall be
reduced.
Qualified nonelective contributions made on the Participant's
behalf for the limitation year shall be reduced.
The amount of any reduction of Tax-Deferred Contributions or After-Tax
Contributions (plus any income attributable thereto) shall be returned to the
Participant. The amount of any reduction of Employer Contributions shall be
deemed a forfeiture for the limitation year. Amounts deemed to be forfeitures
under this Section shall be held unallocated in a suspense account established
for the limitation year and shall be applied against the Employer's contribution
obligation for the next following limitation year (and succeeding limitation
years, as necessary). If a suspense account is in existence at any time during a
limitation year, all amounts in the suspense account must be allocated to
Participants' Separate Accounts (subject to the limitations contained herein)
before any further Tax-Deferred Contributions, Employer Contributions, or
After-Tax Contributions may be made to the Plan by or on behalf of Participants.
No suspense account established hereunder shall share in any increase or
decrease in the net worth of the Trust. For purposes of this Article, excesses
shall result only from the allocation of forfeitures, a reasonable error in
estimating a Participant's annual compensation (as defined in Section 415(c)(3)
of the Code and regulations issued thereunder), a reasonable error in
determining the amount of Tax-Deferred Contributions that may be made with
respect to any Participant under the limits of Section 415 of the Code, or other
limited facts and circumstances that justify the availability of the provisions
set forth above.
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7.11 - COVERAGE UNDER OTHER QUALIFIED DEFINED CONTRIBUTION PLAN
If a Participant is covered by any other qualified defined contribution plan
(whether or not terminated) maintained by an Employer or a Related Company
concurrently with the Plan, and if the annual addition for the limitation year
would otherwise exceed the amount that may be applied for the Participant's
benefit under the limitation contained in Section 7.10, such excess shall be
reduced first by returning the employee contributions made by the Participant
for the limitation year under all of the defined contribution plans other than
the Plan and the income attributable thereto to the extent necessary. If the
limitation contained in Section 7.10 is still not satisfied after returning all
of the employee contributions made by the Participant under all such other
plans, the excess shall be reduced by returning the elective contributions made
on the Participant's behalf for the limitation year under all such other plans
and the income attributable thereto to the extent necessary on a pro rata basis
among all of such plans. If the limitation contained in Section 7.10 is still
not satisfied after returning all of the elective contributions made on the
Participant's behalf under all such other plans, the procedure set forth in
Section 7.10 shall be invoked to eliminate any such excess. If the limitation
contained in Section 7.10 is still not satisfied after invocation of the
procedure set forth in Section 7.10, the portion of the employer contributions
and of forfeitures for the limitation year under all such other plans that has
been allocated to the Participant thereunder, but which exceeds the limitation
set forth in Section 7.10, shall be deemed a forfeiture for the limitation year
and shall be disposed of as provided in such other plans; provided, however,
that if the Participant is covered by a money purchase pension plan, the
forfeiture shall be effected first under any other defined contribution plan
that is not a money purchase pension plan and, if the limitation is still not
satisfied, then under such money purchase pension plan.
7.12 - COVERAGE UNDER QUALIFIED DEFINED BENEFIT PLAN
If a Participant in the Plan is also covered by a qualified defined benefit plan
(whether or not terminated) maintained by an Employer or a Related Company, in
no event shall the sum of the defined benefit plan fraction (as defined in
Section 415(e)(2) of the Code) and the defined contribution plan fraction (as
defined in Section 415(e)(3) of the Code) exceed 1.0 in any limitation year. If,
before October 3, 1973, the Participant was an active participant in a qualified
defined benefit plan maintained by an Employer or a Related Company and
otherwise satisfies the requirements of Section 2004(d)(2) of ERISA, then for
purposes of
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applying this Section, the defined benefit plan fraction shall not exceed 1.0.
If the Plan satisfied the applicable requirements of Section 415 of the Code as
in effect for all limitation years beginning before January 1, 1987, an amount
shall be subtracted from the numerator of the defined contribution plan fraction
(not exceeding such numerator) as prescribed by the Secretary of the Treasury so
that the sum of the defined benefit plan fraction and the defined contribution
plan fraction computed under Section 415(e)(1) of the Code, as revised by the
Tax Reform Act of 1986, does not exceed 1.0 for such limitation year. In the
event the special limitation contained in this Section is exceeded, the benefits
otherwise payable to the Participant under any such qualified defined benefit
plan shall be reduced to the extent necessary to meet such limitation.
7.13 - SCOPE OF LIMITATIONS
The limitations contained in Sections 7.10, 7.11, and 7.12 shall be applicable
only with respect to benefits provided pursuant to defined contribution plans
and defined benefit plans described in Section 415(k) of the Code.
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ARTICLE VIII
TRUST FUNDS AND SEPARATE ACCOUNTS
8.1 - GENERAL FUND
The Trustee shall maintain a General Fund as required to hold and administer any
assets of the Trust that are not allocated among the Investment Funds as
provided in the Plan or the Trust Agreement. The General Fund shall be held and
administered as a separate common trust fund. The interest of each Participant
or Beneficiary under the Plan in the General Fund shall be an undivided
interest. The General Fund may be invested in whole or in part in equity
securities issued by an Employer or a Related Company that are publicly traded
and are "qualifying employer securities" as defined in Section 407(d)(5) of
ERISA.
8.2 - INVESTMENT FUNDS
The Sponsor shall determine the number and type of Investment Funds and select
the investments for such Investment Funds. The number of Investment Funds and
the investments for such Investment Funds may be changed by the Sponsor from
time to time. The Sponsor shall communicate the same and any changes therein in
writing to the Administrator and the Trustee. Each Investment Fund shall be held
and administered as a separate common trust fund. The interest of each
Participant or Beneficiary under the Plan in any Investment Fund shall be an
undivided interest.
The Sponsor may determine to offer one or more Investment Funds that are
invested in whole or in part in equity securities issued by an Employer or a
Related Company that are publicly traded and are "qualifying employer
securities" as defined in Section 407(d)(5) of ERISA.
8.3 - LOAN INVESTMENT FUND
If a loan from the Plan to a Participant is approved in accordance with the
provisions of Article XII, the Sponsor shall direct the establishment and
maintenance of a loan Investment Fund in the Participant's name. The assets of
the loan Investment Fund shall be held as a separate trust fund. A Participant's
loan Investment Fund shall be invested in the note reflecting the loan that is
executed by the Participant in accordance with the provisions of Article XII.
Notwithstanding any other provision of the Plan to the contrary, income received
with respect to a Participant's loan Investment Fund shall be allocated and the
loan Investment Fund shall be administered as provided in Article XII.
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8.4 - INCOME ON TRUST
Any dividends, interest, distributions, or other income received by the Trustee
with respect to any Trust Fund maintained hereunder shall be allocated by the
Trustee to the Trust Fund for which the income was received.
8.5 - SEPARATE ACCOUNTS
As of the first date a contribution is made by or on behalf of an Employee,
there shall be established a Separate Account in his name reflecting his
interest in the Trust. Each Separate Account shall be maintained and
administered for each Participant and Beneficiary in accordance with the
provisions of the Plan. The balance of each Separate Account shall be the
balance of the account after all credits and charges thereto, for and as of such
date, have been made as provided herein.
8.6 - SUB-ACCOUNTS
A Participant's Separate Account shall be divided into individual Sub-Accounts
reflecting the portion of the Participant's Separate Account that is derived
from Tax-Deferred Contributions, After- Tax Contributions, Rollover
Contributions, or Employer Contributions. Each Sub-Account shall reflect
separately contributions allocated to each Trust Fund maintained hereunder and
the earnings and losses attributable thereto. The Employer Contributions
Sub-Account shall reflect separately that portion of such Sub-Account that is
derived from Employer Contributions that may be taken into account to satisfy
the limitations on contributions for Highly Compensated Employees contained in
Article VII. Such other Sub-Accounts may be established as are necessary or
appropriate to reflect a Participant's interest in the Trust.
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ARTICLE IX
LIFE INSURANCE CONTRACTS
9.1 - NO LIFE INSURANCE CONTRACTS
There shall be no life insurance contracts purchased under the Plan.
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ARTICLE X
DEPOSIT AND INVESTMENT OF CONTRIBUTIONS
10.1 - FUTURE CONTRIBUTION INVESTMENT ELECTIONS
Each Eligible Employee shall make an investment election in the manner and form
prescribed by the Administrator directing the manner in which his Tax-Deferred
Contributions, After-Tax Contributions, Rollover Contributions, and Employer
Contributions shall be invested. An Eligible Employee's investment election
shall specify the percentage, in the percentage increments prescribed by the
Administrator, of such contributions that shall be allocated to one or more of
the Investment Funds with the sum of such percentages equaling 100 percent. The
investment election by a Participant shall remain in effect until his entire
interest under the Plan is distributed or forfeited in accordance with the
provisions of the Plan or until he files a change of investment election with
the Administrator, in such form as the Administrator shall prescribe. A
Participant's change of investment election may be made effective as of the date
or dates prescribed by the Administrator.
10.2 - DEPOSIT OF CONTRIBUTIONS
All Tax-Deferred Contributions, After-Tax Contributions, Rollover Contributions,
and Employer Contributions shall be deposited in the Trust and allocated among
the Investment Funds in accordance with the Participant's currently effective
investment election; provided, however, that any contributions made to the Plan
in qualifying employer securities shall be allocated to the Employer securities
Investment Fund established by the Sponsor, pending directions to the
Administrator regarding their future investment. If no investment election is on
file with the Administrator at the time contributions are to be deposited to a
Participant's Separate Account, the Participant shall be notified and an
investment election form shall be provided to him. Until such Participant shall
make an effective election under this Section, his contributions shall be
allocated among the Investment Funds as directed by the Administrator.
10.3 - ELECTION TO TRANSFER BETWEEN FUNDS
A Participant may elect to transfer investments from any Investment Fund to any
other Investment Fund. The Participant's transfer election shall specify either
(i) a percentage, in the percentage increments prescribed by the Administrator,
of the amount eligible for transfer, which percentage may not exceed 100
percent, or (ii) a dollar amount that is to be transferred. Subject to any
restrictions pertaining to a particular Investment
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Fund, a Participant's transfer election may be made effective as of the date or
dates prescribed by the Administrator.
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ARTICLE XI
CREDITING AND VALUING SEPARATE ACCOUNTS
11.1 - CREDITING SEPARATE ACCOUNTS
All contributions made under the provisions of the Plan shall be credited to
Separate Accounts in the Trust Funds by the Trustee, in accordance with
procedures established in writing by the Administrator, either when received or
on the succeeding Valuation Date after valuation of the Trust Fund has been
completed for such Valuation Date as provided in Section 11.2, as shall be
determined by the Administrator.
11.2 - VALUING SEPARATE ACCOUNTS
Separate Accounts in the Trust Funds shall be valued by the Trustee on the
Valuation Date, in accordance with procedures established in writing by the
Administrator, either in the manner adopted by the Trustee and approved by the
Administrator or in the manner set forth in Section 11.3 as Plan valuation
procedures, as determined by the Administrator.
11.3 - PLAN VALUATION PROCEDURES
With respect to the Trust Funds, the Administrator may determine that the
following valuation procedures shall be applied. As of each Valuation Date
hereunder, the portion of any Separate Accounts in a Trust Fund shall be
adjusted to reflect any increase or decrease in the value of the Trust Fund for
the period of time occurring since the immediately preceding Valuation Date for
the Trust Fund (the "valuation period") in the following manner:
(a) First, the value of the Trust Fund shall be determined by valuing
all of the assets of the Trust Fund at Fair Market Value.
(b) Next, the net increase or decrease in the value of the Trust Fund
attributable to net income and all profits and losses, realized
and unrealized, during the valuation period shall be determined
on the basis of the valuation under paragraph (a) taking into
account appropriate adjustments for contributions, loan payments,
and transfers to and distributions, withdrawals, loans, and
transfers from such Trust Fund during the valuation period.
(c) Finally, the net increase or decrease in the value of the Trust
Fund shall be allocated among Separate Accounts in
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the Trust Fund in the ratio of the balance of the portion of such
Separate Account in the Trust Fund as of the preceding Valuation
Date less any distributions, withdrawals, loans, and transfers
from such Separate Account balance in the Trust Fund since the
Valuation Date to the aggregate balances of the portions of all
Separate Accounts in the Trust Fund similarly adjusted, and each
Separate Account in the Trust Fund shall be credited or charged
with the amount of its allocated share. Notwithstanding the
foregoing, the Administrator may adopt such accounting procedures
as it considers appropriate and equitable to establish a
proportionate crediting of net increase or decrease in the value
of the Trust Fund for contributions, loan payments, and transfers
to and distributions, withdrawals, loans, and transfers from such
Trust Fund made by or on behalf of a Participant during the
valuation period.
11.4 - FINALITY OF DETERMINATIONS
The Trustee shall have exclusive responsibility for determining the balance of
each Separate Account maintained hereunder. The Trustee's determinations thereof
shall be conclusive upon all interested parties.
11.5 - NOTIFICATION
Within a reasonable period of time after the end of each Plan Year, the
Administrator shall notify each Participant and Beneficiary of the balances of
his Separate Account and Sub-Accounts as of a Valuation Date during the Plan
Year.
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ARTICLE XII
LOANS
12.1 - APPLICATION FOR LOAN
A Participant who is a party in interest, other than a shareholder employee, as
defined in Section 408(d)(3) of ERISA, may make written application to the
Administrator for a loan from his Separate Account.
As collateral for any loan granted hereunder, the Participant shall grant to the
Plan a security interest in his vested interest under the Plan equal to the
amount of the loan; provided, however, that in no event may the security
interest exceed 50 percent of the Participant's vested interest under the Plan
determined as of the date as of which the loan is originated in accordance with
Plan provisions. In the case of a Participant who is an active employee, the
Participant also shall enter into an agreement to repay the loan by payroll
withholding. No loan in excess of 50 percent of the Participant's vested
interest under the Plan shall be made from the Plan. Loans shall not be made
available to Highly Compensated Employees in an amount greater than the amount
made available to other employees.
A loan shall not be granted unless the Participant consents in writing to the
charging of his Separate Account for unpaid principal and interest amounts in
the event the loan is declared to be in default. If a Participant's Separate
Account is subject to the qualified joint and survivor annuity provisions under
Article XVI, the Participant's spouse must consent in writing to any loan
hereunder. Any spousal consent given pursuant to this Section must acknowledge
the effect of the loan and must be witnessed by a Plan representative or a
notary public. Such spousal consent shall be binding with respect to the
consenting spouse and any subsequent spouse with respect to the loan. A new
spousal consent shall be required if the Participant's Separate Account is used
for security in any renegotiation, extension, renewal, or other revision of the
loan.
12.2 - REDUCTION OF ACCOUNT UPON DISTRIBUTION
Notwithstanding any other provision of the Plan, the amount of a Participant's
Separate Account that is distributable to the Participant or his Beneficiary
under Article XIII or XV shall be reduced by the portion of his vested interest
that is held by the Plan as security for any loan outstanding to the
Participant, provided that in the event of a distribution under Article XV the
reduction is used to repay the loan. If distribution is made because of the
Participant's death prior to the commencement of
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distribution of his Separate Account and less than 100 percent of the
Participant's vested interest in his Separate Account (determined without regard
to the preceding sentence) is payable to his surviving spouse, then the balance
of the Participant's vested interest in his Separate Account shall be adjusted
by reducing the vested account balance by the amount of the security used to
repay the loan, as provided in the preceding sentence, prior to determining the
amount of the benefit payable to the surviving spouse.
12.3 - REQUIREMENTS TO PREVENT A TAXABLE DISTRIBUTION
Notwithstanding any other provision of the Plan to the contrary, the following
terms and conditions shall apply to any loan made to a Participant under this
Article:
(a) The interest rate on any loan to a Participant shall be a
reasonable interest rate commensurate with current interest rates
charged for loans made under similar circumstances by persons in
the business of lending money.
(b) The amount of any loan to a Participant (when added to the
outstanding balance of all other loans to the Participant from the
Plan or any other plan maintained by an Employer or a Related
Company) shall not exceed the lesser of:
(i) $50,000, reduced by the excess, if any, of the highest
outstanding balance of any other loan to the
Participant from the Plan or any other plan maintained
by an Employer or a Related Company during the
preceding 12-month period over the outstanding balance
of such loans on the date a loan is made hereunder; or
(ii) 50 percent of the vested portions of the Participant's
Separate Account and his vested interest under all
other plans maintained by an Employer or a Related
Company.
(c) The term of any loan to a Participant shall be no greater than five
years, except in the case of a loan used to acquire any dwelling
unit which within a reasonable period of time is to be used
(determined at the time the loan is made) as a principal residence
of the Participant.
(d) Except as otherwise permitted under Treasury regulations,
substantially level amortization shall be required over the term of
the loan with payments made not less frequently than quarterly.
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12.4 - ADMINISTRATION OF LOAN INVESTMENT FUND
Upon approval of a loan to a Participant, the Administrator shall direct the
Trustee to transfer an amount equal to the loan amount from the Investment Funds
in which it is invested, as directed by the Administrator, to the loan
Investment Fund established in the Participant's name. Any loan approved by the
Administrator shall be made to the Participant out of the Participant's loan
Investment Fund. All principal and interest paid by the Participant on a loan
made under this Article shall be deposited to his Separate Account and shall be
allocated upon receipt among the Investment Funds in accordance with the
Participant's currently effective investment election. The balance of the
Participant's loan Investment Fund shall be decreased by the amount of principal
payments and the loan Investment Fund shall be terminated when the loan has been
repaid in full.
12.5 - DEFAULT
If a Participant fails to make or cause to be made, any payment required under
the terms of the loan within 90 days following the date on which such payment
shall become due or there is an outstanding principal balance existing on a loan
after the last scheduled repayment date, the Administrator shall direct the
Trustee to declare the loan to be in default, and the entire unpaid balance of
such loan, together with accrued interest, shall be immediately due and payable.
In any such event, if such balance and interest thereon is not then paid, the
Trustee shall charge the Separate Account of the borrower with the amount of
such balance and interest as of the earliest date a distribution may be made
from the Plan to the borrower without adversely affecting the tax qualification
of the Plan or of the cash or deferred arrangement.
12.6 - SPECIAL RULES APPLICABLE TO LOANS
Any loan made hereunder shall be subject to the following rules:
(a) Loans limited to Eligible Employees: No loans shall be made to an
Employee who makes a Rollover Contribution in accordance with
Article V, but who is not an Eligible Employee as provided in
Article III.
(b) Minimum Loan Amount: A Participant may not request a loan for less
than $1,000.
(c) Maximum Number of Outstanding Loans: A Participant with an
outstanding loan may not apply for another loan until the existing
loan is paid in full and may not refinance an existing loan or
attain a second loan for the purpose of
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paying off the existing loan. A Participant may not apply for more
than one loan during the Plan Year. The provisions of this
paragraph shall not apply to any loans made prior to the effective
date of this amendment and restatement; provided, however, that a
Participant may not apply for a new loan hereunder until all
outstanding loans made to the Participant prior to the effective
date of this amendment and restatement have been paid in full.
(d) Maximum Period for Real Estate Loans: The term of any loan to a
Participant that is used to acquire any dwelling unit which within
a reasonable period of time is to be used (determined at the time
the loan is made) as a principal residence of the Participant shall
be no greater than ten years.
(e) Pre-Payment Without Penalty: A Participant may pre-pay the balance
of any loan hereunder prior to the date it is due without penalty.
(f) Effect of Termination of Employment: Upon a Participant's
termination of employment, the balance of any outstanding loan
hereunder shall immediately become due and owing.
12.7 - LOANS GRANTED PRIOR TO AMENDMENT
Notwithstanding any other provision of this Article to the contrary, any loan
made under the provisions of the Plan as in effect prior to this amendment and
restatement shall remain outstanding until repaid in accordance with its terms
or the otherwise applicable Plan provisions.
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ARTICLE XIII
WITHDRAWALS WHILE EMPLOYED
13.1 - WITHDRAWALS OF AFTER-TAX CONTRIBUTIONS
A Participant who is employed by an Employer or a Related Company may elect in
writing, subject to the limitations and conditions prescribed in this Article,
to make a cash withdrawal or a withdrawal in the form of a qualified joint and
survivor annuity as provided in Article XVI from his After-Tax Contributions
Sub-Account.
13.2 - WITHDRAWALS OF ROLLOVER CONTRIBUTIONS
A Participant who is employed by an Employer or a Related Company may elect in
writing, subject to the limitations and conditions prescribed in this Article,
to make a cash withdrawal or a withdrawal in the form of a qualified joint and
survivor annuity as provided in Article XVI from his Rollover Contributions
Sub-Account.
13.3 - WITHDRAWALS OF EMPLOYER CONTRIBUTIONS
A Participant who is employed by an Employer or a Related Company and has
attained age 59 1/2, been a Participant under the Plan for 5 or more years, or
is determined by the Administrator to have incurred a hardship as defined in
this Article may elect in writing, subject to the limitations and conditions
prescribed in this Article to make a cash withdrawal or a withdrawal in the form
of a qualified joint and survivor annuity as provided in Article XVI from his
vested interest in his Employer Contributions Sub-Account. Notwithstanding the
foregoing, in no event may a Participant withdraw that portion of his Employer
Contributions Sub-Account that is attributable to Employer Contributions that
may be taken into account to satisfy the limitations on contributions for Highly
Compensated Employees contained in Article VII prior to the Participant's
attainment of age 59 1/2, unless the distribution is made because of a hardship.
The maximum amount that a Participant may withdraw pursuant to this Section
shall be an amount ("X") determined by the following formula:
X = P(AB + D) - D
For purposes of the formula:
P = The Participant's vested interest in his Employer
Contributions Sub-Account on the date distribution is to be
made; provided, however, that if the
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distribution is to be made prior to the Participant's
attainment of age 59 1/2, his vested interest shall be
determined without regard to his vested interest in that
portion of his Employer Contributions Sub-Account that is
attributable to Employer Contributions that may be taken
into account to satisfy the limitations on contributions for
Highly Compensated Employees contained in Article VII.
AB = The balance of the Participant's Employer Contributions
Sub-Account as of the Valuation Date immediately preceding
the date distribution is to be made; provided, however, that
if the distribution is to be made prior to the Participant's
attainment of age 59 1/2, such balance shall exclude that
portion of his Employer Contributions Sub-Account that is
attributable to Employer Contributions that may be taken
into account to satisfy the limitations on contributions for
Highly Compensated Employees contained in Article VII.
D = The amount of all prior withdrawals from the Participant's
Employer Contributions Sub-Account made pursuant to this
Section.
Notwithstanding any other provision of the Plan to the contrary, the maximum
amount that a Participant may withdraw pursuant to this Section because of a
hardship is 100 percent of his vested interest in the balance of his Employer
Contributions Sub-Account, exclusive of Employer Contributions that may be taken
into account to satisfy the limitations on contributions for Highly Compensated
Employees contained in Article VII, and any earnings thereon, that are credited
to such account as of a date that is after December 31, 1988.
13.4 - WITHDRAWALS OF TAX-DEFERRED CONTRIBUTIONS
A Participant who is employed by an Employer or a Related Company and who has
attained age 59 1/2 or is determined by the Administrator to have incurred a
hardship as defined in this Article may elect in writing, subject to the
limitations and conditions prescribed in this Article, to make a cash withdrawal
or a withdrawal in the form of a qualified joint and survivor annuity as
provided in Article XVI from his Tax-Deferred Contributions Sub-Account. The
maximum amount that a Participant may withdraw pursuant to this Section because
of a hardship is the balance of his Tax-Deferred Contributions Sub-Account,
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exclusive of any earnings credited to such Sub-Account as of a date that is
after December 31, 1988.
13.5 - LIMITATIONS ON WITHDRAWALS OTHER THAN HARDSHIP WITHDRAWALS
Withdrawals made pursuant to this Article, other than hardship withdrawals,
shall be subject to the following conditions and limitations:
A Participant must file a written withdrawal application with the
Administrator such number of days prior to the date as of which it
is to be effective as the Administrator shall prescribe.
Withdrawals may be made effective as soon as reasonably practicable
following the Administrator's receipt of the Participant's
directions.
A Participant who makes a withdrawal from his After-Tax
Contributions Sub-Account prior to attaining age 59 1/2 may not
make a further withdrawal of After-Tax Contributions under this
Article during the remainder of the Plan Year in which the
withdrawal is effective.
A Participant who makes a withdrawal from his Rollover
Contributions Sub-Account prior to attaining age 59 1/2 may not
make a further withdrawal of Rollover Contributions under this
Article during the remainder of the Plan Year in which the
withdrawal is effective.
If a Participant's Separate Account is subject to the qualified joint and
survivor annuity provisions under Article XVI, the Participant's spouse must
consent in writing to any withdrawal hereunder.
13.6 - CONDITIONS AND LIMITATIONS ON HARDSHIP WITHDRAWALS
A Participant must file a written application for a hardship withdrawal with the
Administrator such number of days prior to the date as of which it is to be
effective as the Administrator may prescribe. Hardship withdrawals may be made
effective as soon as reasonably practicable following the Administrator's
receipt of the Participant's directions. If a Participant's Separate Account is
subject to the qualified joint and survivor annuity provisions under Article
XVI, the Participant's spouse must consent to any withdrawal hereunder. The
Administrator shall grant a hardship withdrawal only if it determines that the
withdrawal is necessary to meet an immediate and heavy financial need of the
Participant. An immediate and heavy financial need of the Participant means a
financial need on account of:
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(a) expenses previously incurred by or necessary to obtain for the
Participant, the Participant's spouse, or any dependent of the
Participant (as defined in Section 152 of the Code) medical care
described in Section 213(d) of the Code;
(b) costs directly related to the purchase (excluding mortgage
payments) of a principal residence for the Participant;
(c) payment of tuition, related educational fees, and room and board
expenses for the next 12 months of post-secondary education for the
Participant, the Participant's spouse, or any dependent of the
Participant; or
(d) the need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
A withdrawal shall be deemed to be necessary to satisfy an immediate and heavy
financial need of a Participant only if all of the following requirements are
satisfied:
The withdrawal is not in excess of the amount of the immediate and
heavy financial need of the Participant.
The Participant has obtained all distributions, other than hardship
distributions, and all non-taxable loans currently available under
all plans maintained by an Employer or any Related Company.
The Participant's Tax-Deferred Contributions and After-Tax
Contributions and the Participant's elective tax-deferred
contributions and employee after-tax contributions under all other
tax-qualified plans maintained by an Employer or any Related
Company shall be suspended for at least twelve months after his
receipt of the withdrawal.
The Participant shall not make Tax-Deferred Contributions or
elective tax-deferred contributions under any other tax-qualified
plan maintained by an Employer or any Related Company for the
Participant's taxable year immediately following the taxable year
of the withdrawal in excess of the applicable limit under Section
402(g) of the Code for such next taxable year less the amount of
the Participant's Tax-Deferred Contributions and elective
tax-deferred contributions under any other plan maintained by an
Employer or any Related Company for the taxable year of the
withdrawal.
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The minimum hardship withdrawal that a Participant may make is $1,000. The
amount of a hardship withdrawal may include any amounts necessary to pay any
Federal, state, or local income taxes or penalties reasonably anticipated to
result from the distribution. A Participant shall not fail to be treated as an
Eligible Employee for purposes of applying the limitations contained in Article
VII of the Plan merely because his Tax-Deferred Contributions are suspended in
accordance with this Section.
13.7 - ORDER OF WITHDRAWAL FROM A PARTICIPANT'S SUB-ACCOUNTS
Distribution of a withdrawal amount shall be made from a Participant's
Sub-Accounts, to the extent necessary, in the order prescribed by the
Administrator, which order shall be uniform with respect to all Participants and
non-discriminatory. If the Sub-Account from which a Participant is receiving a
withdrawal is invested in more than one Investment Fund, the withdrawal shall be
charged against the Investment Funds as directed by the Administrator.
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ARTICLE XIV
TERMINATION OF EMPLOYMENT AND SETTLEMENT DATE
14.1 - TERMINATION OF EMPLOYMENT AND SETTLEMENT DATE
A Participant's Settlement Date shall occur on the date he terminates employment
with an Employer and all Related Companies because of death, disability,
retirement, or other termination of employment. Written notice of a
Participant's Settlement Date shall be given by the Administrator to the
Trustee.
14.2 - SEPARATE ACCOUNTING FOR NON-VESTED AMOUNTS
If as of a Participant's Settlement Date the Participant's vested interest in
his Employer Contributions Sub-Account is less than 100 percent, that portion of
his Employer Contributions Sub-Account that is not vested shall be accounted for
separately from the vested portion and shall be disposed of as provided in the
following Section. If prior to his Settlement Date such a Participant made a
withdrawal in accordance with the provisions of Article XIII, the vested portion
of his Employer Contributions Sub-Account shall be equal to the maximum
withdrawable amount as determined under Article XIII, without regard to any
exclusion for amounts attributable to Employer Contributions that may be taken
into account to satisfy the limitations on contributions for Highly Compensated
Employees contained in Article VII.
14.3 - DISPOSITION OF NON-VESTED AMOUNTS
That portion of a Participant's Employer Contributions Sub-Account that is not
vested upon the occurrence of his Settlement Date shall be disposed of as
follows:
(a) If the Participant has no vested interest in his Separate Account upon
the occurrence of his Settlement Date or his vested interest in his
Separate Account as of the date of distribution does not exceed $3,500
resulting in the Participant's receipt of a single sum payment of such
vested interest, the non-vested balance remaining in the Participant's
Employer Contributions Sub-Account will be forfeited and his Separate
Account closed as of (i) the Participant's Settlement Date, if the
Participant has no vested interest in his Separate Account, or (ii)
the date the single sum payment occurs.
(b) If the Participant's vested interest in his Separate Account exceeds
$3,500 and the Participant is eligible for and consents in writing to
a single sum payment of his vested interest in his Separate Account,
the non-vested
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balance remaining in the Participant's Employer Contributions
Sub-Account will be forfeited and his Separate Account closed as of
the date the single sum payment occurs, provided that such
distribution occurs prior to the end of the second Plan Year beginning
on or after the Participant's Settlement Date.
(c) If neither paragraph (a) nor paragraph (b) is applicable, the
non-vested portion of the Participant's Employer Contributions
Sub-Account will continue to be held in such Sub-Account and will not
be forfeited until the end of the five-year period beginning on his
Settlement Date.
Whenever the non-vested portion of a Participant's Employer Contributions
Sub-Account is forfeited under the provisions of the Plan with respect to a Plan
Year, the amount of such forfeiture, as of the last day of the Plan Year, shall
be applied first against Plan expenses for the Plan Year and then against the
Employer Contribution obligations for the Plan Year of the Employer for which
the Participant last performed services as an Employee. Notwithstanding the
foregoing, however, should the amount of all such forfeitures for any Plan Year
with respect to any Employer exceed the amount of such Employer's Employer
Contribution obligation for the Plan Year, the excess amount of such forfeitures
shall be held unallocated in a suspense account established with respect to the
Employer and shall for all Plan purposes be applied against the Employer's
Employer Contribution obligations for the following Plan Year.
14.4 - RECREDITING OF FORFEITED AMOUNTS
A former Participant who forfeited the non-vested portion of his Employer
Contributions Sub-Account in accordance with the provisions of this Article and
who is reemployed by an Employer or a Related Company shall have such forfeited
amounts recredited to a new Separate Account in his name, without adjustment for
interim gains or losses experienced by the Trust, if:
(a) he returns to employment with an Employer or a Related Company before
the end of the five-year period beginning on the later of his
Settlement Date or the date he received distribution of his vested
interest in his Separate Account;
(b) he resumes employment covered under the Plan before the end of the
five-year period beginning on the date he is reemployed; and
(c) if he received distribution of his vested interest in his Separate
Account, he repays to the Plan the full amount of
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such distribution before the end of the five-year period beginning on
the date he is reemployed.
Funds needed in any Plan Year to recredit the Separate Account of a Participant
with the amounts of prior forfeitures in accordance with the preceding sentence
shall come first from forfeitures that arise during such Plan Year, and then
from Trust income earned in such Plan Year, with each Trust Fund being charged
with the amount of such income proportionately, unless his Employer chooses to
make an additional Employer Contribution, and shall finally be provided by his
Employer by way of a separate Employer Contribution.
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ARTICLE XV
DISTRIBUTIONS
15.1 - DISTRIBUTIONS TO PARTICIPANTS
A Participant whose Settlement Date occurs shall receive distribution of his
vested interest in his Separate Account in the form provided under Article XVI
beginning as soon as reasonably practicable following his Settlement Date or the
date his application for distribution is filed with the Administrator, if later.
In addition, a Participant who continues in employment with an Employer or a
Related Company after his Normal Retirement Date may elect to receive
distribution of all or any portion of his Separate Account in the form provided
under Article XVI at any time following his Normal Retirement Date.
15.2 - DISTRIBUTIONS TO BENEFICIARIES
If a Participant dies prior to the date distribution of his vested interest in
his Separate Account begins under this Article, his Beneficiary shall receive
distribution of the Participant's vested interest in his Separate Account in the
form provided under Article XVI beginning as soon as reasonably practicable
following the date the Beneficiary's application for distribution is filed with
the Administrator. Unless distribution is to be made over the life or over a
period certain not greater than the life expectancy of the Beneficiary,
distribution of the Participant's entire vested interest shall be made to the
Beneficiary no later than the end of the fifth calendar year beginning after the
Participant's death. If distribution is to be made over the life or over a
period certain no greater than the life expectancy of the Beneficiary,
distribution shall commence no later than:
(a) If the Beneficiary is not the Participant's spouse, the end of the
first calendar year beginning after the Participant's death; or
(b) If the Beneficiary is the Participant's spouse, the later of (i) the
end of the first calendar year beginning after the Participant's death
or (ii) the end of the calendar year in which the Participant would
have attained age 70 1/2.
If distribution is to be made to a Participant's spouse, it shall be made
available within a reasonable period of time after the Participant's death that
is no less favorable than the period of time applicable to other distributions.
If a Participant dies after the date distribution of his vested interest in his
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Separate Account begins under this Article, but before his entire vested
interest in his Separate Account is distributed, his Beneficiary shall receive
distribution of the remainder of the Participant's vested interest in his
Separate Account beginning as soon as reasonably practicable following the
Participant's date of death in a form that provides for distribution at least as
rapidly as under the form in which the Participant was receiving distribution.
15.3 - CASH OUTS AND PARTICIPANT CONSENT
Notwithstanding any other provision of the Plan to the contrary, if a
Participant's vested interest in his Separate Account does not exceed $3,500,
distribution of such vested interest shall be made to the Participant in a
single sum payment as soon as reasonably practicable following his Settlement
Date. If a Participant's vested interest in his Separate Account is $0, he shall
be deemed to have received distribution of such vested interest as of his
Settlement Date. If a Participant's vested interest in his Separate Account
exceeds $3,500, distribution shall not commence to such Participant prior to his
Normal Retirement Date without the Participant's written consent and the written
consent of his spouse if the Participant's Separate Account is subject to the
qualified joint and survivor annuity provisions under Article XVI and payment is
not made through the purchase of a qualified joint and survivor annuity. If at
the time of a distribution or deemed distribution to a Participant from his
Separate Account, the Participant's vested interest in his Separate Account
exceeded $3,500, then for purposes of this Section, the Participant's vested
interest in his Separate Account on any subsequent date shall be deemed to
exceed $3,500.
15.4 - REQUIRED COMMENCEMENT OF DISTRIBUTION
Notwithstanding any other provision of the Plan to the contrary, distribution of
a Participant's vested interest in his Separate Account shall commence to the
Participant no later than the earlier of:
(a) 60 days after the close of the Plan Year in which (i) the
Participant's Normal Retirement Date occurs, (ii) the 10th
anniversary of the year in which he commenced participation in the
Plan occurs, or (iii) his Settlement Date occurs, whichever is
latest; or
(b) the April 1 following the close of the calendar year in which he
attains age 70 1/2, whether or not his Settlement Date has
occurred, except that if a Participant attained age 70 1/2 prior to
January 1, 1988, and was not a five-percent owner (as defined in
Section 416 of the Code)
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at any time during the five-Plan-Year period ending within the
calendar year in which he attained age 70 1/2, distribution of such
Participant's vested interest in his Separate Account shall
commence no later than the April 1 following the close of the
calendar year in which he attains age 70 1/2 or retires, whichever
is later.
Distributions required to commence under this Section shall be made in the form
provided under Article XVI and in accordance with Section 401(a)(9) of the Code
and regulations issued thereunder, including the minimum distribution incidental
benefit requirements.
15.5 - REEMPLOYMENT OF A PARTICIPANT
If a Participant whose Settlement Date has occurred is reemployed by an Employer
or a Related Company, he shall lose his right to any distribution or further
distributions from the Trust arising from his prior Settlement Date and his
interest in the Trust shall thereafter be treated in the same manner as that of
any other Participant whose Settlement Date has not occurred.
15.6 - RESTRICTIONS ON ALIENATION
Except as provided in Section 401(a)(13) of the Code relating to qualified
domestic relations orders and Section 1.401(a)-13(b)(2) of Treasury regulations
relating to Federal tax levies and judgments, no benefit under the Plan at any
time shall be subject in any manner to anticipation, alienation, assignment
(either at law or in equity), encumbrance, garnishment, levy, execution, or
other legal or equitable process; and no person shall have power
in any manner to anticipate, transfer, assign (either at law or in equity),
alienate or subject to attachment, garnishment, levy, execution, or other legal
or equitable process, or in any way encumber his benefits under the Plan, or any
part thereof, and any attempt to do so shall be void.
15.7 - FACILITY OF PAYMENT
If the Administrator finds that any individual to whom an amount is payable
hereunder is incapable of attending to his financial affairs because of any
mental or physical condition, including the infirmities of advanced age, such
amount (unless prior claim therefor shall have been made by a duly qualified
guardian or other legal representative) may, in the discretion of the
Administrator, be paid to another person for the use or benefit of the
individual found incapable of attending to his financial affairs or in
satisfaction of legal obligations incurred by or on behalf of such individual.
The Trustee shall make such payment only upon receipt of written instructions to
such effect from the
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Administrator. Any such payment shall be charged to the Separate Account from
which any such payment would otherwise have been paid to the individual found
incapable of attending to his financial affairs and shall be a complete
discharge of any liability therefor under the Plan.
15.8 - INABILITY TO LOCATE PAYEE
If any benefit becomes payable to any person, or to the executor or
administrator of any deceased person, and if that person or his executor or
administrator does not present himself to the Administrator within a reasonable
period after the Administrator mails written notice of his eligibility to
receive a distribution hereunder to his last known address and makes such other
diligent effort to locate the person as the Administrator determines, that
benefit will be forfeited. However, if the payee later files a claim for that
benefit, the benefit will be restored.
15.9 - DISTRIBUTION PURSUANT TO QUALIFIED DOMESTIC RELATIONS
ORDERS
Notwithstanding any other provision of the Plan to the contrary, if a qualified
domestic relations order so provides, distribution may be made to an alternate
payee pursuant to a qualified domestic relations order, as defined in Section
414(p) of the Code, regardless of whether the Participant's Settlement Date has
occurred or whether the Participant is otherwise entitled to receive a
distribution under the Plan.
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ARTICLE XVI
FORM OF PAYMENT
16.1 - DEFINITIONS
For purposes of this Article, the following terms have the following meanings:
(a) A Participant's "annuity starting date" means the first day of the
first period for which an amount is paid as an annuity or any other
form.
(b) The "automatic annuity form" means the form of annuity that will be
purchased on behalf of a Participant who has elected the optional
annuity form of payment unless the Participant elects another form of
annuity.
(c) A "qualified election" means an election that is made during the
qualified election period. A qualified election of a form of payment
other than a qualified joint and survivor annuity or designating a
Beneficiary other than the Participant's spouse to receive amounts
otherwise payable as a qualified preretirement survivor annuity must
include the written consent of the Participant's spouse, if any. A
Participant's spouse will be deemed to have given written consent to
the Participant's election if the Participant establishes to the
satisfaction of a Plan representative that spousal consent cannot be
obtained because the spouse cannot be located or because of other
circumstances set forth in Section 401(a)(11) of the Code and
regulations issued thereunder. The spouse's written consent must
acknowledge the effect of the Participant's election and must be
witnessed by a Plan representative or a notary public. In addition,
the spouse's written consent must either (i) specify the form of
payment selected instead of a joint and survivor annuity, if
applicable, and that such form may not be changed (except to a
qualified joint and survivor annuity) without written spousal consent
and specify any non-spouse Beneficiary designated by the Participant,
if applicable, and that such Beneficiary may not be changed without
written spousal consent or (ii) acknowledge that the spouse has the
right to limit consent as provided in clause (i), but permit the
Participant to change the form of payment selected or the designated
Beneficiary without the spouse's further consent. Any written consent
given or deemed to have been given by a Participant's spouse hereunder
shall be irrevocable and shall be effective only
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with respect to such spouse and not with respect to any subsequent
spouse.
(d) The "qualified election period" with respect to the automatic annuity
form means the 90 day period ending on a Participant's annuity
starting date. The "qualified election period" with respect to a
qualified preretirement survivor annuity means the period beginning on
the later of (i) the date he elects an annuity form of payment or (ii)
the first day of the Plan Year in which the Participant attains age 35
or, if he terminates employment prior to such date, the day he
terminates employment with his Employer and all Related Companies. A
Participant whose employment has not terminated may make a qualified
election designating a Beneficiary other than his spouse prior to the
Plan Year in which he attains age 35; provided, however, that such
election shall cease to be effective as of the first day of the Plan
Year in which the Participant attains age 35.
(e) A "qualified joint and survivor annuity" means an immediate annuity
payable at earliest retirement age under the Plan, as defined in
regulations issued under Section 401(a)(11) of the Code, for the life
of a Participant with a survivor annuity payable for the life of the
Participant's spouse that is equal to at least 50 percent of the
amount of the annuity payable during the joint lives of the
Participant and his spouse, provided that the survivor annuity shall
not be payable to a Participant's spouse if such spouse is not the
same spouse to whom the Participant was married on his annuity
starting date.
(f) A "qualified preretirement survivor annuity" means an annuity
payable to the surviving spouse of a Participant in accordance with
the provisions of Section 16.6.
(g) A "single life annuity" means an annuity payable for the life of the
Participant.
16.2 - NORMAL FORM OF PAYMENT
Except as otherwise provided in Section 16.6, unless a Participant, or his
Beneficiary, if the Participant has died, elects one of the optional forms of
payment, distribution shall be made to the Participant, or his Beneficiary, as
the case may be, in a single sum payment. Distribution of the Fair Market Value
of the Participant's Separate Account shall be made in cash or in kind, as
elected by the Participant, except that distribution shall not be made in
Employer stock.
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16.3 - OPTIONAL FORMS OF PAYMENT
A Participant, or his Beneficiary, as the case may be, may elect to receive
distribution in one of the following optional forms of payment:
(a) Installment Payments - Distribution shall be made in a series of
installments over a period not exceeding the life expectancy of the
Participant, or the Participant's Beneficiary, if the Participant has
died, or a period not exceeding the joint life and last survivor
expectancy of the Participant and his Beneficiary. Each installment
shall be equal in amount except as necessary to adjust for any changes
in the value of the Participant's Separate Account. The determination
of life expectancies shall be made on the basis of the expected return
multiples in Tables V and VI of Section 1.72-9 of the Treasury
regulations and shall be calculated either once at the time
installment payments begin or annually for the Participant and/or his
Beneficiary, if his Beneficiary is his spouse, as determined by the
Participant at the time installment payments begin. Distribution of
the Fair Market Value of the Participant's Separate Account shall be
made in cash or in kind, as elected by the Participant, except that
distribution shall not be made in Employer stock.
(b) Annuity Contract - Distribution shall be made through the purchase of
an annuity of the type described in Section 16.5. The terms of any
annuity contract purchased hereunder and distributed to a Participant
or his Beneficiary shall comply with the requirements of the Plan.
16.4 - CHANGE OF OPTION ELECTION
Subject to the provisions of Section 16.5, a Participant or Beneficiary who has
elected an optional form of payment may revoke or change his election at any
time prior to his annuity starting date by filing with the Administrator a
written election in the form prescribed by the Administrator.
16.5 - FORM OF ANNUITY REQUIREMENTS
If a Participant elects to receive distribution through the purchase of an
annuity contract, distribution shall be made to such Participant through the
purchase of an annuity contract that provides for payment in one of the
following automatic annuity forms:
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(a) The automatic annuity form for a Participant who is married on his
annuity starting date is the 50 percent qualified joint and
survivor annuity.
(b) The automatic annuity form for a Participant who is not married on
his annuity starting date is the single life annuity.
A Participant who has elected the optional annuity form of payment can revoke or
change his election only pursuant to a qualified election.
16.6 - QUALIFIED PRERETIREMENT SURVIVOR ANNUITY REQUIREMENTS
If a married Participant elects to receive distribution through the purchase of
an annuity contract and dies before his annuity starting date, his spouse shall
receive distribution of the value of the Participant's vested interest in his
Separate Account through the purchase of an annuity contract that provides for
payment over the life of the Participant's spouse. A Participant's spouse may
elect to receive distribution under any one of the other forms of payment
available under this Article instead of in the qualified preretirement survivor
annuity form. If a married Participant's Beneficiary designation on file with
the Administrator pursuant to Article XVII designates a non-spouse Beneficiary,
the designation shall become inoperative upon the Participant's election to
receive distribution through the purchase of an annuity contract, unless the
Participant files a new designation of Beneficiary form with the Administrator.
A Participant can only designate a non-spouse Beneficiary to receive
distribution of that portion of his Separate Account otherwise payable as a
qualified preretirement survivor annuity pursuant to a qualified election.
16.7 - DIRECT ROLLOVER
Notwithstanding any other provision of the Plan to the contrary, in lieu of
receiving distribution in the form of payment provided under this Article, a
"qualified distributee" may elect in writing, in accordance with rules
prescribed by the Administrator, to have any portion or all of a distribution
made on or after January 1, 1993, that is an "eligible rollover distribution"
paid directly by the Plan to the "eligible retirement plan" designated by the
"qualified distributee"; provided, however, that this provision shall not apply
if the total distribution is less than $200 and that a "qualified distributee"
may not elect this provision with respect to a portion of a distribution that is
less than $500. Any such payment by the Plan to another "eligible retirement
plan" shall
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be a direct rollover and shall be made only after all applicable consent
requirements are satisfied. For purposes of this Section, the following terms
have the following meanings:
(a) An "eligible retirement plan" means an individual retirement account
described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code that accepts rollovers;
provided, however, that, in the case of a direct rollover by a
surviving spouse, an eligible retirement plan does not include a
qualified trust described in Section 401(a) of the Code.
(b) An "eligible rollover distribution" means any distribution of all or
any portion of the balance of a Participant's Separate Account;
provided, however, that an eligible rollover distribution does not
include: any distribution that is one of a series of substantially
equal periodic payments made not less frequently than annually for the
life or life expectancy of the qualified distributee or the joint
lives or joint life expectancies of the qualified distributee and the
qualified distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and the
portion of any distribution that consists of the Participant's
After-Tax Contributions.
(c) A "qualified distributee" means a Participant, his surviving spouse,
or his spouse or former spouse who is an alternate payee under a
qualified domestic relations order, as defined in Section 414(p) of
the Code.
16.8 - NOTICE REGARDING FORMS OF PAYMENT
Within the 60 day period ending 30 days before a Participant's annuity starting
date, the Administrator shall provide him with a written explanation of his
right to defer distribution until his Normal Retirement Date, or such later date
as may be provided in the Plan, his right to make a direct rollover, and the
forms of payment available under the Plan, including a written explanation of
(i) the terms and conditions of the automatic annuity form applicable if the
Participant elects to receive distribution through the purchase of an annuity
contract, (ii) the Participant's right to choose a form of payment other than
the automatic annuity form or to revoke such choice, and (iii) the rights of the
Participant's spouse. Notwithstanding the foregoing, distribution of the
Participant's Separate Account may
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commence less than 30 days after such notice is provided to the Participant if
(i) the Administrator clearly informs the Participant of his right to consider
his election of whether or not to make a direct rollover or to receive a
distribution prior to his Normal Retirement Date and his election of a form of
payment for a period of at least 30 days following his receipt of the notice,
(ii) the Participant, after receiving the notice, affirmatively elects an early
distribution with his spouse's written consent, if necessary, (iii) the
Participant's annuity starting date is a date after the date the notice is
provided to him, (iv) the Participant may revoke his election at any time prior
to the later of his annuity starting date or the expiration of the seven-day
period beginning the day after the date the notice is provided to him, and (v)
distribution does not commence to the Participant before such revocation period
ends.
In addition, in the event a Participant elects to receive distribution through
the purchase of an annuity contract, the Administrator shall provide such a
Participant with a written explanation of (i) the terms and conditions of the
qualified preretirement survivor annuity, (ii) the Participant's right to
designate a non-spouse Beneficiary to receive distribution of that portion of
his Separate Account otherwise payable as a qualified preretirement survivor
annuity or to revoke such designation, and (iii) the rights of the Participant's
spouse. The Administrator shall provide such explanation within one of the
following periods, whichever ends last:
(a) the period beginning with the first day of the Plan Year in which
the Participant attains age 32 and ending on the last day of the
Plan Year preceding the Plan Year in which the Participant attains
age 35;
(b) the period beginning 12 calendar months before the date an
individual becomes a Participant and ending 12 calendar months
after such date; or
(c) the period beginning 12 calendar months before the date the
Participant elects to receive distribution through the purchase of
an annuity contract and ending 12 calendar months after such date;
provided, however, that in the case of a Participant who separates from service
prior to attaining age 35, the explanation shall be provided to such Participant
within the period beginning 12 calendar months before the Participant's
separation from service and ending 12 calendar months after his separation from
service.
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16.9 - REEMPLOYMENT
If a Participant is reemployed by an Employer or a Related Company prior to
receiving distribution of the entire balance of his vested interest in his
Separate Account, his prior election of a form of payment hereunder shall become
ineffective. Notwithstanding the foregoing, if a Participant had elected to
receive distribution through the purchase of an annuity contract, the
requirements of Sections 16.5 and 16.6 of the Plan shall continue in effect with
respect to his entire Separate Account.
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ARTICLE XVII
BENEFICIARIES
17.1 - DESIGNATION OF BENEFICIARY
A married Participant's Beneficiary shall be his spouse, unless the Participant
designates a person or persons other than his spouse as Beneficiary with his
spouse's written consent. A Participant may designate a Beneficiary on the form
prescribed by the Administrator. If no Beneficiary has been designated pursuant
to the provisions of this Section, or if no Beneficiary survives the Participant
and he has no surviving spouse, then the Beneficiary under the Plan shall be the
Participant's estate. If a Beneficiary dies after becoming entitled to receive a
distribution under the Plan but before distribution is made to him in full, and
if no other Beneficiary has been designated to receive the balance of the
distribution in that event, the estate of the deceased Beneficiary shall be the
Beneficiary as to the balance of the distribution. A Participant's designation
of a Beneficiary shall be subject to the qualified preretirement survivor
annuity provisions of Article XVI.
17.2 - SPOUSAL CONSENT REQUIREMENTS
Any written spousal consent given pursuant to this Article must acknowledge the
effect of the action taken and must be witnessed by a Plan representative or a
notary public. In addition, the spouse's written consent must either (i) specify
any non-spouse Beneficiary designated by the Participant and that such
Beneficiary may not be changed without written spousal consent or (ii)
acknowledge that the spouse has the right to limit consent to a specific
Beneficiary, but permit the Participant to change the designated Beneficiary
without the spouse's further consent. A Participant's spouse will be deemed to
have given written consent to the Participant's designation of Beneficiary if
the Participant establishes to the satisfaction of a Plan representative that
such consent cannot be obtained because the spouse cannot be located or because
of other circumstances set forth in Section 401(a)(11) of the Code and
regulations issued thereunder. Any written consent given or deemed to have been
given by a Participant's spouse hereunder shall be valid only with respect to
the spouse who signs the consent.
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ARTICLE XVIII
ADMINISTRATION
18.1 - AUTHORITY OF THE SPONSOR
The Sponsor, which shall be the administrator for purposes of ERISA and the plan
administrator for purposes of the Code, shall be responsible for the
administration of the Plan and, in addition to the powers and authorities
expressly conferred upon it in the Plan, shall have all such powers and
authorities as may be necessary to carry out the provisions of the Plan,
including the power and authority to interpret and construe the provisions of
the Plan, to make benefit determinations, and to resolve any disputes which
arise under the Plan. The Sponsor may employ such attorneys, agents, and
accountants as it may deem necessary or advisable to assist in carrying out its
duties hereunder. The Sponsor shall be a "named fiduciary" as that term is
defined in Section 402(a)(2) of ERISA. The Sponsor may:
(a) allocate any of the powers, authority, or responsibilities for the
operation and administration of the Plan (other than trustee
responsibilities as defined in Section 405(c)(3) of ERISA) among
named fiduciaries; and
(b) designate a person or persons other than a named fiduciary to carry
out any of such powers, authority, or responsibilities;
except that no allocation by the Sponsor of, or designation by the Sponsor with
respect to, any of such powers, authority, or responsibilities to another named
fiduciary or a person other than a named fiduciary shall become effective unless
such allocation or designation shall first be accepted by such named fiduciary
or other person in a writing signed by it and delivered to the Sponsor.
18.2 - ACTION OF THE SPONSOR
Any act authorized, permitted, or required to be taken under the Plan by the
Sponsor and which has not been delegated in accordance with Section 18.1, may be
taken by a majority of the members of the board of directors of the Sponsor,
either by vote at a meeting, or in writing without a meeting, or by the employee
or employees of the Sponsor designated by the board of directors to carry out
such acts on behalf of the Sponsor. All notices, advice, directions,
certifications, approvals, and instructions required or authorized to be given
by the Sponsor as under the Plan shall be in writing and signed by either (i) a
majority of the members of the board of directors of the Sponsor or by such
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member or members as may be designated by an instrument in writing, signed by
all the members thereof, as having authority to execute such documents on its
behalf, or (ii) the employee or employees authorized to act for the Sponsor in
accordance with the provisions of this Section.
18.3 - CLAIMS REVIEW PROCEDURE
Whenever a claim for benefits under the Plan filed by any person (herein
referred to as the "Claimant") is denied, whether in whole or in part, the
Sponsor shall transmit a written notice of such decision to the Claimant within
90 days of the date the claim was filed or, if special circumstances require an
extension, within 180 days of such date, which notice shall be written in a
manner calculated to be understood by the Claimant and shall contain a statement
of (i) the specific reasons for the denial of the claim, (ii) specific reference
to pertinent Plan provisions on which the denial is based, and (iii) a
description of any additional material or information necessary for the Claimant
to perfect the claim and an explanation of why such information is necessary.
The notice shall also include a statement advising the Claimant that, within 60
days of the date on which he receives such notice, he may obtain review of such
decision in accordance with the procedures hereinafter set forth. Within such
60-day period, the Claimant or his authorized representative may request that
the claim denial be reviewed by filing with the Sponsor a written request
therefor, which request shall contain the following information:
(a) the date on which the Claimant's request was filed with the
Sponsor; provided, however, that the date on which the Claimant's
request for review was in fact filed with the Sponsor shall control
in the event that the date of the actual filing is later than the
date stated by the Claimant pursuant to this paragraph;
(b) the specific portions of the denial of his claim which the Claimant
requests the Sponsor to review;
(c) a statement by the Claimant setting forth the basis upon which he
believes the Sponsor should reverse the previous denial of his
claim for benefits and accept his claim as made; and
(d) any written material (offered as exhibits) which the Claimant
desires the Sponsor to examine in its consideration of his position
as stated pursuant to paragraph (c) of this Section.
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Within 60 days of the date determined pursuant to paragraph (a) of this Section
or, if special circumstances require an extension, within 120 days of such date,
the Sponsor shall conduct a full and fair review of the decision denying the
Claimant's claim for benefits and shall render its written decision on review to
the Claimant. The Sponsor's decision on review shall be written in a manner
calculated to be understood by the Claimant and shall specify the reasons and
Plan provisions upon which the Sponsor's decision was based.
18.4 - QUALIFIED DOMESTIC RELATIONS ORDERS
The Sponsor shall establish reasonable procedures to determine the status of
domestic relations orders and to administer distributions under domestic
relations orders which are deemed to be qualified orders. Such procedures shall
be in writing and shall comply with the provisions of Section 414(p) of the Code
and regulations issued thereunder.
18.5 - INDEMNIFICATION
In addition to whatever rights of indemnification the members of the board of
directors of the Sponsor or any employee or employees of the Sponsor to whom any
power, authority, or responsibility is delegated pursuant to Section 18.2, may
be entitled under the articles of incorporation or regulations of the Sponsor,
under any provision of law, or under any other agreement, the Sponsor shall
satisfy any liability actually and reasonably incurred by any such person or
persons, including expenses, attorneys' fees, judgments, fines, and amounts paid
in settlement (other than amounts paid in settlement not approved by the
Sponsor), in connection with any threatened, pending or completed action, suit,
or proceeding which is related to the exercising or failure to exercise by such
person or persons of any of the powers, authority, responsibilities, or
discretion as provided under the Plan, or reasonably believed by such person or
persons to be provided hereunder, and any action taken by such person or persons
in connection therewith, unless the same is judicially determined to be the
result of such person or persons' gross negligence or willful misconduct.
18.6 - ACTIONS BINDING
Subject to the provisions of Section 18.3, any action taken by the Sponsor which
is authorized, permitted, or required under the Plan shall be final and binding
upon the Employers, the Trustee, all persons who have or who claim an interest
under the Plan, and all third parties dealing with the Employers or the Trustee.
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ARTICLE XIX
AMENDMENT AND TERMINATION
19.1 - AMENDMENT
Subject to the provisions of Section 19.2, the Sponsor may at any time and from
time to time, by action of its board of directors, or such officers of the
Sponsor as are authorized by its board of directors, amend the Plan, either
prospectively or retroactively. Any such amendment shall be by written
instrument executed by the Sponsor.
19.2 - LIMITATION ON AMENDMENT
The Sponsor shall make no amendment to the Plan which shall decrease the accrued
benefit of any Participant or Beneficiary, except that nothing contained herein
shall restrict the right to amend the provisions of the Plan relating to the
administration of the Plan and Trust. Moreover, no such amendment shall be made
hereunder which shall permit any part of the Trust to revert to an Employer or
any Related Company or be used or be diverted to purposes other than the
exclusive benefit of Participants and Beneficiaries.
19.3 - TERMINATION
The Sponsor reserves the right, by action of its board of directors, to
terminate the Plan as to all Employers at any time (the effective date of such
termination being hereinafter referred to as the "termination date"). Upon any
such termination of the Plan, the following actions shall be taken for the
benefit of Participants and Beneficiaries:
(a) As of the termination date, each Investment Fund shall be valued and
all Separate Accounts and Sub-Accounts shall be adjusted in the manner
provided in Article XI, with any unallocated contributions or
forfeitures being allocated as of the termination date in the manner
otherwise provided in the Plan. The termination date shall become a
Valuation Date for purposes of Article XI. In determining the net
worth of the Trust, there shall be included as a liability such
amounts as shall be necessary to pay all expenses in connection with
the termination of the Trust and the liquidation and distribution of
the property of the Trust, as well as other expenses, whether or not
accrued, and shall include as an asset all accrued income.
(b) All Separate Accounts shall then be disposed of to or for the benefit
of each Participant or Beneficiary in
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accordance with the provisions of Article XV as if the termination
date were his Settlement Date; provided, however, that notwithstanding
the provisions of Article XV, if the Plan does not offer an annuity
option and if neither his Employer nor a Related Company establishes
or maintains another defined contribution plan (other than an employee
stock ownership plan as defined in Section 4975(e)(7) of the Code),
the Participant's written consent to the commencement of distribution
shall not be required regardless of the value of the vested portions
of his Separate Account.
(c) Notwithstanding the provisions of paragraph (b) of this Section, no
distribution shall be made to a Participant of any portion of the
balance of his Tax-Deferred Contributions Sub-Account prior to his
separation from service (other than a distribution made in accordance
with Article XIII or required in accordance with Section 401(a)(9) of
the Code) unless (i) neither his Employer nor a Related Company
establishes or maintains another defined contribution plan (other than
an employee stock ownership plan as defined in Section 4975(e)(7) of
the Code, a tax credit employee stock ownership plan as defined in
Section 409 of the Code, or a simplified employee pension as defined
in Section 408(k) of the Code) either at the time the Plan is
terminated or at any time during the period ending 12 months after
distribution of all assets from the Plan; provided, however, that this
provision shall not apply if fewer than two percent of the Eligible
Employees under the Plan were eligible to participate at any time in
such other defined contribution plan during the 24-month period
beginning 12 months before the Plan termination, and (ii) the
distribution the Participant receives is a "lump sum distribution" as
defined in Section 402(e)(4) of the Code, without regard to clauses
(i), (ii), (iii), and (iv) of sub-paragraph (A), sub-paragraph (B), or
sub-paragraph (H) thereof.
Notwithstanding anything to the contrary contained in the Plan, upon any such
Plan termination, the vested interest of each Participant and Beneficiary in his
Employer Contributions Sub-Account shall be 100 percent; and, if there is a
partial termination of the Plan, the vested interest of each Participant and
Beneficiary who is affected by the partial termination in his Employer
Contributions Sub-Account shall be 100 percent. For purposes of the preceding
sentence only, the Plan shall be deemed to terminate automatically if there
shall be a complete discontinuance of contributions hereunder by all Employers.
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19.4 - REORGANIZATION
The merger, consolidation, or liquidation of any Employer with or into any other
Employer or a Related Company shall not constitute a termination of the Plan as
to such Employer. If an Employer disposes of substantially all of the assets
used by the Employer in a trade or business or disposes of a subsidiary and in
connection therewith one or more Participants terminates employment but
continues in employment with the purchaser of the assets or with such
subsidiary, no distribution from the Plan shall be made to any such Participant
prior to his separation from service (other than a distribution made in
accordance with Article XIII or required in accordance with Section 401(a)(9) of
the Code), except that a distribution shall be permitted to be made in such a
case, subject to the Participant's consent (to the extent required by law), if
(i) the distribution would constitute a "lump sum distribution" as defined in
section 402(e)(4) of the Code, without regard to clauses (i), (ii), (iii), or
(iv) of sub-paragraph (A), sub-paragraph (B), or sub-paragraph (H) thereof, (ii)
the Employer continues to maintain the Plan after the disposition, (iii) the
purchaser does not maintain the Plan after the disposition, and (iv) the
distribution is made by the end of the second calendar year after the calendar
year in which the disposition occurred.
19.5 - WITHDRAWAL OF AN EMPLOYER
An Employer other than the Sponsor may withdraw from the Plan at any time upon
notice in writing to the Administrator (the effective date of such withdrawal
being hereinafter referred to as the "withdrawal date"), and shall thereupon
cease to be an Employer for all purposes of the Plan. An Employer shall be
deemed automatically to withdraw from the Plan in the event of its complete
discontinuance of contributions, or, subject to Section 19.4 and unless the
Sponsor otherwise directs, it ceases to be a Related Company of the Sponsor or
any other Employer. Upon the withdrawal of an Employer, the withdrawing Employer
shall determine whether a partial termination has occurred with respect to its
Employees. In the event that the withdrawing Employer determines a partial
termination has occurred, the action specified in Section 19.3 shall be taken as
of the withdrawal date, as on a termination of the Plan, but with respect only
to Participants who are employed solely by the withdrawing Employer, and who,
upon such withdrawal, are neither transferred to nor continued in employment
with any other Employer or a Related Company. The interest of any Participant
employed by the withdrawing Employer who is transferred to or continues in
employment with any other Employer or a Related Company, and the interest of any
Participant employed solely by an Employer or a Related Company other than the
withdrawing
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Employer, shall remain unaffected by such withdrawal; no adjustment to his
Separate Accounts shall be made by reason of the withdrawal; and he shall
continue as a Participant hereunder subject to the remaining provisions of the
Plan.
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ARTICLE XX
ADOPTION BY OTHER ENTITIES
20.1 - ADOPTION BY RELATED COMPANIES
A Related Company that is not an Employer may, with the consent of the Sponsor,
adopt the Plan and become an Employer hereunder by causing an appropriate
written instrument evidencing such adoption to be executed in accordance with
the requirements of its organizational authority. Any such instrument shall
specify the effective date of the adoption.
20.2 - EFFECTIVE PLAN PROVISIONS
An Employer who adopts the Plan shall be bound by the provisions of the Plan in
effect at the time of the adoption and as subsequently in effect because of any
amendment to the Plan.
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ARTICLE XXI
MISCELLANEOUS PROVISIONS
21.1 - NO COMMITMENT AS TO EMPLOYMENT
Nothing contained herein shall be construed as a commitment or agreement upon
the part of any person to continue his employment with an Employer or Related
Company, or as a commitment on the part of any Employer or Related Company to
continue the employment, compensation, or benefits of any person for any period.
21.2 - BENEFITS
Nothing in the Plan nor the Trust Agreement shall be construed to confer any
right or claim upon any person, firm, or corporation other than the Employers,
the Trustee, Participants, and Beneficiaries.
21.3 - NO GUARANTEES
The Employers, the Administrator, and the Trustee do not guarantee the Trust
from loss or depreciation, nor do they guarantee the payment of any amount which
may become due to any person hereunder.
21.4 - EXPENSES
The expenses of administration of the Plan, including the expenses of the
Administrator and fees of the Trustee, shall be paid from the Trust as a general
charge thereon, unless the Sponsor elects to make payment. Notwithstanding the
foregoing, the Sponsor may direct that administrative expenses that are
allocable to the Separate Account of a specific Participant shall be paid from
that Separate Account and the costs incident to the management of the assets of
an Investment Fund or to the purchase or sale of securities held in an
Investment Fund shall be paid by the Trustee from such Investment Fund.
21.5 - PRECEDENT
Except as otherwise specifically provided, no action taken in accordance with
the Plan shall be construed or relied upon as a precedent for similar action
under similar circumstances.
21.6 - DUTY TO FURNISH INFORMATION
The Employers, the Administrator, and the Trustee shall furnish to any of the
others any documents, reports, returns, statements,
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or other information that the other reasonably deems necessary to perform its
duties hereunder or otherwise imposed by law.
21.7 - WITHHOLDING
The Trustee shall withhold any tax which by any present or future law is
required to be withheld, and which the Administrator notifies the Trustee in
writing is to be so withheld, from any payment to any Participant or Beneficiary
hereunder.
21.8 - MERGER, CONSOLIDATION, OR TRANSFER OF PLAN ASSETS
The Plan shall not be merged or consolidated with any other plan, nor shall any
of its assets or liabilities be transferred to another plan, unless, immediately
after such merger, consolidation, or transfer of assets or liabilities, each
Participant in the Plan would receive a benefit under the Plan which is at least
equal to the benefit he would have received immediately prior to such merger,
consolidation, or transfer of assets or liabilities (assuming in each instance
that the Plan had then terminated).
21.9 - BACK PAY AWARDS
The provisions of this Section shall apply only to an Employee or former
Employee who becomes entitled to back pay by an award or agreement of an
Employer without regard to mitigation of damages. If a person to whom this
Section applies was or would have become an Eligible Employee after such back
pay award or agreement has been effected, and if any such person who had not
previously elected to make Tax-Deferred Contributions pursuant to Section 4.1
shall within 30 days of the date he receives notice of the provisions of this
Section make an election to make Tax-Deferred Contributions in accordance with
such Section 4.1 (retroactive to any Enrollment Date as of which he was or has
become eligible to do so), then such Participant may elect that any Tax-Deferred
Contributions not previously made on his behalf but which, after application of
the foregoing provisions of this Section, would have been made under the
provisions of Article IV and any After-Tax Contributions which he had not
previously made but which, after application of the foregoing provisions of this
Section, he would have made under the provisions of Article V, shall be made out
of the proceeds of such back pay award or agreement. In addition, if any such
Employee or former Employee would have been eligible to participate in the
allocation of Employer Contributions under the provisions of Article VI for any
prior Plan Year after such back pay award or agreement has been effected, his
Employer shall make an Employer Contribution equal to the amount of the Employer
Contribution which would have been allocated to such Participant under the
provisions of Article VI
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as in effect during each such Plan Year. The amounts of such additional
contributions shall be credited to the Separate Account of such Participant. Any
additional contributions made by such Participant and by an Employer pursuant to
this Section shall be made in accordance with, and subject to the limitations of
the applicable provisions of Articles IV, V, VI, and VII.
21.10 - CONDITION ON EMPLOYER CONTRIBUTIONS
Notwithstanding anything to the contrary contained in the Plan or the Trust
Agreement, any contribution of an Employer hereunder is conditioned upon the
continued qualification of the Plan under Section 401(a) of the Code, the exempt
status of the Trust under Section 501(a) of the Code, and the deductibility of
the contribution under Section 404 of the Code. Except as otherwise provided in
this Section and Section 21.11, however, in no event shall any portion of the
property of the Trust ever revert to or otherwise inure to the benefit of an
Employer or any Related Company.
21.11 - RETURN OF CONTRIBUTIONS TO AN EMPLOYER
Notwithstanding any other provision of the Plan or the Trust Agreement to the
contrary, in the event any contribution of an Employer made hereunder:
(a) is made under a mistake of fact, or
(b) is disallowed as a deduction under Section 404 of the Code,
such contribution may be returned to the Employer within one year after the
payment of the contribution or the disallowance of the deduction to the extent
disallowed, whichever is applicable. In the event the Plan does not initially
qualify under Section 401(a) of the Code, any contribution of an Employer made
hereunder may be returned to the Employer within one year of the date of denial
of the initial qualification of the Plan, but only if an application for
determination was made within the period of time prescribed under Section
403(c)(2)(B) of ERISA.
21.12 - VALIDITY OF PLAN
The validity of the Plan shall be determined and the Plan shall be construed and
interpreted in accordance with the laws of the State or Commonwealth in which
the Sponsor has its principal place of business, except as preempted by
applicable Federal law. The invalidity or illegality of any provision of the
Plan shall not affect the legality or validity of any other part thereof.
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21.13 - TRUST AGREEMENT
The Trust Agreement and the Trust maintained thereunder shall be deemed to be a
part of the Plan as if fully set forth herein and the provisions of the Trust
Agreement are hereby incorporated by reference into the Plan.
21.14 - PARTIES BOUND
The Plan shall be binding upon the Employers, all Participants and Beneficiaries
hereunder, and, as the case may be, the heirs, executors, administrators,
successors, and assigns of each of them.
21.15 - APPLICATION OF CERTAIN PLAN PROVISIONS
A Participant's Beneficiary, if the Participant has died, or alternate payee
under a qualified domestic relations order shall be treated as a Participant for
purposes of directing investments as provided in Article X. For purposes of the
general administrative provisions and limitations of the Plan, a Participant's
Beneficiary or alternate payee under a qualified domestic relations order shall
be treated as any other person entitled to receive benefits under the Plan. Upon
any termination of the Plan, any such Beneficiary or alternate payee under a
qualified domestic relations order who has an interest under the Plan at the
time of such termination, which does not cease by reason thereof, shall be
deemed to be a Participant for all purposes of the Plan.
21.16 - LEASED EMPLOYEES
Any leased employee, other than an excludable leased employee, shall be treated
as an employee of the Employer for which he performs services for all purposes
of the Plan with respect to the provisions of Sections 401(a)(3), (4), (7), and
(16), and 408(k), 410, 411, 415, and 416 of the Code; provided, however, that no
leased employee shall accrue a benefit hereunder based on service as a leased
employee except as otherwise specifically provided in the Plan. A "leased
employee" means any person who performs services for an Employer or a Related
Company (the "recipient") (other than an employee of the recipient) pursuant to
an agreement between the recipient and any other person (the "leasing
organization") on a substantially full-time basis for a period of at least one
year, provided that such services are of a type historically performed, in the
business field of the recipient, by employees. An "excludable leased employee"
means any leased employee of the recipient who is covered by a money purchase
pension plan maintained by the leasing organization which provides for (i) a
nonintegrated employer contribution on
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behalf of each participant in the plan equal to at least ten percent of
compensation, (ii) full and immediate vesting, and (iii) immediate participation
by employees of the leasing organization (other than employees who perform
substantially all of their services for the leasing organization or whose
compensation from the leasing organization in each plan year during the
four-year period ending with the plan year is less than $1,000); provided,
however, that leased employees do not constitute more than 20 percent of the
recipient's nonhighly compensated work force. For purposes of this Section,
contributions or benefits provided to a leased employee by the leasing
organization that are attributable to services performed for the recipient shall
be treated as provided by the recipient.
21.17 - TRANSFERRED FUNDS
If funds from another qualified plan are transferred or merged into the Plan,
such funds shall be held and administered in accordance with any restrictions
applicable to them under such other plan to the extent required by law and shall
be accounted for separately to the extent necessary to accomplish the foregoing.
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ARTICLE XXII
TOP-HEAVY PROVISIONS
22.1 - DEFINITIONS
For purposes of this Article, the following terms shall have the following
meanings:
(a) The "compensation" of an employee means compensation as defined in
Section 415 of the Code and regulations issued thereunder. In no
event, however, shall the compensation of a Participant taken into
account under the Plan for any Plan Year exceed (1) $200,000 for Plan
Years beginning prior to January 1, 1994, or (2) $150,000 for Plan
Years beginning on or after January 1, 1994 (subject to adjustment
annually as provided in Section 401(a)(17)(B) and Section 415(d) of
the Code; provided, however, that the dollar increase in effect on
January 1 of any calendar year, if any, is effective for Plan Years
beginning in such calendar year). If the compensation of a Participant
is determined over a period of time that contains fewer than 12
calendar months, then the annual compensation limitation described
above shall be adjusted with respect to that Participant by
multiplying the annual compensation limitation in effect for the Plan
Year by a fraction the numerator of which is the number of full months
in the period and the denominator of which is 12; provided, however,
that no proration is required for a Participant who is covered under
the Plan for less than one full Plan Year if the formula for
allocations is based on Compensation for a period of at least 12
months. In determining the compensation, for purposes of applying the
annual compensation limitation described above, of a Participant who
is a five-percent owner or one of the ten Highly Compensated Employees
receiving the greatest compensation for the Plan Year, the
compensation of the Participant's spouse and of his lineal descendants
who have not attained age 19 as of the close of the Plan Year shall be
included as compensation of the Participant for the Plan Year. If as a
result of applying the family aggregation rule described in the
preceding sentence the annual compensation limitation would be
exceeded, the limitation shall be prorated among the affected family
members in proportion to each member's compensation as determined
prior to application of the family aggregation rules.
(b) The "determination date" with respect to any Plan Year means the last
day of the preceding Plan Year, except that
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the determination date with respect to the first Plan Year of the
Plan, shall mean the last day of such Plan Year.
(c) A "key employee" means any Employee or former Employee who is a key
employee pursuant to the provisions of Section 416(i)(1) of the Code
and any Beneficiary of such Employee or former Employee.
(d) A "non-key employee" means any Employee who is not a key employee.
(e) A "permissive aggregation group" means those plans included in each
Employer's required aggregation group together with any other plan or
plans of the Employer, so long as the entire group of plans would
continue to meet the requirements of Sections 401(a)(4) and 410 of the
Code.
(f) A "required aggregation group" means the group of tax-qualified plans
maintained by an Employer or a Related Company consisting of each plan
in which a key employee participates and each other plan that enables
a plan in which a key employee participates to meet the requirements
of Section 401(a)(4) or Section 410 of the Code, including any plan
that terminated within the five-year period ending on the relevant
determination date.
(g) A "super top-heavy group" with respect to a particular Plan Year means
a required or permissive aggregation group that, as of the
determination date, would qualify as a top-heavy group under the
definition in paragraph (i) of this Section with "90 percent"
substituted for "60 percent" each place where "60 percent" appears in
the definition.
(h) A "super top-heavy plan" with respect to a particular Plan Year means
a plan that, as of the determination date, would qualify as a
top-heavy plan under the definition in paragraph (j) of this Section
with "90 percent" substituted for "60 percent" each place where "60
percent" appears in the definition. A plan is also a "super top-heavy
plan" if it is part of a super top-heavy group.
(i) A "top-heavy group" with respect to a particular Plan Year means a
required or permissive aggregation group if the sum, as of the
determination date, of the present value of the cumulative accrued
benefits for key employees under all defined benefit plans included in
such group and the aggregate of the account balances of key employees
under all defined contribution plans included in such group
82
<PAGE>
exceeds 60 percent of a similar sum determined for all employees
covered by the plans included in such group.
(j) A "top-heavy plan" with respect to a particular Plan Year means
(i), in the case of a defined contribution plan (including any
simplified employee pension plan), a plan for which, as of the
determination date, the aggregate of the accounts (within the meaning
of Section 416(g) of the Code and the regulations and rulings
thereunder) of key employees exceeds 60 percent of the aggregate of
the accounts of all participants under the plan, with the accounts
valued as of the relevant valuation date and increased for any
distribution of an account balance made in the five-year period ending
on the determination date, (ii), in the case of a defined benefit
plan, a plan for which, as of the determination date, the present
value of the cumulative accrued benefits payable under the plan
(within the meaning of Section 416(g) of the Code and the regulations
and rulings thereunder) to key employees exceeds 60 percent of the
present value of the cumulative accrued benefits under the plan for
all employees, with the present value of accrued benefits to be
determined under the accrual method uniformly used under all plans
maintained by an Employer or, if no such method exists, under the
slowest accrual method permitted under the fractional accrual rate of
Section 411(b)(1)(C) of the Code and including the present value of
any part of any accrued benefits distributed in the five-year period
ending on the determination date, and (iii) any plan (including any
simplified employee pension plan) included in a required aggregation
group that is a top-heavy group. For purposes of this paragraph, the
accounts and accrued benefits of any employee who has not performed
services for an Employer or a Related Company during the five-year
period ending on the determination date shall be disregarded. For
purposes of this paragraph, the present value of cumulative accrued
benefits under a defined benefit plan for purposes of top-heavy
determinations shall be calculated using the actuarial assumptions
otherwise employed under such plan, except that the same actuarial
assumptions shall be used for all plans within a required or
permissive aggregation group. A Participant's interest in the Plan
attributable to any Rollover Contributions, except Rollover
Contributions made from a plan maintained by an Employer or a Related
Company, shall not be considered in determining whether the Plan is
top-heavy. Notwithstanding the foregoing, if a plan is included in a
required or permissive aggregation group that is not a top-heavy
group, such plan shall not be a top-heavy plan.
83
<PAGE>
(k) The "valuation date" with respect to any determination date means the
most recent Valuation Date occurring within the 12-month period ending
on the determination date.
22.2 - APPLICABILITY
Notwithstanding any other provision of the Plan to the contrary, the provisions
of this Article shall be applicable during any Plan Year in which the Plan is
determined to be a top-heavy plan as hereinafter defined. If the Plan is
determined to be a top-heavy plan and upon a subsequent determination date is
determined no longer to be a top-heavy plan, the vesting provisions of Article
VI shall again become applicable as of such subsequent determination date;
provided, however, that if the prior vesting provisions do again become
applicable, any Employee with three or more years of Vesting Service may elect
in accordance with the provisions of Article VI, to continue to have his vested
interest in his Employer Contributions Sub-Account determined in accordance with
the vesting schedule specified in Section 22.5.
22.3 - MINIMUM EMPLOYER CONTRIBUTION
If the Plan is determined to be a top-heavy plan, the Employer Contributions
allocated to the Separate Account of each non-key employee who is an Eligible
Employee and who is employed by an Employer or a Related Company on the last day
of such top-heavy Plan Year shall be no less than the lesser of (i) three
percent of his compensation or (ii) the largest percentage of compensation that
is allocated as an Employer Contribution and/or Tax-Deferred Contribution for
such Plan Year to the Separate Account of any key employee; except that, in the
event the Plan is part of a required aggregation group, and the Plan enables a
defined benefit plan included in such group to meet the requirements of Section
401(a)(4) or 410 of the Code, the minimum allocation of Employer Contributions
to each such non-key employee shall be three percent of the compensation of such
non-key employee. Any minimum allocation to a non-key employee required by this
Section shall be made without regard to any social security contribution made on
behalf of the non-key employee, his number of hours of service, his level of
compensation, or whether he declined to make elective or mandatory
contributions. Notwithstanding the minimum top-heavy allocation requirements of
this Section, if the Plan is a top-heavy plan, each non-key employee who is an
Eligible Employee and who is employed by an Employer or a Related Company on the
last day of a top-heavy Plan Year and who is also covered under a top-heavy
defined benefit plan maintained by an Employer or a Related Company will receive
the top-heavy benefits provided under the defined benefit plan in lieu of the
minimum top-heavy
84
<PAGE>
allocation under the Plan offset by the benefits provided under the Plan.
22.4 - ADJUSTMENTS TO SECTION 415 LIMITATIONS
If the Plan is determined to be a top-heavy plan and an Employer maintains a
defined benefit plan covering some or all of the Employees that are covered by
the Plan, the defined benefit plan fraction and the defined contribution plan
fraction, described in Article VII, shall be determined as provided in Section
415 of the Code by substituting "1.0" for "1.25" each place where "1.25"
appears, except that such substitutions shall not be applied to the Plan if (i)
the Plan is not a super top-heavy plan, (ii) the Employer Contribution for such
top-heavy Plan Year for each non-key employee who is to receive a minimum
top-heavy benefit hereunder is not less than four percent of such non-key
employee's compensation, and (iii) the minimum annual retirement benefit accrued
by a non-key employee who participates under one or more defined benefit plans
of an Employer or a Related Company for such top-heavy Plan Year is not less
than the lesser of three percent times years of service with an Employer or a
Related Company or thirty percent.
22.5 - ACCELERATED VESTING
If the Plan is determined to be a top-heavy plan, a Participant's vested
interest in his Employer Contributions Sub-Account shall be determined no less
rapidly than in accordance with the following vesting schedule:
YEARS OF VESTING SERVICE VESTED INTEREST
less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
85
<PAGE>
ARTICLE XXIII
EFFECTIVE DATE
23.1 - EFFECTIVE DATE OF AMENDMENT AND RESTATEMENT
This amendment and restatement is effective as of October 1, 1997.
* * *
EXECUTED AT BLUE BELL, PA, this 30TH day of DECEMBER, 1997.
C&D TECHNOLOGIES, INC.
By: /s/ Stephen E. Markert, Jr.
Title: VP-CFO
87
EXHIBIT 10.5
C&D Charter Power Systems, Inc.
Pension Plan for Salaried Employees
Amendment 3
It is the desire of the Board of Directors of C&D Charter Power Systems, Inc.
(hereinafter referred to as "the Company") to amend the C&D Charter Power
Systems, Inc. Pension Plan for Salaried Employees (hereinafter referred to as
"the Plan") to modify the factors used in determining a lump sum pension payable
under the Plan. Under Section 10.1 of the Plan, the Company retains the right to
amend the Plan.
(1)
Section 6 of Appendix A to the Plan is hereby amended by the addition of the
following paragraph at the end thereof:
"Lump sum settlements made in accordance with Section 6.7 and 6.8
herein, on or after the first day of the month following the date of
adoption of this amendment, shall equal the monthly pension payable at
Normal Retirement Date (or if later, the Benefit Commencement Date)
multiplied by the factor from the mortality table prescribed by the
Secretary of the Treasury based on the prevailing Commissioners'
standard table (described in Code Section 807(d)(5)(A)) used to
determine reserves for group annuity contracts issued on the date as of
which present value is being determined (without regard to Code Section
807(d)(5)). The interest rate is the interest rate on 30-year Treasury
securities for the month of November which immediately precedes the
Plan Year in which the distribution occurs."
C&D Charter Power Systems, Inc.
By: /s/ Alfred Weber S. E. Markert, Jr.
-------------------------------------
Director
Date: 2/18/97
<PAGE>
C&D Charter Power Systems, Inc.
Pension Plan for Salaried Employees
Amendment 4
(1)
Effective January 1, 1998 the name of the plan shall be:
"C&D TECHNOLOGIES, INC. Pension Plan for Salaried Employees".
and Section 1.23 and any other provision of the plan shall be amended by
replacing the name "C&D Charter Power Systems, Inc." with the name C&D
TECHNOLOGIES, INC.
(2)
Article II, Section 2.1(b) shall be amended by the addition of the following
sentence:
"Effective on and after January 1, 1997, each Employee shall be
eligible to become a Member on their date of hire."
(3)
Article I, Section 1.19(g) shall be amended by the addition of the following:
"Eligibility Service, on and after January 1, 1997, shall be used to
determine vesting or benefits."
C&D TECHNOLOGIES, INC.
By: /s/ Stephen E. Markert, Jr.
----------------------------
Date: 1/27/98
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF C&D TECHNOLOGIES, INC.
C&D Charter Holdings, Inc., incorporated in the state of Delaware
Ratelco Electronics, Inc., incorporated in the state of Delaware
Charter Power F. S. Ltd., incorporated in the Islands of Bermuda
Power Convertibles Corporation Ireland Ltd., organized under the laws of Ireland
PCC Mexican Holdings, Inc., a Delaware corporation
PCC de Mexico, S. A. de C.V., organized under the laws of Sonora, Mexico
C&D TECHNOLOGIES de Mexico, S. A., de C. V., organized under the laws of Sonora,
Mexico
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
C&D TECHNOLOGIES, INC. and Subsidiaries (formerly Charter Power Systems, Inc.)
on Forms S-8 (Registration Nos. 33-31978, 33-71390, 33-86672, 333-17979 and
333-38891) and Form S-3 Registration No. 333-3889 of our reports dated March 10,
1998 on our audits of the consolidated financial statements and financial
statement schedule of C&D TECHNOLOGIES, INC. and Subsidiaries as of January 31,
1998 and 1997, and for each of the three years in the period ended January 31,
1998, which reports are included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 27, 1998
<PAGE>
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