<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _____________
Commission File No. 1-10555
POLYVISION CORPORATION
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(Exact name of registrant as specified in its charter)
New York 13-3482597
----------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
29 Laing Avenue
Dixonville, Pennsylvania 15747
------------------------------------------ ---------------------
(Address of principal executive offices) (Zip Code)
412-254-4321
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-----
The number of shares outstanding of the issuer's Common Stock, par value $.001
per share, as of September 14, 1997, was 8,540,762.
Page 1 of 15 Pages
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POLYVISION CORPORATION
FORM 10-Q
INDEX
Page
PART I . FINANCIAL INFORMATION ...............................................3
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
July 31, 1997 and April 30, 1997...................................3
Condensed Consolidated Statements of Operations -
Three Months Ended July 31, 1997 and 1996..........................5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended July 31, 1997 and 1996..........................6
Notes to Condensed Consolidated Financial Statements -
July 31, 1997......................................................7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations..................11
PART II. OTHER INFORMATION...................................................14
SIGNATURES...................................................................15
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POLYVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
- --------------------------------------------------------------------------------
JULY 31, APRIL 30,
(IN THOUSANDS, EXCEPT SHARE DATA) 1997 1997
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 378 $ 415
Accounts receivable, less allowance
(July--$904 and April--$1,103) 7,883 7,020
Inventories 4,099 3,336
Costs and estimated earnings in excess
of billings on uncompleted contracts 960 690
Prepaid expenses, deposits and other 257 146
- --------------------------------------------------------------------------------
Total current assets 13,577 11,607
- --------------------------------------------------------------------------------
Property, plant and equipment:
Furniture and fixtures 269 157
Building and leasehold improvements 1,517 1,507
Machinery and equipment 2,170 2,125
- --------------------------------------------------------------------------------
3,956 3,789
Less allowance for depreciation (2,393) (2,347)
- --------------------------------------------------------------------------------
Net property, plant and equipment 1,563 1,442
Goodwill, less accumulated amortization 3,800 3,836
(July--$1,432 and April--$1,396)
Other assets 26 16
Total assets $18,966 $16,901
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
3
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POLYVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
- --------------------------------------------------------------------------------
JULY 31, APRIL 30,
(IN THOUSANDS, EXCEPT SHARE DATA) 1997 1997
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 3,080 $ 2,298
Current maturities of long-term debt 240 980
Accounts payable 2,992 2,361
Accrued expenses 2,446 2,494
Accrued dividends 4,613 4,099
Billings in excess of costs and estimated
earnings on uncompleted contracts 297 259
- --------------------------------------------------------------------------------
Total current liabilities 13,668 12,491
- --------------------------------------------------------------------------------
Long-term debt, less current maturities 680 --
Royalties payable 750 750
Indebtedness to The Alpine Group, Inc. 6,588 6,382
Excess of net assets over purchase price of
acquisition, less accumulated amortization
(July--$19_and April--$17) 266 268
- --------------------------------------------------------------------------------
Stockholders' equity:
Series A Preferred stock, $.01 par value, at $25
per share liquidation value; authorized
1,500,000 shares, issued outstanding 1,029,253
shares 25,731 25,731
Common stock, $.001 par value; authorized
25,000,000 shares, issued and outstanding
8,540,762 shares 9 9
Capital in excess of par value 38,641 38,618
Accumulated deficit (67,367) (67,348)
- --------------------------------------------------------------------------------
Total stockholders' equity (2,986) (2,990)
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $18,966 $16,901
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
4
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POLYVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
- --------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
JULY 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996
- --------------------------------------------------------------------------------
Net sales $ 8,499 $ 9,642
Cost of goods sold 5,882 6,784
- --------------------------------------------------------------------------------
Gross profit 2,617 2,858
Research and development -- 329
Selling, general and administrative 1,960 2,272
- --------------------------------------------------------------------------------
Operating profit (loss) 657 257
- --------------------------------------------------------------------------------
Other income (expense):
Interest (expense) (151) (201)
Interest and other income (9) 64
- --------------------------------------------------------------------------------
Income (loss) before income taxes 497 120
- --------------------------------------------------------------------------------
Income taxes -- --
- --------------------------------------------------------------------------------
Net income (loss) 497 120
Preferred stock dividends 514 510
- --------------------------------------------------------------------------------
Loss applicable to common stock ($17) ($390)
- --------------------------------------------------------------------------------
Loss per share of common stock ($0.00) ($0.05)
Average common shares outstanding 8,540,762 8,530,073
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
5
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POLYVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED JULY 31,
(IN THOUSANDS) 1997 1996
- --------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) $ 497 $ 120
Non-cash expenses included in net income (loss):
Depreciation and amortization 81 120
Compensation expense for stock grants 24 23
Deferred interest (340) 119
Changes in operating assets and liabilities:
Accounts receivable (863) (1,352)
Inventory (763) 99
Prepaid expenses, deposits and other (123) (179)
Costs and estimated earnings in excess of
billings on uncompleted contracts (270) (347)
Accounts payable and accrued liabilities 581 (156)
Billings in excess of costs and estimated
earnings on uncompleted contracts 38 (34)
- --------------------------------------------------------------------------------
Cash used for operating activities (1,138) (1,587)
- --------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (170) (38)
Proceeds from sale of equipment 3 35
- --------------------------------------------------------------------------------
Cash used for investing activities (167) (3)
- --------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Short-term borrowings 782 538
Repayments of long-term borrowings (60) (40)
Borrowings on Alpine promissory note 546 546
- --------------------------------------------------------------------------------
Cash provided by financing activities 1,268 1,044
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (37) (546)
Cash and cash equivalents
at beginning of period 415 670
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 378 $ 124
- --------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
6
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POLYVISION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JULY 31, 1997
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE NOTED)
NOTE 1 - BASIS OF PRESENTATION
PolyVision Corporation (formerly Information Display Technology, Inc. or
("IDT")), through its wholly-owned subsidiaries, Greensteel, Inc.
("Greensteel"), Posterloid Corporation ("Posterloid"), and APV, Inc. ("APV"),
collectively the "Company", is engaged in the development, manufacture and sale
of information display products. Greensteel is engaged in the manufacture and
sale of custom-designed and engineered writing, projection and other visual
display surfaces (such as porcelain chalkboards and marker boards), custom
cabinets, and work station and conference center casework. Posterloid is engaged
in the manufacture and sale of indoor and outdoor menuboard display systems to
the fast food and convenience store industries, and changeable magnetic signs
used principally by banks to display interest rates, currency exchange rates and
other information. APV was engaged in the research, development, licensing and
initial manufacturing and testing of a proprietary display technology known as
PolyVision-TM-. In April, 1997 the Company made the decision to discontinue its
research and development efforts and to market this technology through licensing
agreements.
On December 21, 1994, The Alpine Group, Inc. ("Alpine") acquired an additional
82 percent of the outstanding common stock of Adience, Inc. ("Adience") to
increase its ownership in Adience to approximately 87 percent, resulting in an
indirect ownership in IDT of approximately 70 percent. Also on December 21,
1994, IDT entered into a Merger Agreement with Alpine and two of its
subsidiaries, APV and Posterloid (together, "IDG"), whereby the Company would
merge with IDG and the Company would be named PolyVision Corporation. Because
Alpine controlled both IDG and IDT, the Merger, which was completed on May 24,
1995, resulted in a new reporting entity which is being accounted for as a
reorganization of entities under common control. The merged entity has adopted
IDG's April 30 fiscal year end and, in order to provide meaningful information,
the accompanying financial statements are presented as if the merger occurred on
April 30, 1995. The accompanying financial statements give effect to push-down
accounting to adjust IDT's accounting basis to fair value related to the
December 21, 1994 acquisition of Adience by Alpine. All significant
intercompany transactions and accounts have been eliminated in the accompanying
consolidated financial statements.
In connection with the Merger, APV transferred its previously wholly-owned
subsidiary, PolyVision France S.A., to Alpine at its book value. Also in
connection with the Merger, Alpine distributed to its shareholders 76% of its
ownership in the Company resulting in Alpine retaining a 19% ownership of the
Company's common stock.
7
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The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
results of operations for the three month period ended July 31, 1997, are not
necessarily indicative of the results that may be expected for a full fiscal
year.
The accompanying unaudited condensed consolidated financial statements should be
read in conjunction with the Company's audited financial statements included in
the Company's annual report on Form 10-K for the year ended April 30, 1997.
Loss applicable to common stock is computed by dividing net income (loss)
available to common stock by the weighted average number of shares outstanding.
NOTE 2 - INVENTORIES
Inventories consist primarily of raw materials of $3,287 and $2,679, work in
process of $556 and $527, and finished goods of $256 and $130 at July 31, 1997
and April 30, 1997, respectively.
NOTE 3 - CONTRACTS IN PROGRESS
The status of contract costs on uncompleted construction contracts was as
follows:
Costs and estimated Billings in excess
earnings in of costs and
excess of billings estimated earnings Net
------------------- ------------------ ---
July 31, 1997:
Costs and estimated
earnings of $ 3,761 $ 3,265 $ 7,026
Billings (2,801) (3,562) (6,363)
------ ------ ------
$ 960 $ (297) $ 663
April 30, 1997:
Costs and estimated
earnings of $ 2,779 $ 6,218 $ 8,997
Billings (2,089) (6,477) (8,566)
------ ------ ------
$ 690 $( 259) $ 431
8
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Accounts receivable at July 31, 1997 and April 30, 1997 include amounts billed
but not yet paid by customers under retainage provisions of $1,063 and $1,384,
respectively. Such amounts are generally due within one year.
NOTE 4 - FINANCING ARRANGEMENTS
On July 23, 1997, Greensteel as borrower and the Company as guarantor,
entered into a restated master credit agreement with the Bank of Boston,
Connecticut, which amends the previous agreement dated April 25, 1996 and
which would have expired August 31, 1997. The new agreement provides for a
revolving credit line of up to $3,800,000, based upon eligible accounts
receivable and inventory, as defined, (unused and available borrowings were
$170,000 at July 31, 1997) at the Bank's prime rate plus a margin based on
certain performance ratios (10.00% at July 31, 1997) and a $920,000 term loan
payable in 17 consecutive equal monthly installments of $20,000 with interest
at the Bank's prime rate plus a margin based on certain performance ratios
(10.50% at July 31, 1997) with the remaining unpaid principal amount of
$580,000 due on May 31, 1999. The agreement terminates on May 31, 1999 and
provides for renewal at the Bank's discretion.
Substantially all of Greensteel's assets are pledged as collateral under the
credit facility. The agreement requires Greensteel's compliance with certain
financial covenants including specific levels of earnings before interest,
taxes and depreciation, and specific current ratio levels and debt levels.
Greensteel is in compliance with all material covenants at July 31, 1997.
On May 24, 1995, the Company entered into an agreement with Alpine, pursuant to
which the Company may borrow up to $5,000,000 from Alpine to be used by the
Company to fund its working capital needs, including research, development and
commercialization activities in connection with APV's PolyVision-TM- display
technology. Borrowings under the agreement are unsecured and bear interest at a
market rate reflecting Alpine's cost of borrowing such funds. As of July 31,
1997 $5,000,000 was outstanding under this agreement.
On July 31, 1997, the Company executed a promissory note with Alpine to
borrow $1,357,000, including accrued interest, to fund the Company's
corporate borrowing requirements. Borrowings under the agreement are at
Alpine's cost of borrowing such funds (8-1/2% at July 31, 1997). As of July
31, 1997 the Company owed Alpine a total of $6,357,000 under this note and
the foregoing agreement. Alpine has agreed to advance further funds to the
Company through July 31, 1998 as may be necessary for the Company to meet its
financial commitments to third parties incurred in the ordinary course of
business. The decision to continue to provide such financial support is made
annually by Alpine and future decisions will be based upon the conditions
existing at that time.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
In 1994, Reliance Insurance Company of New York (the "Plaintiff") commenced an
action in the Supreme Court of the State of New York, County of Suffolk, against
several defendants including the Company seeking money damages based on the
purported sale and delivery by defendants of
9
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some 860 insulated metal curtain wall panels manufactured by the Company in 1987
and of an additional 520 replacement panels in 1991 and 1992. Plaintiff has
alleged that such panels were defective in their design and manufacture. Among
the theories of liability advanced by Plaintiff are breach of contract, breach
of express warranty and implied warranty. Pursuant to orders of the Court, the
causes of action based on the 1987 transaction were dismissed on statute of
limitation grounds. However, Plaintiff has been granted leave to serve an
amended complaint to allege, among other things, a claim under the New Jersey
Consumer Fraud Act (the "NJCFA") (which might permit treble damages), while
preserving the right of the defendants, including the Company to challenge the
applicability of the NJCFA. The amended complaint was served during April, 1997
and Plaintiff currently seeks $1,405,000 in damages as well as treble damages
under the NJCFA. The Company has served its answer to the amended complaint
substantially denying Plaintiff's allegations of defective design and
manufacture and pleading affirmative defenses, as well as commencing third party
claims against an adhesives supplier whose product was utilized by the Company
in fabricating the subject panels. As of the date hereof, discovery has yet to
commence and it is premature to render an estimate of the outcome of this
litigation.
In December 1993, the Company and Adience signed a consent order with the Ohio
EPA and Ohio Attorney General that required the Company and Adience to pay to
the State of Ohio a civil penalty of $200,000 of which the Company paid $175,000
and Adience paid $25,000. In addition, the consent order required the payment
of stipulated penalties of up to $1,000 per day for failure to satisfy certain
requirements of the consent order, including milestones in the closure plan.
Removal and remediation activities as contemplated under the consent order have
been completed.
The Company has submitted risk assessment reports which demonstrate, in
management's opinion, that no further cleanup actions will be required on the
remaining property area not addressed under the closure plan. Based on
administrative precedent, the Company believes that it is likely that the Ohio
EPA will agree with the risk assessment reports. The Company is currently
waiting for a determination from the Ohio EPA as to whether the submitted
reports are approved. If such an agreement is not reached, additional costs may
have to be incurred to complete additional remediation efforts. Although there
are no assurances that additional costs will not have to be incurred, the
Company believes that such costs will not need to be incurred. At July 31,
1997, environmental accruals amounted to $26,000, which represents management's
reasonable estimate of the amounts to be incurred in the resolution of this
matter. Since 1991, the Company and Adience have together paid $1,449,000
(excluding the $200,000 civil penalty) for the environmental cleanup related to
the Alliance facility.
Under the acquisition agreement pursuant to which the Company acquired the
Alliance facility from Adience, Adience represented and warranted that, except
as otherwise disclosed to the Company, no hazardous material had been stored or
disposed of on such property and agreed to indemnify the Company for any losses
in excess of $250,000. The Company has notified Adience that it is claiming the
right to indemnification for all costs in excess of $250,000 incurred by the
Company in this matter, and has received assurance from Alpine that Adience will
honor such claim. Adience has reimbursed the Company $1,373,000 through June
30, 1997. If Adience is financially unable to honor its remaining obligation,
such costs would be borne by the Company.
The Company is involved in other various matters of litigation incidental to the
normal conduct of its business. In management's opinion, the disposition of
such litigation will not have a material adverse impact on the Company.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1997, COMPARED WITH THREE MONTHS ENDED JULY 31,
1996
The following table summarizes, for the periods presented, the respective
amounts of Greensteel, APV (except as to Net sales and Gross profit, of which
there were none) and Posterloid:
THREE MONTHS
ENDED JULY 31,
--------------
1997 1996
---- ----
(IN THOUSANDS, EXCEPT PERCENTAGES)
Net sales
Greensteel . . . . . . . . . . . . . . . $7,094 $7,799
Posterloid . . . . . . . . . . . . . . . 1,405 1,843
----- -----
8,499 9,642
Gross profit
Greensteel . . . . . . . . . . . . . . . 2,085 2,122
Posterloid . . . . . . . . . . . . . . . 532 736
----- -----
2,617 2,858
Gross margin . . . . . . . . . . . . . . . 30.8% 29.6%
Selling, general and administrative
expenses
Greensteel . . . . . . . . . . . . . . . 1,506 1,666
Posterloid . . . . . . . . . . . . . . . 430 440
APV and Corporate . . . . . . . . . . . 24 166
----- -----
1,960 2,272
Research and development
APV . . . . . . . . . . . . . . . 0 329
Operating income (loss)
Greensteel . . . . . . . . . . . . . . . 579 456
Posterloid . . . . . . . . . . . . . . . 102 296
APV and Corporate . . . . . . . . . . . (24) (495)
----- -----
$ 657 $ 257
11
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THREE MONTHS ENDED JULY 31, 1997, COMPARED WITH THREE MONTHS ENDED JULY 31,
1996
The Company's net sales for the three months ended July 31, 1997 decreased 12%
to $8,498,000 compared to net sales of $9,642,000 for the three months ended
July 31, 1996. Greensteel's sales declined by 9% to $7,094,000. The Company
continued its efforts to convert is distribution channels to sales through
dealers and distributors which do not require extended project management and
have reduced working capital requirements. As a result of selling through
distributors, installation work that was previously done by the Company is now
performed by the distributor, resulting in reduced revenues for the Company.
Distributor sales increased by 36% when compared to last year.
Posterloid's sales decreased by 24% the three months ended July 31, 1997 to
$1,405,000 versus $1,843,000 for last year. The first quarter sales for last
year included the roll out of menu boards for a major customer.
The Company's gross profit for the three months ended July 31, 1997 decreased to
$2,617,000 from $2,858,000 for the three months ended July 31, 1996. Gross
margins increased to 30.8% from 29.6% primarily due to lower production costs at
Greensteel, resulting from increased productivity. The gross margins at
Posterloid declined due to lower sales volume and additional expenses for
materials.
Selling, general and administrative expenses for the three months ended July 31,
1997 were $1,960,000 compared to $2,272,000 for the corresponding period last
year. The decreased costs were due to lower corporate administrative expenses
and lower selling expenses.
In April, 1997 the Company decided to discontinue its research and development
efforts and market the PolyVision-TM- display technology through third party
licensing agreements. Therefore, in the three months ended July 31, 1997 there
were no research and development costs as compared to $329,000 of research and
development costs in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended July 31, 1997, $1,138,000 of cash was used to
support operating activities. This included seasonal increases of $863,000 for
accounts receivable and $763,000 for inventories. Funds from operating
activities were provided by a $581,000 increase in accounts payable and the net
income and depreciation from operations of $497,000 and $81,000 respectively.
Cash financing was provided by an increase of $782,000 in the revolving line of
credit with the Bank of Boston and an increase in borrowings from The Alpine
Group of $546,000. During the three months ended July 31, 1997, Greensteel used
$550,000 for its operating activities while Posterloid provided $85,000 from its
activities.
On July 23, 1997, Greensteel, as borrower, and the Company, as guarantor,
entered into a restated master credit agreement with the Bank of Boston
Connecticut, which amends the previous agreement, dated April 25, 1996, and
which would have expired on August 31, 1997.
12
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The new agreement provides for a revolving credit line of up to $3,800,000,
based upon eligible accounts receivable and inventory, as defined, (unused and
available borrowings were $170,000 at July 31, 1997) at the Bank's prime rate
plus a margin based on certain performance ratios (10.00% at July 31, 1997) and
a $920,000 term loan payable in 17 consecutive equal monthly installments of
$20,000 with interest at the Bank's prime rate plus a margin based on certain
performance ratios (10.50% at July 31, 1997) with the remaining unpaid principal
amount of $580,000 due on May 31, 1999. The agreement terminates on May 31,
1999 and provides for renewal at the Bank's discretion.
Substantially all of Greensteel's assets are pledged as collateral under the
credit facility. The agreement requires Greensteel's compliance with certain
financial covenants including specific levels of earnings before interest, taxes
and depreciation, and specific current ratio levels and debt levels. Greensteel
is in compliance with all material covenants at July 31, 1997.
On May 24 1995, the Company entered into an agreement with Alpine, pursuant to
which the Company may borrow up to $5,000,000 from Alpine to be used by the
Company to fund its working capital needs, including research, development and
commercialization activities in connection with APV's PolyVision-TM- display
technology. Borrowings under the agreement are unsecured and bear interest at a
market rate reflecting Alpine's cost of borrowing such funds. As of July 31,
1997 $5,000,000 was outstanding under this agreement.
On July 31, 1997, the Company executed a promissory note with Alpine to borrow
$1,357,000, including accrued interest, to fund the Company's corporate
borrowing requirements. Borrowings under the agreement are at Alpine's cost of
borrowing such funds (8-1/2% at July 31, 1997). As of July 31, 1997, the
Company owed Alpine a total of $6,357,000 under this note and the foregoing
agreement. Alpine has agreed to advance further funds to the Company through
July 31, 1998 as may be necessary for the Company to meet its financial
commitments to third parties incurred in the ordinary course of business. The
decision to continue to provide such financial support is made annually by
Alpine and future decisions will be based upon the conditions existing at that
time.
13
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information included in Note 5, "Commitments and Contingencies" of
the Notes to Condensed Consolidated Financial Statements is included
herein by reference.
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.33 First Amended and Restated Master Credit Agreement, dated
July 23, 1997, by and among Bank of Boston Connecticut, as
bank, Greensteel, Inc., as borrower, and PolyVision
Corporation, as guarantor.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POLYVISION CORPORATION
Date: September 12, 1997 By: /s/Lawrence W. Hay
-----------------------------
Lawrence W. Hay
Vice President of Finance
(as both a duly authorized officer of the
registrant and the principal financial
officer or chief accounting officer of the
registrant)
15
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EX-10.33
FIRST AMENDED AND RESTATED MASTER CREDIT AGREEMENT
FIRST AMENDED AND RESTATED MASTER CREDIT AGREEMENT
by and among
BANK OF BOSTON CONNECTICUT, as Bank
GREENSTEEL, INC., as Borrower,
and
POLYVISION CORPORATION, as Guarantor
July 23, 1997
<PAGE>
FIRST AMENDED AND RESTATED MASTER CREDIT AGREEMENT
This FIRST AMENDED AND RESTATED MASTER CREDIT AGREEMENT (the "Agreement")
is made as of this 23rd day of July, 1997 by and among BANK OF BOSTON
CONNECTICUT, a Connecticut savings bank with its head office located at 100
Pearl Street, Hartford, Connecticut 06103 ("Bank") and GREENSTEEL, INC., a
Delaware corporation, with its chief executive office located at 29 Laing
Avenue, Dixonville, Pennsylvania 15734-0335 ("Borrower") and, to the extent of
Section 4 hereof, POLYVISION CORPORATION, a New York corporation, having its
chief executive office located at 48-62 36th Street, Long Island City, New York
11101 ("Guarantor").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Master Credit Agreement dated as of the
25th day of April, 1996 (the "Original Credit Agreement") by and among Bank,
Borrower and Guarantor, Bank agreed to extend certain credit facilities to
Borrower pursuant to which Bank would make loans and advances and otherwise
extend credit to Borrower; and
WHEREAS, Borrower is a wholly-owned subsidiary of Guarantor; and
WHEREAS, Guarantor derives substantial benefits from the loans, advances
and other extensions of credit made by Bank to Borrower; and
WHEREAS, in consideration of such benefits, Guarantor agreed to guarantee
the payment and performance of Borrower's obligations to Bank under the Original
Credit Agreement; and
WHEREAS, Bank, Borrower and Guarantor desire to amend and restate the
terms and conditions of the Original Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, Bank, Borrower and Guarantor hereby agree that the Original
Credit Agreement shall be amended and restated as follows:
SECTION 1. DEFINITIONS
All capitalized terms used in this Agreement, the Notes or the Other
Documents, or in any certificate, report or other document, instrument or
agreement executed or delivered pursuant hereto and thereto (unless otherwise
indicated therein) shall have the meanings ascribed to such terms below.
Section 1.1. "Account Debtor" means any Person obligated to Borrower with
respect to an Account Receivable.
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Section 1.2. "Account Receivable" or "Accounts Receivable" means the
unpaid portion of obligations as stated on the respective invoices issued to a
customer of Borrower or any of its Subsidiaries with respect to Inventory sold
and shipped or services performed or rendered in the ordinary course of
business.
Section 1.3. "Affiliate" means any Person (i) which directly or indirectly
controls, or is controlled by, or is under common control with, Borrower,
Guarantor or any Subsidiary of Borrower or Guarantor; (ii) which directly or
indirectly beneficially owns or holds ten percent (10%) or more of any class of
voting stock of Borrower, Guarantor or any Subsidiary of Borrower or Guarantor;
or (iii) ten percent (10%) or. more of the voting stock of which is directly or
indirectly beneficially owned or held by Borrower, Guarantor or any Subsidiary
of Borrower or Guarantor. The term "control" (and its correlative meanings
"controlled by" and "under common control with") as used in this Section 1.3.
means the possession, directly or indirectly, of the power to direct, or cause
the direction of, the management and policies of a Person, whether through
ownership of voting stock, by contract or otherwise.
Section 1.4. "Agreement" means this First Amended and Restated Master
Credit Agreement, including all schedules and exhibits attached hereto, and any
and all amendments, modifications and supplements hereto.
Section 1.5. "Bank" shall have the meaning set forth in the Preamble
hereof.
Section 1.6. "Bank Affiliate" or "Bank Affiliates" means any Affiliate of
Bank or its parent bank holding company.
Section 1.7. "Bank Agents" shall have the meaning set forth in Section
13.2.5. hereof.
Section 1.8. "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.
Section 1.9. "Base Rate" means the greater of (i) the rate of interest
announced from time to time by BankBoston, N.A. at its head office located at
100 Federal Street, Boston, Massachusetts 02110 as its "Base Rate", and (ii) the
Federal Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if
necessary, to the next 1/8 of 1%).
Section 1.10. "Base Rate Margin" shall mean, with respect to any Loan, a
percentage per annum determined in the manner set forth in Section 2.4.3.
hereof.
Section 1.11. "Beneficiary" means the beneficiary of any Letter of Credit
issued by Bank for the account of Borrower or any Subsidiary of Borrower.
Section 1.12. "Borrower" shall have the meaning set forth in the Preamble
hereof.
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Section 1.13. "Borrowing Base" means, as of any date as of which the
amount thereof shall be determined, an amount equal to the sum of (i) the
Security Value of Accounts Receivable as of such date plus (ii) the Security
Value of Inventory as of such date and (iii) minus the Term Loan Reserve and the
Collateral Access Reserve as of such date.
Section 1.14. "Borrowing Base Certificate" shall have the meaning set
forth in Section 7.1.4. hereof.
Section 1.15. "Business Day" means any day other than a Saturday, Sunday,
legal holiday or other day on which banks in the State of Connecticut or
Commonwealth of Massachusetts are required or permitted by law to close.
Section 1.16. "Cash Management Agreements" shall have the meaning set
forth in Section 2.1.3. hereof and shall include any and all schedules and
exhibits thereto.
Section 1.17. "Capital Expenditures" means, without duplication, for any
period, the aggregate of all expenditures on a consolidated basis including
deposits (whether paid in cash or property or accrued as liabilities and
including the aggregate amount of all principal payments due for the entire term
of all Capital Leases that are required to be capitalized on the balance sheet)
made by Borrower and its Subsidiaries that, in conformity with GAAP, are
required to be included in the property, plant, equipment, or similar fixed
asset account.
Section 1.18. "Capital Lease" means any lease of any property (whether
real, personal or mixed) that, in conformity with GAAP, should be accounted for
as a capital lease.
Section 1.19. "Closing Date" means the date hereof.
Section 1.20. "Code" means the Internal Revenue Code of 1986 and the rules
and regulations promulgated thereunder, collectively, as the same may from time
to time be supplemented or amended and remain in effect.
Section 1.21. "Collateral" means all collateral received or delivered as
security for the Obligations by Borrower pursuant to, and as more particularly
described in, the Security Agreement, the Pledge Agreement, the Mortgage, the
Letter of Credit Applications and the Collateral Disclosure List and any
property or interest provided in addition to or in substitution for any of the
foregoing.
Section 1.22. "Collateral Access Reserve" shall mean an amount which is
equal to Borrower's aggregate obligation to make payments of rent, additional
rent and other amounts whether or not characterized as rent for a period of
three (3) months under any lease for any business premises at which any
Collateral which is included within the calculation of the Borrowing Base is
located or situated unless the lessor of such premises shall have executed and
delivered to Bank an agreement satisfactory in form and substance to Bank and
its legal counsel as required under Section 7.14. hereof.
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Section 1.23. "Collateral Disclosure List" shall have the meaning set
forth in Section 3.1. hereof.
Section 1.24. "Commitment Amount" means the aggregate principal
amount of THREE MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS
($3,800,000.00) or any lesser amount, including zero (0), resulting from (i) a
reduction or termination of such amount in accordance with Section 2.1.5. or
Section 12.1.
Section 1.25. "Contractual Obligation" means, as applied to any Person,
any indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any of its
properties is hound or to which it or any of its properties is subject.
Section 1.26. "Controlled Group" means all trades or businesses (whether
or not incorporated) under common control that, together with Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
Section l.27. "Credits Outstanding" means, as of any date as of which the
amount thereof shall be determined, the aggregate undrawn amount of all issued
and outstanding Letters of Credit but excluding any amounts which constitute
unpaid Reimbursement Obligations as of such date.
Section 1.28. "Credit Parties" means Borrower and Guarantor, collectively.
Section 1.29. "Credit Party" means Borrower or Guarantor, individually.
Section 1.30. "Default" means an event or condition that, but for the
lapse of time, the giving of notice, or both, would constitute an Event of
Default if that event or condition was not cured or removed within any
applicable grace or cure period.
Section 1.31. "Default Rate" means the rate of interest determined by
increasing the rate of interest otherwise chargeable under this Agreement to a
rate which shall be the lower of (i) the highest rate allowed by law or (ii)
four percentage points (4%) above the rate of interest which would otherwise be
in effect under this Agreement.
Section 1.32. "Disqualified Accounts Receivable" means:
a. An Account Receivable which does not arise out of a bona fide
sale of goods or rendering of services of the kind sold or rendered by Borrower
in the ordinary course of its business; or
b. An Account Receivable which remains unpaid for more than ninety
(90) days after the invoice date or sixty (60) days after the due date; or
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c. An Account Receivable owing by an Account Debtor if twenty
percent (20%) or more of the dollar value of all Accounts Receivable owed by
such Account Debtor remain unpaid for more than sixty (60) days after the due
date; or
d. An Account Receivable with respect to which the Account Debtor is
a director, officer, employee or agent of Borrower or is a Subsidiary or an
Affiliate of Borrower; or
e. An Account Receivable with respect to which any covenant,
representation or warranty set forth in this Agreement has been breached; or
f. An Account Receivable with respect to which the Account Debtor
has commenced a voluntary case in bankruptcy, or made an assignment for the
benefit of creditors, or if a decree or order for relief has been entered by a
court having jurisdiction over the Account Debtor in an involuntary case in
bankruptcy, or if any petition or other application for relief in bankruptcy has
been filed against the Account Debtor, or if the Account Debtor has failed,
ceased business operations, become insolvent or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or all or
substantially all of its properties or assets; or
g. An Account Receivable with respect to which the goods giving rise
thereto have not been shipped by the Account Debtor or the services giving rise
thereto have not been performed by Borrower and accepted by the Account Debtor
or if the Account Receivable does not otherwise represent a final sale; or
h. An Account Receivable owing by a single Account Debtor located
outside of the United States of America, Canada or Puerto Rico unless such
Account Receivable is a Secured Foreign Receivable or an Insured Foreign
Receivable; or
i. An Account Receivable with respect to which the sale giving rise
thereto is on a bill-and-hold, sale-and-return, sale on approval, consignment or
other repurchase or return basis; or
j. An Account Receivable with respect to which the Account Debtor is
the United States of America or any department, agency or office thereof unless
Borrower assigns its right to payment of such Account Receivable to Bank in
accordance with the Federal Assignment of Claims Act of 1940; or
k. An Account Receivable to the extent that the Account Debtor has
paid or advanced to Borrower any deposit or other advance in respect of the
payment thereof; or
l. An Account Receivable to the extent that the Account Debtor has
earned or accrued, or is due, any rebate, credit or other allowance by Borrower;
or
m. An Account Receivable to the extent of any amounts owed by
Borrower to such Account Debtor; or
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n. An Account Receivable in which Bank does not possess a valid and
perfected first priority security interest; or
o. An Account Receivable owing by an Account Debtor located in a
jurisdiction in which Borrower has not complied with any laws, if the result of
such non-compliance might be to restrict Borrower's ability to collect such
Account Receivable; or
p. An Account Receivable which Bank, in its reasonable credit
judgment, excludes from the calculation of the Borrowing Base under Section
2.1.4. hereof.
Section 1.33. "Disqualified Inventory" means:
a. Inventory in which Bank does not possess a valid and perfected
first priority security interest; or
b. Inventory which is not in good, saleable and readily usable
condition or is obsolete, slow moving or unmerchantable; or
c. Inventory which is located outside of, or in transit to, the
United States of America, Canada or Puerto Rico; or
d. Inventory which has been produced in violation of the Fair Labor
Standards Act and subject to the so-called "hot goods" provisions contained in
29 U.S.C. 215 (a); or
e. Inventory with respect to which any covenant, representation or
warranty set forth in this Agreement has been breached; or
f. Inventory which Bank, in its reasonable credit judgment, excludes
from the calculation of the Borrowing Base under Section 2.1.4. hereof; or
g. Inventory which consists of Work In Process.
Section 1.34. "Dividend" or "Dividends" means the payment of any dividend
or other distribution in respect of the capital stock of a corporation in cash
or other property (excepting distribution in the form of such stock) or the
redemption or acquisition of any capital stock or security of a corporation.
Section 1.35. "Drawing" or "Drawings" means any payment(s) or
disbursement(s) made by Bank under any Letter of Credit issued by Bank for the
account of Borrower honoring any demand for payment presented by the Beneficiary
of such Letter of Credit in accordance with the terms thereof.
Section 1.36. "Eligible Account Receivable" means an Account Receivable
which is NOT a Disqualified Account Receivable.
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Section 1.37. "Eligible Inventory" means that portion of Borrower's
Inventory which is NOT Disqualified Inventory.
Section 1.38. "Encumbrance" or "Encumbrances" means any security interest,
mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement,
lessor's interest under a financing lease or any analogous arrangements in any
of Borrower's properties or assets, intended as, or having the effect of,
security.
Section 1.39. "Environmental Certificate" shall have the meaning set
forth in Section 5.2.11. hereof.
Section 1.40. "Environmental Laws" means any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any Federal, state
or local governmental body, instrumentality or agency pertaining to the
environment, including without limitation, the Clean Water Act, the Clean Air
Act, as amended, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), and as may be further amended (all
together herein called "CERCLA"), the Federal Water Pollution Control
Amendments, the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), the Hazardous Materials Transportation Act of 1975, as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, and any comparable or similar environmental laws of the State of
Connecticut and any other state in which Borrower maintains manufacturing
facilities or operations or other business premises at which Hazardous Materials
are located or stored. Likewise, the terms "hazardous substance," "release," and
"threatened release" herein referenced in connection with Environmental Laws
shall have the meanings specified in CERCLA and the terms "solid waste" and
"dispose" (or "disposed") shall have the meanings specified in RCRA; provided,
however, in the event either CERCLA or RCRA is amended so as to broaden the
meaning of any term defined therein, such broader meaning shall apply subsequent
to the effective date of such amendment, and provided further that, to the
extent the laws of any state establish a meaning for "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either CERCLA or RCRA, such broader meaning shall apply.
Section 1.41. "Equipment" means all of Borrower's machinery, equipment,
office machinery, furniture, trade fixtures, conveyors, tools, materials,
storage and handling equipment, computer equipment and hardware, including
central processing units, terminals, drives, memory units, printers, keyboards,
screens, peripherals and input or output devices, automotive equipment, trucks,
molds, dies, stamps, motor vehicles and other equipment of every kind and
nature.
Section 1.42. "ERISA" means the Employee Retirement Income Security Act of
1974 and the rules and regulations promulgated thereunder; collectively, as the
same may from time to time be supplemented or amended and remain in effect
Section 1.43. "Event of Default" shall have the meaning set forth in
Section 11. hereof.
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Section 1.44. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
Section 1.45. "Extension of Credit" means any Loan, Letter of Credit or
any other loan, advance or extension of credit by Bank to Borrower under this
Agreement or the Other Documents.
Section 1.46. "Facility Fee" shall have the meaning set forth in Section
5.5. hereof.
Section 1.47. "Federal Funds Effective Rate" means for any day, a
fluctuating interest rate per annum equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by BankBoston, N.A. from three (3) Federal funds brokers
of recognized standing selected by BankBoston, N.A.
Section 1.48. "FIFO" means the first in, first out method of valuing
inventory.
Section 1.49. "Financial Statement" or "Financial Statements" means, as of
any date, or with respect to any period, as applicable, a financial report or
reports consisting of (i) a balance sheet; (ii) an income statement; (iii) a
statement of cash flow; and (iv) a statement of changes in stockholders' equity.
Section 1.50. "Fiscal Quarter" means the fiscal period ending on April 30,
July 31, October 31, and January 31 in each Fiscal Year.
Section 1.51. "Fiscal Year" means the twelve (12) month fiscal period
ending on April 30 in each year.
Section 1.52. "Fixed Assets" means, as of any date, the Mortgaged Property
and the Equipment to the extent that Borrower is the record owner of any of the
foregoing as of any date.
Section 1.53. "Fixed Asset Value" means, as of any date, the sum of (i)
70% of the forced liquidation value of Borrower's Equipment as of such date plus
(ii) 75% of the fair market value of that portion of Borrower's Fixed Assets
which consist of real property as of such date, all of the foregoing as
determined by reference to the most recent appraisals of the Fixed Assets
obtained by Bank.
Section 1.54. "Forecasts" shall have the meaning set forth in Section 4.8.
hereof.
Section 1.55. "Foreign Credit Insurer" means either (i) collectively, the
Foreign Credit Insurance Association and the Export-Import Bank of the United
States of America or (ii) Lloyd's of London, or any private insurer approved in
writing by Bank.
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Section 1.56. "GAAP" means generally accepted accounting principles as set
forth in Statement on Auditing Standards No.69 entitled "The Meaning of 'Present
Fairly in Conformity with Generally Accepted Accounting Principles' in the
Independent Auditor's Report" issued by the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board that are applicable to the circumstances as of the date of
determination.
Section 1.57. "Governmental Authority" means any Federal, state, local or
foreign court, commission or tribunal, or governmental, administrative or
regulatory agency, department, authority, instrumentality or other body.
Section 1.58. "Government Obligations" means notes, bonds, securities and
other obligations which are general obligations of the United States of America
or which are unconditionally guaranteed by the United States of America as to
timely payment of principal and interest
Section 159. "Government Contract" means any contract for the purchase of
goods or services by the United States of America or any department, agency or
office thereof.
Section 1.60. "Guarantees" means, as applied to Borrower and its
Subsidiaries, all guarantees, endorsements or other contingent or surety
obligations with respect to obligations of any other Person, whether or not
reflected on the consolidated balance sheet of Borrower and its Subsidiaries,
including any obligation to furnish funds, directly or indirectly (whether by
virtue of partnership arrangements, by agreement to keep-well or otherwise),
through the purchase of goods, supplies or services, or by way of stock
purchase, capital contribution, advance or loan, or to enter into a contract for
any of the foregoing, for the purpose of payment of obligations of any other
Person.
Section 1.61 "Guarantor" shall have the meaning set forth in the
Preamable.
Section 1.62. "Guaranty" shall have the meaning set forth in Section
3.2.2. hereof.
Section 1.63. "Hazardous Materials" means (i) any chemical, compound,
material, mixture or substance that is now or hereafter defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous waste", "restricted hazardous waste", or "toxic
substances" or terms of similar import under any applicable Federal, state or
local law or under the regulations adopted or promulgated pursuant thereto,
including, without limitation, Environmental Laws; (ii) any oil, petroleum or
petroleum derived substance, any drilling fluids, produced waters and other
wastes associated with the exploration, development or production of crude oil,
any flammable substances or explosives, any radioactive materials, any hazardous
wastes or substances, any toxic wastes or substances or any other materials or
pollutants which could cause any of Borrower's properties or assets to be in
violation of any Environmental Laws; (iii) asbestos in any form, urea
formaldehyde foam insulation,
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electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty (50) parts per million;
and (iv) any other chemical, material or substance, exposure to, or disposal of,
which is now or hereafter prohibited, limited or regulated by any Federal, state
or local governmental body, instrumentality or agency.
Section 1.64. "Indebtedness" means, as applied to any Person, without
duplication: (a) all indebtedness for borrowed money; (b) that portion of
obligations with respect to Capital Leases that is properly classified as a
liability on a balance sheet in conformity with GAAP; (c) notes payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; and (e) all indebtedness secured by any
Encumbrance on any property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed by that Person
or is nonrecourse to the credit of that Person. Provided that, if such
indebtedness is not assumed by or is nonrecourse as to such Person, then the
amount of the "Indebtedness" for purposes hereof is limited to the fair value of
such Person's assets which secure such indebtedness.)
Section 1.65. "Insured Foreign Receivable" means an Account Receivable
(other than a Secured Foreign Receivable) that arises from a sale of goods to an
Account Debtor having its principal assets or place of business outside of the
United States of America, Canada or Puerto Rico, so long as a Foreign Credit
Insurer has assumed the risk of nonpayment due to the Account Debtor's financial
inability to pay and due to foreign currency restrictions and political matters
in the country of such Account Debtor, and Borrower has promptly and properly
submitted to the Foreign Credit Insurer proof of loss with respect to all
Accounts Receivable of such Account Debtor for which a claim could be submitted
under the foreign credit insurance policy insuring Borrower's sales to such
Account Debtor.
Section 1.66. "Inventory" means all goods, merchandise, raw materials,
supplies, work in process, finished goods and other tangible personal property
held by Borrower for processing, sale or lease or furnished or to be
furnished by Borrower under contracts of service or to be used or consumed in
Borrower's business.
Section 1.67. "Inventory Cap" means the amount of ONE MILLION SEVEN
HUNDRED THOUSAND AND NO/100 DOLLARS ($1,700,000.00); provided, however, that as
long as no Default or Event of Default shall have occurred and be continuing,
during the months of June, July, August and September in each Fiscal Year, the
Inventory Cap shall increase to the amount of ONE MILLION EIGHT HUNDRED THOUSAND
AND NO/100 DOLLARS ($1,800,000.00).
Section 1.68. "Investment" means, as applied to Borrower and its
Subsidiaries, the purchase or acquisition of (i) any share of capital stock,
partnership interest, evidence of indebtedness or other equity security of any
other Person, or (ii) all or any material portion of the properties and assets
of any Person, any loan, advance or extension of credit to, or contribution to
the capital of, any other Person, any real estate held for sale or investment,
any commodities futures contracts
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held other than in connection with bona fide hedging transactions, any other
investment in any other Person, and the making of any commitment or acquisition
of any option to make an Investment.
Section 1.69. "Letter of Credit" or "Letters of Credit" means any
letter(s) of credit issued by Bank for the account of Borrower and shall include
any Letter of Credit as it may be amended, modified or extended from time to
time.
Section 1.70. "Letter of Credit Application" shall have the meaning set
forth in Section 2.2.2. hereof.
Section 1.71. " Line of Credit" shall have the meaning set forth in
Section 2.1.1. hereof
Section 1.72. "Loan" means any Revolving Loan or the Term Loan.
Section 1.73. "Loans" means each Revolving Loan and the Term Loan.
Section 1.74. "Loan Account" means the account established by Borrower
with Bank or a Bank Affiliate for purposes of administering the Line of Credit.
Section 1.75. "Lockbox Account" shall have the meaning set forth in
Section 10.1.1. hereof.
Section 1.76. "Material Adverse Effect" means (i) a material adverse
effect upon the business, operations, properties, assets or condition (financial
or otherwise) of Borrower and its Subsidiaries; taken as a whole, or (ii) a
material adverse effect on the ability of Borrower to perform its obligations
under this Agreement, the Notes or the Other Documents or the ability of Bank to
enforce or collect any of the Obligations including the obligations of Guarantor
to perform or of Bank to enforce the Guaranty. In determining whether any
individual event would result in a Material Adverse Effect, notwithstanding that
such event does not of itself have such an effect, a Material Adverse Effect
shall be deemed to have occurred if the cumulative effect of such event and all
other then existing events would result in a Material Adverse Effect.
Section 1.77. "Maturity Date" shall have the meaning set forth in Section
2.3.3. hereof.
Section 1.78. INTENTIONALLY OMITTED.
Section 1.79. "Mortgage" means each of the mortgages, deeds of trust,
leasehold mortgages; leasehold deed of trust, collateral assignments of leases
or other real estate security documents executed and delivered by Borrower to
Bank on the Original Closing Date with respect to the Mortgaged Property and
[amended and] confirmed as of the Closing Date, as it may be amended, modified
or supplemented from time to time.
Section 1.80. "Mortgaged Property" means the real property, together with
all improvements thereon, owned by Borrower and listed on Schedule 1.80.
attached hereto.
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Section 1.81. "Note" means the Revolving Credit Note or the Term Note.
Section 1.82. "Notes" means the Revolving Credit Note and the Term Note.
Section 1.83. "Notice of Borrowing" shall have the meaning set forth in
Section 2.1.2. hereof.
Section 1.84. "Obligations" means any and all loans, advances,
indebtedness, liabilities, obligations, covenants or duties of Borrower to Bank
of any kind or nature, including obligations to pay money and to perform acts or
refrain from taking action, whether arising under a loan, lease, credit card,
line of credit, letter of credit, guaranty, indemnity, confirmation, acceptance,
currency exchange, interest rate protection, overdraft or other type of
financing arrangement, and any and all extensions and renewals thereof, and
modifications and amendments thereto, whether in whole or in part, whether
created directly by Bank or acquired by assignment, purchase, discount or
otherwise, whether any of the foregoing are direct or indirect, joint or
several, absolute or contingent under, due or to become due, now existing or
hereafter arising, whether any present or future agreement or instrument, and
whether or not evidenced by a writing and specifically including but not being
limited to (i) the unpaid principal amount outstanding at any time under the
Notes, plus all accrued and unpaid interest thereon, together with all fees,
expenses, including attorneys' fees, penalties, and other amounts owing by or
chargeable to by Borrower under this Agreement, the Notes or the Other Documents
and (ii) unpaid Reimbursement Obligations.
Section 1.85. "Original Closing Date" means April 25, 1996.
Section 1.86. "Original Credit Agreement" shall have the meaning set forth
in the Preamble hereof.
Section 1.87. "Other Documents" means the Collateral Disclosure List, the
Security Agreement, the Mortgage, the Pledge Agreement, the Cash Management
Agreements, the Guaranty, the Stock Pledge and the Letter of Credit Applications
and any other document, agreement or instrument executed by any Credit Party in
connection with this Agreement and any Extension of Credit and any and all
amendments, modifications and supplements thereto.
Section 1.88. "OUTSTANDING AMOUNT" means, as of any date as of which the
amount thereof shall be determined, the outstanding principal amount of the Line
of Credit as of the date of determination.
Section 1.89. "PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or part of its functions under ERISA.
Section 1.90. "Performance Ratio" means the ratio of Borrower's
Consolidated Operating Cash Flow to its Consolidated Debt Service calculated in
the manner set forth in Section 9.3. hereof.
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Section 1.91. "Permitted Capital Expenditures" shall have the meaning set
forth in Section 8.9. hereof.
Section 1.92. "Permitted Encumbrances" shall have the meaning set forth in
Section 8.5. hereof.
Section 1.93. "Permitted Indebtedness" shall have the meaning set forth in
Section 8.1. hereof.
Section 1.94. "Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture or other entity of whatever nature, whether public or private.
Section 1.95. "Plan" means, at any time, an employee pension or other
benefit plan that is subject to Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code and is either (i) maintained by
Borrower or any member of the Controlled Group for employees of Borrower or any
member of the Controlled Group or (ii) if such plan is established, maintained
pursuant to a collective bargaining agreement or any other arrangement under
which more than one (1) employer makes contributions and to which Borrower or
any member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five (5) plan years made
contributions.
Section 1.96. "Pledge Agreement" means the pledge agreement executed and
delivered by Borrower in favor of Bank on the Original Closing Date and
confirmed as of the Closing Date, as it may be amended, modified or supplemented
from time to time.
Section 1.97. "Post Closing Matters" shall have the meaning set forth in
Section 11.1.(m) hereof.
Section 1.98. "Qualifications" means, with respect to any report of
independent public accountants covering any Financial Statements of Borrower and
its Subsidiaries, a qualification to such report (such as a "subject to" or
"except for" statement therein) (i) resulting from a limitation on the scope of
examination of the Financial Statements or the underlying data; (ii) as to the
capability of the Person whose Financial Statements are certified to continue
operations as a going concern; or (iii) which could be eliminated by changes in
the Financial Statements or notes thereto covered by such report (such as, by
the creation of or increase in a reserve or a decrease in the carrying value of
assets) and which if so eliminated by the making of any such change and after
giving effect thereto would constitute an Event of Default; provided that
neither of the following shall constitute a Qualification: (a) a consistency
exception relating to a change in accounting principles with which the
independent public accountants for the Person whose Financial Statements are
being examined have concurred or (b) a qualification relating to the outcome or
disposition of any uncertainty, including but not limited to threatened
litigation, pending litigation being contested in good faith, pending or
threatened claims or other contingencies, the impact of which litigation,
claims, contingencies or uncertainties cannot be determined with sufficient
certainty to permit certification in such Financial Statements.
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Section 1.99. "Qualified Investments" means, as applied to Borrower and
its Subsidiaries, investments in (i) Government Obligations; (ii) certificates
of deposit or other deposit instruments or accounts of banks or trust companies
organized under the laws of the United States or any state thereof that have
capital and surplus of at least ONE HUNDRED MILLION AND NO/100 DOLLARS
($100,000,000.00); (iii) commercial paper that is rated not less than prime-one
or A-1 or their equivalents by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or their successors; and (iv) any repurchase
agreement secured by any one (1) or more of the foregoing.
Section 1.100. "Reimbursement Obligations" means, as of any date as of
which the amount thereof shall be determined, the aggregate obligation of
Borrower, as of such date, to reimburse Bank in respect of Letters of Credit in
accordance with Section 2.2.3 hereof.
Section 1.101. "Release" means any release, emission, disposal, leaching,
or migration into the environment of any Hazardous Materials (including, without
limitation, the abandonment or disposal of any barrels, containers, or other
closed receptacles containing any Hazardous Materials), into or out of any
property owned, occupied or used by Borrower.
Section 1.102. "Reportable Event" means any of the events described in
Section 4043(b) of ERISA.
Section 1.103. "Revolving Credit Period" means the period beginning on the
Closing Date and extending through and including the Revolving Credit
Termination Date or such earlier date on which the obligation of Bank to make
Revolving Loans is terminated or the Commitment Amount is reduced to zero (0) in
accordance with the terms hereof.
Section 1.104. "Revolving Credit Termination Date" means (i) May 31, 1999
and (ii) any subsequent date to which the Revolving Credit Termination Date may
be extended under Section 2.1.11. hereof.
Section 1.105. "Revolving Credit Note" shall have the meaning set forth in
Section 2.1.6. hereof.
Section 1.106. "Revolving Loan" means the loan(s) and advance(s) which
Borrower requests or is deemed to have requested pursuant to Section 2.1.1.
hereof.
Section 1.107. "Secured Foreign Receivable" means an Account Receivable
(other than an Insured Foreign Receivable) that arises from the sale of goods to
an Account Debtor having its principal assets or place of business outside of
the United States of America, Canada or Puerto Rico so long as Bank has received
in respect of such Account Receivable a letter of credit or similar guaranty of
payment in form and substance and issued or confirmed by a financial institution
satisfactory to Bank and its legal counsel that has not expired, been revoked
or terminated, and has been pledged to, and had the proceeds thereof assigned
to, Bank.
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Section 1.108. "Security Agreement" means the security agreement executed
and delivered by Borrower in favor of Bank on the Original Closing Date and
confirmed on the Closing Date, as it may be amended, modified or supplemented
from time to time.
Section 1.109. "Security Value of Accounts Receivable" means, as of any
date as of which the amount thereof shall be determined, eighty-five percent
(85%) (or such lesser percentage as Bank may determine in its reasonable credit
judgment) of the Eligible Account Receivables of Borrower as of the date of
determination.
Section 1.110. "Security Value of Inventory" means, as of any date as of
which the amount thereof shall be determined, the lesser of:
(i)(a) forty percent (40%) (or such lesser percentage as Bank may determine from
time to time in its reasonable credit judgment) of Borrower's Eligible Inventory
as of the date of determination valued on a FIFO basis at the lower of cost or
market value and (b), as long as no Default or Event of Default shall have
occurred and be continuing, during the months of June, July, August and
September in each Fiscal Year, forty-five percent (45%) (or such lesser
percentage as Bank may determine from time to time in its reasonable credit
judgment) of Borrower's Eligible Inventory as of the date of determination
valued on a FIFO basis at the lower of cost or market value, or
(ii) the Inventory Cap in effect on such date.
Section 1.111. "Solvent" means, when used with respect to any Person, that
as of the date as to which the Person's solvency is to be determined:
(a) the fair saleable value of such Person's properties and assets
is in excess of the total amount of its liabilities (including contingent
liabilities) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able to meet its debts as they mature.
Section 1.112. "Stock Pledge" means the stock pledge agreement executed
and delivered by Guarantor in favor of Bank on the Original Closing Date and
confirmed as of the Closing Date, as it may be amended, modified or supplemented
from time to time.
Section 1.113. "Subordinated Indebtedness" means Indebtedness, whether now
existing or hereafter arising, with respect to which the payment of the
principal of and interest on is expressly subordinated in right of payment, in
form and on terms approved by Bank in writing, to the prior payment in full of
the Obligations.
Section 1.114. "Subsidiary" means any Person of which fifty percent (50%)
or more of the ordinary voting power for the election of a majority of the
members of the board of directors or
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other governing body of such Person is held or controlled by Borrower or a
Subsidiary of Borrower; or any other such organization the management of which
is directly or indirectly controlled by Borrower or a Subsidiary of Borrower
through the exercise of voting power or otherwise; or any joint venture, whether
incorporated or not, in which Borrower has a fifty percent (50%) or more
ownership interest. The term "control" (and its correlative meanings "controlled
by" and "under common control with") as used in this Section means the
possession, directly or indirectly, of the power to direct, or cause the
direction of, the management and policies of a Person, whether through ownership
of voting stock, by contract or otherwise.
Section 1.115. "TERM NOTE" shall have the meaning set forth in Section
2.3.2. hereof.
Section 1.116. "TERM LOAN" shall have the meaning set forth in Section
2.3.1. hereof.
Section 1.117. "Term Loan Reserve" shall mean TWO HUNDRED AND FIFTY
THOUSAND AND NO/100 DOLLARS ($250,000.00); provided, however, that the Term Loan
Reserve shall, as long as no Default or Event of Default shall have occurred and
be continuing, be reduced to zero at such times as the outstanding principal
amount of the Term Loan is less than or equal to FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($500,000.00).
Section 1.118. "Uniform Customs and Practice" means the Uniform Customs
and Practice for Documentary Credits (1993) Revision, International Chamber of
Commerce Publication No. 500.
Section 1.119. "Work in Process" means as of any date of which the amount
thereof shall be determined, that portion of Borrower's Inventory which
constitutes work-in-process.
SECTION 2. THE CREDIT FACILITIES
Section 2.l. Line of Credit.
Section 2.1.1. Revolving Loans. Upon the execution of this Agreement, Bank
agrees to extend to Borrower a line of credit, so that as long as no Default or
Event of Default has occurred and is continuing, Borrower may borrow, repay and
reborrow, on a revolving basis in one (1) or more Revolving Loans from time to
time prior to the close of business on the Revolving Credit Termination Date,
amounts which together with the amount of (i) Credits Outstanding and (ii)
unpaid Reimbursement Obligations deemed to be Revolving Loans under this Section
2.1.1., do not exceed in the aggregate at any one time outstanding the lesser of
the Borrowing Base or the Commitment Amount in effect from time to time (the
"Line of Credit"). Bank shall have the right, in its reasonable credit judgment,
to deem any unpaid Reimbursement Obligations or any other payments, deposits,
guaranties or indemnifications made by Bank under any letter of credit,
reimbursement agreement, acceptance, guaranty or similar instrument to be
Revolving Loans, and Bank may, in its reasonable credit judgment, establish such
reserves as it deems appropriate against any present or future obligation of
Bank to make payment, to deposit or to perform in respect of any of the same.
Bank may, in its reasonable credit judgment, fund such reserves
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and/or charge the same to the Loan Account at such time as it deems appropriate.
Notwithstanding any provision of this Agreement to the contrary, all Revolving
Loans, any unpaid Reimbursement Obligations, and all other payments, deposits,
guaranties or indemnifications deemed to be Revolving Loans by Bank hereunder,
shall constitute one obligation of Borrower to Bank, secured by Bank's security
interest in the Collateral.
Section 2.1.2. Notice and Manner of Borrowing. Except as provided in the
Cash Management Agreements, whenever Borrower desires to obtain a Revolving
Loan, Borrower shall notify Bank (which notice shall be irrevocable) by telex,
telegraph, telephone or telecopier received no later than 2:00 p.m. on the date
on which the requested Revolving Loan is to be made. Such notice shall specify
the effective date and amount of each Revolving Loan subject to the limitations
set forth in Section 2.1.1. hereof. Each such notification (a "Notice of
Borrowing") shall be immediately followed by a written confirmation thereof by
Borrower in substantially the form of Exhibit A attached hereto; provided,
however, that if such written confirmation differs in any material respect from
the action taken by Bank, the records of Bank shall control absent manifest
error. Subject to the terms and conditions of this Agreement, and provided that
the Borrowing Base is sufficient to permit Bank to make the requested Revolving
Loan, Bank shall make each Revolving Loan on the effective date specified
therefor by crediting the amount of such Revolving Loan to the Loan Account.
Section 2.1.3. Administration of the Line of Credit. Notwithstanding any
provision of this Agreement to the contrary, Borrower and Bank hereby
acknowledge and agree that the primary purpose of the Line of Credit and the
making of loans and advances thereunder is to fund Borrower's daily cash
requirements. In furtherance thereof, Borrower hereby authorizes Bank, subject
to the terms, conditions and limitations of this Agreement and the cash
management, lockbox and similar agreements (the "Cash Management Agreements")
which Bank requires Borrower to execute and deliver from time to time in
connection with the administration of the Line of Credit, to automatically make
Revolving Loans in such amounts as may be necessary to fund Borrower's daily
cash requirements. In addition, Bank hereby agrees to apply and credit against
the Line of Credit any amounts which are deposited on any Business Day in the
Lockbox Account in accordance with the terms, conditions and limitations of this
Agreement and the Cash Management Agreements. In consideration of Bank's
agreement to apply and credit such amounts deposited in the Lockbox Account
prior to the actual collection of such amounts by Bank in good funds, Borrower
hereby agrees that Bank may assess a float fee against Borrower by holding
amounts deposited in the Lockbox Account for one Business Day before crediting
the amount thereof against the outstanding principal amount of the Line of
Credit. In addition, in consideration of Bank's services in connection with the
administration of the Line of Credit, Borrower hereby agrees to pay to Bank a
monthly administrative fee of $1,500.00, which fee shall be payable monthly in
advance upon the Closing Date (such fee to be pro rated for the month of July
and any partial calendar month upon the termination of the Line of Credit) and
on the first day of each succeeding calendar month thereafter. Borrower
acknowledges that Bank shall have the right to terminate its obligations and
agreements under this Section 2.1.3. upon the occurrence and during the
continuance of an Event of Default or in accordance with the terms of the Cash
Management Agreements.
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Section 2.1.4. Calculation of Borrowing Base. The Borrowing Base as of any
time shall be calculated by Bank using the most recent Borrowing Base
Certificate and other financial reports delivered by Borrower to Bank under
Section 7.1. hereof. Bank shall have the right, in its reasonable credit
judgment, and at any time and for any reason, to exclude any items, types or
categories of Accounts Receivable or Inventory from the Borrowing Base and to
reduce the dollar amount of (i) Eligible Accounts Receivable by the amount of
discounts, credits, allowances and returns of any kind then outstanding,
issued, granted, owing, accrued or liable to be accrued or (ii) Eligible
Inventory by the amount of special order goods, advertising, packaging, parts,
supplies, tooling or similar items. Any Accounts Receivable or Inventory which
have been so excluded as well as any Accounts Receivable or Inventory which are
or have become Disqualified Accounts Receivable or Disqualified Inventory for
any other reason shall remain as collateral for the Obligations notwithstanding
such exclusion or disqualification.
Section 2.1.5. Reduction of Commitment Amount. Borrower may from time to
time, by written notice delivered to Bank at least five (5) Business Days prior
to the date of the requested reduction, reduce by integral multiples of ONE
HUNDRED THOUSAND AND NO/l00 DOLLARS ($100,000.00) any unborrowed portion of the
Commitment Amount. No reduction of the Commitment Amount shall be subject to
reinstatement.
Section 2.1.6. Revolving Credit Note. Revolving Loans shall be evidenced
by a promissory note executed by Borrower in substantially the form attached
hereto as Exhibit B in substitution for that certain revolving credit note
executed by Borrower on the Original Closing Date (the "Revolving Credit Note"),
with all blanks therein appropriately completed, payable to the order of Bank,
which Revolving Credit Note is hereby incorporated herein by reference and made
a part hereof.
Section 2.1.7. Payment of Principal. The aggregate unpaid principal amount
of all Revolving Loans, together with accrued and unpaid interest thereon, as
evidenced by the Revolving Credit Note, shall, unless sooner accelerated by Bank
following the occurrence of an Event of Default, be repaid by Borrower on the
Revolving Credit Termination Date.
Section 2.1.8. Interest. The aggregate unpaid principal amount of all
Revolving Loans, as evidenced by the Revolving Credit Note, shall bear interest
at a fluctuating per annum rate equal to the Base Rate as in effect from time to
time, plus the Base Rate Margin. Interest shall be due and payable (i) in
arrears commencing August 1, 1997 and continuing on the first (1st) day of each
succeeding calendar month (or portion thereof) until the principal amount of the
Revolving Credit Note is paid in full and (ii) when the principal amount of the
Revolving Credit Note is paid in full (whether at maturity, upon acceleration,
upon prepayment or otherwise).
Section 2.1.9. Record of Revolving Loans. Each Revolving Loan shall be
recorded on the books maintained by Bank with respect to the Loan Account by
Bank. Bank shall also record on such books all payments made by Borrower on the
Revolving Credit Note, interest and expenses and other appropriate debits and
credits as herein provided. Bank shall from time to time render and send to
Borrower a statement of the Loan Account showing the outstanding aggregate
principal balance of the Revolving Credit Note, together with interest and other
appropriate
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debits and credits as of the date of the statement. The statement of Loan
Account shall be considered correct in all respects and accepted by and be
conclusively binding upon Borrower unless Borrower makes specific written
objections thereto within sixty (60) days after the date the statement of the
Loan Account is received or later presents objective evidence demonstrating a
manifest error by Bank in the preparation of the statement of the Loan Account.
Bank may also record and endorse on Schedule A attached to and forming a part of
the Revolving Credit Note appropriate notations evidencing (i) the date and
amount of each Revolving Loan to be evidenced by the Revolving Credit Note and
(ii) the date and amount of each payment of principal made by Borrower with
respect thereto; provided, however, that the failure of Bank to make such
notation shall not limit or otherwise affect the obligations of Borrower under
the Revolving Credit Note or this Agreement. Bank is hereby irrevocably
authorized by Borrower to so endorse such Schedule A and to attach to and make a
part of the Revolving Credit Note a continuation of such Schedule A as and when
required.
Section 2.1.10. Termination. The Line of Credit and Bank's obligation to
lend thereunder shall terminate on the Revolving Credit Termination Date, at
which point all of the sums due and owing under the Line of Credit shall be
immediately due and payable, unless the Line of Credit is renewed in accordance
with Section 2.1.l1. hereof.
Section 2.1.11 Renewal. Bank may, in its sole and absolute discretion,
upon written agreement with Borrower, renew the Line of Credit for additional
periods of time but not in excess of one (1) year at any one time) on such terms
and conditions as it may elect; provided, however, that Bank hereby agrees that
it shall provide notice to Borrower of its intention not to renew the Line of
Credit at least thirty (30) days prior to the Revolving Credit Termination Date.
In the event Bank agrees to a renewal of the Line of Credit, the Revolving
Credit Termination Date shall be extended for a corresponding period.
Section 2.1.12. Use of Proceeds. Revolving Loans under the Line of Credit
shall be used solely for the future working capital needs of Borrower and to pay
fees and expenses incurred by Borrower in connection with the closing of the
transactions contemplated by this Agreement.
Section 2.1.13. Commitment Fee. Borrower shall pay to Bank during the
Revolving Credit Period a commitment fee (the "Commitment Fee") computed at the
rate of one-half of one percent (.50%) per annum on the average daily amount of
the unborrowed portion of the Commitment Amount in effect from time to time.
Commitment fees shall be payable monthly in arrears commencing August 1, 1997
and continuing on the first day of each succeeding calendar month during the
Revolving Credit Period.
Section 2.1.14. Mandatory Prepayment. If at any time the outstanding
aggregate principal amount of all Revolving Loans shall exceed the Borrowing
Base then in effect, then any such excess amount shall, at Bank's election, be
due and payable on demand.
Section 2.1.15. Voluntary Prepayment. If Borrower elects to prepay the
outstanding principal amount of the Line of Credit and terminate this Agreement
at any time prior to the
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Revolving Credit Termination Date, then Borrower shall pay a prepayment fee in
the amount of one and one-half percent (1.5%) of the then effective Commitment
Amount if such prepayment occurs on or prior to July , 1998 and one percent
(1.0%) of the then effective Commitment Amount if such prepayment occurs after
such date and prior to the Revolving Credit Termination Date.
Section 2.2. Letters of Credit.
Section 2.2.1. Issuance. Upon the execution of this Agreement, and as long
as no Default or Event of Default has occurred and is continuing, Bank, either
directly or through a Bank Affiliate, hereby agrees to issue, extend, amend or
renew Letters of Credit from time to time after the Closing Date, either
directly or through a Bank Affiliate, for the account of Borrower; provided,
however, that the amount of each requested Letter of Credit, when added to the
aggregate amount of all outstanding Revolving Loans, all Credits Outstanding and
(without duplication) all unpaid Reimbursement Obligations deemed to be
Revolving Loans and other payments, deposits, guaranties or indemnifications
deemed to be Revolving Loans under Section 2.1.1. hereof, does not exceed the
lesser of the Borrowing Base or the Commitment Amount in effect from time to
time and provided, further, that the aggregate amount of Credits Outstanding and
unpaid Reimbursement Obligations (after taking into account the amount of the
requested Letter of Credit) shall not exceed TWO MILLION AND NO/l00 DOLLARS
($2,000,000.00). Notwithstanding the foregoing, the issuance of each Letter of
Credit other than documentary letters of credit shall be made on a case by case
basis in the sole and absolute discretion of Bank.
Section 2.2.2. Application. Borrower shall request the issuance of a
Letter of Credit by its execution and delivery to Bank of an application in such
form as Bank may require from time to time (the "Letter of Credit Application").
If the Letter of Credit Application is acceptable to Bank, in its sole and
absolute discretion, then Bank shall prepare the Letter of Credit in accordance
with the instructions set forth in the Letter of Credit Application and,
provided that there is adequate availability under the Line of Credit as set
forth in Section 2.1.1. above, issue the Letter of Credit to the Beneficiary
thereof unless otherwise instructed by Borrower. Borrower acknowledges and
agrees that Bank shall have no obligation to issue any Letter of Credit which
provides for an expiration date later than thirty (30) days prior to the
Revolving Credit Termination Date, unless Borrower provides cash collateral for
the full face amount of such Letter of Credit.
Section 2.2.3. Reimbursement. Borrower hereby acknowledges and agrees that
it shall be obligated to reimburse Bank in respect of obligations under Letters
of Credit:
(a) except as otherwise provided in this Agreement, or the applicable
Letter of Credit Application, on each date that any Drawing is honored by
Bank or a Bank Affiliate, or Bank or a Bank Affiliate otherwise makes a
payment with respect thereto, and only to the extent that such Drawing is
not deemed to be a Revolving Loan under Section 2.1.1. hereof, (i) the
amount paid by Bank or a Bank Affiliate under or with respect to such
Drawing, and (ii) the amount of any taxes, fees, charges or other
reasonable costs and expenses whatsoever
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incurred by Bank or any Bank Affiliate in connection with any payment made
by Bank or Bank Affiliate under, or with respect to, such Letter of
Credit;
(b) upon the reduction (but not termination) of the Commitment Amount to
an amount less than the sum of (i) all outstanding Revolving Loans and
(without duplication) amounts deemed to be Revolving Loans as of such date
and Credits Outstanding as of such date plus (ii) the amount of unpaid
Reimbursement Obligations as of such date, an amount equal to any such
difference which relates to Letters of Credit, which amount shall be held
by Bank as cash collateral for all Reimbursement Obligations; and
(c) upon the termination of the Commitment Amount, or the acceleration of
the Reimbursement Obligations in accordance with Section 12.1. hereof, an
amount equal to the sum of (i) Credits Outstanding as of such date plus
(ii) the amount of unpaid Reimbursement Obligations as of such date, which
amount Shall be held by Bank as cash collateral for all Reimbursement
Obligations.
Borrower shall pay interest on any amounts due and payable under this Section
2.2.3. from the date such amounts are payable (whether at maturity, by
acceleration or otherwise) until paid in full at the rate of interest applicable
to Revolving Loans for three (3) days and, thereafter, at the Default Rate
applicable to the Revolving Loans.
Section 2.2.4. Debit to Line of Credit. Bank shall be entitled, in its
sole and absolute discretion, to debit the amount of any Drawing as well as any
fees, costs and expenses incurred by Bank or a Bank Affiliate in connection with
such Drawing against the Line of Credit and deem such amount to be Revolving
Loans under Section 2.1.1. hereof.
Section 2.2.5. Termination of Obligation. The obligation of Bank to issue
Letters of Credit under this Section 2.2. shall terminate thirty (30) days prior
to the Revolving Credit Termination Date or any renewal thereof.
Section 2.2.6. Obligations Absolute. The obligations of Borrower with
respect to Letters of Credit issued under this Agreement shall be unconditional
and irrevocable, shall be paid strictly in accordance with the terms of this
Agreement under all circumstances and shall not be reduced by: (a) any lack of
validity or enforceability of any document executed between Borrower and a
Beneficiary; (b) the existence of any claim, set-off, defense or other right
which Borrower may have at any time against a Beneficiary or any transferee of a
Letter of Credit (or any Persons for which such Beneficiary or any such
transferee may be acting), against Bank, or against any other Person, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction; and (c) any statement or any other document presented
under a Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect, unless Bank had actual knowledge (without any investigation
having been made) that such statement or other document was forged, fraudulent,
invalid or insufficient.
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Section 2.2.7. Indemnification. Borrower hereby indemnifies and holds
Bank, and its directors, officers, employees and agents (collectively, the "Bank
Agents"), harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses (including reasonable legal fees and expenses)
which Bank or any Bank Agents may incur or which may be claimed against Bank by
any Person by reason of or in connection with the execution and delivery or
transfer of, or payment or failure to make lawful payment under, a Letter of
Credit; provided, however, that Borrower shall not be required to indemnify Bank
or any Bank Agents for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by Bank's (i) failure to
act in good faith and in conformity with such laws, regulations or commercial or
banking customs, as Bank may reasonably deem to be applicable, or (ii) honoring
a Drawing on a Letter of Credit issued hereunder when at the time of such
honoring Bank had actual knowledge (without any investigation having been made)
that such Drawing was forged, fraudulent, invalid or insufficient. Nothing in
this Section 2.2.7. is intended to limit Borrower's obligations hereunder.
Without prejudice to the survival of any other obligation of Borrower hereunder,
the indemnities and obligations of Borrower contained in this Section 2.2.7.
shall survive the payment in full of the Obligations. In case any claim is
asserted or any action or proceeding is brought against Bank or any Bank Agents,
Bank or any such Bank Agents shall promptly notify Borrower of such claim,
action or proceeding and Borrower shall resist, settle or defend with counsel
reasonably acceptable to Bank, such claim, action or proceeding. If, within
thirty (30) days of Borrower's receipt of such notice, Borrower does not
commence and continue to prosecute the defense of such claim, action or
proceeding, Bank, or any such Bank Agents, may retain a single legal counsel to
represent them in such defense and Borrower shall indemnify Bank, or any such
Bank Agents, for the reasonable fees and expenses of such legal counsel. Subject
to the foregoing, Bank shall cooperate and join with Borrower, at the expense of
Borrower, as may be required in connection with any action taken or defended by
Borrower.
Section 2.2.8. Liability of Bank. Any action, inaction or omission on the
part of Bank under or in connection with a Letter of Credit issued hereunder or
related instruments or documents, if in good faith and in conformity with such
laws, regulations or commercial or banking customs as Bank may reasonably deem
to be applicable, shall be binding upon Borrower, shall not place Bank under any
liability to Borrower, shall not affect, impair or prevent the vesting of any of
Bank's rights or powers hereunder or Borrower's obligation to make full
reimbursement to Bank. Borrower assumes all risks of the acts or omissions of a
Beneficiary or transferee of a Letter of Credit with respect to its use of the
Letter of Credit. In furtherance of, and not in limitation of Bank's rights and
powers under the Uniform Customs and Practice, but subject to all other
provisions of this Section 2.2. it is understood and agreed that Bank shall not
have any liability for and that Borrower assumes all responsibility for: (a) the
genuineness of any signature; (b)the form, correctness, validity, sufficiency,
genuineness, falsification and legal effect of any draft, certification or other
document required by a Letter of Credit and the authority of the person signing
the same; (c) the failure of any instrument to bear any reference or adequate
reference to the Letter of Credit or the failure of any persons to note the
amount of any instrument on the reverse of the Letter of Credit or to surrender
the Letter of Credit or otherwise to comply with the terms and conditions of the
Letter of Credit; (d) the good faith or acts of any person other than Bank and
its agents and employees; (e) the existence, form, sufficiency or breach of or
default under any other agreement or instrument of any nature whatsoever; (f)
any
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delay in giving or failure to give any notice, demand or protest; and (g) any
error, omission, delay in or nondelivery of any notice or other communication,
however sent. The determination as to whether the required documents are
presented prior to the expiration of a Letter of Credit issued hereunder and
whether such other documents are in proper and sufficient form for compliance
with the Letter of Credit shall be made by Bank in its sole and absolute
discretion.
Section 2.2.9. Fees. Borrower hereby agrees to pay to Bank or a Bank
Affiliate any issuance, drawing, renewal, amendment or other fee or charge
customarily assessed by Bank or a Bank Affiliate in connection with any Letter
of Credit. Any such fees shall be paid at the time Borrower becomes obligated to
pay any such fee.
Section 2.3 Term Loan
Section 2.3.1 Amount of Loan. Borrower hereby acknowledges and agrees that
Bank loaned the principal amount of ONE MILLION TWO HUNDRED THOUSAND AND NO/100
DOLLARS ($1,200,000.00) to Borrower on the Original Closing Date (the "Term
Loan"). Borrower hereby further acknowledges and agrees that as of the Closing
Date the outstanding principal amount of the Term Loan is NINE HUNDRED TWENTY
THOUSAND AND 00/100 DOLLARS ($920,000.00).
Section 2.3.2. Term Note. The Term Loan shall be evidenced by a promissory
note executed by Borrower in substantially the form attached hereto as Exhibit C
(the "Term Note"), with all blanks therein appropriately completed and payable
to the order of Bank, which Term Note is hereby incorporated by reference and
made a part hereof.
Section 2.3.3. Payment of Principal. Commencing August 1, 1997 and
continuing on the first day of each succeeding calendar month thereafter, the
outstanding principal amount of the Term Loan, as evidenced by the Term Note,
shall be payable in seventeen (17) consecutive installments, the first sixteen
(16) of such installments to be in the amount of TWENTY THOUSAND AND NO/100
DOLLARS ($20,000.00) and, if not sooner paid, a final installment in the then
unpaid principal amount of the Term Loan, together with accrued and unpaid
interest thereon and all other amounts due and owing under this Agreement with
respect to the Term Loan, shall be due and payable on May 31, 1999 (the
"Maturity Date").
Section 2.3.4. Interest The unpaid principal amount of the Term Loan, as
evidenced by the Term Note, shall bear interest at a fluctuating per annum rate
equal to the Base Rate as in effect from time to time, plus the Base Rate
Margin. Interest on the unpaid principal amount of the Term Note shall be due
and payable commencing July 1, 1997 and continuing on the first day of each
succeeding calendar month thereafter until the entire outstanding principal
amount of the Term Loan shall be paid in full.
Section 2.3.5. Voluntary Prepayment. Borrower may prepay the principal of
the Term Note in whole at any time prior to the Maturity Date upon the payment
of a prepayment premium in the amount of one and one-half percent (1.5%) of the
outstanding principal amount of the Term Loan on the Closing Date if such
prepayment occurs prior to June , 1998 and one
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percent (1.0%) of the outstanding principal amount of the Term Loan on the
Closing Date if such prepayment occurs after such date and prior to the Maturity
Date.
Section 2.3.6. Mandatory Prepayment. Borrower shall prepay the outstanding
principal amount of the Term Loan with the net proceeds received by Borrower
from (a) the sale or other disposition of any Equipment in excess of $25,000 and
(b) the sale or other disposition (including sale and leaseback) of any of the
Mortgaged Property. Any such prepayment shall be without premium or penalty, and
shall first be applied to any outstanding cost or expense due to Bank, then to
any accrued and unpaid interest and then to installments of principal in the
inverse order of maturity thereof.
Section 2.3.7. Maturity. Except where this Agreement or any instrument
evidencing indebtedness hereunder provides that the obligations of Borrower
shall become due upon any earlier date and notwithstanding any applicable
provision permitting repayment at a later date, the Term Loan shall become fully
and finally due and payable on the Maturity Date.
Section 2.3.8. Use of Proceeds. The proceeds of the Term Loan shall be
used solely for the purposes set forth in Section 2.1.12. hereof.
Section 2.4. General Terms Applicable to Any Extension of Credit.
Section 2.4.1. Increased Costs and Capital Adequacy.
(a) If Bank determines that any change in any law or regulation or
directive or bulletin or in the interpretation thereof after the Closing Date by
any court or administrative or governmental authority charged with the
administration thereof shall either (i) impose, modify or deem applicable any
reserve, special deposit or similar requirement against any credit extended by
Bank under this Agreement, or (ii) impose on Bank or its parent bank holding
company any other condition regarding this Agreement and the result of any event
referred to in the preceding clause (i) or (ii) above shall be to increase the
cost to Bank or such holding company of issuing, funding or maintaining any
Extension of Credit (which increase in cost shall be determined by Bank's
reasonable allocation of the aggregate of such cost increases resulting from
such event), then, upon written demand by Bank, Borrower shall pay to Bank from
time to time as specified by Bank, additional amounts which shall be sufficient
to compensate Bank for such increased cost from the date of such change. A
certificate as to such increased cost incurred by Bank as a result of any event
mentioned in clause (i) or (ii) above prepared in reasonable detail (which shall
include the method employed by Bank in determining the allocation of such costs
to Borrower) and otherwise in accordance with this subsection (a), submitted by
Bank to Borrower, shall be conclusive evidence, absent manifest error, as to the
amount thereof.
(b) If Bank shall determine that the adoption after the Closing Date
of any applicable law, rule or regulation pursuant to or arising out of the July
1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled "International Convergence of Capital Measurement and Capital
Standards", or the adoption after the date
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hereof of any other law, rule, or regulation regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof;
or compliance by Bank or its parent bank holding company with any new or amended
requirement or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, except
any such adoption or change or any such compliance with a request or directive
which applies or has been applied solely to Bank or its parent Bank holding
company by reason of events or conditions relating solely to Bank, has the
effect of reducing the rate of return on Bank's or its parent bank holding
company's capital as a consequence of its commitment hereunder to a level below
that which Bank or such holding company could have achieved but for such
adoption, change or compliance by an amount deemed by Bank to be material (for
which reduction of the rate of return shall be determined by Bank's or such
holding company's reasonable allocation of such reduction of the rate of return
resulting from such event) then, upon written demand by Bank, Borrower shall pay
to Bank, from time to time as specified by Bank, such additional amount or
amounts which shall be sufficient to compensate Bank for such reduction. A
certificate as to such increased cost incurred by Bank as a result of any event
mentioned in this subsection (b), prepared in reasonable detail (which shall
include the method employed by Bank in determining the allocation of such costs
to Borrower) and otherwise in accordance with this subsection (b) submitted by
Bank to Borrower, shall be conclusive evidence, absent manifest error, as to the
amount thereof.
(c) Amounts payable by Borrower pursuant to this Section 2.4.1.
shall be payable within ten (10) Business Days of receipt by Borrower of a
certificate described in subsection (a) or (b) of this Section 2.4.1.
(d) Notwithstanding any provision of this Section 2.4.1. to the
contrary, prior to seeking payment from Borrower of any amounts pursuant hereto,
Bank shall first use its best efforts (which shall not require additional costs
or administrative burdens on Bank) to take such steps as would eliminate or
reduce any cost or expense otherwise to be borne by Borrower under this Section
2.4.1.
(e) Borrower shall have the right, within thirty (30) Business Days
of the delivery of demand for payment under this Section 2.4.1., to terminate
this Agreement without premium or penalty by paying the entire principal amount
due and payable under this Agreement, the Notes and the Other Documents and
paying any amount required in respect of Credits Outstanding in accordance with
Section 2.2.3.(c) hereof.
(f) Notwithstanding any provision of this Section 2.4.1. to the contrary,
in no event shall Borrower be obligated to pay any amounts under this Section
2.4.1. which relates to any income, excise or franchise taxes imposed or sought
to be imposed on Bank.
Section 2.4.2. Interest. Interest shall accrue on the basis of a three
hundred sixty (360) day year, and shall be calculated according to the actual
number of days elapsed during each accrual period. Each adjustment in the Base
Rate shall correspondingly result immediately, without notice or demand of any
kind, in a new rate of interest effective with respect to periods on and after
the date of such adjustment. The Base Rate is a base interest rate used by Bank
for
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loans making reference thereto and is not necessarily the lowest rate at which
Bank may lend money. The Base Rate is neither tied to any external rate of
interest nor is it a rate charged by Bank to any particular class or category of
customer. If the Base Rate shall be discontinued or for any other reason not be
available for determining the rate of interest chargeable under this Agreement,
then Bank shall select a substitute method of determining the rate of interest
chargeable under this Agreement and shall notify Borrower of such selection,
which method shall, in Bank's good faith estimation, yield a rate of return to
Bank substantially equivalent to the rate of return that Bank would have
expected to receive if the Base Rate remained available for that purpose.
Section 2.4.3. Base Rate Margins. As of the Closing Date and during any
period in which an Event of Default shall have occurred and be continuing, the
Base Rate Margin applicable to the Line of Credit shall be 1.50% and the Base
Rate Margin applicable to the Term Loan shall be 2.0%. Commencing as of April
30, 1998 and continuing on the last day of each succeeding Fiscal Quarter, and
as long as no Event of Default shall have occurred and be continuing, the Base
Rate Margin applicable to any Loan shall be subject to change (each such change,
a "Margin Change") by reference to Borrower's Performance Ratio as of the last
day of any such Fiscal Quarter as follows:
PERFORMANCE RATIO BASE RATE MARGIN BASE RATE MARGIN
APPLICABLE TO APPLICABLE TO TERM
LINE OF CREDIT LOAN
Equal to or greater than 1.00% 1.50%
1.25 to 1.0 (or if an Event
of Default shall exist)
Equal to or greater than 1.25% 1.75%
1.0 to 1.0 but less than
1.25 to 1.0
Less than l.0 to l.0 1.50% 2.00%
The calculation of the Performance Ratio for purposes of a Margin Change shall
be reviewed and verified by Bank, in its sole and absolute discretion, by
reference to the Financial Statements to be provided by Borrower under Section
7.1. hereof. Each Margin Change shall be effective, including with respect to
Loans which are then outstanding, as of the date on which the Financial
Statements referred to in Section 7.1. hereof are provided to the Bank
(notwithstanding the fact that the calculation of the Leverage Ratio associated
with such Margin Change is reviewed and verified by the Bank at a later date).
Section 2.4.4. Late Payment. Any payment of principal or interest due
under this Agreement which is not made within ten (10) days of the date
specified for payment (other than a date fixed upon acceleration) shall bear a
late fee equal to five percent (5%) of the amount of the
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payment then due to compensate Bank for the costs incurred in processing the
late payment. The imposition or collection of a late fee shall not affect Bank's
right to exercise any of its rights and remedies upon the occurrence of an Event
of Default.
Section 2.4.5. Method of Payment. All payments and prepayments of
principal and all payments of interest shall be made by Borrower to Bank at its
head office in immediately available funds, on or before 3:00 p.m. on the due
date thereof, free and clear of and without any deduction or withholding for,
any taxes or other payments. Bank may, and Borrower hereby authorizes Bank to,
debit the amount of any payment not made by such time to the Loan Account.
Section 2.4.6. Default Rate. Overdue principal (whether at maturity, by
reason of acceleration or otherwise) and, to the extent permitted by applicable
law, overdue interest and fees or any other amounts payable under this Agreement
shall bear interest from and including the due date thereof until paid, at the
Default Rate, which interest shall be payable on demand.
SECTION 3. SECURITY FOR THE OBLIGATIONS
Section 3.1. Collateral Disclosure List. Borrower shall deliver to Bank on
the Closing Date a list identifying, inter alia, all of its properties and
assets and the locations thereof on a form provided by Bank (the "Collateral
Disclosure List").
Section 3.2. Security. The Obligations shall be secured by:
Section 3.2.1. All properties and assets of Borrower, including
goods, accounts receivable, inventory, contract rights, accounts, documents,
instruments and chattel paper, business and financial records and general
intangible assets of Borrower as more particularly defined in the Security
Agreement and the Pledge Agreement.
Section 3.2.2. A guaranty executed by the Guarantor dated the
Original Closing Date (the "Guaranty"), which shall be secured by a pledge of
all of Borrower's right, title and interest in and to all shares of capital
stock of the Borrower pursuant to the Stock Pledge.
Section 3.2.3. A first lien on the Mortgaged Property pursuant to a
Mortgage.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce Bank to enter into this Agreement and to make any
Extension of Credit, the Credit Parties, to the extent indicated in this Section
4, make the following representations and warranties to Bank, which shall be
deemed made as of the date hereof and, except as otherwise provided in this
Section 4., the date of each Extension of Credit.
Section 4.1. Corporate Existence. Each Credit Party is a corporation duly
incorporated, validly existing and in good standing under the laws of its
respective state of incorporation and to the best of its knowledge, is duly
qualified in all other jurisdictions in which the properties and.
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assets owned, leased or operated by it, or the nature of the business conducted
by it, make such qualification necessary and where failure to so qualify would
have a Material Adverse Effect.
Section 4.2. Corporate Authority. The execution, delivery and performance
by each of the Credit Parties of this Agreement, the Notes, the Credit Parties
and the Other Documents, the consummation of the transactions herein and therein
contemplated, and the fulfillment of and compliance with the terms and
provisions hereof and thereof by each of the Credit Parties have been duly
authorized by all necessary corporate action of the Credit Parties and are
within its corporate power and will not result in a violation of its Certificate
of Incorporation or Bylaws, if and as amended.
Section 4.3. Binding Obligations. This Agreement, the Notes and the Other
Documents constitute the legal, valid and binding obligations of the Credit
Parties, enforceable against them in accordance with their respective terms
except as the enforceability thereof may be limited by bankruptcy, insolvency or
other similar laws of general applicability affecting the enforcement of
creditors' rights or by general principles of equity limiting the availability
of equitable remedies.
Section 4.4. Noncontravention. The execution, delivery and performance by
Borrower of this Agreement, the Notes and the Other Documents will not violate
any existing law, ordinance, rule, regulation or order of any Governmental
Authority or result in a breach of any of the terms of, or constitute a default
under, any contractual obligation to which the Credit Parties is a party or by
which it or any of its properties or assets are bound or result in or require
the imposition of any Encumbrances on any of such Credit Party's properties or
assets (other than Permitted Encumbrances).
Section 4.5. Permits. Each Credit Party possesses all material permits,
authorizations, licenses, approvals, waivers and consents, without unusual
restrictions or limitations, the failure of which to possess would have a
Material Adverse Effect, all of which are in full force and effect.
Section 4.6. No Consents. The execution, delivery and performance of this
Agreement, the Notes and the Other Documents does not require any approval,
consent or waiver under any Contractual Obligation. No approval, authorization,
consent, waiver or order of, or registration, application or filing with, any
Governmental Authority is required in connection with the transactions
contemplated by this Agreement, the Notes, and the Other Documents.
Section 4.7. Financial Statements. Borrower has provided to Bank its
Financial Statements dated as of April 30, 1996 and related footnotes, audited
and certified by Arthur Andersen LLP as included in the consolidated Financial
Statements of Guarantor for the fiscal year then ended. Borrower has also
provided to Bank its internally prepared Financial Statements dated as of March
31, 1997 as included in the consolidated Financial Statements of Guarantor
prepared as of the fiscal period then ended and certified by the chief financial
officer of Borrower but subject, however, to normal, recurring year-end
adjustments that shall not in the aggregate be material in amount. All Financial
Statements of Borrower heretofore provided to Bank present fairly in all
material respects the financial condition and results of business operations of
Borrower for the
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periods indicated in accordance with GAAP. Borrower has no material direct or
contingent liabilities, liabilities for taxes, unusual commitments or unrealized
or unanticipated losses not disclosed in such Financial Statements. Since the
date of the latest dated consolidated balance sheet included in the Financial
Statements, there has been no material adverse change in the business operations
or financial condition of Borrower from that set forth in the balance sheet
contained in such Financial Statements (subject to the foregoing qualifications
as to interim Financial Statements) and no Dividends have been declared or made
to stockholders, nor have any shares of its capital stock (or any warrant to
purchase, options to acquire or notes convertible, in whole or in part, into any
shares of its capital stock) been purchased or acquired by any Person in any
manner nor has Borrower made any Investment except as set forth on Schedule 4.7.
attached hereto.
Section 4.8. Financial Forecasts. Borrower has provided to Bank forecasted
Financial Statements together with appropriate supporting details and a
statement of the underlying assumptions, ranges and limitations, prepared on a
monthly basis covering the one (1) year period commencing on May 1, 1997 and
being attached hereto as Schedule 4.8 (the "Forecasts"). The Forecasts have been
prepared in good faith and represent the good faith opinion of Borrower and its
senior management as to the most probable course of Borrower's business
operations for the periods covered thereby and have a reasonable basis;
provided, that the failure of Borrower to achieve any such Forecasts shall not,
in and of itself, constitute a Default or Event of Default.
Section 4.9. Financial Information. All written data, reports and
information which the Credit Parties have supplied to Bank or caused to be so
supplied by a third party on its behalf in connection with this Agreement are
complete and accurate and contain no material omission or misstatement except
such as have been corrected in a writing delivered to Bank.
Section 4.10. Business Relationships. There exists no actual or, to the
best of Borrower's knowledge, threatened termination, cancellation or limitation
of, or any modification or change in, the business relationship of Borrower with
any customer or group of customers whose purchases individually or in the
aggregate are material to its business operations, or with any material supplier
(other than in the ordinary course of business where one supplier is replaced by
another offering terms which are substantially comparable or more favorable to
Borrower).
Section 4.11. Brokers. No broker or finder has brought about the
obtaining, making or closing of, and no broker's or finder's fees or commissions
will be payable by any Credit Party to any Person in connection with, the
transactions contemplated by this Agreement.
Section 4.12. Use of Proceeds. No Credit Party is an "investment company,"
or an "affiliated person" of, or "promoter or principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended (15 U.S.C. ss.ss.80(a)(1) et seq.). No Extension of Credit, the
application of the proceeds and repayment thereof by Borrower or the performance
of the transactions contemplated by this Agreement will violate any provision of
said Act, or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder. No Credit Party owns any margin security as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
and the
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proceeds of each Extension of Credit will be used only for the purposes set
forth in this Agreement. None of the proceeds of any Extension of Credit will be
used, or have been used, directly or indirectly, for the purpose of purchasing
or carrying any margin security or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might constitute such Extension of
Credit a "purpose credit" within the meaning of said Regulation U or Regulations
G or X of the Federal Reserve Board. No Credit Party will take, or permit any
Person acting on its behalf to take, any action which might cause this Agreement
or any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board.
Section 4.13. Statutory Compliance. Each Credit Party is in compliance
with all material laws, ordinances, rules, regulations and orders of any
Governmental Authority applicable to it, its properties and assets and the
business conducted by it, including, without limitation, ERISA, the United
States Occupational Safety and Health Act of 1970 and all Environmental Laws
except where non-compliance would not have a Material Adverse Effect.
Section 4.14. Commitments. Borrower does not have any fixed, contingent or
other obligations to issue any shares, or rights exercisable into shares, of its
capital stock except as set forth on Schedule 4.14. attached hereto.
Section 4.15. Events of Default. No Default or Event of Default has
occurred and is continuing.
Section 4.16. Other Defaults. No Credit Party is in default in any
material respect in the performance, observance or fulfillment of any
Contractual Obligation.
Section 4.17. Taxes. Each Credit Party has filed all tax returns and
reports required to be filed by it with any Governmental Authority and has paid
in full, or made adequate provisions or established adequate reserves for, the
payment of all taxes, interest, penalties, assessments or deficiencies shown
to be due on or in respect to such tax returns and reports.
Section 4.18. Ownership of Borrower. A list of the holders of the shares
of capital stock of Borrower is set forth in Schedule 4.18. attached hereto and
incorporated herein by reference, and no other Person has any rights and/or
claim to any issued or unissued shares of such capital stock.
Section 4.19. Solvency. Each Credit Party is currently Solvent; and
neither Credit Party is contemplating either the filing of a petition by it
under the Bankruptcy Code or any state bankruptcy or insolvency law or the
liquidating of all or a major portion of its properties and assets or has any
knowledge of any Person contemplating the filing of any such petition against
it.
Section 4.20. Business Name. Borrower conducts its business solely through
the names set forth on Schedule 12 of the Collateral Disclosure List, without
the use of any trade name, or the intervention of or through any other Person.
Borrower has not, except as set forth in the
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Collateral Disclosure List, during the preceding five (5) years, conducted its
business through any other name or trade name or been the surviving corporation
in a merger or consolidation or acquired all or substantially all of the assets
of any other Person.
Section 4.21. Affiliate Contracts. All contracts and transactions between
Borrower and any Affiliate or Subsidiary of Borrower have been executed or will
be executed on such terms as would be contained in an agreement executed at
arms' length with an unrelated third party.
Section 4.22. Capitalization. The outstanding shares of capital stock of
Borrower have been duly issued and are fully paid and non-assessable.
Section 4.23. Litigation. Except as set forth on Schedule 4.23. attached
hereto, there are no actions, suits or proceedings by or before any Governmental
Authority or any arbitration or alternate dispute resolution proceeding, pending
or, to the knowledge of Borrower or any of its officers, threatened against
either Credit Party or its properties and assets, which if adversely determined,
would have a Material Adverse Effect
Section 4.24. Title to Properties. Borrower has good and marketable title
to all of the properties, assets and rights of every name and nature now
purported to be owned by it, including, without limitation, such properties,
assets and rights as are reflected in the Financial Statements referred to in
Section 4.7. (except such properties, assets or rights as have been disposed of
in the ordinary course of business since the date thereof), free from all
Encumbrances except Permitted Encumbrances or those Encumbrances disclosed in
Schedule 4.24. attached hereto, and, free from all defects of title that might
have a Material Adverse Effect (other than those covered by title insurance in
amounts sufficient to compensate Borrower for such defect). Borrower's
properties, assets and rights are sufficient to permit it to conduct the
business in which it is presently engaged. Borrower possesses all trademarks,
service marks, trade names, trade service styles, copyrights and patents that
may be necessary to own its properties and assets, and to conduct its business
as it is presently conducted or as Borrower intends to conduct it hereafter,
without any infringement or conflict with the rights of any other Person or any
violation of law.
Section 4.25. Labor Relations. Except as set forth on Schedule 4.25.
attached hereto, neither Credit Party is a party to any collective bargaining or
other agreement with any union and there are no material grievances, disputes or
controversies with any union or other organization of such Credit Party's
employees, or threats of strikes, work stoppages or demands by any union or such
other organization.
Section 4.26. Guarantees. Borrower is not a party to any Guarantee or
other similar type of agreement, and it has not offered its endorsement to any
Person which would in any way create a contingent liability (except by
endorsement of negotiable instruments payable at sight for deposit or collection
or similar banking transactions in the ordinary course of business).
Section 4.27. Subsidiaries. As of the date of this Agreement, all of the
Subsidiaries and Affiliates of Borrower are set forth on Schedule 14 of the
Collateral Disclosure List. Borrower
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or a Subsidiary of Borrower is the owner (subject to specified minority
interests) free and clear of all Encumbrances, of all of the issued and
outstanding capital stock of each Subsidiary. All shares of such capital stock
have been validly issued and are fully paid and nonassessable, and no rights to
subscribe to any additional shares have been granted, and no options, warrants
or similar rights are outstanding. Borrower is not engaged in any joint venture,
partnership or other business arrangement with any other Person except as
described on said Schedule 14.
Section 4.28. ERISA. Borrower and each member of the Controlled Group have
fulfilled their obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and are in compliance in all material respects
with the applicable provisions of ERISA and the Code, and have not incurred any
liability to the PBGC or a Plan under Title IV of ERISA; and no "prohibited
transaction" or "reportable event" (as such terms are defined in ERISA) has
occurred with respect to any Plan.
Section 4.29. Environmental Protection. Except as set forth on Schedule
4.29. attached hereto:
(a) The Borrower's manufacturing operations and other business
operations involving the generation, storage, transport or use of Hazardous
Materials comply in all material respects with all Environmental Laws.
b) Borrower has not received (i) any written notice or claim to the
effect that it is or may be liable to any Person as a result of the Release or
threatened Release of any Hazardous Materials or (ii) any letter or request for
information under CERCLA or any other Environmental Laws, and, to the best of
Borrower's knowledge, based upon reasonable investigation, the Borrower's
manufacturing operations and other business operations involving the generation,
storage, transport or use of Hazardous Materials are not the subject of any
investigation or claim by any Governmental Authority evaluating whether any
remedial action is needed to respond to a Release or threatened Release of any
Hazardous Material, or subject to a lawsuit or claim arising under or related to
any alleged violation of any Environmental Law.
(c) Neither Borrower nor any Affiliate of Borrower is subject to any
outstanding written order or agreement with any Governmental Authority or
private party with respect to any Environmental Laws which relates to any of
Borrower's manufacturing operations or facilities or other business operations
or facilities which involve the generation, storage, transport or use of
Hazardous Materials.
(d) Neither Borrower nor any Affiliate of Borrower has filed any
notice under any Environmental Law indicating past or present treatment or
disposal of Hazardous Materials on Borrower's business premises, and none of the
business operations of Borrower involves the generation, transportation, storage
or disposal of Hazardous Materials.
(e) To the best of Borrower's knowledge, based, upon reasonable
investigation, no Hazardous Material exists on, under or about any of the
properties of Borrower in violation of Environmental Laws, and Borrower has not
filed any notice or report of a Release of any
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Hazardous Materials that could give rise to any claim or suit against Borrower
arising from such a Release.
Section 4.30. Accounts Receivable. All of Borrower's Accounts Receivable
(i) are and shall be based on an actual and bona fide sale and shipment of goods
or the rendition of services to Account Debtors; (ii) are and shall be made by
Borrower in the ordinary course of its business; (iii) result from goods and
Inventory being sold (or services being rendered) which are the exclusive
property of Borrower; (iv) are the exclusive property of Borrower; (v) are not
subject to any Encumbrance other than Permitted Encumbrances; and (vi) are
represented by invoices or statements issued in the name of Borrower.
Section 4.31. Investments. Except as set forth on Schedule 4.31. attached
hereto, Borrower has no Investment in any Person other than existing Investments
in Subsidiaries and Qualified Investments.
SECTION 5. CONDITIONS TO OBLIGATION OF BANK
Bank shall have no obligation under this Agreement to make any further
Extension of Credit unless and until it is satisfied, in its sole and absolute
discretion, that all of the following conditions shall have been satisfied or
waived by Bank in writing prior to or on the Closing Date:
Section 5.1. Representations and Warranties True. The representations and
warranties contained in Section 4 are true and correct in all material respects,
and Borrower, by its President or other executive officer, shall have so
certified to Bank.
Section 5.2. Delivery of Documents. The Credit Parties shall have duly
executed and delivered to Bank, in form and substance satisfactory to Bank and
its legal counsel, this Agreement, the Notes, the Other Documents and all
further documents as Bank may reasonably request to evidence the Obligations or
to create, perfect or continue any security interest or mortgage lien
contemplated by this Agreement and the Other Documents. In addition, Bank shall
have received or agreed in writing to waive or delay the receipt of:
Section 5.2.1. Copies of all corporate action taken by the Credit
Parties to authorize the execution and delivery of this Agreement, the Notes and
the Other Documents, together with a certificate of the corporate secretary or
assistant secretary of the subject Credit Party certifying that the same are
true, correct and complete as of the Closing Date.
Section 5.2.2. Copies of each Credit Party's Certificate of
Incorporation and Bylaws, if and as amended, together with a certificate of the
corporate secretary or assistant secretary of the subject Credit Party
certifying that the same are true, correct and complete as of the Closing Date.
Section 5.2.3. A certificate(s) issued by the appropriate tax
departments or agencies of each state in which the chief executive office of
each Credit Party is located to the effect that such Credit Party has paid all
income, sales and applicable taxes.
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Section 5.2.4. A certificate issued by the office of the Secretary
of State of the state of each Credit Party's incorporation to the effect that
such Credit Party is legally existing and in good standing under the laws of
such state.
Section 5.2.5. A certificate issued by the office of the Secretary
of State of each state in which such Credit Party is qualified as a foreign
corporation to the effect that such Credit Party is duly qualified and in good
standing as a foreign corporation under the laws of such state.
Section 5.2.6. A certificate of the corporate secretary or assistant
secretary of each Credit Party certifying to the incumbency and signatures of
all officers of such Credit Party who are authorized to execute this Agreement,
the Notes, the Guaranty and the Other Documents.
Section 5.2.7. Objective evidence satisfactory to Bank and its legal
counsel of the payment of all taxes and assessments due or claimed to be due to
any Governmental Authority with respect to the Collateral.
Section 5.2.8. A UCC-11 Request for Information certified by the
Office of the Secretary of State of the State of Connecticut (or an acceptable
equivalent thereto) for each name set forth on the Collateral Disclosure List
listing the filings against Borrower as debtor under such names at such offices.
Section 5.2.9. Such supplemental UCC-1 Financing Statements as Bank
deems necessary to perfect any security interests contemplated by this Agreement
or the Other Documents.
Section 5.2.10. Insurance policies and certificates evidencing
insurance coverage on Borrower's properties and assets complying with Section
7.2 hereof, which insurance policies shall name Bank as an additional
insured/loss payee.
Section 5.2.11. An environmental certificate and indemnity agreement
executed by Borrower on the Original Closing Date and confirmed on the Closing
Date, satisfactory in form and substance to Bank and its legal counsel (the
"Environmental Certificate").
Section 5.2.12. Such cash management, lockbox and similar agreements
required by Bank to administer the Line of Credit.
Section 5.2.13. An endorsement to each ALTA title insurance policy
or policies insuring the lien of the Mortgage in the Mortgaged Property in
amounts and with such exceptions to coverage as may be approved by Bank and its
legal counsel.
Section 5.2.14. Such further documents, instruments and agreements
as Bank shall reasonably request, all in form and substance satisfactory to Bank
and its legal counsel.
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Section 5.3. Validity of Liens. All Encumbrances in the Collateral shall
have been created in favor of Bank, which Encumbrances shall constitute legal,
valid and enforceable and, unless otherwise consented to by Bank, first security
interests in and liens upon the Collateral. All filings, recordings, deliveries
of instruments and other actions necessary or desirable in the sole and absolute
discretion of Bank and its legal counsel to create said Encumbrances shall have
been made, taken and/or effected.
Section 5.4. Opinion of Counsel. Bank shall have received from counsel for
the Credit Parties a written opinion, in the form of Exhibit E attached hereto,
satisfactory in form and substance to Bank and its legal counsel.
Section 5.5. Payment of Fees. Borrower shall have paid to Bank a facility
fee (the "Facility Fee") in the amount of THIRTY THOUSAND AND NO/100 DOLLARS
($30,000.00) on the Closing Date. In addition, Borrower shall have paid any
other applicable fees and expenses due to Bank at closing, including the
reasonable fees and expenses of Bank's legal counsel.
Section 5.6. Legal Matters. All legal matters incident to the transactions
hereby contemplated shall be satisfactory to Bank and its legal counsel.
SECTION 6. CONDITIONS TO EXTENSION OF CREDIT
Section 6.1. In General. Bank shall have no obligation to make any
Extension of Credit unless and until, it is satisfied, in its sole and absolute
discretion, that all of the following conditions shall have been fulfilled prior
to or contemporaneously with the making of such Extension of Credit.
Section 6.1.1. Notice of Borrowing. Bank shall have received, in a timely
manner, a Notice of Borrowing in a form satisfactory to Bank.
Section 6.1.2. Borrowing Base Certificate. Bank shall have received a
Borrowing Base Certificate satisfactory in form and substance to Bank showing
that the Borrowing Base is sufficient to permit Bank to make the requested
Extension of Credit.
Section 6.1.3. No Material Adverse Change. There has been no change in the
financial condition or business operations of Borrower or its Subsidiaries since
the date of the last Financial Statements or other financial reports delivered
to Bank which has a Material Adverse Effect.
Section 6.1.4. Truth of Representations and Warranties. All of the
representations and warranties set forth in Section 4 of this Agreement are true
and correct in all materials respects as of the date on which the requested
Extension of Credit is made.
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Section 6.1.5. No Default. No Default or Event of Default shall have
occurred and be continuing or shall occur as a result of the requested Extension
of Credit.
Section 6.1.6. Payment of Fees. Borrower shall have paid any applicable
fees and expenses due to Bank, including any reasonable fees and expenses of
Bank's legal counsel.
Section 6.1.7. Corporate Action. The corporate action of Borrower referred
to in Section 5.2.1. shall remain in full force and effect and the incumbency of
officers shall be as stated in the certificates of incumbency delivered pursuant
to Section 5.2.6. or as subsequently reflected in a new certificate of
incumbency delivered to Bank in connection with the requested Extension of
Credit.
Section 6.1.8. Legal Matters. All legal matters incident to the
transactions contemplated by the requested Extension of Credit shall be
satisfactory to Bank and its legal counsel and no change shall have occurred in
any law or regulation or interpretation thereof, which, in the opinion of Bank
and its legal counsel, would make it illegal or against the policy of any
governmental body, agency or instrumentality for Bank to make the requested
Extension of Credit.
SECTION 7. AFFIRMATIVE COVENANTS OF BORROWER
Borrower covenants and agrees that from the date hereof until the payment
and performance in full of the Obligations, unless Bank otherwise consents in
writing:
7.1. Financial Statements and Reporting Requirements. Borrower shall
furnish to Bank:
Section 7.1.1. As soon as available, but in no event later than
ninety (90) days after the end of each Fiscal Year, consolidated and
consolidating Financial Statements for each of Borrower and Guarantor for such
year, audited and certified by Arthur Andersen LLP (or other independent
certified public accountants acceptable to Bank) in the case of such
consolidated statements, and certified by the chief financial officer of
Borrower or Guarantor, as applicable, in the case of such consolidating
statements; and, concurrently with the delivery of such Financial Statements, a
copy of said certified public accountants' management report and a written
statement by such accountants that, in the making of the audit necessary for
their report and opinion upon such Financial Statements, they have obtained no
knowledge of any Default or Event of Default, or, if in the opinion of such
accountants any such Default or Event of Default exists, they shall disclose in
such written statement the nature and status thereof.
Section 7.1.2. As soon as available, but in no event later than
thirty (30) days after the end of each month (60 days after month-end in the
case of May, 1997), internally prepared Financial Statements, prepared in
accordance with GAAP on year-to-date and month to date
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basis certified by the chief financial officer of Borrower but subject, however,
to normal, recurring year-end adjustments that shall not in the aggregate be
material in amount.
Section 7.1.3. As soon as available, but in no event later than
fifteen (15) days after the end of each month, internally prepared copies of the
following financial reports: (i) a reconciliation of Accounts Receivable in
substantially the form of Exhibit F attached hereto; (ii) an aging of accounts
receivable and accounts payable; (iii) an accounts receivable exclusion report
in substantially the form of Exhibit G attached hereto; (iv) a Borrowing Base
Certificate and (v) a designation of merchandise report in substantially the
form of Exhibit H attached hereto, all prepared in accordance with GAAP.
Section 7.1.4. As soon as available, but in no event later than five
(5) days after the end of each calendar week, (a) a certificate in substantially
the form of Exhibit I-1 attached hereto setting forth (i) Borrower's then
existing Eligible Inventory or, if requested by Bank, particular items, types or
categories thereof; (ii) Borrower's then existing Eligible Accounts Receivable;
(iii) such other information in respect of Inventory, Accounts Receivable,
Equipment and other Collateral as Bank may reasonably request; and (iv)
containing a calculation of Borrowing Base and borrowing availability as of the
date of said certificate (the "Borrowing Base Certificate") and (b) a report as
to orders received and booked by Borrower and a backlog report, such reports to
be in the form of Exhibits I-2 and I-3 attached hereto.
Section 7.1.5. As soon as available, but in no event later than
thirty (30) days prior to the end of each Fiscal Year, forecasted Financial
Statements prepared in accordance with the standards set forth in Section 4.8.
hereof, showing a most probable scenario and including collateral availability
and usage under the Line of Credit and in such further reasonable detail as Bank
may request for each of the forthcoming twelve (12) months, month by month,
together with such appropriate supporting details and statements or assumptions.
Section 7.1.6. As soon as available, but in no event later than
forty-five (45) days after the end of each Fiscal Quarter, a report in
substantially the form of Exhibit J attached hereto signed on behalf of Borrower
by its chief financial officer.
Section 7.1.7. On a daily basis as required by Bank, a loan advance
confirmation report and/or a loan payment calculation report in substantially
the form of Exhibit A and Exhibit K attached hereto.
Section 7.1.8. As soon as available, copies of any and all reports
filed by Guarantor with the United States Securities and Exchange Commission,
including Form l0-Q and Form 10-K.
Section 7.2. Fire and Hazard Insurance. Borrower shall keep its properties
and assets insured against fire and other hazards (so called "All Risk
Coverage") in amounts and with companies satisfactory to Bank to the same extent
and covering such risks as is customary in the state or similar business, but in
no event in an aggregate amount less than the Obligations, which policies shall
name Bank as first loss payee as its interest may appear. Borrower shall also
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maintain public liability coverage against claims for personal injuries or
death, business interruption, worker's compensation, employment or similar
insurance with coverage and in amounts satisfactory to Bank and as may be
required by applicable law. Such policies shall provide for a minimum of thirty
(30) days' written cancellation notice to Bank. Borrower agrees to deliver
copies of all of the aforesaid insurance policies to Bank. In the event of any
loss or damage to the Collateral, Borrower shall give immediate written notice
to Bank and to its insurers of such loss or damage and shall promptly file proof
of loss with its insurers.
Section 7.3. Maintenance of Existence. Except as provided by Section 8.6.
hereof, Borrower shall preserve and maintain its corporate existence, rights,
franchises and privileges, including its corporate name, in the jurisdiction of
its incorporation, and qualify and remain qualified as a foreign corporation in
each jurisdiction in which such qualification is necessary or desirable and the
failure to be so qualified would have a Material Adverse Effect.
Section 7.4. Preservation of Collateral. Borrower shall preserve and
maintain the Collateral in good repair, working order and operating condition
(ordinary wear and tear excepted) and Borrower shall immediately notify Bank of
any event causing material loss or unusual depreciation in the value of the
Collateral.
Section 7.5. Taxes and Other Assessments. Borrower shall pay and
discharge, and maintain adequate reserves for the payment and discharge of, all
taxes, assessments, government charges or levies, or claims for labor, supplies,
rent or other obligations made against it or its properties and assets which, if
unpaid, might become an Encumbrance against Borrower or its properties and
assets, except liabilities which are being contested in good faith in
appropriate proceedings. Borrower shall file all Federal, state and local tax
returns and other reports that it is required by law to file other than returns
and other reports in respect of taxes which are being contested in good faith in
accordance with applicable law. Borrower shall promptly notify or cause notice
to be given to Bank of any pending audits of its income tax returns by the
Internal Revenue Service or by any state in which Borrower conducts business
operations and the results of each such audit.
Section 7.6. Inspection. Borrower shall permit Bank or its designees, at
any time during normal business hours and upon reasonable prior notice (or if a
Default or Event of Default shall have occurred and is continuing, at any time
and without prior notice), to (i) visit and inspect the properties and assets of
Borrower and its Subsidiaries; (ii) examine and make copies of and take
abstracts from the books and records of Borrower and its Subsidiaries; and (iii)
discuss the affairs, finances and accounts of Borrower and its Subsidiaries with
their appropriate officers, employees and accountants. In handling such
information Bank shall exercise the same degree of care that it exercises with
respect to its own proprietary information of the same types, to maintain the
confidentiality of any non-public information thereby received or received
pursuant to Section 7.1. hereof except that disclosure of such information may
be made (i) to Bank Affiliates in connection with their present or prospective
business relations with Borrower; (ii) to prospective transferees or purchasers
of an interest in the Obligations; (iii) as required by law, regulation, rule or
order, subpoena, judicial order or similar order; and (iv) as may be required in
connection with the examination, audit or similar investigation of Bank.
Borrower shall permit
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Bank (or any of its officers, agents, attorneys or accountants) for the purpose
of ascertaining whether or not each and every provision of this Agreement or the
Other Documents is being performed or for the purpose of examining the
Collateral and the records relating thereto, to enter the offices and business
premises of Borrower and its Subsidiaries, and to conduct an audit of the
Collateral and/or Borrower's financial and business records on four (4)
occasions during each twelve (12) month period at such times as Bank may select
in its sole and absolute discretion; provided however, that Bank shall have the
right to conduct such an audit on more than four (4) occasions if a Default or
Event of Default shall have occurred and be continuing. Any such audit shall be
conducted at Borrower's expense at Bank's current rate of $500.00 per man day
plus expenses. Any charges and expenses relating to such audits shall be
directly debited by Bank from the Loan Account.
Section 7.7. Notices. Borrower shall promptly upon becoming aware of the
occurrence of a Default or Event of Default notify Bank thereof in writing.
Borrower shall also promptly advise Bank of:
(a) any labor controversy resulting in or threatening to result in a
strike or work stoppage against Borrower or its Subsidiaries;
(b) any change of independent public accountants, notice that such
change has occurred together with the name of the new accountants; or
(c) any other matter which has resulted or may reasonably be
expected to result in a Material Adverse Effect.
Section 7.8. Litigation. Borrower shall promptly inform Bank of any
action, suit, or proceeding by or before any Government Authority or arbitration
or alternate dispute resolution proceeding, which might have a Material Adverse
Effect.
Section 7.9. Maintenance of Books and Records. Each of Borrower and its
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with GAAP including
the maintenance of adequate reserves for depreciation of property, if such
reserves are required by GAAP. Each of Borrower and its Subsidiaries shall
maintain duplicate copies of all such books and records (i) on-site at all times
and (ii) off-site updated on a monthly basis.
Section 7.10. Maintenance of Permits. Borrower shall obtain and/or
maintain in full force and effect all material permits, authorizations,
licenses, approvals, waivers and consents which it presently possesses or which
may may become necessary in the future to conduct its business operations.
Section 7.11. Use of Proceeds. Borrower will use the proceeds of any
Extension of Credit solely for the purposes set forth in this Agreement.
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Section 7.12. Payment of Indebtedness. Borrower shall promptly pay and
discharge when due and payable (or within applicable grace periods) all
Indebtedness due to any Person from Borrower, except when the amount thereof is
being contested in good faith by appropriate proceedings and with reserves
therefor being established as a current liability on the books of Borrower as
required by GAAP.
Section 7.13. Additional Offices. Borrower shall give Bank written notice
of each additional facility or office of Borrower to be opened after the Closing
Date. Except to the extent set forth in any such notice, the chief executive
office of Borrower and all records relating to the Collateral shall be located
at the locations set forth in the Collateral Disclosure List
Section 7.14. Access to Collateral. With respect to each location at which
the Collateral is now or hereafter located, Borrower will obtain (subject to the
provisions of existing leases and other restrictions) such lien waivers,
estoppel certificates or subordination agreements as Bank may reasonably require
to insure the priority of its security interest in, and, subject to applicable
law, its ability to take possession of, the Collateral situated at such
locations.
Section 7.15. Compliance with Laws. Borrower shall comply in all material
respects with the requirements of all applicable laws, ordinances, rules,
regulations and orders of any Government Authority.
Section 7.16. ERISA. Borrower shall: (i) make prompt payments of
contributions required to meet the minimum funding standards set forth under
ERISA with respect to each and every Plan and, promptly after the filing thereof
furnish to Bank copies of each annual report required to be filed under ERISA in
connection with each and every Plan for each and every Plan year; (ii) notify
Bank immediately of any fact, including, but not limited to, any "reportable
event", arising in connection with any Plan which might constitute grounds for
the termination thereof by the PBGC or for the appointment by the appropriate
United States district court of a trustee to administer the Plan; (iii) promptly
after the issuance thereof furnish to Bank a copy of any notice of any
"reportable event" given to the PBGC with respect to any Plan; (iv) promptly
after receipt thereof, furnish to Bank a copy of any notice received from the
PBGC relating to the intention of the PBGC to terminate any Plan or to appoint a
trustee to administer any Plan; and (v) furnish to Bank, promptly upon its
request therefor, such additional information concerning each and every Plan as
may be reasonably requested.
Section 7.17. Compliance with Environmental Laws.
(a) Borrower shall, from time to time, if requested by Bank upon
reasonable cause, retain, at Borrower's expense, an independent professional
environmental consultant to prepare a report relating to Hazardous Materials and
to conduct an investigation of any or all of the business premises of Borrower.
Borrower agrees also that Bank (or its agents) may, upon reasonable cause, from
time to time retain at Borrower's expense, an independent professional
environmental consultant to advise Bank as to any such report relating to
Hazardous Materials. Borrower hereby grants to Bank, its agents, employees,
consultants and contractors the right to enter into or onto Borrower's business
premises to perform such tests and/or sampling as are
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reasonably necessary to conduct such a review and/or investigation in accordance
with a mutually agreeable site access agreement between Borrower and Bank.
b) Borrower shall promptly advise Bank in writing and in reasonable
detail of (i) any Release of any Hazardous Material on its business premises
required to be reported to any Governmental Authority under any applicable
Environmental Laws; (ii) any and all written communications with respect to
claims or suits under such laws or any Release of Hazardous Materials on its
business premises required to be reported to any Federal, state or local
governmental authority, instrumentality or agency; (iii) any remedial action
taken by Borrower or any other Person in response to (A) any Hazardous Materials
on, under or about the business premises of Borrower, the existence of which
could have a Material Adverse Effect or (B) any claim or suit resulting in a
material adverse change in Borrower's business operations or financial
condition; (iv) Borrower's discovery of any occurrence or condition on any real
property adjoining or in the vicinity of Borrower's business premises that could
cause such premises to be subject to any material restrictions on the ownership,
occupancy, transferability or use thereof under any Environmental Laws; and (v)
any request for information from any Governmental Authority that indicates such
authority, instrumentality or agency is investigating whether Borrower may be
potentially responsible for a Release of Hazardous Materials.
(c) Borrower shall, at its own expense, provide copies of such
documents or information as Bank may reasonably request in relation to any
matters disclosed pursuant to this Section 7.17.
(d) Borrower shall comply in material respects with all
Environmental Laws and establish and maintain policies and procedures to ensure
and monitor continued compliance with all Environmental Laws. Borrower shall
promptly take any and all remedial action required by applicable Environmental
Laws in connection with the presence, storage, use, disposal, transportation or
Release of any Hazardous Materials on, under or about its business premises. If
Borrower undertakes any remedial action with respect to any Hazardous Materials
on, under or about its business premises, Borrower shall conduct and complete
such remedial action in compliance with the policies, orders and directives of
any Governmental Authority except when and only to the extent that Borrower's
liability for such presence, storage, use, disposal, transportation or discharge
of any Hazardous Material or the scope or extent of the remedial action is being
contested in good faith by Borrower.
Section 7.18. Appraisals. Borrower shall permit Bank to obtain, at the
expense of Borrower, on one occasion during each twelve month period (and more
often if an Event of Default shall occur and be continuing), appraisals of the
Fixed Assets prepared by an appraiser satisfactory to Bank in its sole and
absolute discretion.
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SECTION 8. NEGATIVE COVENANTS
Borrower covenants and agrees that from the date hereof until the payment
and performance in full of the Obligations, unless Bank otherwise consents in
writing:
Section 8.1. Limitation on Indebtedness. Neither Borrower nor any of its
Subsidiaries shall create, incur, assume, guarantee or be or remain liable with
respect to any Indebtedness other than the following ("Permitted Indebtedness"):
(a) Indebtedness of Borrower or any of its Subsidiaries to Bank or
any Bank Affiliates;
(b) Indebtedness existing as of the date of this Agreement and
disclosed on Schedule 8.1. attached hereto or in the Financial Statements
referred to in Section 4.7. hereof, or which may hereafter be incurred pursuant
to any commitment disclosed on Schedule 8.1.;
(c) Subordinated Indebtedness incurred with the prior written
consent of Bank;
(d) Indebtedness secured by Permitted Encumbrances; and
(e) other Indebtedness of Borrower in an aggregate outstanding
principal amount not exceeding (i) ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00) in any one (1) instance or TWO HUNDRED AND NO/l00 DOLLARS
($200,000.00) in the aggregate during any twelve (12) month period or (ii) FOUR
HUNDRED THOUSAND AND NO/l00 DOLLARS ($400,000.00) in the aggregate at any one
time outstanding.
Section 8.2. Contingent Liabilities. Neither Borrower nor any of its
Subsidiaries shall create, incur, assume, guarantee or remain liable with
respect to any Guarantees other than the following:
(a) Guarantees in favor of Bank or any Bank Affiliates;
(b) Guarantees existing on the date of this Agreement and disclosed
on Schedule 8.2. attached hereto or in the Financial Statements referred to in
Section 4.7. hereof;
(c) Guarantees resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business;
(d) Guarantees with respect to surety, appeal performance and
return-of-money and other similar obligations incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money) not
exceeding (i) ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) in any one
(1) instance or TWO HUNDRED THOUSAND AND NO/l00 DOLLARS ($200,000.00) in the
aggregate in any twelve (12) month period or (ii) FOUR HUNDRED THOUSAND AND
NO/100 DOLLARS ($400,000.00) in the aggregate at any one time; and
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(e) Guarantees of normal trade debt relating to the acquisition of
goods and supplies.
Section 8.3. Leases. Neither Borrower nor any of its Subsidiaries shall
during any Fiscal Year enter into any leases of real or personal property as
lessee, except for Capital Leases or leases providing for payments in any one
(1) fiscal year (whether or not such payments are termed rent) as permitted
under Section 8.1. hereof, that in the aggregate do not increase the aggregate
annual lease payments of Borrower and its Subsidiaries in excess of ONE HUNDRED
FIFTY THOUSAND AND NO/l00 DOLLARS ($150,000.00) over such payments required to
be made during the immediately preceding Fiscal Year.
Section 8.4. Sale and Leaseback. Neither Borrower nor any of its
Subsidiaries shall enter into any arrangement, directly or indirectly, whereby
it shall sell or transfer any property owned by it in order to lease such
property or lease other property that Borrower or any such Subsidiary intends to
use for substantially the same purpose as the property being sold or
transferred.
Section 8.5 Encumbrances. Neither Borrower nor any of its Subsidiaries
shall (i) create, incur, assume or suffer to exist any Encumbrance, or (ii)
assign or otherwise convey any right to receive income, including the Accounts
Receivable, with or without recourse, except the following ("Permitted
Encumbrances"):
(a) Encumbrances in favor of Bank or any Bank Affiliates;
(b) Encumbrances existing as of the date of this Agreement and
disclosed in Schedule 4.24. attached hereto;
(c) liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same may be postponed or is not
required in accordance with the provisions of Section 7.5. hereof;
(d) landlords' and lessors' liens in respect of rent not in default
or liens in respect of pledges or deposits under worker's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation
or liens securing the performance of bids, tenders, contracts (other than for
the payment of money); and statutory obligations incidental to the conduct of
its business and that do not in the aggregate materially detract from the value
of its property or materially impair the use thereof in the operation of its
business;
(e) judgment, mechanics', laborers' and materialmen's and similar
liens, if the obligations secured by such liens are not then delinquent; liens
securing the performance of bids, tenders, contracts (other than for the payment
of money) that shall not have been in existence for a period longer than thirty
(30) days after the creation thereof or, if a stay of execution shall have been
obtained, for a period longer than thirty (30) days after the expiration of such
stay;
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(f) rights of lessors under Capital Leases;
(g) Encumbrances in respect of any purchase money obligations for
tangible property used in its business incurred as permitted under Section 8.1.
hereof; provided, however, that any such Encumbrances shall not extend to
properties and assets of Borrower or any such Subsidiary not financed by such
purchase money obligation;
(h) easements, rights of way, restrictions and other similar charges
or Encumbrances relating to real property and not interfering in a material way
with the ordinary conduct of its business; and
(i) Encumbrances on its property or assets created in connection
with the refinancing of Indebtedness secured by Permitted Encumbrances on such
property; provided, however, that the amount of Indebtedness secured by any such
Encumbrance shall not be increased as a result of such refinancing and no such
Encumbrance shall extend to property and assets of Borrower or any such
Subsidiary not encumbered prior to any such refinancing.
Section 8.6. Merger; Consolidation; Sale or Lease of Assets. Neither
Borrower nor any of its Subsidiaries shall sell, lease or otherwise dispose of
properties or assets (valued at the lower of cost or market), other than sales
of Inventory in the ordinary course of business or Equipment as permitted under
Section 10.3.5. hereof, or liquidate, merge or consolidate into or with any
other Person; provided, however, that any Subsidiary of Borrower may merge or
consolidate into or with (i) Borrower if no Default or Event of Default has
occurred and is continuing or would result from such merger and if Borrower is
the surviving company, or (ii) any other wholly-owned Subsidiary of Borrower.
Notwithstanding the foregoing, Borrower may sell its real property located in
the Town of Landis, Rowan County, North Carolina as long as no Default or Event
of Default shall have occurred and be continuing as of the date of sale and the
net proceeds of such sale are used by Borrower in accordance with Section 2.3.6.
of this Agreement.
Section 8.7. Additional Stock Issuance. Borrower shall not permit any of
its Subsidiaries to issue any additional shares of its capital stock or other
equity securities, any options therefor or any securities convertible thereto
other than to Borrower. Neither Borrower nor any of its Subsidiaries shall sell,
transfer or otherwise dispose of any of the capital stock or other equity
securities of a Subsidiary, except (i) to Borrower or any of its wholly-owned
Subsidiaries, or (ii) in connection with a transaction permitted by Section 8.6.
Section 8.8. Dividends. Borrower shall not pay any (i) Dividends on any
class of its capital stock or make any other distribution or payment on account
of or in redemption, retirement or purchase of such capital stock or (ii) make
any tax sharing payments, corporate overhead contribution or any other similar
payment, contributions or charge except that Borrower may pay Dividends or make
other payments to Guarantor in an amount which does not exceed TWO HUNDRED
THOUSAND AND NO/100 DOLLARS ($200,000.00) in the aggregate during any Fiscal
Year to reimburse Guarantor for the payment of amounts actually and customarily
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incurred for legal, audit and similar expenses and for no other purpose upon the
satisfaction of the following conditions precedent:
(a) No Default or Event of Default shall have occurred or be continuing or
result from the payment of any such Dividends or other payments; and
(b) Dividends and other payments may be paid on a quarterly basis to
Guarantor commencing with the Fiscal Quarter ending July 31, 1997; and
(c) Prior to the payment of any Dividends or other payments, Bank shall
confirm in writing Borrower's compliance with the financial covenants set forth
in Section 9 hereof and, in the case of the payment of Dividends or other
payments for the Fiscal Quarter ending April 30 in each year, Bank shall have
received all annual financial statements, reports and certificates then required
to be provided under Section 7.1. hereof.
This Section 8.8. shall not apply to (i) the issuance, delivery or distribution
by Borrower of shares of its capital stock pro rata to its existing shareholders
and (ii) the purchase or redemption by Borrower of its capital stock with the
proceeds of the issuance of additional shares of capital stock.
Section 8.9. Capital Expenditures. Neither Borrower nor any of its
Subsidiaries shall purchase or agree to purchase, or incur any obligations
(including that portion of obligations arising under Capital Leases that is
required to be capitalized on the consolidated balance sheet of Borrower and its
Subsidiaries) for, any equipment or other property constituting fixed assets in
excess of FIVE HUNDRED THOUSAND AND NO/l00 DOLLARS ($500,000.00) in any Fiscal
Year commencing with the Fiscal Year ending April 30, 1997 ("Permitted Capital
Expenditures").
Section 8.10. Investments. Neither Borrower nor any of its Subsidiaries
shall make or maintain any Investments other than (i) existing Investments in
Subsidiaries and (ii) Qualified Investments.
Section 8.11. ERISA. Neither Borrower nor any member of the Controlled
Group shall permit any plan maintained by it to (i) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code); (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived; or (iii) terminate any Plan in a manner that could result in the
imposition of an Encumbrance on the property and assets of Borrower or any of
its Subsidiaries pursuant to Section 4068 of ERISA.
Section 8.12. Change in Terms and Prepayment of Subordinated Indebtedness.
Borrower shall not:
(a) effect or permit any change in or amendment to (i) the terms by
which any Subordinated Indebtedness purports to be subordinated to the payment
and performance of the Obligations or (ii) the terms relating to the repayment
of any Subordinated Indebtedness; or
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b) directly or indirectly, make any payment of any principal of or
in redemption, retirement or repurchase of Subordinated Indebtedness except
payments required by the instruments evidencing such Indebtedness.
Section 8.13. Change in Management. Borrower shall not make a material
change in its present form and structure of business and financial management
Section 8.14. Change Name or Location. Borrower shall not change its
corporate name or conduct its business under any name other than those set forth
in the Collateral Disclosure List or change its chief executive office, place of
business or location of the Collateral or records relating to the Collateral
from the locations set forth in the Collateral Disclosure List unless it has
given Bank at least thirty (30) days prior written notice.
Section 8.15. Contracts. Borrower shall not enter into any contract other
than on such terms as would be contained in an agreement executed at arms'
length with an unrelated third party.
Section 8.16. Compliance with Environmental Laws. Borrower shall not
generate, handle, use, store or treat any Hazardous Materials except in
compliance with Environmental Laws.
Section 8.17. Lines of Business. Borrower shall not make a material change
in or discontinue its existing lines of business nor enter into any new line or
lines of business except as set forth in the Forecasts.
Section 8.18. Fiscal Year. Borrower shall not change its existing Fiscal
Year.
SECTION 9. FINANCIAL COVENANTS.
Borrower covenants and agrees that from the date hereof, until the payment
and performance in full of the Obligations, unless Bank otherwise consents in
writing:
Section 9.1. Current Ratio. The ratio of Borrower's Consolidated Current
Assets to its Consolidated Current liabilities shall not be less than the
following amounts as of the end of the following Fiscal Quarters:
FISCAL QUARTER ENDING RATIO
--------------------- -----
July 31, 1997 1.6 to 1.0
October 31, 1997 1.3 to 1.0
January 31, 1998 2.3 to 1.0
April 30, 1998 2.0 to 1.0
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Section 9.2. Consolidated EBITDA. Borrower's Consolidated EBITDA shall be
at least the following amounts as of the end of the following months (calculated
on a fiscal year-to-date basis):
MONTH AMOUNT (in 000s)
----- ----------------
May, 1997 $ 97.
June, 1997 $ 268.
July, 1997 $ 564.
August, 1997 $ 833.
September, 1997 $1,078.
October, 1997 $1,235.
November, 1997 $1,245.
December, 1997 $1,173.
January, 1998 $1,032.
February, 1998 $ 953.
March, 1998 $ 926.
April, 1998 $ 831.
Section 9.3. Debt Service Coverage. Borrower shall not permit the ratio of
its Consolidated Operating Cash Flow to Consolidated Total Debt Service to be
less than 1.0 to 1.0 at the end of each Fiscal Quarter. Borrower's compliance
with such covenant shall be calculated commencing with the Fiscal Quarter ending
April 30, 1998 on a rolling basis by reference to the Fiscal Quarter then ending
and the three (3) immediately preceding Fiscal Quarters.
Section 9.4. Consolidated Total Liabilities to Consolidated Tangible Net
Worth Ratio. The ratio of Borrower's Consolidated Total Liabilities to its
Consolidated Tangible Net Worth shall not be greater than the following amounts
during the following Fiscal Quarters:
FISCAL QUARTER ENDING RATIO
--------------------- -----
July 31, 1997 2.5 to 1.0
October 31, 1997 2.0 to 1.0
January 31, 1998 1.5 to 1.0
April 30, 1998 1.5 to 1.0
Section 9.5. Definitions. The following capitalized terms used in
this Section 9 and in any certificate, report or other document, instrument or
agreement executed or delivered in connection with the covenants set forth in
this Section 9 shall have the meanings ascribed to such terms below:
Section 9.5.1. "Consolidated Current Assets" means, as of any date
as of which the amount thereof shall be determined, all amounts that should, in
accordance with GAAP, be
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included as current assets on the consolidated balance sheet of Borrower and its
Subsidiaries prepared as of such date.
Section 9.5.2. "Consolidated Current Liabilities" means, as of any
date as of which the amount thereof shall be determined, all amounts that
should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries prepared as of such
date, plus, to the extent not already included therein, all Revolving Loans and
all Indebtedness that is payable upon demand or within one (1) year from the
date of determination thereof unless such Indebtedness is renewable or
extendable at the option of Borrower or any Subsidiary to a date more than one
(1) year from the date of determination.
Section 9.5.3. "Consolidated Operating Cash Flow" means, for any
period, the Consolidated EBITDA determined in accordance with GAAP.
Section 9.5.4. "Consolidated EBITDA" means, for any period, the
consolidated earnings of Borrower and its Subsidiaries for such period before
any provision for (i) interest expense for such period, (ii) income tax expense
for such period and (iii) amounts in respect of depreciation and amortization
for such period, all of the foregoing determined in accordance with GAAP.
Section 9.5.5. "Consolidated Tangible Net Worth" means, as of any
date as of which the amount thereof shall be determined, the consolidated total
assets of Borrower and its Subsidiaries minus (i) the sum of any amounts
attributable to (a) goodwill; (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses; (c) all reserves not
already deducted from assets; (d) any write-up in the book value of assets
resulting from any reevaluation thereof subsequent to the date of the Financial
Statements referred to in Section 7.1.; and (e) the value of any minority
interests in Subsidiaries and (ii) Consolidated Total Liabilities.
Section 9.5.6. "Consolidated Total Debt" means, as of any date as of
which the amount thereof shall be determined, all Indebtedness of Borrower
including the Obligations as of such date.
Section 9.5.7. "Consolidated Total Debt Service" means, for any
period, the aggregate amount of Borrower's obligation to make payments of
principal, interest and other amounts in respect of all Consolidated Total Debt
for such period.
Section 9.5.8. "Consolidated Total Liabilities" means, as of any
date as of which the amount thereof shall be determined, all obligations that
should, in accordance with GAAP, be classified as liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, including in any
event all Indebtedness.
Section 9.6. Establishment of Covenants. Bank and Borrower acknowledge
that the foregoing covenants were established by Borrower and Bank on the basis
of the Forecasts provided to Bank by Borrower under Section 4.8. after leaving a
margin in favor of Borrower
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which Borrower and Bank have mutually agreed is fair. Accordingly, Borrower and
Bank have mutually agreed that Borrower's failure to comply with the express
terms of any financial covenants shall be deemed material for the purposes of
this Agreement.
SECTION 10. SPECIAL COVENANTS RELATING TO COLLATERAL
Borrower covenants and agrees that from the date hereof until the payment
and performance in full of the Obligations, unless Bank otherwise consents in
writing:
Section 10.1 Accounts Receivable. With respect to its Accounts Receivable:
Section 10.1.1. Borrower shall deposit all payments received from or
on behalf of an Account Debtor into an account established with Bank and
Borrower shall direct or otherwise cause all Account Debtors to pay all monies
due under their respective Accounts Receivable to a lockbox account (the
"Lockbox Account") maintained by Bank in Borrower's name at Borrower's expense
and, to the extent Borrower receives such payments directly, all remittances
received by Borrower on account of Accounts Receivable shall be held as Bank's
property by Borrower as trustee of an express trust for Bank's benefit, and
Borrower will immediately deliver to Bank the identical checks, moneys or other
forms of payment received. Borrower hereby constitutes Bank, or any
representative whom Bank may designate, as Borrower's attorney-in-fact (i) to
endorse the Borrower's name on any notes, acceptances, checks, drafts, money
orders or other evidence of payment or security interest that may come into
Bank's possession, and (ii) during the continuance of an Event of Default, to
sign Borrower's name on any invoice or bill of lading relating to Accounts
Receivable, on drafts against customers, assignments and certificates of
Accounts Receivable, and notices to customers. Bank retains the right at all
times during the continuance of an Event of Default to notify Account Debtors
that their respective Accounts Receivable have been assigned to Bank and to
collect Accounts Receivable directly in its own name and to charge the
collection costs and expenses, including reasonable attorneys' fees to, the Loan
Account. Bank has no duty to protect, insure, collect or realize upon the
Accounts Receivable or other collateral or preserve rights in them other than to
act in a commercially reasonable manner. Borrower releases Bank from any
liability for any act or omission relating to the Obligations, the Accounts
Receivable or other Collateral or this Agreement, except Bank's failure to act
in a commercially reasonable manner. All amounts received by Bank in payment of
Accounts Receivable assigned to it are to be credited to the Loan Account upon
receipt by Bank, conditioned upon collection by Bank of good funds in respect
thereof.
Section 10.1.2. Following the occurrence of an Event of Default and
in connection with any audit conducted under Section 7.6. hereof, and in all
other instances following written notice to Borrower, any of Bank's officers,
employees, or agents shall have the right, in Bank's name or in the name of
Borrower, to request the verification of the validity, amount or any other
matter relating to any Account Receivable by mail, telephone, facsimile
transmission, telegraph, or other communication to Account Debtors.
Section 10.1.3. Borrower shall keep accurate and complete records of
its Accounts Receivable and accounts payable, and upon demand by Bank shall
deliver to Bank copies of
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proof of delivery and the original copy of all documents, including, without
limitation, repayment histories and present status reports, relating to
Borrower's Accounts Receivable and accounts payable and such other matters and
information relating to the status of the Accounts Receivable and accounts
payable as Bank shall reasonably request.
Section 10.1.4. Borrower shall promptly advise Bank:
(a) of any material delay in Borrower's performance of any of its
material obligations to any Account Debtor or the assertion of any claim, offset
or setoff by any Account Debtor in excess of ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00); or
(b) in the event that any Eligible Account Receivable becomes
ineligible for reasons other than lapse of time in payment and the reasons
therefor; or
(c) of the receipt of any Government Contract which is subject to
the Federal Assignment of Claims Act of 1940; or
(d) of the receipt of any cancellation or termination of; or the
delivery of notice of default under, any Government Contract.
Section 10.1.5. Borrower shall promptly execute any assignment and
take any action requested or required by Bank with respect to any Account
Receivable, the face value of which exceeds ONE THOUSAND AND NO/l00 DOLLARS
($1,000.00), which arises out of a Government Contract in order to insure
compliance with the Federal Assignment of Claims Act of 1940.
Section 10.1.6. Borrower shall maintain all Accounts Receivable free
of all Encumbrances other than those in favor of Bank.
Section 10.2. Inventory. With respect to its Inventory:
Section 10.2.1. Borrower shall maintain all Inventory free of all
Encumbrances other than those in favor of Bank.
Section 10.2.2. Borrower shall not store or deposit any Inventory
with a bailee, warehouseman, or similar party without Bank's prior written
consent and, if Bank gives such consent, Borrower will concurrently therewith
cause any such bailee, warehouseman, or similar party to issue and deliver to
Bank, in form and substance acceptable to Bank and its legal counsel, warehouse
receipts for such Inventory in Bank's name or a warehouseman's waiver and
agreement.
Section 10.2.3. If any Inventory is in the possession or control of
any third party other than a purchaser in the ordinary course of business or a
warehouseman where the warehouse receipt is in the name of or held by Bank or
who has executed a warehouseman's waiver and consent in favor of Bank, Borrower
shall notify such Person of Bank's security
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interest therein and, upon request, instruct such Person or Persons to hold all
such Inventory for the account of Bank and subject to Bank's instructions.
Section 10.3. Equipment. With respect to its Equipment:
Section 10.3.1. Borrower shall maintain the Equipment used in the
ordinary course of business in good operating condition and repair (normal wear
and tear excepted), and make all necessary replacements of and repairs thereto
so that the value and operating efficiency of the Equipment shall be maintained
and preserved.
Section 10.3.2. The Equipment, other than when being used in the
ordinary course of business, is located or stored at the locations described in
Schedule 3 of the Collateral Disclosure List (other than Equipment being
temporarily stored for purposes of repair or maintenance), and Borrower shall
promptly notify Bank, in writing, in the event Borrower shall store or locate
the Equipment at any location other than the locations specified in said
Schedule 3.
Section 10.3.3. Borrower, immediately on demand therefor by Bank,
shall deliver to Bank any and all evidence of ownership, if any, of any of the
Equipment Borrower purports to own (including, without limitation, certificates
of title and applications for title).
Section 10.3.4. Borrower shall maintain accurate, itemized records,
itemizing and describing the kind, type, quality, quantity and value of its
Equipment and shall furnish Bank with a current schedule containing the
foregoing information at Bank's reasonable request.
Section 10.3.5. Borrower shall not sell, lease, or otherwise dispose
of or transfer any interest in any of its Equipment or any part thereof in
excess of FIFTY THOUSAND AND NO/l00 DOLLARS ($50,000.00) in any one (1) instance
or ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) in the aggregate during
any Fiscal Year without the prior written consent of Bank, unless (a) no Default
or Event of Default shall exist at the time of such sale, lease or disposition,
(b) such sale, lease or disposition is made in the ordinary course of Borrower's
business, and (c) the net proceeds of such sale, lease or disposition are used
to prepay the Term Loan as set forth in Section 2.3.6. hereof or, if consented
to by Bank, for the purchase of additional Equipment on which Bank will have a
first priority security interest. Where Borrower is permitted to dispose of any
Equipment under this Agreement or by any consent thereto hereafter given by
Bank, it shall do so at arm's length, in good faith and by obtaining the
commercially reasonable amount of recovery practicable therefor and without
impairing the operating integrity of the remaining Equipment.
Section 10.3.6 Borrower shall, if requested by Bank with due cause,
provide to Bank a forced and orderly liquidation value appraisal of Borrower's
Equipment performed by an appraiser acceptable to Bank and at Borrower's
expense.
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SECTION 11 DEFAULT
Section 11.1. The occurrence of any of the following events Shall
constitute a default under this Agreement, the Notes and the Other Documents (an
"Event of Default"):
(a) Borrower shall fail to pay (i) any outstanding principal amount
of the Line of Credit when due, (ii) any Reimbursement Obligations when due,
(iii) any outstanding principal of the Term Loan within ten (10) days of the due
date or (iv) any accrued and unpaid interest on the Loans or any fees or
expenses payable under this Agreement, the Notes or the Other Documents within
ten (10) days of the due date; or
(b) Borrower shall fail to perform any term, covenant or agreement
contained in Sections 7.1., 7.3., 7.6., 7.11., 7.14., 8. or 10 of this
Agreement; or
(c) Borrower shall fall to perform any covenant or agreement
contained in Sections 7.2. or 7.4. of this Agreement, and such failure shall
continue for thirty (30) days; or
(d) Borrower shall fail to perform any other term, covenant or
agreement (other than terms, covenants or agreements which are the subject of
Sections 11.1.(a) through 11.1.(c) and Section 11.1.(k) hereof) contained in
this Agreement and such default shall continue for thirty (30) days after
written notice thereof has been sent to Borrower by Bank; or
(e) any representation or warranty of the Credit Parties made in
this Agreement, the Notes or the Other Documents or in any certificate or report
delivered hereunder or thereunder shall prove to have been false in any material
respect upon the date when made or deemed to have been made; or
(f) Either Credit Party shall fail to pay at maturity (unless
disputed in good faith), or within any applicable period of grace, any
Indebtedness or obligations for the use of real or personal property in excess
of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) in the aggregate or
fail to observe or perform any term, covenant or agreement evidencing or
securing such Indebtedness, or Borrower shall fail to observe or perform any
term, covenant or agreement relating to obligations for the use of real or
personal property, or relating to such use of real or personal property, in an
aggregate amount as aforesaid, the result of which failure is to permit (i) the
holder or holders of such Indebtedness or obligations to cause the same to
become due prior to its stated maturity or (ii) the lessor of such real or
personal property to terminate Borrower's use thereof prior to the specified
term therefor; or
(g) Either Credit Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar official of itself or of all or a substantial part of its
properties and assets; (ii) be generally not paying its debts as such debts
become due; (iii) make a general assignment for the benefit of its creditors;
(iv) commence a voluntary case under the Bankruptcy Code; (v) take any action or
commence any case or proceeding under any law relating to bankruptcy,
insolvency, reorganization, winding-up or
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composition or adjustment of debts, or any other law providing for the relief of
debtors; (vi) fail to contest in a timely or appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code or other law; (vii) take any action under the laws of its
jurisdiction of incorporation or organization similar to any of the foregoing;
or (viii) take any corporate action for the purpose of effecting any of the
foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of either Credit Party in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding
up, or composition or readjustment of its debts; (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its properties and assets; or (iii) similar relief in
respect of it, under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts or any other law providing for
the relief of debtors, which in any case is not dismissed within sixty (60)
days; or an order for relief shall be entered in an involuntary case under the
Bankruptcy Code, against either Credit Patty; or action under the laws of the
jurisdiction of incorporation or organization of Borrower or any of its
Subsidiaries similar to any of the foregoing shall be taken with respect to such
Credit Party, which in any case is not dismissed within sixty (60) days; or
(i) a judgment or order for the payment of money shall be entered
against either Credit Party by any court, or a warrant of attachment or
execution or similar process shall be issued or levied against property of
either Credit Party that in the aggregate exceeds ONE HUNDRED THOUSAND AND
NO/100 DOLLARS ($100,000.00) in value and such judgment, order, warrant or
process shall continue undischarged or unstayed for sixty (60) days; or
(j) Borrower or any member of the Controlled Group shall fail to pay
when due an amount or amounts aggregating in excess of ONE HUNDRED THOUSAND AND
NO/100 DOLLARS ($100,000.00) that it shall have become liable to pay to the PBGC
or to a plan under Title IV of ERISA; intent to terminate a plan or plans shall
be filed under Title IV of ERISA by Borrower, any member of the Controlled
Group, any plan administrator or any combination of the foregoing, if as of the
date on which the Plan is terminated the unfunded benefit liabilities (as
defined in Section 4001(a)(18) of ERISA) exceeds ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00); or the PBGC shall institute proceedings under Title IV of
ERISA to terminate or to cause a trustee to be appointed to administer any such
plan or plans or a proceeding shall be instituted by a fiduciary of any such
plan or plans against Borrower and such proceedings shall not have been
dismissed within thirty (30) days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
any such plan or plans must be terminated; or
(k) Borrower shall fail to meet any financial covenant set forth in
Section 9. hereof; or
(l) Borrower's independent certified public accountants shall refuse
to deliver an opinion with no Qualification with respect to any Financial
Statements required to be delivered under Section 7.1.1. of this Agreement; or
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(m) The failure of Borrower to execute, deliver or address, or cause
to be executed, delivered and addressed, the matters set forth on Schedule 11.1.
attached hereto within thirty (30) days after the Closing Date (the "Post
Closing Matters"); or
(n) Any Government Authority shall condemn, seize or otherwise
appropriate, or take custody or control of, or file a lien, levy or assessment
in respect of, all or any substantial portion of the properties or assets of
either Credit Party; or
(o) Any Governmental Authority or other Person shall garnish, seize
or levy or execute upon any monies of either Credit Party on deposit with or
otherwise in the custody of Bank or any Bank affiliate for an amount in excess
of ONE HUNDRED THOUSAND DOLLARS ($100,000.00); or
(p) Any material change in the executive or financial management
personnel of Borrower shall occur without the prior written approval of Bank; or
(q) Guarantor shall cease to own 100% of the issued and outstanding
shares of capital stock of Borrower; or
(r) Bank, at any time and in good faith, shall deem itself insecure
(and for the purposes of this Agreement, Bank shall be entitled to deem itself
insecure when some event occurs, fails to occur or is threatened or some
objective condition exists or is threatened which materially impairs the
prospects that any of the Obligations will be paid when due, which significantly
impairs the value of the Collateral to Bank or which materially affects the
financial condition or business operations of either Credit Party).
SECTION 12. REMEDIES
Section 12.1. Remedies. Upon the occurrence of an Event of Default, and at
any time thereafter while such Event of Default is continuing, immediately and
automatically in the case of an event of Default specified in Section 11.1(g) or
11.1.(h), and in all other cases, at Bank's option and upon Bank's declaration:
(a) Bank's obligation to make any Extension of Credit (including the
issuance of any Letter of Credit) shall terminate;
(b) the unpaid principal amount of the Loans, together with accrued
interest thereon, and all other Obligations shall become immediately due and
payable without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived;
(c) Bank may exercise any right of setoff granted to Bank pursuant
to Section 13.2.4 hereof;
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(d) Bank may reduce any advance rate in respect of Borrower's
Accounts Receivable or Inventory as set forth in Sections 1.109. and 1.110. of
this Agreement; and
(e) Bank may exercise any and all other rights and remedies it has
under this Agreement, the Notes or the Other Documents or at law or in equity,
and proceed to protect and enforce Bank's rights by any action at law, in equity
or other appropriate proceeding.
Section 12.2. Default Interest Rate. At Bank's option, which may be
exercised during the continuance of any Event of Default, whether or not Bank
exercises any other right or remedy, the Obligations shall bear interest
thereafter at the Default Rate.
SECTION 13. MISCELLANEOUS
Section 13.1. Cross Collateral. The security interests, liens and other
rights and interests in and relative to any Collateral now or hereafter granted
to Bank by Borrower by or in any instuument or agreement, including but not
limited to this Agreement and the Other Documents, shall serve as security for
any and all obligations of Borrower to Bank, and, for the repayment thereof,
Bank may resort to any security held by it in such order and manner as it may
elect.
Section 13.2. Waivers.
Section 13.2.1. In General. Borrower waives presentment, demand,
notice, protest, notice of acceptance, notice of loans made, credit extended,
collateral received or delivered or other action taken in reliance hereon and
all other demands and notices of any description. With respect both to the
Obligations and the Collateral, Borrower assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of the Collateral, to the addition or release
of any party or Person primarily or secondarily liable therefor, to the
acceptance of partial payments thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as Bank
may deem advisable in its sole and absolute discretion (provided that any
action, compromise or adjustment respecting Collateral shall be done in a
commercially reasonable manner). Bank shall have no duty, other than to act in a
commercially reasonable manner, as to the collection or protection of the
Collateral or any income thereon, as to the preservation of rights or remedies
against prior parties, or as to the preservation of any rights and remedies
pertaining thereto. Bank may exercise its rights and remedies with respect to
the Collateral without resorting or regard to other collateral or sources of
reimbursement for liability. Bank shall not be deemed to have waived any of its
rights and remedies with respect to the Obligations or the Collateral unless
such waiver be in writing and signed by Bank. No delay or omission on the part
of Bank in exercising any right or remedy shall operate as a waiver of such
right or remedy or any other right or remedy. A waiver on any one occasion shall
not be construed as a bar to any subsequent enforcement by Bank. All rights and
remedies of Bank with respect to the Obligations or the Collateral shall be
cumulative and may be exercised singularly or concurrently.
Section 13.2.2. PREJUDGMENT REMEDY. EACH CREDIT PARTY ACKNOWLEDGES
THAT THE TRANSACTION OF WHICH THIS AGREEMENT IS A
<PAGE>
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PART IS A COMMERCIAL TRANSACTION AND HEREBY WAIVES ITS RIGHT TO NOTICE AND
HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES OR BY OTHER
APPLICABLE LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH BANK MAY DESIRE TO
USE.
Section 13.2.3. JURY TRIAL. EACH CREDIT PARTY HEREBY WAIVES TRIAL BY
JURY IN ANY COURT IN ANY SUIT, ACTION OR PROCEEDING OR ANY MATTER ARISING IN
CONNECTION WITH OR IN ANY WAY RELATED TO THE TRANSACTION OF WHICH THIS AGREEMENT
IS A PART AND/OR IN THE ENFORCEMENT BY BANK OF ANY OF ITS RIGHTS AND REMEDIES
HEREUNDER OR UNDER APPLICABLE LAW. EACH CREDIT PARTY ACKNOWLEDGES THAT IT MAKES
THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER CONSIDERATION OF THE
RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEY.
Section 13.2.4. Lien and Setoff. Regardless of the adequacy of any
collateral or other means of obtaining repayment of the Obligations, any
deposits (general or special, time or demand, provisional or final), balances or
other sums credited by or due from Bank or any Bank Affiliate to Borrower (other
than payroll and payroll tax deposit accounts, and any funds expressly
designated as trust funds) may, at any time and from time to time during the
continuance of an Event of Default, without notice to Borrower or compliance
with any other condition precedent now or hereafter imposed by statute, rule of
law, or otherwise (all of which are hereby expressly waived) be setoff,
appropriated, and applied by Bank or any Bank Affiliate against any and all
Obligations of Borrower to Bank or any Bank Affiliate in such manner as Bank or
any Bank Affiliate in their sole and absolute discretion may determine, and
Borrower hereby grants Bank a continuing security interest in such deposits,
balances or other sums for the payment and performance of the Obligations. The
rights provided to Bank and any Bank Affiliate in this Section 13.2.4. shall be
in addition to and shall not limit any common law right of setoff available to
Bank or any Bank Affiliate.
Section 13.2.5. Claims. Borrower does hereby (i) waive any claim in
tort, contract or otherwise which Borrower may have against Bank, a Bank
Affiliate or their officers, directors, agents, or employees (collectively,
"Bank Agents") which may arise out of the relationship between Borrower and Bank
or any Bank Affiliate prior to the Closing Date; and (ii) absolutely and
unconditionally release and discharge Bank and any Bank Affiliate or Bank Agents
from any and all claims, causes of action, losses, damages or expenses which may
arise out of any relationship between it and Bank or any Bank Affiliate which
Borrower may have prior to the Closing Date. Borrower acknowledges that it makes
this waiver and release knowingly, voluntarily and only after considering the
ramifications of this waiver and release with its attorney.
Section 13.3. Notices. All notices, requests, demands or other
communications required by this Agreement shall be made in writing, and unless
otherwise specifically provided herein, shall be deemed to have been duly given
when delivered by hand or mailed first class mail postage prepaid, or, in the
case of telecopy or facsimile notice, when transmitted, answer back received,
addressed as follows, or to such other address as either patty may designate in
writing:
<PAGE>
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If to Bank:
Bank of Boston Connecticut
c/o BankBoston, N.A.
Asset Based Financing
100 Federal Street, MS 01-09-06
Boston, MA 02110
Attn: Stephen J. Carll,
Assistant Vice President
FAX (617) 434-2309
If to Borrower:
Greensteel, Inc.
29 Laing Avenue
Dixonville, PA 15734-0335
Attn: Lawrence W. Hay,
Chief Financial Officer
FAX (412) 254-2885
Section 13.4. Fees and Expenses. Borrower will pay on demand all
reasonable expenses incurred by Bank in connection with (i) the preparation,
execution and delivery of this Agreement, the Notes or the Other Documents, (ii)
the administration (exclusive of Bank's normal overhead expenses) of Bank's
obligations under this Agreement or (iii) Bank's exercise, preservation or
enforcement of any of its rights and remedies thereunder, including, without
limitation, reasonable fees and expenses of outside legal counsel or the
allocated costs of in-house legal counsel, accounting, appraisal, auditing,
consulting, brokerage or other similar professional fees or expenses, and any
reasonable fees or expenses associated with any travel or other costs relating
to any appraisals or examinations conducted in connection with the Obligations
or the Collateral.
Section 13.5. Term of Agreement. This Agreement shall continue in force
and effect so long as Bank has any commitment to extend credit to Borrower or
any of the Obligations shall be outstanding.
Section 13.6. Stamp Tax. Borrower will pay any stamp, franchise or other
recording tax which becomes payable in respect of this Agreement, the Notes or
the Other Documents.
Section 13.7. Schedules and Exhibits. The schedules and exhibits which are
attached hereto are and shall constitute a part of this Agreement.
Section 13.8. Governing Law; Consent to Jurisdiction. This Agreement, the
Notes and the Other Documents, and the rights and obligations of the parties
hereunder and thereunder, shall be governed by and construed and interpreted in
accordance with, the laws of the State of
<PAGE>
-58-
Connecticut. Borrower agrees that any suit for the enforcement of this
Agreement, the Notes or the Other Documents may be brought in the courts of the
State of Connecticut or any federal court sitting therein and consents to the
non-exclusive jurisdiction of such court and to service of process in any such
suit being made upon Borrower by mail at the address referred to Section 13.3.
hereof. Borrower hereby waives any objection that Borrower may now or hereafter
have to the venue of any such suit or any such court or that such suit is
brought in an inconvenient court.
Section 13.9. Survival of Representations. All representations,
warranties, covenants and agreements contained in this Agreement, the Notes or
the Other Documents shall survive the Closing Date and continue in full force
and effect until the payment and the performance of the Obligations in full.
Section 13.10. Amendments. No modification or amendment of this Agreement,
the Notes or the Other Documents shall be effective unless the same shall be in
writing and signed by the parties hereto or thereto (as the case may be).
Section 13.11. Binding Effect of Agreement. This Agreement shall be
binding upon and inure to the benefit of Borrower and Bank and their respective
successors and assigns; Provided, however, that Borrower may not assign or
transfer its rights or obligations hereunder. Bank may sell, transfer or grant
participations in the Obligations without the prior written consent of Borrower
(but after obtaining an agreement to maintain the confidentiality of any
financial and business information of Borrower), and Borrower agrees that any
transferee or participant shall be entitled to the benefits of this Agreement to
the same extent as if such transferee or participant were Bank; provided,
further that notwithstanding any such transfer or participation, Borrower may,
for all purposes of this Agreement, treat Bank as the Person entitled to
exercise all rights and remedies under this Agreement and under the Notes and
the Other Documents and to receive all payments with respect to the Obligations.
Section 13.12. Interest Rate. If the rate of interest payable by Borrower
under this Agreement, the Notes or the Other Documents shall be or become
usurious or otherwise unlawful under laws applicable thereto, the interest rate
shall be reduced to the maximum lawful rate and any amount paid by Borrower in
excess of the maximum lawful rate shall be considered a payment in reduction of
principal or, at the sole election of Bank, shall be returned to Borrower.
Section 13.13. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon one and the same instrument.
Section 13.14. No Agency Relationship. Bank is not the agent, fiduciary or
representative of Borrower nor is Borrower the agent, fiduciary or
representative of Bank and this Agreement shall not make Bank liable to any
third patty, including but not limited to, Borrower's shareholders, directors,
officers, creditors or any other person.
<PAGE>
-59-
Section 13.15. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
Section 13.16. Headings. All article, section and subsection headings in
this Agreement, the Notes and the Other Documents are included for convenience
of reference only and shall not constitute a part of this Agreement, the Notes
or the Other Documents for any other purpose.
Section 13.17. Reinstatement. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any amount
received by Bank in respect of the Obligations is rescinded or must otherwise be
restored or returned by Bank upon the insolvency, Bankruptcy, dissolution,
liquidation or reorganization of Borrower or upon the appointment of any
intervenor or conservator of, or trustee or similar official for, Borrower or
any substantial part of its properties or assets, or otherwise, all as though
such payments had not been made.
Section 13.18. Interpretation and Construction. The following rules shall
apply to the interpretation and construction of this Agreement, the Notes and
the Other Documents unless the context requires otherwise: (a) the singular
includes the plural and the plural includes the singular; (b)words importing
any gender include the other genders; (c) references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing the statute to which reference is made and all regulations promulgated
pursuant to such statutes; (d) references to "writing" shall include printing,
photocopy, typing, lithography and other means of reproducing words in a
tangible, visible form; (e) the words "including", "includes" and "include"
shall be deemed to be followed by the words "without limitation"; (f) references
to the introductory paragraph, preliminary statements, articles, sections (or
subdivisions of sections), exhibits or schedules are to those of this Agreement
unless otherwise indicated; (g) references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent that such amendments
and other modifications are permitted or not prohibited by the terms of this
Agreement; (h) references to Persons include their respective permitted
successors and assigns; and (i) "or" is not exclusive.
Section 13.19. Relation to Other Documents. Nothing in this Agreement
shall be deemed to amend, or relieve Borrower of its obligations under, any of
the Other Documents and to the extent that the provisions of any of the Other
Documents allow Borrower to take certain actions, or not take certain actions,
with regard for example to the granting of liens, transfers of properties or
assets, maintenance of financial ratios and similar matters, Borrower
nevertheless shall be fully bound by the provisions of this Agreement.
Section 13.20 Confidentiality. The Bank agrees to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all information provided to it by the Borrower under this Agreement or the Other
Documents, and the Bank shall not use any such information other than in
connection with or in the administration or enforcement of this Agreement and
the Other Documents, except to the extent such information (i) was or becomes
<PAGE>
-60-
generally available to the public other than as a result of disclosure by the
Bank, (ii) was or becomes available on a nonconfidential basis from a source
other than the Borrower, provided that such source is not bound by a
confidentiality agreement with the Borrower, known to the officers of the Bank
handling the transaction contemplated hereby; and provided, further, that the
Bank may disclose such information (A) at the request or pursuant to any
requirement of any governmental authority or regulator to which the Bank is
subject or in connection with an examination of the Bank by any such authority
or regulator, (B) pursuant to subpoena or other court process, (C) when required
to do so in accordance with the provisions of any applicable law, (D)to the
extent reasonably required in connection with any litigation or proceeding to
which the Bank may be party, (E) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any Other Document, (F) to
the Bank's independent auditors, attorneys, accountants and other professional
advisors, and (G) to any Affiliate of the Bank provided that such Person agrees
in writing to keep such information confidential to the same extent required of
the Bank hereunder.
Section 13.21. GAAP Changes. Notwithstanding anything to the contrary set
forth herein, if changes in GAAP from those used in the preparation of the
Borrower's Financial Statements for the Fiscal Year ended April 30, 1996 ("GAAP
Changes") hereafter occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial Accounting Standards
Board of the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) result in a change in the method of
calculation of, or in different components in, any of the financial covenants,
definitional provisions, standards of other terms or conditions found in this
Agreement, (i) the parties hereto agree to enter into negotiations with respect
to amendments to this Agreement to conform those covenants, definitional
provisions, standards or other terms and conditions as criteria for evaluating
the Borrower's financial condition and performance to substantially the same
criteria as were effective prior to such GAAP Change, and (ii) the Borrower
shall be deemed to be in compliance with the affected covenant or other
provision during the thirty (30) day period following any such GAAP Change if
and to the extent that the Borrower would have been in compliance therewith
under GAAP as in effect immediately prior to such GAAP Change; provided,
however, that this Section 13.21 shall not be deemed to require the Borrower or
the Bank to agree to modify any provision of this Agreement or the Other
Documents to reflect any such GAAP Change and, if the parties, in their sole
discretion, fail to reach agreement on such modifications prior to the end of
the thirty (30) day period referred to in clause (ii), the terms of this
Agreement shall remain unchanged and the compliance of the Borrower with the
financial covenants and other provisions contained herein shall, upon the
expiration of such thirty (30) day period, be calculated in accordance with GAAP
without giving effect to such GAAP Change.
Section 13.22. Environmental Law Changes. Notwithstanding any provision of
this Agreement to the contrary, if changes in any Environmental Law or in any
Environmental Law which defines Hazardous Materials shall occur by virtue of the
enactment of new statutory laws, the adoption of regulations, the judicial or
administrative interpretation of new or existing Environmental Laws, the
expansion of existing such laws, or otherwise, and the result of such change is
to cause Borrower to be in default of any covenant or other provision under this
Agreement, then Borrower shall be deemed to be in compliance with the affected
covenant or
<PAGE>
-61-
other provision during the thirty (30) day period following any such change if
and to the extent that the Borrower would have been in compliance therewith
under Environmental Laws as in effect immediately prior to such change;
provided, however, that this Section 13.22 shall not be deemed to require the
Borrower or the Bank to agree to modify any provision of this Agreement or the
Other Documents to reflect any such change and, if the parties, in their sole
discretion, fail to reach agreement on such modifications prior to the end of
such thirty (30) day period, the terms of this Agreement shall remain unchanged
and the compliance of the Borrower with Environmental Laws shall, upon the
expiration of such thirty (30) day period, be determined by giving effect to
such changes.
[NEXT PAGE IS SIGNATURE PAGE]
<PAGE>
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IN WITNESS WHEREOF, Bank and Borrower have executed this Agreement as of
the date first above written.
BANK OF BOSTON CONNECTICUT
By: /s/ Brent P. Hazzad
-----------------------
Name: Brent P. Hazzad
Title:
GREENSTEEL, INC.
By:
-----------------------
Name:
Title:
POLYVISION CORPORATION
(to the extent of Section 4 hereof
By:
-----------------------
Name:
Title:
<PAGE>
-63-
IN WITNESS WHEREOF, Bank and Borrower have executed this Agreement as of
the date first above written.
BANK OF BOSTON CONNECTICUT
By:
------------------------------
Name:
Title:
GREENSTEEL, INC.
By: /s/ Lawrence W. Hay
------------------------------
Name: Lawrence W. Hay
Title:
POLYVISION CORPORATION
(to the extent of Section 4 hereof
By: /s/ Lawrence W. Hay
------------------------------
Name: Lawrence W. Hay
Title: V P FIN
<PAGE>
EXHIBIT A
FORM OF LOAN CONFIRMATION
<PAGE>
EXHIBIT B
FORM OF REVOLVING CREDIT NOTE
<PAGE>
REVOLVING CREDIT NOTE
$3,800,000.00 July 23, 1997
FOR VALUE RECEIVED, the undersigned GREENSTEEL, INC. ("Maker") hereby
unconditionally promises to pay to BANK OF BOSTON CONNECTICUT (the "Payee" or
"Bank"), or any subsequent assignee or holder (Payee and any subsequent assignee
or holder being sometimes referred to as "Holder") at the head office of the
Bank located at 100 Pearl Street, Hartford, Connecticut 06103, the principal
amount of THREE MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS $3,800,000.00)
or such lesser amount as may have been loaned, advanced or readvanced to Maker
by Bank under the terms of that certain First Amended and Restated Master Credit
Agreement, of even date herewith, by and among Maker, the Bank and POLYVISION
CORPORATION, a New York corporation, having its chief executive office located
at 48-62 36th Street, Long Island City, New York 11101 (as amended and in effect
from time to time, the "Restated Credit Agreement"), together with interest
thereon as provided herein and all other sums due from Maker to Bank under the
Restated Credit Agreement and this Note.
The unpaid principal amount of this Note shall be paid at the times and in
the manner set forth in Section 2.1.7. of the Restated Credit Agreement, but if
not sooner paid the entire unpaid principal amount of this Note, together with
accrued and unpaid interest thereon, shall be due and payable on May 31, 1999
unless such date shall be extended pursuant to Section 2.1.11. of the Restated
Credit Agreement.
Interest on the unpaid principal amount of this Note shall be payable
monthly in arrears from the date hereof, commencing July 1, 1997 and continuing
on the first day of each succeeding calendar month until paid in full at the
rate and in the manner specified in Section 2.1.8. of the Restated Credit
Agreement.
This Note is the Revolving Credit Note referred to in Section 2.1.6. of
the Restated Credit Agreement, the terms and conditions of which are hereby
incorporated by this reference, and is in substitution for that certain
$3,800,000 Revolving Credit Note dated April 25, 1996 which heretofore evidenced
Revolving Loans under the Master Credit Agreement. Capitalized terms used herein
without definition shall have the meanings set forth in the Restated Credit
Agreement.
Overdue payments of principal (whether at stated maturity, by acceleration
or otherwise), and, to the extent permitted by law, overdue interest, shall bear
interest at the rate and in the manner set forth in Section 2.4.6. of the
Restated Credit Agreement.
<PAGE>
2
Any payment of principal or interest due under this Note which is not made
within ten (10) days of its due date (exclusive of any due date arising by
reason of acceleration of this Note), shall bear a late fee as provided in
Section 2.4.4. of the Restated Credit Agreement. Nothing in the preceding
sentence shall affect the Bank's rights to exercise any of its rights and
remedies provided in the Agreement if an Event of Default has occurred and is
continuing.
No reference to the Restated Credit Agreement nor any provision thereof
shall affect or impair the absolute and unconditional obligation of the Maker of
this Note to pay the principal of and interest on this Note as herein provided.
All sums paid under this Note shall be applied first to all fees, costs
and reasonable expenses incurred by Bank under the Restated Credit Agreement and
this Note, then to any late charges payable by Maker, then to any accrued and
unpaid interest, with the balance, if any, to be applied to unpaid principal.
Until notified in writing of the transfer of this Note, Maker shall be
entitled to deem Payee or such person who has been so identified by the
transferor in writing to Maker as the holder of this Note, as the owner and
holder of this Note. Holder agrees that before disposing of this Note, or any
part hereof, it will make a notation on Schedule A attached hereto and
incorporated herein by reference evidencing (i) the date and amount of each
advance to be evidenced by this Note and (ii) the date and amount of each
principal payment made with respect thereto; provided, however, that the failure
to make a notation of any payment made on this Note shall not limit or otherwise
affect the obligations of Maker under this Note.
The Restated Credit Agreement and this Note shall be governed by, and
shall be construed and enforced in accordance with, the laws of the State of
Connecticut.
Upon the occurrence and during the continuance of an Event of Default (as
defined in Section 11 of the Restated Credit Agreement), the unpaid principal
amount of this Note may become or may be declared to be due and payable in the
manner, upon the conditions and with the effect provided in Section 12 of the
Restated Credit Agreement.
The terms of this Note are subject to amendment only in the manner
provided in Section 13.10. of the Restated Credit Agreement.
This Note is subject to mandatory prepayment under the circumstances set
forth in Section 2.1.14. of the Restated Credit Agreement.
Any failure by Bank to exercise any right under this Note or the Restated
Credit Agreement arising or existing as a result of the occurrence of an Event
of Default, or any delay in such exercise, shall not constitute a waiver of the
right to exercise such right at a later time so long as such Event of Default
shall remain uncured, and shall not constitute a waiver of the right to exercise
such right if any other Event of Default shall occur and be continuing. The
acceptance
<PAGE>
3
by Bank of the payment of any sum due and payable under this Note after the date
specified for such payment shall not be a waiver of Bank's right to require
prompt payment when due of all other sums payable under this Note.
Maker and each endorser, guarantor and surety of this Note, and each other
person liable or who shall become liable for all or any part of the indebtedness
evidenced by this Note:
(a) waive demand, presentment, protest, notice of protest, notice of
dishonor, diligence in collection, notice of nonpayment and all notices of a
like nature; and
(b) consent to (i) the release, surrender, exchange or substitution
of all or any part of the security for the indebtedness evidenced by this Note,
or the taking of any additional security; (ii) the release of any or all other
persons from liability, whether primary or contingent, for the indebtedness
evidenced by this Note or for any related obligations; and (iii) the granting of
any other indulgences to any such person.
(c) consent to (i) all renewals, extensions or modifications of this
Note or the Agreement (including any affecting the time of payment), and (ii)
all advances under this Note or the Restated Credit Agreement.
Any such renewal, extension, modification, advance, release, surrender,
exchange, substitution, taking or indulgence may take place without notice to
any such person, and, whether or not any such notice is given, shall not impair
the liability of any such person.
Maker and each endorser, guarantor and surety of this Note, and each other
person liable or who shall become liable for all or any part of the indebtedness
evidenced by this Note, hereby give Holder a lien and right of setoff for all of
their respective liabilities in respect of such indebtedness upon and against
all of their respective deposits, credits and property (exclusive of funds
expressly designated as trust funds), now or hereafter in the possession or
control of Holder or in transit to Holder. Holder may, at any time after the
occurrence and during the continuance of an Event of Default, apply the same, or
any part thereof, to any liability of Maker or any such other person, whether
matured or unmatured, to Holder.
If this Note is now, or hereafter shall be, signed by more than one
Person, it shall be the joint and several obligation of all such persons
(including, without limitation, all makers, endorsers, guarantors and sureties,
if any) and shall be binding on all such Persons and their respective heirs,
executors, administrators, legal representatives, successors and assigns. This
Note and all covenants, agreements and provisions set forth in this Note shall
inure to the benefit of Holder and its successors and assigns, including any
lender(s) with which Holder may participate in the making of any loans or
advances evidenced by this Note.
As used in this Note, words of any gender shall be deemed to apply equally
to any other gender, the plural shall include the singular and the singular
shall include the plural (as the
<PAGE>
4
context shall require), and the word "person" shall refer to individuals,
entities, authorities and other natural and juridical persons of every type.
MAKER AND EACH AND EVERY ENDORSER, GUARANTOR AND SURETY OF THIS NOTE, AND
EACH OTHER PERSON WHO IS OR WHO SHALL BECOME LIABLE FOR ALL OR ANY PART OF THIS
NOTE, HEREBY ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A
COMMERCIAL TRANSACTION AND WAIVE THEIR RIGHTS TO NOTICE AND HEARING UNDER
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES OR BY OTHER APPLICABLE LAW WITH
RESPECT TO ANY PREJUDGMENT REMEDY WHICH HOLDER MAY DESIRE TO USE.
MAKER AND EACH AND EVERY ENDORSER, GUARANTOR AND SURETY OF THIS NOTE, AND
EACH OTHER PERSON WHO IS OR WHO SHALL BECOME LIABLE FOR ALL OR ANY PART OF THIS
NOTE, HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION, OR
PROCEEDING OR ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO THE
TRANSACTION OF WHICH THIS NOTE IS A PART AND/OR IN THE ENFORCEMENT BY BANK OF
ANY OF ITS RIGHTS AND REMEDIES HEREUNDER OR UNDER APPLICABLE LAW. MAKER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER BY ITS ATTORNEY.
IN WITNESS WHEREOF, Maker has executed this Note as of the date first set
forth above.
GREENSTEEL, INC.
By:
------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
TO REVOLVING CREDIT NOTE
AMOUNT
OF AMOUNT MADE BY
DATE LOAN PAID NOTATION
- ---- ---- ---- --------
<PAGE>
EXHIBIT C
FORM OF TERM NOTE
<PAGE>
TERM NOTE
$920,000.00 July 23, 1997
FOR VALUE RECEIVED, the undersigned GREENSTEEL, INC., a Delaware
corporation, with its chief executive office located at 29 Laing Avenue,
Dixonville, Pennsylvania 15734-O335 ("Maker") hereby unconditionally promises to
pay to BANK OF BOSTON CONNECTICUT, a Connecticut savings bank (the "Payee" or
"Bank"), or any subsequent assignee or holder (payee and any subsequent assignee
or holder being sometimes referred to as "Holder") at the head office of Bank
located at 100 Pearl Street, Hartford, Connecticut 06103, the principal amount
of NINE HUNDRED TWENTY THOUSAND AND NO/100 DOLLARS ($920,000.00), which
principal amount is outstanding under that certain First Amended and Restated
Master Credit Agreement, of even date herewith, by and between Maker, Bank and
POLYVISION CORPORATION, a New York Corporation, having its chief executive
office located at 48-62 36th Street, Long Island City, New York 11101 (the
"Restated Credit Agreement"), together with interest thereon as provided herein
and all other sums due from Maker to Bank under this Note and the
Restated Credit Agreement.
Commencing August 1, 1997, and continuing on the first day of each
succeeding month thereafter, the unpaid principal of this Note shall be payable
in seventeen (17) consecutive monthly installments in the amount of TWENTY
THOUSAND AND NO/100 DOLLARS ($20,000.00), and, if not sooner paid, a final
installment in the then unpaid principal amount of this Note, together with
accrued and unpaid interest thereon and all other amounts due and owing under
this Note, shall be due and payable on May 31, 1999.
Interest on the unpaid principal amount of this Note shall be payable at
the times, at the rate and in the manner specified in Section 2.3.4 of the
Restated Credit Agreement. Interest shall be payable monthly in arrears from the
date hereof, commencing on the first day of the first month after the date
hereof, and continuing on the first day of each succeeding calendar month until
the entire principal amount of this Note is paid in full.
This Note is the Term Note referred to in Section 2.3.2 of the Restated
Credit Agreement, the terms and conditions of which are hereby incorporated by
this reference, and is in substitution for that certain 1,200,000.00 Term Note
dated April 25, 1996 which evidenced the Term Loan. Capitalized terms used
herein without definition shall have the meanings set forth in the Restated
Credit Agreement.
If a payment of principal or interest is not made within ten (10) days of
its due date (exclusive of any due date arising by reason of acceleration of
this Note), the undersigned will also pay on demand a late payment charge equal
to five percent (5.0%) of the amount of such
<PAGE>
2
payment. Nothing in the preceding sentence shall affect the Bank's rights to
exercise any of its rights and remedies provided in the Agreement if an Event of
Default shall have occurred and is continuing.
Overdue payments of principal (whether at stated maturity, by acceleration
or otherwise), and, to the extent permitted by law, overdue interest, shall bear
interest at the rate and in the manner set forth in Section 2.4.6 of the
Restated Credit Agreement.
No reference to the Restated Credit Agreement nor any provision thereof
shall affect or impair the absolute and unconditional obligation of the Maker of
this Note to pay the principal of and interest on this Note as herein provided.
All sums paid under this Note shall be applied first to all fees, costs
and reasonable expenses incurred by Bank under the Restated Credit Agreement and
this Note, then to any late charges payable by Maker, then to any accrued and
unpaid interest, with the balance, if any, to be applied to unpaid principal.
This Note shall be subject to the prepayment provisions set forth in
Sections 2.3.5 and 2.3.6 of the Restated Credit Agreement.
Until notified in writing of the transfer of this Note, Maker shall be
entitled to deem Payee or such person who has been so identified by the
transferor in writing to Maker as the holder of this Note, as the owner and
holder of this Note.
The Restated Credit Agreement and this Note shall be governed by, and
shall be construed and enforced in accordance with, the laws of the State of
Connecticut.
Upon the occurrence of and during the continuance of an Event of Default
(as defined in Section 11 of the Restated Credit Agreement), the unpaid
principal amount of this Note may become or may be declared to be due and
payable in the manner, upon the conditions and with the effect provided in
Section 12 of the Restated Credit Agreement.
The terms of this Note are subject to amendment only in the manner
provided in Section 13.10 of the Restated Credit Agreement.
Any failure by Bank to exercise any right under this Note or the Restated
Credit Agreement arising or existing as a result of the occurrence of an Event
of Default, or any delay in such exercise, shall not constitute a waiver of the
right to exercise such right at a later time so long as such Event of Default
shall remain uncured, and shall not constitute a waiver of the right to exercise
such right if any other Event of Default shall occur and be continuing. The
acceptance by Bank of the payment of any sum due and payable under this Note
after the date specified for such payment shall not be a waiver of Bank's right
to require prompt payment when due of all other sums payable under this Note.
<PAGE>
3
Maker and each endorser, guarantor and surety of this Note, and each
other person liable or who shall become liable for all or any part of the
indebtedness evidenced by this Note:
(a) waive demand, presentment, protest, notice of protest, notice of
dishonor, diligence in collection, notice of nonpayment and all notices of a
like nature; and
(b) consent to (i) the release, surrender, exchange or substitution
of all or any part of the security for the indebtedness evidenced by this Note,
or the taking of any additional security; (ii) the release of any or all other
persons from liability, whether primary or contingent, for the indebtedness
evidenced by this Note or for any related obligations; and (iii) the granting of
any other indulgences to any such person.
(c) consent to (i) all renewals, extensions or modifications of this
Note or the Agreement (including any affecting the time of payment), and (ii)
all advances under this Note or the Restated Credit Agreement.
Any such renewal, extension, modification, advance, release, surrender,
exchange, substitution, taking or indulgence may take place without notice to
any such person, and, whether or not any such notice is given, shall not impair
the liability of any such person.
Maker and each endorser, guarantor and surety of this Note, and each other
person liable or who shall become liable for all or any part of the indebtedness
evidenced by this Note, hereby give Holder a lien and right of setoff for all of
their respective liabilities in respect of such indebtedness upon and against
all of their respective deposits, credits and property (exclusive of funds
expressly designated as trust funds), now or hereafter in the possession or
control of Holder or in transit to Holder. Holder may, at any time after the
occurrence and during the continuance of an Event of Default, apply the same, or
any part thereof, to any liability of Maker or any such other person, whether
matured or unmatured, to Holder.
If this Note is now, or hereafter shall be, signed by more than one
Person, it shall be the joint and several obligation of all such persons
(including, without limitation, all makers, endorsers, guarantors and sureties,
if any) and shall be binding on all such Persons arid their respective heirs,
executors, administrators, legal representatives, successors and assigns. This
Note and all covenants, agreements and provisions set forth in this Note shall
inure to the benefit of Holder and its successors and assigns, including any
lender(s) with which Holder may participate in the making of any loans or
advances evidenced by this Note.
As used in this Note, words of any gender shall be deemed to apply equally
to any other gender, the plural shall include the singular and the singular
shall include the plural (as the context shall require), and the word "person"
shall refer to individuals, entities, authorities and other natural and
juridical persons of every type.
MAKER AND EACH AND EVERY ENDORSER, GUARANTOR AND SURETY OF THIS NOTE, AND
EACH OTHER PERSON WHO IS OR WHO SHALL BECOME LIABLE FOR ALL OR ANY PART OF THIS
NOTE, HEREBY ACKNOWLEDGE THAT THE
<PAGE>
4
TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION AND WAIVE
THEIR RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL
STATUTES OR BY OTHER APPLICABLE LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH
HOLDER MAY DESIRE TO USE.
MAKER AND EACH AND EVERY ENDORSER, GUARANTOR AND SURETY OF THIS NOTE, AND
EACH OTHER PERSON WHO IS OR WHO SHALL BECOME LIABLE FOR ALL OR ANY PART OF THIS
NOTE, HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION, OR
PROCEEDING OR ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO THE
TRANSACTION OF WHICH THIS NOTE IS A PART AND/OR IN THE ENFORCEMENT BY BANK OF
ANY OF ITS RIGHTS AND REMEDIES HEREUNDER OR UNDER APPLICABLE LAW. MAKER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER BY ITS ATTORNEY.
IN WITNESS WHEREOF, Maker has executed this Note as of the date first set
forth above.
GREENSTEEL, INC.
By:
-----------------------
Name:
Title:
<PAGE>
EXHIBIT E
FORM OF OPINION OF COUNSEL
<PAGE>
Bank of Boston Connecticut
100 Pearl Street
Hartford, Connecticut 06103
RE: First Amended and Restated Master Credit Agreement dated as of
June __, 1997
Ladies and Gentlemen:
This letter and the options expressed herein are furnished to you in
connection with the amendment and restatement of certain credit facilities (the
"Credit Facilities") by BANK OF BOSTON CONNECTICUT (the "Bank") to GREENSTEEL,
INC. (the "Borrower") pursuant to a certain Master Credit Agreement of even date
herewith (the "Credit Agreement").
We have acted as counsel to Borrower and Polyvision Corporation (the
"Guarantor") in connection with the transactions contemplated in the Credit
Agreement. This opinion is being delivered to you in accordance with Section
5.4. of the Credit Agreement and any capitalized terms not otherwise defined
herein shall have the meanings ascribed to such terms in the Credit Agreement.
In order to render the opinions expressed herein, we have examined and
reviewed the Credit Agreement, together with the exhibits and schedules thereto,
the Note and the following documents, instruments and agreements executed and
delivered in connection with the extension, and amendment and restatement, of
the Credit Facilities (such documents, instruments and agreements being
sometimes hereinafter referred to collectively with the Credit Agreement and the
Note as the "Loan Documents"):
(i) the Security Agreement;
(ii) the UCC-1 financing statements prepared to perfect security interest
granted under the Security Agreement (the "Financing Statements");
(iii) the UCC fixture filings prepared to perfect the security interests
granted under the Security Agreement in collateral which constitutes fixtures
(the "Fixture Filings");
(iv) the Pledge Agreement;
(v) the Collateral Disclosure List;
(vi) the Environmental Certificate;
(vii) the Mortgage;
(viii) the Guaranty;
(ix) the Stock Pledge, together with the stock powers relating thereto;
<PAGE>
(x) a mortgage, assignment and security agreement - trademarks (the
"Trademark Agreement"); and
(xi) (INSERT OTHER DOCUMENTS]
We have also examined and relied upon (a) the Certificate of
Incorporation, if and as amended, the Bylaws, if and as amended, and the minutes
of certain corporate proceedings of the Borrower and the Guarantor; (b) various
certificates of good standing and other certificates and certified copies of
public records relating to the Borrower and the Guarantor provided to us by
various governmental officials; and (d) such other matters of fact and law as we
have deemed necessary for such purposes.
In making such examinations, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to original documents of documents submitted to us as certified
or photostatic copies, the validity of all applicable statutes, ordinances,
rules and regulations, the legal capacity of all persons executing documents and
the proper indexing and accuracy of all public records and documents. As to
questions of fact material to our opinion, we have, in part, relied on the
statements or certifications of officers of the Borrower and the Guarantor on
which we believe we are entitled to rely and have made such other factual
inquiries of said officers and such other individuals and public officials as we
have deemed necessary in order to render this opinion. Our opinion is
necessarily limited to facts disclosed to us by such officers, individuals and
officials.
Based on and subject to the foregoing, we are of the opinion that:
1. Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has all requisite corporate
power to own its property and conduct its business as now conducted and is duly
qualified and in good standing as a foreign corporation and duly authorized to
do business in each jurisdiction wherein the nature of its properties or
business requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on its business, financial
condition, assets or properties taken as a whole.
2. The Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, has all requisite
corporate power to own its property and conduct its businesses as now conducted
and is duly qualified and in good standing as a foreign corporation and is duly
authorized to do business in each jurisdiction where the nature of its
properties or businesses requires such justification, except where the failure
to be so qualified would not have a material adverse effect on its business,
financial condition, assets or properties taken as a whole.
3. All necessary corporate action has been taken by the Credit Parties to
authorize the execution, delivery and performance of the Loan Documents executed
or to be executed by it, and each of such Loan Documents has been duly executed
and, when delivered by the Credit Parties, will be enforceable against it in
accordance with its terms. As of the date hereof, the execution, delivery and
performance by the Borrower of each of the Loan Documents executed or to be
executed by it does not and will not violate or contravene or result in default
under, or event which, with the lapse of time, the giving of notice, or both,
<PAGE>
would constitute a default under (i) any provision of its Certificate of
Incorporation or Bylaws or (ii) any applicable federal laws or laws of the State
of Connecticut or, (iii) to the best of our knowledge, any material provision of
any mortgage, lien, lease agreement, contract or other instrument, judicial or
arbitration judgment or decision to which the Borrower is a party or by which it
is bound.
4. The Credit Parties are not required to obtain any approval,
authorization, consent, adjudication, or order of, or make any filing or
registration with, any Federal, state or local governmental authority as a
precondition to the due execution and delivery of the Loan Documents executed or
to be executed by them, as applicable, nor, to our knowledge, are any such
approvals, authorizations, consents, adjudications, orders, filings or
regulations necessary in connection with the performance of its obligations
under the Loan Documents.
5. Except as set forth on Schedule 5.23. to the Credit Agreement, there is
no litigation, proceeding or investigation pending, or, to the best of our
knowledge after due inquiry, threatened, against Borrower or the Guarantor
which, if adversely determined, would result in a material judgment not
substantially covered by insurance or would otherwise have a material adverse
effect on the properties and assets, business operations or financial conditions
of Borrower or the Guarantor.
6. The Borrower is not in material violation, with respect to the conduct
of its business, of any Federal, state or local law or ordinance or any
environmental protection, health, occupation, safety or such other similar law,
regulation or order.
7. The Guarantor is the record holder of all of the issued and outstanding
stock of the Borrower. All shares of such stock have been validly issued and are
fully paid and nonassessable, and no rights to subscribe to any additional
shares have been granted, and no options, warrants or similar rights are
outstanding.
8. Neither the Borrower nor the Guarantor is subject to regulation under
the Investment Company Act of 1940, as amended. No part of the proceeds of the
Loan will be used by Borrower in violation of Regulation G, Regulation T,
Regulation U or Regulation X promulgated by the Board of Governors of the United
States Federal Reserve System.
9. All state and local recording, franchise, stamp, documentary and other
taxes and governmental charges and assessments required to be paid in connection
with the execution, delivery, filing or recordation of, or as a condition to the
enforcement of, the Loan Documents, including, without limitation, the security
interest grants contained therein, and any of the transactions contemplated
thereby, have been duly paid or had adequate provision made for the payment
thereof.
10. We understand that you have filed the Financing Statements and the
Fixture Filings, or will cause the Financing Statements and the Fixture Filings
to be filed with the filing offices and locations set forth on Exhibit A
attached hereto (the "Filing Offices") with respect to the collateral granted to
the Bank under the Security Agreements showing the Borrower as Debtor and Bank
as Secured Party, these being the only places provided by the laws of the State
of Connecticut for filing in order to perfect a security interest in the
Collateral to the extent that such is subject to the Connecticut Uniform
Commercial Code.
<PAGE>
The security interest granted under the Security Agreements will be perfected
under Connecticut law by reason of such filings to the extent that, under the
Connecticut Uniform Commercial Code, such security interest is perfected by
filing financing statements in Connecticut. No other filings in Connecticut,
where filing is the appropriate method of perfection, are necessary to perfect
such security interest. Based solely upon our examination of the [IDENTIFY
SEARCHES] and provided that no financing statements related to the Collateral
have been filed with the Filing Offices since the completion of the
aforementioned searches, the Bank will have a perfected security interest in the
Collateral senior to all other known security interests which are perfected by
recording financing statements with the Filing Offices.
11. The opinions expressed in Paragraph 11 are further qualified in their
entirety in that, to the extent the Security Agreement and UCC-l Financing
Statements filed in connection therewith purport to cover collateral in which a
security interest may be perfected only by the secured party's taking possession
thereof, i.e., money or instruments other than certificated securities or
instruments which constitute part of chattel paper or to which the filing
provisions of Article 9 of the Uniform Commercial Code do not apply and in which
a third party may have acquired a security interest, we express no opinion as to
the perfection or priority of Bank's security interest. We also call to your
attention the fact that it may be necessary for the Bank to file continuation
statements in order to maintain the perfection of the various security interests
granted under the Security Agreement
12. The Trademark Assignment is in proper form and, upon filing with, and
acceptance by, the United States Patent and Trademark Office, will constitute
valid liens upon the trademarks and trademark applications listed and described
therein.
The opinions herein are made as of the date hereof and may not be
construed or implied to be continuing representations of law by us to you or any
other party without our express written consent.
Very truly yours,
<PAGE>
EXHIBIT F
FORM OF ACCOUNTS RECEIVABLE RECONCILIATION
<PAGE>
EXHIBITG
FORM OF ACCOUNTS RECEIVABLE EXCLUSION REPORT
<PAGE>
EXHIBIT H
FORM OF DESIGNATION OF MERCHANDISE REPORT
<PAGE>
EXHIBIT I-1
FORM OF BORROWING BASE CERTIFICATE
<PAGE>
EXHIBIT I-2
FORM OF BOOKINGS REPORT
<PAGE>
EXHIBIT I-3
FORM OF BACKLOG REPORT
<PAGE>
EXHIBIT J
FORM OF REPORT OF CHIEF FINANCIAL OFFICER
<PAGE>
GREENSTEEL, INC. (the "Borrower") HEREBY CERTIFIES that:
This Report is furnished pursuant to that certain First Amended and
Restated Master Credit Agreement dated as of July 23, 1997 by and among the
Borrower, BANK OF BOSTON CONNECTICUT and POLYVISION CORPORATION (the
"Agreement"). Unless otherwise defined herein, the capitalized terms used in
this Report have the meanings given to them in the Agreement.
As required by the Agreement, consolidated Financial Statements of
Borrower and its Subsidiaries for the [year/month/quarter] ended ____________,
19__ (the "Financial Statements") prepared in accordance with GAAP (subject to
the qualifications hereinafter stated) accompany this Report. The Financial
Statements present fairly the consolidated financial position of Borrower and
its Subsidiaries as at the date thereof and the consolidated results of
operations of Borrower and its Subsidiaries for the period covered thereby
(subject to normal recurring year-end adjustments and to the absence of certain
footnote disclosures).
The figures set forth in Schedule A for determining compliance by Borrower
with the financial covenants contained in the Agreement are true and complete as
of the date of the accompanying Financial Statements.
The activities of Borrower and its Subsidiaries during the period covered
by the Financial Statements have been reviewed by the Chief Financial Officer or
by employees or agents under his or her immediate supervision. Based on such
review, to the best knowledge and belief of the Chief Financial Officer (but
without any personal liability for any inaccuracy), and as of the date of this
Report, no Default or Event of Default has occurred which has not been waived in
writing by Bank.(1)
GREENSTEEL, INC.
By: /s/ Lawrence W. Hay
------------------------------
Name: Lawrence W. Hay
Title: V P FIN
- ----------
(1) If an Event of Default has occurred and is continuing, this paragraph is to
be modified with an appropriate statement as to the, nature thereof, the period
of existence thereof and what action Borrower has taken, is taking, or proposes
to take with respect thereto.
<PAGE>
SCHEDULE A
FINANMCIAL COVENANTS
Current Ratio (Section 9.1)
REQUIRED ______:1.00
ACTUAL: ______:1.00
(i) Consolidated Current Assets $__________
(ii) Consolidated Current Liabilities $__________
(iii) Line (i) divided by Line (ii) :1.00
Consolidated EBITDA (Section 9.2.)
REQUIRED: $__________
ACTUAL: $__________
Debt Service Coverage (Section 9.3.)
REQUIRED: 1.00:1.00
ACTUAL: ___________
(i) Consolidated Operating Cash Flow $__________
(ii) Consolidated Total Debt Service $__________
(iii) Line (i) divided by Line (ii) _____:1.00
<PAGE>
Consolidated Total Liabilities to Consolidated Tangible Net Worth Ratio (Section
9.4.)
REQUIRED: _____:1.00
ACTUAL: _____:1.00
(i) Consolidated Total Liabilities $_________
(ii) Consolidated Tangible Net Worth $_________
(iii) Line (i) divided by line (ii) _____:1.00
WITNESS my hand this ____ day of _________, 19.
GREENSTEEL, INC.
By:
-------------------------
<PAGE>
EXHIBIT K
FORM OF LOAN PAYMENT CONFUSION
<PAGE>
DISCLOSURE SCHEDULES
July 23, 1997
These Disclosure Schedules are delivered pursuant to the First
Amended and Restated Master Credit Agreement, dated as of July 23, 1997, by and
among Bank of Boston Connecticut, as Bank, Greensteel, Inc., as Borrower, and
PolyVision Corporation, as Guarantor (the "Agreement"). The titles used herein
are merely for convenience and are not to be read as part of the Agreement or
the disclosures.
Capitalized terms used herein that are not otherwise defined herein
shall have the meanings set forth in the Agreement, of which these Schedules are
a part. Any matter disclosed pursuant to one section or subsection hereof, or in
the Financial Statements provided to the Bank, is deemed disclosed for all
purposes of these Schedules to the extent the Agreement requires such
disclosure. These Schedules supersede and replace any other schedules or
document lists previously furnished by the Borrower or the Guarantor to the
Bank.
<PAGE>
Schedule 1.80: Mortgaged Property
1. 29 Laing Avenue
Dixonville, PA 15734-0335
2. 14536 Oyster Road
Alliance, OH 44601-9243
3. 110 N. Upright Street
Landis, NC 28088-0137
2
<PAGE>
Schedule 4.7: Financial Statements
None.
3
<PAGE>
Schedule 4.8: Financial Forecasts
The Financial Forecasts attached hereto are incorporated herein by
reference in their entirety.
4
<PAGE>
Schedule 4.14: Commitments
None.
5
<PAGE>
Schedule 4.18: Ownership of Borrower
Holder Shares
- ------ ------
PolyVision Corporation 100 shares of Common Stock,
par value $.01 per share
6
<PAGE>
Schedule 4.23: Litigation
1. Alliance. Ohio - Reference is made to Schedule 4.29 hereof, the
information described therein being incorporated herein by reference in
its entirety.
2. Suffolk County, New York - In 1994, Reliance Insurance Company of New York
(the "Plaintiff") commenced an action in the Supreme Court of the State of
New York, County of Suffolk, against several defendants including the
Guarantor seeking money damages based on the purported sale and delivery
by defendants of some 860 insulated metal curtain wall panels. Plaintiff
has alleged that such panels were defective in their design and
manufacture. In its original complaint, Plaintiff seeks damages of
$385,454 allegedly already incurred and unspecified future damages. The
alleged sales fall into two categories, an original sale in 1987 and two
or more sales in 1991 and 1992 of so-called replacement panels. Among the
theories of liability advanced by Plaintiff are breach of contract, breach
of express warranty and implied warranty. Pursuant to orders of the Court,
the causes of action based on the 1987 transaction were dismissed on
statute of limitation grounds. However, Plaintiff has been granted leave
to serve an amended complaint to allege, among other things, a claim under
the New Jersey Consumer Fraud Act (which might permit treble damages),
while preserving the right of the defendants, including the Guarantor, to
challenge the applicability of such Act. Since an amended complaint has
not yet been served, Plaintiff's theories of liability and damages are as
yet not completely certain. Moreover, since an answer to the amended
complaint, if served, remains to be served, and, as well, discovery has
yet to commence, it is premature to render an estimate of the outcome of
this litigation.
3. Juneau, Alaska - This suit, filed in U.S. District Court, District of
Alaska, involves the delamination of wall panels that were installed at an
elementary school in Yakutat, Alaska. The contractor, Gilco Construction,
Inc., filed a Complaint against its supplier, Urban Industries, Inc.
("Urban"), and Urban filed a Third Party Complaint against its supplier,
the Borrower. Gilco's complaint contains several theories against Urban:
(a) breach of contract and warranty; (b) breach of an implied covenant of
good faith and fair dealing; and (c) negligence and misrepresentation.
Urban alleges in its Third Party Complaint that Urban is entitled to
indemnity, contribution and/or equitable apportionment from the Borrower.
Gilco demands judgment in the amount of $91,000, plus prejudgment interest
and its attorney's fees and costs. Neither Gilco nor Urban has alleged
with specificity the particular defect in the panels or the cause of the
alleged delamination. The Borrower has not had an opportunity to have an
expert examine either
7
<PAGE>
the system or the particular panels, and has not taken a position as to whether
there is a problem or what the cause of the problem might be. Gilco has promised
to determine, and advise the other parties, as soon as possible, whether there
has been any damage to the building, or whether the damage has been limited to
the panels. Once that has been determined, the parties have agreed to discuss
settlement of the case.
4. Erie County, New York - In 1995, the Borrower filed suit against Ciminelli
- Wallbridge, a joint venture, and the joint venture's bonding companies
to recover for unpaid contract amounts, extra costs and additional damages
arising from the Borrower's performance of its subcontract with the joint
venture in connection with the construction of the Fine Arts Center owned
by the State University Construction Fund at the State University of New
York at Buffalo, Amherst Campus. The construction was begun in 1992 and
completed in 1994.. The Borrower is due $429,000 for unpaid retention and
base contract work, which work has been accepted by the joint venture and
the owner. In addition, the Borrower claims approximately $240,000 remains
due for extra work it performed at the direction of the joint venture, but
for which it has not been paid. The Borrower further asserts additional
damages arising from alleged interferences and design changes to its work.
The suit is pending in the Supreme Court, Erie County, New York. The
Borrower is currently negotiating with the joint venture to resolve these
claims.
5. Stark County, Ohio - In January 1997, Michael Yoder and Dana Yoder (the
"Yoders") filed suit against the Borrower and Manpower Inc., for damages
arising out of a personal injury allegedly suffered by Mr. Yoder while a
temporary employee of the Borrower at the Borrower's facility in Ohio. The
Yoders' complaint seeks compensatory damages in an amount in excess of
$25,000, punitive damages in an amount in excess of $25,000, and the costs
of the action. To date, answers to the complaint have been filed,
depositions have been taken, and discovery is continuing. The Borrower is
unable to estimate the outcome of this litigation.
8
<PAGE>
Schedule 4.24: Title to Properties
UCC Financing Statements
<TABLE>
<CAPTION>
Filing
Debtor Secured Party Collateral Filing Jurisdiction Date and No.
------ ------------- ---------- ------------------- ------------
<S> <C> <C> <C> <C>
Greensteel Division Standard Office Toshiba copier Secretary of State February 5, 1992
of Information Systems under lease of California (92024163)
Display
Technology, Inc.
Information Display AT&T Credit AT&T telephone Secretary of State May 20, 1994
Technology, Inc. Corporation equipment under of Pennsylvania (23150481)
lease
Greensteel Division E.N. Dunlap, Inc. Ricoh Secretary of State February 3, 1995
of Information copier under of Pennsylvania (23961130)
Display lease
Technology, Inc. Indiana County, February 3, 1995
Pennsylvania (20202 CD 1995)
Greensteel Stiles Machinery Weeke boring Indiana County, 1996
Inc. machine (owned) Pennsylvania (20768 CD 1996)
</TABLE>
9
<PAGE>
Schedule 4.25: Labor Relations
1. Articles of Agreement between Borrower and The Carpenters' District Council
of Western Pennsylvania of the United Brotherhood of Carpenters and Joiners of
America, AFL-CIO, on behalf of Local Union 2240, for the period from
February 29, 1996 to and including February 28, 1999.
10
<PAGE>
Schedule 4.29: Environmental Protection
1. General - The Borrower's manufacturing operations are subject to numerous
federal, state and local laws and regulations relating to the storage, handling,
emission, transportation and discharge of hazardous materials and waste
products.
2. Alliance. Ohio Consent Order - In February 1992, IDT was cited by the Ohio
Environmental Protection Agency (the "Ohio EPA") for violations of Ohio's
hazardous waste regulations, including speculative accumulation of waste and
illegal disposal of hazardous waste on the site of its Alliance, Ohio
manufacturing facility.
In December 1993, IDT and Adience, Inc., the then majority shareholder of
IDT ("Adience"), signed a consent order with the Ohio EPA and Ohio Attorney
General that required IDT and Adience to pay to the State of Ohio a civil
penalty of $200,000, of which IDT paid $175,000 and Adience paid $25,000. In
addition, the consent order required the payment of stipulated penalties of up
to $1,000 per day for failure to satisfy certain requirements of the consent
order, including milestones in the closure plan. The work to be conducted under
the closure plan was substantially completed in February 1995, subject to the
Company receiving all necessary approvals from the Ohio EPA. In addition, the
Company is preparing a risk assessment study which demonstrates, in management's
opinion, that no further cleanup actions will be required on the remaining
property area not addressed under the closure plan. Based on administrative
precedent, IDT believes that it is likely that the Ohio EPA will agree with the
risk assessment study. If such an agreement is not reached, additional costs may
have to be incurred to complete additional remediation efforts. Although there
are no assurances that additional costs will not have to be incurred, the
Company believes that such costs will not need to be incurred.
As of January 31, 1996, environmental accruals amounted to $39,000, which
represents management's reasonable estimate of the amounts to be incurred in the
resolution of this matter. Since 1991, Adience and IDT have paid $1,404,000
(excluding the $200,000 civil penalty) for the environmental cleanup related to
the Alliance facility.
Under the acquisition agreement pursuant to which IDT acquired the
property from Adience in 1990, Adience represented and warranted that, except as
otherwise disclosed to IDT, no hazardous material had been stored or disposed of
on such property. No disclosure of storage or disposal of hazardous material on
the site was made; accordingly, Adience is required to indemnify the Company for
any losses in excess of $250,000. IDT has notified Adience that it is claiming
the right to indemnification for all costs in excess of $250,000 incurred by IDT
in this matter, and has received assurance from Alpine that Adience will honor
such claim. Adience has reimbursed IDT $1,354,000 through January 31, 1996.
3. Use of Hazardous Materials - In the ordinary course of business operations of
the Borrower, (i) stains, varnishes, paints and thinners are stored and disposed
of at the Borrower's
11
<PAGE>
manufacturing facilities in accordance with law, and (ii) Borrower utilizes
petroleum-based products (primarily gasoline) in the operation of motor vehicles
(which are kept and maintained at Borrower's facilities).
12
<PAGE>
Schedule 4.31: Investments
None.
13
<PAGE>
Schedule 8.1: Indebtedness
1. Letter Agreement, dated May 24, 1995, between PolyVision Corporation and
The Alpine Group, Inc., as assigned by Polyvision Corporation to
Greensteel, Inc., providing for funding of up to $7,500,000 in principal
amount, plus accrued interest thereon.
2. The list of office equipment, motor vehicles and real estate leases
attached hereto is incorporated herein by reference in its entirety.
14
<PAGE>
POLYVISION
SCHEDULE OF LEASES
07-23-97
MONTHLY
GREENSTEEL DESCRIPTION AMOUNT
- ---------- ----------- ------
CORONA WAREHOUSE OFFICE 8,377
MICHIGAN WAREHOUSE 725
MICHIGAN OFFICE 650
RICO COPIER, DIXONVILLE 784
RICO COPIER, DIXONVILLE 434
RICO FAX, DIXONVILLE 100
FAX, CORONA 114
IBM COMPUTER, DIXONVILLE 16,876
MONTHLY
POSTERLOID DESCRIPTION AMOUNT
- ---------- ----------- ------
LONG ISLAND PLANT 25,416
48-62 36TH STREET
LONG ISLAND CITY, NY 11101
<PAGE>
Schedule 8.2: Guarantees
None.
15
<PAGE>
Schedule 11.1: Post Closing Matters
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JUL-31-1997
<CASH> 378
<SECURITIES> 0
<RECEIVABLES> 8,787
<ALLOWANCES> 904
<INVENTORY> 4,099
<CURRENT-ASSETS> 13,577
<PP&E> 3,956
<DEPRECIATION> 2,393
<TOTAL-ASSETS> 18,966
<CURRENT-LIABILITIES> 13,668
<BONDS> 0
0
25,731
<COMMON> 9
<OTHER-SE> (67,367)
<TOTAL-LIABILITY-AND-EQUITY> 18,966
<SALES> 8,499
<TOTAL-REVENUES> 8,499
<CGS> 5,882
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151
<INCOME-PRETAX> 497
<INCOME-TAX> 0
<INCOME-CONTINUING> 497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 497
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
