SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment No. 1
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
Commission File Number: 33-95452
LANESBOROUGH CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-3389799
(State of Incorporation) (I.R.S. employer identification number)
65 East 55th Street
New York, New York 10022
(Address of principal executive offices, including zip code)
(212) 759-6301
(Telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the 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 _____
As of October 22, 1996, the aggregate number of outstanding shares of
the Registrant's Common Stock, $0.01 par value, was 99,911.
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LANESBOROUGH CORPORATION
FORM 10-Q/A
AMENDMENT NO. 1
Quarter Ended September 30, 1996
INDEX
Page
No.
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 2
Signatures 3
PART II - OTHER INFORMATION
Item 6(a). Exhibits
Exhibit
Number Description
10.1* Corporate Revolving and Term Loan Agreement
between BCC and Manufacturers and Traders Trust
Company dated October 11, 1996
11.1 Computation of Earnings (Loss) per Share
(previously filed)
27.1 Financial Data Schedule (previously filed)
Item 6(b). Reports on Form 8-K
Not applicable.
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* Filed herewith.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q/A, Amendment No.
1 to be signed on its behalf by the undersigned, thereunto duly authorized.
LANESBOROUGH CORPORATION
Date: November 7, 1996 /s/ Craig L. McKibben
---------------- ------------------------
Craig L. McKibben
Chairman and Chief Executive
Officer
Date: November 7, 1996 /s/ William O. Fields, Jr.
---------------- -----------------------------
William O. Fields, Jr.
Secretary and Treasurer
3
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LANESBOROUGH CORPORATION
FORM 10-Q/A, AMENDMENT NO. 1 for the Quarter Ended
September 30, 1996
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
10.1* Corporate Revolving and Term Loan Agreement between BCC and
Manufacturers and Traders Trust Company dated October 11,
1996
11.1 Computation of Earnings (Loss) per Share (previously filed)
27.1 Financial Data Schedule (previously filed)
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* Filed herewith.
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EXHIBIT 10.1
CORPORATE REVOLVING AND TERM LOAN AGREEMENT
BETWEEN
MANUFACTURERS AND TRADERS TRUST COMPANY
AND
BUFFALO COLOR CORPORATION
DATED October 11, 1996
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TABLE OF CONTENTS
1. DEFINITIONS...................................................1
a. Accumulated Funding Deficiency.......................1
b. Affiliate............................................1
c. Bankruptcy Law.......................................2
d. Bank's Prime Rate....................................2
e. CERCLA...............................................2
f. Control..............................................2
g. Distribution.........................................3
h. Eligible Account.....................................3
i. Eligible Inventory...................................6
j. Environmental Law....................................6
k. ERISA................................................7
l. Event of Default.....................................7
m. Governmental Authority..............................11
n. Hazardous Material..................................11
o. Internal Revenue Code...............................11
p. Law.................................................11
q. Loan................................................12
r. Loan Document.......................................12
s. Material Adverse Effect.............................12
t. Pension Plan........................................13
u. Permitted Investment................................13
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v. Permitted Lien......................................14
w. Permitted Loan......................................16
x. Person..............................................17
y. Potential Event of Default..........................17
z. Prohibited Transaction..............................17
aa. Release.............................................17
bb. Reportable Event....................................17
cc. Revolving Loan......................................17
dd. Revolving Loan Maturity Date........................18
ee. Subsidiary..........................................18
ff. Term Loan...........................................18
gg. Other Definitions...................................18
2. REVOLVING LOANS..............................................19
a. Making and Obtaining Revolving Loans................19
b. Revolving Loan Note.................................21
c. Repayment...........................................22
d. Optional Repayment in Advance.......................22
e. Interest............................................22
f. Late Charge.........................................24
g. Commitment Fee......................................24
h. Non-Usage Fee.......................................24
i. Exit Fee............................................25
j. General Provisions as to Repayment and Payment......26
3. TERM LOAN....................................................27
a. Making and Obtaining Loan...........................27
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b. Termination of Obligation...........................27
c. Repayment...........................................27
d. Optional Repayment in Advance.......................28
e. Interest............................................29
f. Late Charge.........................................30
g. Commitment Fee......................................30
h. Exit Fee............................................30
i. General Provisions as to Repayment and Payment......31
4. PREREQUISITES TO LOAN........................................32
a. No Default..........................................32
b. Representations and Warranties......................33
c. Proceedings.........................................33
d. Receipt by Bank.....................................34
5. REPRESENTATIONS AND WARRANTIES...............................38
a. Use of Proceeds.....................................38
b. Subsidiaries; Affiliates............................38
c. Good Standing; Qualification; Authority.............39
d. Control.............................................39
e. Compliance..........................................39
f. Environmental Matters...............................41
g. Legality............................................43
h. Fiscal Year.........................................46
i. Financial Statements................................46
j. Material Adverse Effects; Distributions.............47
k. Tax Returns and Payments............................48
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l. Certain Indebtedness................................48
m. Pension Obligations.................................49
n. Leases..............................................50
o. Assets; Liens and Encumbrances......................50
p. Investments.........................................51
q. Loans...............................................51
r. Judgments and Litigation............................51
s. Transactions with Affiliates........................51
t. Default.............................................52
u. Full Disclosure.....................................52
6. AFFIRMATIVE COVENANTS.............................................52
a. Good Standing; Qualification........................53
b. Compliance..........................................53
c. Working Capital; Current Ratio......................55
d. Cash Flow Coverage..................................56
e. Net Worth; Liabilities..............................57
f. Accounting; Reserves; Tax Returns...................57
g. Financial and Other Information; Certificates of
No Default..........................................57
h. Information as to Accounts and Inventory............60
i. Payment of Certain Indebtedness.....................62
j. Maintenance of Title and Assets; Insurance..........62
k. Inspections.........................................63
l. Pension Obligations.................................64
m. Changes in Management, Ownership and Control........65
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n. Judgments...........................................65
o. Litigation..........................................66
p. Liens and Encumbrances..............................67
q. Events and Conditions Affecting Accounts............68
r. Defaults and Material Adverse Effects...............69
s. Additional Guaranties and Security Agreements.......69
t. Further Actions.....................................70
7. NEGATIVE COVENANTS...........................................70
a. Fiscal Year.........................................71
b. Certain Indebtedness................................70
c. Compensation........................................72
d. Pension Obligations.................................72
e. Liens and Encumbrances..............................73
f. Capital Expenditures................................73
g. Operating Leases....................................74
h. Investments.........................................74
i. Loans...............................................75
j. Transactions with Affiliates........................75
k. Distributions.......................................75
l. Corporate and Other Changes ........................77
m. Sale of Receivables.................................78
n. Stock of or Ownership Interest in Subsidiary........78
o. Full Disclosure.....................................79
8. INDEBTEDNESS IMMEDIATELY DUE.................................78
9. EXPENSES; INDEMNIFICATION....................................79
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a. Loan Document Expenses..............................79
b. Collection Expenses.................................80
c. Expenses Due to Law Changes.........................81
d. Environmental Indemnification.......................83
10. NOTICES......................................................84
a. By Bank to Borrower.................................84
b. By Borrower to Bank.................................85
11. MISCELLANEOUS................................................85
a. Term; Survival......................................85
b. Survival; Reliance..................................85
c. Right of Setoff.....................................86
d. Assignment or Grant of Participation................87
e. Binding Effect......................................88
f. Entire Agreement, Modifications and Waivers.........88
g. Rights and Remedies Cumulative......................89
h. Requests............................................89
i. Extent of Consents and Waivers......................89
j. Directly or Indirectly..............................90
k. Accounting Terms and Computations...................90
l. Reference to Law....................................91
m. Reference to Governmental Authority.................91
n. Severability........................................91
o. Governing Law.......................................92
p. Headings............................................92
q. Confidentiality.....................................92
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12. CONSENTS AND WAIVERS RELATING TO LEGAL PROCEEDINGS...............93
a. JURISDICTIONAL CONSENTS AND WAIVERS.................93
b. WAIVER OF TRIAL BY JURY AND CLAIMS TO CERTAIN
DAMAGES.............................................94
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CORPORATE REVOLVING AND TERM LOAN AGREEMENT
This Agreement is made this 11th day of October 1996 between
Manufacturers and Traders Trust Company, a New York banking corporation having
its chief executive office at One M&T Plaza, Buffalo, New York 14240, (the
"Bank") and Buffalo Color Corporation, a Delaware business corporation having
its chief executive office at Suite 201, 959 Route 46 East, Parsippany, New
Jersey 07054 and its principal office at 100 Lee Street, Buffalo, New York
14210, (the "Borrower").
The Bank and the Borrower agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
a. Accumulated Funding Deficiency. "Accumulated
Funding Deficiency" has the meaning given to such term in Section
412(a) of the Internal Revenue Code.
b. Affiliate. "Affiliate" means, other than the
Borrower and all Subsidiaries, (i) any Person who or that now or
hereafter has Control of or is now or hereafter under common
Control with the Borrower or any Subsidiary or over whom or which
the Borrower or any Subsidiary now or hereafter has Control, (ii)
any Person who is now or hereafter a member of the immediate
family of any Person referred to in clause (i) of this sentence,
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(iii) any Person who is now or hereafter a director or officer of the Borrower
or any Subsidiary or has functions with respect to any Subsidiary similar to
those of a director or officer of a corporation or (iv) any Person who is now
or hereafter a member of the immediate family of any Person referred to in
clause (iii) of this sentence or over whom or which any such Person now or
hereafter has Control.
c. Bankruptcy Law. "Bankruptcy Law" means any
bankruptcy or insolvency Law or any other Law relating to the
relief of debtors, the readjustment, composition or extension of
indebtedness, liquidation or reorganization.
d. Bank's Prime Rate. The "Bank's Prime Rate" means the rate
announced by the Bank as its prime rate of interest, whether or not such rate
is actually the lowest or best rate charged by the Bank in connection with any
loan or other extension of credit made by the Bank.
e. CERCLA. "CERCLA" means the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended.
f. Control. "Control" means, with respect to any
Person, whether direct or indirect, (i) the power to vote 10% or
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more of the outstanding shares of any class of stock of such Person ordinarily
having the power to vote for the election of directors of such Person or 10% or
more of any class of other ownership interest in such Person ordinarily having
the power to vote for the election of, appoint or otherwise designate Persons
having functions with respect to such Person similar to those of directors of a
corporation or the power to direct or cause the direction of the management and
policies of such Person, (ii) the beneficial ownership of 10% or more of the
outstanding shares of any class of stock of such Person or 10% or more of any
class of other ownership interest in such Person or (iii) the power to direct
or cause the direction of the management and policies of such Person, whether
by ownership of any stock or other ownership interest, by agreement or
otherwise.
g. Distribution. "Distribution" means, with respect
to any Person, (i) any dividend or other distribution, whether in
cash or in the form of any other asset, on account of any of its
stock or any other ownership interest therein or (ii) any payment
on account of the purchase, redemption, retirement or other
acquisition of any of its stock or any other ownership interest
therein.
h. Eligible Account. "Eligible Account" means, at
any time, any Account of the Borrower that at such time is an
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Account (i) in which the Bank has a perfected first security interest, (ii)
that is lawfully owned by the Borrower alone, (iii) that arose in the ordinary
course of the business of the Borrower from services fully and satisfactorily
performed by the Borrower or the absolute sale by the Borrower of any Inventory
of the Borrower that (A) theretofore has been shipped or delivered to and
finally accepted by the Account Debtor obligated with respect thereto and (B)
has not theretofore been returned, rejected or damaged, (iv) as to which each
applicable covenant set forth in any security agreement between the Borrower
and the Bank is being met and as to which each applicable representation or
warranty set forth in any such security agreement is true and correct, (v) that
has not been in existence for more than 90 days, (vi) that is not evidenced by
any Chattel Paper or Instrument not theretofore delivered to the Bank with each
endorsement, instrument of assignment or other writing that the Bank deems
necessary or desirable at the sole option of the Bank to accomplish the
assignment or other transfer of such Chattel Paper or Instrument to the Bank,
(vii) that did not arise from a contract or order that prohibited, attempted to
render void or unenforceable or required any consent to any assignment thereof
or the grant of any security interest therein, (viii) that is not owing by an
Account Debtor who or that (A) is obligated to the Borrower with respect to
Accounts more than 50% of the aggregate outstanding principal amounts of which
are unpaid for more than
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90 days after coming into existence, (B) has been dissolved, ceased to exist,
assigned or otherwise transferred or disposed of all or substantially all of
his, her or its assets, died or become incompetent or insolvent (however such
insolvency is evidenced), is generally failing to pay his, her or its debts as
they become due, has suspended or ceased his, her or its business, had any
receiver, trustee, custodian or similar Person for him, her or it or any of
his, her or its assets appointed (whether with or without his, her or its
consent), made any assignment for the benefit of creditors or commenced or had
commenced against him, her or it any case or other proceeding pursuant to any
Bankruptcy Law or any formal or informal proceeding for the dissolution,
liquidation or winding up of the affairs of or the settlement of claims against
him, her or it, (C) the Bank in good faith determines and notifies the Borrower
is an uncreditworthy Account Debtor or (D) is a Subsidiary or Affiliate and
(ix) that is not of a type that the Bank in good faith determines and notifies
the Borrower meets the general criteria of the Bank for ineligible Accounts;
provided, however, that, if such Account is owing by an Account Debtor who or
that is a supplier of the Borrower or is an affiliate of any supplier of the
Borrower, it shall be an ineligible Account except to the extent that the
amount thereof exceeds the aggregate amount owing by the Borrower to such
Account Debtor.
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i. Eligible Inventory. "Eligible Inventory" means, at
any time, any Inventory that at such time is Inventory (i) in
which the Bank has a perfected first security interest, (ii) that
is lawfully owned by the Borrower alone, (iii) that has been produced or
acquired by the Borrower in the ordinary course of the business of the
Borrower, (iv) that is of a type normally sold by the Borrower in the ordinary
course of the business of the Borrower, (v) that is new and unused, (vi) as to
which any applicable covenant set forth in any security agreement between the
Bank and the Borrower is being met and each applicable representation and
warranty set forth in any such security agreement is true and correct, (vii)
that has not given rise to any Account in which the Bank has any security
interest, (viii) that has not been held by the Borrower for more than five
years, (ix) that does not constitute returned, rejected, damaged or obsolete
goods or spare parts, (x) that is not subject to any Document, (xi) that is not
work-in-process and (xii) that is not of a type that the Bank in good faith
determines and notifies the Borrower meets the general criteria of the Bank for
ineligible Inventory.
j. Environmental Law. "Environmental Law" means any
Law relating to public health or protection of the environment,
including, but not limited to, (i) CERCLA and (ii) the Resource
Conservation and Recovery Act, as amended.
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k. ERISA. "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
l. Event of Default. An "Event of Default" occurs or exists
if (i) the Borrower (A) defaults in the repayment when due of any of the
principal amount of any Loan, (B) defaults for more than three days in the
payment when due of any interest payable pursuant to this Agreement or any
other amount payable by the Borrower to the Bank pursuant to this Agreement
other than any of the principal amount of any Loan, (C) defaults for more than
30 days in the performance when due of any obligation to the Bank pursuant to
Section 6 of this Agreement or (D) defaults in the performance when due of any
obligation to the Bank pursuant to this Agreement other than any obligation to
pay any money to the Bank and any obligation to the Bank pursuant to Section 6
of this Agreement, (ii) the Borrower or any Subsidiary defaults in the
performance when due, whether by acceleration or otherwise, of any obligation
(including, but not limited to, any obligation to pay any money, whether for
any principal, interest, fee, charge, cost or expense or otherwise), whether
now existing or hereafter arising or accruing, to the Bank or any other Person
other than, in the case of any Person other than the Bank, any obligation to
pay any money in connection with any indebtedness of $300,000 or less, the
maturity of any such obligation is accelerated or there occurs or exists any
event or condition that, after giving effect
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to any applicable grace period, constitutes a default with respect to or
permits the acceleration of the maturity of any such obligation, (iii) the
Borrower or any Subsidiary ceases to exist, makes or permits a fraudulent
transfer or fraudulent conveyance of any of its assets, makes any bulk sale,
sends any notice of any intended bulk sale, becomes insolvent (however such
insolvency is evidenced), generally fails to pay its debts as they become due
or has served, filed or recorded against it or any of its assets any judgment,
order or award of any Governmental Authority or arbitrator other than (A) any
such judgment, order or award for the payment of not in excess of $300,000
beyond any amount covered by insurance and (B) any such judgment, order or
award (I) the validity of which is being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted, (II) for which
adequate reserves have been established, (III) the execution or other
enforcement of which is effectively stayed and (IV) that does not have any
Material Adverse Effect, (iv) the Borrower or any Subsidiary has any receiver,
trustee, custodian or similar Person for it or any of its assets appointed
(whether with or without its consent), makes any assignment for the benefit of
creditors or commences or has commenced against it any case or other proceeding
pursuant to any Bankruptcy Law or any formal or informal proceeding for the
dissolution, liquidation or winding up of the affairs of or the settlement of
claims against it and,
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with respect to any such case or other proceeding pursuant to any Bankruptcy
Law commenced against it, (A) such case or other proceeding is not discharged
or stayed within 60 days after such commencement or (B) any such stay is
terminated, (v) any representation or warranty made by the Borrower in this
Agreement proves to have been incorrect or misleading in any material respect
as of the date of this Agreement or, except to the extent updated in a
certificate executed by the President, a Vice President or the chief financial
officer of the Borrower and received by the Bank at or before any time as of
which such representation or warranty is deemed to have been so made, as of
such time, (vi) any financial statement heretofore or hereafter provided to the
Bank by or on behalf of the Borrower or any Subsidiary proves, as of the date
thereof, to have been incorrect or misleading in any material respect or before
the execution and delivery to the Bank by the Borrower of this Agreement there
occurred and was not disclosed to the Bank any material adverse change in any
information disclosed in any financial statement heretofore so provided, (vii)
there occurs or exists with respect to any Pension Plan any Prohibited
Transaction, Reportable Event or other event or condition that, in the opinion
of the Bank, constitutes or will or might constitute grounds for the
institution by the Pension Benefit Guaranty Corporation of any proceeding under
ERISA seeking the termination of such Pension Plan or the appointment of a
trustee to administer such Pension Plan, the
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Pension Benefit Guaranty Corporation institutes any proceeding under ERISA
seeking the termination of any Pension Plan or the appointment of a trustee to
administer any Pension Plan, any Person other than the Pension Benefit Guaranty
Corporation institutes any proceeding under ERISA seeking the termination of
any Pension Plan or the appointment of a trustee to administer any Pension Plan
that is, in the opinion of the Bank, likely to result in the termination of
such Pension Plan, any trustee is appointed by a United States District Court
to administer any Pension Plan, any Pension Plan is terminated or there are
vested unfunded liabilities under any Pension Plan that, in the opinion of the
Bank, have or will or is reasonably likely to have any Material Adverse Effect
or (viii) there occurs any change in (A) the identity of the Chairman,
President or chief executive officer of the Borrower, (B) the beneficial
ownership by any Person having Control of the Borrower or any Subsidiary of any
stock or other ownership interest in the Borrower or any Subsidiary ordinarily
having the power to vote for the election of directors of the Borrower or any
Subsidiary or the power to vote for the election of, appoint or otherwise
designate Persons having functions with respect to any Subsidiary similar to
those of directors of a corporation or the power to direct or cause the
direction of the management and policies of any Subsidiary or (C) direct
Control of the Borrower or any Subsidiary that is, in the opinion of the Bank,
materially adverse to its interest and is
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not corrected to its full satisfaction within 30 days after it gives to the
Borrower a notice that it considers such change materially adverse to its
interest.
m. Governmental Authority. "Governmental Authority"
means any government, political subdivision, court, agency,
central bank or other entity, body, organization or group
exercising any executive, legislative, judicial, fiscal,
monetary, regulatory or administrative function of government.
n. Hazardous Material. "Hazardous Material" means (i) any
"hazardous substance" as such term is defined in 42 U.S.C. ss. 9601(14), (ii)
any pollutant, contaminant or hazardous, dangerous or toxic chemical, material,
waste or other substance for purposes of any other Environmental Law relating
to or imposing any liability or standard of conduct with respect to any
pollutant, contaminant or hazardous, dangerous or toxic chemical, material,
waste or other substance or (iii) any petroleum product used for fuel or
lubrication.
o. Internal Revenue Code. The "Internal Revenue
Code" means the Internal Revenue Code of 1986, as amended.
p. Law. "Law" means any statute, ordinance,
regulation, rule, interpretation, decision, guideline or other
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requirement enacted or issued by any Governmental Authority,
whether or not having the force of law.
q. Loan. "Loan" means any Revolving Loan or the Term
Loan.
r. Loan Document. "Loan Document" means (i) this
Agreement, (ii) any other agreement or instrument referred to in
Section 4d of this Agreement or (iii) any replacement of any such
other agreement or instrument.
s. Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on (i) the ability of the Borrower to repay when
due any of the principal amount of any Loan or to pay when due any interest
payable pursuant to this Agreement, any other amount payable by the Borrower to
the Bank pursuant to this Agreement or any other indebtedness or other
obligation of the Borrower to the Bank, whether now existing or hereafter
arising or accruing, (ii) the ability of the Borrower or any Subsidiary to
perform when due any obligation pursuant to any Loan Document or (iii) the
business, operations, assets, affairs or condition (financial or other) of the
Borrower and all Subsidiaries taken as a whole.
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t. Pension Plan. "Pension Plan" means (i) any pension plan,
as such term is defined in Section 3(2) of ERISA, (A) that has heretofore been
or is hereafter established or maintained by the Borrower, any Subsidiary or
any other Person that is, together with the Borrower or any Subsidiary, a
member of a controlled group of corporations for purposes of Section 414(b) of
the Internal Revenue Code or is under common control with the Borrower or any
Subsidiary for purposes of Section 414(c) of the Internal Revenue Code, (B) to
which contributions have heretofore been or are hereafter made by the Borrower,
any Subsidiary or any such other Person or (C) to which the Borrower, any
Subsidiary or any such other Person has heretofore agreed or hereafter agrees
or otherwise has heretofore incurred or hereafter incurs any obligation to make
contributions or (ii) any trust heretofore or hereafter created under any such
pension plan.
u. Permitted Investment. "Permitted Investment" means any
investment by the Borrower or any Subsidiary in (i) any readily marketable
direct obligation of the United States maturing within one year after the date
of its acquisition thereof, (ii) any time deposit maturing within one year
after the date of its acquisition thereof and issued by any banking institution
that is incorporated under any statute of the United States or any state of the
United States and has a combined
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capital and surplus of not less than $500,000,000, (iii) any demand or savings
deposit with any such banking institution, (iv) any security of any Subsidiary
if such security is owned by it on the date of this Agreement or (v) any
security fully and accurately described under the heading "Permitted
Investments" in Exhibit A attached to and made a part of this Agreement.
v. Permitted Lien. "Permitted Lien" means (i) any lease of
any asset by the Borrower or any Subsidiary as a lessor in the ordinary course
of its business and without interference with the conduct of its business or
operations, (ii) any pledge or deposit made by the Borrower or any Subsidiary
in the ordinary course of its business (A) in connection with any workers'
compensation, unemployment insurance, social security or similar Law or (B) to
secure the payment of any indebtedness or other obligation in connection with
any letter of credit, bid, tender, trade or government contract, lease, surety,
appeal or performance bond or Law, or any similar indebtedness or other
obligation, not incurred in connection with the borrowing of any money or the
deferral of the payment of the purchase price of any asset, (iii) any
attachment, levy or similar lien with respect to the Borrower or any Subsidiary
arising in connection with any action or other legal proceeding so long as (A)
the validity of the claim or judgment secured thereby is being contested in
good faith by appropriate proceedings promptly instituted and
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diligently conducted, (B) adequate reserves have been appropriately established
for such claim or judgment, (C) the execution or other enforcement of such
attachment, levy or similar lien is effectively stayed and (D) neither such
claim or judgment nor such attachment, levy or similar lien has any Material
Adverse Effect, (iv) any statutory lien in favor of the United States for any
amount paid to the Borrower or any Subsidiary as a progress payment pursuant to
any government contract, (v) any statutory lien securing the payment of any
tax, assessment, fee, charge, fine or penalty imposed by any government or
political subdivision upon the Borrower, any Subsidiary or any of the assets,
income and franchises of the Borrower or any Subsidiary but not yet required by
Section 6i of this Agreement to be paid, (vi) any statutory lien securing the
payment of any claim or demand of any materialman, mechanic, carrier,
warehouseman, garageman or landlord against the Borrower or any Subsidiary but
not yet required by such Section 6i to be paid, (vii) any reservation,
exception, encroachment, easement, right-of-way, covenant, condition,
restriction, lease or similar title exception or encumbrance affecting the
title to any real property of the Borrower or any Subsidiary but not
interfering with the conduct of its business or operations, (viii) any security
interest, mortgage or other lien or encumbrance in favor of the Bank or (ix)
any security interest, mortgage or other lien or encumbrance existing on the
date of this Agreement and fully
<PAGE>
- 16 -
and accurately described under the heading "Permitted Liens" in Exhibit A
attached to and made a part of this Agreement.
w. Permitted Loan. "Permitted Loan" means (i) any loan,
advance or other extension of credit made by any Subsidiary to the Borrower or
by the Borrower or any Subsidiary to any Subsidiary that (A) is a guarantor,
without any limitation as to amount, of the payment of all indebtedness and
other obligations of the Borrower to the Bank, whether now existing or
hereafter arising or accruing, pursuant to a guaranty agreement in form and
substance satisfactory to the Bank and (B) has granted to the Bank a security
interest in all of its personal property and fixtures as security for the
payment, without any limitation as to amount, of all such indebtedness and
other obligations pursuant to a security agreement in form and substance
satisfactory to the Bank, (ii) any deferral of the purchase price of any
inventory or service sold by the Borrower or any Subsidiary in the ordinary
course of its business, (iii) any advance made by the Borrower or any
Subsidiary in the ordinary course of its business to any of its officers and
employees for out-of-pocket expenses incurred by such officer or employee on
its behalf in the conduct of its business or operations or (iv) any loan,
advance or other extension of credit fully and accurately described under the
heading "Permitted Loans" in Exhibit A attached to and made a part of this
Agreement.
<PAGE>
- 17 -
x. Person. "Person" means (i) any individual,
corporation, partnership, limited liability company, joint
venture, trust or unincorporated association, (ii) any
Governmental Authority or (iii) any other entity, body,
organization or group.
y. Potential Event of Default. "Potential Event of
Default" means any event or condition that, after notice, lapse
of time or both notice and lapse of time, would constitute an
Event of Default.
z. Prohibited Transaction. "Prohibited Transaction"
(i) has the meaning given to such term in Section 4975(c) of the
Internal Revenue Code and (ii) means any transaction prohibited
by Section 406(a) of ERISA.
aa. Release. "Release" means any "release" as such
term is defined in 42 U.S.C. ss. 9601(22).
bb. Reportable Event. "Reportable Event" has the
meaning given to such term in Section 4043(b) of ERISA.
cc. Revolving Loan. "Revolving Loan" means any loan
by the Bank to the Borrower pursuant to Section 2a of this
Agreement.
<PAGE>
- 18 -
dd. Revolving Loan Maturity Date. The "Revolving Loan
Maturity Date" means ____________________, 1999.
ee. Subsidiary. "Subsidiary" means any Person of
which the Borrower now or hereafter has beneficial ownership,
whether direct or indirect, of (i) 50% or more of the outstanding
shares of any class of stock ordinarily having the power to vote
for the election of directors of such Person or 50% or more of
any class of other ownership interest ordinarily having the power
to vote for the election of, appoint or otherwise designate
Persons having functions with respect to such Person similar to
those of directors of a corporation or the power to direct or
cause the direction of the management and policies of such Person
or (ii) such lower percentage of the outstanding shares of any
class of such stock or any class of such other ownership interest
as is sufficient to render such Person a subsidiary of the
Borrower for purposes of generally accepted accounting principles
as in effect at the time of determination of the status of such
Person for purposes of this sentence.
ff. Term Loan. "Term Loan" means the loan by the Bank
to the Borrower pursuant to Section 3a of this Agreement.
gg. Other Definitions. Each of the following terms
has the meaning it has for purposes of the Uniform Commercial
<PAGE>
- 19 -
Code of the State of New York on the date of this Agreement: (i)
Account; (ii) Account Debtor; (iii) Chattel Paper; (iv) Document;
(v) Instrument; and (vi) Inventory.
2. REVOLVING LOANS.
a. Making and Obtaining Revolving Loans. Upon and subject to
each term and condition of this Agreement, at any time and from time to time
during the period beginning on the date of this Agreement and ending on the day
before the Revolving Loan Maturity Date, the Borrower may obtain Revolving
Loans from the Bank, and the Bank shall make Revolving Loans to the Borrower.
The principal amount of each Revolving Loan shall be an integral multiple of
$100,000, and the aggregate outstanding principal amounts of all Revolving
Loans shall not at any time exceed $5,500,000 minus the total of (i) the
aggregate face amounts of all standby or documentary letters of credit issued
by the Bank for the account of the Borrower or any Subsidiary and outstanding
at such time and (ii) the aggregate amount of all draws under any standby or
documentary letter of credit issued by the Bank for the account of the Borrower
or any Subsidiary for which the Bank has not been reimbursed at such time. The
aggregate outstanding principal amounts of all Revolving Loans the proceeds of
which are used for working capital of the Borrower shall not at any time exceed
$3,500,000. The total at any time of (i) the
<PAGE>
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aggregate outstanding principal amounts of all Revolving Loans, (ii) the
aggregate face amounts of all standby or documentary letters of credit issued
by the Bank for the account of the Borrower or any Subsidiary and outstanding
at such time, (iii) the aggregate amount of all draws under any standby or
documentary letter of credit issued by the Bank for the account of the Borrower
or any Subsidiary for which the Bank has not been reimbursed at such time and
(iv) the outstanding principal amount of the Term Loan shall not exceed the
total at such time of (i) 80% of all Eligible Accounts at such time owing by
Account Debtors located in the United States or Canada, (ii) 25% of all
Eligible Accounts at such time owing by Account Debtors not located in the
United States or Canada and (iii) the lesser of (A) 50% of the lesser of (I)
the aggregate cost of all Eligible Inventory or (II) the aggregate fair market
value at such time of all Eligible Inventory or (B) $2,500,000 minus the
portion of the principal amount of the Term Loan that has been repaid at such
time. The Bank may treat as made by the Borrower and rely upon, and the
Borrower shall be bound by, any oral (including, but not limited to,
telephonic), written or other (including, but not limited to, facsimile)
request for such Revolving Loan that the Bank believes in good faith to be
valid and to have been made in the name or on behalf of the Borrower by any
officer of the Borrower, and the Bank shall not incur any liability to the
Borrower or any other Person as a direct or indirect result of
<PAGE>
- 21 -
making such Revolving Loan. Each request for a Revolving Loan shall state the
amount requested as the principal amount of such Revolving Loan and the
business day of the Bank on which such Revolving Loan is requested to be made
and shall be irrevocable; provided, however, that, if such business day is the
day such request is received by the Bank and such request is so received after
10:00 a.m. on such day, the Bank may, but shall not be obligated to, treat such
request as stating the next business day of the Bank as the date upon which
such Revolving Loan is requested to be made.
b. Revolving Loan Note. The Bank shall set forth on the
schedule attached to and made a part of the Revolving Loan Note referred to in
clause (i) of Section 4d of this Agreement or any similar schedule or loan
account (including, but not limited to, any similar schedule or loan account
maintained in computerized records) annotations evidencing (i) the date and
principal amount of each Revolving Loan, (ii) the date and amount of each
payment applied to the outstanding principal amount of such Revolving Loan Note
and (iii) such outstanding principal amount after each Revolving Loan and each
such payment. Each such annotation shall, in the absence of manifest error, be
conclusive and binding upon the Borrower. No failure of the Bank to make and no
error by the Bank in making any annotation on such attached schedule or any
such similar schedule or loan account
<PAGE>
- 22 -
shall affect the obligation of the Borrower to repay the principal amount of
each Revolving Loan, the obligation of the Borrower to pay interest on the
outstanding principal amount of each Revolving Loan or any other obligation of
the Borrower to the Bank pursuant to this Agreement.
c. Repayment. The Borrower shall repay the aggregate
outstanding principal amounts of all Revolving Loans to the Bank
on the Revolving Loan Maturity Date, when the Borrower shall pay
to the Bank all interest payable pursuant to this Agreement in
connection with any Revolving Loan and remaining unpaid and all
other amounts payable by the Borrower to the Bank pursuant to
this Agreement in connection with any Revolving Loan and
remaining unpaid.
d. Optional Repayment in Advance. The Borrower shall
have the option of repaying the outstanding principal amount of
any Revolving Loan to the Bank in advance in full or part at any
time and from time to time without any premium or penalty.
e. Interest. From and including the date the first
Revolving Loan is made to but not including the date the
aggregate outstanding principal amounts of all Revolving Loans
are repaid in full, the Borrower shall pay to the Bank interest,
calculated on the basis of a 360-day year for the actual number
<PAGE>
- 23 -
of days of each year (365 or 366, as applicable), on such aggregate outstanding
principal amounts at a rate per year that shall (i) on each day beginning
before the maturity, whether by acceleration or otherwise, of such aggregate
outstanding principal amounts be the total of (A) 1 1/2% and (B) the rate in
effect such day as the Bank's Prime Rate and (ii) on each day subsequent to the
last day described in clause (i) of this sentence be the total of (A) 4% and
(B) the rate in effect such subsequent day as the Bank's Prime Rate; provided,
however, that (A) in no event shall such interest be payable at a rate in
excess of the maximum rate permitted by applicable law and (B) solely to the
extent necessary to result in such interest not being payable at a rate in
excess of such maximum rate, any amount that would be treated as part of such
interest under a final judicial interpretation of applicable law shall be
deemed to have been a mistake and automatically canceled and, if received by
the Bank, shall be refunded to the Borrower, it being the intention of the Bank
and the Borrower that such interest not be payable at a rate in excess of such
maximum rate. Except as otherwise provided in Section 2c of this Agreement, (i)
a payment of such interest shall become due on the first day of each calendar
month, beginning on the first day of the first calendar month after the
calendar month in which the first Revolving Loan is made.
<PAGE>
- 24 -
f. Late Charge. If any of the principal amount of any
Revolving Loan is not repaid, or any interest payable pursuant to this
Agreement in connection with any Revolving Loan is not paid, by the date it
becomes due, whether by acceleration or otherwise, the Borrower shall pay to
the Bank on demand made by the Bank a late charge of the greater of (i) 5%
thereof or (ii) $50.
g. Commitment Fee. Upon the execution and delivery
to the Bank of this Agreement by the Borrower, the Borrower shall
pay to the Bank the remaining $9,200 of the commitment fee of
$27,500 payable to the Bank by the Borrower in connection with
Revolving Loans.
h. Non-Usage Fee. For each period (i) beginning on the date
of this Agreement and ending on the last day of the calendar quarter containing
such date, (ii) consisting of a calendar quarter beginning after the calendar
quarter containing the date of this Agreement and ending before the calendar
quarter containing the day before the Revolving Loan Maturity Date or (iii)
beginning on the first day of the calendar quarter containing the day before
the Revolving Loan Maturity Date and ending on such day, the Borrower shall pay
to the Bank on demand made by the Bank a non-usage fee equal to the product
obtained by multiplying (A) the difference between $5,500,000 and the daily
<PAGE>
- 25 -
average during such period of the total of (I) the aggregate outstanding
principal amounts of all Revolving Loans and (II) the aggregate face amounts of
all standby or documentary letters of credit issued by the Bank for the account
of the Borrower or any Subsidiary first by (B) 1/4% and then by (C) the
fraction obtained by dividing the number of days in such period by 360;
provided, however, that (1) in no event shall there be payable any such
non-usage fee that would result in interest being payable on the outstanding
principal amount of any Revolving Loan at a rate in excess of the maximum rate
permitted by applicable law and (2) solely to the extent necessary to result in
such interest not being payable at a rate in excess of such maximum rate, any
amount that would be treated as part of such interest under a final judicial
interpretation of applicable law shall be deemed to have been a mistake and
automatically canceled and, if received by the Bank, shall be refunded to the
Borrower, it being the intention of the Bank and the Borrower that such
interest not be payable at a rate in excess of such maximum rate.
i. Exit Fee. If the Borrower ends its borrowing
relationship with the Bank within three years after the date of
this Agreement, the Borrower shall pay to the Bank on demand made
by the Bank an exit fee of 2% of the average aggregate
outstanding principal amounts of all Revolving Loans during the
<PAGE>
- 26 -
calendar quarter preceding the calendar quarter in which such borrowing
relationship is ended.
j. General Provisions as to Repayment and Payment. Repayment
of the principal amount of each Revolving Loan, payment of all interest payable
pursuant to this Agreement in connection with any Revolving Loan and payment of
all other amounts payable by the Borrower to the Bank pursuant to this
Agreement in connection with any Revolving Loan shall be made in lawful money
of the United States and immediately available funds at the banking office of
the Bank located at One Fountain Plaza, Buffalo, New York, or at such other
office of the Bank as may at any time and from time to time be specified in any
notice given to the Borrower by the Bank. Such repayment or payment shall be
made without any setoff or counterclaim and free and clear of and without any
deduction or withholding for any tax, assessment, fee, charge, fine or penalty
imposed by any Governmental Authority; provided, however, that, if such
deduction or withholding is required by any Law, (i) such repayment or payment
shall include such additional amount as necessary to result in the net amount
of such repayment or payment after such deduction or withholding not being less
than the amount of such repayment or payment without such deduction or
withholding, (ii) the Borrower shall make such deduction or withholding and
(iii) the Borrower shall pay the amount of such deduction or withholding as
<PAGE>
- 27 -
required by such Law. No such repayment or payment shall be deemed to have been
received by the Bank until received by the Bank at the office of the Bank
determined in accordance with the second preceding sentence, and any such
repayment or payment received by the Bank at such office after 2:00 p.m.
eastern United States time on any day shall be deemed to have been received by
the Bank at the time such office opens for business on the next business day of
the Bank. If the time by which any of the principal amount of any Revolving
Loan is to be repaid is extended by operation of law or otherwise, the Borrower
shall pay interest on the outstanding portion thereof during such period of
extension as provided in Section 2e of this Agreement.
3. TERM LOAN.
a. Making and Obtaining Term Loan. Upon and subject
to each term and condition of this Agreement, the Borrower shall
obtain the Term Loan from the Bank, and the Bank shall make the
Term Loan to the Borrower. The principal amount of the Term Loan
shall be $3,000,000.
b. Termination of Obligation. Any obligation of the
Bank to make the Term Loan shall terminate no later than October
____, 1996.
<PAGE>
- 28 -
c. Repayment. The Borrower shall repay the principal amount
of the Term Loan to the Bank in 36 installments, with the first of such
installments to become due on the first day of the first calendar month after
the calendar month in which the Term Loan is made and one of such installments
to become due on the first day of each succeeding calendar month through the
first day of the thirty-sixth calendar month after the calendar month in which
the Term Loan is made, when the Borrower shall repay the outstanding principal
amount of the Term Loan to the Bank and pay to the Bank all interest payable
pursuant to this Agreement and remaining unpaid and all other amounts payable
by the Borrower to the Bank pursuant to this Agreement and remaining unpaid.
Each of the first 35 of such installments shall be $83,333.33, and the last of
such installments shall be $83,333.45.
d. Optional Repayment in Advance. The Borrower shall
have the option of repaying the outstanding principal amount of
the Term Loan to the Bank in advance in full or part at any time
and from time to time without any premium or penalty; provided,
however, that (i) the amount of any such repayment in part shall
be an integral multiple of $100,000 and (ii) upon making any such
repayment in full the Borrower shall pay to the Bank all interest
payable pursuant to this Agreement and remaining unpaid and all
other amounts payable by the Borrower to the Bank pursuant to
this Agreement and remaining unpaid. Each such repayment in part
<PAGE>
- 29 -
shall be applied to the installments of the principal amount of the Term Loan
in the inverse order of such installments becoming due.
e. Interest. From and including the date the Term
Loan is made to but not including the date the outstanding
principal amount of the Term Loan is repaid in full, the Borrower
shall pay to the Bank interest, calculated on the basis of a 360-
day year for the actual number of days of each year (365 or 366,
as applicable), on such outstanding principal amount at a rate
per year that shall (i) on each day beginning before the
maturity, whether by acceleration or otherwise, of such
outstanding principal amount be the total of (A) 2% and (B) the
rate in effect such day as the Bank's Prime Rate and (ii) on each
day subsequent to the last day described in clause (i) of this
sentence be the total of (A) 4% and (B) the rate in effect such
subsequent day as the Bank's Prime Rate; provided, however, that
(A) in no event shall such interest be payable at a rate in
excess of the maximum rate permitted by applicable law and (B)
solely to the extent necessary to result in such interest not
being payable at a rate in excess of such maximum rate, any
amount that would be treated as part of such interest under a
final judicial interpretation of applicable law shall be deemed
to have been a mistake and automatically canceled and, if
received by the Bank, shall be refunded to the Borrower, it being
<PAGE>
- 30 -
the intention of the Bank and the Borrower that such interest not be payable at
a rate in excess of such maximum rate. Except as otherwise provided in Section
3c or 3d of this Agreement, a payment of such interest shall become due on the
first day of each calendar month, beginning on the first day of the first
calendar month after the calendar month in which the Term Loan is made.
f. Late Charge. If any of the principal amount of the Term
Loan is not repaid, or any interest payable pursuant to this Agreement in
connection with the Term Loan is not paid, by the date it becomes due, whether
by acceleration or otherwise, the Borrower shall pay to the Bank on demand made
by the Bank a late charge of the greater of (i) 5% thereof or (ii) $50.
g. Commitment Fee. Upon the execution and delivery
to the Bank of this Agreement by the Borrower, the Borrower shall
pay to the Bank the remaining $5,000 of the commitment fee of
$15,000 payable to the Bank by the Borrower in connection with
the Term Loan.
h. Exit Fee. If the Borrower ends its borrowing
relationship with the Bank within three years after the date of
this Agreement, the Borrower shall pay to the Bank on demand made
by the Bank an exit fee of 2% of the average outstanding
<PAGE>
- 31 -
principal amount of the Term Loan during the calendar quarter preceding the
calendar quarter in which such borrowing relationship is ended.
i. General Provisions as to Repayment and Payment. Repayment
of the principal amount of the Term Loan, payment of all interest payable
pursuant to this Agreement in connection with the Term Loan and payment of all
other amounts payable by the Borrower to the Bank pursuant to this Agreement in
connection with the Term Loan shall be made in lawful money of the United
States and immediately available funds at the banking office of the Bank
located at One Fountain Plaza, Buffalo, New York, or at such other office of
the Bank as may at any time and from time to time be specified in any notice
given to the Borrower by the Bank. Such repayment or payment shall be made
without any setoff or counterclaim and free and clear of and without any
deduction or withholding for any tax, assessment, fee, charge, fine or penalty
imposed by any Governmental Authority; provided, however, that, if such
deduction or withholding is required by any Law, (i) such repayment or payment
shall include such additional amount as is necessary to result in the net
amount of such repayment or payment after such deduction or withholding not
being less than the amount of such repayment or payment without such deduction
or withholding, (ii) the Borrower shall make such deduction or withholding and
(iii) the Borrower shall pay the
<PAGE>
- 32 -
amount of such deduction or withholding as required by such Law. No such
repayment or payment shall be deemed to have been received by the Bank until
received by the Bank at the office of the Bank determined in accordance with
the second preceding sentence, and any such repayment or payment received by
the Bank at such office after 2:00 p.m. eastern United States time on any day
shall be deemed to have been received by the Bank at the time such office opens
for business on the next business day of the Bank. If the time by which any of
the principal amount of the Loan is to be repaid is extended by operation of
law or otherwise, the Borrower shall pay interest on the outstanding portion
thereof during such period of extension as provided in Section 2e of this
Agreement.
4. PREREQUISITES TO LOAN. The obligation of the Bank
to make any Loan shall be conditioned upon the following:
a. No Default. (i) There not having occurred or existed at
any time during the period beginning on the date of this Agreement and ending
at the time such Loan is to be made and there not existing at the time such
Loan is to be made any Event of Default or Potential Event of Default and (ii)
the Bank not believing in good faith that any Event of Default or Potential
Event of Default has so occurred or existed, so exists or, if such Loan is
made, will occur or exist;
<PAGE>
- 33 -
b. Representations and Warranties. (i) Each representation
and warranty made in this Agreement being true and correct as of the date of
this Agreement and, except to the extent updated in a certificate executed by
the President, a Vice President or the chief financial officer of the Borrower
and received by the Bank at or before the time such Loan is to be made, as of
such time, (ii) each other representation and warranty made to the Bank by or
on behalf of the Borrower or any Subsidiary before the time such Loan is to be
made being true and correct as of the date thereof, (iii) each financial
statement provided to the Bank by or on behalf of the Borrower or any
Subsidiary before the time such Loan is to be made being true and correct as of
the date thereof and (iv) the Bank not believing in good faith that (A) any
such representation or warranty, except to the extent so updated, was or is
other than true and correct as of any date or time of determination of the
truth or correctness thereof, (B) any event or condition the occurrence,
non-occurrence, existence or non-existence of which is a subject of any such
representation or warranty would or might have any Material Adverse Effect or
(C) any such financial statement was other than true and correct as of the date
thereof;
c. Proceedings. The Bank being satisfied as to each
corporate or other proceeding in connection with any transaction
contemplated by this Agreement; and
<PAGE>
- 34 -
d. Receipt by Bank. The receipt by the Bank at or
before the time such Loan is to be made of the following, in form
and substance satisfactory to the Bank:
i. If such Loan is the first Revolving Loan, a
Revolving Loan Note, appropriately completed and duly executed by
the Borrower;
ii. If such Loan is the Term Loan, a Term Loan Note,
appropriately completed and duly executed by the Borrower;
iii. If such Loan is a Revolving Loan, a request for
such Loan determined by the Bank to meet the requirements for
such a request set forth in Section 2a of this Agreement;
iv. (A) A General Security Agreement, appropriately completed and
duly executed by the Borrower, securing, without any limitation as to amount,
the payment of all indebtedness and other obligations of the Borrower to the
Bank, whether now existing or hereafter arising or accruing, and (B) whether or
not such Loan is the first Loan, evidence that neither such General Security
Agreement nor any security agreement referred to in clause (ii) of Section 6p
of this Agreement has been terminated as provided therein;
<PAGE>
- 35 -
v. If such Loan is the first Loan, an opinion of
Battle Fowler, LLP, counsel to the Borrower;
vi. A certificate executed by the President, a Vice President or
the chief financial officer of the Borrower and stating that (A) there did not
occur or exist at any time during the period beginning on the date of this
Agreement and ending at the time such Loan is to be made and there does not
exist at the time such Loan is to be made any Event of Default or Potential
Event of Default and (B) each representation and warranty made in this
Agreement was true and correct as of all times during the period beginning on
the date of this Agreement and ending at the time such Loan is to be made and
is true and correct as of the time such Loan is to be made, except to the
extent updated in a certificate executed by the President, a Vice President or
the chief financial officer of the Borrower and received by the Bank at or
before the time such Loan is to be made;
vii. If such Loan is the first Loan, evidence that each of the
Borrower and all Subsidiaries is at the time such Loan is to be made (A) in
good standing under the law of the jurisdiction in which it is organized and
(B) duly qualified and in good standing as a foreign Person of its type
authorized to do business in each jurisdiction in which such qualification is
necessary;
<PAGE>
- 36 -
viii. If such Loan is the first Loan, a copy of each certificate or
articles of incorporation or organization, by-laws, operating or partnership
agreement or other charter, organizational or governing document of each of the
Borrower and all Subsidiaries certified by its Secretary or a Person having
functions with respect to it similar to those of the Secretary of a corporation
to be complete and accurate at the time such Loan is to be made;
ix. If such Loan is the first Loan, evidence of the taking and the
continuation in full force and effect at the time such Loan is to be made of
each corporate or other action of the Borrower or any other Person necessary to
authorize the obtaining of all Loans by the Borrower, the execution, delivery
to the Bank and performance of each Loan Document by each Person other than the
Bank who or that is contemplated by such Loan Document as a party thereto and
the imposition or creation of each security interest, mortgage and other lien
and encumbrance imposed or created pursuant to any Loan Document;
x. If such Loan is the first Loan, evidence (A) that no asset
subject to any security interest, mortgage or other lien or encumbrance
pursuant to any Loan Document is at the time such Loan is to be made subject to
any other security interest, mortgage or other lien or encumbrance, except for
Permitted
<PAGE>
- 37 -
Liens, and (B) of the making of each recording and filing, and the taking of
each other action, deemed necessary or desirable by the Bank at the sole option
of the Bank to perfect or otherwise establish, preserve or protect the priority
of any such security interest, mortgage or other lien or encumbrance;
xi. If such Loan is the first Loan, evidence that each
requirement contained in any Loan Document with respect to
insurance is being met at the time such Loan is to be made;
xii. Each additional agreement, instrument and other writing
(including, but not limited to, (A) each agreement, instrument and other
writing intended to be filed or recorded with any Governmental Authority to
perfect or otherwise establish, preserve or protect the priority of any
security interest, mortgage or other lien or encumbrance created or imposed
pursuant to any Loan Document and (B) if such Loan is not the first Loan, each
item referred to in any of clauses (i) through (xi) of this Section 4d)
required by any Loan Document or deemed necessary or desirable by the Bank at
the sole option of the Bank;
xiii. Payment of the remaining $9,200 of the commitment
fee of $27,500 payable to the Bank by the Borrower in connection
<PAGE>
- 38 -
with Revolving Loans and the remaining $5,000 of the commitment fee of $15,000
payable to the Bank by the Borrower in connection with the Term Loan; and
xiv. Payment of all costs and expenses payable pursuant
to Section 9a of this Agreement at or before the time such Loan
is to be made.
5. REPRESENTATIONS AND WARRANTIES. Except as fully and
accurately described in Exhibit A attached to and made a part of this
Agreement, the Borrower represents and warrants to the Bank, and, except to the
extent updated in a certificate executed by the President, a Vice President or
the chief financial officer of the Borrower and received by the Bank before the
time any Loan is made, the Borrower shall be deemed to represent and warrant to
the Bank as of such time, as follows:
a. Use of Proceeds. The proceeds of each Revolving Loan will
be used only for working capital of the Borrower. The proceeds of the Term Loan
will be used only (i) to repay an existing term loan to the Borrower from Fleet
Bank and (ii) for working capital of the Borrower.
b. Subsidiaries; Affiliates. The Borrower has (i) no
Subsidiary and (ii) no Affiliate that is not an individual.
<PAGE>
- 39 -
c. Good Standing; Qualification; Authority. Each of
the Borrower and all Subsidiaries (i) is duly organized, validly
existing and in good standing under the law of the jurisdiction
in which it is organized, (ii) is duly qualified and in good
standing as a foreign Person of its type authorized to do
business in each jurisdiction in which such qualification is
necessary and in which the failure to be so qualified would have
any Material Adverse Effect and (iii) has the power and authority
to conduct its business and operations as now and as anticipated
that its business and operations will hereafter be conducted, own
each of its assets and use each of its assets as now and as
anticipated that such asset will hereafter be used.
d. Control. There is no Person other than the
Borrower and all Subsidiaries who or that, insofar as the
Borrower or any Subsidiary has knowledge or reason to know, has
(i) direct Control over the Borrower or any Subsidiary or (ii)
the right pursuant to any agreement with any Person having such
Control to acquire such Control.
e. Compliance. The present and currently anticipated
conduct of the business and operations of the Borrower and each
Subsidiary, the present and currently anticipated ownership and
use of each asset of the Borrower and each Subsidiary, the
present and currently anticipated use of each asset leased by the
<PAGE>
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Borrower or any Subsidiary as a lessee and the generation, treatment, storage,
recycling, transportation and disposal by the Borrower or any Subsidiary of any
Hazardous Material are in compliance in each material respect with each
applicable Law (including, but not limited to, each applicable Environmental
Law), except for any failure to so comply that would not have any Material
Adverse Effect. Each trademark, service mark, trade name, patent, copyright,
license and franchise, and each authorization, certification, certificate,
approval, permit and consent from, registration and filing with, declaration,
report and notice to and other act by or relating to any Person, necessary for
the present or currently anticipated conduct of the business or operations of
the Borrower or any Subsidiary, the present or currently anticipated ownership
or use of any asset of the Borrower or any Subsidiary, the present or currently
anticipated use of any asset leased by the Borrower or any Subsidiary as a
lessee or the generation, treatment, storage, recycling, transportation or
disposal by the Borrower or any Subsidiary of any Hazardous Material has been
duly obtained, made, given or done and is in full force and effect unless the
failure to so obtain, make, give or do it and maintain it in full force and
effect would not have any Material Adverse Effect. Except to the extent that
the failure to do so would not have any Material Adverse Effect, each of the
Borrower and all Subsidiaries (i) has taken or caused to be taken each action
<PAGE>
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necessary to preserve and protect each such trademark, service mark, trade
name, patent, copyright, license and franchise with respect to it and (ii) is
in compliance in each material respect with (A) each such authorization,
certification, certificate, approval, permit and consent with respect to it,
(B) each certificate or articles of incorporation or organization, by-laws,
operating or partnership agreement or other charter, organizational or
governing document of it and (C) each agreement and instrument to which it is a
party or by which it or any of its assets is bound.
f. Environmental Matters. To the best of the
current knowledge of the Borrower after due inquiry:
i. There has not been any Release or threatened Release of
any Hazardous Material at, in, on or under any property now or previously
owned, leased as a lessee or used by the Borrower or any Subsidiary that,
whether alone or together with any other such Release or threatened Release or
other such Releases and threatened Releases, has had or (so far as the Borrower
or any Subsidiary can foresee) will or is reasonably likely to have any
Material Adverse Effect;
ii. No property now or previously owned, leased as a
lessee or used by the Borrower or any Subsidiary and no property
<PAGE>
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to or from which the Borrower or any Subsidiary has transported or arranged for
the transportation of any Hazardous Material has been listed or proposed for
listing on the National Priorities List pursuant to CERCLA, the Comprehensive
Environmental Response, Compensation and Liability Information System or any
other list of sites requiring investigation or clean-up that is maintained by
any Governmental Authority, except for any such listing that will not and is
not reasonably likely to have any Material Adverse Effect;
iii. There is no active or abandoned underground storage tank at,
in, on or under any property now or previously owned, leased as a lessee or
used by the Borrower or any Subsidiary that, whether alone or together with any
other such storage tank or other such storage tanks, has had or (so far as the
Borrower or any Subsidiary can foresee) will or is reasonably likely to have
any Material Adverse Effect;
iv. There is no polychlorinated biphenyl or friable asbestos
present at, in, on or under any property now or previously owned, leased as a
lessee or used by the Borrower or any Subsidiary that, whether alone or
together with any other such polychlorinated biphenyl, other such
polychlorinated biphenyls or any other friable asbestos, has had or (so far as
<PAGE>
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the Borrower or any Subsidiary can foresee) will or is reasonably
likely to have any Material Adverse Effect; and
v. There exists no condition at, in, on or under any property
now or previously owned, leased as a lessee or used by the Borrower or any
Subsidiary that, after notice, lapse of time or both notice and lapse of time,
would or would be reasonably likely to give rise to any material liability
under any Environmental Law that would or would be reasonably likely to have
any Material Adverse Effect.
g. Legality. The obtaining of each Loan by the
Borrower (i) is and will be in furtherance of the purposes of the
Borrower and within the power and authority of the Borrower, (ii)
does not and will not (A) violate or result in any violation of
any Law or any judgment, order or award of any Governmental
Authority or arbitrator or (B) violate, result in any violation
of, constitute (whether immediately or after notice, lapse of
time or both notice and lapse of time) any default under or
result in or require the imposition or creation of any security
interest in or mortgage or other lien or encumbrance upon any
asset of the Borrower pursuant to (I) the certificate or articles
of incorporation or other charter document of the Borrower, (II)
the by-laws or other organizational document of the Borrower,
(III) any shareholder agreement, voting trust or similar
<PAGE>
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arrangement applicable to any stock of the Borrower, (IV) any resolution or
other action of record of the shareholders or board of directors of the
Borrower or (V) any agreement or instrument to which the Borrower is a party or
by which the Borrower or any asset of the Borrower is bound and (iii) has been
duly authorized by each necessary action of the shareholders or board of
directors of the Borrower. The execution, delivery to the Bank and performance
of each Loan Document by each Person other than the Bank who or that is
contemplated by such Loan Document as a party thereto and the imposition or
creation of each security interest, mortgage and other lien and encumbrance
imposed or created pursuant thereto (i) do not and will not (A) violate or
result in any violation of any Law or any judgment, order or award of any
Governmental Authority or arbitrator or (B) violate, result in any violation
of, constitute (whether immediately or after notice, lapse of time or both
notice and lapse of time) any default under or, other than pursuant to any Loan
Document, result in or require the imposition or creation of any security
interest in or mortgage or other lien or encumbrance upon any asset of such
Person pursuant to any agreement or instrument to which such Person is a party
or by which such Person or any asset of such Person is bound and (ii) if such
Person is not an individual, (A) are and will be in furtherance of the purposes
of such Person and within the power and authority of such Person, (B) do not
and will not violate, result in any violation of or
<PAGE>
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result in or require the imposition or creation of any security interest in or
mortgage or other lien or encumbrance upon any asset of such Person pursuant to
(I) any certificate or articles of incorporation or organization, by-laws,
operating or partnership agreement or other charter, organizational or
governing document of such Person, (II) any shareholder agreement, voting trust
or similar arrangement applicable to any stock of or other ownership interest
in such Person or (III) any resolution or other action of record of any such
shareholders or members of such Person, any board of directors or trustees of
such Person or any other Person responsible for governing such Person and (C)
have been duly authorized by each necessary action of any such shareholders,
members, board of directors or trustees or other Person. Each authorization,
certification, certificate, approval, permit, consent, franchise and license
from, registration and filing with, declaration, report and notice to and other
act by or relating to any Person required as a condition of the obtaining of
any Loan by the Borrower, the execution, delivery to the Bank or performance of
any Loan Document by any Person other than the Bank who or that is contemplated
by such Loan Document as a party thereto or the imposition or creation of any
security interest, mortgage or other lien or encumbrance imposed or created
pursuant to any Loan Document has been duly obtained, made, given or done and
is in full force and effect. Each Loan Document has been duly executed
<PAGE>
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and delivered to the Bank by each Person other than the Bank who or that is
contemplated by such Loan Document as a party thereto.
h. Fiscal Year. The fiscal year of the Borrower and
each Subsidiary is the 52- or 53-week period ending on the Sunday
falling on or nearest to December 31.
i. Financial Statements. The Borrower has heretofore
delivered to the Bank a copy of each of the following financial
statements:
i. Audited consolidated statements of income and cash
flows of the Borrower for its fiscal year ended December 31,
1995;
ii. An audited consolidated balance sheet of the
Borrower dated as of December 31, 1995;
iii. Unaudited consolidated statements of income and
cash flows of the Borrower for its fiscal quarter ended June 30,
1996; and
iv. An unaudited consolidated balance sheet of the
Borrower dated as of June 30, 1996.
<PAGE>
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Each such financial statement (i) is correct and complete in each material
respect, (ii) is in accordance with the records of the Borrower and each
Subsidiary, (iii) presents fairly (subject to normal and nonmaterial year-end
adjustments if the fiscal period covered thereby is not a fiscal year of the
Borrower or the date thereof is not the last day of such a fiscal year) the
results of the consolidated operations and consolidated cash flows of the
Borrower for the fiscal period covered thereby, or the consolidated financial
position of the Borrower as of the date thereof, in conformity with generally
accepted accounting principles applied consistently with the application of
such principles with respect to the preceding fiscal period of the Borrower and
(iv) if a balance sheet, reflects each indebtedness and other obligation of the
Borrower or any Subsidiary as of the date thereof that has had or (so far as
the Borrower or any Subsidiary can foresee) will or is reasonably likely to
have any Material Adverse Effect.
j. Material Adverse Effects; Distributions. Since
June 30, 1996, (i) there has not occurred or existed any event or
condition that has had or (so far as the Borrower or any
Subsidiary can foresee) will or is reasonably likely to have any
Material Adverse Effect, and (ii) neither the Borrower nor any
Subsidiary has declared, paid, made or agreed or otherwise
<PAGE>
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incurred any obligation to declare, pay or make any Distribution.
k. Tax Returns and Payments. Each of the Borrower and all
Subsidiaries has duly (i) filed each tax return required to be filed by it and
(ii) except to the extent that the failure to do so would not have any Material
Adverse Effect, paid or caused to be paid each tax, assessment, fee, charge,
fine and penalty that has been imposed by any Governmental Authority upon it or
any of its assets, income and franchises and has become due.
l. Certain Indebtedness. Neither the Borrower nor any
Subsidiary has any indebtedness or other obligation (i) arising from the
borrowing of any money or the deferral of the payment of the purchase price of
any asset or (ii) pursuant to any guaranty or other contingent obligation
(including, but not limited to, any obligation to (A) maintain the net worth of
any other Person, (B) purchase or otherwise acquire or assume any indebtedness
or other obligation or (C) provide funds for or otherwise assure the payment of
any indebtedness or other obligation, whether by means of any investment, by
means of any purchase, sale or other acquisition or disposition of any asset or
service or otherwise), except for indebtedness and other obligations (I) to the
Bank, (II) constituting unsecured normal trade debt incurred upon customary
terms in the ordinary course
<PAGE>
- 49 -
of its business or (III) arising from the endorsement in the ordinary course of
its business of any check or other negotiable instrument for deposit or
collection.
m. Pension Obligations. No Pension Plan was or is a
multiemployer plan, as such term is defined in Section 3(37) of ERISA. The
present value of all benefits vested under any Pension Plan does not exceed the
value of the assets of such Pension Plan allocable to such vested benefits.
Since September 2, 1974, (i) no Prohibited Transaction that could subject any
Pension Plan to any tax or penalty imposed pursuant to the Internal Revenue
Code or ERISA has been engaged in by any Pension Plan, (ii) there has not
occurred or existed with respect to any Pension Plan any Reportable Event or
Accumulated Funding Deficiency or any event or condition that (A) but for a
waiver by the Internal Revenue Service would constitute an Accumulated Funding
Deficiency, (B) after notice, lapse of time or both notice and lapse of time
will or might constitute a Reportable Event or (C) constituted or will or might
constitute grounds for the institution by the Pension Benefit Guaranty
Corporation of any proceeding under ERISA seeking the termination of such
Pension Plan or the appointment of a trustee to administer such Pension Plan,
(iii) no Pension Plan has been terminated, (iv) no trustee has been appointed
by a United States District Court to administer any Pension Plan, (v) no
proceeding seeking the
<PAGE>
- 50 -
termination of any Pension Plan or the appointment of a trustee to administer
any Pension Plan has been instituted, and (vi) neither the Borrower nor any
Subsidiary has made any complete or partial withdrawal from any Pension Plan.
n. Leases. Neither the Borrower nor any Subsidiary is
obligated (whether as a lessee or otherwise) pursuant to any capital or
operating lease. Each capital or operating lease pursuant to which the Borrower
or any Subsidiary is obligated (whether as a lessee or otherwise) entitles each
lessee thereunder to undisturbed possession of each asset leased thereby during
the full term thereof.
o. Assets; Liens and Encumbrances. Each of the
Borrower and all Subsidiaries has good and marketable title to
each asset it purports to own, and no such asset is subject to
any security interest, mortgage or other lien or encumbrance,
except for Permitted Liens.
p. Investments. Neither the Borrower nor any
Subsidiary has any investment (whether by means of any purchase
or other acquisition of any security or interest, by means of any
capital contribution or otherwise) in any other Person, except
for Permitted Investments.
<PAGE>
- 51 -
q. Loans. Neither the Borrower nor any Subsidiary
has made any loan, advance or other extension of credit with
respect to which any sum is owing to it, except for Permitted
Loans.
r. Judgments and Litigation. There is no outstanding
judgment, order or award of any Governmental Authority or arbitrator, and no
pending or threatened claim, audit, investigation or action or other legal
proceeding by or before any Governmental Authority or before any arbitrator,
that (i) is against or otherwise involves the Borrower, any Subsidiary or any
asset of the Borrower or any Subsidiary, (ii) has had or (so far as the
Borrower or any Subsidiary can foresee) will or is reasonably likely to have
any Material Adverse Effect or (iii) renders invalid or questions the validity
of any Loan Document or any action taken or to be taken pursuant to any Loan
Document. No such outstanding judgment, order or award, and no such audit,
investigation or action or other legal proceeding, described in Exhibit A
attached to and made a part of the Agreement has had or (so far as the Borrower
or any Subsidiary can foresee) will or is reasonably likely to have any
Material Adverse Effect.
s. Transactions with Affiliates. There exists no
material agreement, arrangement, transaction or other dealing
(including, but not limited to, the purchase, sale, lease,
<PAGE>
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exchange or other acquisition or disposition of any asset and the rendering of
any service) between the Borrower or any Subsidiary and any Affiliate, except
for agreements, arrangements, transactions and other dealings in the ordinary
course of business of the Borrower or any Subsidiary upon fair and reasonable
terms no less favorable to it than would apply in a comparable arm's length
agreement, arrangement, transaction or other dealing with a Person who or that
is not an Affiliate.
t. Default. There does not exist any Event of
Default or Potential Event of Default.
u. Full Disclosure. Neither any Loan Document nor any
certificate, financial statement or other writing heretofore provided to the
Bank by or on behalf of the Borrower or any Subsidiary contains any statement
of fact that is incorrect or misleading in any material respect or omits to
state any fact necessary to make any statement of fact contained therein not
incorrect or misleading in any material respect.
6. AFFIRMATIVE COVENANTS. During the term of this
Agreement, the Borrower shall do the following unless the prior
written consent of the Bank to not doing so shall have been
obtained by the Borrower:
<PAGE>
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a. Good Standing; Qualification. Cause each of the Borrower
and all Subsidiaries at all times to (i) maintain its corporate, partnership or
other existence in good standing and (ii) remain or become and remain duly
qualified and in good standing as a foreign Person of its type authorized to do
business in each jurisdiction in which such qualification is or becomes
necessary and in which the failure to be so qualified would have any Material
Adverse Effect;
b. Compliance. (i) Except to the extent that the
failure to do so would not have any Material Adverse Effect,
cause each of the Borrower and all Subsidiaries at all times to
(A) conduct its business and operations, own and use each of its
assets, use each asset leased by it as a lessee, and generate,
treat, store, recycle, transport and dispose of all Hazardous
Material in its possession or control, in compliance in each
material respect with each applicable Law (including, but not
limited to, each applicable Environmental Law), (B) maintain in
full force and effect, preserve and protect each trademark,
service mark, trade name, patent, copyright, license and
franchise, and obtain, make, give or do and maintain in full
force and effect each authorization, certification, certificate,
approval, permit and consent from, registration and filing with,
declaration, report and notice to and other act by or relating to
any Person, necessary for the conduct of its business or
<PAGE>
- 54 -
operations, the ownership or use of any of its assets, the use of any asset
leased by it as a lessee or the generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Material in its possession or
control and (C) remain in compliance in each material respect with (I) each
such authorization, certification, certificate, approval, permit, consent,
franchise and license, (II) each certificate or articles of incorporation or
organization, by-laws, operating or partnership agreement or other charter,
organizational or governing document of it and (III) each agreement and
instrument to which it is a party or by which it or any of its assets is bound,
(ii) immediately upon acquiring knowledge or reason to know of any notice or
allegation that the Borrower or any Subsidiary (A) has not complied in any
material respect with any applicable Law (including, but not limited to, any
Environmental Law) in the conduct of its business or operations, the ownership
or use of any of its assets, the use of any asset leased by it as a lessee or
the generation, treatment, storage, recycling, transportation or disposal of
any Hazardous Material in its possession or control, (B) has not maintained in
full force and effect, preserved or protected any such trademark, service mark,
trade name, patent, copyright, license or franchise or obtained, made, given,
done or maintained in full force and effect any such authorization,
certification, certificate, approval, permit, consent, registration, filing,
declaration, report, notice or
<PAGE>
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act, (C) has not complied in any material respect with any such license,
franchise, authorization, certification, certificate, approval, permit,
consent, certificate or articles of incorporation or organization, by-laws,
operating or partnership agreement, other charter, organizational or governing
document, agreement or instrument or (D) is or may be liable for any cost
associated with or damage resulting from any Release, threatened Release or
clean-up of any Hazardous Material, provide to the Bank a certificate executed
by the President, a Vice President or the chief financial officer of the
Borrower and specifying the nature of such notice or allegation and what action
the Borrower has taken, is taking or proposes to take with respect thereto and
(iii) immediately upon acquiring knowledge or reason to know of any development
with respect to any such notice or allegation theretofore disclosed by the
Borrower to the Bank that has or (so far as the Borrower or any Subsidiary can
foresee) will or is reasonably likely to have any Material Adverse Effect,
provide to the Bank a certificate executed by the President, a Vice President
or the chief financial officer of the Borrower and specifying the nature of
such development and what action the Borrower has taken, is taking or proposes
to take with respect thereto;
c. Working Capital; Current Ratio. Assure that at
all times (i) the consolidated net working capital of the Borrow-
<PAGE>
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er is at least $6,500,000 and (ii) all consolidated current assets of the
Borrower other than indebtedness and other obligations of any Affiliate are not
less than 150% of all consolidated current liabilities of the Borrower other
than indebtedness and other obligations of the Borrower that are fully
subordinated pursuant to a subordination agreement in form and substance
satisfactory to the Bank to all indebtedness and other obligations of the
Borrower to the Bank, whether now existing or hereafter arising or accruing;
d. Cash Flow Coverage. Assure that, beginning with the period
consisting of the four fiscal quarters of the Borrower ending December 29,
1996, the total of the consolidated net income before income taxes,
depreciation, amortization and interest expense of the Borrower for each period
consisting of four fiscal quarters of the Borrower is not less than 120% of the
total of (i) all interest paid or payable during such period in connection with
any indebtedness or other obligation of the Borrower or any Subsidiary arising
from the borrowing of any money or the deferral of the purchase price or
capital lease of any asset, (ii) all principal scheduled to be payable during
the following four fiscal quarters of the Borrower in connection with any such
indebtedness or other obligation, (iii) all cash dividends declared or paid by
the Borrower during such period and
<PAGE>
- 57 -
(iv) all compensation paid or payable by the Borrower to
Lanesborough Corporation during such period;
e. Net Worth; Liabilities. Assure that at all times (i) the
consolidated tangible net worth of the Borrower is at least $18,000,000 and
(ii) all consolidated liabilities of the Borrower other than indebtedness and
other obligations of the Borrower that are fully subordinated pursuant to a
subordination agreement in form and substance satisfactory to the Bank to all
indebtedness and other obligations of the Borrower to the Bank, whether now
existing or hereafter arising or accruing, do not exceed 150% of such
consolidated tangible net worth;
f. Accounting; Reserves; Tax Returns. Cause each of
the Borrower and all Subsidiaries at all times to (i) maintain a
system of accounting established and administered in accordance
with generally accepted accounting principles, (ii) establish
each reserve it is required by generally accepted accounting
principles to establish and (iii) file each tax return it is
required to file;
g. Financial and Other Information; Certificates of
No Default. Provide to the Bank, in form satisfactory to the
Bank, (i) within 45 days after the end of each fiscal quarter of
each fiscal year of the Borrower, consolidating and consolidated
<PAGE>
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statements of income and cash flows of the Borrower for such fiscal quarter and
the period from the beginning of such fiscal year to the end of such fiscal
quarter and a consolidating and consolidated balance sheet of the Borrower as
of the end of such fiscal quarter, each to be in reasonable detail, to set
forth comparative consolidated figures for the corresponding period in the
preceding fiscal year of the Borrower and to be certified by the chief
financial officer of the Borrower to be correct and complete, to be in
accordance with the records of the Borrower and each Subsidiary and to present
fairly, subject to normal and nonmaterial year-end adjustments, the results of
the operations and cash flows of the Borrower for such fiscal quarter and the
period from the beginning of such fiscal year to the end of such fiscal
quarter, and the financial position of the Borrower as of the end of such
fiscal quarter, in conformity with generally accepted accounting principles
applied consistently with the application of such principles with respect to
the preceding fiscal quarter of the Borrower, (ii) within 90 days after the end
of each fiscal year of the Borrower, consolidating and consolidated statements
of income and cash flows of the Borrower for such fiscal year and a
consolidating and consolidated balance sheet of the Borrower as of the end of
such fiscal year, each to be in reasonable detail, to set forth comparative
consolidated figures for the preceding fiscal year of the Borrower and to be
certified by an independent certified public accountant
<PAGE>
- 59 -
acceptable to the Bank to present fairly the results of the operations and cash
flows of the Borrower for such fiscal year, and the financial position of the
Borrower as of the end of such fiscal year, in conformity with generally
accepted accounting principles applied consistently with the application of
such principles with respect to the preceding fiscal year of the Borrower and
to have been based upon an audit by such accountant that was made in accordance
with generally accepted auditing standards and accordingly included such tests
of accounting records and such other accounting procedures as such accountant
deemed necessary in the circumstances, (iii) together with each statement of
income and balance sheet required to be delivered by the Borrower to the Bank
pursuant to clause (i) or (ii) of this Section 6g, a certificate (A) executed
by the President, a Vice President or the chief financial officer of the
Borrower, (B) setting forth whatever computations are required to establish
whether the Borrower was in compliance with (I) each of the covenants contained
in Sections 6c, 6d and 6e of this Agreement during the period covered by such
statement of income and (II) if the period covered by such statement of income
is a fiscal year of the Borrower, each of the covenants contained in Sections
7c, 7f and 7g of this Agreement during such period, (C) stating that the
signers of such certificate have reviewed this Agreement and have made or have
caused to be made under their supervision a review of the business, operations,
assets, affairs and condition
<PAGE>
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(financial or other) of each of the Borrower and all Subsidiaries during the
period beginning on the first date covered by such statement of income and
ending on the date of such certificate and (D) if during the period described
in clause (iii)(C) of this Section 6g there did not occur or exist and there
does not then exist any Event of Default or Potential Event of Default, so
stating or, if during such period any Event of Default or Potential Event of
Default occurred or existed or any Event of Default or Potential Event of
Default then exists, stating the nature thereof, the date of occurrence or
period of existence thereof and what action the Borrower has taken, is taking
or proposes to take with respect thereto and (iv) promptly upon the request of
the Bank, all additional information relating to the Borrower, any Subsidiary
or the business, operations, assets, affairs or condition (financial or other)
of the Borrower or any Subsidiary that is so requested;
h. Information as to Accounts and Inventory. At such
intervals as the Bank prescribes and in any event upon the making
of any request for a Revolving Loan and during the first fifteen
days of each calendar month, provide to the Bank (i) a
certificate executed by the chief financial officer of the
Borrower setting forth (A) the aggregate sum owing by Account
Debtors with respect to all Accounts of the Borrower on the date
of such certificate, (B) the aggregate sum owing by Account
<PAGE>
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Debtors with respect to all Eligible Accounts on the date of such certificate,
(C) the aggregate cost and fair market value of all Inventory of the Borrower
on the date of such certificate and (D) the aggregate cost and fair market
value of all Eligible Inventory on the date of such certificate, (ii) a
schedule showing the aging of all Accounts of the Borrower, Eligible Accounts,
Inventory of the Borrower and Eligible Inventory, (iii) a schedule identifying
each Account of the Borrower not previously so identified and setting forth (A)
the name and address of each Account Debtor with respect to any such Account,
(B) the date, number, amount and due date of each invoice relating to any such
Account and (C) a statement as to which of such Accounts constitute Eligible
Accounts and (iv) if requested by the Bank, a copy of each invoice, bill of
lading, shipping document, delivery receipt and other evidence of shipment or
receipt of any Inventory of the Borrower or performance of any service by the
Borrower giving rise to any Account identified to the Bank in any schedule
provided to the Bank pursuant to clause (iii) of this Section 6h, the provision
to the Bank by the Borrower of any such certificate, schedule, invoice, bill of
lading, shipping document, delivery receipt or other evidence to constitute a
representation and warranty to the Bank by the Borrower of the genuineness,
correctness and completeness thereof on the date of such provision thereof to
the Bank by the Borrower;
<PAGE>
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i. Payment of Certain Indebtedness. Cause each of the
Borrower and all Subsidiaries to pay, before the end of any applicable grace
period, each tax, assessment, fee, charge, fine and penalty imposed by any
Governmental Authority upon it or any of its assets, income and franchises and
each claim and demand of any materialman, mechanic, carrier, warehouseman,
garageman or landlord against it; provided, however, that no such tax,
assessment, fee, charge, fine, penalty, claim or demand shall be required to be
so paid so long as (i) the validity thereof is being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, (ii)
adequate reserves have been appropriately established therefor, (iii) the
execution or other enforcement of any lien resulting therefrom is effectively
stayed and (iv) the nonpayment thereof does not have any Material Adverse
Effect;
j. Maintenance of Title and Assets; Insurance. Cause
each of the Borrower and all Subsidiaries to (i) at all times
maintain good and marketable title to each asset it purports to
own, (ii) at all times maintain each of its tangible assets in
good working order and condition, (iii) at any time and from time
to time make each replacement of any of its tangible assets
necessary or desirable for the conduct of its business or opera-
tions, (iv) at all times keep each of its insurable tangible
assets insured with financially sound and reputable insurance
<PAGE>
- 63 -
carriers against fire and other hazards to which extended coverage applies in
such manner and to the extent that the amount of insurance carried on such
asset shall not be less than the greater of (A) the replacement value of such
asset and (B) the percentage of the actual cash value of such asset required by
the policy providing such insurance in order that it shall not become its own
insurer for any part of an otherwise recoverable loss with respect to such
asset and (v) at all times keep adequately insured with financially sound and
reputable insurance carriers against business interruption and liability on
account of damage to any Person or asset or pursuant to any applicable workers'
compensation Law;
k. Inspections. Upon reasonable notice from the Bank
and at reasonable times, promptly permit each officer, employee,
accountant, attorney and other agent of the Bank to (i) visit and
inspect each of the premises of the Borrower and each Subsidiary,
(ii) examine, audit, copy and extract each record of the Borrower
and each Subsidiary and (iii) discuss the business, operations,
assets, affairs and condition (financial or other) of the
Borrower and each Subsidiary with each responsible officer of the
Borrower and each Subsidiary and each independent accountant of
the Borrower and each Subsidiary;
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l. Pension Obligations. (i) Immediately upon acquiring
knowledge or reason to know of the occurrence or existence with respect to any
Pension Plan of any Prohibited Transaction, Reportable Event or Accumulated
Funding Deficiency or any event or condition that (A) but for a waiver by the
Internal Revenue Service would constitute an Accumulated Funding Deficiency,
(B) after notice, lapse of time or both notice and lapse of time will or might
constitute a Reportable Event or (C) constitutes or will or might constitute
grounds for the initiation by the Pension Benefit Guaranty Corporation of any
proceeding under ERISA seeking the termination of such Pension Plan or the
appointment of a trustee to administer such Pension Plan, provide to the Bank a
certificate executed by the President, a Vice President or the chief financial
officer of the Borrower and specifying the nature of such Prohibited
Transaction, Reportable Event, Accumulated Funding Deficiency, event or
condition, what action the Borrower has taken, is taking or proposes to take
with respect thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation with respect thereto and (ii) immediately upon acquiring
knowledge or reason to know of (A) the institution by the Pension Benefit
Guaranty Corporation or any other Person of any proceeding under ERISA seeking
the termination of any Pension Plan or the appointment of a trustee to
administer any Pension Plan or (B) the complete or partial
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withdrawal or proposed complete or partial withdrawal by the Borrower or any
Subsidiary from any Pension Plan, provide to the Bank a certificate executed by
the President, a Vice President or the chief financial officer of the Borrower
and describing such proceeding, withdrawal or proposed withdrawal;
m. Changes in Management, Ownership and Control. Immediately
upon acquiring knowledge or reason to know of any change in (i) the identity of
the Chairman, President or chief executive officer of the Borrower or any
Subsidiary, (ii) the beneficial ownership of any stock of or other ownership
interest in the Borrower or any Subsidiary by any Person having Control of the
Borrower or any Subsidiary or (iii) direct Control of the Borrower or any
Subsidiary, provide to the Bank a certificate executed by the President, a Vice
President or the chief financial officer of the Borrower and specifying such
change;
n. Judgments. Immediately upon acquiring knowledge
or reason to know of any judgment, order or award of any
Governmental Authority or arbitrator that (i) is against or
otherwise involves the Borrower, any Subsidiary or any asset of
the Borrower or any Subsidiary, (ii) has or (so far as the
Borrower or any Subsidiary can foresee) will or is reasonably
likely to have any Material Adverse Effect or (iii) renders
invalid any Loan Document or any action taken or to be taken
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pursuant to any Loan Document, provide to the Bank a certificate executed by
the President, a Vice President or the chief financial officer of the Borrower
and specifying the nature of such judgment, order or award and what action the
Borrower has taken, is taking or proposes to take with respect thereto;
o. Litigation. (i) Immediately upon acquiring knowl-
edge or reason to know of the commencement or threat of any
claim, audit, investigation or action or other legal proceeding
by or before any Governmental Authority or before any arbitrator
that (A) is against or otherwise involves the Borrower, any
Subsidiary or any asset of the Borrower or any Subsidiary and (I)
either involves in excess of $500,000 or results in in excess of
$500,000 in the aggregate for the Borrower and all Subsidiaries
being involved in all claims, audits, investigations and actions
and other legal proceedings by or before any Governmental
Authority or before any arbitrator against or otherwise involving
the Borrower, any Subsidiary or any asset of the Borrower or any
Subsidiary or (II) seeks injunctive or similar relief, (B) has or
(so far as the Borrower or any Subsidiary can foresee) will or is
reasonably likely to have any Material Adverse Effect or (C)
questions the validity of any Loan Document or any action taken
or to be taken pursuant to any Loan Document, provide to the Bank
a certificate executed by the President, a Vice President or the
chief financial officer of the Borrower and specifying the nature
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of such claim, audit, investigation or action or other legal proceeding and
what action the Borrower has taken, is taking or proposes to take with respect
thereto and (ii) immediately upon acquiring knowledge or reason to know of any
development with respect to any claim, audit, investigation or action or other
legal proceeding theretofore disclosed by the Borrower to the Bank that has or
(so far as the Borrower or any Subsidiary can foresee) will or is reasonably
likely to have any Material Adverse Effect, provide to the Bank a certificate
executed by the President, a Vice President or the chief financial officer of
the Borrower and specifying the nature of such development and what action the
Borrower has taken, is taking or proposes to take with respect thereto;
p. Liens and Encumbrances. Immediately upon acquiring
knowledge or reason to know that any asset of the Borrower or any Subsidiary
has or may become subject to any security interest, mortgage or other lien or
encumbrance other than Permitted Liens, provide to the Bank a certificate
executed by the President, a Vice President or the chief financial officer of
the Borrower and specifying the nature of such security interest, mortgage or
other lien or encumbrance and what action the Borrower has taken, is taking or
proposes to take with respect thereto;
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q. Events and Conditions Affecting Accounts. Promptly upon
acquiring knowledge or reason to know of any event or condition that causes or
will or is reasonably likely to cause any Account of the Borrower to cease to
be an Eligible Account or that adversely affects or will or might adversely
affect the value of such account or any of the Bank's rights and remedies
relating to such Account (including, but not limited to, (i) any return or
rejection of any Inventory of the Borrower, (ii) any delay in the delivery of
any Inventory of the Borrower or the performance of any service by the
Borrower, (iii) any demand or claim for any adjustment or credit made by or any
dispute with any Account Debtor and (iv) any Account Debtor being dissolved,
ceasing to exist, assigning or otherwise transferring or disposing of all or
substantially all of his, her or its assets, dying, becoming incompetent or
insolvent (however such insolvency is evidenced), generally failing to pay his,
her or its debts as they become due, suspending or ceasing his, her or its
business, having any receiver, trustee, custodian or similar Person for him,
her or it or any of his, her or its assets appointed (whether with or without
his, her or its consent), making any assignment for the benefit of creditors or
commencing or having commenced against him, her or it any case or other
proceeding pursuant to any Bankruptcy Law or any formal or informal proceeding
for the dissolution, liquidation or winding up of the affairs of or the
settlement of claims against him, her or it),
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provide to the Bank a certificate executed by the President, a Vice President
or the chief financial officer of the Borrower and describing such event or
condition;
r. Defaults and Material Adverse Effects. Immediately upon
acquiring knowledge or reason to know of the occurrence or existence of (i) any
Event of Default or Potential Event of Default or (ii) any event or condition
that has or (so far as the Borrower or any Subsidiary can foresee) will or is
reasonably likely to have any Material Adverse Effect, provide to the Bank a
certificate executed by the President, a Vice President or the chief financial
officer of the Borrower and specifying the nature of such Event of Default,
Potential Event of Default, event or condition, the date of occurrence or
period of existence thereof and what action the Borrower has taken, is taking
or proposes to take with respect thereto;
s. Additional Guaranties and Security Agreements. Cause each
Person that becomes a Subsidiary after the date of this Agreement to execute
and deliver to the Bank, in form and substance satisfactory to the Bank, (i) a
guaranty agreement guaranteeing, without any limitation as to amount, the
payment of all indebtedness and other obligations of the Borrower to the Bank,
whether then existing or thereafter arising or accruing, and (ii) a security
agreement (A) securing, without any
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limitation as to amount, the payment of all such indebtedness and other
obligations and (B) covering all personal property and fixtures of such Person;
and
t. Further Actions. Promptly upon the request of the Bank,
execute and deliver or cause to be executed and delivered each writing, and
take or cause to be taken each other action, that the Bank shall deem necessary
or desirable at the sole option of the Bank in connection with any transaction
contemplated by any Loan Document.
7. NEGATIVE COVENANTS. During the term of this Agreement, the
Borrower shall not, without the prior written consent of the Bank, do, attempt
to do or agree or otherwise incur, assume or have any obligation to do, and the
Borrower shall assure that, without the prior written consent of the Bank, no
Subsidiary does, attempts to do or agrees or otherwise incurs, assumes or has
any obligation to do, any of the following:
a. Fiscal Year. Change its fiscal year;
b. Certain Indebtedness. Create, incur, assume or
have any indebtedness or other obligation (i) arising from the
borrowing of any money or the deferral of the payment of the
purchase price of any asset or (ii) pursuant to any guaranty or
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other contingent obligation (including, but not limited to, any obligation to
(A) maintain the net worth of any other Person, (B) purchase or otherwise
acquire or assume any indebtedness or other obligation or (C) provide funds for
or otherwise assure the payment of any indebtedness or other obligation,
whether by means of any investment, by means of any purchase, sale or other
acquisition or disposition of any asset or service or otherwise), except for
indebtedness and other obligations (I) to the Bank, (II) constituting unsecured
normal trade debt incurred upon customary terms in the ordinary course of its
business, (III) arising from the endorsement in the ordinary course of its
business of any check or other negotiable instrument for deposit or collection,
(IV) to any Affiliate for unsecured short-term advances made to it by such
Affiliate, (V) to Buffalo River Improvement Corporation in an aggregate
outstanding amount not exceeding $2,500,000 at any time, (VI) for reimbursement
to the issuers of, and in connection with, standby letters of credit that are
issued for its account solely for the purpose of providing credit support for
its workers' compensation programs and the aggregate face amounts of which do
not exceed $1,800,000 at any time for the Borrower and all Subsidiaries, (VII)
for reimbursement to the issuers of, and in connection with, documentary
letters of credit that are issued for its account in the ordinary course of its
business and the aggregate face amounts of which do not exceed $500,000 at any
time for the
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Borrower and all Subsidiaries, (VIII) for reimbursement to the issuers of, and
in connection with, insurance policies issued to it in the ordinary course of
its business and the aggregate outstanding amounts of which do not exceed
$1,800,000 at any time for the Borrower and all Subsidiaries or (IX) fully and
accurately described under the heading "Permitted Indebtedness" in Exhibit A
attached to and made a part of this Agreement;
c. Compensation. Pay or accrue during any fiscal
year of the Borrower to all Affiliates compensation (including,
but not limited to, salary, bonuses, consulting, management or
other fees, rentals and other payments) exceeding $700,000 in the
aggregate for the Borrower and all Subsidiaries, except for
compensation paid or accrued to any Affiliate who is an
individual for serving as one of its officers or directors if (i)
the board of directors of the Borrower has determined that the
amount of such compensation is reasonable and (ii) such
individual is an Affiliate solely by reason of such service;
d. Pension Obligations. If doing so would or would be likely
to have any Material Adverse Effect, (i) engage in any Prohibited Transaction
with respect to any Pension Plan, (ii) permit to occur or exist with respect to
any Pension Plan any Accumulated Funding Deficiency or any event or condition
that (A) but for a waiver by the Internal Revenue Service would constitute
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an Accumulated Funding Deficiency or (B) constitutes or will or might
constitute grounds for the institution by the Pension Benefit Guaranty
Corporation of any proceeding under ERISA seeking the termination of such
Pension Plan or the appointment of a trustee to administer such Pension Plan,
(iii) make any complete or partial withdrawal from any Pension Plan, (iv) fail
to make to any Pension Plan any contribution that it is required to make,
whether to meet any minimum funding standard under ERISA or any requirement of
such Pension Plan or otherwise, or (v) terminate any Pension Plan in any
manner, or otherwise take or omit to take any action with respect to any
Pension Plan, that would or might result in the imposition of any lien upon any
asset of the Borrower or any Subsidiary pursuant to ERISA;
e. Liens and Encumbrances. Cause or permit, whether
upon the happening of any contingency or otherwise, any of its
assets to be subject to any security interest, mortgage or other
lien or encumbrance, except for Permitted Liens;
f. Capital Expenditures. Make (whether by means of
any purchase or other acquisition of any asset, by means of any
capital lease or otherwise) capital expenditures exceeding
$5,000,000 in the aggregate for the Borrower and all Subsidiaries
during any fiscal year of the Borrower;
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g. Operating Leases. Create, incur, assume or have any
indebtedness or other obligation for fixed payments (whether rentals, taxes,
premiums for insurance or otherwise) pursuant to any operating lease (whether
as a lessee or otherwise) exceeding $300,000 in the aggregate for the Borrower
and all Subsidiaries during any fiscal year of the Borrower, except for such
obligations pursuant to any operating lease relating to any co-generation or
steam facility entered into by the Borrower or any Subsidiary after the date of
this Agreement;
h. Investments. Make any investment (whether by
means of any purchase or other acquisition of any security or
interest, by means of any capital contribution or otherwise) in
any Person, except for Permitted Investments;
i. Loans. (i) Make any loan, advance or other
extension of credit, except for Permitted Loans, or (ii) forgive
any indebtedness or other obligation arising from any loan,
advance or other extension of credit made by it;
j. Transactions with Affiliates. In the ordinary
course of its business or otherwise, enter into, assume or permit
to exist any agreement, arrangement, transaction or other dealing
(including, but not limited to, the purchase, sale, lease,
exchange or other acquisition or disposition of any asset and the
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rendering of any service) between it and any Affiliate or otherwise deal with
any Affiliate, except for (i) reasonable compensation within the limits set by
Section 6c of this Agreement for services actually performed, (ii) advances
made in the ordinary course of its business to any Affiliate who is one of its
officers and employees for out-of-pocket expenses incurred by such Affiliate on
its behalf in the conduct of its business or operations, (iii) agreements,
arrangements, transactions and other dealings in the ordinary course of its
business upon fair and reasonable terms no less favorable to it than would
apply in a comparable arm's-length agreement, arrangement, transaction or other
dealing with a Person who or that is not an Affiliate and (iv) agreements,
arrangements, transactions and other dealings fully and accurately described
under the heading "Permitted Affiliate Transactions" in Exhibit A attached to
and made a part of this Agreement;
k. Distributions. Declare, pay or make any
Distribution, except for (i) dividends payable solely in any of
its stock, (ii) cash dividends paid to the Borrower by any
Subsidiary (A) all of the outstanding shares of stock of which
other than shares required by any applicable Law to enable any
individual to serve as a director of such Subsidiary or (B) all
ownership interests in which are owned by the Borrower at the
time of such payment and (iii) provided that no Event of Default
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has occurred or existed and not been waived in writing by the Bank or cured by
the Borrower and no Event of Default will occur or exist immediately after or
as a direct or indirect result of the declaration or payment thereof, cash
dividends paid by the Borrower in any fiscal year of the Borrower that do not
exceed $5,000,000 reduced by, if the Borrower is ordered by or agrees with the
Environmental Protection Agency or the New York Department of Environmental
Conservation to conduct environmental remediation, the amount by which (A) the
aggregate estimated expenditures by the Borrower during such fiscal year for
such environmental remediation plus (I) the amount by which the aggregate
actual expenditures by the Borrower during the preceding fiscal year of the
Borrower for such environmental remediation exceeded the aggregate estimated
expenditures by the Borrower during such preceding fiscal year for such
environmental remediation or minus (II) the amount by which the aggregate
estimated expenditures by the Borrower during such preceding fiscal year for
such environmental remediation exceeded the aggregate actual expenditures by
the Borrower during such preceding fiscal year for such environmental
remediation exceed (B) the total of (I) $750,000 and (II) the aggregate
estimated amounts that Allied Signal Inc. is contractually obligated to pay or
reimburse to the Borrower during such fiscal year for such environmental
remediation plus (1) the amount by which the aggregate actual amounts paid or
reimbursed to the Borrower by
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Allied Signal Inc. during such preceding fiscal year for such environmental
remediation exceeded the aggregate estimated amounts that Allied Signal Inc.
was contractually obligated to pay or reimburse to the Borrower during such
preceding fiscal year for such environmental remediation or minus (2) the
amount by which the aggregate estimated amounts that Allied Signal Inc. was
contractually obligated to pay or reimburse to the Borrower during such
preceding fiscal year for such environmental remediation exceeded the aggregate
actual amounts paid or reimbursed to the Borrower by Allied Signal Inc. during
such preceding fiscal year for such environmental remediation;
l. Corporate and Other Changes. (i) Assign, sell, lease as a
lessor or otherwise transfer or dispose of all or substantially all of its
assets, (ii) dissolve or participate in any merger, consolidation or other
absorption, (iii) acquire all or substantially all of the assets of any other
Person, (iv) do business under or otherwise use any name other than its true
name and names listed under the heading "Fictitious Names" in Exhibit A
attached to and made a part of this Agreement, (v) make any election, or
terminate or permit to be revoked any election made by it, pursuant to
Subchapter S of the Internal Revenue Code or (vi) make any change in its
corporate or other business structure, any of its business objectives and
purposes or its
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business or operations that would or would be reasonably likely
to have any Material Adverse Effect;
m. Sale of Receivables. Assign, sell or otherwise
transfer or dispose of any of its notes receivable, accounts
receivable and chattel paper, whether with or without recourse;
n. Stock of or Ownership Interest in Subsidiary. Issue or
sell any stock of or other ownership interest in any Subsidiary, except (i) to
the minimum extent required by any applicable Law to enable any individual to
serve as a director of such Subsidiary, (ii) as a Distribution to the
shareholders of or holders of other ownership interests in such Subsidiary and
(iii) to the Borrower or another Subsidiary; or
o. Full Disclosure. Provide to the Bank or permit to be
provided to the Bank on its behalf any certificate, financial statement or
other writing that contains any statement of fact that is incorrect or
misleading in any material respect or omits to state any fact necessary to make
any statement of fact contained therein not incorrect or misleading in any
material respect.
8. INDEBTEDNESS IMMEDIATELY DUE. Upon or at any time
or from time to time after the occurrence or existence of any
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Event of Default other than, with respect to the Borrower, an Event of Default
described in clause (iv) of Section 1l of this Agreement, the aggregate
outstanding principal amounts of all Loans, all interest payable pursuant to
this Agreement and remaining unpaid and all other amounts payable by the
Borrower to the Bank pursuant to this Agreement and remaining unpaid shall, at
the sole option of the Bank and without any notice, demand, presentment or
protest of any kind (each of which is knowingly, voluntarily, intentionally and
irrevocably waived by the Borrower), become immediately due. Upon the
occurrence or existence of, with respect to the Borrower, any Event of Default
described in such clause (iv), such aggregate outstanding principal amounts,
all such interest and all such other amounts shall, without any notice, demand,
presentment or protest of any kind (each of which is knowingly, voluntarily,
intentionally and irrevocably waived by the Borrower), automatically become
immediately due. Upon such aggregate outstanding principal amounts, all such
interest and all such other amounts becoming immediately due, any obligation of
the Bank to make any additional Loan shall terminate.
9. EXPENSES; INDEMNIFICATION.
a. Loan Document Expenses. The Borrower shall pay to
the Bank on demand made by the Bank each cost and expense
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(including, but not limited to, the reasonable fees and disbursements of
counsel to the Bank and each documentary stamp or other excise or property tax,
assessment, fee and charge) incurred by the Bank in connection with (i) the
preparation of, entry into or performance of any Loan Document, whether or not
any Loan is made, or (ii) any modification of or release, consent or waiver
relating to any Loan Document, whether or not such modification, release,
consent or waiver becomes effective.
b. Collection Expenses. The Borrower shall pay to the Bank on
demand made by the Bank each cost and expense (including, but not limited to,
the reasonable fees and disbursements of counsel to the Bank, whether retained
for advice, litigation or any other purpose) incurred by the Bank in
endeavoring to (i) collect any of the outstanding principal amount of any Loan,
any interest payable pursuant to this Agreement and remaining unpaid or any
other amount payable by the Borrower to the Bank pursuant to this Agreement and
remaining unpaid, (ii) preserve or exercise any right or remedy of the Bank
relating to, enforce or realize upon any collateral, subordination, guaranty,
endorsement or other security or assurance of payment, whether now existing or
hereafter arising, that now or hereafter directly or indirectly secures the
repayment or payment of or is otherwise now or hereafter directly or indirectly
applicable to any of such outstanding principal
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amount, any such interest or any such other amount, (iii) preserve or exercise
any right or remedy of the Bank pursuant to any Loan Document or (iv) defend
against any claim, regardless of the basis or outcome thereof, asserted against
the Bank as a direct or indirect result of the entry into any Loan Document,
except for any claim for any tax imposed by any Governmental Authority upon any
income of the Bank or any interest or penalty relating to any such tax.
c. Expenses Due to Law Changes. The Borrower shall pay to the
Bank on demand made by the Bank each amount necessary to compensate the Bank
for any liability, cost or expense that is a direct or indirect result of (i)
any increase in the amount of capital required or expected to be maintained by
the Bank or any bank holding company of the Bank with respect to any Loan or
the obligation of the Bank to make any Loan that is due to (A) after the date
of this Agreement, the enactment or issuance of or any change in any Law
relating to capital adequacy of banks and banking holding companies or (B) the
compliance by the Bank or such bank holding company with any request or
direction relating to such capital made or issued by any Governmental Authority
after the date of this Agreement, (ii) any change in the basis of taxation of
repayments of the principal amount of any Loan or the payment of any interest
payable pursuant to this Agreement or any other amount payable by the Borrower
to the Bank pursuant to this
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Agreement that is due to, after the date of this Agreement, any change in the
basis of taxation of the overall net income of the Bank in the jurisdiction in
which the Bank has its principal place of business, (iii) any imposition or
application of or increase in any reserve or similar requirement applicable to
assets or liabilities of, deposits with or credit extended by the Bank, or for
the account of the Bank, that increases the cost to the Bank of making, funding
or maintaining any Loan and is due to, after the date of this Agreement, the
enactment or issuance of or any change in any Law, (iv) any imposition or
application of, increase in or deduction or withholding for any tax,
assessment, fee, charge, fine or penalty imposed by any Governmental Authority
that is due to, after the date of this Agreement, the enactment or issuance of
or any change in any Law or (v) without limiting any of clauses (i) through
(iv) of this sentence, after the date of this Agreement, any enactment or
issuance of or any change in any Law that directly or indirectly (A) results in
any increase in the cost to the Bank of making, funding or maintaining any Loan
or (B) reduces that amount of, requires the Bank to forego or, except for any
tax on the overall net income of the Bank in the jurisdiction in which the Bank
has its principal place of business, make any payment with respect to any
repayment by the Borrower of any of the principal amount of any Loan or the
payment by the Borrower of any interest payable pursuant to this Agreement or
any other amount payable by the
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Borrower to the Bank pursuant to this Agreement. The determination by the Bank
of the amount necessary to compensate the Bank for any such liability, cost or
expense shall, in the absence of manifest error, be conclusive and binding upon
the Borrower.
d. Environmental Indemnification. The Borrower shall
indemnify the Bank and each officer, employee, accountant, attorney and other
agent of the Bank on demand made by the Bank against each liability, cost and
expense (including, but not limited to, the reasonable fees and disbursements
of counsel to the Bank or such officer, employee, accountant, attorney or other
agent, whether retained for advice, litigation or any other purpose, and all
costs of any investigation, monitoring, removal, remediation or restoration)
(i) imposed on, incurred by or asserted against the Bank or such officer,
employee, accountant, attorney or other agent as a direct or indirect result of
(A) any Release or threatened Release of any Hazardous Material at, in, on or
under any property now or previously owned, leased as a lessee or used by the
Borrower or any Subsidiary, (B) any active or abandoned underground storage
tank at, in, on or under any such property, (C) any polychlorinated biphenyl or
friable asbestos at, in, on or under any such property, (D) the existence of
any condition at, in, on or under any such property that gives or might give
rise to any liability pursuant to any Environmental
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Law or (E) the Borrower or any Subsidiary transporting or arranging for the
transportation of any Hazardous Material to or from any property and (ii) not
arising from any conduct, including, but not limited to, negligent or willful
misconduct, of the Bank or such officer, employee, accountant, attorney or
other agent.
10. NOTICES.
a. By Bank to Borrower. Each notice and other communication
by the Bank to the Borrower relating to this Agreement (i) may be given orally,
in writing or by facsimile, (ii) if given in writing, may be directed to the
Borrower at the last address of the Borrower shown in the records of the Bank
relating to this Agreement, (iii) if sent by mail or overnight courier service,
shall be deemed to have been given when deposited in the mail, first-class or
certified postage prepaid, or accepted by any post office or overnight courier
service for delivery and to have been received by the Borrower upon the earlier
of (A) the actual receipt thereof or (B) three days after being so deposited or
accepted (iv) if given by facsimile, may be directed to the Borrower at the
last telephone number for receipt of facsimiles by the Borrower shown in the
records of the Bank relating to this Agreement.
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b. By Borrower to Bank. Each notice and other communication
by the Borrower to the Bank relating to this Agreement (i) shall be in writing
and (ii) shall be deemed to have been given only when actually received by an
officer in the Western New York Commercial Banking Department of the Bank at
the office of the Bank located at One Fountain Plaza, Buffalo, New York, or
such other address as may at any time and from time to time be specified in any
notice given by the Bank to the Borrower.
11. MISCELLANEOUS.
a. Term; Survival. The term of this Agreement shall be the
period beginning on the date of this Agreement and ending on the later of (i)
the Revolving Loan Maturity Date or (ii) the date the principal amount of each
Loan, all interest payable pursuant to this Agreement and all other amounts
payable by the Borrower to the Bank pursuant to this Agreement have been fully
and indefeasibly repaid, paid or otherwise discharged. The obligation of the
Borrower to pay liabilities, costs and expenses described in Section 9 of this
Agreement shall survive beyond the term of this Agreement.
b. Survival; Reliance. Each representation,
warranty, covenant and agreement of the Borrower contained in
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this Agreement shall survive the making of each Loan and the execution and
delivery to the Bank of each Loan Document and shall continue in full force and
effect during the term of this Agreement. Each such representation, warranty,
covenant and agreement shall be presumed to have been relied upon by the Bank
regardless of any investigation made or not made, or any information possessed
or not possessed, by the Bank.
c. Right of Setoff. Upon and at any time and from time to
time after any occurrence or existence of any Event of Default, (i) the Bank
shall have the right, at the sole option of the Bank and without any notice or
demand of any kind (each of which is knowingly, voluntarily, intentionally and
irrevocably waived by the Borrower), to place an administrative hold on and set
off against (A) the aggregate outstanding principal amounts of all Loans, all
interest payable pursuant to this Agreement and remaining unpaid and all other
amounts payable by the Borrower to the Bank pursuant to this Agreement and
remaining unpaid (B) each indebtedness and other obligation of the Bank in any
capacity to, in any capacity and whether alone or otherwise, the Borrower,
whether now existing or hereafter arising or accruing, whether or not then due
and whether pursuant to any deposit account or otherwise, and (ii) each holder
of any participation in any unpaid indebtedness of the Borrower to the Bank
pursuant to this Agreement shall have the right, at the sole option of such
holder
<PAGE>
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and without any notice or demand of any kind (each of which is knowingly,
voluntarily, intentionally and irrevocably waived by the Borrower), to place an
administrative hold on and set off against (A) such unpaid indebtedness, to the
extent of such holder's participation in such unpaid indebtedness, (B) each
indebtedness and other obligation of such holder in any capacity to, in any
capacity and whether alone or otherwise, the Borrower, whether now existing or
hereafter arising or accruing, whether or not then due and whether pursuant to
any deposit account or otherwise. Such setoff shall become effective at the
time the Bank or such holder opts therefor even though evidence thereof is not
entered on the records of the Bank or such holder until later.
d. Assignment or Grant of Participation. The Bank shall have
the right to assign or otherwise transfer or grant any participation in this
Agreement, any indebtedness or other obligation of the Borrower pursuant to
this Agreement or any right or remedy of the Bank pursuant to this Agreement.
The Borrower shall not assign or otherwise transfer any right or indebtedness
or other obligation of the Borrower pursuant to this Agreement without the
prior written consent of the Bank, and any such assignment or other transfer
without such prior written consent shall be void. No consent by the Bank to any
such
<PAGE>
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assignment or other transfer shall release the Borrower from any such
indebtedness or other obligation.
e. Binding Effect. This Agreement shall be binding
upon the Borrower and each direct or indirect successor and
assignee of the Borrower and shall inure to the benefit of and be
enforceable by the Bank and each direct or indirect successor and
assignee of the Bank.
f. Entire Agreement, Modifications and Waivers. This
Agreement contains the entire agreement between the Bank and the
Borrower with respect to the subject matter of this Agreement and
supersedes each action heretofore taken or not taken, each course
of conduct heretofore pursued, accepted or acquiesced in, and
each oral or written agreement and representation heretofore
made, by or on behalf of the Bank with respect thereto. No
action heretofore or hereafter taken or not taken, no course of
conduct heretofore or hereafter pursued, accepted or acquiesced
in, no oral or written agreement or representation heretofore
made, and no oral agreement or representation hereafter made, by
or on behalf of the Bank shall modify or terminate this
Agreement, impair or otherwise adversely affect any indebtedness
or other obligation of the Borrower pursuant to this Agreement or
any right or remedy of the Bank pursuant to this Agreement or
arising as a result of this Agreement or operate as a waiver of
<PAGE>
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any such right or remedy. No modification of this Agreement or waiver of any
such right or remedy shall be effective unless made in a writing duly executed
by the Bank and specifically referring to such modification or waiver.
g. Rights and Remedies Cumulative. All rights and remedies of
the Bank pursuant to this Agreement or arising as a result of this Agreement
shall be cumulative, and no such right or remedy shall be exclusive of any
other such right or remedy. For example, all rights and remedies of the Bank
pursuant to Section 8 of this Agreement shall be in addition to all other
rights and remedies of the Bank, whether pursuant to any Loan Document or
applicable law.
h. Requests. Each request of the Bank pursuant to
this Agreement may be made (i) at any time and from time to time,
(ii) at the sole option of the Bank and (iii) whether or not any
Event of Default or Potential Event of Default has occurred or
existed.
i. Extent of Consents and Waivers. Each consent and
waiver of the Bank or the Borrower contained in this Agreement
shall be deemed to have been given to the extent permitted by
applicable law.
<PAGE>
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j. Directly or Indirectly. Any provision of this
Agreement that prohibits or has the effect of prohibiting the
Borrower or any Subsidiary from taking any action shall be
construed to prohibit it from taking such action directly or
indirectly.
k. Accounting Terms and Computations. Each accounting term
used in this Agreement shall be construed as of any time in accordance with
generally accepted accounting principles as in effect at such time. Each
accounting computation that this Agreement requires to be made as of any time
shall be made in accordance with such principles as in effect at such time,
except (i) where such principles are incompatible with any requirement of this
Agreement, (ii) indebtedness and other obligations of the Borrower pursuant to
any order of or agreement with the Environmental Protection Agency or the New
York Department of Environmental Conservation providing for the Borrower to
conduct environmental remediation shall constitute liabilities for purposes of
any such accounting computation only to the extent that, in accordance with
such principles, they constitute current liabilities of the Borrower, (iii) any
amount shown as additional pension liability on a financial statement of the
Borrower in accordance with such principles shall not be treated as reducing
the net worth or stockholder's equity of the Borrower and (iv) for purposes of
the
<PAGE>
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accounting computations required by Section 6c of this Agreement and clause
(ii) of Section 6e of this Agreement, there shall be excluded from consolidated
current liabilities of the Borrower the portion of the outstanding principal
amount of any Loan that constitutes a current liability of the Borrower.
l. Reference to Law. Any reference in this Agreement
to any Law shall be deemed to be as of any time a reference to
such Law as in effect at such time or, if such Law is not in
effect at such time, a reference to any similar Law in effect at
such time.
m. Reference to Governmental Authority. Any
reference in this Agreement to any Governmental Authority shall
be deemed to be as of any time after such Governmental Authority
ceases to exist a reference to the successor of such Governmental
Authority at such time.
n. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law. If, however, any such provision shall be prohibited by or
invalid under such law, it shall be deemed modified to conform to the minimum
requirements of such law, or, if for any reason it is not deemed so modified,
it shall be prohibited or invalid only to the extent of such
<PAGE>
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prohibition or invalidity without the remainder thereof or any other such
provision being prohibited or invalid.
o. Governing Law. This Agreement shall be governed
by and construed, interpreted and enforced in accordance with the
internal law of the State of New York, without regard to
principles of conflict of laws.
p. Headings. In this Agreement, headings of sections
are for convenience of reference only and have no substantive
effect.
q. Confidentiality. The Bank shall keep confidential
all non-public information furnished to it by, or obtained by it
from, the Borrower or any Subsidiary in connection with this
Agreement, except that the Bank may disclose such information (i)
to the extent required by any Law, (ii) to any auditor, examiner,
accountant or attorney of the Bank or (iii) to any assignee or
other transferee of or participant in this Agreement, any
indebtedness or other obligation of the Borrower pursuant to this
Agreement or any right or remedy of the Bank pursuant to this
Agreement provided that such assignee or other transferee or
participant agrees to be bound by this Section 11q.
<PAGE>
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12. CONSENTS AND WAIVERS RELATING TO LEGAL
PROCEEDINGS.
a. JURISDICTIONAL CONSENTS AND WAIVERS. THE BORROWER
KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY (i) CONSENTS IN EACH
ACTION AND OTHER LEGAL PROCEEDING COMMENCED BY THE BANK IN CONNECTION WITH ANY
LOAN, ANY LOAN DOCUMENT OR ANY COLLATERAL, SUBORDINATION, GUARANTY, ENDORSEMENT
OR OTHER SECURITY OR ASSURANCE OF PAYMENT, WHETHER NOW EXISTING OR HEREAFTER
ARISING, THAT NOW OR HEREAFTER DIRECTLY OR INDIRECTLY SECURES THE REPAYMENT OR
PAYMENT THAT OF OR IS OTHERWISE NOW OR HEREAFTER DIRECTLY OR INDIRECTLY
APPLICABLE TO ANY OF THE PRINCIPAL AMOUNT OF ANY LOAN, ANY INTEREST PAYABLE
PURSUANT TO THIS AGREEMENT OR ANY OTHER AMOUNT PAYABLE BY THE BORROWER TO THE
BANK PURSUANT TO THIS AGREEMENT TO THE PERSONAL JURISDICTION OF ANY COURT THAT
IS EITHER A COURT OF RECORD OF THE STATE OF NEW YORK OR A COURT OF THE UNITED
STATES LOCATED IN THE STATE OF NEW YORK, (ii) WAIVES EACH OBJECTION TO THE
LAYING OF VENUE OF ANY SUCH ACTION OR OTHER LEGAL PROCEEDING, (iii) WAIVES
PERSONAL SERVICE OF PROCESS IN EACH SUCH ACTION AND OTHER LEGAL PROCEEDING,
(iv) CONSENTS TO THE MAKING OF SERVICE OF PROCESS IN EACH SUCH ACTION AND OTHER
LEGAL PROCEEDING BY REGISTERED MAIL DIRECTED TO THE BORROWER AT THE LAST
ADDRESS OF THE BORROWER SHOWN IN THE RECORDS RELATING TO THIS AGREEMENT
MAINTAINED BY THE BANK, WITH SUCH SERVICE OF PROCESS TO BE DEEMED COMPLETED
FIVE
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DAYS AFTER THE MAILING THEREOF, (v) WAIVES IN EACH SUCH ACTION AND OTHER LEGAL
PROCEEDING EACH RIGHT TO ASSERT ANY NON-MANDATORY COUNTERCLAIM OR SETOFF OR ANY
DEFENSE BASED UPON ANY STATUTE OF LIMITATIONS OR CLAIM OF LACHES, (vi) WAIVES
EACH RIGHT TO ATTACK ANY FINAL JUDGMENT THAT IS OBTAINED AS A DIRECT OR
INDIRECT RESULT OF ANY SUCH ACTION OR OTHER LEGAL PROCEEDING AND (vii) CONSENTS
TO EACH SUCH FINAL JUDGMENT BEING SUED UPON IN ANY COURT HAVING JURISDICTION
WITH RESPECT THERETO AND ENFORCED IN THE JURISDICTION IN WHICH SUCH COURT IS
LOCATED AS IF ISSUED BY SUCH COURT.
b. WAIVER OF TRIAL BY JURY AND CLAIMS TO CERTAIN DAMAGES.
EACH OF THE BANK AND THE BORROWER KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
IRREVOCABLY WAIVES EACH RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO,
AND EACH RIGHT TO ASSERT ANY CLAIM FOR DAMAGES (INCLUDING, BUT NOT LIMITED TO,
PUNITIVE DAMAGES) IN ADDITION TO ACTUAL AND CONSEQUENTIAL DAMAGES IN, ANY
ACTION OR OTHER LEGAL PROCEEDING, WHETHER BASED ON ANY CONTRACT OR NEGLIGENT,
INTENTIONAL OR OTHER TORT OR OTHERWISE, IN CONNECTION WITH (i) ANY LOAN, ANY
LOAN DOCUMENT OR ANY COLLATERAL, SUBORDINATION, GUARANTY, ENDORSEMENT OR OTHER
SECURITY OR ASSURANCE OF PAYMENT, WHETHER NOW EXISTING OR HEREAFTER ARISING,
THAT NOW OR HEREAFTER DIRECTLY OR INDIRECTLY SECURES THE REPAYMENT OR PAYMENT
OF OR IS OTHERWISE NOW OR HEREAFTER DIRECTLY OR INDIRECTLY APPLICABLE TO ANY OF
THE
<PAGE>
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PRINCIPAL AMOUNT OF ANY LOAN, ANY INTEREST PAYABLE PURSUANT TO THIS AGREEMENT
OR ANY OTHER AMOUNT PAYABLE BY THE BORROWER TO THE BANK PURSUANT TO THIS
AGREEMENT OR (ii) ANY ACTION HERETOFORE OR HEREAFTER TAKEN OR NOT TAKEN, ANY
COURSE OF CONDUCT HERETOFORE OR HEREAFTER PURSUED, ACCEPTED OR ACQUIESCED IN,
OR ANY ORAL OR WRITTEN AGREEMENT OR REPRESENTATION HERETOFORE OR HEREAFTER
MADE, BY OR ON BEHALF OF THE OTHER IN CONNECTION WITH THE LOAN, ANY LOAN
DOCUMENT OR ANY SUCH COLLATERAL, SUBORDINATION, GUARANTY, ENDORSEMENT OR OTHER
SECURITY OR ASSURANCE OF PAYMENT. THIS SECTION 12b IS A MATERIAL INDUCEMENT FOR
EACH OF THE BANK AND THE BORROWER IN CONNECTION WITH ITS ENTRY INTO THIS
AGREEMENT.
The Bank and the Borrower have caused this Agreement to be
duly executed on the date shown at the beginning of this Agreement.
MANUFACTURERS AND TRADERS TRUST COMPANY
By__________________________________________
James A. Rahill Vice President
BUFFALO COLOR CORPORATION
By_______________________________________________
William O. Fields, Jr., Secretary and Treasurer
<PAGE>
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ACKNOWLEDGMENTS
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the 11th day of October in the year 1996, before me personally came
James A. Rahill, to me known, who, being by me duly sworn, did depose and say
that he resides at _____________
- --------------------------------------------------------------;
that he is a Vice President of Manufacturers and Traders Trust Company, the
corporation described in and which executed the above instrument; and that he
signed his name thereto by order of the board of directors of said corporation.
--------------------------------------------
Notary Public
STATE OF NEW YORK )
: SS.
COUNTY OF ERIE )
On the 11th day of October in the year 1996, before me
personally came William O Fields, Jr., who, being by me duly sworn, did depose
and say that he resides at
; that he
is the Secretary and Treasurer of Buffalo Color Corporation, the
corporation described in and which executed the above instrument;
<PAGE>
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and that he signed his name thereto by order of the board of
directors of said corporation.
--------------------------------------
Notary Public
<PAGE>
EXHIBIT A
CORPORATE:68554_4 (1GWA_4)
