<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 26, 1997
SETECH, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-10310 11-2809189
(Commission File Number) (I.R.S. Employer Identification No.)
905 Industrial Drive, Murfreesboro, Tennessee 37129
(Address of Principal Executive Offices) (Zip Code)
(615) 890-1700
(Issuer's Telephone Number)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a)
On June 26, 1997, the Registrant acquired all of the outstanding stock
of Lewis Supply Company, Inc. (the "Acquiree") pursuant to a Stock Purchase
Agreement (attached as Exhibit 2.1) by and among the Registrant and the
Shareholders of Acquiree (the "Sellers"). There is no material
relationship between the Sellers and the Registrant, its affiliates, the
Registrant's officers, directors or their associates, except that one of
the Sellers served as President of the Aquiree prior to the acquisition
described herein (the "Acquisition"), and continues to serve as President
of Aquiree after the Acquisition. The purchase price, negotiated at arms
length by Buyer and Sellers, included $5,952,500 payable to Sellers in
cash, $750,000 payable to Sellers in promissory notes, as well as 285,714
shares of common stock of the Registrant payable to certain of the Sellers
by virtue of their control positions in the Acquiree. The terms of the sale
are more fully described in the Stock Purchase Agreement attached hereto as
Exhibit 2.1. The Acquisition was financed by loans from First Union
Commercial Corporation and two Swiss pension funds, Spida-Ausgleichskassen
and Pensionskasse der ASCOOP.
(b)
The Acquiree is a full line industrial distibutor with a strong
integrated supply presence. The Registrant intends for the Acquiree to
continue in such business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b)
Financial statements and pro forma financial information required by
this item will be furnished to the Commission not later than September 9,
1997 (60 days after this initial report on Form 8-K is required to be
filed).
(c) Exhibits
Exhibit 2.1 Stock Purchase Agreement among SETECH, Inc. and the
Shareholders of Lewis Supply Company, Inc. dated June 26, 1997
(the "Stock Purchase Agreement").
Items 2.1(a) through 2.1(l) are schedules or attachments to the Stock
Purchase Agreement and will be provided to the Commission upon request,
pursuant to Item 601(b)(2) of Regulation S-B.
2.1(a) Disclosure Letter
2.1(b) Allocation of Purchase Price
2.1(c) Employment and Noncompetition Agreement
2.1(d) Non-negotiable Promissory Note
2.1(e) Burnham Employment and Noncompetition Agreement
2.1(f) Shareholder Agreement
2.1(g) Sellers' Representative Power of Attorney
2.1(h) Approved Inventory of Company
2.1(i) Tax Allocation
2.1(j) Opinion of Counsel to Sellers
2.1(k) Opinion of Counsel to Buyers
2.1(l) Addresses for Notice to Sellers
Exhibit 4.1 Loan and Security Agreement by and among First Union
Commercial Corporation, SETECH, Inc., Lewis Supply Company,
Inc., Southeastern Technology, Inc., and Titan Services, Inc.
dated June 26, 1997
Exhibit 4.2 Guaranty Agreement dated June 26, 1997, whereby SETECH, Inc.
guarantees subsidiary indebtedness obligations to First
Union Commercial Corporation
Exhibit 4.3 Revolver Note dated June 26, 1997 payable by Lewis Supply
Company, Inc. to First Union Commercial Corporation
Exhibit 4.4 Revolver Note dated June 26, 1997 payable by Titan Services,
Inc. to First Union Commercial Corporation
Exhibit 4.5 Revolver Note dated June 26, 1997 payable by Southeastern
Technology, Inc. to First Union Commercial Corporation
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
SETECH, Inc.
(Registrant)
/s/ Thomas N. Eisenman
Date: July 10, 1997 By: Thomas N. Eisenman
President and CEO
<PAGE>
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
among
SETECH, INC.
and the
SHAREHOLDERS
of
LEWIS SUPPLY COMPANY, INC.
Dated June , 1997
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS 1
2. SALE AND TRANSFER OF SHARES; CLOSING 4
2.1 SHARES. 4
2.2 PURCHASE PRICE 4
2.3 CLOSING. 5
2.4 CLOSING OBLIGATIONS 5
2.5 ADJUSTMENTS TO PURCHASE PRICE AND LIMITATIONS UPON
INDEMNIFICATION..................................... 7
3. REPRESENTATIONS AND WARRANTIES OF SELLERS 8
3.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY; COMPLIANCE
WITH LAW............................................ 8
3.2 CONSENTS 9
3.3 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS 9
3.4 CAPITALIZATION 9
3.5 PRIOR SALES OF SECURITIES 10
3.6 SUBSIDIARIES 10
3.7 OTHER INTERESTS 10
3.8 NO VIOLATION 10
3.9 FINANCIAL STATEMENTS 10
3.10 CONTRACTS 11
3.11 ABSENCE OF CERTAIN CHANGES 12
3.12 TAX MATTERS 13
3.13 EMPLOYEES AND BENEFIT PLANS 13
3.14 ASSETS 15
3.15 LAWFULLY OPERATING 16
3.16 POWER OF ATTORNEY 16
3.17 NO LITIGATION 16
3.18 CORPORATE RECORDS 16
3.19 NO DEFAULTS 16
3.20 HAZARDOUS SUBSTANCES 16
3.21 LABOR MATTERS 18
3.22 CONDITION OF ASSETS 18
3.23 ACCOUNTS RECEIVABLE 19
3.24 INVENTORY 19
3.25 NO LIABILITIES 19
3.26 INSURANCE 19
3.27 INTELLECTUAL PROPERTY 21
3.28 BROKERS OR FINDERS 22
3.29DISCLOSURE 22
3.30 SELLERS' REPRESENTATIVE 23
3.31 SELLERS' KNOWLEDGE OF CLAIMS 23
4. REPRESENTATIONS AND WARRANTIES OF BUYER...................23
4.1 ORGANIZATION AND GOOD STANDING...................... 23
4.2 AUTHORITY; NO CONFLICT 23
4.3 INVESTMENT INTENT 23
4.4 CERTAIN PROCEEDINGS 24
4.5 BROKERS OR FINDERS 24
4.6 SETECH FINANCIAL STATEMENTS 24
4.7 INVENTORY DUE DILIGENCE 24
4.8 BUYER'S KNOWLEDGE OF CLAIMS 24
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE 24
5.1 ACCESS AND INVESTIGATION 24
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY 24
5.3 REQUIRED APPROVALS 25
5.4 NO NEGOTIATION 25
5.5 NOTIFICATION 25
5.6 [INTENTIONALLY OMITTED] 25
5.7 TAX COVENANTS 25
5.8 DISTRIBUTIONS, DIVIDENDS AND BONUSES 27
5.9 ADVANCES TO SHAREHOLDERS, DIRECTORS AND OFFICERS. 28
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE 28
6.1 APPROVALS OF GOVERNMENTAL BODIES.................... 28
6.2 BEST EFFORTS. 28
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE 28
7.1 ACCURACY OF REPRESENTATIONS 28
7.2 SELLERS' PERFORMANCE 29
7.3 CONSENTS 29
7.4 ADDITIONAL DOCUMENTS.................................29
7.5 NO PROCEEDINGS 29
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS 29
7.7 NO PROHIBITION 29
7.8 FINANCING 29
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE 30
8.1 ACCURACY OF REPRESENTATIONS 30
8.2 BUYER'S PERFORMANCE 30
8.3 ADDITIONAL DOCUMENTS 30
8.4 NO INJUNCTION 30
8.5 CONSENTS 30
8.6 NO PROCEEDINGS 31
9. TERMINATION 31
9.1 TERMINATION EVENTS 31
9.2 EFFECT OF TERMINATION 31
10. INDEMNIFICATION; REMEDIES 31
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION AFFECTED BY CERTAIN
KNOWLEDGE........................................... 31
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS 32
10.3 [Intentionally Omitted] 33
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER 33
10.5 TIME LIMITATIONS 33
10.6 THRESHOLD ON AMOUNT--SELLERS 33
10.7 THRESHOLD ON AMOUNT--BUYER 34
10.8 RIGHT OF SET-OFF AND EXERCISE OF REMEDIES 34
10.9PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS 35
10.10 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS 36
11. GENERAL PROVISIONS 36
11.1 EXPENSES 36
11.2 PUBLIC ANNOUNCEMENTS 36
11.3 MANDATORY ARBITRATION 36
11.4 CONFIDENTIALITY 37
11.5 NOTICES 37
11.6 JURISDICTION; SERVICE OF PROCESS 38
11.7 FURTHER ASSURANCES 38
11.8 WAIVER 38
11.9 ENTIRE AGREEMENT AND MODIFICATION 38
11.10 DISCLOSURE LETTER 39
11.11 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS 39
11.12 SEVERABILITY 39
11.13 SECTION HEADINGS, CONSTRUCTION 39
11.14 TIME OF ESSENCE 39
11.15 GOVERNING LAW 39
11.16 COUNTERPARTS 40
EXHIBITS
Exhibit 1 Disclosure Letter
Exhibit 2.2 Allocation of Purchase Price
Exhibit 2.4(a)(ii) Employment and Noncompetition Agreement
Exhibit 2.4(b)(ii) Non-Negotiable Promissory Note
Exhibit 2.4(c)(99) Burnham Employment and Noncompetition Agreement
Exhibit 2.4(c)(iii) Shareholder Agreement
Exhibit 3.30 Sellers' Representative Power of Attorney
Exhibit 4.7 Approved Inventory of Company
Exhibit 5.7 Tax Allocation
Exhibit 7.4(a) Opinion of Counsel to Sellers
Exhibit 8.3(a) Opinion of Counsel to Buyer
Exhibit 11.5 Addresses for Notice to Sellers
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of
June, 1997, by and among SETECH, INC., a Delaware corporation having
its principal place of business at 905 Industrial Drive,
Murfreesboro, Tennessee 37129 ("Buyer"), and the parties appearing on the
signature pages hereto (such parties are collectively referred to herein as
the "Sellers").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the
issued and outstanding shares (the "Shares") of capital stock of Lewis
Supply Company, Inc., a Delaware corporation having its principal place of
business at 477 South Main Street, Memphis, Tennessee 38103 (the
"Company"), for the consideration and on the terms set forth in this
Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"APPLICABLE CONTRACT"--any contract (a) under which the Company has or
may acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability, or (c) by which the Company or any
of its assets is or may become bound.
"BALANCE SHEET"--as defined in Section 3.09.
"BURNHAM EMPLOYMENT AND NONCOMPETITION AGREEMENT"--as defined in
Section 2.4(c)(ii).
"BUSINESS DAY--any day other than a Saturday, Sunday, a legal holiday
or a day on which banking institutions are authorized or required by law to
close in the State of Tennessee.
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.3.
"CLOSING DATE"--the date and time as of which the Closing actually
takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Promissory
Notes, the [Security for Promissory Notes], the Employment and
Noncompetition Agreements, the Shareholder Agreement, and the Burnham
Employment and Noncompetition Agreement;
(c) the performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares.
"DAMAGES"--as defined in Section 10.2.
"DEFERRED PAYMENTS"--the payments due under the Promissory Notes under
Section 2.2(a)(i)(A)(B) and (C) and the Stock Purchase Price payable after
the Closing Date under Section 2.2(a)(ii)(A)(B) and (C).
"DISCLOSURE LETTER"--the disclosure letter delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"EMPLOYMENT AND NONCOMPETITION AGREEMENTS"--as defined in Section
2.4(a)(ii).
"ENCUMBRANCE"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest,
right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"GAAP"--generally accepted accounting principles, applied on a basis
consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.9 were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
"GOVERNMENTAL BODY"--any federal, state, local or municipal government
(or agency thereof) or quasi-governmental authority of any nature.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.27.
"INTERIM BALANCE SHEET"--as defined in Section 3.9.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, or other
administrative order, constitution, law, ordinance, principle of common
law, regulation or statute.
"ORDER"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORGANIZATIONAL DOCUMENTS"-- the articles or certificate of
incorporation and the bylaws of a corporation and any amendment to the
foregoing.
"PERSON"--any individual, corporation, general or limited partnership,
limited liability company, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Body.
"PLAN"--as defined in Section 3.13.
"PROMISSORY NOTES"--as defined in Section 2.4(b)(ii).
"PURCHASE PRICE"--the Dollar Purchase Price (as defined in Section
2.2) and the Stock Purchase Price (as defined in Section 2.2).
"SECURITIES ACT"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SELLERS' REPRESENTATIVE"--Michael S. Burnham, Jr.
"SHARES"--as defined in the Recitals of this Agreement.
"SHAREHOLDER AGREEMENT"--as defined in Section 2.4(d)(ii).
"TAX RETURN"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment,
collection, or payment of any tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any tax.
2. SALE AND TRANSFER OF SHARES; CLOSING.
1 SHARES. Subject to the terms and conditions of this Agreement,
at the Closing, Sellers will sell and transfer the Shares to Buyer, and
Buyer will purchase the Shares from Sellers.
2 PURCHASE PRICE.
(a) Subject to the adjustments set forth in Section 2.5, Section
5.8(b) and as set forth in other provisions of this Agreement, the
purchase price for the Shares shall be Six Million Seven Hundred Two
Thousand and Five Thousand Dollars ($6,702,500) payable in cash (the
"Dollar Purchase Price") plus Two Hundred and Eighty-Five Thousand
Seven Hundred Fourteen (285,714) shares of the common stock of Buyer
(the "Stock Purchase Price"). Subject to such adjustments, the
Purchase Price shall be payable as follows:
(i) At the Closing, $5,952,500 will be paid in cash to the
Sellers (to be allocated among the Sellers in accordance with
Exhibit 2.2) with the remainder of the Dollar Purchase Price
payable pursuant to the Promissory Notes as follows:
(A) $250,000 payable to the Sellers on June
1, 1998 (allocated among the Sellers in accordance
with Exhibit 2.2)(together with the payment
described in Section 2.2(a)(ii)(A), the "First
Deferred Payment");
(B) $250,000 payable to the Sellers on June
1, 1999 (allocated among the Sellers in accordance
with Exhibit 2.2)(together with the payment
described in Section 2.2(a)(ii)(B), the "Second
Deferred Payment"); and
(C) $250,000 payable to the Sellers on June
1, 2000 (allocated among the Sellers in accordance
with Exhibit 2.2)(together with the payment
described in Section 2.2(a)(ii)(C), the "Third
Deferred Payment").
Interest on the Promissory Notes shall accrue at a rate
equal to either (i) the thirty-day LIBOR Rate (as quoted by the
telerate system of on the date of Seller's
election) plus one and one-half percent per annum (the "LIBOR
Option"); or (ii) the prime rate (as quoted by on the date of
Seller's election) minus one percent per annum (the "Prime Rate
Option"). Each Seller shall elect either the LIBOR Option or the
Prime Rate Option by written notice delivered to Buyer at least
three (3) Business Days prior to the Closing Date. The interest
rate elected by a Seller shall be a fixed rate during the entire
term of the Promissory Note.
(ii) At the Closing, Buyer will deliver 255,102 shares of
the Stock Purchase Price, which shall be allocated to Michael S.
Burnham, Jr. and his Permitted Transferees (as defined in the
Shareholder Agreement) in accordance with Exhibit 2.2, with the
remainder of the Stock Purchase Price payable as follows:
(A) 10,204 shares of the Stock Purchase Price to be
delivered on June 1, 1998 to Michael Burnham or his
Permitted Transferees (as defined in the Shareholder
Agreement);
(B) 10,204 shares of the Stock Purchase Price to be
delivered on June 1, 1999 to Michael Burnham or his
Permitted Transferees (as defined in the Shareholder
Agreement);
(C) 10,204 shares of the Stock Purchase Price to be
delivered on June 1, 2000 to Michael Burnham or his
Permitted Transferees (as defined in the Shareholder
Agreement).
Solely for purposes of Michael S. Burnham's rights and
options under the Shareholder Agreement, all shares of the Stock
Purchase Price shall be deemed issued as of the Closing Date.
(iii) Buyer, Sellers and Michael S. Burnham, Jr. acknowledge
that the portion of the Purchase Price payable to Michael S.
Burnham, Jr., Elizabeth A. Harris, Michael S. Burnham, Jr.,
Custodian for Gregory Burnham under TN UTMA, Michael S. Burnham,
Jr., Custodian for Spencer Burnham under TN UTMA, Elizabeth A.
Harris, Trustee U/A dated 4/23/90 FBO Gregory Burnham and Spencer
Burnham ("Elizabeth Harris Trust I"), Elizabeth A. Harris,
Trustee U/A dated 4/23/90 FBO Gregory Burnham and Spencer Burnham
("Elizabeth Harris Trust II"), Elizabeth A. Harris, Trustee U/A
dated 4/23/90 FBO Gregory Burnham and Spencer Burnham ("Elizabeth
Harris Trust III") (the "Burnham Interests") has been separately
bargained for by and between Buyer and the Burnham Interests due
to the control position of the Burnham Interests, and therefore
the Purchase Price payable to the Burnham Interests is
disproportionate.
3 CLOSING. The purchase and sale (the "Closing") provided for in
this Agreement will take place at the offices of Waring Cox, PLC in
Memphis, Tennessee, at 10:00 a.m. (local time):
(i) at the option of the Buyer, on a Business Day following the
last to be fulfilled or waived of the conditions set forth in Sections
7 and 8 designated by Buyer upon not less than three Business Days
notice to Sellers' Representative, but in no event earlier than June
20, 1997 nor later than June 30, 1997; or
(ii) at such other time and place as the Buyer and Sellers'
Representative may agree. Subject to the provisions of Section 9,
failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to
this Section 2.3 will not result in the termination of this Agreement
and will not relieve any party of any obligation under this Agreement.
4 CLOSING OBLIGATIONS.
At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures
guaranteed by a commercial bank or by a member firm of the New
York Stock Exchange, for transfer to Buyer;
(ii) employment and noncompetition agreements in
substantially the form of collective Exhibit 2.4(a)(ii), executed
by Steven Humbert, William Reznicek and David
Wright (collectively, the "Employment and Noncompetition
Agreements"); and
(iii) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and
warranties in this Agreement was accurate in all respects as of
the date of this Agreement and is accurate in all respects as of
the Closing Date as if made on the Closing Date (giving full
effect to the Disclosure Letter.
(b) Buyer will deliver to Sellers (subject to the adjustments set
forth in Section 2.5 and Section 5.8):
(i) cash in an amount equal to $5,952,000 payable by wire
transfer in immediately available funds payable to the accounts
(designated in writing to Buyer three (3) Business Days prior to
the Closing Date) of the respective Sellers as allocated in
accordance with Exhibit 2.2;
(ii) promissory notes in the form of Exhibit 2.4(b)(ii)
payable to Sellers (and/or their Permitted Transferees as such
term is defined in the Promissory Notes) in the respective
principal amounts as set forth in Exhibit 2.2 (the "Promissory
Notes") pursuant to which the unpaid balance of the Dollar
Purchase Price shall be payable to Sellers; with interest payable
in accordance with the terms of the Promissory Notes;
(iii) a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing
Date;
(iv) the Employment and Noncompetition Agreements, executed
by Buyer; and
(v) the Burnham Employment and Noncompetition Agreement,
executed by Buyer.
(c) Buyer will deliver to Michael S. Burnham, Jr., Two Hundred
Fifty-Five Thousand One Hundred Two (255,102) shares of the fully paid
and nonassessable Common Stock, $0.01 par value, of Buyer, registered
in the name of Michael S. Burnham, Jr. (and/or his Permitted
Transferees as defined in the Shareholder Agreement) in accordance
with Exhibit 2.2;
(d) Buyer will deliver to Michael S. Burnham, Jr., and Michael S.
Burnham, Jr. will deliver to Buyer:
(i) an agreement executed by Buyer and Michael S. Burnham,
Jr. in the form of Exhibit 2.4(c)(ii) which consists of, INTER
ALIA, an employment and noncompetition agreement and a grant to
Michael S. Burnham, Jr. of the right and option to purchase
additional shares of the Buyer under the terms set forth therein
(the "Burnham Employment and Noncompetition Agreement"); and
(ii) an agreement executed by Buyer and Michael S. Burnham,
Jr. in the form of Exhibit 2.4(c)(iii) (the "Shareholder
Agreement").
5 ADJUSTMENTS TO PURCHASE PRICE AND LIMITATIONS UPON
INDEMNIFICATION. The Purchase Price may be adjusted under the provisions
of this Section, subject to the following terms and conditions:
(a) ADJUSTMENT BASED ON STOCKHOLDERS' EQUITY OF COMPANY.
(i) The First Deferred Payment (and any interest accrued thereon)
shall be reduced by an amount, if any, that is equal to the sum of:
(A) the positive difference, if any, between:
(1) Three Million Eight Hundred Thousand Dollars
($3,800,000) plus net income of the Company for the
period February 1, 1997 to the Closing Date, minus the
amount of any allowable distributions made by the
Company in accordance with Section 5.8(a)(i) and (ii)
herein); and
(2) any lesser amount of stockholders' equity (calculated
in accordance with GAAP consistently applied) of the
Company as of the Closing Date reflected in the Closing
Financial Statements (defined below)
and;
(B) interest from the Closing Date at a rate equal to the
interest rate payable under the Promissory Notes, on the
amount calculated under (A) immediately above .
(ii) The adjustment of purchase price in this Section 2.5(a) will be
determined in accordance with the following procedure: Buyer, at its
expense, will prepare and will cause Arthur Andersen LLP and Dempsey
Wilson & Co., P.C. the Company's certified public accountants, to
audit the consolidated financial statements ("Closing Financial
Statements") of the Company as of the Closing Date (such Closing
Financial Statements to be prepared in accordance with GAAP,
consistently applied) and for the period from the date of the Balance
Sheet through the Closing Date, including a computation of
stockholders' equity as of the Closing Date. Buyer will deliver the
Closing Financial Statements to Sellers' Representative within sixty
(60) days after the Closing Date. If within sixty (60) days following
delivery of the Closing Financial Statements, Sellers' Representative
has not given notice (such notice shall contain a statement of the
basis of the objection by Sellers' Representative) of his objection to
such statements, then the Closing Financial Statements will be used to
compute the adjustment, if any, under Section 2.5(a)(i) above. If
Sellers' Representative gives such notice of its objections, then
Buyer and Sellers' Representative shall use their best efforts to
resolve any objections. If no resolution is made within fifteen (15)
days after the notice of objection by the Sellers' Representative, the
issues in dispute will be submitted to a "Big Six" certified public
accounting firm located in Memphis, Tennessee other than Ernst & Young
and the accountants which prepared the Closing Financial Statements
(or if any such "Big Six" accounting firm is unwilling to accept such
appointment, another nationally recognized certified public accounting
firm which has not provided services to Buyer or the Company during
the last five years) selected by Sellers' Representative, subject to
the reasonable consent of the Buyer, which consent will not be
unreasonably withheld or delayed (the "Mediating Accountants"), for
resolution. If issues in dispute are submitted to the Mediating
Accountants for resolution, (1) each party will furnish to the
Mediating Accountants such workpapers and other documents and
information relating to the disputed issues as the Mediating
Accountants may request and are available to that party, and will be
afforded the opportunity to present to the Mediating Accountants any
material relating to the determination and to discuss the
determination with the Mediating Accountants; (2) the determination by
the Mediating Accountants, as set forth in a notice delivered to both
parties by the Mediating Accountants, will be binding and conclusive
on the parties hereto; and (3) Buyer and Sellers will pay fees of the
Mediating Accountants for such determination as follows: (x) if the
Mediating Accountants determine that the amount of stockholders'
equity as of the Closing Date is equal to or greater than the amount
set forth in Section 2.5(a)(i)(A)(1), Buyer shall pay 100% of the
fees; (y) if the Mediating Accountants determine that the amount of
stockholders' equity as of the Closing Date is less than the amount
set forth in Section 2.5(a)(i)(A)(1), Sellers, pro rata, shall pay
100% of such fees (in which event, at Buyer's option, Buyer may set-
off against the First Deferred Payment to pay such fees.
(iii) any reduction in Deferred Payments constituting a portion of the
Stock Purchase Price shall be valued at the greater of $3.50 per share
(as such shares may be adjusted under Section 3 of the Shareholders
Agreement) or the current fair market value.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer, as of the date hereof and
through the Closing Date, as follows:
1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY; COMPLIANCE WITH
LAW. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. The Company is
duly licensed or qualified to do business as a foreign corporation and is
in good standing under the laws of Tennessee, Mississippi, Arkansas and any
other state in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified would
not have a material adverse effect on the business, results of operations
or financial condition of the Company. The Company has all requisite
corporate power and authority to own, operate and lease its properties and
carry on its business as now conducted. The Company is not in violation of
any order of any court, governmental authority or arbitration board or
tribunal, or any law, ordinance, governmental rule or regulation to which
the Company or any of its properties or assets is subject, where such
violation would have a material adverse effect on the business, results of
operations or financial condition of the Company. The Company has obtained
all licenses, permits and other authorizations and has taken all actions
required by applicable law or governmental regulations in connection with
its business as now conducted, except where such failure to obtain the same
would not have a material adverse effect on the business, results of
operations or financial condition of the Company.
2 CONSENTS. Except as set forth in Part 3.2 of the Disclosure
Letter, neither the Company nor any Sellers will be required to give any
notice to or obtain any consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance
of any of the Contemplated Transactions.
3 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. This Agreement
constitutes, and all agreements and documents contemplated hereby (when
executed and delivered pursuant hereto for value received) will constitute,
the valid and legally binding obligations of the Sellers, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
and general principles of equity. Neither the execution and delivery of
this Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will, to the actual knowledge of
Sellers, give any Person the right to prevent, delay, or otherwise
interfere with any of the Contemplated Transactions.
4 CAPITALIZATION. Part 3.4 of the Disclosure Letter includes a
complete and accurate list of each shareholder of the Company and the
number of shares held by each. The authorized equity securities of the
Company consists of shares of common stock, $ par
value. As of the date hereof, there are issued and outstanding
shares of the Company's equity securities. The Company has no other shares
or securities authorized or outstanding other than the Shares. The Company
has no outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the shareholders
of the Company on any matter. All issued and outstanding equity securities
of the Company are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. There are no options,
warrants, calls subscriptions, convertible securities, or other rights,
agreements or commitments which obligate the Company to issue, transfer or
sell any shares of equity securities of the Company except as disclosed in
Part 3.4 of the Disclosure Letter. Sellers are and will be on the Closing
Date the record and beneficial owners and holders of the Shares, free and
clear of all Encumbrances. With the exception of the Shares owned by the
Sellers, all outstanding and issued equity securities and other securities
of the Company are owned of record by the Company, free and clear of all
Encumbrances. Notwithstanding any provision herein to the contrary, the
representations and warranties set forth in this Section concerning the
Sellers' ownership of shares, the absence of Encumbrances thereon, and any
preemptive rights with respect thereto, are made severally by each of the
Sellers with respect to such Seller's shares.
5 PRIOR SALES OF SECURITIES. All offers and sales of the Company
equity securities prior to the date hereof were at all relevant times
exempt from the registration requirements of the Securities Act of 1933, as
amended, and were duly registered or the subject of an available exemption
from the registration requirements of the applicable state securities or
Blue Sky laws, or the relevant statutes of limitations have expired, or
civil liability therefor has been eliminated by an offer to rescind.
6 SUBSIDIARIES. The Company's subsidiaries are described in Part
3.6 of the Disclosure Letter:
7 OTHER INTERESTS. Except as set forth in Part 3.6 of the
Disclosure Letter and as set forth in Part 3.7 of the Disclosure Letter,
the Company does not own directly or indirectly any interest or investment
in any corporation, partnership, joint venture, business, trust or other
entity.
8 NO VIOLATION. After approval by requisite shareholder vote,
neither the execution and delivery of this Agreement nor the consummation
of the Contemplated Transactions will: (i) conflict with or result in a
breach of any provisions of the Articles of Incorporation or Bylaws of the
Company; (ii) except as set forth in Part 3.8 of the Disclosure Letter,
grant any third party the right to terminate an Applicable Contract; (iii)
except as set forth in Part 3.8 of the Disclosure Letter, conflict with,
result in a breach of any provision of or the modification or termination
of, constitute a default under, or result in the creation of imposition of
any lien, security interest, charge or encumbrance upon any of the assets
of the Company pursuant to any material commitment, lease, Applicable
Contract, or other material agreement or instrument to which the Company is
a party; or (iv) violate any order, arbitration award, judgment, writ,
injunction, decree, statute, rule or regulation applicable to the Company,
the violation of which would have a material adverse effect on the
business, result of operations or financial condition of the Company.
9 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a) the
audited balance sheets of the Company as of January 31, 1997 and the
related audited statements of income, changes in stockholders' equity, and
cash flow for the fiscal year then ended, together with the report thereon
of Ernst & Young, LLP (including the notes thereto, the "Balance Sheet"),
and (b) an unaudited consolidated balance sheet of the Company (prepared by
the Company) as of May 31, 1997 (the "Interim Balance Sheet") and the
related unaudited consolidated statements of income and changes in
stockholders' equity for the four months then ended, including in each case
the notes thereto. Such financial statements and notes fairly present the
financial condition and the results of operations, changes in stockholders'
equity, and cash flow (with respect to the Balance Sheet) of the Company as
at the respective dates of and for the periods referred to in such
financial statements. To the best of Seller's knowledge, the Balance Sheet
and the Interim Balance Sheet are prepared in accordance with GAAP except
for any non-GAAP items known to Seller, which are disclosed in Part 3.9 of
the Disclosure Letter.
10 CONTRACTS.
(a) Part 3.10 of the Disclosure Letter lists all material contracts
and other agreements to which the Company is a party, and Sellers have
delivered to Buyer true and complete copies of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an amount
or value in excess of $50,000 as to which the Company has not yet
fully performed or delivered;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount
or value in excess of $100,000 as to which the vendor has not fully
performed or delivered;
(iii) each Applicable Contract that was not entered into in the
ordinary course of business and that involves expenditures or receipts
of the Company in excess of $10,000 as to which the Company or the
vendor has not yet fully performed or delivered;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property
(except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than
$5,000 and with terms of less than one year);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the non-
disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Company or limit
the ability of the Company to engage in any line of business or to
compete with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct
payments for goods;
(x) each Applicable Contract for capital expenditures in excess
of $50,000;
Part 3.10(a) of the Disclosure Letter shall disclose Applicable
Contracts and other agreements listed therein, effective at least three (3)
Business Days prior to the Closing Date. Each contract listed in Part
3.10(a) of the Disclosure Letter is in full force and effect, each is a
legal, valid and binding contract, and there is no material default (or any
event which, with the giving of notice or lapse of time or both, would be a
material default) by the Company, in the timely performance or any material
obligation to be performed or paid under such contract.
(b) The Company has delivered a full and complete copy (including all
amendments and addenda thereto) of each Applicable Contract constituting an
integrated supply contract (the "Integrated Supply Contracts"). The
Integrated Supply Contracts consist of the agreements set forth in Part
3.10(b) of the Disclosure Letter. Each Integrated Supply Contract is in
full force and effect, each is a legal and binding contract, is not subject
to setoff rights against the Company and there is no default (or any event
with the giving of notice or lapse of time or both would be a default)
thereunder.
11 ABSENCE OF CERTAIN CHANGES. Except as set forth in Part 3.11 of
the Disclosure Letter, since the date of the Company's Balance Sheet
delivered to Buyer, the Company has conducted its business only in the
ordinary course of business and there has not been any:
(a) change in any Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock
of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any shares of any
such capital stock; or any other transaction that would cause the
authorized or issued shares of capital stock to change or that would
provide additional rights to holders of such shares; or declaration or
payment of any dividend or other distribution or payment in respect of
shares of capital stock except distributions permitted under Section
5.8;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses,
distributions, salaries, or other compensation to any stockholder,
director, officer, or (except in the ordinary course of business)
employee or entry into any employment, severance, or similar contract
with any director, officer, or employee, except for bonuses permitted
in Section 5.8;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of the Company;
(e) damage to or destruction or loss of any asset or property of
the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial
condition, or prospects of the Company;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii)
any contract or transaction involving a total remaining commitment by
or to the Company of at least $25,000;
(g) sale (other than sales of inventory in the ordinary course of
business), lease, or other disposition of any material asset or
property of the Company or mortgage, pledge, or imposition of any lien
or other encumbrance on any material asset or property of the Company.
12 TAX MATTERS. The Company and Sellers have duly paid all taxes and
other charges (whether or not shown on any tax return) due or claimed to be
due by federal, foreign, state or local taxing authorities; and true and
correct copies of all tax reports and returns of the Company (including
amended returns) relating to such taxes and other charges for the fiscal
years from February 1, 1991 through January 31, 1997 have been heretofore
delivered to the Buyer. Except as set forth in Part 3.12 of the Disclosure
Letter, the reserves for state franchise and excise taxes contained in the
financial statements and carried on the books of the Company are adequate
to cover all tax liabilities as of the date of this Agreement, including
recognition of deferred taxes or benefits determined in accordance with
GAAP. The Company has not incurred any state tax liabilities other than in
the ordinary course of business. There are no tax liens (other than liens
for current state taxes not yet due) upon any properties or assets of the
Company (whether real, personal or mixed, tangible or intangible), and,
there are no pending or threatened questions or examinations relating to,
or claims asserted for, taxes or assessments against the Company or the
Sellers. Neither the Company nor any of the Sellers have been granted any
extension of the limitation period applicable to any claim for taxes or
assessments with respect to taxes. The Company has been at all times since
at least 1981 an S Corporation for federal income tax purposes (as defined
in Section 1361(a)(1) of the IRC). The Company will not incur any tax
liability under Section 1374 of the IRC as a result of the consummation of
this Agreement and the Contemplated Transactions. The Company has not
experienced a termination, as defined in Section 1362(d) of the IRC, of its
S Corporation status. The Company has not filed or been subject to a Legal
Requirement to file any Tax Returns with any Governmental Bodies outside
the United States of America.
13 EMPLOYEES AND BENEFIT PLANS.
(a) Part 3.13 of the Disclosure Letter sets forth the names, ages
and titles of all members of the Board of Directors and officers of
the Company and all employees of the Company earning in excess of
$50,000 per annum, and the annual rate of compensation (including
bonuses) being paid to each such member of the Board of Directors,
officer and employee as of the most recent practicable date.
(b) The Disclosure Letter lists each employment, bonus, deferred
compensation, pension, stock option, stock appreciation right, profit-
sharing or retirement plan, arrangement or practice, each medical,
vacation, retiree medical, severance pay plan, and each other
agreement or fringe benefit plan, arrangement or practice, of the
Company, whether legally binding or not, which affects one or more of
its employees, including all "employee benefit plans" as defined by
Section 3(3) of ERISA (individually, a "Plan" and collectively, the
"Plans"). All Plans which are subject to Title IV of ERISA or the
minimum funding standards of Section 412 of the Code shall be referred
to as the "Pension Plans."
(c) For each Plan which is an "employee benefit plan" under
Section 3(3) of ERISA, the Company has delivered to the Buyer correct
and complete copies of the plan documents and, except for the Plan
listed in Part 3.13(c) of the Disclosure Letter, summary plan
descriptions, the most recent determination letter received from the
IRS, the most recent Form 5500 Annual Report, and all related trust
agreements, insurance contracts and funding agreements which implement
each such Plan.
(d) The Company does not have any commitment, (i) to create any
additional such Plan; (ii) to modify or change any such Plan; or (iii)
to maintain for any period of time any such Plan. The Disclosure
Letter contains an accurate and complete description of the funding
policies (and commitments, if any) of the Company with respect to each
such existing Plan.
(e) The Company has no unfunded past service liability in respect
of any of its Plans; the actually computed value of vested benefits
under any Pension Plan of the Company (determined in accordance with
methods and assumptions utilized by the Pension Benefit Guaranty
Corporation ("PBGC") applicable to a plan terminating on the date of
determination) does not exceed the fair market value of the fund
assets relating to such Pension Plan; neither the Company nor any Plan
nor any trustee, administrator, fiduciary or sponsor of any Plan has
engaged in any prohibited transactions as defined in Section 406 of
ERISA or Section 4975 of the Code for which there is no statutory
exemption in Section 408 of ERISA or Section 4975 of the Code; all
filings, reports and descriptions as to such Plans (including Form
5500 Annual Reports, Summary Plan Descriptions, PBCG-1's and Summary
Annual Reports) required to have been made or distributed to
participants, the Internal Revenue Service, the United States
Department of Labor and other governmental agencies have been made in
a timely manner; there is no material litigation, disputed claim,
governmental proceeding or investigation pending or threatened with
respect to any of such Plans, the related trusts, or any fiduciary,
trustee, administrator or sponsor of such Plans; such Plans have been
established, maintained and administered in all material respects in
accordance with their governing documents and applicable provisions of
ERISA and the Code and Treasury Regulations promulgated thereunder;
there has been no "Reportable Event" as defined in Section 4043 of
ERISA with respect to any Pension Plan; and each Pension Plan and each
Plan which is intended to be a qualified plan under Section 401(a) of
the Code has received, within the last three years, a favorable
determination letter from the Internal Revenue Service.
(f) The Company has complied in all material respects with all
applicable federal, state and local laws, rules and regulations
relating to employees' employment and/or employment relationships,
including, without limitation, wage related laws, anti-discrimination
laws, Occupational Safety and Health Laws and COBRA (defined herein to
mean the requirements of Code Section 4980B, Proposed Treasury
Regulation Section 1.162-26 and Part 6 of Subtitle B of Title I of
ERISA).
(g) The consummation of the transactions contemplated by this
Agreement will not (i) result in the payment or series of payments by
the Company to any employee or other person of an "excess parachute
payment" within the meaning of Section 280G of the Code, (ii) entitle
any employee or former employee of the Company to severance pay,
unemployment compensation or any other payment, and (iii) accelerate
the time of payment or vesting of any stock option, stock appreciation
right (except as set forth in Part 3.13(g) of the Disclosure Letter),
deferred compensation or other employee benefits under any Plan
(including vacation and sick pay).
(h) None of the Plans which are "welfare benefit plans," within
the meaning of Section 3(1) of ERISA, provide for continuing benefits
or coverage after termination or retirement from employment, except
for COBRA rights under a "group health plan" as defined in Code
Section 4980B(g) and ERISA Section 607.
(i) No Pension Plan has been completely or partially terminated,
nor has any plan been instituted by the PBGC to terminate any such
Pension Plan; the Company has not incurred, and does not presently
owe, any liability to the PBGC or the Internal Revenue Service with
respect to any Pension Plan including, but not by way of limitation,
any liability for PBGC premiums or excise taxes under Code Section
4971.
14 ASSETS.
(a) The Company owns the assets reflected on the Balance Sheet
with good and marketable title (as to all real property), free and
clear of any and all claims, liens, mortgages, options, charges,
conditional sale or title retention agreements, security interests,
restrictions, easements, or encumbrances whatsoever and free and clear
of any rights or privileges capable of becoming claims, liens,
mortgages, options, charges, security interests, restrictions,
easements or encumbrances, except (i) for certain of the assets which
are encumbered by liens that are listed in Part 3.14 of the Disclosure
Letter, (ii) as shown on the title insurance policies furnished to the
Buyer, (iii) real property taxes not yet due and payable, (iv) utility
easements for utilities serving the Property, (v) the replacement
and/or disposition of obsolete or worn-out personalty in the ordinary
course of business, (vi) minor imperfections of title which do not
materially affect the value and use of such assets; and (vii) zoning
laws and other land use restrictions that do not impair the use of the
property subject thereto.
(b) The Company owns good and marketable leasehold title to the
premises leased by the Company, free and clear of any and all claims,
liens, mortgages, options, charges, conditional sale or title
retention agreements, security interests, restrictions, easements, or
encumbrances whatsoever and free and clear of any rights or privileges
capable of becoming claims, liens, mortgages, options, charges,
security interests, restrictions, easements or encumbrances, except
(i) to the extent expressly set forth in the leases, (ii) as shown on
the title insurance policies furnished to the Buyer, (iii) real
property taxes not yet due and payable, and (iv) zoning laws and other
land use restrictions that do not impair the use of the property
subject thereto.
15 LAWFULLY OPERATING. To the knowledge of the Company, the Company
has been and currently is conducting and each of the premises leased or
owned have been and now are being used and operated, in compliance in all
material respects with all applicable statutes, regulations, bylaws,
orders, covenants or restrictions of a Governmental Body.
16 POWER OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Company.
17 NO LITIGATION. Except as set forth in Part 3.17 of the Disclosure
Letter, there are currently no pending, or, to the knowledge of the
Sellers, threatened, lawsuits or administrative proceedings or
investigations against the Company or to which its assets are subject. If
adversely determined, none of the pending or threatened litigation
described in Part 3.17 of the Disclosure Letter is likely to have a
material adverse effect on the financial condition, results of operations,
business, prospects, assets, or liabilities of the Company. The Company is
not subject to any currently existing order, writ, injunction, or decree
relating to its operations.
18 CORPORATE RECORDS. True and correct copies of the Articles of
Incorporation and bylaws of the Company have been delivered to the Buyer.
19 NO DEFAULTS. Except as set forth in Part 3.19 of the Disclosure
Letter, the Company has in all material respects performed all material
obligations to be performed by it under all contracts, agreements, and
commitments to which it is a party, and there is not under any such
contracts, agreements, or commitments any existing default or event of
default or event which with notice or lapse of time or both would
constitute a default, which default would have a material adverse effect
upon the business, result of operations or financial condition of the
Company.
20 HAZARDOUS SUBSTANCES. For purposes of this Agreement, the
following terms shall have the following meanings:
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. <section><section> 9601 ET
SEQ.;
"Company Property" shall mean (i) any real property and improvements
presently owned, leased, used, operated or occupied by the Company, and
(ii) any other real property and improvements at any previous time owned,
leased, used, operated or occupied by the Company, but only as to the time
owned, leased, used, operated or occupied by the Company;
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any
way to any Environmental Law (for purposes of (i) and (ii) below, "Claims")
or any permit issued under any such Environmental Law, including without
limitation:
(a) any and all Claims by governmental or regulatory authorities
for investigation, oversight, enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any applicable
Environmental Law; and
(b) any and all Claims by any third party seeking damages,
response, costs, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety
or the environment;
"Environmental Law" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law now in
effect and as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent, decree or
judgment, relating to the environment, health, or safety of hazardous,
toxic or dangerous materials, substances or wastes, including without
limitation CERCLA; the Toxic Substances Control Act, as amended, 15 U.S.C.
<section><section> 2601 ET SEQ.; the Clean Air Act, as amended, 42 U.S.C.
<section><section> 7401 ET SEQ.; the Federal Water Pollution Control Act,
as amended, 33 U.S.C. <section><section> 1251 ET SEQ.; the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C.
<section><section> 136, ET SEQ.; the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. <section><section> 1801 ET SEQ.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C.
<section><section> 6901 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C.
<section><section> 300f ET SEQ.; the Clean Water Act, as amended, 33 U.S.C.
<section><section> 1251, ET SEQ.; and any similar state or local law;
"Hazardous Materials" shall mean those materials listed in Section
101(14) of CERCLA, as hereinafter defined, and any other substance defined
as toxic or hazardous under any federal, state or local law, rules,
regulation, ordinance code or policy, including, but not limited to:
(a) any petroleum or petroleum products, flammable explosives,
radioactive materials, asbestos, asbestos products, urea formaldehyde
foam insulation, polychlorinated biphenyls, including transformers or
other equipment that contain dielectric fluid containing detectible
levels of polychlorinated biphenyls, and radon gas;
(b) any hazardous, toxic or dangerous waste, substance or
material defined as such in (or for purposes of) any current
Environmental Law or currently listed as such pursuant to any
Environmental Law; and
(c) any other chemical, material or substance, exposure to which
is prohibited, limited or regulated by any governmental authority:
"Improperly" means done in any manner that poses a threat to human
health, safety or the environment;
"Release" means disposing, depositing, discharging, injecting,
spilling, leaking, leaching, dumping, emitting, escaping, emptying,
seeping, placing and the like, into or upon any land or water or air, or
otherwise entering into the environment.
Except as set forth in Part 3.20 of the Disclosure Letter, to the
knowledge of the Sellers:
(a) Hazardous Materials have not at any time been illegally or
Improperly generated, used, treated or stored on, or transported to or
from, any Company Property;
(b) No asbestos containing materials or other Hazardous Materials
have been installed in or affixed to structures on any Company
Property;
(c) Hazardous Materials have not at any time been disposed of or
otherwise Released on any Company Property;
(d) The Company is currently, and has at all times in the past
been, in compliance with all applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws with
respect to any Company Property;
(e) There are no past, pending or, to the knowledge of the
Company, threatened Environmental Claims against the Company or any
Company Property;
(f) There are no facts or circumstances, conditions or
occurrences on any Company Property or otherwise that could reasonably
be anticipated by the Company:
(i) to form the basis of an Environmental Claim against the
Company or any Company Property; or
(ii) to cause such Company Property to be subject to any
restrictions on the ownership, occupancy, use or transferability
of such Company Property under any Environmental Law; and
(g) There are not now, nor have there been at any time, any
aboveground or underground storage tanks located on any Company
Property.
21 LABOR MATTERS. The Company is not a party to any collective
bargaining agreement and has not been the subject of any union activity or
labor dispute, and there has not been any strike of any kind called or
threatened to be called against the Company. To the knowledge of the
Sellers, the Company has not violated any applicable federal or state law
or regulation relating to labor or labor practices. The Company has no
liability to any of its employees, agents, or consultants in connection
with grievances by, or the termination of, such employees, agents, or
consultants. To the knowledge of Sellers, there are no negotiations,
proposals or activities concerning the organization of a union (or any
collective bargaining groups) with respect to the Company.
22 CONDITION OF ASSETS. Except as specifically described in Part
3.22 of the Disclosure Letter, the buildings, plants, structures, equipment
and other tangible personalty of the Company included in the assets on the
Balance Sheet or Interim Balance Sheet are structurally sound and are in
good working order. None of such buildings, plants, structures, equipment
or other tangible personalty included in the assets on the Balance Sheet or
Interim Balance Sheet is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature
or cost. Notwithstanding the foregoing, the representations and warranties
in this Section concerning the Company's real property, vehicles and
equipment is qualified by and subject to the best of Sellers' knowledge.
23 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that
are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable") represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of
business. Unless paid prior to the Closing Date, the Accounts Receivable
are or will be as of the Closing Date current and collectible net of the
respective reserves shown on the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Company as of the Closing Date (which
reserves are adequate and calculated consistent with GAAP). Subject to such
reserves and except as set forth in Part 3.23 of the Disclosure Letter,
each of the Accounts Receivable either has been or will be collected in
full, without any set-off, within ninety days after the day on which it
first becomes due and payable. Except as set forth in Part 3.23 of the
Disclosure Letter, there is no contest, claim, or right of set-off, other
than returns in the ordinary course of business, under any Contract with
any obligor of an Accounts Receivable relating to the amount or validity of
such Accounts Receivable. Part 3.23 of the Disclosure Letter contains a
complete and accurate list of all Accounts Receivable as of the date of the
Interim Balance Sheet, which list sets forth the aging of such Accounts
Receivable. The Buyer and the Sellers' acknowledge that if the Accounts
Receivable are not collected within ninety (90) days, they are not subject
to set-off unless such Accounts Receivable remain uncollected prior to the
Third Deferred Payment.
24 INVENTORY. All inventory of the Company, whether or not reflected
in the Balance Sheet or the Interim Balance Sheet, consists of a quality
and quantity usable and salable in the ordinary course of business, except
for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or market value on a
moving average basis.
25 NO LIABILITIES. Except as set forth in Part 3.25 of the
Disclosure Letter, the Company has no material liabilities or obligations
of any nature (whether known or unknown and whether absolute, accrued,
contingent, or otherwise), except for liabilities or obligations of a
nature which is the subject matter of another representation or warranty
herein and which is limited to Seller's knowledge or which are reflected or
reserved against in the Balance Sheet or the Interim Balance Sheet and
current liabilities incurred in the ordinary course of business since the
respective dates thereof. Part 3.25 of the Disclosure Letter lists all
obligations of the Company with any financial institution.
26 INSURANCE.
(a) Sellers have delivered to Buyer true and complete copies of
all policies of insurance to which the Company is a party and which is
presently in force; and
(b) Part 3.26(b) of the Disclosure Letter describes:
(i) any self-insurance arrangements by the Company, and
(ii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such
coverage is provided.
(c) Part 3.26(c) of the Disclosure Letter sets forth, by year,
for 1996 and 1997:
(i) a summary of the loss experience under all policies of
insurance (including prior policies which have expired);
(ii) a statement describing each claim (other than claims
for health insurance) under an insurance policy for an amount in
excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim;
and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate
cost of such claims.
(d) Except as set forth on Part 3.26(d) of the Disclosure Letter:
(i) To the best of the Sellers' knowledge, all policies to
which the Company is a party or that provide coverage to Sellers,
or any director or officer of the Company:
(A) are valid, outstanding, and enforceable;
(B) taken together, provide adequate insurance coverage
for the assets and the operations of the Company;
(C) are sufficient for compliance with all Legal
Requirements and contracts to which the Company is a party
which require insurance coverage;
(D) will continue in full force and effect following
the consummation of the Contemplated Transactions; and
(E) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part
of the Company.
(ii) The Company has paid all premiums due, and has
otherwise performed all of its obligations, under each policy to
which the Company is a party.
(iii) The Company has given notice to the insurer of all
claims (of which the Company is aware) that may be insured
thereby.
27 INTELLECTUAL PROPERTY.
(a) INTELLECTUAL PROPERTY ASSETS--The term "Intellectual Property
Assets" includes:
(i) the name Lewis Supply Company, Inc., all fictitious
business names, trade names, registered and unregistered
trademarks, service marks, and applications currently used by the
Company at its own (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents"); and
(iii) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively,
"Trade Secrets"); owned, used, or licensed by the Company as
licensee or licensor.
(b) AGREEMENTS--Part 3.27(b) of the Disclosure Letter contains a
complete and accurate list and summary description, including any
royalties paid or received by the Company, of all contracts relating
to the Intellectual Property Assets to which the Company is a party or
by which the Company is bound. There are no outstanding and, to
Sellers' knowledge, no threatened disputes or disagreements with
respect to any such agreements.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS. The Intellectual
Property Assets are all those of which the Sellers have knowledge and
which are necessary for the operation of the Company's businesses as
they are currently conducted.
(d) PATENTS The Company has no right, title or interest in any
Patents.
(e) TRADEMARKS
(i) Part 3.27(e) of Disclosure Letter contains a complete
and accurate list and summary description of all Marks. To the
best of Sellers' knowledge, the Company is the owner of all
right, title, and interest in and to each of the Marks, free and
clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims within the Company's trade
area.
(ii) To the best of Sellers' knowledge, all Marks that have
been registered with the United States Patent and Trademark
Office are currently in compliance with all formal legal
requirements and are valid and enforceable.
(iii) To the best of Sellers' knowledge, no Mark that has
been registered with the United States Patent and Trademark
Office, has been or is now involved in any opposition,
invalidation, or cancellation and, to Sellers' knowledge, no such
action is threatened with the respect to any of the Marks.
(iv) To the best of Sellers' knowledge, there is no
potentially interfering trademark or trademark application of any
third party.
(v) To the best of Sellers' knowledge, no Mark is infringed
or has been challenged or threatened in any way. To the best of
Sellers' knowledge, none of the Marks used by the Company
infringes or is alleged to infringe any trade name, trademark, or
service mark of any third party.
(f) TRADE SECRETS
(i) Except as specifically disclosed in Part 3.27(f)(i) of
the Disclosure Letter, with respect to each Trade Secret (other
than software owned or licensed by the Company), the
documentation relating to such Trade Secret is current, accurate,
and sufficient in detail and content, in all material respects,
to identify and explain it and to allow its full and proper use.
(ii) Sellers and the Company have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of
Trade Secrets owned by the Company.
(iii) The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature, and,
to Sellers' knowledge, have not been used, divulged, or
appropriated either for the benefit of any Person (other than the
Company) or to the detriment of the Company. To the best of
Sellers' knowledge, no Trade Secret is subject to any adverse
claim or has been challenged or threatened in any way.
28 BROKERS OR FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with
this Agreement.
3.29 DISCLOSURE.
(a) To the knowledge of each Seller, no representation or
warranty of any of the Sellers in this Agreement omits to state a
material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
(b) To the knowledge of each Seller, the Disclosure Letter,
including any supplement thereto, does not contain any untrue
statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances
in which they were made, not misleading.
3.30 SELLERS' REPRESENTATIVE. Pursuant to a written power of attorney
(such power being coupled with an interest) in the form of Exhibit 3.30,
the Sellers have concurrently herewith appointed Michael S. Burnham, Jr. as
the Sellers' Representative under this Agreement, delegating to the
Sellers' Representative the power and the right to take any actions, make
certain elections, consent to any matters, and otherwise bind each of the
Sellers with respect to any matters delegated to the Sellers'
Representative under this Agreement or otherwise within the discretion of
the Sellers under this Agreement.
3.31 SELLERS' KNOWLEDGE OF CLAIMS. Sellers have no actual knowledge of
any facts, matters or circumstances that would give rise to a claim for
indemnity by or Damages against Buyer under this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Sellers, as of the date hereof and through the Closing Date, as
follows:
1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware.
2 AUTHORITY; NO CONFLICT. This Agreement and all agreements and
documents contemplated hereby (when executed and delivered) will constitute
the legal, valid, and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
and general principles of equity. Neither the execution and delivery of
this Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated
Transactions. Except as set forth in Schedule 4.2, Buyer is not and will
not be required to obtain any consent from any Person in connection with
the execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
3 INVESTMENT INTENT. Buyer is acquiring the Shares for investment
and not with a view to, or for sale or other disposition in connection
with, any distribution thereof, nor with any present intention of selling
or otherwise disposing of the same. Buyer is an Accredited Investor (as
that term is defined in Rule 501 promulgated by the Securities and Exchange
Commission under the Securities Act), and acknowledges that the Shares are
being sold pursuant to a private offering exemption under Section 4(2) of
the Securities Act and are not being registered under the Securities Act or
under the securities or blue sky laws of any state or foreign jurisdiction
and that such Shares must be held indefinitely unless they are subsequently
registered under the Securities Act and any applicable state securities or
blue sky laws, or unless an exemption from registration is available
thereunder.
4 CERTAIN PROCEEDINGS. There is no pending action, suit or
proceeding that has been commenced against Buyer that challenges, or may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions. To Buyer's
knowledge, no such Proceeding has been threatened.
5 BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in
connection with this Agreement and will indemnify and hold Sellers harmless
from any such payment alleged to be due by or through Buyer as a result of
the action of Buyer or its officers or agents.
6 SETECH FINANCIAL STATEMENTS. The financial statements and any
accompanying notes contained in the annual report of SETECH filed with the
Securities and Exchange Commission (SEC) on Form 10-K for the fiscal year
ended June 30, 1996 and in the quarterly reports on Form 10-Q filed with
the Securities and Exchange Commission after the filing of the annual
report fairly present in all material respects the financial condition and
the results of operations, changes in stockholders' equity, and cash flow
of SETECH and its subsidiaries on a consolidated basis as at the respective
dates of and for the periods referred to in such financial statements, all
in accordance with GAAP, in all material respects. The Buyer is current in
all required filings with the SEC.
7 INVENTORY DUE DILIGENCE. Buyer has inspected a portion of the
Company's inventory described in Exhibit 4.7. The Buyer acknowledges and
agrees that the inventory described in Exhibit 4.7 is not obsolete and that
Buyer will not reduce the Purchase Price by any devaluation of such
inventory after the Closing Date.
4.8 BUYER'S KNOWLEDGE OF CLAIMS. Buyer has no actual knowledge of any
facts, matters or circumstances that would give rise to a claim for setoff
against the Purchase Price, or for Damages against or indemnification by
Sellers under this Agreement.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE.
1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause the Company and its
representatives to, (a) afford Buyer and its representatives (and its
prospective lenders) (collectively, "Buyer's Advisors") full and free
access to the Company's personnel, properties, contracts, books and
records, and other documents and data at reasonable times and no more
frequently than may be reasonable, (b) furnish Buyer and Buyer's Advisors
with copies of all such contracts, books and records, and other existing
documents and data as Buyer may reasonably request, and (c) furnish Buyer
and Buyer's Advisors with such additional financial, operating, and other
data and information as Buyer may reasonably request.
2 OPERATION OF THE BUSINESSES OF THE COMPANY. Between the date of
this Agreement and the Closing Date, Sellers will, and will cause the
Company to:
(a) conduct the business of the Company only in the ordinary
course of business;
(b) use their best efforts to preserve intact the current
business organization of the Company, keep available the services of
the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers,
creditors, employees, agents, and others having business relationships
with the Company.
3 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Sellers will, and will cause the Company to, make all
filings required by Legal Requirements to be made by them in order to
consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Sellers will, and will cause the Company
to, (a) cooperate with Buyer with respect to all filings that Buyer elects
to make or is required by Legal Requirements to make in connection with the
Contemplated Transactions, including but not limited to Buyer's filing of
SEC Form 8-K, and (b) cooperate with Buyer in obtaining all consents
identified in Schedule 4.2.
4 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and will cause the
Company and each of their representatives not to, directly or indirectly
solicit or initiate any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets
(other than in the ordinary course of business) of the Company, or any of
the capital stock of the Company, or any merger, consolidation, or similar
transaction involving the Company.
5 NOTIFICATION. Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller
becomes aware of any fact or condition that causes or constitutes a breach
of any of Sellers' representations and warranties as of the date of this
Agreement, or if such Seller becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such
representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. During
the same period, each Seller will promptly notify Buyer of the occurrence
of any breach of any covenant of Sellers in this Section 5 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 7 impossible or unlikely.
6 [INTENTIONALLY OMITTED].
7 TAX COVENANTS.
(a) The Sellers shall, at their expense, file or cause to be
filed all federal, state, local and foreign tax returns which are
required to be filed by, or with respect to, the Company for the
period immediately prior to and ending with the Closing Date and,
except as provided below, shall pay all taxes required to be paid in
accordance with such tax returns including, without limitation, any
and all tax liabilities attributable to the making of the election
under Section 338(h)(10) of the IRC (the "Election") as described
below. Buyer shall file or cause to be filed such tax returns for the
Company for the period after the Closing Date. In the event that any
state or local tax return is required to be filed on behalf of the
Company and such tax return is required to include periods ending both
on and after the Closing Date, Sellers and Buyer shall each pay a pro
rata portion (such proration to be based upon profitability of the
Company prior to and after the Closing Date) of the liability shown on
such tax return. Each of the parties to this Agreement covenants and
agrees that, at the option of Buyer, it will fully cooperate, in
accordance with all reasonable directions provided by Buyer, in the
making and filing of the Election. In furtherance thereof, Buyer and
the Sellers shall prepare, execute and timely file IRS Form 8023-A and
all schedules thereto in accordance with the instructions to that
Form. Any information on such Form 8023-A allocating the purchase
price to separately identifiable assets and categories thereof shall
conform with the purchase price/asset allocation set forth on Exhibit
5.7 hereof. Upon the making of the Election, Sellers covenant and
agree that, with respect to the preparation and filing of any federal,
state, local or foreign income tax return, Sellers shall prepare and
file all such tax returns on a basis consistent with the principles
illustrated in Treas. Regs. <section> 1.338(h)(10)-1 and information
contained in Exhibit 5.7 hereof. In the event Buyer exercises its
option to cause the Sellers to file the Election, the Buyer shall pay
each of the Sellers (at least fifteen (15) days prior to the date such
taxes are due) an amount equal to the increased federal tax liability
due to such election, together with an amount that will pay the
increased federal tax liability of such Seller incurred by any
payments to Seller's under this Section. The Sellers will provide only
such portions of their federal tax return required to establish their
increased liability for the Election. The Sellers covenant and agree
that the Company will not incur any tax liability under Section 1374
of the IRC as a result of the consummation of this Agreement and the
Contemplated Transactions. The Sellers will, no later than 15 days
prior to the due date for the filing of a tax return required by this
Section to be filed by the Company, provide a copy to Buyer of the
proposed completed form of Company's tax return. Buyer shall have the
right to approve that portion of the Sellers' tax return relating to
the Election and any Company tax returns required by this Section.
Buyer covenants that the Company will become a member of the
affiliated group of corporations of which Buyer is the common parent
and, for the period beginning the day after the Closing Date, will be
properly included in the consolidated federal income tax return filed
by Buyer.
(b) As soon as practicable, but in any event within 30 days after
Sellers' request, from and after the Closing Date, Buyer shall provide
Sellers with such cooperation and shall deliver to Sellers such
information and data concerning the operations of the Company prior to
the Closing Date and make available such knowledgeable employees of
the Company as Sellers may reasonably request, including providing the
information and data required to complete and file all tax returns
when due which they may be required to file with respect to the
operations and business of the Company through the Closing Date or to
respond to audits on a timely basis. Sellers shall have the right, at
their expense, to conduct and, subject to this Section, settle or
contest all examinations of tax returns of the Company relating to all
periods ending on or before the Closing Date.
(c) Except for the changes required in connection with the
termination of the Company's "Subchapter S" status (or other changes
as required by the IRC) as of the Closing Date, neither Sellers nor
the Company shall, without the prior written consent of Buyer, which
consent shall not be unreasonably withheld, to the extent it may
affect or relate to the Company or the Sellers, make or change any tax
election, change any annual tax accounting period, adopt or change any
method of tax accounting, file any amended tax return, enter into any
closing agreement, settle any tax claim or assessment, surrender any
right to claim a tax refund, consent to any extension or waiver of the
limitations period applicable to any tax claim or assessment or take
or omit to take any other action, if any such action or omission would
have the effect of increasing the tax liability or reducing any tax
asset of the Company.
(d) Except for changes required in connection with the
termination of the Company's "Subchapter S" status (or other changes
as required by the IRC) as of the Closing Date, neither Buyer nor the
Company (or any subsidiary or any affiliate of Buyer) shall, without
the prior written consent of Sellers, which consent shall not be
unreasonably withheld, to the extent it may affect or relate to the
Company, make or change any tax election, change any annual tax
accounting period, adopt or change any method of tax accounting, file
any amended tax return, enter into any closing agreement, settle any
tax claim or assessment, surrender any right to claim a tax refund,
consent to any extension or waiver of the limitations period
applicable to any tax claim or assessment or take or omit to take any
other action, if any such action or omission would have the effect of
increasing Sellers' tax liability or obligation to indemnify Buyer.
(e) The Buyer shall be liable for any state or local sales, use
or other transfer taxes imposed as a result of the consummation of the
Contemplated Transactions.
8 DISTRIBUTIONS, DIVIDENDS AND BONUSES.
(a) Since the date of the Company's Balance Sheet, which has been
delivered to Buyer, Sellers have not received a dividend or other
distribution with respect to equity securities of the Company and
Sellers will cause the Company to refrain from declaring, setting
aside or paying any dividend or other distribution with respect to the
equity securities of the Company except as follows:
(i) Buyer and Seller agree that prior to the Closing Date,
the Company may distribute (or has distributed) to Sellers,
proportionately in accordance with the relative percentage
ownership of Shares by Sellers, an amount in the aggregate not to
exceed $ , which distributions to the Sellers
are intended to enable Sellers to pay their respective liability
for federal and state income taxes accrued through January 31,
1997 (but not including any penalties or interest with respect to
such taxes) which are directly attributable to taxable income of
the Sellers from the Sellers' ownership of their respective
Shares;
(ii) In addition to the distribution permitted in Section
5.8(a)(i), Buyer and Seller agree that prior to the Closing Date,
the Company may distribute (or has distributed) to Sellers,
proportionately in accordance with the relative percentage
ownership of Shares by Sellers, an amount equal to the Sellers'
respective liabilities for state and federal income taxes (but
not including any penalties or interest with respect to any such
taxes), directly attributable to taxable income of the Sellers
from the Sellers' ownership of their respective Shares (but not
attributable to any taxes payable by reason of the sale of the
Shares under this Agreement or any Election), and which accrued
from the period commencing February 1, 1997 and ending through
the Closing Date (such period shall be defined as the "Interim
Period"). The tax rate for computation of the distributions under
this Section 5.8(a)(ii) shall not exceed the rate used for
computation of the distribution in Section 5.8(a)(i).
In the event the Company declares a dividend or makes any
distribution in excess of the amounts allowable under Section
5.8(a)(i) and (ii), such excess shall reduce the Dollar Purchase
Price to be paid at the Closing.
(b) Buyer and Sellers acknowledge and agree to the payment by the
Company of bonuses to employees of the Company paid after December 31,
1996 in excess of the Company's compensation plan (set forth in Part
5.8(b) of the Disclosure Letter), in an amount equal to $297,500. Any
bonuses in excess of such amount shall reduce the Dollar Purchase
Price payable at the Closing.
9 ADVANCES TO SHAREHOLDERS, DIRECTORS AND OFFICERS. Part 5.9 of the
Disclosure Letter lists all outstanding loans, receivables or other
advances outstanding to Sellers, directors or officers of the Company. The
Sellers will cause all outstanding loans, receivables and advances to
Sellers, officers and directors of the Company, to be repaid to the Company
prior to the Closing Date.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable
after the date of this Agreement, Buyer will make all filings required by
Legal Requirements to be made by them to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date,
Buyer will, cooperate with Sellers with respect to all filings that Sellers
are required by Legal Requirements to make in connection with the
Contemplated Transactions, and cooperate with Sellers in obtaining all
consents identified in Part 3.2 of the Disclosure Letter; provided that
this Agreement will not require Buyer to dispose of or make any change in
any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
2 BEST EFFORTS. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Buyer will use its
best efforts to cause the conditions in Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's
obligation to purchase the Shares and to take the other actions required to
be taken by Buyer at the Closing is subject to the satisfaction, at or
prior to the Closing Date, of each of the following conditions (any of
which may be waived by Buyer, in whole or in part):
1 ACCURACY OF REPRESENTATIONS. Each of the Sellers' representations
and warranties in this Agreement, must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date.
2 SELLERS' PERFORMANCE. All of the covenants and obligations that
Sellers are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been duly performed and
complied with in all material respects.
3 CONSENTS. Each of the consents identified in Part 3.2 of the
Disclosure Letter, and each consent identified in Schedule 4.2, must have
been obtained and must be in full force and effect.
4 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
(a) an opinion of Waring Cox, PLC, dated the Closing Date, in the
form of Exhibit 7.4(a);
(b) such other documents as Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to
in Section 8.3(a), (ii) evidencing the accuracy of any of Sellers'
representations and warranties, (iii) evidencing the performance by
either Seller of, or the compliance by either Seller with, any
covenant or obligation required to be performed or complied with by
such Seller, (iv) evidencing the satisfaction of any condition
referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against Buyer, any actions, suits or
proceedings (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the Contemplated Transactions.
6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must
not have been made or threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Company, or (b) is
entitled to all or any portion of the Purchase Price.
7 NO PROHIBITION. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with,
or result in a material violation of, or cause Buyer or any Person
affiliated with Buyer to suffer any material adverse consequence under,
(a) any applicable Legal Requirement or Order, or (b) any Legal Requirement
or Order that has been published, introduced, or otherwise formally
proposed by or before any Governmental Body.
8 FINANCING. Buyer shall have obtained financing substantially in
accordance with the terms and provisions of that certain Commitment Letter
dated May 20, 1997 executed by First Union Commercial Corporation and
Buyer, a copy of which Buyer has previously provided to Sellers.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions (any of which may be waived by Sellers, in whole or in part):
1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement, and each of these representations and
warranties, must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
2 BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is required
to perform or to comply with pursuant to this Agreement at or prior to
the Closing, and each of these covenants and obligations must have
been performed and complied with in all material respects.
(b) Buyer must have delivered each of the documents required to
be delivered by Buyer pursuant to Section 2.4 and must have made the
payments required to be made by Buyer pursuant to Section 2.4.
3 ADDITIONAL DOCUMENTS. Buyer must have caused the following
documents to be delivered to Sellers:
(a) an opinion of Farris, Warfield & Kanaday, PLC, dated the
Closing Date, in the form of Exhibit 8.3(a); and
(b) such other documents as Sellers may reasonably request for
the purpose of (i) enabling their counsel to provide the opinion
referred to in Section 7.4(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer, (iii) evidencing the performance
by Buyer of, or the compliance by Buyer with, any covenant or
obligation required to be performed or complied with by Buyer,
(ii) evidencing the satisfaction of any condition referred to in this
Section 8, or (v) otherwise facilitating the consummation of any of
the Contemplated Transactions.
4 NO INJUNCTION. There must not be in effect any Legal Requirement
or any injunction or other Order that (a) prohibits the sale of the Shares
by Sellers to Buyer, and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.
5 CONSENTS. Each of the consents identified in Part 3.2 of the
Disclosure Letter, and each consent identified in Schedule 4.2, must have
been obtained and must be in full force and effect.
6 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against the Company or the Sellers, any
actions, suits or proceedings (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with any of the Contemplated
Transactions.
9. TERMINATION.
1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material breach of any
provision of this Agreement has been committed by the other party and
such breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer
has not waived such condition on or before the Closing Date; or (ii)
by Sellers, if any of the conditions in Section 8 has not been
satisfied of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have
not waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement)
on or before July 1, 1997, or such later date as the parties may agree
upon.
2 EFFECT OF TERMINATION. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not
be an election of remedies. If this Agreement is terminated pursuant to
Section 9.1, all further obligations of the parties under this Agreement
will terminate, except that the obligations in Sections 11.1, 11.3 and 11.4
will survive; provided, however, that if this Agreement is terminated by a
party because of the breach of the Agreement by the other party or because
one or more of the conditions to the terminating party's obligations under
this Agreement is not satisfied as a result of the other party's failure to
comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination
unimpaired.
10. INDEMNIFICATION; REMEDIES.
1 SURVIVAL; RIGHT TO INDEMNIFICATION AFFECTED BY CERTAIN KNOWLEDGE.
Subject to the limitations set forth in Section 10.2, all representations,
warranties, covenants, and obligations in this Agreement, the Disclosure
Letter, the certificate delivered pursuant to Section 2.4(a)(iii), and any
other certificate or document delivered pursuant to this Agreement will
survive the Closing. The Buyer will be deemed to have knowledge of matters
disclosed by the express terms and provisions of documents previously
delivered to Buyer by the Company prior to the Closing Date and described
in Exhibit 10.1. Except for matters described in the Disclosure Letter and
matters described in the preceding sentence, the right to indemnification,
payment of damages or other remedy based on such representations,
warranties, covenants, and obligations will not be affected by any
investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect
to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on
the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, payment of damages, or other remedy
based on such representations, warranties, covenants, and obligations, and
Buyer shall have no right of setoff or indemnification (or claim for
Damages) for matters as to which Buyer has knowledge under the terms of
this Section.
2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Subject to the
limitations set forth in Sections 3.4, 10.1, 10.5, 10.6 and 10.8, Sellers,
jointly and severally, will indemnify and hold harmless Buyer, the Company,
and their respective representatives, stockholders, controlling persons,
and affiliates (collectively, the "Indemnified Persons") for, and will pay
to the Indemnified Persons the amount of, any loss, liability, claim,
damage, expense (including costs of investigation and defense and
reasonable attorneys' or accountants' fees) or diminution of value, whether
or not involving a third-party claim (collectively, "Damages"), arising,
directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by Sellers
in this Agreement, the Disclosure Letter, or any other certificate or
document delivered by Sellers pursuant to this Agreement. With respect
to a breach of certain warranties described in subsections (i) through
(iii) below, the following provisions shall apply:
(i) To the extent that any of the buildings, plants, structures,
equipment and other tangible personalty of the Company included in the
assets on the Balance Sheet or Interim Balance Sheet are not in good
condition or working order as of the Closing Date constituting a
breach of warranties under Section 3.22, an amount equal to the cost
of repair or, if repair is not commercially practicable, the cost of
replacement;
(ii) To the extent of a breach of warranties under Section 3.14
and to the extent items of inventory (except for inventory described
in Section 4.7) are obsolete as of the Closing Date, an amount
reflected in the Balance Sheet or Interim Balance Sheet of the Company
for such inventory;
(iii) To the extent that undisclosed liabilities exist as of the
Closing Date as a breach of warranties under Section 3.25, an amount
necessary to discharge such undisclosed liabilities.
(b) any breach by any Seller of any covenant or obligation of
such Seller in this Agreement.
The remedies provided in this Section 10.2 are separate and distinct
from Buyer's rights under Sections 2.5 and 5.8 hereof for a Purchase Price
adjustment; provided, however, that in the event that facts, events,
conditions or circumstances constituting or resulting in Damages under this
Section 10.2 also give rise to a reduction in the Purchase Price under
Sections 2.5 and 5.8 hereof, any payment obligations of Sellers under
Section 10.2 shall first be deducted from the Third Deferred Payment. If
the Third Deferred Payment is insufficient to satisfy Seller's obligations
under Section 10.2 because the aggregate of the Purchase Price reduction
pursuant to Section 2.5 hereof and the amounts payable by Sellers under
Section 10.2 hereof exceeds $250,000 (the maximum amount of the reduction
in the Third Deferred Payment), Sellers shall be jointly and severally
liable (except under the provisions of Section 3.4) to pay such amount to
Buyer. Amounts payable by the Sellers under this Section 10.2 shall accrue
interest from the Closing Date at the rate equal to the rate of interest
borne by the Promissory Notes. The Buyer shall not be entitled to Damages
under Section 10.2, if an adjustment for purchase price under Section 2.5
or 5.8 has been made for the same matter.
3 [Intentionally Omitted]
4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of
any Damages arising, directly or indirectly, from or in connection with (a)
any breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this
Agreement, or (b) any breach by Buyer of any covenant or obligation of
Buyer in this Agreement.
5 TIME LIMITATIONS.
(a) If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, unless on or before August 31, 1998 (and in the case
of representations, warranties or covenants under Section 3.4, on or before
June , 2000) Buyer notifies the Sellers' Representative of a claim
specifying the factual basis of that claim in reasonable detail to the
extent then known by Buyer. Notwithstanding any provision of this Section
10.5 to the contrary, Sellers' liability (for indemnification or otherwise)
with respect to representations, warranties, covenants or obligations with
respect to Section 3.20 (Environmental Matters) and Section 3.12 (Tax
Matters) will not be limited by the failure of Buyer to notify Sellers of a
claim as set forth in the preceding sentence.
(b) If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, unless on or before August 31, 1998 the Sellers'
Representative notifies Buyer of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Sellers.
6 THRESHOLD ON AMOUNT--SELLERS. Sellers will have no liability (for
indemnification or otherwise) with respect to the matters described in
Section 10.2 until the total of all Damages exceed $50,000 and only for the
amount by which such Damages exceed $50,000.
Notwithstanding any other provision of this Agreement, the limitations
of this Section 10.6 will not apply:
(a) to a Seller with respect to which any breach of any of such
Seller's representations and warranties of which such Seller had
knowledge prior to the date on which such representation or warranty
is made or any intentional breach by such Seller of any covenant or
obligation; or
(b) any breach of any representation or warranty of Sellers set
forth in Section 3.4.
7 THRESHOLD ON AMOUNT--BUYER. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in
Section 10.4 until the total of all damages with respect to such matters
exceeds $50,000, and then only for the amount by which such damages exceed
$50,000. However, this Section 10.7 will not apply to any breach of any of
Buyer's representations and warranties of which Buyer had knowledge prior
to the date on which such representation and warranty is made or any
intentional breach by Buyer of any covenant or obligation.
8 RIGHT OF SET-OFF AND EXERCISE OF REMEDIES. Based upon the
provisions of Section 2.5 and this Section 10, upon prompt notice (after
Buyer learns of the basis for a set-off) to Sellers' Representative
specifying in reasonable detail the basis for such set-off, Buyer may set
off any amount to which it may be entitled under Section 2.5 or this
Section 10 against the Third Deferred Payment. The exercise of such right
of set-off by Buyer in good faith, whether or not ultimately determined to
be justified, will not constitute an event of default under the Promissory
Notes or any instrument securing a Promissory Note. Except as set forth in
this Section, neither the exercise of nor the failure to exercise such
right of set-off will constitute an election of remedies or limit Buyer in
any manner in the enforcement of any other remedies that may be available
to it. Except for a breach of the several warranties under Section 3.4,
Buyer agrees that it will pursue its remedies under Section 10 in the
following order of priority: (i) first, Buyer will exercise its right of
set-off against the Promissory Notes of Sellers and the unpaid Stock
Purchase Price on a pro rata basis; (ii) second, after exercising its set-
off rights as set forth in subsection (i) of this Section, the Buyer shall
pursue its remedies under Section 11.3, and if Buyer's claim is
established, it shall first make demand against Sellers' on a pro rata
basis (if Sellers are liable on a pro rata basis); (iii) third, then if a
Seller (or Sellers) does not make full payment within 120 days after such
demand, the Buyer may exercise its remedies hereunder against the Sellers
on a non pro rata basis. With respect to a breach of the several warranties
under Section 3.4, the Buyer will exercise its rights and remedies under
this Agreement only against such defaulting Seller. Any set-off against the
Stock Purchase Price shall value the shares constituting the Stock Purchase
Price at the greater of current fair market value or $3.50 per share (as
such shares may be adjusted under Section 3 of the Shareholders Agreement).
9 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section
10.2 or 10.4 of notice of the commencement of any action, claim, suit
or proceeding against it, such indemnified party will, if a claim is
to be made against an indemnifying party under such Section, give
notice to the indemnifying party of the commencement of such claim,
but the failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the
indemnifying party's failure to give such notice. Notice to Sellers'
Representative will constitute notice to all Sellers under this
Section 10.9 and the consent of Sellers' Representative under this
Section 10.9 shall constitute the consent of all Sellers to the
matters set forth in Section 10.9.
(b) If any proceeding referred to in Section 10.9(a) is brought
against an indemnified party and it gives notice to the indemnifying
party of the commencement of such proceeding, the indemnifying party
will, unless the claim involves taxes, be entitled to participate in
such proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such proceeding and the
indemnified party determines in good faith that joint representation
would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial
capacity to defend such proceeding and provide indemnification with
respect to such proceeding), to assume the defense of such proceeding
with counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its election
to assume the defense of such proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel
or any other expenses with respect to the defense of such proceeding,
in each case subsequently incurred by the indemnified party in
connection with the defense of such proceeding, other than reasonable
costs of investigation. If the indemnifying party assumes the defense
of a proceeding, (i) it will be conclusively established for purposes
of this Agreement (unless the parties agree otherwise) that the claims
made in that proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation
of Legal Requirements or any violation of the rights of any Person and
no effect on any other claims that may be made against the indemnified
party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified
party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is
given to an indemnifying party of the commencement of any proceeding
and the indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the indemnified
party of its election to assume the defense of such proceeding, the
indemnifying party will be bound by any determination made in such
proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by
notice to the indemnifying party, assume the exclusive right to
defend, compromise, or settle such proceeding, but the indemnifying
party will not be bound by any determination of a proceeding so
defended or any compromise or settlement effected without its consent
(which may not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of
any court in which a proceeding is brought against any Indemnified
Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such proceeding or the matters
alleged therein, and agree that process may be served on Sellers with
respect to such a claim anywhere in the world.
10 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by prompt notice (setting forth in reasonable detail the nature of
the claim) to the party from whom indemnification is sought.
11. GENERAL PROVISIONS.
1 EXPENSES. Except as set forth in the next sentence, each party to
this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. Except for payments equaling
one-half of the fees and expenses of its counsel, Waring Cox, PLC (which
one-half portion shall not exceed $30,000), Sellers will cause the Company
not to incur any out-of-pocket expenses with third parties in connection
with this Agreement and the consummation of the transactions contemplated
herein. In the event of termination of this Agreement, the obligation of
each party to pay its own expenses will be subject to any rights of such
party arising from a breach of this Agreement by another party.
2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions
will be issued, if at all, at such time and in such manner as Buyer and
Sellers' Representative shall mutually determine. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing,
Sellers shall, and shall cause the Company to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any
Person. Sellers and Buyer will consult with each other concerning the means
by which the Company's employees, customers, and suppliers and others
having dealings with the Company will be informed of the Contemplated
Transactions, and Buyer will have the right to be present for any such
communication.
3 MANDATORY ARBITRATION. Any controversy or claim between or among
the parties hereto, including but not limited to those arising out of or
relating to this Agreement, including any claim based on or arising from an
alleged tort, (but excluding the adjustment under Section 2.5 which is
governed procedurally by Section 2.5(a)(ii) hereof and excluding claims,
controversies and disputes under the Non-Competition Agreements and the
Employment Agreements, all of which shall be governed by the terms thereof)
shall be determined by binding arbitration in accordance with the Federal
Arbitration Act (or, if not applicable, the applicable Tennessee law), the
rules of practice and procedure for the arbitration of commercial disputes
of the American Arbitration Association ("A.A.A."), and the "Special Rules"
set forth below. In the event of any inconsistency, the Special Rules shall
control. Judgment upon any arbitration award may be entered in any court
having jurisdiction. Any party to this Agreement may bring an action,
including a summary or expedited proceeding, to compel arbitration of any
controversy or claim to which this Agreement applies in any court having
jurisdiction over such action.
(i) SPECIAL RULES. The arbitration shall be conducted in
Nashville, Tennessee and administered by A.A.A., who will appoint an
arbitrator. All arbitration hearings will be commenced within ninety
(90) days of the demand for arbitration. Further, the arbitrator shall
only, upon a showing of cause, be permitted to extend the commencement
of such hearing for an additional sixty (60) days.
4 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause
the directors, officers, employees, agents, and advisors of Buyer and the
Company to maintain in confidence, any information obtained in confidence
from another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to
such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b)
the use of such information is necessary or appropriate in making any
filing or obtaining any consent or approval required for the consummation
of the Contemplated Transactions, or (c) the furnishing or use of such
information is required by legal proceedings. If the Contemplated
Transactions are not consummated, each party will return or destroy as much
of such written information as the other party may reasonably request.
5 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been
duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to
the appropriate addresses and telecopier numbers set forth in Exhibit 11.5
for Sellers (with a copy as provided below) and as set forth below Buyer:
Buyer: Setech, Inc.
Address: 905 Industrial Drive
Murfreesboro, TN 37129
Facsimile No.: (615) 890-2914
With a copy to: Joseph N. Barker, Esq.
Farris, Warfield & Kanaday PLC
424 Church Street, Suite 1900
Nashville, TN 37219
Facsimile No.: (615) 726-3185
A copy of notice to any of the Sellers shall be sent to:
Samuel D. Chafetz, Esq.
Waring Cox, PLC
Morgan Keegan Tower
50 North Front Street
Suite 1300
Memphis, TN 38103-1190
Facsimile No.: (901) 543-8036
The Buyer, the Sellers or any other party described in this Section may
designate such other address or telecopier number by written notice to the
other parties required to give notice under this Agreement.
6 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of,
the Employment Agreements or the Non-Competition may be brought against any
of the parties thereto in the courts of the State of Tennessee, County of
Rutherford, or, if it has or can acquire jurisdiction, in the United States
District Court for the Middle District of Tennessee, and each of the
parties thereto who is a party to this Agreement consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in
any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
7 FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each
other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to in this
Agreement.
8 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by
any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any
such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a
party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
9 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated April 7,
1997) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may
not be amended except by a written agreement executed by the party to be
charged with the amendment.
10 DISCLOSURE LETTER.
(a) The disclosures in the Disclosure Letter, may relate not only
to the representations and warranties in the Section of the Agreement
to which they expressly relate, but also to any other representation
or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Disclosure Letter (other
than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty),
the statements in the body of this Agreement will control.
11 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. None of
the parties may assign any of its rights under this Agreement without the
prior consent of the other parties, except that Buyer may assign any of its
rights under this Agreement to any subsidiary of Buyer. Subject to the
preceding sentence, this Agreement will apply to, be binding in all
respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement
will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their heirs, legal
representatives or permitted successors and assigns.
12 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid
or unenforceable.
13 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this Agreement. All words
used in this Agreement will be construed to be of such gender or number as
the circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
14 TIME OF ESSENCE. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
15 GOVERNING LAW. This Agreement will be governed by the laws
of the State of Tennessee without regard to conflicts of laws principles.
16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
SELLERS:
By:
Michael S. Burnham, Jr.
By:
Sara Katz
By:
Elizabeth A. Harris
By:
Barbara Harris
By:
Michael S. Burnham, Jr., Custodian for
Gregory Burnham under TN UTMA
By:
Joanna Gorodetzki
By:
Michael S. Burnham, Jr., Custodian for
Spencer Burnham under TN UTMA
By:
Alexander Gorodetzki
By:
Elizabeth A. Harris, Trustee U/A dated
4/23/90 FBO Gregory Burnham and Spencer
Burnham ("Elizabeth Harris Trust I")
By:
Barbara Harris, Trustee U/A dated
4/23/90 FBO Joanna Gorodetzki and
Alexander Gorodetzki ("Barbara Harris
Trust I")
By:
Elizabeth A. Harris, Trustee U/A dated
4/23/90 FBO Gregory Burnham and Spencer
Burnham ("Elizabeth Harris Trust II")
By:
Barbara Harris, Trustee U/A dated
4/23/90 FBO Joanna Gorodetzki and
Alexander Gorodetzki ("Barbara Harris
Trust II")
By:
Elizabeth A. Harris, Trustee U/A dated
4/23/90 FBO Gregory Burnham and Spencer
Burnham ("Elizabeth Harris Trust III")
By:
Barbara Harris, Trustee U/A dated
4/23/90 FBO Joanna Gorodetzki and
Alexander Gorodetzki ("Barbara Harris
Trust III")
By:
Nancy Katz
By:
Robert Martin
By:
John Katz
By:
David Wright
By:
David Katz
By:
Jared Katz
BUYER:
SETECH, INC.
By:
Title:
<PAGE>
EXHIBIT 4.1
LOAN AND SECURITY AGREEMENT
AMONG
FIRST UNION COMMERCIAL CORPORATION,
AS LENDER
SETECH, INC., AS PARENT
AND A GUARANTOR
AND
LEWIS SUPPLY COMPANY, INC.,
SOUTHEASTERN TECHNOLOGY, INC.
AND TITAN SERVICES, INC.,
AS SUBSIDIARIES, CO-BORROWERS
AND CROSS-GUARANTORS
CLOSING DATE: June ___, 1997
268638.2 <<Date>>
<PAGE>
TABLE OF CONTENTS
SECTION 1. GENERAL DEFINITIONS..............................................2
1.1. DEFINED TERMS....................................................2
1.2. ACCOUNTING TERMS................................................21
1.3. OTHER TERMS.....................................................22
1.4. CONSTRUCTION AND INTERPRETATION.................................22
SECTION 2. CREDIT FACILITY.................................................22
2.1. REVOLVER FACILITY...............................................23
2.2. ALL REVOLVER LOANS TO CONSTITUTE ONE OBLIGATION.................24
SECTION 3. INTEREST, FEES AND REPAYMENT....................................25
3.1. INTEREST, FEES AND CHARGES......................................25
3.2. PAYMENTS AND COLLECTIONS........................................29
SECTION 4. REPRESENTATIONS AND WARRANTIES..................................31
4.1. GENERAL REPRESENTATIONS AND WARRANTIES..........................31
4.2. REAFFIRMATION...................................................35
4.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................35
SECTION 5. COVENANTS AND CONTINUING AGREEMENTS.............................35
5.1. AFFIRMATIVE COVENANTS...........................................35
5.2. NEGATIVE COVENANTS..............................................41
5.3. FINANCIAL COVENANTS.............................................44
SECTION 6. COLLATERAL......................................................44
6.1. GRANT OF SECURITY INTEREST......................................45
6.2. REPRESENTATIONS, WARRANTIES AND COVENANTS -- COLLATERAL
GENERALLY.......................................................45
6.3. LIEN PERFECTION.................................................45
6.4. LOCATION OF COLLATERAL..........................................45
6.5. INSURANCE OF COLLATERAL.........................................46
6.6. PROTECTION OF COLLATERAL........................................46
6.7. SPECIAL PROVISIONS RELATING TO ACCOUNTS.........................47
6.8. SPECIAL PROVISIONS RELATING TO INVENTORY........................48
6.9. SPECIAL PROVISIONS RELATING TO SUPPLY CONTRACTS.................49
SECTION 7. EVENTS OF DEFAULT AND REMEDIES ON DEFAULT.......................50
7.1. EVENTS OF DEFAULT...............................................50
7.2. ACCELERATION OF THE OBLIGATIONS.................................52
7.3. OTHER REMEDIES..................................................52
7.4. LICENSE TO USE..................................................53
7.5. REMEDIES CUMULATIVE; NO WAIVER..................................54
SECTION 8. MISCELLANEOUS...................................................54
8.1. POWER OF ATTORNEY...............................................54
8.2. INDEMNITY.......................................................55
8.3. MODIFICATION OF AGREEMENT; SALE OF INTEREST.....................55
8.4. REIMBURSEMENT OF EXPENSES.......................................56
8.5. INDULGENCES NOT WAIVERS.........................................57
8.6. SEVERABILITY....................................................57
8.7. SUCCESSORS AND ASSIGNS..........................................57
8.8. CUMULATIVE EFFECT...............................................58
8.9. EXECUTION IN COUNTERPARTS.......................................58
8.10. NOTICES.........................................................58
8.11. LENDER'S CONSENT................................................58
8.12. TIME OF ESSENCE.................................................58
8.13. ENTIRE AGREEMENT................................................58
8.14. INTERPRETATION..................................................59
8.15. MARSHALLING; PAYMENTS SET ASIDE.................................59
8.16. CONSTRUCTION....................................................59
8.17. GOVERNING LAW...................................................59
8.18. WAIVER OF JURY TRIAL............................................59
8.19. ARBITRATION AND PRESERVATION OF REMEDIES........................60
8.20. PUBLICITY.......................................................61
8.21. EFFECTIVENESS...................................................62
8.22. SOLE BENEFIT..................................................62
8.23. CERTAIN WAIVERS BY OBLIGORS.....................................62
8.24. INDEPENDENCE OF COVENANTS.......................................62
8.25. SEVERABILITY...................................................62
8.26. HEADINGS........................................................62
8.27. NO FIDUCIARY RELATIONSHIP.......................................63
8.28. LIMITATION OF LENDER'S LIABILITY................................63
8.29. NO DUTY.........................................................63
8.30. MAXIMUM INTEREST................................................63
8.31. NATURE OF OBLIGOR'S LIABILITY...................................64
8.32. PARENT AS AGENT.................................................64
SECTION 9. CONDITIONS PRECEDENT............................................64
9.1. CONDITIONS TO INITIAL LOANS.....................................64
9.2. CONDITIONS TO ALL LOANS.........................................66
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, made as of the _____ day of June,
1997 (the "CLOSING DATE"), by and among FIRST UNION COMMERCIAL CORPORATION
("LENDER"), a North Carolina corporation with an office at the address
specified on the signature page to this Agreement; SETECH, INC., a Delaware
corporation, formerly known as "Aviation Education Systems, Inc.," with its
chief executive office and principal place of business at the address
specified on the signature page to this Agreement ("PARENT"); and the
following Subsidiaries of Parent, to-wit: LEWIS SUPPLY COMPANY, INC., a
Delaware corporation ("LEWIS"), SOUTHEASTERN TECHNOLOGY, INC., a Tennessee
corporation ("SOUTHEASTERN"), and TITAN SERVICES, INC., a Tennessee
corporation ("TITAN"), each with its chief executive office and principal
place of business at the address specified on the signature page to this
Agreement;
W I T N E S S E T H T H A T:
WHEREAS, Parent is engaged primarily in the business of providing
engineering and machine shop services, wholesale distribution services and
"integrated supply"/inventory management services to a variety of
industries through its Subsidiaries as part of an integrated operation; and
WHEREAS, heretofore, pursuant to a Loan and Security Agreement, dated
as of December 17, 1996, between Titan and Lender (herein, together with
all amendments, supplements and additions thereto, called the "TITAN LOAN
AGREEMENT"), Lender extended credit to Titan; and
WHEREAS, effective on the Closing Date, pursuant to the terms of a
Stock Purchase Agreement, dated as of June ___, 1997, between Parent, as
buyer, and the shareholders of Lewis, as sellers (herein, together with all
amendments, supplements and additions thereto, called the "LEWIS
ACQUISITION AGREEMENT"), Parent has acquired the capital stock of Lewis
(the "LEWIS ACQUISITION"); and
WHEREAS, in connection with the Lewis Acquisition, Parent has proposed
that Lender extend additional credit to or for the benefit of Lewis in
order to finance, in part, the Lewis Acquisition and to provide for Lewis'
working capital needs; and
WHEREAS, to facilitate the foregoing, and to take advantage of certain
economies of scale and other present and substantive benefits accruing to
Parent and its Subsidiaries, Parent has further proposed that Lender extend
such credit to Lewis as part of a consolidated financing arrangement,
including Lewis, Titan and Southeastern as co-borrowers, in which each
co-borrower will obtain credit based on the value of its respective
collateral, or borrowing base, all pursuant to an amendment and
restatement, in its entirety, of the existing Titan Loan Agreement, which
Lender has agreed to do pursuant hereto;
NOW, THEREFORE, in consideration of the agreements, provisions and
covenants herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. GENERAL DEFINITIONS
1.1. DEFINED TERMS. When used in this Agreement, the following terms
shall have the following meanings:
"ACCOUNT DEBTOR" - any Person who is or may become obligated on or
under an Account.
"ACCOUNTS" - shall mean (i) all "accounts," as that term is defined
under Article 9 of the Code and (ii) all that other Property described
under the term "Accounts" in the Collateral Schedule.
"AFFILIATE" - a Person: (i) that directly or indirectly, through one
or more intermediaries, controls, or is controlled by, or is under common
control with, any Obligor; (ii) that beneficially owns or holds five
percent (5%) or more of any class of Voting Stock or other equity interest
of any Obligor; or (iii) five percent (5%) or more of whose Voting Stock
(or in the case of a Person which is not a corporation, five percent (5%)
or more of whose equity interest) is beneficially owned or held by any
Obligor or a Subsidiary of any Obligor. For purposes hereof, "control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock or other equity interests, by
contract, or otherwise.
"AGREEMENT" - this Loan and Security Agreement, as it may be modified
or amended from time to time. The term "AGREEMENT," as used herein, shall
include all Schedules, Exhibits, Annexes and Appendices hereto, and all
amendments or modifications hereof, and shall refer to this Agreement as
the same shall be in effect at the time such reference becomes operative.
"APPLICABLE LAW" - all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant or Loan Documents in question,
including, but not limited to, all applicable common law and equitable
principles; all provisions of all applicable federal, state, and local
constitutions, statutes, rules, regulations and orders of governmental
bodies; and all orders, judgments and decrees of all courts and
arbitrators. The term "APPLICABLE LAW" shall include all Environmental
Laws.
"AUTHORIZED OFFICER" means the chief executive officer, chief
operating officer or chief financial officer of each Obligor, and such
other officers or representatives of each Obligor as each such Obligor may
nominate, and Lender may approve, from time to time for purposes hereof.
"BANK AGENCY AGREEMENT" means an agreement (or series thereof),
satisfactory in form and substance to Lender, among Lender, each Borrower
and each bank at which such Borrower maintains depository accounts
respecting the manner of receipt, collection and disposition of funds of
such Borrower constituting proceeds from the sale of Inventory, the
collection of Accounts and the disposition of other Collateral. Without
limitation, the foregoing shall include "blocked account" agreements,
"agency" agreements and "lockbox" agreements.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy," as amended from time to time and all rules and regulations
promulgated thereunder.
"BASE MARGINED RATE" - with respect to each day during each Interest
Period pertaining to a Base Rate Loan, a rate per annum determined for such
day by Lender to be equal to the Base Rate PLUS the applicable Interest
Margin. The Base Margined Rate as of the Closing Date is eight and fifty-
hundredths of one percent (8.50%) per annum.
"BASE RATE" - the rate of interest quoted by North Carolina Bank from
time to time at its office in Charlotte, North Carolina as its prime rate,
whether or not such bank actually charges such rate and whether or not such
rate is the lowest rate charged by such bank; and if the prime rate is
discontinued by such bank as a standard, a comparable reference rate
designated by Lender as a substitute therefor shall be the Base Rate.
"BASE RATE LOANS" - Loans bearing interest at rates determined by
reference to the Base Rate. The Base Rate as of the Closing Date is eight
and fifty-hundredths of one percent (8.50%) per annum.
"BORROWER" - individually and collectively, each of Lewis,
Southeastern and Titan. The term "BORROWERS" may also be used as a
collective reference to each Borrower.
"BORROWING BASE" - at any date of determination thereof, an amount,
determined for each Borrower, equal to the LESSER of:
(a) an aggregate sum, not to exceed Twenty-Five Million
Dollars ($25,000,000), subdivided per Borrower as follows: (i)
as to Lewis, Eleven Million Dollars ($11,000,000); (ii) as to
Southeastern, One Million Two Hundred Fifty Thousand Dollars
($1,250,000); and (iii) as to Titan, Twelve Million Seven Hundred
Fifty Thousand Dollars ($12,750,000),or such lesser or greater
amounts in the aggregate, or per Borrower, as Lender may impose
or approve from time to time; LESS, in each case, any Reserves
applicable or allocable thereto; or
(b) an amount equal to the sum of (i) the "INVENTORY
COMPONENT" (as defined hereinbelow) for each Borrower, PLUS (ii)
the "RECEIVABLES COMPONENT" (as defined hereinbelow) for each
Borrower, PLUS (iii) in the case of Southeastern only (but no
other Borrower), the "Additional Availability Component" (as
defined hereinbelow), LESS (iv) any Reserves applicable or
allocable thereto, in each instance; wherein (a) the "INVENTORY
COMPONENT" of the Borrowing Base shall be equal to the sum of (A)
ninety percent (90%), or such lesser percentage as Lender may
determine to be appropriate from time to time, of the cost of
Eligible Inventory which has been identified to an Eligible
Supply Contract of a Borrower at such date, with cost calculated
on a first-in, first-out (FIFO) basis, PLUS (B) fifty percent
(50%), or such lesser percentage as Lender may determine to be
appropriate from time to time, of the cost of Eligible Inventory
which has not been identified to an Eligible Supply Contract of a
Borrower at such date, with cost calculated on a first-in,
first-out (FIFO) basis; (b) the "RECEIVABLES COMPONENT" of the
Borrowing Base shall be equal to eighty-five percent (85%), or
such lesser percentage as Lender may determine to be appropriate
from time to time, of the net amount of Eligible Accounts of a
Borrower at such date (the "net amount" thereof being equal to
the face amount of such outstanding Accounts, LESS any and all
returns, rebates, discounts calculated on shortest terms,
credits, allowances, sales or excise taxes of any nature at any
time issued, owing, claimed, granted, outstanding or payable in
connection with such Accounts at such time); and (c) the
"ADDITIONAL AVAILABILITY COMPONENT" of the Borrowing Base shall
be equal, initially, to the sum of Two Hundred Fifty Thousand
Dollars ($250,000), reducing, however, by Twelve Thousand Five
Hundred Dollars ($12,500) per quarter, commencing on September 1,
1997, and continuing on each December 1, March 1, July 1 and
September 1 thereafter, until it is reduced to zero (0).
"BORROWING BASE CERTIFICATE" means a certificate, appropriately
completed and in substantially the form of EXHIBIT "A", issued by an
Authorized Officer of a Borrower in respect of the Borrowing Base pursuant
to Section 5.1(J).
"BUSINESS DAY" - any day that is not a Saturday, Sunday or a legal
holiday on which banks are authorized or required to be closed in
Charlotte, North Carolina, and, with respect to all notices,
determinations, fundings and payments in connection with LIBOR Rate Loans,
any day that is a Business Day described above and that is also a day for
trading by and between banks in Dollar deposits in the applicable interbank
LIBOR market.
"CAPITAL EXPENDITURES" - expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than
one (1) year, including the direct or indirect acquisition of such assets
by way of increased product or service charges, offset items or otherwise
and the principal portion of payments with respect to Capitalized Lease
Obligations.
"CAPITAL LEASE" - any lease of Property which would be capitalized on
the lessee's balance sheet or for which the amount of the asset or
liability thereunder, if so capitalized, should be disclosed in a note to
such balance sheet.
"CAPITALIZED LEASE OBLIGATION" - any Indebtedness represented by
obligations under a Capital Lease, and the amount of such Indebtedness
shall be the capitalized amount of such obligations.
"CHARGES" - all taxes, assessments, levies, claims or charges upon
Borrower, its income or sales, or any of its Properties imposed by any
Governmental Authority.
"CHATTEL PAPER" - shall mean (i) all "chattel paper," as that term is
defined under Article 9 of the Code and (ii) all that other Property
described under the term "Chattel Paper" in the Collateral Schedule.
"CODE" - the Uniform Commercial Code as adopted and in force in the
State of Georgia.
"COLLATERAL" - all of the following described types of Property and
interests in Property of each Borrower, whether now owned or existing or
hereafter created, acquired or arising and wherever located: (A) all
Accounts; (B) all Chattel Paper; (C) all Documents; (D) all Instruments;
(E) all Inventory; (F) all Equipment; (G) all General Intangibles; (H) all
monies and other Property of any kind, now or at any time or times
hereafter, in the possession or under the control of Lender, a bailee of
Lender or Depository Bank; (I) all Products and Proceeds of the Property
described in (A) through (H) above, including, without limitation, Proceeds
of and unearned premiums with respect to insurance policies insuring any of
the Collateral and claims against any Person for loss of, damage to, or
destruction of any or all of the foregoing; all as more particularly set
forth and described in the Collateral Schedule; and (J) all funds at any
time on deposit in the Controlled Disbursement Accounts, the Dominion
Accounts and the Investment Accounts. The term "COLLATERAL" shall also
include: (i) all Voting Stock of each Subsidiary, which is being pledged
by Parent to Lender pursuant to a Stock Pledge Agreement, dated of even
date herewith, between Parent and Lender; (ii) certain real Property of
Lewis, described more particularly in the Location and Real Property
Schedule, which is being mortgaged by Lewis to the benefit of Lender
pursuant to a Tennessee Deed of Trust, Assignment of Leases and Rents and
Security Agreement, dated of even date herewith, executed by Lewis in trust
for the benefit of Lender; and (iii) any other Property of any Obligor in
which at any time a Lien is granted to or for the benefit of Lender.
"COLLATERAL LOCATION" shall mean each store, distribution center,
warehouse or other location, whether owned or leased by a Borrower or
otherwise, at which any Collateral is situated at any time or from time to
time.
"COMPLIANCE CERTIFICATE" means a certificate, appropriately completed
and substantially in the form of EXHIBIT "B", issued by an Authorized
Officer in respect of Parent's and Borrower's continuing compliance with
this Agreement pursuant to Section 5.1(I)(iii).
"CONSOLIDATED" - the consolidation of the accounts or other items as
to which such term applies.
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (a) with
respect to any Indebtedness or other liability or obligation of another
Person; (b) with respect to any letter of credit or banker's acceptance
issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings; (c) under Interest Rate
Agreements; (d) under any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect
that Person against fluctuations in currency values; (e) under any "take or
pay," "guaranteed purchase," "sale or return" or similar arrangement, or
(f) with respect to any employee welfare benefit plan covering retired or
terminated employees and their beneficiaries.
"CONTROLLED DISBURSEMENT ACCOUNT" - a deposit account of each Borrower
maintained with a Depository Bank into which the proceeds of any Loans
shall be disbursed.
"DEBT SERVICE COVERAGE" - for each period of twelve (12) consecutive
Fiscal Months of Parent and its Consolidated Subsidiaries, the quotient,
determined on a Consolidated basis, of (A) EBITDA for such period, MINUS
the sum of (i) all Unfinanced Capital Expenditures made in such period,
(ii) all Distributions paid in cash or accrued in such period, unless then
expressly permitted to be paid pursuant to the terms hereof, and (iii) all
income and franchise taxes paid in cash or accrued in such period; DIVIDED
by (B) the sum of (i) Interest Expense for such period, PLUS (ii) scheduled
principal payments with respect to all direct Indebtedness of Parent and
its Consolidated Subsidiaries in such period.
"DEFAULT" - an event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of
Default.
"DEFAULT RATE" - a fluctuating interest rate which is two percent (2%)
per annum above the Base Margined Rate.
"DEPOSITORY BANK" - North Carolina Bank, any Affiliate(s) thereof or
any other bank mutually approved by Lender and Borrower from time to time.
"DISTRIBUTION" - (a) any dividend or other distribution, direct or
indirect, on account of any shares of any class of stock of an Obligor or
any of its Subsidiaries now or hereafter outstanding, except a dividend
payable solely in shares of that class of stock to the holders of that
class; (b) any redemption, conversion, exchange, retirement, sinking fund
or similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any class of stock of an Obligor or any of its
Subsidiaries now or hereafter outstanding; (c) any payment made to retire,
or to obtain the surrender of, any outstanding warrants, options or other
rights to acquire shares of any class of stock of an Obligor or any of its
Subsidiaries now or hereafter outstanding; (d) any payment by an Obligor or
any of its Subsidiaries to any Affiliate of any management fees or similar
fees, whether pursuant to a management agreement or otherwise; and (e) any
payment or prepayment of principal of, premium (if any) or interest on, or
any redemption, conversion, exchange, purchase, retirement, defeasance,
sinking fund or similar payment with respect to, any Subordinated Debt.
"DOCUMENTS" - shall mean (i) all "documents," as that term is defined
under Article 9 of the Code and (ii) all that other Property described
under the term "Documents" in the Collateral Schedule.
"DOLLARS" - and the sign "$" refer to currency of the United States of
America.
"DOMINION ACCOUNT" - a special deposit account established by a
Borrower pursuant to a Bank Agency Agreement over which Lender shall have
sole and exclusive access and control for withdrawal purposes.
"EBITDA" - for any fiscal period, the net income of Parent and its
Consolidated Subsidiaries, PLUS the following, each determined on a
Consolidated basis: (a) Interest Expense paid or accrued in such period,
(b) amortization and depreciation deducted in determining net income in
such period, (c) any Distributions paid in cash or accrued in such period,
unless then expressly permitted to be paid pursuant to the terms hereof,
and (d) income and franchise taxes paid or accrued in such period;
PROVIDED, HOWEVER, that in calculating net income for the purpose of
determining EBITDA there shall be excluded therefrom: (i) any gain or loss
arising from the sale of capital assets (including specifically the payment
of approximately $1,000,000 in contingency payments in respect of the
Barton divestiture); (ii) any gain arising from any write-up of assets;
(iii) all earnings of any Subsidiary accrued prior to the date it became a
Subsidiary; (iv) all earnings of any entity substantially all the assets of
which have been acquired in any manner by Parent or any Consolidated
Subsidiary, realized by such entity prior to the date of such acquisition;
(v) all net earnings of any entity (other than a Subsidiary) in which
Parent or any Consolidated Subsidiary has an ownership interest unless such
net earnings have actually been received by it in the form of cash
distributions; (vi) any portion of the net earnings of any Subsidiary which
for any reason is unavailable for payment of dividends to Parent or any
Consolidated Subsidiary; (vii) all earnings of any Person to which any
assets of Parent or any Consolidated Subsidiary have been sold, transferred
or disposed of, or into which Parent or any Consolidated Subsidiary has
merged, or with which Parent or any Consolidated Subsidiary has been a
party to any consolidation or other form of reorganization, prior to the
date of such transaction; (viii) any gain arising from the acquisition of
any Securities of Parent or any Consolidated Subsidiary; and (ix) any gain
arising from extraordinary or nonrecurring items.
"ELIGIBLE ACCOUNT" - an Account arising in the ordinary course of a
Borrower's business from the sale of Inventory or rendition of services
which Lender deems to be an Eligible Account. Without limiting the
generality of the foregoing, no Account is to be an Eligible Account if:
(i) it arises out of a sale made by a Borrower to a Subsidiary or an
Affiliate of a Borrower or to a Person controlled by an Affiliate of a
Borrower; (ii) it is unpaid for more than sixty (60) days after the
original due date shown on the invoice or is due or unpaid more than ninety
(90) days after the original invoice date; (iii) fifty percent (50%) or
more of the Accounts from the Account Debtor are not deemed Eligible
Accounts hereunder by operation of clause (ii) above; (iv) any covenant,
representation or warranty contained in this Agreement with respect to such
Account has been breached; (v) the Account Debtor is also a Borrower's
creditor or supplier, or has disputed liability with respect to such
Account, or the Account otherwise is or may become subject to any right of
setoff by the Account Debtor, to the extent of the amount of any offset,
dispute or claim; (vi) the Account Debtor has commenced a voluntary case
under the Bankruptcy Code, or made an assignment for the benefit of
creditors, or a decree or order for relief has been entered by a court
having jurisdiction in the premises in respect of the Account Debtor in an
involuntary case under the Bankruptcy Code or any other petition or other
application for relief under the Bankruptcy Code has been filed against the
Account Debtor, or if the Account Debtor has ceased to do business,
suspended business, or consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed for it or for all or a significant
portion of its assets or affairs; (vii) it arises from a sale outside the
United States, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Lender; (viii) it arises from
a sale to the Account Debtor on a bill-and-hold, guaranteed sale, sale-or-
return, sale-on-approval, consignment or any other repurchase or return
basis or the Account otherwise does not represent a final sale; (ix) Lender
believes that collection of such Account is insecure or that payment
thereof is doubtful or will be delayed by reason of the Account Debtor's
financial condition; (x) the Account Debtor is the United States of America
or any department, agency or instrumentality thereof, unless a Borrower
assigns its right to payment of such Account to Lender, in form and
substance satisfactory to Lender, so as to comply with the Assignment of
Claims Act of 1940, as amended; (xi) the address of the Account Debtor to
which invoices are delivered by a Borrower is located in the States of New
Jersey, Minnesota or Indiana, unless such Borrower has filed a Notice of
Business Activities Report with the appropriate officials in those states
for the then current year; (xii) the Account Debtor is located in a state
in which a Borrower is deemed to be doing business under the laws of such
state and which denies creditors access to its courts in the absence of
qualification to transact business in such state or of the filing of any
reports with such state, unless such Borrower has qualified as a foreign
corporation authorized to transact business in such state or has filed all
required reports; (xiii) Lender does not have a duly perfected first
priority security interest therein or the Account is otherwise subject to
any Lien, other than a Permitted Lien; (xiv) the total unpaid Accounts of
the Account Debtor exceed a credit limit determined by Lender, to the
extent such Account exceeds such limit; (xv) the Account is evidenced by
Chattel Paper or an Instrument, or has been reduced to judgment; (xvi) a
Borrower has made any agreement with the Account Debtor for any deduction
therefrom, except for discounts or allowances which are made in the
ordinary course of business for prompt payment and which discounts or
allowances are reflected in the calculation of the face value of each
invoice related to such Account; (xvii) a Borrower has made an agreement
with the Account Debtor to extend the time of payment thereof beyond the
initial payment terms; (xviii) the Account arises from a retail sale of
goods to a Person who is purchasing same primarily for personal, family or
household purposes; (xix) any covenant, representation or warranty
contained herein or in any Loan Document has been breached with respect to
such Account (unless then cured); or (xx) the Account arises from a
contract or purchase order which, by its terms, makes void or unenforceable
the assignment of such Account.
"ELIGIBLE INVENTORY" - such Inventory of a Borrower which Lender deems
to be Eligible Inventory. Without limiting the generality of the
foregoing, no Inventory is to be Eligible Inventory unless it (i) is
finished goods in a Borrower's possession and control which, if identified
to and purchased in respect of an existing Eligible Supply Contract,
conforms in all respects with all requirements of such Eligible Supply
Contract, (ii) is readily marketable and saleable in its current form, in
the normal course of a Borrower's business at prices at least equal to the
cost thereof, (iii) is not obsolete or unmerchantable, (iv) is not goods
returned to a Borrower by or repossessed from an Account Debtor or goods
taken in trade, (v) meets all standards imposed by any Governmental
Authority, (vi) conforms in all respects to the covenants, warranties and
representations set forth in this Agreement, (vii) is at all times subject
to Lender's duly perfected, first priority security interest and no other
Lien, except a Permitted Lien, (viii) is situated at a Collateral Location
listed and described in the Location and Real Property Schedule, as it may
be changed from time to time pursuant to Sections 5.1(J) and (O), (ix) is
not located at any Collateral Location which is leased or which belongs to
any processor, landlord, warehouseman or other third party, unless a Lien
Waiver has been executed by such Person or a Reserve has been imposed in
respect thereof, (x) is not in-transit, (xi) is not subject to a negotiable
warehouse receipt or other negotiable instrument, unless Lender is the
holder thereof, (xii) is owned by a Borrower and not held by it on
consignment or other sale or return terms, or (xiii) with respect to which
the manufacture, sale or use thereof is subject to any licensing, patent,
royalty, trademark, copyright or similar agreement limits or restricts a
Borrower's or Lender's right to sell or otherwise dispose of such
Inventory.
"ELIGIBLE SUPPLY CONTRACT" - any Supply Contract: (i) which is
entered into by a Borrower, individually (and not as joint venturer), with
a manufacturer domiciled in the United States and otherwise acceptable to
Lender; (ii) which requires delivery of Inventory solely to a plant or
production facility of such manufacturer located within the continental
United States; (iii) which is valid and subsisting in all respects; (iv)
which is not in default, nor has any notice of termination, revocation,
rescission or cancellation been given or received by such Borrower in
respect thereof; (v) which contains a mandatory purchase, "take or pay,"
liquidated damages or similar provisions, acceptable to Lender, on the part
of the manufacturer in respect of Inventory identified to such Supply
Contract; (vi) which includes an express acknowledgment of Lender's Lien on
the subject Inventory and its right to receive and enforce, as collateral
assignee of a Borrower, all payment obligations owing in respect thereof;
and (vii) as to which each Borrower has complied in all respects with the
terms of Section 6.9 relevant thereto.
"ENVIRONMENTAL LAWS" - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to environmental clean up, pollution, toxic waste or other
environmental matters.
"ENVIRONMENTAL LIENS" - Liens in favor of any Governmental Authority
arising under or in connection with any Environmental Law.
"EQUIPMENT" - shall mean (i) all "equipment" and "fixtures," as each
such term is defined under Article 9 of the Code and (ii) all that other
Property described under the term "Equipment" in the Collateral Schedule.
"EVENT OF DEFAULT" - as defined in Section 7 of this Agreement.
"FINANCIAL STATEMENTS" - collectively (i) as of the Closing Date, the
financial statements of Parent and its Consolidated Subsidiaries described
in and attached to the Financial and Contingency Schedule; (ii) thereafter,
the most recent financial statements delivered from time to time pursuant
to Section 5.1(I).
"FISCAL YEAR" means the annual accounting period of Parent and its
Consolidated Subsidiaries (including each Borrower) as in effect on the
Closing Date. As used herein, "FISCAL QUARTER" and "FISCAL MONTH" shall
have correlative meanings.
"GAAP" - generally accepted accounting principles in the United States
of America in effect from time to time.
"GENERAL INTANGIBLES" - shall mean (i) all "general intangibles," as
that term is defined under Article 9 of the Code and (ii) all that other
Property described under the term "General Intangibles" in the Collateral
Schedule. The term "GENERAL INTANGIBLES" shall include, in any event, all
right, title and interest of a Borrower in respect of all Supply Contracts
to which it is (or becomes) party, whether now or hereafter existing.
"GOVERNMENTAL AUTHORITY" means any nation or government or federal,
state, county, province, canton, city, town, municipality, local or other
political subdivision thereof, and any department, commission, agency or
instrumentality exercising executive, legislative, judicial, regulatory or
administrative function of or pertaining to government.
"GUARANTOR" - each Person who now or hereafter guarantees payment or
performance of the whole or any part of the Obligations. As of the Closing
Date, the Parent and each other Borrower is a guarantor of each Borrower's
Obligations.
"GUARANTY AGREEMENT" - each Guaranty Agreement which is executed by a
Guarantor in favor of Lender.
"INDEBTEDNESS" - as applied to a Person means, without duplication
(i) all items which would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as at the
date as of which Indebtedness is to be determined, including, without
limitation, Capitalized Lease Obligations, (ii) all Contingent Obligations
of such Person and (iii) in the case of Parent and each Borrower (without
duplication), the Obligations.
"INSTRUMENTS" - shall mean (i) all "instruments," as that term is
defined under Article 9 of the Code and (ii) all that other Property
described under the term "Instruments" in the Collateral Schedule.
"INTEREST MARGIN" means the interest rate per annum, to be added to
the Base Rate or the LIBOR Rate, as the case may be, in order to determine,
respectively, the Base Margined Rate and the LIBOR Margined Rate; which (i)
for Base Rate Loans, shall be zero percent (0%) per annum, and (ii) for
LIBOR Rate Loans, shall be two and one-half percent (2 1/2%) per annum.
"INTEREST PERIOD" - any interest period applicable to a Revolver Loan,
as provided in Section 3.1.
"INTEREST RATE AGREEMENT" - any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect Parent or any of its
Consolidated Subsidiaries against fluctuations in interest rates.
"INVENTORY" - shall mean (i) all "inventory," as that term is defined
under Article 9 of the Code and (ii) all that other Property described
under the term "Inventory" in the Collateral Schedule.
"INVESTMENT ACCOUNT" - an investment account maintained by an Obligor
with Depository Bank.
"LENDER'S ACCOUNT" - an account of Lender with Depository Bank
designated by Lender from time to time as the account to which all
remittances in respect of any given Eligible Supply Contract or proceeds of
other Accounts are to be made.
"LIABILITIES" - all liabilities of a Person includable on a balance
sheet of such Person.
"LIBOR RATE" - for each Interest Period, a rate of interest (such rate
to be rounded upward to the next whole multiple of one-sixteenth of one
percent (1/16th of 1%)) determined by Lender to be equal to: (a) the rate
of interest determined by Lender at which deposits in Dollars for the
relevant Interest Period are offered based on information presented on the
Telerate Screen LIBOR Page 3750 at approximately 11:00 a.m., London time,
two (2) Business Days prior to the first day of such Interest Period;
PROVIDED, HOWEVER, that if, for any reason, such rate is not available,
then "LIBOR Rate" shall mean the rate per annum at which, in the opinion of
Lender, Dollars in the amount of the requested LIBOR Loan are being offered
to leading reference banks for settlement in the London interbank market at
approximately such time and for such maturity, DIVIDED BY (b) a number
equal to 1.0 MINUS the percentage expressed as decimal and rounded upwards,
if necessary, to the next whole multiple of one-sixteenth of one percent
(1/16th of 1%), determined by Lender to be in effect for such day as
prescribed by the Federal Reserve Board (or any successor) for determining
the maximum reserve requirement (including any basic, supplemental or
emergency reserves) for member banks of the Federal Reserve System in
respect of Eurocurrency liabilities (or any similar category of
liabilities).
"LIBOR MARGINED RATE" - with respect to each day during each Interest
Period pertaining to a LIBOR Rate Loan, a rate per annum determined for
such day by Lender to be equal to the LIBOR Rate PLUS the applicable
Interest Margin.
"LIBOR RATE LOANS" - Loans bearing interest at rates determined by
reference to the LIBOR Rate.
"LIEN" - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including,
but not limited to, the security interest, security title or lien arising
from a security agreement, mortgage, deed of trust, deed to secure debt,
encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes.
"LIEN WAIVER" shall mean a written agreement, in substantially the
form of EXHIBIT "C" or which Lender otherwise determines to be acceptable
from time to time, pursuant to which a landlord, warehouseman, processor or
other Person in possession or control of any Inventory or other Property of
a Borrower shall agree to waive or subordinate its rights and claims in
such Property, grant access to Lender for the repossession of such
Property and make such other agreements with Lender relative thereto as
Lender shall determine to be relevant in the circumstances.
"LOAN ACCOUNT" - a loan account established on the books of Lender for
the purpose of recording the disbursement and collection of Loans to a
Borrower.
"LOAN DOCUMENTS" - this Agreement, the Other Agreements and the
Security Documents.
"LOANS" - all loans and advances made by Lender pursuant to this
Agreement, including, without limitation, all Revolver Loans.
"MATERIAL ADVERSE EFFECT" - the effect of any event or condition
which, alone or when taken together with other events or conditions
occurring or existing concurrently therewith, (a) has or may be reasonably
expected to have a material adverse effect upon the business, operations,
Properties, condition (financial or otherwise) or business prospects of any
Obligor, any Guarantor, or any Subsidiary, or the industry in which any
Obligor, any Guarantor or any Subsidiary operates; (b) has or may be
reasonably expected to have any material adverse effect whatsoever upon the
validity or enforceability of this Agreement or any of the other Loan
Documents; (c) has or may be reasonably expected to have any material
adverse effect upon any of the Collateral, the Liens of Lender with respect
to any of the Collateral or the priority of any such Liens; or (d) has
impaired, or may be reasonably expected to impair, materially the ability
of any Obligor or any Guarantor to perform its respective obligations under
this Agreement, any Guaranty Agreement or any of the other Loan Documents
or of Lender to enforce or collect the obligations or realize upon any of
the Collateral in accordance with the Loan Documents and Applicable Law.
"MAXIMUM RATE" - the maximum non-usurious rate of interest permitted
by Applicable Law that at any time, or from time to time, may be contracted
for, taken, reserved, charged or received on the Indebtedness in question
or, to the extent that at any time Applicable Law may thereafter permit a
higher maximum non-usurious interest rate, then such higher rate.
Notwithstanding any other provision hereof, the Maximum Rate is to be
calculated on a daily basis (computed on the actual number of days elapsed
over a year of 365 or 366 days, as the case may be).
"MONEY BORROWED" - as applied to Indebtedness, means (i) Indebtedness
for borrowed money; (ii) Indebtedness, whether or not in any such case the
same was for borrowed money, (A) which is represented by notes payable or
drafts accepted that evidence extension of credit, (B) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments,
or (C) upon which interest charges are customarily paid (other than
accounts payable) or that was issued or assumed as full or partial payment
for Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) Indebtedness under any agreement or obligation to
reimburse the issuer of any letter of credit for amounts paid by the issuer
on account of such letter of credit; and (v) Indebtedness under any
guaranty of obligations that would constitute Indebtedness for Money
Borrowed under clauses (i) through (iv) hereof.
"NET PROCEEDS" - proceeds (including cash receivable (when received)
by way of deferred payment) received by any Obligor from the sale, lease,
transfer or other disposition of any Property, including, without
limitation, insurance proceeds and awards of compensation received with
respect to the destruction or condemnation of all or part of such Property,
net of: (i) the direct costs of such sale, lease, transfer or other
disposition; and (ii) any amounts applied, with Lender's consent, to
repayment of Indebtedness (other than the Obligations) secured by a
Permitted Lien on the Property disposed.
"NORTH CAROLINA BANK" - First Union National Bank, a national bank,
and any successor(s)-in-interest to it, having its principal office in
Charlotte, North Carolina.
"NOTES" - collectively, (i) the Revolver Notes and (ii) any other
Instruments at any time evidencing any of the Obligations.
"NOTICE OF BORROWING" - a notice in substantially the form of EXHIBIT
"D" issued by an Authorized Officer of a Borrower, requesting a Revolver
Loan.
"OBLIGATIONS" - all indebtedness, liabilities and obligations owing,
arising, due to or payable from each Obligor to Lender of every kind or
nature, whether absolute or contingent, due or to become due, joint or
several, liquidated or unliquidated, matured or unmatured, primary or
secondary, now existing or hereafter incurred, purchase money or
nonpurchase money, or arising under any of the Loan Documents or otherwise,
and regardless of the form or purpose of such indebtedness, liabilities or
obligations, including, without limitation, all of the Loans, all
liabilities of each Obligor to Lender under any indemnity, reimbursement,
Guaranty Agreement, Bank Agency Agreement or other agreement heretofore or
hereafter executed by such Obligor with or in favor of Lender (whether or
not Parent or Borrower is the account party or drawer). The term
"OBLIGATIONS" includes all interest, charges, expenses, attorneys' fees and
other sums chargeable to each Obligor under any of the Loan Documents and
all other obligations which such Obligor may have (under contract or
Applicable Law) to reimburse Lender (or any Affiliate of Lender) in
connection with any Interest Rate Agreement, foreign exchange contract,
letter of credit, banker's acceptance or guaranty issued by Lender to such
Obligor or for its benefit.
"OBLIGOR" - individually and collectively, Parent and each Borrower.
The term "OBLIGORS" may also be used as a collective reference to each
Obligor.
"OTHER AGREEMENTS" - any and all agreements, instruments and documents
(other than this Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower and delivered to Lender with respect to the
transactions contemplated by this Agreement.
"OVERADVANCE" - on any date, (i) in respect of any Eligible Supply
Contract, the amount by which the total amount of Revolver Loans
outstanding in respect of such Eligible Supply Contract on such date
exceeds the Borrowing Base in respect of such Eligible Supply Contract on
such date, or (ii) per Borrower, the amount by which the total amount of
all Revolver Loans to such Borrower outstanding on such date exceeds its
Borrowing Base on such date, or (iii) generally, the amount by which the
total amount of all Revolver Loans outstanding to all Borrowers on such
date exceeds the total Borrowing Base of all Borrowers on such date.
"PARTICIPATING LENDER" - any Person which is either: (i) an assignee
of Lender hereunder; or (ii) the purchaser from Lender of a participation
interest in any Loans or other Obligations.
"PERMITTED INDEBTEDNESS" - any of the following: (i) Obligations owing
to Lender; (ii) Indebtedness of any Borrower to another Borrower or of any
Borrower to Parent; (iii) accounts payable to trade creditors (including
Affiliates, to the extent then permitted under Section 5.2(D)) which are
not aged more than one hundred twenty (120) days from billing date and
current operating expenses (other than Money Borrowed) which are not more
than sixty (60) days past due, in each case incurred in the ordinary course
of business and paid within such time period, unless the same are actively
being Properly Contested; (iv) obligations to pay rents on operating leases
permitted herein; (v) Permitted Purchase Money Indebtedness;
(vi) Contingent Obligations arising out of endorsements of checks and other
negotiable instruments for deposit or collection in the ordinary course of
business; (vii) Charges not yet past due or payable; (viii) Subordinated
Debt in existence on the Closing Date and disclosed in the Financial and
Contingency Schedule; and (ix) Indebtedness not included in clauses
(i) through (viii) above which is disclosed in the Financial and
Contingency Schedule.
"PERMITTED INVESTMENTS" - the following: (i) investments in each
Borrower by Parent or by another Borrower, to the extent existing on the
Closing Date or otherwise expressly permitted hereunder; (ii) Property
used, or to be used, in the ordinary course of business; (iii) Current
Assets arising from the sale of goods and services in the ordinary course
of business of Parent and its Subsidiaries; and (iv) any of the following
investments, if and to the extent made within an Investment Account,
to-wit: (a) deposit accounts and certificates of deposit maintained with,
or issued by, Depository Bank maturing in thirty (30) days or less; (b)
direct obligations of the United States of America maturing in thirty (30)
days; and (c) "overnight" repurchase contracts in respect of commercial
paper offered by Depository Bank.
"PERMITTED LIENS" - any of the following: (i) Liens at any time
granted in favor of Lender; (ii) statutory Liens of carriers, mechanics,
materialmen, landlords, warehousemen, and other similar liens imposed by
law, which are incurred in the ordinary course of business for sums not yet
due or which, if due and payable, are being Properly Contested; PROVIDED
that a Lien Waiver shall have been executed in respect thereof or a
deduction from the Borrowing Base in an amount satisfactory to Lender shall
have been made therefor; (iii) Liens resulting from deposits made in the
ordinary course of business in connection with workmen's compensation,
unemployment insurance, social security and other like laws;
(iv) attachment, judgment and other similar non-tax Liens (excluding
Environmental Liens) arising in connection with court proceedings, but only
if and for so long as the execution or other enforcement of such Liens is
and continues to be effectively stayed and bonded on appeal in a manner
satisfactory to Lender for the full amount thereof, the validity and amount
of the claims secured thereby are being Properly Contested, such Liens do
not, in the aggregate, materially detract from the value of the Property of
an Obligor or materially impair the use thereof in the operation of such
Obligor's business and such Liens are and at all times remain junior in
priority to the Liens in favor of Lender; (v) Liens of a bank (including
Depository Bank) or other financial institution with respect to funds on
deposit with such institution; (vi) such other Liens as appear on the Lien
Schedule; (vii) Liens in existence immediately prior to the Closing Date
that are paid and satisfied in full and released on the Closing Date as a
result of the application of an Obligor's cash on hand at the Closing Date
and/or, the proceeds of the Loans being made on the Closing Date; and
(viii) Purchase Money Liens securing Permitted Purchase Money Indebtedness
which is not incurred in violation of this Agreement.
"PERMITTED PROCEEDS USES" - any of the following: (i) financing, in
part, of the Lewis Acquisition, on the Closing Date, in an aggregate amount
not to exceed Nine Million Dollars ($9,000,000), as to all Borrowers,
collectively (including, for this purpose, any loans or advances made to
Lewis by any other Borrower with the proceeds of any Loan made to it); (ii)
the refinancing of the existing Indebtedness of Lewis to NationsBank; (iii)
the refinancing of the existing Indebtedness of Titan to Lender under the
Titan Loan Agreement; (iv) the satisfaction of certain existing
Indebtedness of any other Borrower for Money Borrowed; (v) closing costs
associated with this transaction; (vi) the making of intercompany loans and
advances by one Borrower to another Borrower; and (vii) each Borrower's
general operating needs, to the extent not inconsistent with the provisions
of this Agreement and Applicable Law.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" - Purchase Money Indebtedness
which (i) is incurred under a Supply Contract to the extent that the costs
associated therewith are passed through to, and reimbursed by, the buyer
under such contract; or (ii) when aggregated with the principal amount of
all other Purchase Money Indebtedness (not included within clause (i)
above) and Capitalized Lease Obligations of Parent and its Consolidated
Subsidiaries at the time outstanding, does not exceed One Million Dollars
($1,000,000).
"PERSON" - an individual, partnership, corporation, joint venture,
joint stock company, limited liability company, land trust, business trust,
unincorporated organization, a government or agency or political
subdivision thereof, or any other form of entity.
"PLAN" - an employee benefit plan now or hereafter maintained for
employees of Parent or any Subsidiary that is covered by Title IV of ERISA.
"PROCEEDS" - shall mean all "proceeds," as that term is defined in
Article 9 of the Code, of the Collateral.
"PRODUCTS" - shall mean all "products," as that term is defined in
Article 9 of the Code, of the Collateral.
"PROJECTIONS" - for each Obligor, Parent's forecasted: (a) balance
sheets and cash flow statements, on an aggregate basis, including all
Supply Contracts, and (b) income statements, on a per Supply Contract and
aggregate basis, all prepared on a consolidated and consolidating basis
consistent with Parent's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"PROPERLY CONTESTED" - in the case of any Liability of Parent or any
Subsidiary that is not paid as and when due or payable by reason of a bona
fide dispute concerning its liability to pay same or concerning the amount
thereof, that (i) such Liability and any Liens securing same are being
properly contested in good faith by appropriate proceedings promptly
institute and diligently conducted; (ii) appropriate reserves have been
established as shall be required in conformity with GAAP, (iii) the non-
payment of such Liability will not have a Material Adverse Effect and will
not result in a forfeiture of any assets of Parent or any Subsidiary; (iv)
no Lien is imposed upon any assets of Parent or any Subsidiary with respect
to such Liability unless such Lien is at all times junior and subordinate
in priority to the Liens in favor of Lender (except only with respect to
property taxes that have priority as a matter of applicable state law) and
enforcement of such Lien is stayed during the period prior to the final
resolution or disposition of such dispute; (v) if Liability results from
the entry, rendition or issuance against Parent or any Subsidiary or any of
its assets of a judgment, writ, order or decree, such judgment, writ, order
or decree is stayed or bonded pending a timely appeal or other judicial
review; and (vi) if such contest is abandoned, settled or determined
adversely to Parent or any Subsidiary, Parent or any Subsidiary forthwith
pays such Liabilities and all penalties and interest in connection
therewith.
"PROPERTY" - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"PURCHASE MONEY INDEBTEDNESS" - means and includes (i) any
Indebtedness (other than the Obligations) for the payment of all or any
part of the purchase price of any fixed assets, including Capitalized Lease
Obligations, (ii) any Indebtedness (other than the Obligations) incurred at
the time of or within ten (10) days prior to or after the acquisition of
any fixed assets for the purpose of financing all or any part of the
purchase price thereof, and (iii) any renewals, extensions or refinancings
thereof, but not any increases in the principal amounts thereof outstanding
at the time.
"PURCHASE MONEY LIEN" - a Lien upon fixed assets which secures
Purchase Money Indebtedness incurred by an Obligor in connection with its
acquisition of such fixed assets, but only if such Lien is at all times to
be confined solely to those fixed assets (and proceeds thereof) the
purchase price of which was financed through the incurrence of the Purchase
Money Indebtedness secured by such Lien and such Lien constitutes a
purchase money security interest under the Code.
"RESTRICTED INVESTMENT" - any investment in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or
other obligation or Security, or by loan, advance, capital contribution,
subscription or otherwise, in any Property, EXCEPT Permitted Investments.
"RESERVES" - shall mean an amount calculated from time to time by
Lender equal to the sum of: (i) any amounts which Parent or any Subsidiary
is obligated to pay to any third party, whether for rent, royalties,
insurance or taxes or otherwise, which Parent or any Subsidiary does not
pay when due, until paid by Parent or any Subsidiary or by Lender on its
behalf by charging same as a Loan pursuant hereto; and (ii) any other
amounts which Lender elects to reserve from borrowing availability from
time to time.
"REVOLVER FACILITY" - the credit facility established by Lender in
favor of Borrowers pursuant to Section 2 hereof, inclusive of each sub-
facility created thereunder in respect of each Borrower.
"REVOLVER LOAN" - a Loan made by Lender under the Revolver Facility to
a Borrower.
"REVOLVER NOTE" - each promissory note executed by a Borrower on the
Closing Date in favor of Lender to evidence any and all Revolver Loans to
it made under the Revolving Facility; together with any and all renewals
and extensions thereof, and any amendments or modifications thereto. Each
Revolver Note shall be substantially in the form of EXHIBIT "E". There
shall be only one (1) Revolver Note per Borrower.
"SCHEDULE OF ACCOUNTS" - the detailed aged trial balance of all
Accounts of each Borrower existing as of the last day of the preceding
month, specifying the names, addresses, face value, dates of invoices and
due dates for each Account Debtor obligated on an Account so listed and any
other information Lender reasonably requests.
"SCHEDULES" - all Schedules, together with all attachments thereto,
provided by the Obligors and attached to this Agreement and made a part
hereof. The Schedules are listed on the first page following the signature
page to this Agreement.
"SECURITY" - is to have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"SECURITY DOCUMENTS" - each Guaranty Agreement and any and all other
instruments and agreements now or at any time hereafter securing the whole
or any part of the Obligations.
"SOLVENT" - as to any Person, means that such Person (i) owns Property
the fair value of which is greater than the amount required to pay all of
such Person's Indebtedness (including contingent debts), (ii) owns Property
the present fair salable value of which is greater than the amount that
will be required to pay the probable liability of such Person on its
existing Indebtedness as such becomes absolute and matured, (iii) is able
to pay all of its Indebtedness as such Indebtedness matures, and (iv) has
capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage.
"SUBORDINATED DEBT" - Indebtedness of Parent or any Subsidiary that is
expressly subordinated to the Obligations in right of payment and claim
pursuant to an agreement or provisions approved in writing by Lender. As
of the Closing Date, all outstanding Subordinated Debt (including any
issued in connection with the Lewis Acquisition) is described more
particularly on the Financial and Contingency Schedule.
"SUBSIDIARY" - any corporation, association or other business entity
of which more than fifty percent (50%) of the total voting power of shares
of stock (or equivalent ownership or controlling interest) entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by a Person or one or more of the other
Subsidiaries of the Person or a combination thereof.
"SUPPLY CONTRACT" - each supply contract, long term purchase order or
similar arrangement between a Borrower, as seller, and an automobile
manufacturer or other customer, as buyer, with respect to the acquisition,
warehousing and ultimate sale and delivery of any Inventory to a specific
production facility of such manufacturer; as it may be supplemented,
extended, modified or amended from time to time. The term "Supply
Contract" shall also include any letter of understanding, acknowledgment,
confirmation or waiver, signed by any such customer of Borrower in favor of
Lender or for its benefit, which has the effect of supplementing,
extending, modifying or amending any terms of said contract whether or not
any Borrower is party thereto.
"TANGIBLE NET WORTH" - the difference between: (i) total
shareholders' equity (including capital stock, additional paid-in capital
and retained earnings, after deducting treasury stock) of Parent and its
Consolidated Subsidiaries; and (ii) all intangible assets of such Persons,
including, without limitation, any General Intangibles.
"TERMINATION DATE" - that date which is three (3) years from the
Closing Date.
"UNFINANCED CAPITAL EXPENDITURES" - Capital Expenditures not financed
through Permitted Purchase Money Indebtedness.
"VOTING STOCK" - Securities of any class or classes of a corporation
the holders of which are ordinarily, in the absence of contingencies,
entitled to elect a majority of the board of directors of such corporation
(or Persons performing similar functions).
1.2. ACCOUNTING TERMS. Unless otherwise specified herein, all terms
of an accounting character used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made, and all
financial statements required to be delivered under this Agreement shall be
prepared in accordance with GAAP, applied on a basis consistent with the
most recent audited Consolidated financial statements of Parent and its
Consolidated Subsidiaries heretofore delivered to Lender and using the same
method for inventory valuation as used in such audited financial
statements, except for any change in which Parent's independent public
accountants concur or as required by GAAP; PROVIDED, HOWEVER, that unless
and until either (i) Lender shall have determined, and given written notice
to Parent to such effect, that such changes will not affect (in a manner
adverse to Lender's interests) the calculation of the financial covenants
set forth in Section 5.3 or the Obligors' compliance therewith, or (ii)
Lender and the Obligors shall have amended the financial covenants set
forth in Section 5.3 to reflect such changes, all calculations of the
financial covenants set forth in said Section 5.3 shall be made on a basis
consistent with those used in the preparation of the latest financial
statements as to which no such change was made.
1.3. OTHER TERMS. All terms contained in this Agreement and not
otherwise specifically defined herein are to have the meanings provided for
by the Code to the extent the same are used or defined therein.
1.4. CONSTRUCTION AND INTERPRETATION. References herein to
"SECTIONS", "SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Sections,
subsections, Exhibits and Schedules, respectively, of this Agreement unless
otherwise specifically provided. Any of the terms defined in Section 1.1
may, unless the context otherwise requires, be used in the singular or the
plural depending on the reference. In this Agreement, "hereof," "herein,"
"hereto," "hereunder" and the like mean and refer to this Agreement as a
whole and not merely to the specific section, paragraph or clause in which
the respective word appears. Words importing any gender include the other
genders. References to "writing" include printing, typing, lithography and
other means of reproducing words in a tangible visible form. The words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation." References to agreements and other contractual
instruments shall be deemed to include subsequent amendments, assignments,
and other modifications thereto, but only to the extent such amendments,
assignments and other modifications are not prohibited by the terms of this
Agreement or any other Loan Document. References to Persons include their
respective permitted successors and assigns or, in the case of Governmental
Authorities, Persons succeeding to the relevant functions of such Persons.
All references to statutes and related regulations shall include, as to any
statute, its related regulations, any amendments of same and any successor
statutes and regulations. Any consent, waiver, approval or determination
which, pursuant hereto or to any Loan Document, is required or permitted to
be given or made by Lender shall be made in its sole discretion, exercised
in good faith and, if and where required by Applicable Law, in a
commercially reasonable manner. Any reference herein or in any Loan
Document "to the knowledge" of any Person (or words of substantially the
same import) shall mean to its knowledge after, and assuming, reasonable
investigation and diligence.
SECTION 2. CREDIT FACILITY
Subject to all of the terms and conditions of this Agreement, in
reliance upon the representations and warranties made herein and in the
other Loan Documents and so long as no Default or Event of Default then
exists, Lender will provide credit to Borrowers as follows:
2.1. REVOLVER FACILITY.
(1) During the period from the date hereof to, but not
including, the Termination Date, each Borrower may borrow, repay and
reborrow Revolver Loans up to a maximum principal amount at any time
outstanding under the Revolver Facility equal to its Borrowing Base, as
determined by Lender for such Borrower; PROVIDED, HOWEVER, that in the
event that any Overadvance shall ever exist, Borrowers shall repay such
Overadvance, in full, immediately; and, PROVIDED, FURTHER, that if any
Eligible Supply Contract shall cease to be an Eligible Supply Contract,
then, Lender may, at its option, (i) refuse to make any further Revolver
Loans in respect thereof and (ii) demand full payment of all Revolver Loans
then outstanding in respect thereof. Each Revolver Loan shall be made (or
deemed made), in the following manner: (a) a Borrower shall give Lender
written or oral notice of its intention to borrow (which notice shall be
irrevocable) before 11:30 a.m. (Charlotte, North Carolina time), on any
Business Day specifying the amount of the proposed borrowing, the proposed
borrowing date and whether such Loan is to be a Base Rate Loan or a LIBOR
Rate Loan; (b) unless payment is otherwise timely made by a Borrower, the
becoming due of any Obligation required to be paid under this Agreement or
any Loan Document shall be deemed irrevocably to be a request by such
Borrower for a Revolver Loan on the due date of, and in the amount required
to pay, such Obligations; and (c) the presentation by a Borrower for
payment by Disbursement Bank of any check or other item of payment drawn on
the Controlled Disbursement Account shall be deemed irrevocably to be a
request by it for a Revolver Loan in the amount of such check or other item
of payment. The proceeds of each Revolver Loan requested by oral or
written notice of intention to borrow given as described above are to be
disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter or other
instructions from a Borrower, and in the case of each subsequent borrowing,
by wire transfer to the Controlled Disbursement Account; and the proceeds
of each Revolver Loan requested to satisfy an Obligation as described above
are to be disbursed by Lender by way of direct payment of the relevant
Obligation. Each oral request for a Revolver Loan is to be conclusively
presumed to be made by a Person authorized by a Borrower to do so; and the
making of the requested Revolver Loan shall conclusively establish a
Borrower's obligation to repay such Revolver Loan in accordance with this
Agreement. Any written notice of intention to borrow shall be in the form
of a Notice of Borrowing. Any oral notice of intention to borrow may, at
Lender's option, be required to be confirmed not later than one (1)
Business Day later than the giving of oral notice by the giving of a
written Notice of Borrowing. Notwithstanding the foregoing, and in any
event, all notices of intention to borrow LIBOR Rate Loans shall be
delivered by a Notice of Borrowing received by Lender at least three (3)
Business Days in advance of a proposed borrowing date and be in the minimum
amount of Five Hundred Thousand Dollars ($500,000) and integral multiples
of Fifty Thousand Dollars ($50,000) in excess thereof. The proceeds of
each Revolver Loan shall be used by Borrowers solely for Permitted Proceeds
Uses. Notwithstanding Lender's receipt (or deemed receipt) of any request
for a Revolver Loan, Lender shall not be bound to honor any such request
except to the extent, in the manner and subject to all terms and conditions
relevant thereto contained herein. The Indebtedness of each Borrower to
Lender arising from the making of each Revolver Loan to it shall be
evidenced by a separate Revolver Note in a principal amount equal to the
maximum amount of borrowings which may be obtained hereunder by such
Borrower. A Revolver Note shall be executed and delivered by each Borrower
on the Closing Date.
(2) The Revolver Facility will be in effect for each Borrower
for a period commencing on the date hereof and ending on the Termination
Date, unless sooner terminated as hereinafter provided.
(3) Lender may immediately terminate the Revolver Facility, as
to each Borrower or every Borrower, without notice, upon or after the
occurrence of an Event of Default and during its continuation; and the
Revolver Facility shall automatically terminate, without notice, upon the
occurrence of any Event of Default of the type specified in Section 7.1(G).
(4) Upon the effective date of any termination of the Revolver
Facility, all Revolver Loans then outstanding, shall become due and
payable, in full, and Lender may discontinue making further Loans to
Borrowers. No termination (regardless of cause or procedure) of the
Revolver Facility shall in any way affect or impair the rights, powers or
privileges of Lender or the obligations, duties or liabilities of Borrowers
relating to (i) any transaction or event occurring prior to the effective
date of such termination or (ii) any of the undertakings, agreements,
covenants, warranties or representations of Borrowers contained in this
Agreement or in any of the other Loan Documents.
2.2. ALL REVOLVER LOANS TO CONSTITUTE ONE OBLIGATION. All Revolver
Loans made to a Borrower are to constitute one general Obligation of
Borrowers, and are to be secured by Lender's security interest in and Lien
upon all of the Collateral, and by all other security interests and Liens
heretofore, now or at any time or times hereafter granted by each Obligor
to Lender to the extent provided in the Security Documents under which any
such Lien arises.
SECTION 3. INTEREST, FEES AND REPAYMENT
3.1. INTEREST, FEES AND CHARGES.
(1) INTEREST.
(1) RATE OF INTEREST. The Revolver Loans shall bear
interest from the date such Loans are made to the date paid at the
Base Margined Rate or at the LIBOR Margined Rate, at each Borrower's
option, and the applicable basis for determining the rate of interest
shall be selected by a Borrower at the time a Notice of Borrowing is
given. The basis for determining the interest rate with respect to
any Revolver Loan may be changed by a Borrower from time to time
pursuant to subparagraph (iii) below. If on any day a Loan is
outstanding with respect to which notice has not been delivered to
Lender in accordance with the terms of this Agreement specifying the
basis for determining the rate of interest, then for that day that
Loan shall bear interest at the Base Margined Rate.
(2) INTEREST PERIODS. In connection with each LIBOR Rate
Loan, in its Notice of Borrowing therefor, a Borrower shall select an
interest period (each an "INTEREST PERIOD") to be applicable to such
Loan, which Interest Period shall be either a one (1), two (2) or
three (3) month period, PROVIDED that: (1) the initial Interest Period
for any such Loan shall commence on the funding date of such Loan;
(2) in the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the day on which the next
preceding Interest Period expires; (3) if an Interest Period would
otherwise expire on a day that is not a Business Day, such Interest
Period shall expire on the next succeeding Business Day, but if any
Interest Period would otherwise expire on a day that is not a Business
Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next
preceding Business Day; (4) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to part (5) below, end on the
last Business Day of a calendar month; (5) no Interest Period shall
extend beyond the Termination Date; (6) no Interest Period with
respect to any of the Loans may extend beyond a date on which a
Borrower is required to make a scheduled payment of principal with
respect to such Loan; (7) the Interest Period for a Loan that is
converted pursuant to subparagraph (iii) below shall commence on the
date of such conversion and shall expire on the date on which the
Interest Period for the Loans so converted expires; and (8) there
shall be no more than two (2) Interest Periods relating to LIBOR Rate
Loans allocated to any one Borrower outstanding at any time.
(3) CONVERSION OR CONTINUATION. Subject to the provisions
of this subparagraph (iii) and the limitation on the number of
Interest Periods prescribed in subparagraph (ii) above, each Borrower
shall have the option to (1) convert at any time all or any part of
outstanding Loans equal to Five Hundred Thousand Dollars ($500,000)
and integral multiples of Fifty Thousand Dollars ($50,000) in excess
of that amount from Loans bearing interest at a rate determined by
reference to one basis to Loans bearing interest at a rate determined
by reference to an alternative basis, or (2) upon the expiration of
any Interest Period applicable to a LIBOR Rate Loan, to continue all
or any portion of such Loan equal to Five Hundred Thousand Dollars
($500,000) and integral multiples of Fifty Thousand Dollars ($50,000)
in excess of that amount as a LIBOR Rate Loan and the succeeding
Interest Period(s) of such continued Loan shall commence on the last
day of the Interest Period of the Loan to be continued; PROVIDED that
LIBOR Rate Loans may only be converted into Loans bearing interest
determined by reference to an alternative basis on the expiration date
of an Interest Period applicable thereto; and PROVIDED, FURTHER, that
no outstanding Loan may be continued as, or be converted into, a LIBOR
Rate Loan when an Event of Default or Default has occurred and is
continuing; and PROVIDED, FINALLY, that no Loan may be converted into
a LIBOR Rate Loan until ten (10) days after the Closing Date; I.E.,
any Loans made on the Closing Date or within ten (10) days thereafter
shall be made as Base Rate Loans. Each Borrower shall deliver a fully
and properly completed Notice of Borrowing to Lender no later than
11:00 a.m. (Charlotte time) at least three (3) Business Days in
advance of any proposed conversion/continuation date in respect of any
LIBOR Rate Loan.
(4) INABILITY TO DETERMINE INTEREST RATE. In the event that
Lender determines that, by reason of circumstances affecting the
London interbank market, either (i) adequate and reasonable means do
not exist for ascertaining the LIBOR Rate for any requested Interest
Period or (ii) the interest rate determined for such Interest Period
does not accurately reflect the cost to Lender of making or
maintaining LIBOR Rate Loans during such Interest Period; then, Lender
shall forthwith give notice of such determination to Borrowers. From
and after Borrowers' receipt of such notice, any then requested LIBOR
Rate Loans shall be made as Base Rate Loans, any Base Rate Loans that
were to have been converted to LIBOR Rate Loans shall be continued as
Base Rate Loans and any outstanding LIBOR Rate Loans shall be
converted, on the last day of the then current Interest Period with
respect thereto, to Base Rate Loans; and no further LIBOR Rate Loans
shall be made or continued as such, nor shall any Borrower have the
right to convert Base Rate Loans to LIBOR Rate Loans unless and until
the circumstances causing such suspension of LIBOR Rate Loans no
longer exists.
(5) ILLEGALITY. Notwithstanding any other provisions
herein, if any Applicable Law or any change therein or in the
interpretation or application thereof shall make it unlawful for
Lender to make or maintain LIBOR Rate Loans as contemplated by this
Agreement, (a) the commitment of Lender hereunder to make LIBOR Rate
Loans, continue LIBOR Rate Loans as such or convert Base Rate Loans to
LIBOR Rate Loans shall forthwith be canceled and (b) Lender's Loans
then outstanding as LIBOR Rate Loans, if any, shall be converted
automatically to Base Rate Loans on the respective last day's of the
then current Interest Periods with respect to such Loans or within
such earlier period as required by law.
(6) COMPUTATION AND PAYMENT OF INTEREST. In computing
interest on any Loan, the date of funding of the Loan or the first day
of an Interest Period applicable to such Loan or, with respect to a
Base Rate Loan being converted from a LIBOR Rate Loan, the date of
conversion of such LIBOR Rate Loan to such Base Rate Loan shall be
included and the date of payment of such Loan or the expiration date
of an Interest Period applicable to such Loan, or with respect to a
Base Rate Loan being converted to a LIBOR Rate Loan, the date of
conversion of such Base Rate Loan to such LIBOR Rate Loan, shall be
excluded; provided that if a Loan is repaid on the same day on which
it is made, one day's interest shall be paid on that Loan. All
interest (together with any fees or other charges determined on a "per
annum" basis) shall be calculated on a daily basis (computed on the
actual number of days elapsed over a year of 360 days, unless
reference to a 365 or 366-day year is necessary in order not to exceed
the Maximum Rate), commencing on the Closing Date, and shall be
payable (i) monthly, in arrears, on the first day of each month, in
the case of Base Rate Loans, (ii) at the end of the Interest Period
selected therefor, in the case of LIBOR Rate Loans, and (iii) on
demand, at maturity (whether by stated payment terms, by acceleration
or otherwise).
(7) DEFAULT RATE OF INTEREST. Upon the occurrence of an
Event of Default, and during its continuance, at Lender's election,
the principal amount of all Obligations then and thereafter shall bear
interest at the Default Rate. Interest at the Default Rate shall be
paid without prejudice to the rights of Lender to collect any other
amounts provided to be paid hereunder or under any of the other Loan
Documents or to declare a default under this Agreement or any of the
other Loan Documents.
(2) LIBOR INDEMNITY. Each Obligor agrees to indemnify Lender
and to hold Lender harmless from any loss or expense which Lender may
sustain or incur as a consequence of (a) default by a Borrower in payment
when due of the principal amount of or interest on any LIBOR Rate Loans,
(b) default by a Borrower in making, continuing or converting a borrowing
after Borrower has given a Notice of Borrowing in respect thereto, (c)
default by a Borrower in making any prepayment after such Borrower has
given a voluntary prepayment notice, or (d) the making of a prepayment of a
LIBOR Rate Loan on a day which is not the last day of the Interest Period
with respect thereto, including, without limitation, in each case, any such
loss or expense arising from the reemployment of funds obtained by Lender
to maintain its LIBOR Rate Loans hereunder or from fees payable to
terminate the deposits from which such funds were obtained. The amount of
such loss or expense shall be determined by Lender using any reasonable
attribution or averaging method which it selects and, as appropriate, based
on the assumption that a requested LIBOR Rate Loan was funded in the London
interbank market by Lender on the requested disbursement date; and shall be
due and payable on demand. A certificate of the Lender claiming
entitlement to such indemnity, addressed to the Obligors, setting forth the
nature of the occurrence giving rise to such amount of such loss or
expense, the claim for indemnity hereunder, and the method by which the
amount of such claim was determined, shall accompany each demand for
indemnity hereunder.
(3) CAPITAL ADEQUACY. If after the Closing Date, Lender
determines, in good faith, that (a) the adoption of any Applicable Law
regarding capital requirements for banks or bank holding companies or the
subsidiaries thereof, (b) any change in the interpretation or
administration of any such law, rule or regulation by any governmental
authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or (c) compliance by Lender or
its holding company with any request or directive of any such governmental
authority, central bank or comparable agency regarding capital adequacy
(whether or not having the force of law), has the effect of reducing the
return on Lender's capital to a level below that which Lender could have
achieved (taking into consideration Lender's and its holding company's
policies with respect to capital adequacy immediately before such adoption,
change or compliance and assuming that Lender's capital was fully utilized
prior to such adoption, change or compliance) but for such adoption, change
or compliance as a consequence of Lender' s commitment to make the Loans
pursuant hereto by any amount deemed by Lender to be material: (i) Lender
is promptly, after Lender's determination of such occurrence, to give
notice thereof to Borrowers, and (ii) Borrowers are to pay to Lender as an
additional fee from time to time, on demand, such amount as Lender
certifies to be the amount that will compensate Lender for such reduction.
A certificate of Lender claiming entitlement to such compensation, setting
forth the nature of the occurrence giving rise to such compensation, the
additional amount or amounts to be paid to Lender, and the method by which
such amounts were determined will be conclusive in the absence of manifest
error. In determining such amount, Lender may use any reasonable averaging
and attribution method.
3.2. PAYMENTS AND COLLECTIONS.
(1) MANNER AND TIME OF PAYMENT. All payments of the Obligations
made by Borrowers pursuant hereto, whether voluntary or mandatory, shall be
made without deduction, defense, set-off or counterclaim and in same day
funds delivered to Lender by wire transfer to Lender, referencing the
corresponding Lender's Account to which such payments are to be deposited.
In order to cause timely payment to be made to Lender of all Obligations as
and when due, each Borrower hereby authorizes and directs Lender, at
Lender's option, to debit its Loan Account (by increasing the principal
balance of its Revolving Loans then outstanding) for any amounts of
principal, accrued interest, fees, charges or expenses at any time owing
hereunder or under any Loan Documents as and when such Obligations become
due (even if, in doing so, an Overadvance is created).
(2) DOMINION ACCOUNTS. In addition to payments of the
Obligations made (or deemed made) by Borrowers pursuant to subsection (A)
hereinabove, each of the Borrowers shall also be obliged to establish a
Dominion Account into which all Proceeds of Accounts, Inventory and other
Collateral of each Borrower shall be deposited as and when received by
Borrower. Each such Dominion Account shall be opened with a Depository
Bank or, subject to Lender's approval, a bank selected by a Borrower, but
satisfactory to Lender, which bank shall agree to a Bank Agency Agreement.
Collected funds deposited to each Dominion Account shall be disbursed
therefrom on a daily basis, FIRST, to the corresponding Lender's Account,
thereupon to be applied in payment of that portion (if any) of the
corresponding Obligations then outstanding, as prescribed in subsection (C)
below, and, NEXT, as to any balance remaining, to the Controlled
Disbursement Account (unless a Borrower otherwise directs Lender to apply
such proceeds); PROVIDED, HOWEVER, that, notwithstanding the foregoing, if
(i) an Overadvance has occurred or would occur, but for the direct
application of a greater amount (or all) of such proceeds to the
Obligations, Lender may apply such proceeds accordingly to reduce or avoid
such Overadvance; or (ii) a Default or Event of Default has occurred and is
continuing, Lender may cause any portion or all of such proceeds to be
remitted directly to one or more Lender's Accounts for application to the
Obligations in the manner specified in subsection (C) below. Each Borrower
shall provide Lender with copies of all bank statements which it receives
relative to each Dominion Account from any bank (other than from Depository
Bank) as soon as practicable but in any event within ten (10) days from the
date each such statement is received by such Borrower, and shall provide
Lender with a reconciliation report with respect to each such bank
statement for each such account as soon as practicable after such
Borrower's receipt of each such bank statement but in any event within
twenty (20) days from the date of such receipt.
(3) CREDIT FOR COLLECTIONS. All payments and other collections
received by Lender for application to outstanding Obligations, whether
pursuant to subsections (A) or (B) above, or otherwise, shall be applied to
outstanding Obligations on the Business Day of receipt or deposit by Lender
of same in immediately available funds in the Lender's Account during
regular banking hours of a Depository Bank, in accordance with subsection
(F) below, with such application to be made, FIRST, to any expenses of
Lender incurred in effecting such collections; NEXT, to any accrued
interest or fees which are then due and payable to Lender pursuant hereto;
NEXT, to any other Obligations of each Borrower which are then due and
payable; NEXT, to any Revolving Loans then outstanding (with any Revolving
Loans then constituting Base Rate Loans deemed paid first); it being
understood that, in the absence of contrary direction from Borrowers,
Lender shall have the right to allocate such collections between or among
the Revolver Loans of each Borrower then outstanding, at Lender's
discretion (even if, in doing so, an Overadvance is created); and, LASTLY,
provided that no Event of Default has occurred and is continuing, any
remainder shall be remitted to Borrowers. If an Event of Default has
occurred and is continuing, without limiting any other rights and remedies
of Lender hereunder, Lender may apply any remainder to any other
Obligations then outstanding, regardless of whether then past due, or hold
the same as additional cash Collateral pending the due dates for payment of
such Obligations.
(4) LOAN ACCOUNT; STATEMENTS OF ACCOUNT. Lender shall enter all
Revolver Loans as debits to the Loan Account and shall also record in the
Loan Account all payment made by Borrowers on Revolver Loans and all
proceeds of Collateral which are finally paid to Lender, and may record
therein, in accordance with customary accounting practice, all charges and
expenses properly chargeable to Borrowers hereunder. Lender will account
to Borrowers monthly with a statement of Loans, charges and payments made
pursuant to this Agreement, and such account rendered by Lender is to be
deemed final, binding and conclusive upon Borrowers unless Lender is
notified by Borrowers in writing to the contrary within thirty (30) days
after the date each account is mailed to Borrowers. Such notice is only to
be deemed an objection to those items specifically objected to therein.
(5) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
hereunder, whether of principal, interest, fees or otherwise, shall be
stated to be due on a day that is not a Business Day, the payment may be
made on the next succeeding Business Day and such extension of time shall
be included in the computation of the amount of interest or fees due
hereunder.
(6) TIMING OF RECEIPT OF FUNDS. All funds received for
application to the Obligations pursuant hereto shall be deemed received
pursuant hereto on the Business Day received if such funds are received by
a Depository Bank for deposit in a Lender's Account by 2:00 p.m. (Charlotte
time) on such day; otherwise, such funds shall be deemed received on the
succeeding Business Day.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to
enter into this Agreement, and make Loans hereunder, each Obligor warrants
and represents to Lender that:
(1) ORGANIZATION. Each Obligor and any Subsidiary is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, as provided in the Corporate
Information Schedule and has duly qualified and is authorized to do
business and is in good standing as a foreign corporation in each other
state or jurisdiction where the character of its Properties or the nature
of its activities make such qualification necessary.
(2) CORPORATE NAME. During the preceding seven (7) years,
neither Obligor nor any Subsidiary has been known as or used any corporate,
fictitious or trade names, and has had no office, place of business or
agent for service of process located in any state or county, except as
disclosed in the Corporate Information Schedule.
(3) CORPORATE AUTHORITY. Obligor has the right and power and is
duly authorized and empowered to enter into, execute, deliver and perform
this Agreement and each of the other Loan Documents to which it is a party.
The execution, delivery and performance of this Agreement and each such
Loan Document have been duly authorized by all necessary corporate action
on the part of Obligor and do not and will not (i) require any consent or
approval of the shareholders of Obligor; (ii) contravene Borrower's
articles of incorporation or bylaws; (iii) violate, or cause Obligor to be
in default under, any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award in effect having
applicability to Obligor; (iv) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which Obligor is a party or by which it
or its Properties may be bound or affected; or (v) result in, or require,
the creation or imposition of any Lien (other than Permitted Liens) upon or
with respect to any of the Properties now owned or hereafter acquired by
Obligor.
(4) GOVERNMENTAL CONSENTS. The execution, delivery and
performance by Obligor of this Agreement and each Loan Document to which it
is a party, and the consummation of the transactions contemplated therein
do not and will not require any registration with, consent or approval of,
or notice to, or other action to, with or by, any Governmental Authority
except for any filings required by federal or state securities laws (which
filings, if required, have been made) and filings required in connection
with the perfection of security interests granted pursuant to the Loan
Documents.
(5) ENFORCEABILITY. This Agreement is, and each of the other
Loan Documents when delivered under this Agreement will be, a legal, valid
and binding obligation of Obligor enforceable against it in accordance with
its terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally or by principles of equity pertaining to the
availability of equitable remedies.
(6) GOOD STANDING. Each of Obligor and any Subsidiary has, and
is in good standing with respect to, all governmental consents, approvals,
authorizations, permits, certificates, inspections, and franchises
necessary to continue to conduct its business as heretofore or proposed to
be conducted by it and to own or lease and operate its Properties as now
owned or leased by it.
(7) PERMITS. Each Obligor and any Subsidiary owns or possesses
all the patents, trademarks, service marks, trade names, copyrights and
licenses necessary for the present and planned future conduct of its
business, all of which are listed in the Intellectual Property Schedule
attached hereto and made a part hereof, without any known conflict with the
rights of others.
(8) CAPITAL STOCK. Parent owns and controls, and has good title
to, all of the shares of the Voting Stock of each Borrower, free and clear
of any Liens other than Permitted Liens. Each Borrower owns and controls,
and has good title to, all of the shares of the Voting Stock of each of its
Subsidiaries, if any, free and clear in each case of any Lien other than
Permitted Liens. All such shares of Voting Stock owned by Parent and each
Borrower, as the case may be, have been duly issued and are fully paid and
non-assessable. Other than as set forth in the Corporate Information
Schedule, there are not outstanding any options to purchase, or any rights
or warrants to subscribe for, or any commitments or agreements to issue or
sell, or any Securities or obligations convertible into, or any powers of
attorney relating to, shares of the capital stock of Parent, any Borrower
or any Subsidiary, or any agreements or instruments binding upon Parent,
any Borrower or Parent relating to the ownership of its shares of any such
capital stock.
(9) SOLVENCY. Obligor is now and, after giving effect to all
Loans to be made hereunder, at all times will be, Solvent.
(10) NO RESTRICTIONS. Obligor is not a party or subject to any
contract or agreement or charter or other corporate restriction, that
restricts its right or ability to incur Indebtedness. Obligor has not
agreed or consented to cause or permit in the future (upon the happening of
a contingency or otherwise) any of its Property, whether now owned or
hereafter acquired, to be subject to a Lien that is not a Permitted Lien.
(11) NO LAWSUITS. Except as set forth in the Financial and
Contingency Schedule, there are no actions, suits, proceedings or
investigations pending, or to the knowledge of Obligor, threatened, against
or affecting Obligor or any of its Subsidiaries, or the business,
operations, Properties, prospects, profits or condition of Obligor or any
of such Subsidiaries, in any court or before any Governmental Authority,
and no action, suit, proceeding or investigation shown in the Financial and
Contingency Schedule will have a Material Adverse Effect. Neither Obligor
nor any of its Subsidiaries is in default with respect to any order, writ,
injunction, judgement, decree or rule of any Governmental Authority.
(12) TITLE. Each Obligor and any Subsidiary has good,
indefeasible and marketable title to and fee simple ownership of, or valid
and subsisting leasehold interests in, all of its real Property, and good
title to all of its other Property, in each case, free and clear of all
Liens, charges or claims (including infringement claims with respect to
patents, trademarks, copyrights and the like), except Permitted Liens.
(13) FINANCIAL STATEMENTS. The Financial Statements have been
prepared in accordance with GAAP and present fairly the financial position
and the results of operations reflected in the Financial Statements. Since
the date of the Financial Statements, there has been no material change in
the condition, financial or otherwise, of Parent or any of its Consolidated
Subsidiaries except changes in the ordinary course of business, none of
which individually or in the aggregate has been materially adverse. The
Financial Statements, this Agreement or any other written statement of any
Obligor to Lender (including, without limitation, those statements
contained in filings, if any, with the Securities and Exchange Commission)
do not contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein not
misleading. There is no fact which Obligor has failed to disclose to
Lender in writing which has had, or foreseeably will have, a Material
Adverse Effect, other than facts which are generally available to the
public and not particular to Obligor, such as general economic and industry
trends. The Fiscal Year of Obligor ends as provided in the Financial and
Contingency Schedule.
(14) TAX RETURNS. Each Obligor and any Subsidiary has filed all
federal, state and local tax returns and other reports it is required by
Applicable Law to file and has paid, or made provision for the payment of,
all Charges that are due and payable, excepting any which are being
Properly Contested. The provision for taxes on the books of Borrower and
its Subsidiaries are adequate for all years not closed by applicable
statutes, and for its current fiscal year.
(15) MATERIAL AGREEMENTS. Except as may be disclosed in the
Material Agreement Schedule, neither Obligor nor any of its Subsidiaries is
a party to any collective bargaining agreement. There are no material
grievances, disputes or controversies with any union or any other
organization of employees of Parent or any Subsidiary, or threats of
strikes, work stoppages or any asserted pending demands for collective
bargaining by any union or organization.
(16) APPLICABLE LAW. Each Obligor and any Subsidiary has duly
complied with, and its Properties, business operations and leaseholds are
in compliance in all material respects with, the provisions of all
Applicable Law, and there have been no citations, notices or orders of
noncompliance issued to Borrower or any of its Subsidiaries under any such
Applicable Law.
(17) NOT A SURETY. Except as provided in the Financial and
Contingency Schedule, neither Obligor nor any Subsidiary is obligated as
surety or indemnitor under any surety or similar Bond or other contract
issued or entered into any agreement to assure payment, performance or
completion of performance of any undertaking or obligation of any Person.
(18) NO DEFAULT. No event has occurred and no condition exists
which would, upon the execution and delivery of this Agreement or Obligor's
performance hereunder, constitute a Default or an Event of Default. Neither
Obligor nor any of its Subsidiaries is in default, and no event has
occurred and no condition exists which constitutes, or which with the
passage of time or the giving of notice or both would constitute, a default
in the payment of any Indebtedness to any Person.
(19) BROKERS. Except as provided in the Financial and
Contingency Schedule, there are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement.
(20) NO THREATENED TERMINATION. There exists no actual or
threatened termination, cancellation or limitation of, or any material
modification or change in, the business relationship between Obligor or any
Subsidiary and any material supplier or any customer or group of customers
whose purchases individually or in the aggregate are material to the
business of Obligor or any Subsidiary, and no present condition or state of
facts or circumstances will, after the consummation of the transaction
contemplated herein, have a Material Adverse Effect or prevent Obligor from
conducting such business in substantially the same manner in which it has
heretofore been conducted.
(21) LOCATIONS. The Location and Real Property Schedule includes
a complete listing of all Collateral Locations, Capital Leases and all
operating leases of Obligor and any Subsidiary.
(22) INSURANCE. The Insurance Schedule sets forth a summary
description of all policies of insurance in effect as of the Closing Date
for Obligor and its Subsidiaries. Obligor and its Subsidiaries are
adequately insured under such policies, no notice of cancellation has been
received with respect to any of such policies. Obligor and its
Subsidiaries are in compliance with all conditions contained in such
policies.
(23) BANK ACCOUNTS. The Financial and Contingency Schedule sets
forth the account numbers and location of all bank accounts of Obligor as
of the Closing Date.
(24) LEWIS ACQUISITION. The Lewis Acquisition has been
consummated substantially in accordance with the terms of the Lewis
Acquisition Agreement; Parent has become the owner of all capital stock of
Lewis; and Lewis is a wholly-owned Subsidiary of Parent.
4.2. REAFFIRMATION. Each request for a Loan made by a Borrower
pursuant to this Agreement or any of the other Loan Documents shall
constitute (i) an automatic representation and warranty by each Obligor to
Lender that there does not then exist any Default or Event of Default and
(ii) a reaffirmation as of the date of said request that all of the
representations and warranties of each Obligor contained in this Agreement
and the other Loan Documents are true in all material respects, except for
any changes disclosed pursuant to Section 5.1(O).
4.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each Obligor
covenants, warrants and represents to Lender that all representations and
warranties of such Obligor contained in this Agreement, or in any of the
other Loan Documents shall be true at the time of such Obligor's execution
thereof, and shall survive the execution, delivery and acceptance hereof
and thereof, and the closing of the transactions described herein or
related hereto.
SECTION 5. COVENANTS AND CONTINUING AGREEMENTS
5.1. AFFIRMATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, each Obligor
shall (and shall cause each of its Subsidiaries, as appropriate, to):
(1) CHARGES. Pay and discharge all Charges prior to the date on
which such Charges become delinquent or penalties attach thereto, except
and to the extent only that such Charges are being Properly Contested and
that, if such contest is abandoned or determined adversely to Obligor,
Obligor promptly pays all such Charges and any penalties and interest
payable in connection therewith. Obligor shall pay and discharge any
lawful claims which, if unpaid, would become a Lien against any of
Borrower's Properties, except for Permitted Liens.
(2) TAXES. Timely file all federal, state and local tax returns
and other reports which Obligor or such Subsidiary is required by
Applicable Law to file and maintain adequate reserves for the payment of
all taxes, assessments, governmental charges, and levies imposed upon it,
its income, or its profits, or upon any Property belonging to it.
(3) TRANSACTION COSTS. Pay to Lender, on demand, any and all
fees, costs or expenses which Lender or any Participating Lender pays to a
bank or other similar institution (including, without limitation, any fees
paid by the Lender to any Participating Lender) arising out of or in
connection with (i) the forwarding to Obligor or any other Person on behalf
of Obligor, by Lender or any Participating Lender, proceeds of loans made
by Lender to Obligor pursuant to this Agreement and (ii) the depositing for
collection, by Lender or any Participating Lender, of any check or item of
payment received or delivered to Lender or any Participating Lender on
account of the Obligations.
(4) CORPORATE EXISTENCE. Preserve and maintain its separate
corporate existence and all rights, privileges, and franchises in
connection therewith, and maintain its qualification and good standing in
all states in which such qualification is necessary.
(5) PROPERTIES. Maintain its Properties in good condition and
repair, and make all necessary renewals, repairs, replacements, additions
and improvements thereto.
(6) APPLICABLE LAW. Comply with all Applicable Laws, including,
without limitation, all Environmental Laws, and obtain and keep in force
any and all licenses, permits, franchises, or other governmental
authorizations necessary to the ownership of its Properties or to the
conduct of its business which, if not complied with, obtained or kept in
force, individually or in the aggregate, could be reasonably expected to
have a Material Adverse Effect.
(7) BOOKS AND RECORDS. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with GAAP
reflecting all its financial transactions.
(8) INSPECTIONS. Permit representatives of Lender, from time to
time, as often as may be reasonably requested, during normal business
hours, to visit and inspect the Properties of Obligor, inspect and make
extracts from its books and records, and discuss with its officers, its
employees and its independent accountants, Obligor's business, assets,
liabilities, financial condition, business prospects and results of
operations; PROVIDED that any confidential information which Lender obtains
in the course of such visits, inspections, extractions and discussions
shall be maintained by Lender in the same manner, and to the same extent,
as Lender's own confidential information.
(9) FINANCIAL STATEMENTS. Cause to be prepared and furnished to
Lender the following (all to be kept and prepared in accordance with GAAP
applied on a consistent basis, unless Parent's certified public accountants
concur in any change therein and such change is disclosed to Lender and is
consistent with GAAP):
(1) as soon as possible, but not later than one hundred
twenty (120) days after the close of each Fiscal Year of Parent,
unqualified audited Financial Statements of (A) each Borrower,
separately, and (B) Parent and its Consolidated Subsidiaries
(including each Borrower) as of the end of such Fiscal Year, in each
case, on a consolidated and consolidating basis (including each
Borrower), certified by a firm of independent certified public
accountants of recognized national standing or otherwise acceptable to
Lender (except for a qualification for a change in accounting
principles with which the independent public accountant concurs); and,
for purposes hereof, Arthur Andersen, which are Parent's certified
public accountants on the Closing Date, are acceptable to Lender;
(2) as soon as possible, but not later than thirty (30) days
after the end of each Fiscal Month hereafter, unaudited interim
Financial Statements of each Borrower and its Subsidiaries (if any) as
of the end of such Fiscal Month and as of that portion of such
Borrower's Fiscal Year then elapsed, on a consolidated and
consolidating basis, as appropriate (including, as appropriate, income
statements on a per Supply Contract basis), certified by an Authorized
Officer of Parent as prepared in accordance with GAAP and fairly
presenting the consolidated financial position and results of
operations of such Borrower and its Subsidiaries (if any) for such
Fiscal Month and Fiscal Year to date, subject only to changes from
year-end audit adjustments and except that such Financial Statements
need not contain footnotes;
(3) within thirty (30) days after then end of each Fiscal
Month, a Compliance Certificate, with appropriate insertions, signed
by an Authorized Officer;
(4) as soon as available and in any event no later than
thirty (30) days prior to the end of each Fiscal Year of Parent,
month-by-month Projections of Parent and its Consolidated Subsidiaries
for the forthcoming Fiscal Year, including, as appropriate, income
statements per each Borrower on a per Supply Contract basis;
(5) as soon as possible, but not later than forty-five (45)
days after the end of each Fiscal Quarter of Parent, unaudited interim
Financial Statements of Parent and its Subsidiaries (including each
Borrower) as of the end of such Fiscal Quarter and as of that portion
of Parent's Fiscal Year then elapsed, certified by an Authorized
Officer of Parent as prepared in accordance with GAAP and fairly
presenting the consolidated and consolidating financial position and
results of operations of Parent and its Subsidiaries for such Fiscal
Quarter and Fiscal Year to date, subject only to changes from year-end
audit adjustments, and except that such Financial Statements need not
contain footnotes.
(6) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or
reports which a Borrower or Parent makes available to its shareholders
and copies of any 10-Q, 10-K or other, similar reports and any
registration statements which a Borrower or Parent files with the
Securities and Exchange Commission or any governmental authority which
may be substituted therefor, or any national securities exchange.
(7) promptly after the delivery thereof to Parent, all
documents, instruments, certificates and notices received by Parent in
connection with the Lewis Acquisition Agreement subsequent to the
Closing Date, including any relative to post-closing adjustments to
purchase price.
(8) such other related data and information (financial and
otherwise) as Lender, from time to time, may reasonably request.
Concurrently with the delivery of the financial statements described in
clause (i) of this Section, Parent shall forward to Lender a copy of the
accountants' report to Parent's management that is prepared in connection
with such Financial Statements and also shall cause to be prepared and
furnished to Lender a certificate of the aforesaid certified public
accountants certifying to Lender that, based upon their examination of the
Financial Statements of Parent and its Consolidated Subsidiaries, either
(i) they are not aware of any Default or Event of Default, or
(ii) specifying the nature of any Default or Event of Default. Lender
further shall be permitted to communicate from time to time directly with
such accountants in respect of any such Financial Statements, report or
certificate (whether issued or to be issued), and the contents thereof.
(10) COLLATERAL REPORTS. Weekly, on the second (2nd) Business
Day of each calendar week, or more frequently, or on a different weekday,
if requested or accepted by Lender, deliver to Lender a Borrowing Base
Certificate, in form satisfactory to Lender, setting forth the full
calculation of each Borrower's Borrowing Base, accompanied, on a monthly
basis, or more frequently, if requested by Lender, by (A) a detailed
schedule of all Inventory of such Borrower, in each case, as appropriate,
also compiled on a per Eligible Supply Contract basis, and segregated by
Collateral Location; and (B) a detailed Schedule of all Accounts of such
Borrower, as of the last Business Day of the preceding calendar month; in
each case, as appropriate, also compiled, where applicable, on a per
Eligible Supply Contract basis. In addition, within five (5) Business Days
after the end of each Fiscal Month, each Borrower will deliver to Lender an
open accounts payable listing and a report listing all new Collateral
Locations (including relocations) and all closed Collateral Locations since
the last such report.
(11) PHYSICAL COUNTS OF INVENTORY. Conduct (or cause to be
conducted) daily cycle counts and an annual physical inventory and test
count of its Inventory (or more frequently, in each case, from and after
the occurrence of any Event of Default, and during its continuance, at the
direction of Lender). Each Borrower shall give Lender reasonable advance
notice (but not less than one calendar week, however) of its intention to
conduct each annual physical inventory and test count, and permit Lender to
attend and observe such activity. In any event, each Borrower shall
provide Lender with copies of each daily cycle count on a daily basis and
annual physical count of Inventory. Each annual physical count shall be
accompanied by such Borrower's report as to the book value of such
Inventory and an analysis of the book value of such Inventory in relation
to the physical count thereof.
(12) OTHER NOTICES. Notify Lender in writing: (i) promptly
after Obligor's learning thereof, of the commencement of any litigation
affecting Obligor or any of its Properties, and of the institution of any
administrative proceeding which may have a Material Adverse Effect;
(ii) promptly after Obligor's learning thereof, of any labor dispute to
which Obligor may become a party, any strikes or walkouts relating to any
of its plants or other facilities, and the expiration of any labor contract
to which it is a party or by which it is bound; (iii) promptly after the
occurrence thereof, of any Default or Event of Default; (iv) promptly after
Obligor's learning thereof, of any material default by Obligor under any
note, indenture, loan agreement, mortgage, lease, deed, guaranty or other
similar agreement relating to any Indebtedness of Obligor; (vii) promptly
after the occurrence thereof, of any default by any obligor under a note or
other evidence of Indebtedness payable to Obligor; and (vii) promptly after
the rendition thereof, of any judgment rendered against Obligor or any of
its Subsidiaries. Obligor shall provide written notice to Lender of (1)
all jurisdictions in which Obligor or any Subsidiary becomes qualified
after the Closing Date to transact business, (2) any material change after
the Closing Date in the authorized and issued Capital Stock or other equity
interests of Obligor or any Subsidiary or any other material amendment to
their charter, by-laws or other organization documents and (3) any
Subsidiary created or acquired by Obligor or any Subsidiary after the
Closing Date, (presuming a consent is obtained in respect thereof pursuant
hereto), such notice, in each case, to identify the applicable
jurisdictions, capital structures or Subsidiaries, as applicable.
(13) DEBT SUBORDINATION. If and to the extent that any one
Obligor is now or hereafter becomes indebted to any other Obligor, for
Money Borrowed, including in respect of any loans or advances between or
among Obligors with the proceeds of any Loans obtained pursuant hereto, all
rights of payment and claim for all of such Indebtedness and any future
advances thereon shall be subject, inferior and subordinate to the full and
final payment and performance of the Obligations, and no Obligor shall
exercise any right or remedy to enforce the payment of such Indebtedness
unless and except to the extent expressly permitted by Lender.
(14) FURTHER ASSURANCES. At Lender's request, promptly execute
or cause to be executed and deliver to Lender any and all documents,
instruments and agreements deemed necessary by Lender to give effect to or
carry out the terms or intent of this Agreement or any of the other Loan
Documents.
(15) SUPPLEMENTED SCHEDULES. As soon as practicable after
Obligor becomes aware thereof, but in any event concurrently with delivery
by Obligor of the monthly financial statements required to be delivered by
Section 5.1(I)(ii), supplement in writing and deliver to Lender revisions
of the Schedules, to the extent necessary to disclose new or changed facts
or circumstances occurring within any Fiscal Month after the Closing Date
in respect of any material data set forth in, or which are the subject of,
any such Schedules; PROVIDED that subsequent disclosures shall not
constitute a cure or waiver of any Default or Event of Default resulting
from the matters disclosed therein.
(16) INSURANCE. In addition to the insurance required herein
with respect to the Collateral, maintain, with financially sound and
reputable insurers, insurance with respect to its Properties and business
against such casualties and contingencies of such type (including product
liability insurance) and in such amounts as is customary in the business or
as otherwise reasonably required by Lender.
(17) INTEREST RATE AGREEMENT. By not later than thirty (30) days
after the Closing Date, Parent shall have obtained, and at all times
thereafter during the term of this Agreement Parent shall maintain, an
Interest Rate Agreement for at least Eight Million Dollars ($8,000,000) in
Indebtedness for Money Borrowed from a Person affiliated with, or otherwise
approved by, Lender, on such terms and conditions (including notional rate
of interest, term and price) as shall be acceptable to Lender.
5.2. NEGATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations owing to Lender,
Obligor shall not (and shall not permit any Subsidiary to):
(1) MERGER. Merge or consolidate with any Person; or acquire
all or any substantial part of the Properties of any Person.
(2) LOANS. Make any loans or other advances of money (other
than for salary, travel advances, advances against commissions and other
similar advances in the ordinary course of business) to any Person,
including, any Affiliates, officers or employees, except that loans and
advances made by Parent to any Borrower or by any Borrower to another
Borrower, to the extent constituting Permitted Indebtedness as and when
incurred by such Persons, shall be permitted hereunder.
(3) INDEBTEDNESS. Create, incur, assume, or suffer to exist,
any Indebtedness, except Permitted Indebtedness, or any Contingent
Obligation, except by endorsement of instruments or items of payment for
deposit or collection in the ordinary course of its business.
(4) AFFILIATES. Enter into, or be a party to any transaction
with any Affiliate or stockholder, officer or employee, except in the
ordinary course of and pursuant to the reasonable requirements of its
business and upon fair and reasonable terms which are fully disclosed to
Lender and are no less favorable than would obtain in a comparable arm's
length transaction with a Person not an Affiliate or stockholder, officer
or employee of Obligor or such Subsidiary.
(5) PARTNERSHIPS. Become or agree to become a general or
limited partner in any general or limited partnership or a joint venturer
in any joint venture.
(6) MATERIAL CONTRACTS. Enter into any transaction which
materially and adversely affects or may materially and adversely affect the
Collateral or Obligor's ability to repay any Obligations or permit or agree
to any material extension, compromise or settlement or make any change or
modification of any kind or nature with respect to any Account, including
any of the terms relating thereto, other than discounts and allowances in
the ordinary course of business, all of which is to be reflected in the
Schedules of Accounts submitted to Lender as required herein.
(7) LIENS. Create or suffer to exist any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired,
except Permitted Liens.
(8) SUBORDINATED DEBT. Make any payment (whether of principal,
interest, premium or otherwise) on any Subordinated Debt unless and except
to the extent, if any, expressly permitted by the terms of subordination
governing such Subordinated Debt; or, in any event, make any prepayment of
any part or all of any Subordinated Debt, or otherwise repurchase, redeem
or retire any instrument evidencing any such Subordinated Debt prior to
maturity; or enter into any agreement which could in any way be construed
to amend, modify, alter or terminate any one or more instruments or
agreements evidencing or relating to any Subordinated Debt.
(9) DISTRIBUTIONS. Declare or make any Distributions; PROVIDED,
HOWEVER, that so long as no Default or Event of Default has occurred or
otherwise would be caused thereby, (i) Borrowers, collectively, may make
cash Distributions to Parent of up to One Million Two Hundred Fifty
Thousand Dollars ($1,250,000), in the aggregate, in each Fiscal Year, in
respect of management fees; and (ii) Parent may make payments on
Subordinated Debt, if and to the extent then expressly permitted to be made
by the terms of subordination governing such Subordinated Debt and the
terms of this Agreement.
(10) SUBSIDIARIES. Create any Subsidiary or divest itself of any
assets by transferring them to any Subsidiary.
(11) PLACE OF BUSINESS. Transfer its principal place of business
or chief executive office, or open new manufacturing plants, or transfer
existing manufacturing plants, to any locations other than those at which
the same are presently kept or maintained, as set forth on the Location and
Real Property Schedule, except upon at least sixty (60) days prior written
notice to Lender and after the delivery to Lender of financing statements,
if required by Lender, in form satisfactory to Lender to perfect or
continue the perfection of Lender's Lien and security interest hereunder.
(12) BUSINESS PURPOSES. Enter into any new business or make any
material change in any of Obligor's or any Subsidiary's business
objectives, purposes and operations.
(13) SALE OF ASSETS. Sell, lease or otherwise dispose of any of
its Properties, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, EXCEPT (i) sales of
Inventory in the ordinary course of business for so long as no Event of
Default exists hereunder, (ii) a transfer of Property to an Obligor by a
Subsidiary or (iii) any other dispositions expressly authorized by this
Agreement; PROVIDED, HOWEVER, that the foregoing restriction is not to
apply, for so long as no Default or Event of Default exists, to
(i) dispositions of Equipment which, in the aggregate during any
consecutive twelve-month period, has a fair market value or book value,
whichever is more, of Ten Thousand Dollars ($10,000) or less, provided that
all Net Proceeds thereof are remitted to Lender for application to the
Obligations, (ii) dispositions of obsolete Equipment, provided that all Net
Proceeds are remitted to Lender for application to the Obligations, or
(iii) replacements of Equipment that is substantially worn or damaged with
Equipment of like kind, function and value, provided that the replacement
Equipment shall be acquired prior to or concurrently with any disposition
of the Equipment that is to be replaced and the replacement Equipment is to
be free and clear of Liens (except for Permitted Liens that are not
Purchase Money Liens), Obligor shall give Lender at least five (5) Business
Days prior written notice of such disposition and Obligor shall turn over
to Lender all Net Proceeds realized from any such disposition.
(14) CORPORATE NAME. Use any corporate name (other than its own)
or any fictitious name, trade style or "d/b/a" except for any names
disclosed on the Corporate Information Schedule.
(15) MARGIN SECURITY. Own, purchase or acquire (or enter into
any contract to purchase or acquire) any "margin security" as defined by
any regulation of the Board of Governors as now in effect or as the same
may hereafter be in effect unless, prior to any such purchase or
acquisition or entering into any such contract, Lender is to have received
an opinion of counsel satisfactory to Lender to the effect that such
purchase or acquisition will not cause the Agreement to violate Regulations
G or U or any other regulation of the Board of Governors then in effect.
(16) RESTRICTED INVESTMENT. Make or have any Restricted
Investment.
(17) BANK ACCOUNTS; COMMINGLING. Establish any deposit accounts
for the deposit of any Proceeds of Collateral not expressly contemplated
herein or commingle any funds not constituting Proceeds of Collateral in
any deposit account established pursuant hereto for the depositing of
Proceeds of Collateral.
(18) FISCAL YEAR. Change its Fiscal Year, or permit any
Subsidiary to have a Fiscal Year different from that of Parent.
(19) CAPITAL STOCK. Sell or otherwise dispose of any shares of
capital stock of any Subsidiary, or permit any Subsidiary to issue any
additional shares of its capital stock except director's qualifying shares.
(20) CONSOLIDATED TAX RETURN. File or consent to the filing of
any consolidated income tax return with any Person other than Parent or a
Subsidiary.
5.3. FINANCIAL COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations owing to Lender, Parent
shall, for Parent and its Consolidated Subsidiaries:
(1) TANGIBLE NET WORTH. Maintain a Tangible Net Worth of not
less than the amount shown below at all times during the period
corresponding thereto (measured monthly at the end of each Fiscal Month):
PERIOD AMOUNT
Closing Date through June 30, 1998 $2,250,000
July 1, 1997 through June 30, 1999 $2,550,000
From and after July 1, 1999 $2,850,000
it being understood and agreed that the foregoing amounts shall be subject
to change based on the actual Tangible Net Worth of Parent and its
Consolidated Subsidiaries as of June 30, 1997, as reflected on, or
determined from, Parent's audited financial statements for such Fiscal
Year. That is, the initial amount of coverage set forth hereinabove
($2,250,000) shall be adjusted (up or down) to that amount which is
$175,000 less than actual Tangible Net Worth as of June 30, 1997, as so
determined, but in any event not less than $2,000,000, and each succeeding
amount set forth hereinabove likewise shall be adjusted (up or down)
accordingly.
(2) DEBT SERVICE COVERAGE. Maintain a Debt Service Coverage of
not less 1.10:1 (measured monthly at the end of each Fiscal Month).
(3) CAPITAL EXPENDITURES. Limit the aggregate amount of all
Capital Expenditures (including without limitation, Capital Leases) of
Parent and its Consolidated Subsidiaries to not more than Six Hundred
Thousand Dollars ($600,000) during any Fiscal Year of Parent.
SECTION 6. COLLATERAL
6.1. GRANT OF SECURITY INTEREST. To secure the prompt payment and
performance of the Obligations, each Borrower hereby grants to Lender a
continuing security interest in, security title to and Lien upon all the
Collateral of such Borrower.
6.2. REPRESENTATIONS, WARRANTIES AND COVENANTS -- COLLATERAL
GENERALLY. To induce Lender to enter into this Agreement, each Borrower
represents and warrants to, and covenants with, Lender as follows:
(1) The Collateral is now and will continue to be owned solely
by Borrower. No other Person has or will have any right, title, interest,
claim, or Lien therein, thereon or thereto other than a Permitted Lien.
(2) The Liens granted to Lender are to be first and prior Liens
on the Collateral. No further action need be taken to perfect the Liens
granted to Lender, other than the filing of financing statements and
continuation statements under the Code or other Applicable Law, continued
possession by Lender of that portion of the Collateral constituting
Instruments or Documents and the processing of Lien notations on motor
vehicle title certificates.
(3) All goods evidenced by the Collateral constituting Chattel
Paper, Documents or Instruments, the possession of which has been given to
Lender, are owned by Borrower and the same are free and clear of any prior
Lien.
6.3. LIEN PERFECTION. Each Borrower agrees to execute financing
statements provided for by the Code or other Applicable Law together with
any and all other instruments, assignments or documents and is to take such
other action as may be required to perfect or to continue the perfection of
Lender's security interest in the Collateral, including, without
limitation, the execution at Lender's request of all documents deemed
necessary by Lender to cause Lender's Lien to be noted on any motor vehicle
title certificates for motor vehicles forming a part of the Collateral.
Unless prohibited by Applicable Law, each Borrower hereby authorizes Lender
to execute and file any such financing statement on each Borrower's behalf.
The parties agree that a carbon, photographic or other reproduction of this
Agreement is to be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.
6.4. LOCATION OF COLLATERAL. All tangible Collateral, other than
Inventory in transit and motor vehicles and any Collateral in possession of
Lender, will at all times be kept by each Borrower at one or more of the
Collateral Locations set forth in the Location and Real Property Schedule
and, unless otherwise approved by Lender, shall not be moved therefrom
except, prior to an Event of Default, for (A) sales of Inventory in the
ordinary course of business; (B) the storage of Inventory at locations
within the continental United States other than those shown on the Location
and Real Property Schedule if (i) a Borrower gives Lender written notice of
the new storage location at least sixty (60) days prior to storing
Inventory at such location, (ii) Lender's security interest in such
Inventory is and continues to be a duly perfected, first priority Lien
thereon, (iii) the Borrower's right of entry upon the premises where such
Inventory is stored, or its right to remove the Inventory therefrom, is not
in any way restricted, (iv) the owner of such premises executes a Lien
Waiver and (v) all negotiable documents and receipts in respect of any
Collateral maintained at such premises are promptly delivered to Lender;
and (C) removals in connection with dispositions of Equipment that are
authorized herein.
6.5. INSURANCE OF COLLATERAL. Each Borrower shall maintain and pay
for insurance upon all Collateral wherever located, in storage or in
transit in vehicles, including goods evidenced by documents, covering
casualty, hazard, public liability and such other risks and in such amounts
and with such insurance companies as is to be reasonably satisfactory to
Lender to insure Lender's interest in the Collateral. Each Borrower is to
deliver the originals of such policies to Lender with satisfactory lender's
loss payable endorsements naming Lender loss payee. Each policy of
insurance or endorsement shall contain a clause requiring the insurer to
give not less than thirty (30) days prior written notice to Lender in the
event of cancellation of the policy for any reason whatsoever and a clause
that the interest of Lender is not to be impaired or invalidated by any act
or neglect of a Borrower or owner of the Property nor by the occupation of
the premises for purposes more hazardous than are permitted by said policy.
If a Borrower fails to provide and pay for such insurance, Lender may, at
such Borrower's expense, procure the same, but is not to be required to do
so. In addition to the insurance required herein with respect to the
Collateral, each Borrower shall maintain, with financially sound and
reputable insurers, insurance with respect to its Properties and business
against such casualties and contingencies of such type (including product
liability, larceny, embezzlement, or other criminal misappropriation
insurance) and in such amounts as is customary in the business or as
otherwise shall be reasonably required by Lender.
6.6. PROTECTION OF COLLATERAL. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping Collateral
(including, without limitation, all rent payable by a Borrower to any
landlord of any premises where any of the Collateral may be located), and
any and all Charges are to be borne and paid by such Borrower. All sums
paid or incurred by Lender in enforcing or protecting its Lien on or rights
and interest in the Collateral or any of its rights or remedies under this
or any other agreement between the parties hereto or in respect of any of
the transactions to be had hereunder until paid by Borrower to Lender with
interest at the Default Rate, are to be considered Obligations, secured by
all Collateral and by any and all other collateral, security, assets,
reserves, or funds of such Borrower in or coming into the hands or inuring
to the benefit of Lender. Lender shall not be liable or responsible in any
way for the safekeeping of any of the Collateral or for any loss or damage
thereto (except for reasonable care in the custody thereof while any
Collateral is in Lender's actual possession) or for any diminution in the
value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, or other Person whomsoever, but the same shall be at
such Borrower's sole risk.
6.7. SPECIAL PROVISIONS RELATING TO ACCOUNTS.
(1) REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to
all Accounts, Lender may rely, in determining which Accounts are Eligible
Accounts, on all statements and representations made by a Borrower or any
Authorized Officer on its behalf, whether hereunder or under any other Loan
Document, with respect to any Account or Accounts. With respect to each
Account, each Borrower represents and warrants: (i) it is genuine and in
all respects what it purports to be, and it is not evidenced by a judgment;
(ii) it arose out of a completed, bona fide sale and delivery of goods or
rendition of services by Borrower in the ordinary course of its business
and in accordance with the terms and conditions of all purchase orders,
contracts or other documents relating thereto and forming a part of the
contract between Borrower and the Account Debtor; (iii) to Borrower's
knowledge, the Account Debtor thereunder had the capacity to contract at
the time any contract or other document giving rise to the Account was
executed, (iv) to Borrower's knowledge, there are no proceedings or actions
which are threatened or pending against any Account Debtor thereunder which
could reasonably be expected to result in any material adverse change in
such Account Debtor's financial condition or the collectibility of such
Account; (v) the Account is for a liquidated amount maturing as stated in
the duplicate invoice covering such sale or rendition of services, a copy
of which has been furnished or is available to Lender; (vi) to Borrower's
knowledge, at the time of sale, such Account, and Lender's security
interest therein, was not subject to any offset, Lien, deduction, defense,
dispute, counterclaim or any other adverse condition except for disputes
resulting in returned goods where the amount in controversy is deemed by
Lender to be immaterial, and each such Account is absolutely owing to
Borrower and was not contingent in any respect or for any reason, and there
are no facts, events or occurrences which in any way impair the validity or
enforceability thereof or tend to reduce the amount payable thereunder from
the face amount of the invoice and statements delivered to Lender with
respect thereto; and (vii) Borrower has made no agreement with any Account
Debtor for any deduction therefrom, except discounts or allowances which
are granted by Borrower in the ordinary course of its business for prompt
payment and which are reflected in the calculation of the net amount of
each respective invoice related thereto.
(2) ADMINISTRATION OF ACCOUNTS. Each Borrower shall keep
accurate and complete records of its Accounts and all payments and
collections thereon. Each Borrower shall promptly report any discounts,
allowances or credits, as the case may be, to Lender and in no event later
than the time of its submission to Lender of the next Schedule of Accounts.
Each Borrower shall provide Lender with written notice of any amounts in
excess of Fifty Thousand Dollars ($50,000) in dispute between such Borrower
and an Account Debtor, explaining in detail the reason for such dispute,
all claims related thereto and the specific amount in controversy. If an
Account includes a charge for any tax payable to any governmental taxing
authority, Lender may pay the amount thereof to the proper taxing authority
for the account of such Borrower and charge the Loan Account therefor.
Each Borrower is to notify Lender if any Account includes any tax due to
any governmental taxing authority and, in the absence of such notice,
Lender is to have the right to retain the full proceeds of the Account and
is not to be liable for any taxes to any governmental taxing authority that
may be due by such Borrower by reason of the sale and delivery creating the
Account. Any of Lender's officers, employees or agents are to have the
right, at any time, in the name of Lender or any designee of Lender or
Borrower, to verify the validity, amount or any other matter relating to
any Accounts by mail, telephone or otherwise. Each Borrower is to
cooperate fully with Lender to facilitate any such verification process.
(3) COLLECTION OF ACCOUNTS. Each Borrower shall deposit all
proceeds of the Collateral, including, without limitation, all remittances
received by Borrower on account of Accounts, or cause the same to be
deposited in kind in a Dominion Account pursuant to a Bank Agency
Agreement. Each Borrower shall issue to any such bank, an irrevocable
letter of instruction directing such banks to deposit all payments or other
remittances received in the lockbox to the Dominion Account for application
on account of the Obligations. All funds deposited in the Dominion Account
are immediately to become the property of Lender and Borrower shall obtain
the agreement by such banks to waive any offset rights against the funds so
deposited. Lender assumes no responsibility for such lockbox arrangement,
including, without limitation, any claim of accord and satisfaction or
release with respect to deposits accepted by any bank thereunder.
(4) GOVERNMENTAL ACCOUNTS. If any of the Accounts, the face
value of which exceeds One Thousand Dollars ($1,000) of any Borrower,
arises out of a contract with the United States of America, or any
department, agency, subdivision or instrumentality thereof, each Borrower
shall promptly notify Lender thereof in writing and is to execute any
instruments and take any other action required or requested by Lender to
comply with the provisions of the Federal Assignment of Claims Act or any
other Applicable Law.
6.8. SPECIAL PROVISIONS RELATING TO INVENTORY.
(1) REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to
Inventory, each Borrower represents and warrants to Lender that Lender may
rely on all statements and representations made by Borrower or any
Authorized Officer on its behalf, whether hereunder or under any other Loan
Document, with respect to any Inventory and that: (i) all Inventory is
presently and will continue to be located at Borrower's places of business
listed in the Location and Real Property Schedule and will not be removed
therefrom except as authorized by this Agreement; and (ii) no Inventory is
or will be produced in violation of the Fair Labor Standards Act or any
other Applicable Law.
(2) RETURNS OF INVENTORY. If at any time or times hereafter any
Account Debtor returns any Inventory to a Borrower the shipment of which
generated a then Eligible Account obligating such Account Debtor in excess
of Fifty Thousand Dollars ($50,000), Borrower shall notify Lender of the
same immediately, specifying the reason for such return and the location
and condition of the returned Inventory.
6.9. SPECIAL PROVISIONS RELATING TO SUPPLY CONTRACTS. With respect to
any Supply Contracts of a Borrower, such Borrower represents, warrants and
covenants to and with Lender that: (i) the Supply Contracts listed on the
Supply Contracts Schedule are the only Supply Contracts existing on the
Closing Date; (ii) true, correct and complete copies of such existing
Supply Contracts (including any supplements, additions, modifications and
amendments thereto) are attached to the Supply Contracts Schedule; (iii)
any Supply Contracts which Borrower proposes to enter into subsequent to
the Closing Date and be considered as Eligible Supply Contracts hereunder
shall be submitted to Lender for its review and prior approval of all terms
thereof, including particularly all terms relating to Lender's rights
therein and compliance with all terms of this Agreement relevant thereto;
(iv) promptly upon their receipt or delivery by Borrower, Borrower shall
deliver to Lender copies of any notices concerning any Eligible Supply
Contract issued by either party thereto in respect of any actual or
proposed supplement, addition, modification, amendment, termination,
revocation, rescission or cancellation thereof, or of any portion thereof;
(v) Borrower shall not enter into, consent to or acquiesce in, any
supplement, addition, modification or amendment to any Eligible Supply
Contract (whether existing at or subsequent to the Closing Date), or any
waiver of any terms thereof, nor shall Borrower institute, consent to, or
acquiesce in, any termination, revocation, rescission or cancellation of
any such Eligible Supply Contract, or portion thereof, except, in each case
after its review and prior approval by Lender.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES ON DEFAULT
7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following conditions or events is to constitute an "Event of Default,"
whatever the reason for such event or condition and whether it be voluntary
or involuntary, or within or without the control of Borrower, any Guarantor
or any Subsidiary, or be effected by operation of law or pursuant to any
order or judgment of a court or otherwise:
(1) NON-PAYMENT. Any Obligor fails to pay any of the following
Obligations, including, without limitation, any installment of principal or
interest owing on any Revolver Note on the due date thereof (whether due at
stated maturity, on demand, upon acceleration or otherwise).
(2) MISREPRESENTATION. Any warranty, representation, or other
statement made or furnished to Lender by or on behalf of any Obligor or any
Guarantor or in any instrument, certificate or financial statement
furnished in compliance with or in reference to this Agreement or any of
the other Loan Documents proves to have been false or misleading in any
material respect when made or furnished.
(3) COVENANTS. Any Obligor fails or neglect to perform, keep or
observe (i) any covenants to comply with Applicable Law or furnish
financial information as provided herein, or any of the covenants set forth
in Sections 5.2, 5.3 or Article 6 or (ii) any other covenant contained in
this Agreement (not dealt with specifically elsewhere in this Section) and
the breach of such other covenant covered by this clause (ii) is not cured
to Lender's satisfaction within ten (10) days after the sooner to occur of
an Obligor's receipt of notice of such breach from Lender or the date on
which such failure or neglect first becomes known to any officer of an
Obligor.
(4) LOAN DOCUMENTS. Any event of default occurs under, or
default by any Obligor in the performance or observance of any term,
condition or agreement contained in, any of the other Loan Documents and
such default continues beyond any applicable period of grace.
(5) CROSS-DEFAULT. Any default or event of default occurs on
the part of any Obligor (including specifically, but without limitation,
due to non-payment) under any agreement, document or instrument to which
such Obligor is a party or by which Obligor or any of its Property is
bound, creating or relating to any Indebtedness (other than the
Obligations) if the payment or maturity of such Indebtedness is accelerated
in consequence of such event of default or demand for payment of such
Indebtedness is made.
(6) MATERIAL LOSS. There occurs any material loss, theft,
damage or destruction not fully covered by insurance, or any sale, lease or
encumbrance or any of the Collateral or the making of any levy, seizure, or
attachment thereof or thereon, except in all cases as may be specifically
permitted by other provisions of this Agreement.
(7) SOLVENCY. Any Obligor or Guarantor ceases to be Solvent or
suffers the appointment of a receiver, trustee, custodian or similar
fiduciary, or makes an assignment for the benefit of creditors, or any
petition for an order for relief is filed by or against any Obligor or
Guarantor under the Bankruptcy Code (if against any Guarantor, the
continuation of such proceeding for more than sixty (60) days), or any
Obligor or Guarantor makes any offer of settlement, extension or
composition to their respective unsecured creditors generally, or any
motion, complaint or other pleading is filed in any bankruptcy case of any
Person other than such Obligor or Guarantor and such motion, complaint or
pleading seeks the consolidation of such Obligor's assets and liabilities
with the assets and liabilities of such Persons.
(8) CESSATION OF BUSINESS. Any Eligible Supply Contract is
terminated, cancelled, revoked or rescinded, in whole or in any material
part; a cessation of a substantial part of the business of an Obligor for a
period which significantly affects such Obligor's capacity to continue its
business on a profitable basis occurs; or any Obligor suffers the loss or
revocation of any license or permit now held or hereafter acquired by such
Obligor which is necessary to the continued or lawful operation of its
business; or any Obligor is enjoined, restrained or in any way prevented by
court, governmental or administrative order from conducting all or any
material part of its business affairs; or any material lease or agreement
pursuant to which such Obligor leases, uses or occupies any Property
necessary to its continued compliance with the requirements of any Eligible
Supply Contract is canceled or terminated prior to the expiration of its
stated term; or all, any material part, of the Collateral is taken through
confiscation, condemnation or other, similar action of Governmental
Authority or the value of such Property is materially impaired thereby.
(9) CHANGE OF CONTROL. Either (i) the Parent shall cease to own
and control, beneficially and of record, all of the issued and outstanding
Voting Stock of each Borrower; or (ii) fifty percent (50%) or more of the
Voting Stock of Parent is owned or controlled by any Person (or group of
Persons acting in concert) which is not a shareholder of Parent on the
Closing Date.
(10) CONTEST OF LOAN DOCUMENTS. Any Obligor or Guarantor, or any
Affiliate of either, challenges or contests in any action, suit or
proceeding the validity or enforceability of this Agreement or any of the
other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Lender.
(11) GUARANTY. Any Guarantor revokes or attempts to revoke the
Guaranty Agreement signed by such Guarantor, or repudiates such Guarantor's
liability thereunder or becomes in default under the terms thereof.
(12) MONEY JUDGMENT. Any money judgment, writ of attachment or
similar process is entered or filed against any Obligor in the amount of
One Hundred Thousand Dollars ($100,000) or more or any of its Property
which results in the creation or imposition of any Lien that is not a
Permitted Lien.
7.2. ACCELERATION OF THE OBLIGATIONS. Upon the occurrence of any
Event of Default described in Section 7.1(G), all Obligations shall
automatically become immediately due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or
other requirements of any kind, all of which are hereby expressly waived by
Borrower. Upon the occurrence and during the continuance of any other
Event of Default, Lender may, by written notice to Obligors declare all or
any portion of the Loans and all or some of the other Obligations to be,
and the same shall forthwith become, immediately due and payable together
with accrued interest thereon.
7.3. OTHER REMEDIES. Upon or at any time after the occurrence of an
Event of Default, Lender may exercise from time to time the following
rights and remedies:
(1) TERMINATE. The right to terminate the Revolver Facility
without further notice to Obligors.
(2) NOTIFY ACCOUNT DEBTORS. The right to notify all Persons in
any way liable on any Accounts, Instruments or Chattel Paper to make
remittances to Lender of all sums due or to become due thereon and to
collect and enforce payment of all Accounts, Instruments and Chattel Paper
directly from the Persons liable thereon, by legal proceedings or
otherwise, and generally exercise all of each Borrower's rights and
remedies with respect to the collection of the Accounts.
(3) REPOSSESSION. The right (i) to take immediate possession of
the Inventory and Equipment, or alternatively to require each Borrower to
assemble the Inventory and Equipment, at such Borrower's expense, and make
it available to Lender at a place designated by Lender that is reasonably
convenient to both parties, and (ii) to enter any of the premises of a
Borrower or wherever any of the Inventory or Equipment is located, and to
keep and store the same on said premises until sold (and if said premises
be the Property of a Borrower, such Borrower agrees not to charge Lender
for storage thereof).
(4) ELIGIBLE SUPPLY CONTRACT. The right to exercise any right
or remedy accorded to Lender under any Eligible Supply Contract, including
the right to require that such contract be terminated and that the customer
of a Borrower thereunder purchase Inventory identified to said contract in
connection therewith.
(5) DISPOSE OF COLLATERAL. With respect to any or all of the
Collateral, the right to sell or otherwise dispose of all or any of such
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as
may be required by applicable law, in lots or in bulk, for cash or on
credit, all as Lender, in its sole discretion, may deem advisable. Ten
(10) days written notice to Obligors of any public or private sale or
other disposition of any such Collateral shall be reasonable notice
thereof; PROVIDED, HOWEVER, that no notice of Lender's intended disposition
of such Collateral shall be required with respect to any portion of such
Collateral that is perishable, threatens to decline speedily in value or is
of a type customarily sold on a recognized market, nor is any such notice
to be required hereunder if not otherwise required under Applicable Law.
Lender shall have the right to conduct such sales on an Obligor's premises,
without charge therefor, and such sales may be adjourned from time to time
in accordance with Applicable Law. Lender shall have the right to sell,
lease or otherwise dispose of any such Collateral, or any part thereof, for
cash, credit or any combination thereof, and Lender may purchase all or any
part of any such Collateral at public or, if permitted by applicable law,
private sale and, in lieu of actual payment of such purchase price, may set
off the amount of such price against the Obligations.
(6) SETOFF. The right at any time or times, to the fullest
extent permitted by Applicable Law and without notice to any Obligor, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other Indebtedness at any time
owing by Lender to or for the credit or the account of such Obligor or any
Guarantor against any and all of the Obligations, if and to the extent then
due.
(7) OTHER RIGHTS. All of the rights and remedies of a secured
party under the Code or under other Applicable Law and all other legal and
equitable rights to which Lender may be entitled.
7.4. LICENSE TO USE. Lender is hereby further granted a license or
other right to use, without charge, each Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any Property or a similar nature, as
it pertains to the Collateral, in advertising for sale and selling any
Collateral, and each Borrower's rights and under all licenses and all
franchise agreements are to inure to Lender's benefit. The proceeds
realized from the sale or other disposition of any Collateral may be
applied, after allowing two (2) Business Days for collection, first to the
costs, expenses and attorneys' fees incurred by Lender in collecting the
Obligations, in enforcing the rights of Lender under the Loan Documents and
in collecting, retaking, completing, protecting, removing, storing,
advertising for sale, selling and delivering any of the Collateral;
secondly, to interest due upon any of the Obligations; and thirdly, to the
principal amount of the Obligations. If any deficiency arises, each
Obligor and Guarantor will remain jointly and severally liable to Lender
therefor.
7.5. REMEDIES CUMULATIVE; NO WAIVER. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
each Obligor contained in this Agreement and the other Loan Documents, or
in any other agreement between Lender and an Obligor, heretofore,
concurrently, or hereafter entered into, are to be deemed cumulative to and
not in derogation or substitution of any of the terms, covenants,
conditions, or agreements of such Obligor herein contained.
SECTION 8. MISCELLANEOUS
8.1. POWER OF ATTORNEY. Each Obligor hereby irrevocably designates,
makes, constitutes and appoints Lender (and all Persons designated by
Lender) as Obligor's true and lawful attorney (and agent-in-fact) and
Lender, or Lender's agent, may, without notice to such Obligor and in
either such Obligor's or Lender's name, but at the cost and expense of
Obligor:
(1) At any time, endorse Obligor's name on any checks, Revolving
Notes, acceptances, drafts, money orders or any other evidence of payment
or proceeds of Collateral which come into the possession of Lender or under
Lender's control; and
(2) At such time or times upon or after the occurrence of, and
during the continuation of, any Event of Default: (i) settle, adjust,
compromise, discharge or release any of the Accounts or other Collateral or
any legal proceedings brought to collect any of the Accounts or other
Collateral; (ii) sell or assign any of the Accounts and other Collateral
upon such terms, for such amounts and at such time or times as Lender deems
advisable; (iii) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (iv) prepare, file and sign Obligor's
name to a proof of claim in bankruptcy or similar document against any
Account Debtor or to any notice of Lien, assignment or satisfaction of Lien
or similar document in connection with any of the Collateral; (v) receive,
open and dispose of all mail addressed to borrower and notify postal
authorities to change the address for delivery thereof to such address as
Lender may designate; (vi) endorse the name of Obligor upon any of the
items of payment or proceeds relating to any Collateral and deposit the
same to the account of Lender for application to the obligations;
(vii) endorse the name of Obligor upon any chattel paper, document,
instrument, invoice, freight bill, bill of lading or similar document or
agreement relating to the Accounts, Inventory and any other Collateral;
(viii) use Obligor's stationery and sign the name of Obligor to
verifications of the Accounts and notices thereof to Account Debtors;
(ix) use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Accounts,
Inventory, Equipment and any other Collateral and to which Obligor has
access; (x) make and adjust claims under policies of insurance; and (xi) do
all other acts and things necessary, in Lender's determination, to fulfill
Obligor's obligations under this Agreement or any of the other Loan
Documents.
8.2. INDEMNITY. Each Obligor hereby indemnifies Lender and agrees to
hold Lender harmless from and against any liability, loss, damage, suit,
action or proceeding ever suffered or incurred by Lender as the result of
such Obligor's failure to observe, perform or discharge such Obligor's
duties hereunder. Without limiting the generality of the foregoing, this
indemnity is to extend to any claims asserted against Lender by any Person
under any Environmental Laws. Additionally, if any taxes (excluding taxes
imposed upon or measured by the net income of Lender, but including,
without limitation, any intangibles tax, stamp tax, recording tax or
franchise tax) are payable by Lender, any Obligor or any Guarantor on
account of the execution or delivery of this Agreement, or the execution,
delivery, issuance or recording of any of the other Loan Documents, or the
creation of any of the Obligations hereunder, by reason of any existing or
hereafter enacted federal, state, foreign or local statute, rule or
regulation, each Obligor will pay (or will promptly reimburse Lender for
the payment of) all such taxes, including, but not limited to, any interest
and penalties thereon, and will indemnify and hold Lender harmless from and
against liability in connection therewith. Notwithstanding any contrary
provision of this Agreement, any obligation of an Obligor under this
Agreement to indemnify Lender for any expense or liability incurred by
Lender (i) shall survive the payment in full of the Obligations and the
termination of this Agreement; and (ii) shall not extend to or include any
such expense or liability incurred by Lender as a direct result of its
gross negligence or wilful misconduct.
8.3. MODIFICATION OF AGREEMENT; SALE OF INTEREST. This Agreement may
not be modified, altered or amended, except by an agreement in writing
signed by each Obligor and Lender. An Obligor may not sell, assign or
transfer any interest in this Agreement or any of the other Loan Documents,
or any portion thereof, including such Obligor's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. Lender shall have
the right to sell, assign, transfer or otherwise dispose of its right,
title, interests. remedies, powers and duties hereunder and under any other
Loan Documents, or to sell participation interests therein, at any time or
from time to time, without first giving notice to, or obtaining the prior
written consent of, Obligor, so long as (i) Lender retains at least a
majority in interest in the rights, titles, interests, remedies, power and
duties so conveyed, (ii) the Participating Lender is a Permitted Assignee
(as hereinafter defined) and (iii) upon receiving such sale, assignment or
participation, the Participating Lender becomes subject to the same terms,
covenants and conditions as to which Lender is then subject hereunder, to
the extent of sale, assignment or participation. As used herein, the term
"ELIGIBLE ASSIGNEE" shall mean: (i) North Carolina Bank, Depository Bank
or any other affiliate of Lender; (ii) any national bank or state-chartered
bank domiciled in the United States of America, or any affiliate thereof,
having total assets of at least $1,000,000,000; or (iii) any other
Person(s) to which an Obligor shall have consented in writing at any time.
In the event of any such participation, sale, assignment, transfer or other
disposition, Lender is authorized to provide to each Participating Lender,
assignee or transferee all information in Lender's possession regarding
each Obligor and the Collateral. In the case of any such assignment, the
Person receiving such assignment, shall have, to the extent of such
assignment, the same rights, benefits and obligations as it would if it
were an original Lender hereunder, and Lender shall be relieved of its
obligations hereunder with respect to its assigned portion thereof. Each
Obligor hereby acknowledges and agrees that any such assignment will give
rise to a direct obligation of such Obligor to the Person receiving such
assignment and that such Person, upon such assignment becoming effective,
shall be considered to be a "Lender" or the "Lender" for all purposes of
this Agreement and the Loan Documents.
8.4. REIMBURSEMENT OF EXPENSES. If, at any time or times prior or
subsequent to the date hereof, regardless of whether or not an Event of
Default then exists or any of the transactions contemplated hereunder are
concluded, Lender employs counsel for advice or other representation, or
incurs legal expenses or other costs or out-of-pocket expenses in
connection with: (A) the negotiation and preparation of this Agreement or
any of the other Loan Documents or any amendment of or modification of this
Agreement or any of the other Loan Documents; (B) the administration of
this Agreement or any of the other Loan Documents and the transactions
contemplated hereby and thereby; (C) periodic audits and appraisals
performed by Lender; (D) any litigation, contest, dispute, suit, proceeding
or action (whether instituted by Lender, Obligor or any other Person) in
any way relating to the Collateral, this Agreement or any of the other Loan
Documents or any Obligor's affairs; (E) any attempt to enforce any rights
or remedies of Lender or any Participating Lender against any Obligor, any
Guarantor or any other Person which may be obligated to Lender by virtue of
this Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (F) any attempt to inspect, verify,
protect, preserve, restore, collect, sell, liquidate or otherwise dispose
of or realize upon the Collateral; then, in any such event, the attorneys'
fees arising from such services and all expenses, costs, charges and other
fees of such counsel or of Lender or relating to any of the events or
actions described in this Section are to be payable, on demand, by such
Obligor to Lender or to such Participating Lender, as the case may be and
are to be additional obligations hereunder secured by the Collateral.
Without limiting the generality of the foregoing, such expenses, costs,
charges and fees may include accountants' fees, costs and expenses; costs
and expenses incurred by Lender's loan administration staff, audit staff
and appraisal staff; court reporter fees, costs and expenses; photocopying
and duplicating expenses; court reporter fees, costs and expenses; long
distance telephone charges; air express charges; telegram charges;
secretarial over-time charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such legal services.
Each Obligor acknowledges and agrees that legal counsel to Lender does not
represent any Obligor as Obligor's attorney, that each Obligor has retained
counsel of its own choice and has not and will not rely upon any advice
from Lender's counsel and that each Obligor's reimbursement of expenses
pursuant to this Agreement (even if effected by payment directly by such
Obligor to Lender's counsel) shall not be deemed to establish an
attorney-client relationship between Obligor and Lender's counsel.
8.5. INDULGENCES NOT WAIVERS. Lender's failure, at any time or times
hereafter, to require strict performance by an Obligor of any provision of
this Agreement or any Loan Document is not to waive, affect or diminish any
right of Lender thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by Lender of an Event of Default under
this Agreement or any of the other Loan Documents is not to suspend, waive
or affect any other Event of Default under this Agreement or any of the
other Loan Documents, whether the same is prior or subsequent thereto and
whether of the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of any Obligor
contained in this Agreement or any of the other Loan Documents and no Event
of Default under this Agreement or any of the other Loan Documents are to
be deemed to have been suspended or waived by Lender, unless such
suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of
Lender and directed to Obligors. Lender may, by written notice to
Obligors, at any time and from time to time, waive any Default or any Event
of Default and its consequences, but any such waivers are to be for such
period and subject to such conditions as are to be specified in any such
notice. In the case of any such waiver, each such Obligor and Lender are
to be restored to their former positions and rights hereunder and under the
other Loan Documents and any Default or Event of Default so waived is to be
deemed to be cured and not continuing during the period specified in such
written notice. No such waiver is to extend to any subsequent or other
Default or Event of Default or impair any right or remedy consequent
thereon.
8.6. SEVERABILITY. Wherever possible, each provision of this
Agreement is to be interpreted in such manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement is to be
prohibited by or invalid under Applicable Law, such provision is to be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
8.7. SUCCESSORS AND ASSIGNS. This Agreement, the Other Agreements and
the Security Documents are to be binding upon and inure to the benefit of
the successors and assigns of Obligor and Lender. This provision, however,
is not to be deemed to permit Obligor to sell, assign or transfer this
Agreement or any of the other Loan Documents.
8.8. CUMULATIVE EFFECT. The provisions of the Other Agreements and
the Security Documents are cumulative with the provisions of this
Agreement.
8.9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered are to be deemed
to be an original and all of which counterparts taken together are to
constitute but one and the same instrument. In proving this Agreement in
any judicial proceeding, it is not to be necessary to produce or account
for more than one such counterpart signed by the party against whom such
enforcement is sought.
8.10. NOTICES. Unless otherwise specifically provided herein, any
notice or other communication required or permitted to be given shall be in
writing addressed to the respective party as set forth below and may be
personally served, telecopied, telexed or sent by overnight courier service
or United States mail and shall be deemed to have been given: (a) if
delivered in person, when delivered; (b) if delivered by telecopy or telex,
on the date of transmission if transmitted before 4:00 p.m. (Charlotte
time) on a Business Day or, if not, on the next succeeding Business Day;
(c) if delivered by overnight courier, two (2) Business Days after delivery
to such courier properly addressed; or (d) if by U.S. Mail, five (5)
Business Days after depositing in the United States mail, by certified
mail, return receipt requested, with postage prepaid and properly
addressed. Notices shall be addressed care of the addresses of each
Obligor and Lender set forth below or to such other address as the party
addressed shall have previously designated by written notice to the serving
party, given in accordance with this Section. A notice not given as
provided above shall, if it is in writing, be deemed given if and when
actually received by the party to whom given. Any notice given to Parent
by Lender shall be deemed to be notice given to each other Obligor
simultaneously.
8.11. LENDER'S CONSENT. Whenever Lender's consent is required to
be obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or
event, Lender is authorized to give or withhold such consent in its sole
and absolute discretion and to condition its consent upon the giving of
additional collateral security for the Obligations, the payment of money or
any other manner.
8.12. TIME OF ESSENCE. Time is of the essence in this Agreement,
the Other Agreements and the Security Documents.
8.13. ENTIRE AGREEMENT. This Agreement and the other Loan
Documents, together with all other instruments, agreements and
certificates executed by the parties in connection therewith or with
reference thereto, embody the entire understanding and agreement between
the parties hereto and thereto with respect to the subject matter hereof
and thereof and supersede all prior agreements, understandings and
inducements, whether express or implied, oral or written. Without
limitation of the foregoing, this Agreement constitutes an amendment and
restatement in its entirety of, but not a novation of, the Titan Loan
Agreement. Notwithstanding the foregoing, however, nothing contained
herein is intended to abrogate, or alter, any "Loan Documents" (as that
term is defined in the Titan Loan Agreement) heretofore executed and/or
delivered pursuant to the Titan Loan Agreement, all of which shall be and
remain in full force and effect except only as otherwise expressly amended,
restated, superseded or replaced by one or more of the Loan Documents
executed and/or delivered in connection herewith.
8.14. INTERPRETATION. No provision of this Agreement or any of
the other Loan Documents is to be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or
judicial authority by reason of such party having or being deemed to have
structured or dictated such provision.
8.15. MARSHALLING; PAYMENTS SET ASIDE. Lender shall be under no
obligation to marshall any assets or securities in favor of any Obligor or
Guarantor or any other Person or against or in payment of any or all of the
obligations. To the extent that any Obligor makes a payment or payments to
Lender, or Lender enforces its security interest or exercises its rights or
setoff, and such payment or payments for the proceeds of such enforcement
or setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then to the extent of such
recovery, the Obligations or part thereof originally intended to be
satisfied, and all Liens, rights and remedies therefor, are to be revived
and continued in full force and effect as if such payment had not been made
or such enforcement or setoff had not occurred.
8.16. CONSTRUCTION. Lender and each Obligor acknowledge that each
of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by Lender and Obligor.
8.17. GOVERNING LAW. THIS AGREEMENT AND, UNLESS OTHERWISE
EXPRESSLY PROVIDED THEREIN, ALL OTHER LOAN DOCUMENTS, SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF GEORGIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
8.18. WAIVER OF JURY TRIAL. IF AND TO THE EXTENT THEN PERMITTED
BY APPLICABLE LAW AT THE TIME OF THE COMMENCEMENT THEREOF, EACH OBLIGOR AND
LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE
LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
OF THIS LOAN TRANSACTION AND THE RELATIONSHIP THAT IS BEING ESTABLISHED
HEREUNDER. BORROWER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF LENDER. THE SCOPE OF
THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH
OBLIGOR AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY
ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OBLIGOR AND LENDER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS OR ANY LETTERS OF
CREDIT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
8.19. ARBITRATION AND PRESERVATION OF REMEDIES. WITHOUT IN ANY
WAY LIMITING ANY PROVISIONS OF THE FOREGOING SECTION 8.17, UPON DEMAND OF
ANY PARTY HERETO, WHETHER MADE BEFORE OR AFTER INSTITUTION OF ANY JUDICIAL
ACTION, ANY DISPUTE, CLAIM OR CONTROVERSY ("DISPUTES") ARISING OUT OF OR
CONNECTED WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS SHALL BE RESOLVED
BY BINDING ARBITRATION AS PROVIDED HEREIN. DISPUTES MAY INCLUDE, WITHOUT
LIMITATION, TORT CLAIMS, COUNTERCLAIMS, CLAIMS BROUGHT AS CLASS ACTIONS,
AND CLAIMS ARISING FROM LOAN DOCUMENTS EXECUTED IN THE FUTURE. ARBITRATION
SHALL BE CONDUCTED UNDER THE COMMERCIAL FINANCIAL DISPUTES ARBITRATION
RULES (THE "ARBITRATION RULES") OF THE AMERICAN ARBITRATION ASSOCIATION AND
TITLE 9 OF THE U.S. CODE. ALL ARBITRATION HEARINGS SHALL BE CONDUCTED IN
ATLANTA, GEORGIA OR ANY PLACE AGREED TO IN WRITING BY THE PARTIES. THE
EXPEDITED PROCEDURES SET FORTH IN RULE 51 ET SEQ. OF THE ARBITRATION RULES
SHALL BE APPLICABLE TO CLAIMS OF LESS THAN ONE MILLION DOLLARS
($1,000,000). ALL APPLICABLE STATUTES OF LIMITATION SHALL APPLY TO ANY
DISPUTE. A JUDGMENT UPON THE AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. THE PANEL FROM WHICH ALL ARBITRATORS ARE SELECTED SHALL BE
COMPRISED OF LICENSED ATTORNEYS. THE SINGLE ARBITRATOR SELECTED FOR
EXPEDITED PROCEDURE SHALL BE A RETIRED JUDGE FROM THE HIGHEST COURT OF
GENERAL JURISDICTION, STATE OR FEDERAL, OF THE STATE WHERE THE HEARING WILL
BE CONDUCTED. THE ARBITRATORS SHALL BE APPOINTED AS PROVIDED IN THE
ARBITRATION RULES. NOTWITHSTANDING THE PRECEDING BINDING ARBITRATION
PROVISION, EACH PARTY HERETO HEREBY PRESERVES CERTAIN REMEDIES THAT ANY
PARTY HERETO MAY EXERCISE FREELY, EITHER ALONE OR DURING A DISPUTE. ANY
PARTY HERETO SHALL HAVE THE RIGHT TO PROCEED IN ANY COURT OF PROPER
JURISDICTION OR BY SELF HELP TO EXERCISE OR PROSECUTE THE FOLLOWING
REMEDIES, AS APPLICABLE: (I) ALL RIGHTS TO FORECLOSE AGAINST ANY REAL OR
PERSONAL PROPERTY OR OTHER SECURITY BY EXERCISING A POWER OF SALE GRANTED
IN THE LOAN DOCUMENTS OR UNDER APPLICABLE LAW, (II) ALL RIGHTS OF SELF HELP
INCLUDING PEACEFUL OCCUPATION OF REAL PROPERTY AND COLLECTION OF RENTS,
SET-OFF, AND PEACEFUL POSSESSION OF PERSONAL PROPERTY, AND (III) OBTAINING
PROVISIONAL OR ANCILLARY REMEDIES INCLUDING INJUNCTIVE RELIEF,
SEQUESTRATION, GARNISHMENT, ATTACHMENT AND APPOINTMENT OF RECEIVER.
PRESERVATION OF THESE REMEDIES DOES NOT LIMIT THE POWER OF AN ARBITRATOR TO
GRANT SIMILAR REMEDIES THAT MAY BE REQUESTED BY A PARTY IN A DISPUTE. EACH
PARTY HERETO AGREES THAT IT SHALL NOT HAVE A REMEDY OF PUNITIVE OR
EXEMPLARY DAMAGES AGAINST THE OTHER IN ANY DISPUTE AND HEREBY WAIVES ANY
RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE NOW OR WHICH
MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY DISPUTE, WHETHER THE DISPUTE
IS RESOLVED BY ARBITRATION OR JUDICIALLY. NOTWITHSTANDING THE FOREGOING,
THIS ARBITRATION PROVISION DOES NOT APPLY TO DISPUTES UNDER OR RELATED TO
INTEREST RATE AGREEMENTS.
8.20. PUBLICITY. Each Obligor authorizes Lender to publicize and
place "tombstone" advertisements with respect to the financing arrangements
set forth in this Agreement and the transactions contemplated hereby,
PROVIDED that, to the extent that an Obligor's identity or that of any
customer of an Obligor is being disclosed therein, Lender first shall have
reviewed such advertisements with such Obligor and obtained its prior
written consent thereto.
8.21. EFFECTIVENESS. This Agreement and each Loan Document shall
become effective upon the execution of a counterpart hereof and thereof by
each of the parties hereto, and the delivery thereof to Lender in Atlanta,
Georgia.
8.22. SOLE BENEFIT. The rights and benefits set forth in this
Agreement and in all the other Loan Documents are for the sole and
exclusive benefit of the parties hereto and thereto, and may be relied upon
only by such parties.
8.23. CERTAIN WAIVERS BY OBLIGORS. To the fullest extent
permitted by Applicable Law, each Obligor waives (i) presentment, demand
and protest and notice of presentment, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or
all commercial paper, accounts, contract rights, documents, instruments,
chattel paper and guaranties at any time held by Lender on which an Obligor
may in any way be liable and hereby ratifies and confirms whatever Lender
may do in this regard (ii) notice prior to Lender's taking possession or
control of any of the Collateral or any bond or security which might be
required by any court prior to allowing Lender to exercise any of Lender's
remedies, including the issuance of an immediate writ of possession;
(iii) the benefit of all valuation, appraisement and exemption laws;
(iv) any right any Obligor may have upon payment in full of the obligations
to require Lender to terminate its security interest in the Collateral or
in any other Property of any Obligor until the execution by such Obligor,
and by any Person whose loans to Obligor are used in whole or in part to
satisfy the Obligations, of an agreement indemnifying Lender from any loss
or damage which Lender may incur as the result of dishonored checks or
other items of payment received by Lender from Obligor or any Account
Debtor and applied to the Obligations; and (v) notice of Lender's
acceptance hereof.
8.24. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be
given in any jurisdiction independent effect so that if a particular action
or condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of a
Default or an Event of Default if such action is taken or condition exists.
8.25. SEVERABILITY. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or obligation
under this Agreement, the Revolver Notes or other Loan Documents shall not
affect or impair the validity, legality or enforceability of the remaining
provisions or obligations under this Agreement, the Revolver Notes or other
Loan Documents or of such provision or obligation in any other
jurisdiction.
8.26. HEADINGS. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
8.27. NO FIDUCIARY RELATIONSHIP. No provision in this Agreement
or in any of the other Loan Documents and no course of dealing between the
parties shall be deemed to create any fiduciary duty on the part of Lender
to any Obligor.
8.28. LIMITATION OF LENDER'S LIABILITY. Neither Lender nor any
Affiliate, officer, director, employee, attorney, or agent of Lender shall
have any liability with respect to, and Obligor hereby waives, releases,
and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, or consequential damages suffered or incurred by any
Obligor in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents.
8.29. NO DUTY. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Lender shall have the
right to act exclusively in the interest of Lender and shall have no duty
of disclosure, duty of loyalty, duty of care, or other duty or obligation
of any type or nature whatsoever to any Obligor or any of such Obligor's
shareholders or to any other Person.
8.30. MAXIMUM INTEREST. Regardless of any provision contained in
this Agreement or any of the other Loan Documents, the aggregate of all
amounts that are contracted for, charged or collected pursuant to the terms
of this Agreement or any of the other Loan Documents and that are deemed
interest are not to exceed the Maximum Rate under Applicable Law. No
agreement, condition, provision or stipulation contained in this Agreement
or any of the other Loan Documents or the exercise by Lender of any right
or option whatsoever contained therein, or the prepayment by any Obligor of
any of the Obligations, or the occurrence of any contingency whatsoever, is
to entitle Lender to charge or receive or to obligate any Obligor to pay,
interest or any charges, amounts, premiums or fees deemed interest by
Applicable Law (referred to herein collectively as "INTEREST") in excess of
the Maximum Rate. Each Obligor acknowledges and stipulates that any
Interest charged or received in excess of the Maximum Rate ("EXCESS") is to
be the result of an accident and bona fide error and that, with
fluctuations in the rates of interest set forth in this Agreement and the
Maximum Rate, such an unintentional result could inadvertently occur. To
the extent received, any Excess shall be applied first to reduce the
principal Obligations and the balance, if any, returned to such Obligor, it
being the intent of the parties hereto not to enter into a usurious or
otherwise illegal relationship. The right to accelerate the maturity of
any of the Obligations does not include the right to accelerate any
interest that has not otherwise accrued on the date of such acceleration,
and Lender does not intend to collect any unearned interest in the event of
any such acceleration. The credit or return of any Excess shall constitute
the acceptance by each Obligor of such Excess, and Obligor is to seek or
pursue any other remedy, legal or equitable, against Lender, based in whole
or in part upon contracting for, charging or receiving any Interest in
excess of the Maximum Rate. For purposes of determining whether or not any
Excess has been contracted for, charged or received by Lender, all interest
at any time contracted for, charged or received from an Obligor in
connection with any of the Loan Documents, to the extent permitted by
Applicable Law, is to be amortized, prorated, allocated and spread in equal
parts throughout the full term of the Obligations. Each Obligor and
Lender, to the maximum extent permitted under Applicable Law, will (i)
characterize any non-principal payment as an expense, fee or premium rather
than as Interest and (ii) exclude voluntary prepayments and the effects
thereof. The provisions of this Section are to be deemed to be
incorporated into every Loan Document, whether or not any provision of this
Section is specifically referred to therein.
8.31. NATURE OF OBLIGOR'S LIABILITY. The liability of each
Obligor hereunder and under each other Loan Document to which it is party
shall, unless otherwise expressly provided therein or limited thereby, be
joint and several with each other Obligor party thereto. Without
limitation of the foregoing, in the case of Parent, by virtue of the
foregoing and its Guaranty, the Obligations shall constitute "Senior
Indebtedness" (as that term is used in all existing Subordinated Debt of
Parent) of Parent.
8.32. PARENT AS AGENT. Each Borrower hereby nominates and
appoints Parent, irrevocably for the term of this Agreement, to act as its
agent, attorney-in-fact and legal representative in all matters pertaining
to this Agreement and the other Loan Documents. Without limitation of the
foregoing, each Borrower authorizes and directs Parent, on behalf of such
Borrower, to execute and/or deliver to Lender any certificates, instruments
and other Loan Documents executed and/or required to be delivered to Lender
pursuant hereto.
SECTION 9. CONDITIONS PRECEDENT
The obligations of Lender to make Loans are subject to satisfaction of
all of the applicable conditions precedent set forth below.
9.1. CONDITIONS TO INITIAL LOANS. The obligations of Lender to make
the initial Loan is in addition to the conditions precedent specified in
Section 9.2, subject to the prior or concurrent satisfaction of the
conditions set forth below.
(1) FINANCIAL STATEMENTS. Parent shall have delivered to Lender
(i) its interim Financial Statements for the Fiscal Quarter ended March 31,
1997, (ii) its 10-Q report for the Fiscal Quarter ended March 31, 1997 and
(iii) its Projections, on a month-to-month basis, for its current Fiscal
Year, and Lender shall be satisfied in all respects therewith.
(2) EVIDENCE OF PERFECTION AND PRIORITY OF LIENS. Lender shall
have received copies of all filing receipts or acknowledgments issued by
any Governmental Authority to evidence any filing or recordation necessary
to perfect the Liens of Lender in the Collateral and evidence in form
satisfactory to Lender that such Liens constitute valid and perfected first
priority security interests and Liens, and that there are no other Liens
upon any Collateral, except for Permitted Liens.
(3) NO LABOR DISPUTES. Lender shall have received assurances
satisfactory to it that there are no threats of strikes or work stoppages
by any employees, or organization of employees, of Borrower.
(4) COMPLIANCE WITH LAWS AND OTHER AGREEMENTS. Lender shall
have determined or received assurances satisfactory to it that none of the
Loan Documents or any of the transactions contemplated thereby violate any
Applicable Law or agreement binding upon any Obligor.
(5) NO MATERIAL ADVERSE CHANGE. No material adverse change in
the financial condition of any Obligor or the quality or value of any
Collateral shall have occurred since the date of the last audited financial
statement of Obligors described in the Financial and Contingency Schedule.
(6) LOAN DOCUMENTS. On or before the Closing Date, Obligors
shall have delivered, or caused to have been delivered, to Lender the
documents listed on the Closing Documents Schedule, each, unless otherwise
noted, dated the Closing Date, duly executed, in form and substance
satisfactory to Lender and in quantities designated by Lender.
(7) LEWIS ACQUISITION. Prior to closing, Lender shall have
received, reviewed and approved the terms of the Lewis Acquisition
Agreement, including all disclosure schedules attached thereto or required
to be delivered thereby, together with a copy of the audited financial
statements of Lewis for its fiscal year ended January 31, 1997. At
closing, Lender shall have received evidence satisfactory to it that: (i)
the Lewis Acquisition has been consummated substantially in accordance with
the terms of the Lewis Acquisition Agreement, as received, reviewed and
approved by Lender; (ii) not less than Two Million Dollars ($2,000,000), in
cash equity, has been contributed by Parent to finance the Lewis
Acquisition; (iii) not less than Two Million Two Hundred Fifty Thousand
Dollars ($2,250,000) in Subordinated Debt shall have been issued by Parent
to the shareholders of Lewis to finance the Lewis Acquisition; and (iv) not
less than One Million Dollars ($1,000,000) of the obligations due
Michael S. Burnham, Jr. in connection with the Lewis Acquisition shall have
been satisfied by the issuance of capital stock of Parent.
(8) ORIGINATION FEE. Lender shall have received from Parent a
loan origination fee of One Hundred Thousand Dollars ($100,000), less any
portion thereof theretofore paid by Parent to Lender to induce Lender to
issue its financing commitment hereunder.
9.2. CONDITIONS TO ALL LOANS. The obligations of Lender to make any
Loan on each Funding Date are subject to the further conditions precedent
set forth below.
(1) NOTICE OF BORROWING. Lender shall have received, in
accordance with the provisions of subsection 2.1, a Notice of Borrowing.
(2) REPRESENTATIONS STILL TRUE. The representations and
warranties contained herein and in the Loan Documents shall be true,
correct and complete in all material respects on and as of the funding date
to the same extent as though made on and as of the Closing Date, except for
any representation or warranty limited by its terms to a specific date and
taking into account any updates to the Schedules or Exhibits and any events
which would cause any such representations and warranties no longer to be
true, correct or complete, in each case as disclosed in writing by an
Obligor to Lender after the Closing Date, and, if not consistent with the
covenants corresponding thereto, approved by Lender.
(3) NO SUSPENSION OR TERMINATION OF COMMITMENTS. The
commitment(s) of Lender shall not have been suspended or terminated
pursuant to the operation of Section 7.2.
(4) NO RESTRAINING ORDER. Lender shall not have received notice
or knowledge of any pending or threatened order, judgment or decree of any
court, arbitrator or Governmental Authority which purports to enjoin or
restrain Lender from making any Loans.
(5) TAXES. Each Obligor shall have paid, or reimbursed Lender
for the payment of, any intangible, recording or similar tax imposed by any
Governmental Authority in respect of the incurrence of such indebtedness or
the securing of the payment thereof, and joined with Lender in filing any
tax return, UCC financing statement amendment or like document in respect
of such tax.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the Closing Date.
"PARENT"
SETECH, INC.
By:________________________________
Thomas N. Eisenman, President and
Chief Executive Officer
Attest:______________________________
Cindy L. Rollins, Secretary and
Chief Financial Officer
Address: 905 Industrial Drive
Murfreesboro, TN 37129
Telecopier: 615/890-2914
"BORROWERS"
LEWIS SUPPLY COMPANY, INC.
By:________________________________
Michael S. Burnham, Jr., President
Attest:______________________________
Cindy L. Rollins, Secretary
Address: 477 South Main Street
Memphis, TN 38104
Telecopier: 901/525-6156
SOUTHEASTERN TECHNOLOGY, INC.
By:________________________________
Thomas N. Eisenman, Chief Executive
Officer
Attest:______________________________
Cindy L. Rollins, Secretary
Address: 905 Industrial Drive
Murfreesboro, TN 37129
Telecopier: 615/890-2914
TITAN SERVICES, INC.
By:________________________________
Thomas N. Eisenman, Chief Executive
Officer
Attest:_____________________________
Cindy L. Rollins, Secretary
Address: 815 USA Today Way
Murfreesboro, TN 37129
Telecopier: 615/890-2914
"LENDER"
FIRST UNION COMMERCIAL
CORPORATION
By:________________________________
Name:__________________________
Title:___________________________
Address: 301 South College Street, DC-5
Charlotte, NC 28288
Telecopier: (704) 374-2703
<PAGE>
EXHIBIT 4.2
GUARANTY AGREEMENT
(SETECH, INC.)
WHEREAS, the undersigned, SETECH, INC., a Delaware corporation, has
requested that FIRST UNION COMMERCIAL CORPORATION, a North Carolina
corporation (herein called "LENDER") extend credit or make certain
financial accommodations to its subsidiaries, namely, LEWIS SUPPLY COMPANY,
INC., a Delaware corporation, SOUTHEASTERN TECHNOLOGY, INC., a Tennessee
corporation and TITAN SERVICES, INC., a Tennessee corporation (herein
individually and collectively called "BORROWER"), and the Lender has agreed
to extend such credit or make such financial accommodations and/or may in
the future extend such credit or make such financial accommodations to the
Borrower by reason of such request and in reliance upon this guaranty;
NOW, THEREFORE, in consideration of such credit being extended and/or
to be extended or such financial accommodations made or to be made by the
Lender to the Borrower (whether to the same, greater or lesser extent than
any limit, if applicable, of this guaranty), the sum of $5.00 and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned hereby unconditionally guarantees to
the Lender, and its successors, endorsees, transferees and assigns the
punctual payment when due, whether by acceleration or otherwise, and at all
times thereafter of (a) all debts, liabilities and obligations whatsoever
of the Borrower to the Lender, now existing or hereafter coming into
existence, arising under or pursuant to that certain Loan and Security
Agreement, dated as of June ___, 1997, among the undersigned, the Borrower
and the Lender, as it may be amended or modified from time to time (the
"LOAN AGREEMENT"); (b) accrued but unpaid interest on such debts,
liabilities and obligations, whether accruing before or after any
maturity(ies) thereof; and (c) all attorneys' fees and costs of collection
if any such debts, liabilities or obligations of the Borrower are
collected, or the liability of the undersigned hereunder enforced, by or
through any attorney at law (all of (a), (b) and (c) being hereinafter
referred to as the "Obligations"). Without limitation of the foregoing,
the term "Obligations," as used herein, shall extend to and include all
"Obligations" of the Borrower to the Lender (as that term is defined in
the Loan Agreement).
The undersigned consents that, at any time, and from time to time,
either with or without consideration, the whole or any part of any security
now or hereafter held for any Obligations may be substituted, exchanged,
compromised, impaired, released, or surrendered with or without
consideration; the time or place of payment of any Obligations or of any
security thereof may be changed or extended, in whole or in part; the
Borrower may be granted indulgences generally; any of the provisions of any
note or other instrument evidencing any Obligations or any security
therefor may be modified or waived; any party liable for the payment
thereof (including but not being limited to any co-guarantor) may be
granted indulgences or released; neither the death, termination of
existence, bankruptcy, incapacity, lack of authority nor disability of the
Borrower or any one or more of the guarantors, including any of the
undersigned, shall affect the continuing obligation of any other guarantor,
including any of the undersigned, and that no claim need be asserted
against the personal representative, guardian, custodian, trustee or debtor
in bankruptcy or receiver of any deceased, incompetent, bankrupt or
insolvent guarantor; any deposit balance to the credit of the Borrower or
any other party liable for the payment of the Obligations or liable upon
any security therefor may be released, in whole or in part, at, before
and/or after the stated, extended or accelerated maturity of any
Obligations; and the Lender may release, discharge, compromise or enter
into any accord and satisfaction with respect to any collateral for the
Obligations, or the liability of the Borrower or any of the undersigned, or
any liability of any other person primarily or secondarily liable on any of
the Obligations, all without notice to or further assent by the
undersigned, who shall remain bound hereon, notwithstanding any such
exchange, compromise, surrender, extension, renewal, acceleration,
modification, indulgence, release, discharge or accord and satisfaction.
The undersigned expressly waives: (a) notice of acceptance of this
guaranty and of all extensions or renewals of credit or other financial
accommodations to the Borrower; (b) presentment and demand for payment of
any of the Obligations; (c) protest and notice of dishonor or of default to
the undersigned or to any other party with respect to any of the
Obligations or with respect to any security therefor; (d) any invalidity or
disability in whole or in part at the time of the acceptance of, or at any
time with respect to, any security for the Obligations or with respect to
any party primarily or secondarily liable for the payment of Obligations to
the Lender; (e) the fact that any security for the Obligations may at any
time or from time to time be in default or be inaccurately estimated or may
deteriorate in value for any cause whatsoever; (f) any diligence in the
creation or perfection of a security interest or collection or protection
of or realization upon the Obligations or any security therefor, any
liability hereunder, or any party primarily or secondarily liable for the
Obligations or any lack of commercial reasonableness in dealing with any
security for the Obligations; (g) any duty or obligation on the part of the
Lender to ascertain the extent or nature of any security for the
Obligations, or any insurance or other rights respecting such security, or
the liability of any party primarily or secondarily liable for the
Obligations, or to take any steps or actions to safeguard, protect, handle,
obtain or convey information respecting, or otherwise follow in any manner,
any such security, insurance or other rights; (h) any duty or obligation on
the part of Lender, whether arising pursuant to Official Code of Georgia
Section 10-7-24 or any similar or subsequent law, to proceed to collect the
Obligations from, or to commence an action against, the Borrower, any other
guarantor, or any other person, or to resort to any security or to any
balance of any deposit account or credit on the books of the Lender in
favor of the Borrower or any other person, despite any notice or request of
the undersigned to do so; (i) to the extent not prohibited by law, the
right to assert any of the benefits under any statute providing appraisal
or other rights which may reduce or prohibit any deficiency judgments in
any foreclosure or other action; (j) all other notices to which the
undersigned might otherwise be entitled; and (k) demand for payment under
this guaranty.
This is a guaranty of payment and not of collection. The liability of
the undersigned on this guaranty shall be continuing, direct and immediate
and not conditional or contingent upon either the pursuit of any remedies
against the Borrower or any other person or foreclosure of any security
interests or liens available to the Lender, its successors, endorsees or
assigns. The Lender may accept any payment(s), plan for adjustment of
debts, plan or reorganization or liquidation, or plan of composition or
extension proposed by, or on behalf of, the Borrower or any other guarantor
without in any way affecting or discharging the liability of the
undersigned hereunder. If the Obligations are partially paid, the
undersigned shall remain liable for any balance of such Obligations. This
guaranty shall be revived and reinstated in the event any payment received
by Lender on any Obligation is required to be repaid or rescinded under
present or future federal or state law or regulation relating to
bankruptcy, insolvency or other relief of debtors.
The undersigned agrees to furnish (or cause to be furnished) to the
Lender all those reports concerning the financial condition or performance
of the undersigned set forth in Section 5.1(H) of the Loan Agreement in
respect of the undersigned as and when required to be delivered pursuant to
the terms thereof.
The undersigned expressly represents and acknowledges that loans and
other financial accommodations by the Lender to the Borrower are and will
be to the direct interest and advantage of the undersigned as a shareholder
of Borrower.
The Lender may, without notice of any kind, sell, assign or transfer
all or any of the Obligations, and in such event each and every immediate
and successive assignee, transferee, or holder of all or any of the
Obligations shall have the right to enforce this guaranty, by suit or
otherwise, for the benefit of such assignee, transferee or holder, as fully
as if such assignee, transferee or holder were herein by name specifically
given such rights, powers and benefits, but the Lender shall have an
unimpaired right, prior and superior to that of any such assignee,
transferee or holder, to enforce this guaranty for the benefit of the
Lender, as to so much of the Obligations as it has not sold, assigned or
transferred. Notwithstanding the foregoing, however, unless and until the
undersigned receives written notice from the Lender of any such sale,
assignment or transfer, any payments of the Obligations made by the
undersigned to Lender shall discharge, dollar-for-dollar, the undersigned's
liability hereunder.
No delay or failure on the part of the Lender in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Lender of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy.
For purposes of this guaranty, the Obligations shall include all
debts, liabilities and obligations of the Borrower to the Lender,
notwithstanding any right or power of the Borrower or anyone else to asset
any claim or defense as to the invalidity or unenforceability thereof, and
no such claim or defense shall impair or affect the obligations and
liabilities of the undersigned hereunder. Without limiting the generality
of the foregoing, if the Borrower is a corporation, partnership, joint
venture, trust or other form of business organization, this guaranty covers
all Obligations purporting to be made in behalf of such organization by any
officer or agent of the same, without regard to the actual authority of
such officer or agent. The term "corporation" shall include associations
of all kinds and all purported corporations, whether or not correctly and
legally chartered and organized.
To induce Lender to accept this guaranty, the undersigned warrants and
represents to Lender that: (i) the undersigned is a corporation duly
organized, validly existing and in good standing under the laws of the
state of its incorporation; (ii) the undersigned has the right and power
and is duly authorized and empowered to enter into, execute, deliver and
perform this guaranty; (iii) the execution, delivery and performance of
this guaranty have been duly authorized by all necessary corporate action
on the part of the undersigned and does not and will not (A) require any
consent or approval of the shareholders of the undersigned, (B) contravene
the Certificate of Incorporation or bylaws of the undersigned, (C) violate,
or cause the undersigned to be in default under, any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, determination
or award in effect having applicability to the undersigned, (D) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the
undersigned is a party or by which it or its properties may be bound or
affected, or (E) result in, or require, the creation or imposition of any
lien upon or with respect to any of the properties now owned or hereafter
acquired by the undersigned; (iv) the execution, delivery and performance
by the undersigned of this guaranty, and the consummation of the
transactions contemplated herein, do not and will not require any
registration with, consent or approval of, or notice to, or other action
to, with or by, any governmental authority except for any filings required
by federal or state securities laws (which filings, if required, have been
made); and (v) this guaranty is a legal, valid and binding obligation of
the undersigned enforceable against it in accordance with its terms, except
to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally or by principles of equity pertaining to the availability of
equitable remedies.
To secure the payment and performance of its obligations hereunder, the
undersigned has entered into a Pledge Agreement, dated of even date
herewith, in favor of Lender, pursuant to which the undersigned has pledged
to Lender all of the capital stock of Borrower owned by the undersigned.
Any amount received by the Lender from whatever source and applied by
it toward the payment of the Obligations shall be applied in such order of
application as the Lender may from time to time elect.
This guaranty shall bind and inure to the benefit of the Lender, its
successors and assigns, and likewise shall bind and inure to the benefit of
the undersigned, their heirs, executors, administrators, successors and
assigns. If more than one person shall execute this guaranty or a similar,
contemporaneous guaranty, the term "undersigned" shall mean, as used
herein, all parties executing this guaranty and such similar guaranties and
all such parties shall be liable, jointly and severally, one with the other
with the Borrower, for each of the undertakings, agreements, obligations,
covenants and liabilities provided for herein with respect to the
undersigned. This guaranty contains the entire agreement between Lender
and the undersigned respecting the subject matter hereof, and there is no
understanding that any other person shall execute this or a similar
guaranty. Furthermore, no course of dealing between the parties, no usage
of trade, and no parol or extrinsic evidence shall be used to supplement or
modify any terms of this guaranty; nor are there any conditions to the
complete effectiveness of this guaranty.
THIS GUARANTY SHALL BE DEEMED ACCEPTED BY LENDER IN THE STATE OF GEORGIA.
THE PARTIES AGREE THAT THIS GUARANTY SHALL BE DEEMED, MADE, DELIVERED,
PERFORMED AND ACCEPTED BY LENDER IN THE STATE OF GEORGIA AND SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF GEORGIA. WHEREVER POSSIBLE EACH
PROVISION OF THIS GUARANTY SHALL BE INTERPRETED IN SUCH MANNER AS TO BE
EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS
GUARANTY SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH PROVISION
SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY,
WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING
PROVISIONS OF THIS GUARANTY.
IF AND TO THE EXTENT THEN PERMITTED BY APPLICABLE LAW AT THE TIME OF THE
COMMENCEMENT THEREOF, THE UNDERSIGNED AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS GUARANTY, OR ANY DEALINGS BETWEEN THEM RELATING
TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE RELATIONSHIP THAT IS
BEING ESTABLISHED HEREUNDER. THE UNDERSIGNED ALSO WAIVES ANY BOND OR
SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF LENDER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. THE UNDERSIGNED AND LENDER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE
WAIVER IN THEIR RELATED FUTURE DEALINGS. THE UNDERSIGNED AND LENDER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. IN THE EVENT OF LITIGATION,
THIS GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
WITHOUT IN ANY WAY LIMITING ANY PROVISIONS OF THE FOREGOING PARAGRAPH, UPON
DEMAND OF ANY PARTY HERETO, WHETHER MADE BEFORE OR AFTER INSTITUTION OF ANY
JUDICIAL ACTION, ANY DISPUTE, CLAIM OR CONTROVERSY ("DISPUTES") ARISING OUT
OF OR CONNECTED WITH THIS GUARANTY SHALL BE RESOLVED BY BINDING ARBITRATION
AS PROVIDED HEREIN. DISPUTES MAY INCLUDE, WITHOUT LIMITATION, TORT CLAIMS,
COUNTERCLAIMS AND CLAIMS BROUGHT AS CLASS ACTIONS. ARBITRATION SHALL BE
CONDUCTED UNDER THE COMMERCIAL FINANCIAL DISPUTES ARBITRATION RULES (THE
"ARBITRATION RULES") OF THE AMERICAN ARBITRATION ASSOCIATION AND TITLE 9 OF
THE U.S. CODE. ALL ARBITRATION HEARINGS SHALL BE CONDUCTED IN ATLANTA,
GEORGIA OR ANY PLACE AGREED TO IN WRITING BY THE PARTIES. THE EXPEDITED
PROCEDURES SET FORTH IN RULE 51 ET SEQ. OF THE ARBITRATION RULES SHALL BE
APPLICABLE TO CLAIMS OF LESS THAN ONE MILLION DOLLARS ($1,000,000). ALL
APPLICABLE STATUTES OF LIMITATION SHALL APPLY TO ANY DISPUTE. A JUDGMENT
UPON THE AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE PANEL
FROM WHICH ALL ARBITRATORS ARE SELECTED SHALL BE COMPRISED OF LICENSED
ATTORNEYS. THE SINGLE ARBITRATOR SELECTED FOR EXPEDITED PROCEDURE SHALL
BE A RETIRED JUDGE FROM THE HIGHEST COURT OF GENERAL JURISDICTION, STATE OR
FEDERAL, OF THE STATE WHERE THE HEARING WILL BE CONDUCTED. THE ARBITRATORS
SHALL BE APPOINTED AS PROVIDED IN THE ARBITRATION RULES. NOTWITHSTANDING
THE PRECEDING BINDING ARBITRATION PROVISION, EACH PARTY HERETO HEREBY
PRESERVES CERTAIN REMEDIES THAT ANY PARTY HERETO MAY EXERCISE FREELY,
EITHER ALONE OR DURING A DISPUTE. ANY PARTY HERETO SHALL HAVE THE RIGHT TO
PROCEED IN ANY COURT OF PROPER JURISDICTION OR BY SELF HELP TO EXERCISE OR
PROSECUTE THE FOLLOWING REMEDIES, AS APPLICABLE: (I) ALL RIGHTS TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY OR OTHER SECURITY BY
EXERCISING A POWER OF SALE GRANTED IN ANY LOAN DOCUMENTS OR UNDER
APPLICABLE LAW, (II) ALL RIGHTS OF SELF-HELP INCLUDING PEACEFUL OCCUPATION
OF REAL PROPERTY AND COLLECTION OF RENTS, SET-OFF, AND PEACEFUL POSSESSION
OF PERSONAL PROPERTY, AND (III) OBTAINING PROVISIONAL OR ANCILLARY REMEDIES
INCLUDING INJUNCTIVE RELIEF, SEQUESTRATION, GARNISHMENT, ATTACHMENT AND
APPOINTMENT OF RECEIVER. PRESERVATION OF THESE REMEDIES DOES NOT LIMIT THE
POWER OF AN ARBITRATOR TO GRANT SIMILAR REMEDIES THAT MAY BE REQUESTED BY A
PARTY IN A DISPUTE. EACH PARTY HERETO AGREES THAT IT SHALL NOT HAVE A
REMEDY OF PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER IN ANY DISPUTE
AND HEREBY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY
MAY HAVE NOW OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY
DISPUTE, WHETHER THE DISPUTE IS RESOLVED BY ARBITRATION OR JUDICIALLY.
The undersigned hereby expressly waives, for Lender's benefit and the
benefit of the Borrower and any other guarantor, maker or endorser of the
Obligations, any and all claims or actions against the Borrower, any other
guarantor, maker or endorser of the Obligations and any and all rights of
recourse against any property or assets of the Borrower, any other
guarantor, maker or endorser of the Obligations (including, without
limitation, any security for the Obligations) arising out of or related to
any payment made by the undersigned under this guaranty, including, without
limitation, any claim of the undersigned for subrogation, reimbursement,
exoneration of or indemnity that the undersigned may have against the
Borrower, any other guarantor, maker of or endorser of the Obligations and
any benefit of, and any other right to participate in, any security of the
Obligations of or any guaranty of the Obligations now of or hereafter held
by Lender. The waiver contained in this paragraph shall continue until the
termination of this guaranty and the full payment and satisfaction of the
Obligations.
IN WITNESS WHEREOF, the undersigned has executed this guaranty as of
the _____ day of June, 1997.
"GUARANTOR"
SETECH, INC., a Delaware corporation
By:
Thomas N. Eisenman, President
and Chief Executive Officer
Attest:
Cindy L. Rollins, Secretary
and Chief Financial Officer
Address for Notices:
905 Industrial Drive
Murfreesboro, Tennessee 37129
Accepted:
FIRST UNION COMMERCIAL CORPORATION
By:____________________________________
Name:_______________________________
Title:________________________________
<PAGE>
Exhibit 4.3
REVOLVER NOTE
Atlanta, Georgia
$11,000,000 June ___, 1997
FOR VALUE RECEIVED, the undersigned ("BORROWER"), promises to pay
to the order of FIRST UNION COMMERCIAL CORPORATION, a North Carolina
corporation ("LENDER"; Lender, together with any other holder hereof,
sometimes referred to herein as the "HOLDER"), the principal sum of Eleven
Million Dollars ($11,000,000) or such lesser amount as may be outstanding
under Lender's "Revolver Facility" (as that term is defined in the "Loan
Agreement" hereinafter defined) established for Borrower's use pursuant to
the Loan Agreement, in lawful money of the United States of America, at
such time or times as are provided in the Loan Agreement with respect to
Revolver Loans, together with accrued interest on the unpaid principal
balance hereof from the date hereof until the payment in full of this Note
at the then applicable interest rate specified in the Loan Agreement with
respect to Revolver Loans, payable at the times and in the manner provided
in the Loan Agreement.
This Note is a "Revolver Note" issued to evidence the Revolver
Loan made available by Lender to Borrower pursuant to the provisions of the
Loan and Security Agreement, dated as of June ___, 1997 (herein, as at any
time amended, modified or supplemented, called the "LOAN AGREEMENT";
capitalized terms used herein and not defined herein have the meanings
assigned to them in the Loan Agreement), among SETECH, Inc., its
subsidiaries (including Borrower) and Lender, to which reference is hereby
made for a statement of the terms, conditions and covenants under which the
Loans evidenced hereby were made and are to be repaid, including, but not
limited to, those related to voluntary or mandatory prepayment of the
indebtedness represented hereby and to the maturity of the indebtedness
represented hereby upon the termination of the Loan Agreement. Payment of
this Note is secured by the Collateral and Holder is entitled to the
benefit of all of the Security Documents.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
Borrower hereby waives presentment, demand for payment, protest
and notice of protest, notice of dishonor and all other notices in
connection with this Note.
WITNESS THE DUE EXECUTION HEREOF BY AN AUTHORIZED OFFICER OF THE
UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.
LEWIS SUPPLY COMPANY, INC.
By:_________________________________
Michael S. Burnham, Jr., President
Attest:_______________________________
Cindy L. Rollins, Secretary
<PAGE>
EXHIBIT 4.4
REVOLVER NOTE
Atlanta, Georgia
$12,750,000 June ___, 1997
FOR VALUE RECEIVED, the undersigned ("BORROWER"), promises to pay
to the order of FIRST UNION COMMERCIAL CORPORATION, a North Carolina
corporation ("LENDER"; Lender, together with any other holder hereof,
sometimes referred to herein as the "HOLDER"), the principal sum of Twelve
Million Seven Hundred Fifty Thousand Dollars ($12,750,000), or such lesser
amount as may be outstanding under Lender's "Revolver Facility" (as that
term is defined in the "Loan Agreement" hereinafter defined) established
for Borrower's use pursuant to the Loan Agreement, in lawful money of the
United States of America, at such time or times as are provided in the Loan
Agreement with respect to Revolver Loans, together with accrued interest on
the unpaid principal balance hereof from the date hereof until the payment
in full of this Note at the then applicable interest rate specified in the
Loan Agreement with respect to Revolver Loans, payable at the times and in
the manner provided in the Loan Agreement.
This Note is a "Revolver Note" issued to evidence the Revolver
Loan made available by Lender to Borrower pursuant to the provisions of the
Loan and Security Agreement, dated as of June ___, 1997 (herein, as at any
time amended, modified or supplemented, called the "LOAN AGREEMENT";
capitalized terms used herein and not defined herein have the meanings
assigned to them in the Loan Agreement), among SETECH, Inc., its
subsidiaries (including Borrower) and Lender, to which reference is hereby
made for a statement of the terms, conditions and covenants under which the
Loans evidenced hereby were made and are to be repaid, including, but not
limited to, those related to voluntary or mandatory prepayment of the
indebtedness represented hereby and to the maturity of the indebtedness
represented hereby upon the termination of the Loan Agreement. Payment of
this Note is secured by the Collateral and Holder is entitled to the
benefit of all of the Security Documents.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
Borrower hereby waives presentment, demand for payment, protest
and notice of protest, notice of dishonor and all other notices in
connection with this Note.
WITNESS THE DUE EXECUTION HEREOF BY AN AUTHORIZED OFFICER OF THE
UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.
TITAN SERVICES, INC.
By:_________________________________
Thomas N. Eisenman, Chief Executive
Officer
Attest:_______________________________
Cindy L. Rollins, Secretary
<PAGE>
EXHIBIT 4.5
REVOLVER NOTE
Atlanta, Georgia
$1,250,000 June ___, 1997
FOR VALUE RECEIVED, the undersigned ("BORROWER"), promises to pay
to the order of FIRST UNION COMMERCIAL CORPORATION, a North Carolina
corporation ("LENDER"; Lender, together with any other holder hereof,
sometimes referred to herein as the "HOLDER"), the principal sum of One
Million Two Hundred Fifty Thousand Dollars ($1,250,000), or such lesser
amount as may be outstanding under Lender's "Revolver Facility" (as that
term is defined in the "Loan Agreement" hereinafter defined) established
for Borrower's use pursuant to the Loan Agreement, in lawful money of the
United States of America, at such time or times as are provided in the Loan
Agreement with respect to Revolver Loans, together with accrued interest on
the unpaid principal balance hereof from the date hereof until the payment
in full of this Note at the then applicable interest rate specified in the
Loan Agreement with respect to Revolver Loans, payable at the times and in
the manner provided in the Loan Agreement.
This Note is a "Revolver Note" issued to evidence the Revolver
Loan made available by Lender to Borrower pursuant to the provisions of the
Loan and Security Agreement, dated as of June ___, 1997 (herein, as at any
time amended, modified or supplemented, called the "LOAN AGREEMENT";
capitalized terms used herein and not defined herein have the meanings
assigned to them in the Loan Agreement), among SETECH, Inc., its
subsidiaries (including Borrower) and Lender, to which reference is hereby
made for a statement of the terms, conditions and covenants under which the
Loans evidenced hereby were made and are to be repaid, including, but not
limited to, those related to voluntary or mandatory prepayment of the
indebtedness represented hereby and to the maturity of the indebtedness
represented hereby upon the termination of the Loan Agreement. Payment of
this Note is secured by the Collateral and Holder is entitled to the
benefit of all of the Security Documents.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
Borrower hereby waives presentment, demand for payment, protest
and notice of protest, notice of dishonor and all other notices in
connection with this Note.
WITNESS THE DUE EXECUTION HEREOF BY AN AUTHORIZED OFFICER OF THE
UNDERSIGNED AS OF THE DATE FIRST ABOVE WRITTEN.
SOUTHEASTERN TECHNOLOGY, INC.
By:_________________________________
Thomas N. Eisenman, Chief Executive
Officer
Attest:_______________________________
Cindy L. Rollins, Secretary
