SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported) June 30, 1999
WESTBURY METALS GROUP, INC.
(Exact name of registrant as specified in its charter)
New York
(State or Other Jurisdiction of Incorporation)
33-42408-NY 11-3023099
(Commission File Number) (I.R.S. Employer Identification No.)
750 Shames Drive, Westbury, New York 11590
(Address of principal executive offices)(Zip Code)
(516) 997-8333
(Registrant's telephone number, including area code)
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ITEM 2. Acquisition or Disposition of Assets
On July 16, 1999, the Registrant, through its wholly owned subsidiary,
Reliable - West Tech, Inc., a Delaware corporation ("RWT") (formerly known as
West Tech, Inc.), purchased substantially all of the assets (excluding cash and
accounts receivable) of Reliable Corporation, a Connecticut corporation
("Reliable") pursuant to an Asset Purchase Agreement dated May 5, 1999, as
amended by an Amendment dated July 1, 1999, and as modified by an Escrow
Agreement dated July 1, 1999. This transaction was effective as of June 30,1999
for accounting purposes. Reliable is a manufacturer of silver semi-fabricated
products for the industrial plating industries. RWT will use the purchased
assets to continue the business operations of Reliable.
The purchase price for the assets was $1,915,000. One Million Dollars
was paid in cash and the balance was paid with a six year, seven percent self
amortizing promissory note in the principal amount of $915,000. The note was
secured by a security agreement granting a security interest in the machinery,
equipment and the customer list purchased pursuant to this transaction. In
addition, RWT paid the sum of $192,578.55 in cash for the purchase of Reliable's
metals inventory. The cash portion of the purchase price was funded by a
combination of the Registrant's funds and the proceeds of certain financing
described in ITEM 5 below.
As part of this transaction, Rajendra A. Shukla, the President and sole
shareholder of Reliable, sold the building and the real property at which
Reliable operated its business for $185,000. RWT shall continue to run the
business operations from this location. The purchase price was paid with a six
year, seven percent self amortizing promissory note from RWT in the principal
amount of $185,000. The record owner of the property is Westbury Realty
Management, Inc.("Westbury Realty"), a wholly owned subsidiary of the
Registrant. The note was secured by the guaranty of Westbury Realty, which
guaranty was secured by a first mortgage on the purchased real property.
At the Closing, RWT entered into a three year employment
agreement with Rajendra A. Shukla. Mr. Shukla shall serve as a
vice president of RWT and President of its "Reliable" division.
The employment agreement provides for an annual salary of
$150,000.
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ITEM 5. Other Events
On July 13, 1999 RWT, Westbury International, Inc and Westbury Alloys,
Inc.,(each, a wholly owned subsidiary of the Registrant) as co-borrowers, closed
a financing transaction with BankBoston, N.A. pursuant to which the co-borrowers
received a Twelve Million Dollar revolving credit loan, with a Seven Million
Dollar sublimit for a consignment facility and a One Million Five Hundred
Thousand Dollar credit facility for forward contracts and executed a Loan and
Consignment Agreement and a Revolving Credit Promissory Note in the principal
amount of $12,000,000. The co-borrowers' obligations are secured by a security
interest in the assets of the co-borrowers and the guaranties of the
co-borrowers; such obligations are further secured by an Unlimited Guaranty
Agreement of the Registrant, which is secured by a first priority security
interest in all of its tangible and intangible personal property and by a pledge
of the stock of RWT, Westbury International, Inc and Westbury Alloys, Inc.
On July 15, 1999, the Registrant, RWT, Westbury International, Inc. and
Westbury Alloys, Inc., as co-borrowers closed a financing transaction with
Alliance Capital Investments Corp.("Alliance"),pursuant to a Loan Agreement
dated July 13, 1999, pursuant to which the co-borrowers received a $2,000,000
term loan. and executed a Loan Agreement and a Term Promissory Note in the
principal amount of $2,000,000. The co-borrower's obligations are secured by a
second priority security interest in the assets of the co-borrowers. As further
consideration for the loan, pursuant to an Agreement dated as of July 13,1999
the Registrant granted to Alliance a Warrant for the purchase of 90,000 shares
of the Registrant's common stock at an exercise price of $3.00 per share, such
Warrant to remain outstanding until July 15, 2009.
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired (to be
filed by amendment hereto)
(b) Pro Forma Financial Information (to be
filed by amendment hereto)
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(c) Exhibits
1. Copy of Asset Purchase Agreement dated as of May 5,
1999.
2. Copy of Amendment to Asset Purchase Agreement dated
July 1, 1999.
3. Copy of Escrow Agreement dated July 1, 1999.
4. Copy of $915,000 Promissory Note dated July 1, 1999.
5. Copy of $185,000 Promissory Note dated July 1, 1999.
6. Copy of Employment Agreement between Reliable West
Tech, Inc and Rajendra A. Shukla dated as of July 1,
1999
7. Copy of Loan and Consignment Agreement with
BankBoston, N.A. dated July 13, 1999.
8. Copy of Revolving Credit Promissory Note dated July
13, 1999.
9. Copy of Unlimited Guaranty Agreement dated July 13,
1999.
10. Copy of Loan Agreement with Alliance Capital
Investment Corp. dated as of July 13, 1999.
11. Copy of $2,000,000 Term Promissory Note dated July
15, 1999.
12. Agreement with Alliance Capital Investment Corp.
dated July 13, 1999 with respect to its purchase of
Stock Warrants from Registrant.
13. Copy of Stock Warrant issued to Alliance Capital
Investment Corp. dated as of July 15,1999.
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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 hereunto duly authorized.
WESTBURY METALS GROUP, INC.
(Registrant)
By:
Mandel Sherman, President
DATED: July 28, 1999
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ASSET PURCHASE AGREEMENT
DATED AS OF
MAY __, 1999
BETWEEN
RELIABLE CORPORATION AND RAJENDRA A. SHUKLA, AS SELLER
AND
WEST TECH, INC., AS PURCHASER
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THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of May __,
1999, between RELIABLE CORPORATION, a corporation organized under the laws of
Connecticut ("Seller"), Rajendra A. Shukla ("Shukla"), and WEST TECH, INC., a
New York corporation ("Purchaser"). Capitalized terms not otherwise defined in
this Agreement are used as defined in Exhibit A hereto.
WHEREAS, Seller is engaged in the business of manufacturing, processing and
refining metals (hereinafter referred to as the "Business");
WHEREAS, Seller desires to sell and Purchaser desires to acquire from
Seller, as of the Closing Date, all of Seller's right, title and interest in all
assets, property, goodwill and business of Seller, which includes business and
assets of every kind and description, wherever located, whether tangible or
intangible, real, personal, or mixed, whether or not specifically mentioned or
described herein, other than the Excluded Assets (as defined in Section 1.3
hereof) ( which assets together with the "Owned Real Property" are hereinafter
referred to as the "Purchased Assets"), upon the terms and subject to the
conditions contained in this Agreement; and
WHEREAS, Shukla desires to sell and Purchaser desires to acquire from
Shukla, as of the Closing Date, all of Shukla's right, title and interest in and
to the "Owned Real Property" (defined below), upon the terms and subject to the
conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
Purchase and Sale of Assets
1. 1 Agreement to Purchase and Sell. On the terms and subject to the conditions
contained in this Agreement, Purchaser agrees to purchase, acquire and accept
from Seller and Shukla, and Seller and Shukla agree to grant, sell, transfer,
convey, assign and deliver to Purchaser, at the Closing, all right, title and
interest in and to the Purchased Assets. The Purchased Assets shall be sold to
Purchaser free and clear of any Liens.
1.2 Enumeration of Purchased Assets. The Purchased Assets include, without
limitation, the following items:
(a) all inventory, including, without limitation, work in
process, finished goods, service and spare parts and production, maintenance and
office supplies (collectively, the "Inventory");
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(b) all furniture, fixtures, improvements, equipment
(including office equipment), machinery, parts, computer hardware, tools,
vehicles and all other tangible personal property (other than the Inventory)
including, without limitation, the property, plant and equipment listed on
Section 1.2(b) of the Disclosure Schedule (collectively, the "Equipment");
(c) all claims and rights (and benefits arising therefrom)
relating to the Purchased Assets or the Business with or against all persons
whomsoever, including, without limitation, all rights against suppliers under
warranties covering any of the Inventory or Equipment and all Permits and
Environmental Permits, to the extent they are legally transferable by Seller;
(d) all Intellectual Property, including, without limitation,
the name "Reliable Corporation", and all goodwill associated with the
Intellectual Property; including without limitation, the "registered"
Intellectual Property, listed on Section 1.2(d) of the Disclosure Schedule;
(e) all sales orders and sales contracts, quotations and bids;
(f) all benefits and rights with respect to contracts listed on Section 4.4(a)
of the Disclosure Schedule;
(g) all books, papers, files and records of Seller, whether in
hard copy, magnetic or other format, including, without limitation, the
following types of files and records: books of account and accounting and Tax
information, current and former customer, dealer and supplier files, customer
credit information, pricing information, historical and current circulation draw
information, personnel and employment files, manufacturing and production
information, market research and survey reports and records, equipment
maintenance records, equipment warranty information, sales and advertising
material, software (including, without limitation, all documentation and source
codes) specifications and drawings, equipment drawings, manuals and data,
written confirmations or certificates relating to Permits and Environmental
Permits, industry information and information relating to the Business' trade
secrets and customer specifications;
(h) all prepaid expenses (excluding insurance other than
notary bonds and flood insurance), all security and other deposits and advances
made by Seller and other prepaid items, credits and discounts for or toward the
purchase of goods, services and Inventory which have not as of the Closing Date
been received in full by Seller, as set forth on Section 1.2(h) of the
Disclosure Schedule (collectively, the "Prepaid");
(i) all telephone numbers of Seller;
(j) the "Owned Real Property" (as defined in Section 4.8(a));
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(k) all of Seller's Accounts Receivable; and
(l) without limitation, all other assets of Seller and the
Business whether or not reflected in, or included in computing the information
reflected by, the Closing Date Balance Sheet.
1.3 Excluded Assets. Notwithstanding Sections 1.1 and 1.2, the Purchased Assets
shall not include the following assets of Seller (the "Excluded Assets"):
(a) all collective bargaining agreements, all Employee Benefit
Plans and all commitments or agreements with respect to employment, whether
written or oral, express or implied; and
(b) Cash.
ARTICLE II
No Assumption of Liabilities by Purchaser
Purchaser does not assume or agree to pay any liability or obligation
of Seller, direct or indirect, known or unknown, absolute or contingent,
contractual or otherwise, including, without limitation, any of Seller's
liabilities under collective bargaining agreements, Employee Benefit Plans,
severance and vacation pay of any kind, including, without limitation any WARN
liability which may be incurred in connection with this Agreement and any other
commitments or agreements with respect to employment, whether written or oral,
express or implied (all such liabilities not assumed by Purchaser being referred
to herein as the "Excluded Liabilities"). Seller shall remain responsible for
the Excluded Liabilities and shall indemnify Purchaser with respect thereto
pursuant to Section 10.2. To the extent that Purchaser expressly agrees in
writing at the Closing to assume any of the Excluded Liabilities, the amounts of
such assumed liabilities shall be credited against the Purchase Price payable in
cash at the Closing as described in Sections 3.2(b) and 8.2(a).
ARTICLE III
Purchase Price. Manner of Payment and Closing
3.1 Purchase Price. The purchase price of the Purchased Assets shall be equal to
the sum of Two Million One Hundred Thousand Dollars ($2,100,000) plus the
"Inventory Amount", plus " the Accounts Receivable Amount" subject to the
adjustments described herein. The Inventory Amount is the H & H noon price for
Seller's metals inventory on the Closing Date. The Accounts Receivable Amount is
the face value of all Seller's Accounts Receivable which are less than ninety
days past due as of the Closing Date.
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Simultaneously herewith, Purchaser has delivered to Seller's attorney,
Hertzmark & Crean, P.C., as Escrow Agent, (the "Escrow Agent") a check in the
amount of One Hundred Thousand Dollars ($100,000)(the "Deposit"), which check
shall be held by the Escrow Agent, without depositing such check, until the
Deposit is disbursed or returned in accordance with the terms of this Agreement.
3.2 Payment of the Purchase Price. At the Closing, Purchaser shall pay the
Purchase ------------------------------- Price as follows :
(a) The Escrow Agent shall return the check representing the
Deposit to the Seller; the amount of the Deposit will be included in the One
Million Dollar payment described in Section 3.2(c) below;
(b) Purchaser shall execute and deliver to Shukla a promissory
note in the original principal amount of One Hundred Eighty Five Thousand
Dollars ($185,000) in the form annexed hereto as Exhibit B (the "Shukla Note"),
repayment of which shall be secured by a first mortgage on the Building (defined
in Section 4.8 (a)) in the form annexed hereto as Exhibit B.1 (the "Mortgage").
The Shukla Note shall provide for a fixed rate of interest equal to One Percent
(1%) below the prime rate of interest as announced by Chase Manhattan Bank on
the Closing Date. The Shukla Note shall provide for monthly payments of interest
and principal, payable in seventy two (72) monthly installments, based upon a
fifteen year amortization schedule, with the unpaid principal balance and all
accrued interest payable on the sixth anniversary of the execution of the Shukla
Note. The Shukla Note shall provide for prepayment, at the maker's option
without penalty, and shall provide for acceleration at the holder's option in
the event that the employment agreement between Purchaser and Rajendra Shukla is
terminated by the Purchaser without "Cause" as defined therein or is not renewed
by Purchaser for a period which extends to the maturity date of the Shukla Note.
At the Closing there shall be an adjusting payment between Purchaser and Shukla
for portions of any real estate taxes with respect to the Owned Real Property.;
(c) Purchaser shall pay to Seller an amount equal to (i) the
sum of One Million Dollars ($1,000,000) less the amount described in the last
sentence of Article II above, (ii) plus the Inventory Amount; (iii) plus the
Accounts Receivable Amount. Such payment shall be by wire transfer to such
account as Seller shall designate by written notice delivered to Purchaser, or
by delivery of a certified check or bank check payable to the order of Seller;
(d) Purchaser shall execute and deliver to Seller a Promissory
Note in the original principal amount of Nine Hundred Fifteen Thousand Dollars
($915,000) in the form annexed hereto as Exhibit B.2 (the "Reliable Note")
repayment of which shall be secured by, a Security Agreement in the form annexed
hereto as Exhibit B.3 (the "Security Interest") and a Letter of Credit. The
Letter of Credit shall be in the amount of $300,000 and shall be issued by a
reputable financial institution. The Letter of Credit shall be irrevocable and
unconditional except
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that Purchaser shall have the right from time-to-time to reduce the amount of
the Letter of Credit, once the principal balance due under the Note is reduced
below $300,000, provided that any such reduction shall not reduce the amount of
the Letter of Credit below the then existing principal balance of the Note. The
Note shall provide for a fixed rate of interest equal to One Percent (1%) below
the prime rate of interest as announced by Chase Manhattan Bank on the Closing
Date. The Note shall provide for monthly payments of interest and principal,
payable in seventy two (72) monthly installments, base upon a fifteen year
amortization schedule, with the unpaid principal balance and all accrued
interest payable on the sixth anniversary of the execution of the Note. The Note
shall provide for prepayment, at the maker's option without penalty, and shall
provide for acceleration at the holder's option in the event that the employment
agreement between Purchaser and Rajendra Shukla is terminated by the Purchaser
without "Cause" as defined therein or is not renewed by Purchaser for a period
which extends to the maturity date of the Note. Purchaser shall have the right
to reduce the principal balance of the Note, but not by more than Two Hundred
Fifty Thousand Dollars upon notice to Seller, at such time or times that
Purchaser incurs "Damages" (as defined in Section 10.1 herein), in accordance
with the terms of Sections 10.2 and 10.5.
(e) Notwithstanding the foregoing provisions of this Section
3.2, in the event that Purchaser elects not to purchase the Owned Real Property
pursuant to Section 7.2 (h), then, the Purchase Price shall be reduced to One
Million Nine Hundred Fifteen Thousand Dollars ($1,915,000) and Purchaser shall
not execute and deliver the Shukla Note.
3.3 Time and Place of Closing. The transaction contemplated by this Agreement
shall be consummated (the "Closing") at 10:00 a.m. at the offices of McLaughlin
& Stern, LLP, 260 Madison Avenue, New York, New York, on July 1, 1999, or on
such other date, or at such other time or place, as shall be mutually agreed
upon by Seller and Purchaser; provided, however, that the date of the Closing
shall be automatically extended from time to time for so long as any of the
conditions set forth in Article VII shall not be satisfied or waived, subject,
however, to the provisions of Section 11.1(b). The date on which the Closing
occurs in accordance with the preceding sentence is referred to in this
Agreement as the "Closing Date".
3.4 Allocation of Purchase Price. The Purchase Price shall be allocated among
the Purchased Assets as mutually agreed upon by Purchaser and Seller in the
manner required by Section 1060 of the Internal Revenue Code of 1986, as
amended, and in accordance with Schedule 3.4 hereto as determined by Purchaser
at the Closing, and all tax returns and reports filed by Seller and Purchaser
with respect to the transactions contemplated by this Agreement shall be
consistent with such allocation. It is agreed that the sum of One Hundred Eighty
Five Thousand Dollars ($185,000) shall be the amount of the Purchase Price
allocated to the Owned Real Property, and the sum of Seven Hundred Thousand
Dollars ($700,000) shall be the amount of the Purchase Price allocated to the
Equipment.
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ARTICLE IV
Seller's Representations and Warranties
Seller represents and warrants to Purchaser that, except as set forth
in the schedule delivered by Seller to Purchaser concurrently herewith and
identified as the "Disclosure Schedule", that the statements contained in this
Article IV are correct and complete as of the date hereof, and unless a date is
specified in such representation and warranty, will be complete and correct as
of the Closing Date as though made on the Closing Date. To the extent that the
representations and warranties herein relate to the "Owned Real Property", such
representations and warranties are also made by Shukla, provided, however, that
as to Shukla only, such representations and warranties shall not survive the
Closing.
4.1 Corporate.
(a) Seller is a corporation duly organized, existing and in
good standing under the laws of the State of Connecticut. Seller has all
necessary corporate power and authority to own its properties and assets and to
conduct its business as now conducted.
(b) Seller has qualified as a foreign corporation, and is in
good standing, under the laws of each jurisdiction where the nature of the
Business or the nature or location of its assets requires such qualification.
(c) Seller has full corporate power and authority to execute
and deliver this Agreement and all documents and instruments to be executed by
Seller pursuant to this Agreement (collectively, "Seller's Ancillary
Documents"), to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby.
(d) All corporate acts required to be taken by Seller to
authorize the execution and delivery of this Agreement and each of Seller's
Ancillary Documents, the performance of its obligations hereunder and thereunder
and the consummation of the transactions contemplated hereby and thereby,
including, without limitation, the approval of Seller's shareholders and board
of directors, have been duly and properly taken, and no other corporate
proceedings on the part of Seller are necessary to authorize such execution,
delivery and performance.
(e) This Agreement has been, and Seller's Ancillary Documents
will be, duly executed and delivered by duly authorized officers of Seller. This
Agreement and each of Seller's Ancillary Documents that is a contract
constitutes a legal, valid and binding obligation of Seller, enforceable in
accordance with its terms.
(f) No consent, authorization, order or approval of, or filing
or registration with, any governmental authority or other person is required for
the execution and delivery of
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this Agreement and Seller's Ancillary Documents and the consummation by Seller
of the transaction contemplated by this Agreement and Seller's Ancillary
Documents.
(g) Neither the execution and delivery of this Agreement and
Seller's Ancillary Documents by Seller, nor the consummation by Seller of the
transactions contemplated hereby and thereby, will conflict with or result in a
breach of any of the terms, conditions or provisions of (i) Seller's Articles of
Incorporation or By-laws, (ii) any statute or administrative regulation, (iii)
any order, writ, injunction, judgment or decree of any court or any governmental
authority or any arbitration award, or (iv) any contract or agreement to which
Seller is a party or by which the Purchased Assets may be bound, nor give rise
to any default, acceleration, or right of termination under any such contract or
agreement.
4.2 Financial.
(a) Seller's financial statements, books, accounts and records
are, and have been, maintained in Seller's usual, regular and ordinary manner,
in accordance with GAAP consistently applied, and all transactions to which
Seller has been a party are properly reflected therein.
(b) Complete and accurate copies of (i) the reviewed balance
sheets, statements of income and retained earnings, statements of cash flows,
and notes to financial statements, together with any supplementary information
thereto, of Seller, all as of and for the year ended December 31, 1996, (ii) the
audited balance sheets, statements of income and retained earnings, statements
of cash flows, and notes to financial statements, together with any
supplementary information thereto, of Seller, all as of and for the year ended
December 31,1997, and (iii) the unaudited balance sheet of Seller as of December
31, 1998, (the "Most Recent Balance Sheet") and the unaudited statement of
income of Seller for the twelve month period then ended (reflecting or attaching
a list of audit adjustments)(collectively, the "Most Recent Financial
Statements") are contained in Section 4.2(b) of the Disclosure Schedule (all of
the foregoing financial statements described in (i),(ii) and (iii) above are
hereinafter referred to as the "Financial Statements"). The Financial Statements
present accurately and completely the financial position of Seller as of the
respective dates thereof, and the results of operations and cash flows of Seller
for the respective periods covered by said statements, in accordance with GAAP,
consistently applied. Except for accounts payable, Taxes payable and other
liabilities incurred in the ordinary course of business, Seller has no
liabilities or obligations whatsoever, whether accrued, contingent or otherwise
except as and to the extent reflected in the Most Recent Financial Statements.
Section 4.2(b) of the Disclosure Schedule contains complete and correct copies
of all attorney's responses to audit inquiry letters and all management letters
from the accountants for the last five (5) fiscal years of Seller.
Prior to the Closing Date, and as a condition to Purchaser's obligation
to close, Seller shall deliver to Purchaser the audited balance sheets,
statements of income and retained earnings, statements of cash flows, and notes
to financial statements, together with any supplementary
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information thereto, of Seller, all as of and for the years ended December 31,
1997 and December 31,1998 and an unaudited balance sheet and statement of income
for five month period ended May 31, 1999. Upon such delivery, such statements
shall present accurately and completely the financial position of Seller as of
the date thereof, and the results of operations and cash flows of Seller for the
period, covered by said statements, in accordance with GAAP, consistently
applied, and the representations and warranties of this Section 4.2(b) shall be
deemed to apply to such statements.
(c) Seller has good and marketable title to, and the corporate
power to sell, the Purchased Assets, free and clear of any Liens. No unreleased
mortgage, trust deed, chattel mortgage, security agreement, financing statement
or other instrument encumbering any of the Purchased Assets has been recorded,
filed, executed or delivered.
(d) All Tax and information returns required to have been
filed by Seller with any government authority have been duly and timely filed
and each such return correctly reflects Seller's Tax liabilities and all other
information required to be reported thereon as of the Closing. As of the
Closing, Seller will have paid all Taxes payable by Seller and all penalties,
assessments or deficiencies of every nature or description in respect of Seller,
in each case, whether or not yet due, and there currently are, and as of the
Closing there will be, no Liens for unpaid Taxes with respect to the Purchased
Assets, the Business or the Excluded Assets.
(e) Section 4.2(e) of the Disclosure Schedule sets forth a
complete and correct list and brief description of all Equipment used or usable
in the Business or the Purchased Assets (including, without limitation, whether
or not material, all vehicles, computer equipment, software and software
licenses). Seller owns outright and has, and at Closing will convey to
Purchaser, good title, free and clear of all Liens, to all the Equipment. All of
the Equipment included in the Purchased Assets is in good operating condition
and repair, ordinary wear and tear excepted, and is sufficient and appropriate
for current and contemplated uses.
(f) All of the Inventory is in the physical possession and
control of Seller at its facilities or in transit from suppliers. The Inventory
is recorded at its fair market value and is in usable and/or saleable condition
and of a quality and quantity historically usable and/or saleable in the normal
course of business and consistent with past practice. None of the Inventory is
slow moving, obsolete, below standard quality or damaged, except as reflected in
the Most Recent Financial Statements. Since the date of the Most Recent
Financial Statements, no Inventory has been sold other than in the ordinary
course of business. Seller owns outright and has, and at the Closing will convey
to Purchaser good title to the Inventory, free and clear of all liens.
(g) Section 4.2(g) of the Disclosure Schedule sets forth every
business relationship (other than normal employment relationships) between
Seller, on the one hand, and any of Seller's officers, directors, employees or
stockholders or members of their families (or any entity in which any of them
has a material financial interest, directly or indirectly), on the other
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hand which is related to the Business. None of said parties (other than Seller)
owns any assets which are used in the Business, or is engaged in any business
which competes with the Business.
(h) All Accounts Receivable, including, without limitation,
those that will be reflected on the Closing Date Balance Sheet, are valid and
have risen in the ordinary course of business, represent indebtedness incurred
by the applicable account debtor in bona fide third party transactions and are
net of reserves. The reserves contained in the Closing Date Balance Sheet, shall
be adequate. Seller owns the Accounts Receivable free and clear of all Liens.
Section 4.2(i) of the Disclosure Schedule sets forth a summary of Accounts
Receivable of Seller as of December 31, 1998 and February 28, 1999, the carrying
value thereof and the respective age of each such Account Receivable. Seller has
delivered a complete listing of Accounts Receivable at such dates to Purchaser.
4.3 Conduct of Business.
(a) Except as set forth in Section 4.3(a) of the Disclosure
Schedule, since January 1, 1998, Seller has not:
(i) sold or in any way transferred or otherwise disposed of any of its assets or
property, except for (A) use of Inventory in the usual and ordinary course of
business, (B) cash applied in payment of Seller's liabilities in the usual and
ordinary course of business, and (C) disposal of obsolete equipment of Seller
listed in Section 4.3(a) of the Disclosure Schedule, none of which, either
individually or in the aggregate, was material to the operation of the Business;
(ii) entered into any agreement, contract, lease, or license (or
series of related contracts, leases or licenses) other than in the ordinary
course of business, involving consideration in excess of Ten Thousand Dollars
($10,000);
(iii) suffered any acceleration, termination,
modification or cancellation of
any agreement, contract, lease or license;
(iv) suffered the creation or imposition of any Lien
upon Seller's assets;
(v) received any notification, either orally or written, that
any material distributors, customers or suppliers have terminated, intend to
terminate or are considering termination of their respective business
relationships or have modified their relationships with Seller in such a manner
that is less favorable to Seller and Seller has no knowledge of any facts which
would be the basis for such termination or modification;
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(vi) suffered any casualty, damage, destruction or loss, or any
material interruption in use, of any material assets or property (whether or not
covered by insurance), on account of fire, flood, riot, strike or other hazard
or Act of God;
(vii) made or suffered any material change in the
conduct or nature of any
aspect of the Business;
(viii) waived any right or canceled or compromised any debt or claim, other than
in the ordinary course of business and not in excess of $2,500 for any item or
$5,000 in the aggregate;
(ix) increased the cash compensation payable to any employee in
excess of 3 % per year, granted any non-cash compensation to any employee, or
entered into any arrangements with any employee outside of employment Agreements
which have been previously disclosed;
(x) hired, terminated or lost the services through death, retirement or
resignation of any employee who has or had an annual salary in excess of
$25,000;
(xi) entered into any agreement with any independent
contractor;
(xii) borrowed any money or issued any bonds,
debentures, notes or other
corporate securities evidencing money borrowed;
(xiii) paid, declared or set aside any dividend or other distribution on its
securities of any class or purchased, exchanged or redeemed any of its
securities of any class;
(xiv) committed to make any capital expenditure which as of the
date hereof and as of the Closing Date has not been paid in full;
(xv) made any change in accounting methods or
principles; or
(xvi) without limitation by the enumeration of any of the
foregoing, except for the execution of this Agreement, (A) entered into any
transaction or taken any action other than in the usual and ordinary course of
business, or (B) taken any action that, if taken after the date hereof, would
constitute a breach of any of the covenants set forth in Article VI hereof.
(b) Seller has not suffered or been threatened with any
material adverse change in the business, operations, assets, liabilities,
financial condition or prospects of the Business, including, without limiting
the generality of the foregoing, the existence or threat of any labor dispute,
or any material adverse change in, or loss of, any relationship between Seller
and any of its customers (including, without limitation, advertisers,
subscribers and dealers), suppliers or key employees.
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(c) Section 4.3(c) of the Disclosure Schedule sets forth a
complete and accurate list of (i) the ten largest distributors for Seller's
products indicating the specific product, existing contractual arrangements, if
any, with each such distributor and the volume of products distributed, (ii) the
ten largest customers (by dollar volume) of Seller for the current fiscal year,
indicating the existing contractual arrangements with each such customer by
product, and (iii) the ten largest suppliers of significant materials or
services to Seller, indicating the contractual arrangements for continued supply
from such supplier and all outstanding purchase orders submitted to such
suppliers. Except as set forth on Section 4.3(c) of the Disclosure, none of such
distributors, customers or suppliers has terminated or changed significantly or
to the best of Seller's knowledge intends to terminate or change significantly
its relationship with the Business.
4.4 Contracts.
(a) Section 4.4(a) of the Disclosure Schedule correctly and
completely lists and describes all contracts, leases, and agreements to which
Seller is a party and which relate to the conduct of the Business, including,
without limitation: collective bargaining agreements, employment and employment
related agreements; covenants not to compete; loan agreements; notes; security
agreements; sales representative, distribution, franchise, advertising and
similar agreements; license agreements; purchase orders and purchase contracts
and sales orders and sales contracts. All contracts, leases and other
instruments referred to in this Section 4.4(a), and all other contracts or
instruments to which Seller is a party, are in full force and binding upon the
parties thereto. No default by Seller has occurred thereunder and, to the best
of Seller's knowledge, no default by the other contracting parties has occurred
thereunder. No event, occurrence or condition exists which, with the lapse of
time, the giving of notice, or both, or the happening of any further event or
condition, would become a default by Seller thereunder.
(b) Seller is not a party to, or bound by, any unexpired,
undischarged or unsatisfied written or oral contract, agreement, indenture,
mortgage, debenture, note or other instrument under the terms of which
performance by Seller according to the terms of this Agreement will be a default
or an event of acceleration, or whereby timely performance by Seller according
to the terms of this Agreement may be prohibited, prevented or delayed.
(c) Section 4.4(c) of the Disclosure Schedule contains a true
and correct copy of every license, permit, registration and governmental
approval, agreement and consent applied for, pending by, issued or given to
Seller, and every agreement with governmental authorities (Federal, state, local
or foreign) entered into by Seller, which is in effect or has been applied for
or is pending, exclusive of Environmental Permits (the "Permits"). Such Permits
constitute all licenses, permits, registrations, approvals and agreements and
consents (other than Environmental Permits) which are required in order for
Seller to conduct the Business as presently conducted.
(d) Section 4.4(d) of the Disclosure Schedule sets forth a
true and correct list and description (including coverages, deductibles, and
expiration dates) of all of Seller's
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insurance policies (including insurance policies providing property, casualty,
liability and worker's compensation coverage and bond and surety arrangements)
which are owned by or which name Seller as an insured and pertain to the
Purchased Assets, the Business or Seller's employees. Seller has furnished
Purchaser with true and complete copies of such insurance policies. With respect
to each such insurance policy : (i) the policy is legal, valid, binding,
enforceable and in full force and effect, (ii) the transactions contemplated
hereby will not result in the cancellation or modification of such policies, and
(iii) neither Seller, nor to Seller's knowledge, any other party is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such breach or default, or permit termination, modification, or
acceleration under the policy, and (iv) Seller has not received notice of
termination or non-renewal of any such insurance policies. Section 4.4(d)
describes any self insurance arrangements affecting Seller. All such policies
provide adequate coverage for all normal risks incident to Seller's assets,
properties and business operations and are in character and amount at least
equivalent to that carried by those engaged in businesses subject to the same or
similar risks, perils or hazards.
4.5 Employees.
(a) With respect to employees of Seller:
(i) All employee benefit plans, within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA") (the "Employee Benefit
Plans"), maintained by Seller or any affiliate of Seller, as determined under
Section 414(b), (c), (in) or (o) of the Internal Revenue Code of 1986 (the
"Code") ("ERISA Affiliate"), comply in all material respects with and are and
have been operated in substantial accordance with each applicable provision of
ERISA, the Code (including, without limitation, the requirements of Code Section
401(a) to the extent any of such plans which is an employee pension benefit plan
(within the meaning of Section 3(a) of ERISA) is intended to conform to that
section), other Federal statutes, state law (including, without limitation,
state insurance law) and the regulations and rules promulgated pursuant thereto
or in connection therewith. None of Seller nor any ERISA Affiliate has any
notice or knowledge of any violation of any of the foregoing by any Employee
Benefit Plan.
All required reports and descriptions have been filed or distributed
appropriately with respect to each Employee Benefit Plan. All contributions
(including all employer contributions and employee salary reduction
contributions) which are due have been paid to each such Employee Benefit Plan
which is an Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been paid to
each such Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice of the Company.
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(ii) Each Employee Benefit Plan which is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) and which is a group
health plan (within the meaning of Section 5000(b)(1) of the Code) complies with
and has been maintained and operated in accordance with each of the requirements
of Section 162(i) of the Code as in effect for years beginning prior to 1989,
Section 4890B of the Code for years beginning after December 31, 1988 and Part 6
of Subtitle B of Title I of ERISA ("COBRA"). There are no pending or, to the
best knowledge of Seller, threatened claims, suits or other proceedings by any
employee or former employee of the Seller or by the beneficiary, dependent or
representative of any such person, involving the failure of any group health
plan ever maintained by Seller to comply with the health care continuation
requirements of COBRA.
(iii) Each Employee Benefit Plan which is an Employee Pension Benefit Plan
intended to be qualified under Internal Revenue Code Section 401(a) is so
qualified.
(iv) Neither Seller nor any ERISA Affiliate has incurred any
liability to the Pension Benefit Guaranty Corporation ("PBGC") as a result of
the voluntary or involuntary termination of any employee pension benefit plan
which is subject to Title IV of ERISA. There is currently no active filing by
Seller or any ERISA Affiliate with the PBGC (and no proceeding has been
commenced by the PBGC) to terminate any employee pension benefit plan which is
subject to Title IV of ERISA, and which has been maintained or funded, in whole
or in part, by Seller or any ERISA Affiliate.
(v) Neither Seller nor any ERISA Affiliate currently maintains or
is obligated to contribute to, nor has in the past maintained or contributed to,
any multi employer plan, as defined in Section 3(37) of ERISA, and neither
Seller nor any ERISA Affiliate has suffered a "complete withdrawal" or "partial
withdrawal" as such terms are defined in Sections 4203 and 4205, respectively,
of ERISA for which it reasonably expects to incur any withdrawal liability.
(vi) The market value of assets under each such
Employee Benefit Plan
which is an Employee Pension Benefit Plan (other than any Multi employer Plan)
equals or exceeds the present value of all vested and nonvested liabilities
thereunder determined in accordance with PBGC methods, factors, and assumptions
applicable to an Employee Pension Benefit Plan terminating on the date for
determination.
(vii) Seller has delivered to Purchaser correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee Benefit Plan.
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(b) With respect to each Employee Benefit Plan that Seller
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute:
(i) Except as disclosed in ss.4.5(b)of the Disclosure Schedule, no such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than any Multi
employer Plan) has been completely or partially terminated or been the subject
of a Reportable Event as to which notices would be required to be filed with the
PBGC. No proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multi employer Plan) has been instituted or threatened.
(ii) There have been no Prohibited Transactions with respect to any such
Employee Benefit Plan. To the knowledge of Seller, no Fiduciary has any
liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any such
Employee Benefit Plan. No action, suit, proceeding, hearing, or investigation
with respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is pending or
threatened, and Seller has any knowledge of any basis for any such action, suit,
proceeding, hearing, or investigation.
(iii) Seller has not incurred, and has no reason to expect that
Seller will incur, any liability to the PBGC (other than PBGC premium payments)
or otherwise under Title IV of ERISA (including any withdrawal Liability) or
under the Code with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(c) Seller does not contribute to, never has contributed to,
and never has been required to contribute to any Multi employer Plan or has any
liability (including withdrawal liability) under any Multi employer Plan.
(d) No promise or commitment to amend or improve any Employee
Benefit Plan for the benefit of current or former directors, officers, or
employees of the Company which is not reflected in the documentation provided to
Purchaser has been made,
(e) The transactions contemplated by this Agreement shall not
alone or upon the occurrence of any additional or subsequent event, result in
any payment, of severance or otherwise, or acceleration, vesting or increase in
benefits under any Employee Benefit Plan for the benefit of any current or
former director, officer, or employee of Seller.
(f) With respect to employees of Seller, except as provided in Section 4.5(f) of
the Disclosure Schedule:
(i) There are no pending or threatened unfair labor practice charges or employee
grievance charges, or investigations or reviews by the Department of Labor.
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(ii) There is no request for union representation, labor strike,
dispute, slowdown or stoppage actually pending or, to the best of Seller's
knowledge, threatened against or directly affecting Seller.
(iii) No grievance or arbitration proceeding arising
out of or under collective
bargaining agreements is pending and no claims therefor exist.
(iv) Seller shall make all payments required under
the Employee Benefit Plans
and payment of accrued salaries or wages and vacation pay, and all payroll tax
and withholding payments, with respect to employment of any persons by Seller.
Without limiting the generality of the foregoing, employment obligations
incurred for all shifts commencing prior to the close of business on the day of
Closing, through to the conclusion of such shifts, shall be obligations of the
Seller. Except as required by Section 4980B of the Code, Seller has no liability
to provide medical benefits to former employees of Seller or their spouses or
dependents.
(v) Section 4.5(f)(v) of the Disclosure Schedule contains a true
and complete list of all employees who were employed by the Seller as of January
1, 1998 and as of the date hereof, whether active or inactive, and such list
correctly reflects their salaries, hours, wages, other compensation (other than
benefits under the Employee Benefit Plans and including, without limitation, any
housing, lodging or other non-cash compensation paid to or on behalf of such
employee) including all bonuses and incentives paid or accrued since January 1,
1998, dates and amount and description of last increase/decrease in
compensation, dates of employment, positions, date of birth, a description of
all bonus and incentive plans applicable to them and for inactive employees, and
a description of the reason for such employee's inactive status.
4.6 Litigation and Claims.
(a) Except for a contested collection claim pending in the
Superior Court, Judicial District of Waterbury, with a maximum exposure of
$2,729.10, there are no claims, litigations, arbitrations, or proceedings, in
law or in equity, and there are no proceedings or governmental investigations
before any commission or other administrative authority, pending or threatened,
against Seller or its Affiliates, or with respect to the consummation of the
transaction contemplated hereby, or the use of the Purchased Assets (whether
used by Purchaser after the Closing or by Seller prior thereto). Section 4.6(a)
of the Disclosure Schedule sets forth a true and complete list and description
of all workers' compensation claims made during the years 1996, 1997, 1998, and
1999 to date.
(b) Seller is not a party to, or bound by, any decree, order
or arbitration award (or agreement entered into in any administrative, judicial
or arbitration proceeding with any governmental authority) with respect to its
properties, assets, personnel or business activities.
(c) Seller is not in violation of, or delinquent with respect to, any decree,
order
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or arbitration award or law, statute, or regulation of or agreement with, or
Permit from, any Federal, state or local governmental authority (or to which its
properties, assets, personnel, business activities or the Owned Real Property or
the Leased Real Property are subject or to which it, itself, is subject),
including, without limitation, laws, statutes and regulations relating to equal
employment opportunities, fair employment practices, unfair labor practices,
terms of employment, occupational health and safety, wages and hours and
discrimination, and zoning ordinances and building codes. Copies of all notices
of violation of any of the foregoing which Seller has received within the past
three years are attached to Section 4.6(c) of the Disclosure Schedule.
(d) There are no facts which, if known by a potential claimant
or governmental authority, would give rise to a claim or proceeding which, if
asserted or conducted with results unfavorable to Seller, would have an adverse
effect on the business, operations, assets, liabilities, financial condition or
prospects of the Business, or the consummation of the transaction contemplated
hereby, or on the Purchased Assets (whether owned or used by Purchaser after the
Closing or by Seller prior thereto).
(e) There are no conditions which, if left uncorrected would
constitute a violation by Seller of any decree, order or arbitration award or
law, statute, or regulation of or agreement with, or Permit from, any Federal,
state or local governmental authority .
4.7 Environmental Matters.
(a) Except as disclosed in ss.4.7 of the Disclosure Schedule, to the best of
Seller's knowledge:
(i) Seller is and has been in compliance with all applicable Environmental Laws
and Safety Laws;
(ii) Seller has obtained, and is and has been in compliance with the conditions
of, all Environmental Permits required for the continued conduct of the Business
in the manner now conducted and presently proposed to be conducted. Copies of
all Environmental Permits issued to Seller are contained in Section 4.7(a) of
the Disclosure Schedule.;
(iii) Seller has filed all required applications, notices and
other documents necessary to effect the timely renewal or issuance of all
Environmental Permits for the continued conduct of the Business in the manner
now conducted and presently proposed to be conducted;
(iv) there are no past or present events, conditions
or circumstances, including,
without limitation, to the knowledge of Seller, pending changes in any
Environmental Law or Permit or Safety Laws, that are likely to interfere with or
otherwise affect the Business in the manner now conducted or which would
interfere with compliance with any Environmental Law or Permit or Safety Law;
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(v) There has been no storage, treatment, generation, transportation or Release
of any Hazardous Materials by Seller or its predecessors in interest, or by any
other person or entity for which Seller is or may be held responsible, at any
Facility or any Offsite Facility, nor have there been any other circumstances or
conditions present at or arising out of the present or former assets,
properties, leaseholds, businesses or operations of Seller at any Facility or
Off-Site Facility which would reasonably be expected to give rise to any
Environmental Liabilities and Costs;
(vi) there are no circumstances or conditions present at or
arising out of the present or former assets, properties, leaseholds, businesses
or operations of Seller, including but not limited to any on-site storage, use,
disposal or Release of a Chemical Substance, which would reasonably be expected
to give rise to any Environmental Liabilities and Costs or Safety Liability and
Costs;
(vii) Neither Seller nor any of the present or past assets,
properties, businesses, leaseholds or operations of Seller has received or is
subject to, or within the past five years has been subject to, any outstanding
order, decree, judgment, complaint, agreement, claim, citation, or notice or is
subject to any ongoing judicial or administrative proceeding indicating that
Seller or the past and present assets of Seller are or may be: (A) in violation
of any Environmental Law; (B) in violation of any Safety Laws; (C) responsible
for the on-site or off-site storage or Release of any Chemical Substance; or,
(D) liable for any Environmental Liabilities and Costs or Safety Liabilities and
Costs;
(viii) Seller has no reason to believe that Seller
will become subject to a matter
identified in subsection (vii); and, no investigation or review with respect to
such matters is pending or, to the knowledge of the Seller is threatened, nor
has any authority or other third party indicated an intention to conduct the
same;
(ix) Neither the Business nor any of Seller's
properties or assets is subject to,
or as a result of the transactions contemplated by this Agreement will be
subject to, the requirements of any Environmental Laws which require notice,
disclosure, cleanup or approval prior to transfer of the Purchased Assets or the
Business or which will impose Liens on any such asset or property or otherwise
interfere with or affect the Business;
(x) Section 4.7 of the Disclosure Schedule lists all property
presently or previously leased, owned or operated by Seller that has been used
by Seller or by any other Person (including a prior owner or operator) for the
storage or disposal of Chemical Substances;
(xi) Section 4.7 of the Disclosure Schedule lists all
off-site locations,
including, without limitation, commercial waste disposal facilities or municipal
landfills, to which or at which Chemical Substances originating from Seller or
its assets, properties or business have been sent (or otherwise have come to be
located) in amounts that would require a waste manifest under the Resource
Conservation and Recovery Act of 1976 as now in effect for treatment, storage,
disposal, reuse or recycling;
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(xii) Section 4.7 of the Disclosure Schedule sets
forth a list of all Containers
owned or operated at any time by Seller or which at any time were removed from
any Owned Real Property or Leased Real Property and, except as disclosed in
ss.4.7 of the Disclosure Schedule, no such Container is leaking or has leaked at
any time in the past, and there is no pollution or contamination of the
Environment caused by or contributed to or threatened by a Release of a Chemical
Substance from any such Container. All Containers which have been heretofore
removed from the Owned Real Property or the Leased Real Property have been
removed in accordance with all applicable Environmental Laws.
(xiii) Section 4.7 of the Disclosure Schedule lists
all environmental audits,
inspections, assessments, investigations or similar reports in Seller's
possession or of which Seller is aware relating to Seller's assets, properties
or business or the compliance of the same with applicable Environmental Laws and
Safety Laws.
(b) For purposes of this ss.4.7 only, all references to Seller
are intended to include any and all other entities to which the Seller may be
considered a successor under applicable Environmental Laws.
4.8 Real Estate.
(a) Section 4.8(a) of the Disclosure Schedule lists and
contains a legal description of the real property owned by Shukla located in
Waterbury Connecticut, with its mailing address at 302 Platts Mill Road,
Naugatuck, Connecticut (the "Building") (the "Owned Real Property"), such
description including an identification of the deed thereto and any and all side
letters and other agreements relating thereto, and the address and approximate
size of the premises. Shukla will at Closing hold and convey to Purchaser good
and marketable title in fee simple to the Owned Real Property and to all
buildings, structures and other improvements thereon, in each case free and
clear of all tenancies and occupants (other than the occupancy by Reliable
Precious Metals, Inc.("RPM")) and free and clear of all Liens, subject only to
real estate taxes not yet due and payable, and covenants, conditions,
restrictions and easements of record, none of which make title to the owned Real
Property unmarketable and none of which are violated by the Seller or Shukla or
will interfere with Purchaser's use thereof.
There are no condemnation proceedings, special assessments, impact fees
or similar charges pending or, to the best knowledge of either Shukla or the
Seller, threatened in connection with the Owned Real Property, and neither nor
Seller has received or been served with any notice with respect to any of the
foregoing. The current use by the Seller of the Owned Real Property complies in
all respects with the applicable zoning laws and building and use restrictions
(including, without limitation, all agreements of the Seller applicable
thereto). Neither Shukla nor the Seller has any knowledge of any proposed change
in the zoning or building ordinances affecting the Owned Real Property.
Except for R P M, no third party, tenant or other occupant of space has
any lease, license,
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option or other interest in occupancy or possession to the Owned Real Property,
or any part thereof nor any right of refusal, option or other right to purchase
the Owned Real Property. RPM is a tenant in the Building pursuant to an oral
month-to-month lease. RPM occupies approximately one-eighth of the Building.
There are no outstanding requirements or recommendations by any party
including without limitation, any holders of an existing mortgage, or any
federal, state or local governmental authority having or claiming jurisdiction
over the Owned Real Property affecting all or a part of the Owned Real Property
or any insurance companies or insurance-rating organizations, requiring or
recommending that any repairs, alterations or other work be done on or at the
Owned Real Property.
All public utilities required for the operation of the Owned Real
Property, or any part thereof, either enter the Owned Real Property through
adjoining public streets or if they pass through adjoining private land do so in
accordance with valid public easements or private easements which will inure to
the benefit of Purchaser. All of said public utilities are installed and
operating and all installation and connection charges have been paid for in
full.
All curb cut and street opening permits or licenses required for
vehicular access to and from any part of the Owned Real Property to any
adjoining public street have been obtained and paid for by Seller and shall be
in full force and effect on the Closing Date.
There are no service, maintenance or union contracts affecting the
Owned Real Property.
Except as specified herein, Seller has received no violation or note or
notice of violation, and to the best of Seller's knowledge, there exist no
violation or note or notice of violation, of law of municipal, Labor Department
or other governmental ordinances, orders, rules, regulations or requirement
against or affecting the Owned Real Property, or any part thereof, and if any
issue prior to the Closing Date, or after the Closing Date by reason of a
condition which existed prior to the Closing Date, then Seller shall, at its
sole cost and expense, promptly cause the same to be cured and dismissed of
record and pay all fines and penalties in connection therewith. The buildings
and any site improvements located on the Owned Real Property, and any part
thereof, each conform to all requirements of any applicable zoning and building
ordinances, orders, rules, regulations and requirements. No changes or
alterations have been made to the buildings or site improvements, which render
the same in violation of any applicable zoning or building ordinance, order,
rule, regulation or requirement or the existing certificate of occupancy (if
any). Any changes or alterations to the building and site improvements have been
completed in full compliance with all applicable zoning or building ordinances,
orders, rules, regulations or requirements. The existing zoning of the Owned
Real Property and certificate of occupancy permit the Owned Real Property to be
used for the Business. Seller has received no notice and has no knowledge of any
requirement asserted by any governmental authority requiring the installation or
modification of any sewers, sewerage disposal facilities, or other environmental
protection system or facility.
All oil burners, incinerators and other fuel burning devices at the Owned Real
Property
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comply with all applicable federal, state and local air pollution control laws,
rules and regulations, if any.
The roof of the building on the Owned Real Property is watertight and
free of leaks, and the same is free from infestation of termites or other wood
destroying insects, or damage caused thereby. There are no material defects in
any component or part of said building, including, without limitation, the
plumbing, heating, air-conditioning and electrical systems and septic tank,
drain field, well and pumps, if any. The term "material defect" as used in the
preceding sentence shall mean that in the aggregate the defects have an
estimated and reasonable cost to correct of more than $5,000, and that for any
one item, it has an estimated and reasonable cost to correct of more than $500.
There is presently in force with respect to the Owned Real Property,
fire, liability and other forms of insurance, in amounts and covering such risks
as comply with the requirements of any contracts or agreements affecting the
Owned Real Property.
(b) Section 4.8(b) of the Disclosure Schedule lists all real
property and interests in real property leased by the Seller as lessee or lessor
(the "Leased Real Property"), including an identification of the lease agreement
therefor and any and all amendments, modifications, side letters and other
agreements relating thereto, the names of the lessor and lessee thereunder, the
title and date thereof, the address and approximate size of the Owned Real
Property leased thereunder, and the rental and term thereunder, including any
extension options. All leases with respect to the Leased Real Property
("Leases") are in effect and create a valid and binding interest in the Leased
Real Property in favor of the Seller and all rents and other amounts (including
taxes, insurance and utilities) required to be paid by the Seller under such
Leases, which have become due, have been paid. The Seller is in compliance with
the terms of any such Lease and there exists no default by the Seller under any
such Lease, and no event, occurrence, condition or act which, with the giving of
notice, the lapse of time or the happening of any further condition, would
become a default by the Seller under any such Lease; and no waiver or indulgence
has been granted by the lessor under any such Lease. There are no condemnation
proceedings, special assessments, impact fees or similar charges pending or, to
the best knowledge of the Seller, threatened in connection with the Leased Real
Property, and Seller has not received nor been served with any notice with
respect to any of the foregoing. The current use by the Seller of the Leased
Real Property complies in all respects with the applicable zoning laws and
building and use restrictions (including, without limitation, all agreements of
the Seller applicable thereto) and condominium restrictions. The Seller has no
knowledge of any proposed change in the zoning or building ordinances affecting
the Leased Real Property.
(c) The Seller has delivered to Purchaser true and complete
copies of (i) all deeds, title insurance policies, surveys, certificates of
occupancy, permits and licenses in the possession of Seller obtained in
connection with or in respect of any Owned Real Property or Leased Real
Property, and (ii) all Leases (including, without limitation, any and all
amendments, modifications, side letters, default notices, estoppel letters and
other instruments or other material correspondence relating thereto).
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(d) All buildings, structures, improvements and fixtures on,
under, over or within each Owned Real Property or Leased Real Property, and all
other aspects of each Owned Real Property or Leased Real Property: (1) are in
good operating condition and repair (subject to normal wear and tear) and are
structurally sound and free of any material defects; (2) are suitable,
sufficient and appropriate in all respects for their current uses, comply with
all applicable codes and rules of national and local associations and boards of
insurance underwriters; (3) are within the boundary lines of their respective
Owned Real Property or Leased Real Property, as the case may be; and (4) consist
of sufficient land, parking areas, sidewalks, driveways and other improvements
to permit the continued use of such facilities in the manner and for the
purposes to which they are presently devoted and (5) comply with all applicable
laws. There are no outstanding or, to the knowledge of the Seller, threatened
requirements by any insurance company which has issued an insurance policy
covering any Owned Real Property or Leased Real Property, or by any board of
fire underwriters or other body exercising similar functions, requiring any
material repairs or work to be done on any Owned Real Property or Leased Real
Property.
(e) No material alterations to the Owned Real Property or
Leased Real Property are now required to be made or will be required under Title
III of the Americans with Disabilities Act, 42 U.S.C. ss.ss. 12181-12213, as
presently enacted, or under any other existing legal requirements.
(f) The Seller is now in possession of each Owned Real
Property or Leased Real Property, and no lease relating thereto is subject to
any pledge, lien, sublease, assignment, license or other agreement granting to
any third party any interest in or any right to the use or occupancy of any
Owned Real Property or Leased Real Property. There is no pending or, to the
knowledge of the Seller, threatened proceeding which might interfere with the
Seller's quiet enjoyment as tenant under any Lease. There are no outstanding
defaults by the Seller, or, to the knowledge of the Seller, any other party,
under any Lease, nor are there any matters, facts or circumstances which, upon
the giving of notice or passage of time, or both, would constitute a default or
breach by the Seller or, to the knowledge the Seller, any other party, under any
Lease.
4.9 Intellectual Property.
(a) All (i) trademarks, service marks, slogans, trade names,
trade dress and the like (collectively with the associated goodwill of each,
"Trademarks"), together with information regarding all registrations and pending
applications to register any such rights; (ii) common law Trademarks; (iii)
proprietary formulations, manufacturing methods, know-how and trade secrets
which are related to the Business; (iv) patents on and pending applications to
patent any technology or design; (v) registrations of and applications to
register copyrights; and (vi) licenses of rights in computer software,
Trademarks, patents, copyrights, unpatented formulations, manufacturing methods
and other know-how, whether to or by Seller, are identified in Section 4.9(a) of
the Disclosure Schedule and are referred to herein collectively as the
"Intellectual Property."
(b) (i) Seller is the owner of or duly licensed to use each Trademark and its
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associated goodwill; (ii) each Trademark registration exists and has been
maintained in good standing; (iii) each patent and application included in the
Intellectual Property exists, is owned by or licensed to Seller, and has been
maintained in good standing; (iv) each copyright registration exists and is
owned by Seller; (v) to the best of Seller's knowledge, no other firm,
corporation, association or person claims the right to use in connection with
similar or closely related goods and in the same geographic area, any mark which
is identical or confusingly similar to any of the Trademarks; (vi) Seller has no
knowledge of any claim with respect to, and has no reason to believe that any
third party asserts ownership rights in, any of the Intellectual Property; (vii)
Seller has no knowledge of any claim and has no reason to believe that Seller's
use of any Intellectual Property infringes any right of any third party; (viii)
Seller has no knowledge or any reason to believe that any third party is
infringing any of Seller's rights in any of the Intellectual Property; (ix)
Seller is under no obligation to pay any royalties or similar payments in
connection with any license of Intellectual Property; (x) the consummation of
the transaction contemplated by this Agreement will not result in the impairment
of Seller's right to use any of the Intellectual Property nor infringe upon the
rights of any third party; and (xi) Seller is the owner of or duly licensed to
use all Intellectual Property necessary for or useful in the conduct of the
Business and the operation of the Purchased Assets as now conducted and
operated.
4.10 General.
(a) The Purchased Assets constitute (i) all of the assets and
property owned by Seller (except for the Excluded Assets), (ii) all of the
assets and property used, useful or held for use by Seller in, or related to the
operations of, the Business and (iii) all of the assets necessary to own and
conduct the Business as it is presently conducted, and as it is contemplated (to
the knowledge of Seller) to be conducted, and there are no properties or assets
of the type described in the definition of Purchased Assets owned, used, useful
or held for use by Seller that are not included in the Purchased Assets. All the
Purchased Assets that constitute tangible real or personal property are located
in the State of Connecticut. Other than the Excluded Assets, Seller does not
own, hold or use any assets other than the Purchased Assets.
(b) The representations and warranties of Seller in this
Agreement and in Seller's Ancillary Documents do not omit to state a material
fact necessary in order to make the representations, warranties or statements
contained herein not misleading. To the knowledge of Seller there is no fact
relating to the Seller or its assets, properties or business which may adversely
affect the same which has not been disclosed in this Agreement.
(c) Seller has no liability and has no knowledge of any basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against Seller giving rise to any
liability), except for (i) liabilities set forth in the Most Recent Balance
Sheet and (ii) liabilities which have arisen after the date of the Most Recent
Balance Sheet in the ordinary course of business (none of which liabilities
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort infringement, or violation of
law).
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(d) The copies of all documents furnished by Seller to
Purchaser pursuant to the terms of this Agreement are complete and accurate. The
Disclosure Schedule contains complete and accurate copies of all documents
referred to therein. The information contained in the Disclosure Schedule is
complete and accurate.
(e) Since the date of the Most Recent Financial Statements,
there has not been any change which has resulted in a material adverse effect on
the Business or the Purchased Assets and no event has occurred or circumstance
exists that would reasonably be expected to result in such a material adverse
effect.
(f) None of the directors, officers, employees or agents of
Seller, has (a) directly or indirectly given or agreed to give any illegal gift,
contribution, payment or similar benefit to any supplier, customer, governmental
official or employee or other person who was, is or may be in a position to help
or hinder Seller (or assist in connection with any actual or proposed
transaction) or made or agreed to make any illegal contribution, or reimbursed
any illegal political gift or contribution made by any other person, to any
candidate for federal, state, local or foreign public office (i) which might
subject Seller to any damage or penalty in any civil, criminal or governmental
litigation or proceeding or (ii) the non-continuation of which has had or might
have, individually or in the aggregate, a material adverse effect on the
Business or the Purchased Assets, or (b) established or maintained any
unrecorded fund or asset or made any false entries on any books or records for
any purpose.
(g) Neither Seller nor any of its Affiliates has dealt with
any person or entity who is or may be entitled to a broker's commission,
finder's fee, investment banker's fee or similar payment for arranging the
transaction contemplated hereby or introducing the parties to each other.
ARTICLE V
Purchaser's Representations and Warranties
5.1 General. Purchaser represents and warrants to Seller that:
---------
(a) Purchaser is a corporation duly organized, existing and in
good standing under the laws of the State of New York.
(b) Purchaser has full corporate power and authority to enter
into and perform (i) this Agreement and (ii) all documents and instruments to be
executed by Purchaser pursuant to this Agreement (collectively, "Purchaser's
Ancillary Documents"). This Agreement has been, and Purchaser's Ancillary
Documents will be, duly executed and delivered by duly authorized officers of
Purchaser.
(c) No consent, authorization, order or approval of, or filing or registration
with,
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any governmental authority or other person is required for the execution and
delivery by Purchaser of this Agreement and Purchaser's Ancillary Agreements,
and the consummation by Purchaser of the transaction contemplated by this
Agreement and Purchaser's Ancillary Documents.
(d) Neither the execution and delivery of this Agreement and
Purchaser's Ancillary Documents by Purchaser, nor the consummation by Purchaser
of the transaction herein contemplated, will conflict with or result in a breach
of any of the terms, conditions or provisions of Purchaser's Certificate of
Incorporation or By-laws, or of any statute or administrative regulation, or of
any order, writ, injunction, judgment or decree of any court or governmental
authority or of any arbitration award.
(e) Neither Purchaser, nor any of its Affiliates, has dealt
with any person or entity who is or may be entitled to a broker's commission,
finder's fee, investment banker's fee or similar payment for arranging the
transaction contemplated hereby or introducing the parties to each other.
ARTICLE VI
Conduct Prior to the Closing
6.1 General. Seller and Purchaser shall have the rights and obligations with
respect to the period between the date hereof and the Closing Date (the "Due
Diligence Period") which are set forth in the remainder of this Article VI.
6.2 Seller's Obligations. The following are Seller's obligations:
(a) Seller shall give to Purchaser's officers, employees,
attorneys, consultants and accountants reasonable access during normal business
hours to all of the properties, books, contracts, documents, records and
personnel of Seller and shall furnish to Purchaser such information as Purchaser
may at any time and from time to time reasonably request.
Purchaser shall have the right to cause the Owned Real Property and the
Leased Real Property to be inspected by surveyors, engineers or other
consultants. Promptly after the date of this agreement, Seller shall deliver to
Purchaser copies of all documents, agreements and other written material and
information in Seller's possession or control concerning the Owned Real Property
and the Leased Real Property for Purchaser's inspection and review.
Seller shall permit Purchaser and its agents or designees to enter the
Owned Real Property and the Leased Real Property at reasonable times upon
reasonable notice to Seller or Seller's agent
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to make physical inspections including, without limitation, soil samplings and
borings and surveys of the Owned Real Property and the Leased Real Property and
to inspect the same and conduct tests, environmental studies and site
investigations in order to examine such properties, including the soils, roof,
physical structure, foundation, plumbing, heating, ventilation, air conditioning
and mechanical systems, and all other items Purchaser deems necessary. Purchaser
shall repair and restore at its sole cost and expense any and all damage to such
properties as a result of its activities under this provision. Seller shall
cause a "Phase 2" Environmental Study to be completed by a company reasonably
acceptable to Purchaser and to be delivered to Purchaser not later than May
31,1999. The cost of all environmental testing shall be shared equally by Seller
and Purchaser, provided that Seller's responsibility for such costs shall not
exceed Ten Thousand Dollars ($10,000) and further provided that if and when the
Closing occurs, Purchaser shall reimburse Seller for the costs paid by Seller.
(b) Seller shall use its best efforts and make every good
faith attempt (and Purchaser shall cooperate with Seller) to obtain all consents
specified by Purchaser to the assignment of, or alternate arrangements
satisfactory to Purchaser with respect to, any contract, lease, insurance
policy, agreement, purchase order, sales order, or other instruments, Permit or
Environmental Permit, which is to be assigned to Purchaser hereunder and which
may be required for such assignment to be effective (the "Consents").
(c) Seller shall carry on the Business in the usual and
ordinary course of business, consistent with past practices, and shall use its
best efforts to preserve its business and the goodwill of its customers,
suppliers and others having business relations with Seller and to retain its
business organization intact, including keeping available the services of its
present employees, representatives and agents, and shall maintain all of its
properties in good operating condition and repair, ordinary wear and tear
excepted.
(d) Without the prior written consent of Purchaser, and
without limiting the generality of any other provision of this Agreement, Seller
shall not:
(i) change any term of existing agreements, make any payments or distributions
to its employees, officers, directors, agents, independent contractors or
shareholders, except such amounts as constitute currently effective compensation
for services rendered or for reimbursement for ordinary and necessary
out-of-pocket business expenses and payment of accrued bonuses set forth in
Section 4.5(b)(v) of the Disclosure Schedule;
(ii) hire any new employee or terminate the employment of any employee or engage
any independent contractor or terminate any existing agreement with an
independent contractor;
(iii) incur or commit to incur any capital expenditures not set forth in the
Disclosure Schedule, and which will not be made prior to Closing in excess of
$5,000 in the aggregate;
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(iv) prepay any of its material obligations;
(v) incur, assume or guarantee any long-term or
short-term indebtedness;
(vi) directly or indirectly, enter into or assume any
contract, agreement,
obligation, lease, license or commitment;
(vii) adopt or amend any Plan, Welfare Plan or
Employee Benefit Plan;
(viii) increase the compensation payable to any employee;
(ix) enter into any new collective bargaining
agreement or modify or extend
any existing collective bargaining agreement with the effect of incurring
obligations after the Closing Date, or take any action which could cause the
Purchaser to be obligated under Seller's collective bargaining agreements or the
wages, hours, and terms and conditions of employment thereunder;
(x) pay or incur any management or consulting fee;
(xi) sell, transfer or otherwise dispose of any material asset
or property except for use of Inventory in the usual and ordinary course of
business and except for cash applied in payment of Seller's trade liabilities in
the usual and ordinary course of business;
(xii) amend, terminate or give notice of termination
with respect to any
existing agreement to which Seller is a party, or waive any material rights;
(xiii) directly or indirectly, enter into any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of services) with any Affiliate of Seller; or
(xiv) pay, declare or set aside any dividend or other distribution on its
securities of any class or purchase or redeem any of its securities of any
class.
(e) Seller shall satisfy before, or concurrently with, the
Closing, all of the Excluded Liabilities.
(f) Seller shall deliver to Purchaser, within 15 days after
each month's end between the date hereof and the Closing Date, year to date
profit and loss statements and balance sheets for the month then ended,
certified by Seller's President that such information has been prepared in
accordance with GAAP, consistently applied and presents accurately and
completely Seller's financial position for the period shown.
(g) On or before the Closing, Seller shall deliver to
Purchaser a copy of its audit reports for the years ending December 31, 1997 and
December 31, 1998, (the "Audit Reports"),
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including balance sheets, statements of income and retained earnings, statements
of cash flows and notes to such financial statements, certified in a manner
acceptable to Purchaser by Purchaser's accountants and accompanied by a
certificate of Seller's President that the Audit Reports present accurately and
completely the financial position of the Seller at December 31, 1997 and
December 31, 1998 respectively and the results of operations and cash flows for
the years ending December 31, 1997 and December 31, 1998, in accordance with
GAAP consistently applied. Seller shall also deliver to Purchaser, with the
Audit Reports, copies of all attorneys' responses to audit inquiry letters and
all management letters from the accountants with respect to the Audit Reports.
(h) Seller shall promptly disclose to Purchaser any
information contained in its representations and warranties or the Disclosure
Schedule which, because of an event occurring after the date hereof, is
incomplete or is no longer correct as of all times after the date hereof until
the Closing Date; provided, however, that none of such disclosures shall be
deemed to modify, amend or supplement the representations and warranties of
Seller or the Disclosure Schedule hereto for the purposes of Article VI hereof,
unless Purchaser shall have consented thereto in writing.
(i) Seller shall refrain, beginning from the date hereof
through 12:01 a.m. on the day next succeeding the Closing Date, from taking any
action which would result in an "employment loss" (as such term is defined in
WARN) for any employee of the Seller.
(j) During the period from the date of this Agreement until
either the Closing or the date that this Agreement is terminated in accordance
with Section 11.1 hereof Seller will not directly or indirectly through any
representative or otherwise, solicit or entertain offers from, negotiate with or
in any manner encourage or consider other proposals relating to the transactions
described in this Agreement.
6.3 Joint Obligations. The following shall apply with equal force to Seller and
Purchaser:
(a) Without implication that such laws apply to the
transaction contemplated hereby, Seller and Purchaser shall not comply with the
provisions of the laws of any state relating to bulk sales.
(b) No party shall intentionally perform any act which, if
performed, or omit to perform any act which, if omitted to be performed, would
prevent or excuse the performance of this Agreement by any party hereto or which
would result in any representation or warranty herein contained of said party
being untrue in any material respect as if originally made on and as of the
Closing Date.
6.4 Purchaser's Obligations. Until the Closing, or, if this agreement is
terminated in accordance with Section 11.1, then for the longest period
permitted by law after such termination, Purchaser agrees that it shall hold in
strictest confidence and shall not, without the prior approval of Seller, use
for its own benefit (other than in evaluating the transaction described herein)
or
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disclose to any person, firm or corporation (other than its attorneys,
accountants, and other professionals retained in connection with the evaluation
of the transaction described herein) any information provided by the Seller
relating to its business or the Purchased Assets, except to the extent that such
information is otherwise publicly available.
ARTICLE VII
Conditions to Closing
7.1 Conditions to Seller's Obligations. The obligation of Seller to consummate
the transaction contemplated hereby is subject to the fulfillment of all of the
following conditions on or prior to the Closing Date, upon the non-fulfillment
of any of which this Agreement may, at Seller's option, be terminated pursuant
to and with the effect set forth in Article XI:
(a) Each and every representation and warranty made by
Purchaser shall have been true and correct when made and shall be true and
correct in all material respects as if originally made on and as of the Closing
Date.
(b) All obligations of Purchaser to be performed hereunder
through, and including on, the Closing Date shall have been performed.
(c) Seller shall have received all of the agreements,
certificates, documents and items specified in Section 8.2.
(d) No suit, proceeding or investigation shall have been
commenced or threatened by any governmental authority or private person on any
grounds to restrain, enjoin or hinder, or to seek material damages on account
of, the consummation of the transaction contemplated hereby.
7.2 Conditions to Purchaser's Obligations. The obligation of Purchaser to
consummate the transaction contemplated hereby is subject to the fulfillment of
all of the following conditions on or prior to the Closing Date, upon the
non-fulfillment of any of which this Agreement may, at Purchaser's option, be
terminated pursuant to and with the effect set forth in Article XI:
(a) Each and every representation and warranty made by Seller
shall have been true and correct when made and shall be true and correct in all
material respects as if originally made on and as of the Closing Date.
(b) All obligations of Seller to be performed hereunder
through, and including on, the Closing Date shall have been performed.
(c) Purchaser shall have received all of the agreements,
certificates, documents and items specified in Section 8.3.
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(d) All of the Consents and all other consents of third
parties required with respect to the transaction contemplated hereby shall have
been obtained.
(e) No suit, proceeding or investigation shall have been
commenced or threatened by any governmental authority or private person on any
grounds to restrain, enjoin or hinder, or to seek material damages on account
of, the consummation of the transaction contemplated hereby.
(f) Seller shall have obtained from the State of Connecticut
tax clearances including income, sales and unemployment taxes and premiums of
the transaction contemplated herein and shall have paid all necessary fees,
costs, taxes and other charges related thereto.
(g) There shall not have been any material adverse change in
the financial condition, results of operations, business, assets, future
prospects or liabilities of Seller between the date of the Most Recent Financial
Statement and the Closing Date.
(h) Purchaser's inspections and investigations of the Owned
Real Property and the Leased Real Property, including without limitation, review
of title reports and surveys for such properties and the investigations
described in Section 6.2 (a), do not reveal any state of facts which are
unsatisfactory to Purchaser in its sole discretion (hereinafter referred to as
"Purchaser's Objections"), provided, however, if all conditions described in
clauses (a) through (g) above have been satisfied, and Purchaser's Objections
pursuant to this clause (h) relate only to Evironmental Liabilities and Costs ,
and the total Environmental Liabilities and Costs are reasonably estimated by
Purchaser to be Three Hundred Thousand Dollars or less, then Purchaser shall be
obligated to purchase the Owned Real Property at the Closing and Seller shall
promptly undertake all measures (the "Remedial Measures") necessary to remedy
all conditions necessary to remove all Hazardous Materials and to comply with
all Environmental Laws. The first Two Hundred Thousand Dollars ($200,000) of
costs of the Remedial Measures shall be shared equally by Purchaser and Shukla;
the next One Hundred Thousand Dollars of such costs shall be paid by Shukla. In
the event that the costs of such Remedial Measures exceeds Three Hundred
Thousand Dollars, Purchaser shall have the option to either(a) elect not to
purchase the Owned Real Property or (b) elect to purchase the Owned Real
Property in which event Shukla shall be required to pay his $200,000 share of
the costs and Purchaser shall pay its $100,000 share plus all such costs in
excess of $300,000. In the event that Purchaser elects to purchase the Owned
Real Property and Shukla breaches his obligations pursuant to this clause (h)
then Purchaser shall have the right to off-set the amount of such breach against
Purchaser's obligations under the Reliable Note and/or the Shukla Note by an
immediate reduction to the principal balances due under such Notes. In the event
that Purchaser elects not to Purchase the Owned Real Property, (in the case
where all other conditions other than Objections regarding Environmental
Liabilities and Costs have been satisfied) then Purchaser shall still be
obligated to purchase all of the other Purchased Assets in accordance with
Sections 3.2 (a)(c), (d) and (e) above and Purchaser shall have the right to
either (x) remove all of the Purchased Assets from the Building, in which event
Shukla and/or Seller jointly and severally agree to pay to Purchaser its actual
cost of moving the Purchased Assets, but not more than One Hundred Thousand
Dollars
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($100,000), or (y) rent the Building on terms and conditions to be mutually
agreed upon between Purchaser and Shukla.
ARTICLE VIII
Closing
8.1 Form of Documents. At the Closing, the parties shall deliver the documents,
and shall perform the acts, which are set forth in this Article VIII. All
documents which Seller shall deliver shall be in form and substance reasonably
satisfactory to Purchaser and Purchaser's counsel. All documents which Purchaser
shall deliver shall be in form and substance reasonably satisfactory to Seller
and Seller's counsel.
8.2 Purchaser's Deliveries. Subject to the fulfillment or waiver of the
conditions set forth in Section 7.2, Purchaser shall execute and/or deliver to
Seller all of the following:
(a) an amount equal to the sum set forth in Section 3.2(b)
plus the amount necessary to reimburse Seller for the environmental testing
pursuant to Section 6.2(a), by wire transfer to such account as Seller shall
designate by written notice delivered to Purchaser, or by delivery of a
certified check or bank check payable to the order of Seller;
(b) the Reliable Note and, subject to the provisions of Section 7.2(h), the
Shukla Note;
(c) the employment agreement between Purchaser and Rajendra
Shukla in the form annexed hereto as Exhibit C (the "Employment Agreement");
(d) written authorization to the Escrow Agent to pay the Deposit to Seller;
(e) a certified copy of Purchaser's Certificate of Incorporation and Bylaws;
(f) a certificate of good standing of Purchaser, issued not
earlier than ten (10) days prior to the Closing Date by the Secretary of State
of New York;
(g) an incumbency and specimen signature certificate with
respect to the officers of Purchaser executing this Agreement and Purchaser's
Ancillary Documents on behalf of Purchaser;
(h) a certified copy of resolutions of Purchaser's board of
directors, authorizing the execution, delivery and performance of this Agreement
and Purchaser's Ancillary Documents;
(i) a closing certificate executed by an officer of Purchaser
(or any other officer of Purchaser specifically authorized to do so), on behalf
of Purchaser, pursuant to which Purchaser
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represents and warrants to Seller that Purchaser's representations and
warranties to Seller are true and correct as of the Closing Date as if then
originally made (or, if any such representation or warranty is untrue in any
respect, specifying the respect in which the same is untrue), that all covenants
required by the terms hereof to be performed by Purchaser on or before the
Closing Date, to the extent not waived by Purchaser in writing, have been so
performed (or, if any such covenant has not been performed, indicating that such
covenant has not been performed), and that all documents to be executed and
delivered by Purchaser at the Closing have been executed by duly authorized
officers of Purchaser;
(j) the written opinion of McLaughlin & Stern, LLP, counsel to
Purchaser, addressed to Seller, dated as of the Closing Date, in substantially
the form of Exhibit D attached hereto;
(k) without limitation by the specific enumeration of the
foregoing, all other documents required from Purchaser to consummate the
transaction contemplated hereby; and
(l) the Mortgage and the Security Interest.
8.3 Seller's Deliveries. Subject to the fulfillment or waiver of the conditions
set forth in Section 7.1, Seller shall deliver to Purchaser physical possession
of all tangible Purchased Assets, and shall execute (where applicable in
recordable form) and/or deliver or cause to be executed and/or delivered to
Purchaser all of the following:
(a) the deed(s) with respect to the Owned Real Property in the
form annexed hereto as Exhibit E, subject to the provisions of Section 7.2(h);
(b) Photocopies of any and all affidavits, indemnities and
other instruments and documents which Purchaser's title insurance company shall
reasonably require to insure title to the Owned Real Property subject only to
the matters contained in the preliminary title report annexed hereto as Exhibit
F.
(c) A Certification of Non-Foreign Status of Seller, pursuant
to Section 1445 of the Internal Revenue Code.
(d) the Employment Agreement, executed by Rajendra Shukla;
(e) certified copies of Seller's Articles of Incorporation and By-laws;
(f) certificates of good standing of Seller, issued not
earlier than ten (10) days prior to the Closing Date by the Secretary of State
of Connecticut.
(g) an incumbency and specimen signature certificate with
respect to the officers of Seller executing this Agreement and Seller's
Ancillary Documents on behalf of Seller;
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(h) a certified copy of resolutions of Seller's board of
directors and shareholders, authorizing the execution, delivery and performance
of this Agreement and Seller's Ancillary Documents;
(i) a bill of sale, executed by Seller, conveying all of the Inventory,
Equipment and other tangible personal property included in the Purchased Assets
to Purchaser, free and clear of all Liens and containing the warranties of title
set forth in this Agreement;
(j) an assignment to Purchaser, to be subject to acceptance by Purchaser,
executed by Seller, assigning to purchaser all of the Purchased Assets (other
than the Inventory and the Equipment), along with the original instruments (if
any) representing, evidencing or constituting such Purchased Assets, free and
clear of all Liens other than Permitted Liens and containing the warranties of
title set forth in this Agreement. If necessary in the opinion of Purchaser's
counsel, Seller shall also execute and deliver (in recordable form where
required) separate assignments of any of the Purchased Assets, where applicable,
in the form required by the applicable governmental agencies, insurance
companies, customers, lessors, and other parties with whom the assignments must
be filed;
(k) a closing certificate duly executed by the President and Vice President of
Seller, on behalf of Seller, pursuant to which Seller represents and warrants to
Purchaser that Seller's representations and warranties to Purchaser are true and
correct as of the Closing Date as if then originally made (or, if any such
representation or warranty is untrue in any respect, specifying the respect in
which the same is untrue), that all covenants required by the terms hereof to be
performed by Seller on or before the Closing Date, to the extent not waived by
Seller in writing, have been so performed (or, if any such covenant has not been
so performed, indicating that such covenant has not been performed), and that
all documents to be executed and delivered by Seller at the Closing have been
executed by duly authorized officers of Seller;
(l) to the extent obtained, all necessary Consents or alternate arrangements
with respect thereto, all as reasonably acceptable to Purchaser;
(m) certificates of title or origin (or like documents) with respect to all
vehicles included in the Purchased Assets and other Equipment for which a
certificate of title or origin is required in order for title thereto to be
transferred to Purchaser;
(n) the written opinion of Hertzmark & Crean, P.C., counsel to Seller, addressed
to Purchaser, dated as of the Closing Date, in substantially the form of Exhibit
G attached hereto with such changes thereto as shall be reasonably requested by
Purchaser's lenders (it being understood that Purchaser's lenders may rely upon
such opinion);
(o) a list of all employees of Seller who have been terminated by Seller during
the 90 days prior to Closing;
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(p) the Closing Date Balance Sheet, together with a certificate duly executed by
the President, on behalf of Seller, pursuant to which Seller represents and
warrants to Purchaser that the Closing Date Balance Sheet delivered with the
certificate has been prepared in accordance with GAAP in a manner consistent
with the Financial Statements and the Audit Reports and is a reasonable good
faith estimate of the Seller's financial position as of the close of business on
the Closing Date,
(q) satisfactory evidence from a qualified environmental engineer reasonably
acceptable to Purchaser that the transfer of the Owned Real Property is not
subject to the requirements of Connecticut General Statute Sec. 22a-134 et. seq,
and
(r) Such other documents and instruments as Purchaser shall reasonably request
in order to consummate the purchase contemplated by this Agreement.
Post-Closing Agreements
9.1 Post-Closing Agreements. From and after the Closing, the parties shall have
the respective rights and obligations which are set forth in the remainder of
this Article IX.
9.2 Certain Assignments. Any other provision of this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to transfer or
assign, or a transfer or assignment of, any claim, contract, lease, Permit,
Environmental Permit, commitment, or sales order, or any liability or benefit
arising thereunder or resulting therefrom, if an attempt at transfer or
assignment thereof without the consent required or necessary for such assignment
would constitute a breach thereof or in any way adversely affect the rights of
Purchaser or Seller thereunder. If such a consent or agreement to transfer or
assign is not obtained for any reason, Purchaser and Seller shall cooperate in
any arrangement Purchaser may reasonably request to provide for Purchaser the
benefits under such claim, contract, lease, Permit, Environmental Permit,
commitment or order.
9.3 Use of Trademarks: References to Seller. Seller shall cease to use and shall
not license or permit any third party to use any name, slogan, logo or trademark
which is similar or deceptively similar to any of the Trademarks. Purchaser may
refer to its business as formerly being Seller's.
9.4 Employees. Purchaser shall not be obligated to offer employment to any
employee of Seller, but Purchaser shall have the right to employ individuals
previously employed by Seller as of the Closing Date, on terms and conditions
established by Purchaser in its sole discretion.
9.5 Payments of Accounts Receivable. At the Closing Seller shall provide
Purchaser with a detailed aging report of Seller's Accounts Receivable.
Purchaser shall use reasonable efforts, consistent with its existing business
practices to collect such Accounts Receivable. Purchaser shall within fifteen
days after the end of each calendar month following the calendar month of the
Closing, deliver to Seller an accounting showing for such month the amount
received in collections on
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Seller's Accounts Receivable, specifying the amount received on each invoice of
Seller (the "Collection Report"). If the amount of Accounts Receivable collected
by Purchaser exceeds the Accounts Receivable Amount, then Purchaser shall remit
to Seller the amount of such excess. Such payment(s) shall be made
simultaneously with Purchaser's delivery of the Collection Reports. If by the
sixtieth day following the Closing, Purchaser has not received payments with
respect to Seller's Accounts Receivable equal to Accounts Receivable Amount,
then Rajendra Shukla shall pay to Purchaser within ten (10) days after receipt
of written demand therefor, an amount equal to the difference between Seller's
Accounts Receivable collected and the Accounts Receivable Amount.
9.6 Sales and Transfer Taxes and Fees. Seller shall pay when due all sales taxes
and/or use taxes and fees, recording fees, personal property title application
fees, patent and trademark assignment registration fees, transfer taxes and
fees, fees relating to the transfer of software licenses, and other sales taxes
and transfer taxes and fees on transfer of the Purchased Assets arising by
virtue of the sale of the Purchased Assets to Purchaser, regardless of whether
the liability for said taxes or fees is imposed by law upon Seller or upon
Purchaser, and shall make all necessary filings with respect thereto.
9.7 Disclosure of Confidential Information. As a further inducement for
Purchaser to enter into this Agreement, Seller agrees that for the longest
period permitted by law after the Closing Date, Seller shall, and shall cause
its Affiliates to, and Rajendra Shukla shall hold in strictest confidence, and
not, without the prior written approval of Purchaser, use for their own benefit
or the benefit of any party other than Purchaser or disclose to any person, firm
or corporation other than Purchaser (other than as required by law) any
information of any kind relating to the Business or this Agreement, except such
information as was publicly available prior to the Closing Date. This provision
shall survive any termination of this Agreement.
9.8 Covenants Not to Compete: Not to Solicit. As an inducement for Purchaser to
enter into this Agreement, Seller and Rajendra Shukla agree that from and after
the Closing and continuing until the later of five (5) years from the Closing
Date or two years following the termination of Rajendra Shukla's employment with
Purchaser, provided that Purchaser is not in default of its payment obligations
pursuant to the Note, neither Rajendra Shukla nor Seller nor any of its
Affiliates, shall (i) directly or indirectly engage or participate, anywhere in
the Restricted Area, as an owner, partner, shareholder, consultant or (without
limitation by the specific enumeration of the foregoing) otherwise, in any
business which is competitive with the Business or (ii) hire, enter into any
Agreement with or solicit any of Purchaser's employees, agents, consultants, or
independent contractors or encourage any of them to terminate their relationship
with Purchaser.
Rajendra Shukla, Seller and its Affiliates recognize that the
territorial, time and scope limitations set forth in this Section 9.8 are
reasonable and are required for the protection of Purchaser, and in the event
that any such territorial, time or scope limitation is deemed to be unreasonable
by a court of competent jurisdiction, Purchaser and Seller agree to the
reduction of any of said territorial, time or scope limitations to such an area,
period or scope as said court shall deem reasonable under the circumstances.
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9.9 Injunctive Relief. Seller and Rajendra Shukla specifically recognize that
any breach of Section 9.7 or Section 9.8 will cause irreparable injury to
Purchaser and that actual damages may be difficult to ascertain, and in any
event, may be inadequate. Accordingly (and without limiting the availability of
legal or equitable, including injunctive, remedies under any other provisions of
this Agreement), Seller and Rajendra Shukla agree that in the event of any such
breach, Purchaser shall be entitled to injunctive relief in addition to such
other legal and equitable remedies that may be available. Seller, Rajendra
Shukla and Purchaser recognize that the time limitation or absence of a time
limitation in Section 9.7 and Section 9.8 is reasonable and properly required
for the protection of Purchaser and in the event that such limitation or absence
is deemed to be unreasonable by a court of competent jurisdiction, Seller and
Rajendra Shukla agree and submit to the imposition of such a limitation as said
court shall deem reasonable.
9.10 Change of Seller Name. Within thirty days after the Closing, Seller will
file with the Secretary of State of Connecticut and any other appropriate
authority a Certificate of Amendment to Seller's Articles of Incorporation
changing Seller's corporate name to one that is not deceptively similar to
Seller's present name and does not include the word "Reliable"
9.11 Occupancy by RPM After the Closing, RPM may continue to occupy the portion
of the Building which it currently occupies (the "RPM Space") on a month to
month basis. The license payment for the occupancy of the RPM Space shall be
mutually determined by the Purchaser and RPM. RPM shall vacate the RPM Space
within thirty days after receipt of written notice from Purchaser. RPM shall
have the right to vacate the RPM Space at any time upon thirty days written
notice to Purchaser.
9.12 Further Assurances. The parties shall execute such further documents, and
perform such further acts, as may be necessary to transfer and convey the
Purchased Assets to Purchaser, on the terms herein contained, and to otherwise
comply with the terms of this Agreement and to consummate the transaction
contemplated hereby.
ARTICLE X
Indemnification
10.1 General. From and after the Closing, the parties shall indemnify each other
as provided in this Article X. For the purposes of this Article X, each party
shall be deemed to have remade all of its representations and warranties
contained in this Agreement at the Closing with the same effect as if originally
made at the Closing. As used in this Agreement, the term "Damages" shall mean
all liabilities, demands, claims, actions or causes of action, regulatory,
legislative or judicial proceedings or investigations, assessments, levies,
losses, fines, penalties, damages, costs and expenses, including, without
limitation: (a) reasonable attorneys', accountants', investigators', and
experts' fees and expenses, sustained or incurred in connection with the defense
or investigation of any such claim and (b) costs and expenses reasonably
incurred to bring the Purchased Assets and
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the Business into compliance with any laws or regulations, including, without
limitation, Environmental Laws.
10.2 Indemnification Obligations of Seller. Seller shall defend, indemnify, save
and keep harmless Purchaser and its successors and permitted assigns against and
from all Damages sustained or incurred by any of them resulting from or arising
out of or by virtue of:
(a) any inaccuracy in or breach of any representation or
warranty made by Seller in this Agreement or in any closing document delivered
to Purchaser in connection with this Agreement;
(b) any breach by Seller of, or failure by Seller to comply
with, any of its covenants or obligations under this Agreement (including,
without limitation, its obligations under this Article X);
(c) the failure to discharge when due any of the Excluded
Liabilities, or any claim against Purchaser with respect to any Excluded
Liability or alleged Excluded Liability;
(d) any claims by parties other than Purchaser to the extent
caused by acts or omissions of Seller on or prior to the Closing Date,
including, without limitation, claims for Damages which arise or arose out of
Seller's operation of the Business or by virtue of Seller's ownership of the
Purchased Assets on or prior to the Closing Date;
(e) any Plan or Welfare Plan which Seller or an ERISA
Affiliate has at any time maintained or administered or to which Seller or any
ERISA Affiliate has at any time contributed (including, without limitation, any
liability for health continuation requirements under Code Section 4980B or Part
6 of Subtitle B of Title I of ERISA and any liability arising pursuant to Title
IV of ERISA for plan termination, withdrawal or partial withdrawal from any
Multiemployer Plan, or any lien to enforce any Title IV liability or any
liability for retiree benefits);
(f) any benefits accrued pursuant to any Employee Benefit
Plan, or any action or failure to act, in whole or in part, with respect to any
Employee Benefit Plan;
(g) any failure of the parties to comply with any applicable
bulk transfer laws contained in the Uniform Commercial Code of the State of
Connecticut in connection with the transaction contemplated by this Agreement,
as contemplated by Section 6.3(a);
(h) without being limited by the foregoing paragraphs (a)
through (g), and without regard to whether any one or more of the items listed
in this paragraph (h) may be disclosed in the Disclosure Schedule or otherwise
known to Purchaser as of the date hereof or the Closing Date:
(i) any violation of, or delinquency with respect to, any decree, order or
arbitration award or law, statute, or regulation in effect on or prior to the
Closing Date of or
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agreement of Seller with, or any license, Permit or Environmental Permit granted
to Seller from, any Federal, state or local governmental authority to which the
properties, assets, personnel or business activities of the Business are subject
(or to which the Seller is subject as it relates to the properties, assets,
personnel or business activities of the Business), including, without
limitation, laws, statutes and regulations relating to occupational health and
safety, building codes, zoning, equal employment opportunities, fair employment
practices and discrimination;
(ii) any generation, transportation, storage, treatment or Release of any
Hazardous Materials occurring on or prior to the Closing Date (including without
limitation those that allegedly result in, or result in, any Release or
treatment of Hazardous Materials after the Closing Date), regardless of when
liability is asserted, at (A) any Facility, regardless of whether Seller owned,
operated or leased such Facility at the time any such activity occurred, or (B)
any Offsite Facility with regard to any Hazardous Materials with which Seller
was involved in any way at any time;
(iii) any discharges to or from storm, ground or surface waters or wetlands, and
any air emissions or pollution, which result from or are caused by activities,
events, conditions or occurrences on or prior to the Closing Date;
(iv) the exposure of and resulting consequences to any persons, including,
without limitation, employees of Seller, to any Hazardous Materials created,
generated, processed, handled or originating on or prior to the Closing Date at
a Facility or otherwise used by Seller or its predecessors in the conduct of its
business or contained in or constituting a part of merchandise sold by Seller or
its predecessors; or
(v) any violation or alleged violation of, or obligation imposed by, any
Environmental Law as a result of activities, events, conditions or occurrences
prior to the Closing Date, regardless of when the violation or alleged violation
or obligation arises or is asserted.
The obligations of Seller under this Section 10.2 shall extend for five
(5) years following the Closing Date, except for their obligations with respect
to the accuracy of the representations and warranties contained in Sections
4.2(c), 4.2(d), 4.5 and 4.7 of this Agreement, which obligations shall extend
until the applicable statute of limitations with respect to Seller's liability
for such matters shall have expired or, if no statute of limitations is
applicable, for a period of six years following the Closing Date.
10.3 Purchaser's Indemnification Covenants. Purchaser shall defend, indemnify,
save and keep harmless Seller and its successors and permitted assigns against
and from all Damages sustained or incurred by any of them resulting from or
arising out of or by virtue of:
(a) any inaccuracy in or breach of any representation or
warranty made by Purchaser in this Agreement or in any closing document
delivered to Seller in connection with this Agreement;
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(b) any breach by Purchaser of, or failure by Purchaser to
comply with, any of its covenants or obligations under this Agreement
(including, without limitation, its obligations under this Article X);
(c) any claims by parties other than Seller to the extent
caused by the acts or omissions of Purchaser after the Closing Date and not
constituting an Excluded Liability, including, without limitation, claims for
Damages which arise out of Purchaser's operation of the Business after the
Closing Date.
Purchaser's obligations under Section 10.3 shall extend for three (3)
years following the Closing Date.
10.4 Subrogation. Each Indemnifying Party shall be subrogated to all rights of
the Indemnified Party against any third party (including, without limitation,
any insurer) with respect to any claim for which indemnity is paid.
10.5 Set-Off. If, at any time, Purchaser or any other Indemnified Party of
Purchaser shall give notice to Seller pursuant to this Article X of one or more
claims for indemnity (including reasonable estimates thereof in anticipation of
Damages) pursuant to this Article X (any such claim for indemnity as to which
such notice is given being hereinafter referred to as a "Covered Claim"), and
Seller does not promptly thereafter pay the amount of such Covered Claim to
Purchaser or any other Indemnified Party of Purchaser, Purchaser (including on
behalf of any such Indemnified Party of Purchaser) shall have the right, but not
the obligation, upon further notice to Seller, setting forth the amount and
nature of each such Covered Claim in reasonable detail (the "Set-Off Notice"),
to immediately reduce the principal balance due under the Note by the amount of
such Covered Claims (the "Set-Off"") provided, however, that such remedies shall
not reduce the principal balance of the Note by more than Two Hundred Fifty
Thousand Dollars ($250,000), and provided further that with respect to the
"Limited Set-Off Claims" (defined below) Purchaser shall only have a right of
Set-Off against the Note to the extent that the aggregate amount of Damages
incurred with respect to the Limited Set-Off Claims exceeds Ten Thousand
Dollars($10,000). Purchaser's set-off right with respect to the Limited Set-Off
Claims shall be limited to Twenty Five Thousand Dollars ($25,000) in the
aggregate (i.e. if the aggregate amount of Damages with respect to the Limited
Set-Off Claims are Thirty Five Thousand Dollars ($35,000) or more, Purchaser's
Set-Off right with respect to such claims would be limited to Twenty Five
Thousand Dollars ($25,000).
The "Limited Set-Off Claims" are any claims for Damages other than those arising
out of :
(a) any inaccuracy in or breach of any representation or warranty made
by Seller in :
(i) Section 4.2 (d)(i.e. Seller's representations regarding Taxes), or
(ii) Section 4.2 (c), the second sentence of Section 4.2(e) or the last sentence
of Section 4.2 (f ) (i.e Seller's representations regarding title to the
Purchased Assets), or
(b) any claim against Purchaser with respect to any Excluded Liability
or alleged Excluded Liability, or
(c) any claims by parties other than Purchaser to the extent caused by
acts or omissions of Seller on or prior to the Closing Date, including, without
limitation, claims for Damages which arise or arose out of Seller's operation of
the Business or by virtue of Seller's ownership of the Purchased Assets on or
prior to the Closing Date.
If Seller disputes Purchaser's right to a Set-Off for any
Limited Set-Off Claim then Seller shall send written notice to Purchaser not
later than ten days after Seller's receipt of Purchaser's Set-Off Notice. If the
parties cannot settle the dispute within fifteen days after Purchaser's receipt
of Seller's Dispute Notice then such dispute shall be settled by arbitration ion
accordance with the provisions set forth in Section 12.12 below.
The foregoing Set-Off rights shall not limit Purchaser's
ability to enforce any claim for indemnification against Seller to the extent
that the Damages exceed the amount of the allowable Set-Off as described above.
ARTICLE XI
Effect of Termination/Proceeding
11.1 Right to Terminate. This Agreement and the transaction contemplated hereby
may be terminated at any time prior to the Closing by prompt notice given in
accordance with Section 12.2:
(a) by the mutual written consent of Purchaser and Seller; or
(b) by either of such parties if the Closing shall not have occurred
at or before 11:59 p.m. on July 1, 1999; provided, however, that the right to
terminate this Agreement under this Section 11.1(b) shall not be available to
any party whose failure to fulfill any material obligation under this Agreement
has been the cause of, or resulted in the failure of the Closing to occur on or
prior to the aforesaid date.
11.2 Remedies. In the event of a breach of this Agreement, the non-breaching
party shall not be limited to the remedy of termination of this Agreement, but
shall be entitled to pursue all available legal and equitable rights and
remedies, including the right to specific performance of this Agreement, and
shall be entitled to recover all of its reasonable costs and expenses incurred
in pursuing them (including, without limitation, reasonable attorneys' fees).
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ARTICLE XII
Miscellaneous
12.1 Publicity. All press releases concerning this transaction shall be made by
Purchaser only, and Seller shall not make any press releases or other publicity
with respect to this transaction. Prior to making any press release, Purchaser
shall give Seller a copy of same and not less than twenty four hours to review
and comment.
12.2 Notices. All notices required or permitted to be given hereunder shall be
in writing and may be delivered by hand, by facsimile, by nationally recognized
private courier, or by United States mail. Notices delivered by mail shall be
deemed given three (3) business days after being deposited in the United States
mail, postage prepaid, registered or certified mail, return receipt requested.
Notices delivered by hand, by facsimile or by nationally recognized private
carrier shall be deemed given on the first business day following receipt;
provided, however, that a notice delivered by facsimile shall only be effective
if such notice is also delivered by hand, or deposited in the United States
mail, postage prepaid, registered or certified mail, return receipt requested,
on or before two (2) business days after its delivery by facsimile. All notices
shall be addressed as follows:
If to Seller or Rajendra Shukla:
Addressed to :
Mr. Rajendra Shukla
1 Pell Farm Road
Saddle River, New Jersey 07458
with a copy to:
Allan Hertzmark
Hertzmark & Crean, P.C.
76 Center Street
Waterbury, Connecticut 06722
If to Purchaser:
Addressed to:
West Tech, Inc.
750 Shames Drive
Westbury, N.Y. 11590
Attn: Mandel Sherman
with a copy to:
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McLaughlin & Stern, LLP
260 Madison Avenue
New York, New York 10016
Attention: David W. Sass
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 12.2.
12.3 Expenses. Except as set forth in Section 6.2, each party hereto shall bear
all fees and expenses incurred by such party in connection with, relating to or
arising out of the execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby, including, without
limitation, attorneys', accountants' and other professional fees and expenses.
12.4 Entire Agreement. This Agreement and the instruments to be delivered by the
parties pursuant to the provisions hereof constitute the entire agreement
between the parties. Each exhibit, and the Disclosure Schedule, shall be
considered incorporated into this Agreement.
12.5 Survival: Non-Waiver. All representations and warranties shall survive the
Closing regardless of any investigation or lack of investigation by any of the
parties hereto, except as previously described in the last sentence of the
introductory paragraph of Article IV In the event of a breach of any
representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach available to it under this Agreement, Seller's
Ancillary Documents, Purchaser's Ancillary Documents or otherwise, whether at
law or in equity, regardless of any disclosure to, or investigation made by or
on behalf of, such party on or before the Closing Date. The failure in any one
or more instances of a party to insist upon performance of any of the terms,
covenants or conditions of this Agreement or to exercise any right or privilege
in this Agreement conferred, or the waiver by said party of any breach of any of
the terms, covenants or conditions of this Agreement, shall not be construed as
a subsequent waiver of any such terms, covenants, conditions, right or
privileges, but the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred. No waiver shall be effective
unless it is in writing and signed by an authorized representative of the
waiving party.
12.6 Applicable Law. This Agreement shall be governed and controlled as to
validity, enforcement, interpretation, construction, effect and in all other
respects by the internal laws of the State of Connecticut applicable to
contracts made and wholly to be performed in that State.
12.7 Binding Effect: Benefit. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer on any
person other than the parties hereto and their respective successors and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason
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of this Agreement.
12.8 Assignability. This Agreement shall not be assignable by either party
without the prior written consent of the other party, except that at or prior to
the Closing Purchaser may assign its rights and delegate its duties under this
Agreement to a subsidiary or affiliated corporation and may assign its rights
under this Agreement to its lenders or its affiliates for collateral security
purposes, and after the Closing Purchaser may assign its rights and delegate its
duties under this Agreement to any third party. No such assignment shall relieve
Purchaser of any of its liabilities under this Agreement.
12.9 Amendments. This Agreement shall not be modified or amended except pursuant
to an instrument in writing executed and delivered on behalf of each of the
parties hereto.
12.10 Headings. The headings contained in this Agreement are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
12.11 Escrow Provisions
(a) The check representing the Deposit shall be delivered to and held
by the Escrow Agent until the Closing at which time the Deposit shall be paid to
Seller as described in Section 3.2(a), or until it is otherwise paid out in
accordance with the joint written instructions of Seller and Purchaser or in
accordance with this agreement; provided, however, that if Purchaser shall
terminate this agreement in accordance with the terms of Section 11.1 hereof,
the Deposit shall be disbursed to Purchaser.
(b) The parties agree that the duties of Escrow Agent under this
agreement are subject to the following terms and conditions which shall govern
and control the rights, duties, liabilities and immunities of Escrow Agent.
(c) (i) The parties acknowledge that Escrow Agent is acting solely as a
stakeholder at their request and for their convenience. Escrow Agent is not a
party to and is not bound by any other agreement between the parties. Escrow
Agent is acting in the capacity of a depository only. Escrow Agent shall not be
deemed to be the agent of either of the parties and Escrow Agent shall not be
liable to either of the parties for any act or omission on its part unless taken
or suffered in bad faith, in willful disregard of this agreement or involving
gross negligence. Seller and Purchaser shall jointly and severally indemnify and
hold Escrow Agent harmless from and against all costs, claims and expenses,
including reasonable attorneys' fees and disbursements incurred in connection
with the performance of the Escrow Agent's duties hereunder, except with respect
to acts or omissions taken or suffered by Escrow Agent in bad faith, in willful
disregard of this agreement or involving gross negligence on the part of Escrow
Agent.
(ii) Escrow Agent may consult with and obtain advice of legal counsel in the
event of any dispute or question as to the construction of any of the provisions
of this
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agreement. Escrow Agent shall incur no liability and shall be fully protected in
acting in good faith in accordance with the opinion and instructions of its
counsel.
(d) If the Closing does not occur and either Seller or
Purchaser makes a written demand upon Escrow Agent for payment of the Deposit or
any portion of the Deposit, Escrow Agent shall give at least five (5) business
days' written notice to the other party of such demand and of its intention to
release the Deposit to the other party on a stated date. If Escrow Agent does
not receive a written objection to the proposed payment before the proposed
payment date, Escrow Agent may deposit the check representing the Deposit and
make the payment. If the other party delivers to Escrow Agent a written
objection to the payment before the proposed payment date or if Escrow Agent
shall be uncertain of its duties or in the event of a dispute, Escrow Agent
shall (i) continue to hold the Deposit until otherwise directed by joint written
instructions signed by both Seller and Purchaser or by a final judgment of a
court of competent jurisdiction, or (ii) Escrow Agent may deposit the check
representing the Deposit with a court of competent jurisdiction and, after
giving written notice of such action to Seller and Purchaser, Escrow Agent shall
have no further obligations or liability with respect to the Deposit.
(e) Escrow Agent is Seller's attorney. Seller and Purchaser
each acknowledge and agree that, if a dispute arises with respect to the Deposit
or otherwise in connection with this agreement, Escrow Agent may continue to
represent Seller.
12.12 Arbitration All disputes directed to be settled in accordance with the
provisions of this Section ("Arbitrable Disputes") will be submitted by the
Seller for resolution upon the filing of a written demand, with notice to the
Purchaser, to and under the Commercial Arbitration Rules of the American
Arbitration Association ("AAA") in Stamford, Connecticut before a panel of three
(3) arbitrators. One arbitrator shall be appointed by each party within ten (10)
days after the AAA has given notice of the filing of the demand for Arbitration.
The two arbitrators so selected shall select a third, or, if such arbitrators
are unable to select another arbitrator, the AAA shall select a third arbitrator
within five (5) days after the date the latter of the first two arbitrators are
selected. Upon such Arbitrable Dispute being submitted for resolution, the
arbitrators shall assume exclusive jurisdiction over the Arbitrable Dispute, and
shall utilize consultants or experts as they shall deem appropriate to assist
them. The decision of the arbitrators shall be a final, binding determination,
not subject to appeal.
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12.13 Cumulative Remedies. All rights and remedies of either party hereto are
cumulative of each other and every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies. IN WITNESS WHEREOF, the parties have executed this
Agreement on the date first above written.
SELLER:
--------------------------
RAJENDRA SHUKLA
RELIABLE CORPORATION
By:_______________________
Its:
PURCHASER:
WEST TECH, INC.
By:_________________________
Its:
As to Section 9.11 ONLY
RELIABLE PRECIOUS METALS, INC.
By:_______________________________
RAJENDRA SHUKLA, ________
As to Escrow Provisions only:
HERTZMARK & CREAN, P.C.
By:________________________
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EXHIBIT A
CERTAIN DEFINITIONS
"Accounts Receivable" shall mean trade accounts receivable, both billed
and unbilled, notes receivable, negotiable instruments and chattel paper.
"Affiliate" means any person or entity which controls a party to this
Agreement, which that party controls, or which is under common contract with
that party. "Control" means the power, direct or indirect, to direct or cause
the direction of the management and policies of a person or entity through
voting securities, contracts or otherwise.
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"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Sec. 9601 et seq., as amended and reauthorized.
"Chemical Substance" means any chemical substance, including, but not
limited to any (i) pollutant, contaminant, irritant, chemical, raw material,
intermediate, product, by-product, slag, construction debris,; (ii) industrial,
solid, liquid or gaseous toxic or hazardous substance, material or waste; (iii)
petroleum or any fraction thereof; (iv) asbestos or asbestos-containing
material; (v) polychlorinated biphenyl; (vi) chlorofluorocarbons; and (vii) any
other substance, material or waste, which is identified or regulated under any
Environmental Law or Safety Law, as now or hereafter in effect, or other
comparable laws.
"Closing Date Balance Sheet" shall mean a balance sheet of Seller as of
the close of business on the Closing Date, together with a schedule of the
categories and amounts of all Current Assets and Current Liabilities as of the
Closing Date, prepared in accordance with GAAP in a manner consistent with the
preparation of the Financial Statements and the Audit Reports.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985.
"Containers" means above-ground and underground storage tanks, vessels
and related equipment and containers."Environment" means soil, land surface or
subsurface strata, real property, surface waters (including navigable waters,
ocean waters, streams, ponds, drainage basins and wetlands), groundwater, water
body sediments, drinking water supply, stream sediments, ambient air (including
indoor air), plant and animal life and any other environmental medium or natural
resource.
"Environmental Laws" means all Federal, state and local statutes,
regulations, ordinances, rules, regulations and policies, all court orders and
decrees and arbitration awards, and the common law, which pertain to
environmental matters or contamination of any type whatsoever. Environmental
Laws include, without limitation, those relating to: manufacture, processing,
use, distribution, treatment, storage, disposal, generation or transportation of
Hazardous Materials; air, surface or ground water or noise pollution; Releases;
protection of wildlife, endangered species, wetlands, and natural resources;
Containers; health and safety of employees and other persons; and notification
requirements relating to the foregoing.
"Environmental Liabilities and Costs" means all losses and expenses,
including without limitation, all fines, liabilities, or other costs incurred or
which may be required to be incurred: (i) to comply with any Environmental Law;
(ii) as a result of a Release of any Chemical Substance; or (iii) as a result of
any environmental conditions present at, created by or arising out of the past
or present operations of Seller through the Closing Date or of any prior owner
or operator of a facility or site at which Sellers now operate or have
previously operated.
"Environmental Permits" means licenses, permits, registrations, governmental
approvals,
46
<PAGE>
agreements and consents which are required under or are issued pursuant to
Environmental Laws.
"Facility" means any facility as defined in CERCLA.
"GAAP" shall mean generally accepted accounting principles in effect at
the date when applied, consistent with prior periods.
"Hazardous Materials" means: (a) pollutants, contaminants, pesticides
radioactive substances, solid wastes or hazardous or extremely hazardous,
special, dangerous or toxic wastes, substances chemicals or materials within the
meaning of any Environmental Law, including without limitation any (i) hazardous
substance" as defined in CERCLA, and (ii) "hazardous waste" as defined in RCRA;
and (b) even if not prohibited, limited or regulated by Environmental Laws, all
pollutants, contaminants, hazardous, dangerous or toxic chemical materials,
wastes or any other substances, including, without limitation, any industrial
process or pollution control waste (whether or not hazardous within the meaning
of RCRA) which could pose a hazard to the environment or the health and safety
of any person, or impair the use or value of any portion of the Leased Real
Property.
"Indemnified Party" means a party entitled to indemnification under this
Agreement.
"Indemnifying Party" means a party from whom indemnification is sought
under this Agreement.
"Liens" shall mean any lien, security interest, mortgage, restriction,
pledge, option, lease or sublease, claim, easement, encroachment or encumbrance.
"Offsite Facility" means any Facility which is not presently, and has
not heretofore been, owned, leased or occupied by Seller.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. Sec. 6902 et
seq., as amended and reauthorized.
"Release" means any spill, discharge, leak, emission, escape,
injection, dumping, or other release or threatened release of any Hazardous
Materials into the environment, whether or not notification or reporting to any
governmental agency was or is required, including, without limitation, any
Release which is subject to CERCLA.
"Restricted Area" means the United States of America and Canada.
"Safety Laws" means the Occupational Safety and Health Act and any
other federal, state, and local and foreign law, regulation or legal requirement
relating to health or safety, each as now or hereinafter in effect, including
any such law, regulation or legal requirement relating to the (a) exposure of
employees to any Chemical Substance, air quality or working conditions or noise
or (b) the physical structure, use or condition of a building, facility, fixture
or other structure, including,
47
<PAGE>
without limitation, those relating to equipment or manufacturing processes, or
the management, use, storage, disposal, cleanup or removal of any Chemical
Substances, air quality or working conditions.
"Safety Liabilities and Costs" means all losses and expenses incurred
to comply with any Safety Law or as a result of any health or safety conditions
present at, created by or arising out of the past or present operations of the
Seller through the Closing Date.
"Tax" or "Taxes" shall mean all taxes and other charges imposed by any
governmental authority, including, without limitation taxes or other
governmental charges imposed on gross or net incomes minimum tax, gross
receipts, profits or gains, property tangible or intangible assets, transfers,
(including stock transfers), sales, use, ad valorem, franchise, capital, net
worth, license, withholding on amounts paid to any person, payroll, employment,
excise, severance, stamp, occupation, premium, environmental or windfall
profits, customs, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever together with any interest or any penalty,
additions to tax or additional amount.
"WARN" shall mean the Worker Adjustment and Retraining Notification Act of 1988,
29 U.S. ss. 2101 et seq.
48
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT is dated the 1st day
of July, 1999 by and between RELIABLE CORPORATION ("Reliable") and RELIABLE-WEST
TECH, INC. (a/k/a WEST TECH, INC.).
WHEREAS, the parties hereto have previously entered into that certain
Asset Purchase Agreement (the "Agreement") dated as of May 5, 1999, and
WHEREAS, the parties wish to amend the Agreement as hereafter set
forth:
NOW, THEREFORE, the parties agree as follows:
1. Section 1.2(k) is hereby deleted, in order to exclude Seller's
Accounts Receivable from the Purchased Assets. Accordingly, a new clause (c) is
hereby added to Section 1.3 (to include Seller's Accounts Receivable in the
definition of "Excluded Assets") providing as follows:
"(c) Seller's Accounts Receivable".
2. The first sentence of Section 3.1 is modified to provide as follows:
"The purchase price of the Purchase Assets shall be equal to
the sum of Two Million One Hundred Thousand Dollars ($2,100,000) plus the
"Inventory Amount" subject to the adjustment as described herein.
The last sentence of the first paragraph of Section 3.1 is
hereby deleted.
3. The first sentence of Section 3.2(c) is modified to provide as
follows:
"Purchaser shall pay to Seller an amount equal to the sum of
(i) One Million Dollars less the amount described in the last sentence of
Article II above, plus (ii) the Inventory Amount."
4. Section 9.5 is hereby deleted in its entirety.
5. Modifying Section 3.2(d), the Letter of Credit shall be delivered to
Seller on or before August 31, 1999.
6. Except as modified herein, the Agreement shall remain in full force
and effect.
1
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first above written.
RELIABLE CORPORATION
By:
Rajendra A. Shukla
RELIABLE-WEST TECH, INC.
By:
Mandel Sherman
Escrow Agreement
Agreement made this 1st day of July, 1999 between and among Reliable
Corporation ("Reliable"), Rajendra A. Shukla ("Shukla"), Reliable-West
Tech, Inc.("RWT") and Westbury Realty Management, Inc. ("WRM") .
WITNESSETH:
WHEREAS, the parties other than WRM have entered into that
certain Asset Purchase Agreement dated May 5, 1999, as amended by that certain
First Amendment dated July 1, 1999 (collectively, the "Agreement"); and
WHEREAS, capitalized terms not defined herein shall have the meanings ascribed
to them in the Agreement; and
WHEREAS, the parties wish to close the transactions described
in the Agreement, in escrow, pursuant to the terms set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties agree as follows:
1. Partial Payment of Cash Portion of Purchase Price
On this day RWT has, at the direction of Reliable, caused to
be paid to The Chase Manhattan Bank, the sum of Nine Hundred Thousand Dollars
($900,000), by wire transfer, in partial satisfaction of WRT's obligations under
Section 3.2 (c) of the Agreement.
On or before July 15, 1999 (the "Due Date"), time being of the
essence, RWT shall pay to Reliable the sum of One Hundred Thousand Dollars
($100,000) plus the Inventory Amount in the manner set forth in Section 3.2 (c)
of the Agreement plus interest on such amounts at the same per annum interest
rate as charged by Chase Manhattan Bank pursuant to the terms of its payoff
letter dated June 30, 1999 (such amounts being collectively referred to as the
"Cash Balance").
2. Escrow of Documents
The parties have executed and delivered the agreements and
instruments listed on the document entitled "Closing Agenda" annexed hereto (the
"Closing Documents"). The Closing Documents shall be held in escrow by
McLaughlin & Stern, LLP (the "Escrow Agent") pursuant to the terms hereof
(except for those documents relating to the transfer of the Owned Real Property
which shall be held by RWT's title company)..
Upon payment of the Cash Balance, the Closing Documents shall
be released from escrow as follows:
(i) the promissory note in the amount of $915,000 shall be delivered to Reliable
<PAGE>
and the promissory note in the amount of $185,000 shall be delivered to Shukla;
(ii) the Guaranty and Mortgage shall be delivered to Shukla;
(iii) the Security Agreement and the UCC-1 shall be delivered
to Reliable;
(iv) the original UCC termination statements from Merrill
Lynch and Chase Manhattan Bank, the Bill of Sale, the Assignment of Purchased
Assets and the deposit check in the amount of $100,000 shall be delivered to
RWT; and
(v) the deeds shall be delivered to WRM.
From the date hereof until payment of the Cash Balance,
Reliable and Shukla shall continue to be subject to the obligations set forth in
Section 6.2 and 6.3 of the Agreement and RWT shall continue to be subject to the
obligations set forth in Sections 6.3 and 6.4 of the Agreement . Payment of the
Cash Balance and RWT's obligations to close the transactions described in the
Agreement shall continue to be subject to the satisfaction of the conditions set
forth in Section 7.2 of the Agreement. Reliable's and Shukla's obligations to
close shall continue to be subject to the satisfaction of the conditions set
forth in Section 7.1 of the Agreement.
If the Cash Balance is not paid by the Due Date then at the
option of Reliable , the documents described in clause (iv) above shall be
returned to Reliable, except for the original deposit check which shall be
delivered to Alan Hertzmark to be held in escrow pursuant to the terms of the
Agreement, the deeds shall be returned to Shukla and, simultaneously therewith,
the items described in Clauses (i) through (iii) shall be returned to RWT,
Shukla shall repay to RWT the sum of Nine Hundred Thousand Dollars (such actions
being hereafter referred to as the "Reversal"). Notwithstanding the Reversal,
the parties shall still have and the rights, and shall be subject to the
obligations set forth in the Agreement.
3. Operation of Business During Interim Period.
As of the date hereof, RWT shall commence operations of Reliable's business as
if the transactions described in the Agreement had closed without escrow on this
date provided that during the Interim Period (defined below) RWT shall continue
to operate the business under the name "Reliable Corporation". Provided that the
Reversal does not occur, all rights and obligations arising with respect to the
operation of the business on or after July 1, 1999 shall belong to RWT. If the
Reversal occurs then all rights with respect to the operation of the business
shall revert to Reliable, and RWT shall indemnify Reliable to the extent that
the liability for obligations incurred during such interim period exceed the
revenues derived from operations during such period.
4. Insurance
Until payment of the Cash Balance or the Reversal (the "Interim Period"), Shukla
and Reliable shall continue their existing insurance policies with respect to
the Purchased
<PAGE>
Assets and the Owned Real Property. Shukla and/or Reliable shall submit claims
for any damages covered by such policies and arising during the Interim Period
and shall deliver to RWT and/or WRM , as the case may be, the proceeds payable
by such insurers with respect to such damages. Upon closing of the transactions
described in the Agreement, RWT shall reimburse Reliable for the costs of
insurance premiums paid for the Interim Period.
5. Provisions Regarding Escrow Agent
The parties acknowledge that Escrow Agent is acting solely as
a stakeholder at their request and for their convenience. Escrow Agent is not a
party to and is not bound by any other agreement between the parties. Escrow
Agent is acting in the capacity of a depository only. Escrow Agent shall not be
deemed to be the agent of either of the parties and Escrow Agent shall not be
liable to either of the parties for any act or omission on its part unless taken
or suffered in bad faith, in willful disregard of this agreement or involving
gross negligence. The parties shall jointly and severally indemnify and hold
Escrow Agent harmless from and against all costs, claims and expenses, including
reasonable attorneys' fees and disbursements incurred in connection with the
performance of the Escrow Agent's duties hereunder, except with respect to acts
or omissions taken or suffered by Escrow Agent in bad faith, in willful
disregard of this agreement or involving gross negligence on the part of Escrow
Agent.
Escrow Agent may consult with and obtain advice of legal
counsel in the event of any dispute or question as to the construction of any of
the provisions of this agreement. Escrow Agent shall incur no liability and
shall be fully protected in acting in good faith in accordance with the opinion
and instructions of its counsel.
If the Escrow Agent shall be uncertain of its duties or in
the event of a dispute, Escrow Agent shall either continue to hold the Closing
Documents until otherwise directed by joint written instructions signed by both
Reliable and RWT or by a final judgment of a court of competent jurisdiction, or
(ii) Escrow Agent may deposit the Closing Documents with a court of competent
jurisdiction and, after giving written notice of such action to Seller and
Purchaser, Escrow Agent shall have no further obligations or liability with
respect to the Closing Documents.
<PAGE>
The parties each acknowledge and agree that, if a dispute
arises with respect to the Closing Documents or otherwise in connection with
this agreement, Escrow Agent may continue to represent RWT and WRM.
IN WITNESS WHEREOF, the parties have executed this Agreement
this 1st day of July, 1999.
------------------------------
Rajendra A. Shukla
RELIABLE CORPORATION
By: ______________________
Rajendra A. Shukla,
President
RELIABLE-WEST TECH, INC.
By: _______________________
Mandel Sherman
President
WESTBURY REALTY MANAGEMENT, INC
By: _______________________
Mandel Sherman
Escrow Agent:
MCLAUGHLIN & STERN, LLP
By: ______________________
Robert M. Weiss
PROMISSORY NOTE
$185,000 July 1, 1999
FOR VALUE RECEIVED, Reliable-West Tech, Inc. (the " Company"), with
offices at 750 Shames Drive, Westbury, New York, 11590, promises to pay to the
order of Rajendra A. Shukla (the "Holder"), at 1 Pell Farm Road, Saddle River,
New Jersey 07458, or any such other address as may be designated by the holder
of this Note, the principal sum of One Hundred Eighty Five Thousand Dollars
($185,000) (the "Principal Sum"), together with interest thereon at the rate
hereinafter provided, in accordance with the following:
1. Interest. Commencing as of the date hereof and continuing until the
sixth anniversary hereof (the "Maturity Date"), the unpaid Principal Sum shall
bear interest at an annual rate (the "Interest Rate") equal to Seven Percent (7
%).
The Company shall pay to the Holder seventy two (72) equal consecutive monthly
installments of principal and interest in the amount of Three Thousand One
Hundred Fifty Four and 7/100 Dollars ($3,154.07), with the first such
installment due on August 1, 1999.The unpaid principal balance, and all accrued
but unpaid interest thereon shall be due and payable on the Maturity Date.
3. Default Interest. Upon the occurrence of an Event of Default (as
hereinafter defined), the unpaid Principal Sum shall bear interest thereafter at
an annual rate equal to the lesser of twelve percent (12%) or the highest rate
legally permissible.
4. Application and Place of Payments. All payments made on account of
this Note shall be applied first to the payment of accrued and unpaid interest
then due hereunder, and the remainder, if any, shall be applied to the unpaid
Principal Sum. All payments on account of this Note shall be paid in lawful
money of the United States of America in immediately available funds.
5. Prepayment. The Company may prepay the Principal Sum in whole or in
part at any time or times without premium or penalty.
6. Adjustments to Principal Balance and Remaining Installments. In
accordance with, Section 7.2 of the Asset Purchase Agreement between the Company
and the Holder of even date herewith (the "Asset Purchase Agreement"), the
Company shall have the right to immediately reduce the Principal Sum.Upon such
reduction, the payments due hereunder shall be adjusted so that the present
value as of the date hereof (using the Interest Rate as the discount rate) of
the payments made through the date of such reduction, plus the present value of
the remaining payments to be made is equal to the present value of the payments
that would have been made hereunder if the Principal Sum had originally been
such reduced amount.
7. Events of Default. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an "Event
of Default" and collectively, the "Events of Default") under the terms of this
Note and upon the occurrence of an Event of Default the entire unpaid Principal
Sum shall, at the option of the Holder, become immediately due and payable:
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<PAGE>
(a) The failure of the Company to pay any installment due
hereunder within fifteen (15) days after receipt of written notice thereof from
the Holder; or
(b) Entry of a decree or order by a court adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under the Federal Bankruptcy Code or any other applicable Federal
or state law, or appointing a receiver, liquidator, assignee, trustee, (or other
similar official) of the Company or of any substantial part of its properties,
or ordering the winding up or liquidation of its affairs; or
(c) The Company shall: (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of the Company or any of its
properties or assets; (ii) admit in writing its inability to pay its debts as
they mature; (iii) make a general assignment for the benefit of creditors; or
(iv) file a voluntary petition in bankruptcy or have a bankruptcy proceeding
brought against it and such involuntary proceeding is not dismissed within
fifteen (15) days of its commencement; or
(d) The termination of the employment of Rajendra A Shukla by
the Company for a reason other than death, disability or "For Cause" as such
term is defined in the Employment Agreement between the Company and Shukla of
even date herewith, or the failure of the Company to renew the term of the
Employment Agreement at such time when Shukla is willing to continue to provide
his services in accordance with the terms thereof.
8. Remedies. Upon the occurrence of an Event of Default, the Holder
shall have all of the rights, powers, and remedies available under the terms of
this Note and all applicable laws. The Company hereby waives presentment,
protest and demand, notice of protest, notice of demand and of dishonor and
non-payment of this Note.
9. Notices. Any notice, request, or demand to or upon the Company or
the Holder shall be deemed to have been properly given or made when delivered
(i) by certified first class mail, return receipt requested or (ii) by overnight
service or (iii) by telecopier followed by first class mail sent on the same day
as the telecopy to the addresses set forth on the first page hereof. All notices
shall be deemed to be given and received one day after they have been sent out
as provided for herein.
10. Miscellaneous Each right, power and remedy of the Holder as
provided for in this Note or now or hereafter existing under any applicable law
or otherwise shall be cumulative and concurrent and shall be in addition to
every other right, power, or remedy provided for in this Note or now or
hereafter existing under any applicable law. No failure or delay by the Holder
to insist upon the strict performance of any term, condition, covenant, or
agreement of this Note or to exercise any right, power or remedy upon a breach
thereof shall constitute a waiver of any such term, condition, covenant, or
agreement or of any such breach, or preclude the Holder from exercising any such
right, power, or remedy at a later time or times. By accepting payment after the
due date of any amount payable under the terms of this Note, the Holder shall
not be deemed to waive the right either to require prompt payment when due of
all other amounts payable under the terms of this Note or to declare an Event of
Default for the failure to effect such prompt payment of any such other amount.
No course of dealing or conduct shall be effective to amend, modify, waive,
release, or
-2-
<PAGE>
change any provisions of this Note.
11. Governing Law. The provisions of this Note shall be construed,
interpreted and enforced in accordance with the laws of the State of
Connecticut.
12. Waiver of Trial by Jury. The Company hereby waives the right to a
trial by jury in any action or proceeding on or related to this Note and does
further expressly waive any and every right to interpose any counterclaim in any
such action or proceeding. This waiver is knowingly, willingly and voluntarily
made by the Company.
13. Expenses. The Company promises to pay the Holder on demand by the
Holder all costs and expenses incurred by the Holder in connection with the
collection and enforcement of this Note, including without limitation, all
reasonable attorneys' fees and expenses and all court costs.
14. Partial Invalidity. In the event any provision of this Note (or any
part of any provision) is held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision (or remaining part of
the affected provision) of this Note; but this Note shall be construed as if
such invalid, illegal, or unenforceable provision (or part thereof) had not been
contained in this Note, but only to the extent it is invalid, illegal, or
unenforceable.
15. Captions. The captions herein set forth are for convenience only
and shall not be deemed to define, limit, or describe the scope or intent of
this Note.
16. Capitalized Terms. Capitalized Terms not defined herein shall have
the meanings ascribed to them in the Asset Purchase Agreement between the
Company and the Holder of even date herewith.
RELIABLE-WEST TECH, INC.
By:
MANDEL SHERMAN, President
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated as of the 1st day of
July, 1999, by and between Reliable-West Tech, Inc. (the "Company") with offices
at 750 Shames Drive, Westbury, New York 11590 and Rajendra Shukla ("Shukla")
residing at 1 Pell Farm Road, Saddle River, New Jersey, 07458.
WHEREAS, Shukla and the Company have agreed that Shukla shall render
services to the Company in the capacity of President of the Company's "Reliable
Division" pursuant to the terms of this Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein set forth, the parties hereto have agreed and do hereby
mutually agree as follows:
1. Employment Term: The term of this Agreement shall commence on the
date hereof and shall expire three years thereafter (the "Employment Period")
subject to the provisions of Section 5. At the end of the Employment Period, the
Company shall have the right to renew this Agreement on the same terms and
conditions set forth herein for up to two consecutive one year periods upon
written notice to Shukla delivered not later than ninety days prior to the end
of the then current Employment Period.
2. Duties of Executive: Shukla shall serve as Vice President of the
Company and shall also have the title of President of the Company's "Reliable
Division". Shukla shall be required to perform such duties as may from time to
time be required by the Board of Directors, President or Chief Executive Officer
of the Company. Shukla's duties may include performance of services for
affiliates of the Company. Shukla shall devote substantially all of his business
time, attention and energy to the business of the Company and its affiliates.
1
<PAGE>
3. Compensation:
(a) As compensation for his services hereunder, the Company
shall pay Shukla, during the Employment Period, annual compensation in the
amount of One Hundred Fifty Thousand Dollars (the "Base Salary"). Such amount is
inclusive of all benefits described in Section 4 below. Payments of Base Salary
shall be payable in bi-weekly installments during the Employment Period.
(b) During the Employment Period, Shulka may be entitled
to receive a bonus or
bonuses in the form of Common Stock of Westbury Metals Group, Inc. with an
aggregate value (based on the average of the last bid and asked prices on the
last business day prior to issuance) not to exceed Two Hundred Thousand Dollars
($200,000), provided, however, Shukla acknowledges that the decision to pay any
such bonus is entirely within the discretion of the Company.
(c) The Company may withhold from payments of Base Salary amounts
required to be withheld by the Company from time to time under applicable
Federal, State, and local laws and regulations then in effect, including,
without limitation, laws regarding federal, state or local taxes, and may also
withhold such amounts necessary to provide Shukla the benefits described in
Section 4 below.
(d) Upon submission of written statements and bills in
accordance with the then regular procedures of the Company, Shukla shall be
entitled to reimbursement for reasonable out-of-pocket expenses necessarily
incurred in the performance of his duties hereunder, including, but not limited
to, reimbursement for travel and car expenses.
4. Employee Benefits:
Shukla shall be included to the extent eligible thereunder in
any and all existing plans (and any plans which may be adopted in the future)
providing benefits for the Company's employees
2
<PAGE>
generally, including, but not limited to, group life and disability insurance,
hospitalization, medical, vacation, retirement, stock option plans and any and
all similar or comparable benefits.
5. Termination:
(a) The Company may terminate Shukla's employment hereunder
without cause at any time by written notice delivered to Shukla in writing not
less than ninety (90) days prior to the effective date of termination; provided
however, that the Company shall continue to pay to Shukla the Base Salary
throughout the balance of the remaining term of the then current Employment
Period.
(b) Notwithstanding the provisions of Section 5(a) above, the
Company shall not be required to pay the amount owed under such Section if
Shukla's employment is terminated "For Cause." For purposes of this Agreement
"For Cause" shall mean:
(i) The misappropriation of any funds or properties
of the Company or other acts constituting fraud,
theft or the acceptance of a bribe or "kick
back";
(ii) Conviction of a felony or engaging in conduct
involving moral turpitude;
(iii) Engaging in conduct constituting (1) willful
gross neglect (2) willful gross misconduct in
carrying out Shukla's duties under this Agreement
(3) refusal or failure to perform Shukla's
obligations hereunder, provided that Shukla fails
to cure such refusal or failure within a
reasonable time after receipt of written notice
thereof.
In the event that Shukla's employment with the Company is terminated
For Cause, he shall be entitled to, and his sole remedy under this Agreement
shall be payment of Base Salary through the effective date of termination of
employment.
(c) In the event that Shukla dies or becomes disabled so as
not to be able to perform his duties as set forth herein for a period of six
consecutive months or for a total of 180 days during any twelve month period,
this Agreement shall terminate effective as of the date of death or the last
3
<PAGE>
day of such six month period or the 180th day of disability (as the case may be)
and no further compensation shall be payable to Shukla, however, that during any
such period of disability, Shukla shall be entitled to his Base Salary as
provided under Section 3.
6. Covenant Not to Compete:
(a) Shukla agrees that, commencing the date hereof and
continuing until the later of the fifth anniversary of the Closing of the sale
of assets by Reliable Corporation to the Company, or the second anniversary of
the termination of Shukla's employment with the Company, he will not, (i) engage
in any business activity in the "Restricted Area" directly or indirectly, on his
own behalf or as a partner, stockholder (except by ownership of less than ten
percent (10%) of the outstanding stock of a publicly-held corporation),
director, trustee, principal, agent, employee, consultant or otherwise of any
person, firm or corporation which then is competitive with an activity in which
the Company or any parent or subsidiary or affiliate of the Company is then
engaged at the time; or (ii) hire or enter into any agreement with or solicit
any employee, agent, consultant, or independent contractor of the Company or any
parent, subsidiary or affiliate of the Company, to terminate or encourage any
such persons to terminate their relationship with the Company, its parent,
subsidiary or affiliate.
(b) The "Restricted Area" is hereby defined as the United
States of America and Canada. Shukla specifically recognizes that any breach of
this Section 6 or Section 8 below will cause irreparable injury to the Company
and that actual damages may be difficult to ascertain, and in any every, may be
inadequate. Accordingly, (and without limiting the availability of legal or
equitable, including injunctive, remedies under any other provisions of this
Agreement), Shukla agrees that in the event of any such breach, the Company
shall be entitled to injunctive relief in addition to such other legal and
equitable remedies that may be available Shukla and the Company
4
<PAGE>
recognize that the time limitation in this Section 6 and the absence of a time
limitation in Section 8 is reasonable and properly required for the protection
of the Company and in the event that such limitation or absence is deemed to be
unreasonable by a court of competent jurisdiction, the Company and Shukla agree
and submit to the imposition of such a limitation as said court shall deem
reasonable.
7. Default - Remedies: In addition to the remedies described in 5(b),
in the event of a termination of Shukla's employment "For Cause", the Company
shall be entitled to pursue any other available remedy at law or equity.
8. Confidential Information: Except as otherwise required by law,
Shukla shall not disclose or use at any time, except as part of his employment
by the Company, either during or subsequent to such employment, any information
relating to the business of the Company. Without limiting the generality of the
foregoing, Shukla shall not disclose or use any information pertaining to the
business of the Company or any parent or subsidiary of the Company, including,
but not limited to, profit figures, names of or relationships with customers or
advertisers, or the terms of any contracts to which it or they may be a party.
The obligation imposed by this Section 8 shall survive the expiration or other
termination of this Agreement.
9. Surrender of Documents: Shukla shall, at the request of the Company,
promptly surrender to the Company or its nominee, upon any termination of his
employment hereunder, or at any time prior thereto, any document, memorandum,
record, letter, specification or other paper in his possession or under his
control relating to the operations, business, customers, or affairs of the
Company or its affiliates.
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10. Waiver of Breach: The waiver by either the Company or Shukla of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by either the Company or Shukla.
11. Severability: The invalidity or unenforceability of any provision
of this Agreement, whether in whole or in part, shall not in any way affect the
validity or enforceability of any other part of such provision or of any
provision herein contained, and any invalid or unenforceable provision or part
thereof shall be deemed severable to the extent of any such invalidity or
unenforceability. If such invalidity or unenforceability is due to the
unreasonableness of the time or geographical area covered by the covenants or
restrictions of such provision, such covenants and restrictions shall
nevertheless be effective for such period of time and for such area as may be
determined to be reasonable by a court of competent jurisdiction.
12. Assignment; Binding Effect: The obligations of Shukla
hereunder may not be assigned or delegated without the prior written consent of
the Company. The rights and obligations of the parties shall inure to the
benefit of, and be binding upon, their respective heirs, personal
representatives, successors and permitted assigns.
13. Notices:
(a) All notices, requests, demands, and other communications
hereunder must be in writing and shall be deemed to have been given if delivered
by hand or mailed within the continental United States by first class, certified
mail, return receipt requested, postage and registry fees prepaid, or sent by
telecopier (with receipt confirmation), to the applicable party and addressed as
follows:
(i) if to the Company:
West Tech, Inc.
750 Shames Drive
Westbury, New York 11590
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(ii)if to Shukla:
1 Pell Farm Road
Saddle River, New Jersey 07458
(b) Any notice or other communication given by certified mail
shall be deemed given at the time of certification thereof, except for a notice
changing a party's address which shall be deemed given at the time of receipt
thereof. Any notice or other communication sent by telecopier transmission shall
be deemed given at the time of written confirmation of receipt.
13. Entire Agreement of the Parties: This Agreement expresses the
entire agreement of the parties, and all promises, representations,
understandings, arrangements and prior agreements are merged herein and
superseded hereby. No person, other than pursuant to a resolution of the Board,
shall have any authority on behalf of the Company to agree to modify or change
this Agreement or anything in reference thereto, and any such modification or
change must be in writing and signed by both parties hereto.
14. Laws Governing: This Agreement shall be construed, interpreted and
governed in accordance with the laws of the State of Connecticut without regard
to the choice of laws provisions thereof.
15. Counterparts: This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one document.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and Shukla has hereunto set his hand as
of the day and year first above written.
West Tech, Inc.
By:
Name:
Title:
Accepted and Agreed
By:
Rajendra Shukla
LOAN AND CONSIGNMENT AGREEMENT
LOAN AND CONSIGNMENT AGREEMENT, dated as of July __, 1999, by and among
BANKBOSTON, N.A., a national banking association with offices at 100 Federal
Street, Boston, Massachusetts 02110 ("Lender"); and WESTBURY METALS GROUP, INC.,
a Delaware corporation with its principal office at 750 Shames Drive, Westbury,
New York (the "Parent"), WESTBURY ALLOYS, INC., a Delaware corporation with its
principal office at 750 Shames Drive, Westbury, New York ("Alloys"),
RELIABLE-WEST TECH, INC., a Delaware corporation with its principal office at
750 Shames Drive, Westbury, New York ("West Tech"), and WESTBURY INTERNATIONAL,
INC., a Rhode Island corporation with its principal office at 750 Shames Drive,
Westbury, New York ("International") (collectively, Alloys, West Tech, and
International are hereinafter referred to together as the "Companies" and
individually as a "Company").
W I T N E S S E T H:
WHEREAS, the Parent, the Companies and the Lender desire to enter into
this Loan and Consignment Agreement pursuant to which the Lender will (i) extend
a revolving loan to the Companies, (ii) issue letters of credit on behalf of the
Companies, (iii) provide forward contracts on behalf of the Companies, and (iv)
extend a consignment facility to the Companies, all on the terms and conditions
and in reliance upon the representations and warranties of the Companies
hereinafter set forth; and
NOW, THEREFORE, in consideration of the premises and of the mutual
promises hereinafter contained, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
When used herein, the terms set forth below shall be defined as
follows:
1.1 "Advances" means all amounts loaned to the Companies under
Paragraph 3 hereof by the Lender.
1.2 "Affiliate" means (i) any Subsidiary of a Company; (ii) any entity
or corporation controlled by a Company, or by any Subsidiary, employee,
salesperson, officer, director or shareholder of a Company; (iii) any employee,
salesperson, officer, director or shareholder of a Company, and (iv) any entity
which controls a Company. For purposes of this definition, "control" shall
include the ownership of more than 10% of the outstanding stock of a corporation
or of the equity or income of a partnership, a limited liability company or a
joint venture.
1.3 "Approved Locations" means (a) Alloy's premises at 750 Shames
Drive, Westbury, New York and 900 Shames Drive, Westbury, New York, (b) West
Tech's premises at 750 Shames Drive, Westbury, New York, and at 302 Platts Mill
Road, Naugatuck, Connecticut, (c) International's premises at 750 Shames Drive,
Westbury, New York, and (d) such other locations as may be agreed upon from time
to time in writing by the parties hereto; provided, however, the Lender shall
have the right to give written notice that a location, whether now, or hereafter
approved, is no longer an Approved Location.
1.4 "Assignment of Key Man Life Insurance" means the Collateral
Assignment of Life Insurance Policy dated July __, 1999 pursuant to which Alloy
assigned all of its interest under a certain Insurance Policy No. BU1054888
issued by United of Omaha Life Insurance Company on the life of Mandel Sherman
to secure the payment and performance of the Obligations.
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1.5 "Authorized Representatives" means all person(s) who are authorized
by and on behalf of the Companies (a) to transact consignment and purchase and
sale transactions with Lender under the Consignment Facility; (b) to request
Advances from the Lender under the Revolving Loan; (c) to request that the
Lender issue Letters of Credit under the Revolving Loan; (d) to request that an
Advance under the Revolving Loan be continued as such or converted to an Advance
of another Type; and (e) to request Forward Contracts.
1.6 "Borrowing Limit" means the lesser of:
(a) Twelve Million Dollars ($12,000,000) minus the Consignment Facility
Indebtedness; or
(b) Eighty percent (80%) of Eligible Receivables of the
Companies plus Fifty percent (50%) of Eligible
In-House Catalytic Converter Inventory.
1.7 "Breakage Fees" means any reduced return to the Lender due to
redeployment loss or payment or expense incurred by the Lender as a result of
the prepayment or late payment by any Company of any Forward Contract.
1.8 "Business Day" means each and every day other than Saturdays,
Sundays and days on which the Lender is closed by virtue of a national holiday
or a holiday in the Commonwealth of Massachusetts.
1.9 "Company Guaranties" means, singly and collectively, the Unlimited
Guaranties of even date executed by each of the Companies of the Obligations
incurred by each other Company.
1.10 "Companies" means, individually and collectively, Alloys, West
Tech, and International.
1.11 "Companies' Address" means each Company's respective address as
set forth in the Preamble of this Agreement.
1.12 "Consigned Precious Metal" means Precious Metal which has been
consigned to the Companies by the Lender pursuant to the Consignment Facility.
1.13 "Consignment Facility" means the facility under Paragraph 2
hereof, whereby the Companies may request consignments of Precious Metal from
the Lender.
1.14 "Consignment Facility Indebtedness" means the value (as determined
in accordance with Paragraph 2.2 hereof) of Consigned Precious Metal plus any
unpaid purchase price for Consigned Precious Metal.
1.15 "Consignment Limit" means the least of:
(a) the least of:
(i) Seven Million Dollars ($7,000,000); or
(ii) the sum of (i) ninety percent (90%) of
Eligible In-House Silver Industrial Product
Inventory, plus (ii) ninety percent (90%) of
Eligible Precious Metal Bullion, plus (iii)
ninety percent (90%) of Eligible In-House
Catalyst, plus (iv) plus eighty percent
(80%) of Precious Metal contained in
Eligible In-House Assay Refining Lot
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Inventory, plus (iii) seventy percent (70%)
of Precious Metal contained in Eligible
Off-Premises Primary Refiners Inventory; or
(b) such limit as the Lender and the Companies may agree
upon from time to time as evidenced by an amendment
in substantially the form of Exhibit C attached
hereto and made a part hereof or in such other form
as the Lender shall require; or
(c) such other limits as the Lender may approve in its
sole discretion immediately upon notice to the
Companies upon the occurrence of an Event of Default
(as hereinafter defined) or upon the occurrence of an
event which, with the passage of time or the giving
of notice, or both, would be an Event of Default.
1.16 "Conversion Request" means a notice given by an Authorized
Representative to the Lender of the Companies' election to convert or continue
an Advance under the Revolving Loan in accordance with Paragraph 4.3 hereof.
1.17 "Drawdown Date" means, with respect to the Revolving Loan, the
date on which any Advance under the Revolving Loan is made or is to be made and
the date on which any Advance under the Revolving Loan is converted or continued
in accordance with Paragraph 4.3 hereof, as applicable.
1.18 "Eligible Inventory" means Inventory, valued at the lower of cost
or market, which is acceptable to the Lender, in its sole discretion in all
respects, and which satisfies all of the following:
(a) The Inventory is salable through normal trade channels.
(b) The Inventory is owned by the Companies or on consignment to
the Companies by the Lender pursuant to the Consignment
Facility and is not subject to any lien or security interest
not expressly permitted by this Agreement and is not on
consignment from, or to, any person or entity other than from
the Lender to the Companies;
(c) The Inventory is located at an Approved Location and is
subject to a first lien in favor of the Lender;
(d) The Inventory is not of a class or type which the Lender, in
its sole discretion, shall have notified the Companies is not
to be included in Eligible Inventory;
(e) The Inventory has been made available to the Lender for
inspection and has been acceptable to the Lender after such
inspection, if any; and
(f) The Inventory is insured to the Lender's satisfaction.
1.19 "Eligible In-House Catalyst" means Eligible Inventory which is
comprised of platinum or palladium from catalytic converters.
1.20 "Eligible In-House Silver Industrial Product Inventory" means
Eligible Inventory, valued at the lower of cost or market, which is acceptable
to the Lender in its sole discretion in all respects, and which Inventory
constitutes finished goods comprised of silver.
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1.21 "Eligible Precious Metal Bullion Inventory" means Eligible
Inventory which is acceptable to the Lender in its sole discretion in all
respects, and which Inventory consists of Precious Metal bullion.
1.22 "Eligible In-House Catalytic Converter Inventory" means Eligible
Inventory which consists of finished goods comprised of pre-processed catalytic
converters.
1.23 "Eligible In-House Assay Refining Lot Inventory" means Eligible
Inventory which is comprised of Precious Metal in refining lots, less toll-ins.
1.24 "Eligible Off-Premises Primary Refiners Inventory" means all
Eligible Precious Metal Bullion Inventory located at pre-approved principal
refiners of the Companies, which refiners have entered into such agreements with
the Lender as the Lender may reasonably request to confirm the Lender's security
interest therein.
1.25 "Eligible Receivable" means a Receivable which is satisfactory to
the Lender, in its sole discretion, in all respects and which satisfies all of
the following:
(a) The Receivable is an account which arose in the ordinary course of the
business of the applicable Company from or in connection with the performance of
services which have, to the best knowledge of such Company, been fully and
satisfactorily performed or from the absolute sale of Inventory to which such
Company had the sole and complete ownership (subject to the security interests
therein permitted hereby) and which has been shipped or delivered to the account
debtor as evidenced by shipping or delivery receipts in the possession of such
Company or the Lender;
(b) The Receivable is subject to a first lien in favor of
the Lender and not subject to set off, counterclaim,
defense, allowance or adjustment other than discounts
for prompt payment in accordance with the normal
terms of the applicable Company disclosed to the
Lender and shown on the invoice, or to dispute,
objection or complaint by the account debtor, and the
goods the sale of which gave rise to the Receivable
have not been rejected, returned, lost or damaged;
(c) The Receivable has been due and payable for not more
than thirty (30) days past the due date thereof ;
(d) The Receivable is not due from an Affiliate;
(e) The Receivable is not due from an account debtor
located in any state requiring qualification or
registration of foreign corporations making sales to
customers in such state unless either the applicable
Company, shall have qualified or registered in such
state;
(f) Except as otherwise approved by the Lender, the
Receivable is not due from an account debtor which
has no place of business within the United States
unless the applicable Company, has an irrevocable
letter of credit in the amount of the Receivable
securing payment thereof which is satisfactory to the
Lender in all respects;
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(g) The Receivable is not due from any account debtor as
to whom twenty percent (20%) or more of the amount
outstanding under invoices submitted to such account
debtor are otherwise deemed ineligible hereunder;
(h) The Receivable does not arise out of a sale by the
Companies of goods consigned to the Companies, or
delivered to the Companies, as applicable, on sale or
return terms (whether or not compliance has been made
with Section 2-326 of the Uniform Commercial Code;
(i) The Receivable does not arise out of a sale made on a
"bill and hold" or on a delayed billing basis other
than upon terms usual to the current business
practices of the applicable Company;
(j) The Receivable is not owed pursuant to a contract
with the United States Government or any
instrumentality thereof;
(k) The Receivable is not evidenced by a promissory note; and
(l) The financial condition of the account debtor is
satisfactory to the Lender, in its sole discretion.
1.26 "Eurodollar Business Day" means any day on which commercial banks
are open for international business (including dealings in dollar deposits) in
London.
1.27 "Event of Default" means each and every event specified in
Paragraph 11.1 of this Agreement.
1.28 "Financial Statements" means the audited balance sheets of the
Parent and the Companies dated as of June 30, 1998, including combined and
combining statements and the statements of income and retained earnings of the
Companies for the Fiscal Year ended 1998 on such date prepared and certified by
independent certified public accountants and similar management prepared
statements for the Fiscal Year ended 1999.
1.29 "Fiscal Year" means the year ending on the Saturday closest to June 30th of
each ------------- year.
1.30 "Forward Contracts" means a contract to sell or purchase Precious
Metal at some time in the future between the Lender and any Company.
1.31 "Forward Contract Exposure" means with respect to any Forward
Contract, the percentage agreed upon between the Lender and the Companies of the
nominal value based on tenor and volatility up to $1,500,000.00.
1.32 "Forward Contract Maturity Date" means the maturity date mutually
agreed upon by a Company and the Lender for a Forward Contract, which date shall
not be later than the Maturity Date.
1.33 "GAAP" means generally accepted accounting principles consistently
applied.
1.34 "Handy & Harman Price" means with respect to silver, the Handy &
Harman published silver base price on the date of valuation, or if no such price
is available for such date, said published silver base price on the next
previous day for which such price was available.
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1.35 "Indebtedness" means, as to the Companies, all items of
indebtedness, obligation or liability, whether matured or unmatured, liquidated
or unliquidated, direct or contingent, joint or several, including, without
limitation:
(a) All indebtedness guaranteed, directly or indirectly,
in any manner or endorsed (other than for collection
or deposit in the ordinary course of business) or
discounted with recourse;
(b) All indebtedness in effect guaranteed, directly or
indirectly, through agreements, contingent or
otherwise; (1) to purchase such indebtedness; or (2)
to purchase, sell or lease (as lessee or lessor)
property, products, materials or supplies or to
purchase or sell services, primarily for the purpose
of enabling the debtor to make payment of such
indebtedness or to assure the owner of the
indebtedness against loss; or (3) to supply funds to
or in any other manner invest in the debtor;
(c) All indebtedness secured by (or for which the holder
of such indebtedness has a right, contingent or
otherwise, to be secured by) any mortgage, deed of
trust, pledge, lien, security interest or other
charge or encumbrance upon property owned or acquired
subject thereto, whether or not the liabilities
secured thereby have been assumed;
(d) All indebtedness incurred as the consignee of goods
under consignment facilities whether or not, in
accordance with GAAP, such consignment facilities
should be reflected on the consignee's balance sheet;
and
(e) All indebtedness of any partnership or joint venture
in which the Companies or any of their Subsidiaries
is a general partner or joint venturer.
1.36 "Interest Payment Date" shall mean, as to any Prime Rate Advance,
the first day of each calendar month commencing with the month following the
Drawdown Date until such Advance is paid in full, and, as to any LIBOR Rate
Advance, initially, the thirtieth (30th) day after the Drawdown Date thereof,
and, thereafter, each successive thirtieth (30th) day until such Advance is paid
in full.
1.37 "Interest Period" shall mean:
(a) for any Prime Rate Advance, initially, the period
commencing on a Drawdown Date and ending on the last
day of the calendar month, and, thereafter, the
period commencing on the first day of the immediately
succeeding calendar month and ending on the last day
of such calendar month; and
(b) for any LIBOR Rate Advance, initially, the period commencing on a Drawdown
Date and ending on the 7th, 30th, 60th, 90th, or 180th day after such Drawdown
Date (as selected by the Companies or such other period as the Lender and the
Companies shall agree upon from time to time in selecting the corresponding
LIBOR Rate, but in no event later than the Maturity Date); and, thereafter, the
period commencing on the first day after the immediately preceding Interest
Period and ending on the thirtieth (30th) day thereafter (or such other period
as the Lender and the Companies shall agree upon from time to time in selecting
the corresponding LIBOR Rate, but in no event later than the Maturity Date);
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provided that all of the foregoing provisions relating to Interest Periods are
subject to the following:
(i) if any Interest Period with respect to a
LIBOR Rate Advance would otherwise end on a
day that is not a Eurodollar Business Day,
that Interest Period shall be extended to
the next succeeding Eurodollar Business Day;
(ii) if any Interest Period with respect to a
Prime Rate Advance would end on a day that
is not a Business Day, that Interest Period
shall be extended to the next succeeding
Business Day; and
(iii) if the Companies shall fail to give notice
as provided in the Paragraph 4.3, the
Companies shall be deemed to have requested
a conversion of the affected LIBOR Rate
Advance to a Prime Rate Advance on the last
day of the then current Interest Period with
respect thereto.
1.38 "Inventory" means all inventory (as defined in Section 9-109(4) of
the Uniform Commercial Code), goods, merchandise and other personal property,
wherever located, now owned or hereafter acquired by the Companies or acquired
on consignment by the Companies which are held for sale or lease, or furnished
or are raw materials, work in process, supplies or materials used or consumed in
the Companies' business, and all products thereof, and substitutions,
replacements, additions or accessions thereto, all cash or non-cash proceeds of
all of the foregoing including insurance proceeds.
1.39 "Lender" means BankBoston, N.A., a national banking association.
1.40 "Lender's Address" means 100 Federal Street, Boston, Massachusetts 02110,
Attn: Elizabeth Sousa, Vice President.
1.41 "Letters of Credit" means letters of credit which shall be issued
by the Lender for the account of the Companies pursuant to this Agreement.
1.42 "Letter of Credit Documents" means individual letter of credit
applications and agreements for each Letter of Credit to be issued by the
Lender, all in form and substance satisfactory to the Lender in accordance with
its usual and customary practice and containing such items and conditions, and
specifying such prices and in such amounts, as may be offered to the Companies
from time to time by the Lender in its sole discretion.
1.43 "LIBOR Lending Office" means the office of the Lender in London,
England.
1.44 "LIBOR Rate" means, with respect to each Interest Period the rate
per annum (adjusted for reserves, if any) at which U.S. dollar deposits in
immediately available funds are offered to the LIBOR Lending Office two (2)
Eurodollar Business Days prior to the beginning of such Interest Period in the
London interbank eurodollar market where the eurodollar and foreign currency and
exchange operations of such LIBOR Lending Office are customarily conducted at or
about the relevant local time of the LIBOR Lending Office, for delivery on the
first day of such Interest Period for the number of days or months comprised
therein and in an amount equal to the amount of the LIBOR Rate Advance to be
outstanding during such Interest Period. As used herein, "relevant local time"
shall mean 11:00 a.m., local time in London, England. In the event that the
Board of Governors of the Federal Reserve System shall impose a reserve
percentage with respect to LIBOR Deposits of the Lender, then for any period of
time during which such reserve percentage shall apply, the LIBOR Rate shall be
equal to the amount determined above divided by an amount
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equal to 1 minus the reserve percentage. Each determination of the LIBOR Rate
made by the Lender in accordance with this definition shall be conclusive and
binding on the Companies, except in the case of manifest error.
1.45 "LIBOR Rate Advances" means Advances under the Revolving Loan
bearing interest calculated by reference to the LIBOR Rate.
1.46 "Loan Documents" means this Agreement, the Note, the Security
Agreement, the Trademark Security Agreement, the Lockbox Agreement, the Parent
Guaranty, the Parent Stock Pledge Agreement, the Company Guaranties, the
Assignment of Key Man Life Insurance and each additional document executed in
connection with any of the foregoing
1.47 "Lockbox Agreement" means the Agreement more particularly
described in Section 10.30 hereof.
1.48 "London Bullion Broker's Second Fixing Price": With respect to
gold, the London Bullion Broker's second fixing price on the date of valuation
of gold, or if no such price is available for such date, then the gold at issue
shall be valued on the basis of said London Second Fixing Price on the next
previous day for which such price was available.
1.49 "Maturity Date" means July 15, 2001.
1.50 "Merc" means the New York Mercantile Exchange.
1.51 "Merc Palladium Price": For any day, the closing spot settlement
price per troy ounce for the sale of palladium on the Merc (or if there is no
such price for such day, the price on the next preceding day for which such
price exists).
1.52 "Merc Platinum Price": For any day, the closing spot settlement
price per troy ounce for the sale of platinum on the Merc (or if no there is no
such price for such day, the price on the next preceding day for which such
price exists).
1.53 "Note" means the Secured Promissory Note of the Companies payable
to the Lender in the maximum principal amount of Twelve Million Dollars
($12,000,000.00) in the form of Exhibit A hereto, and any other promissory note
which may be issued by the Companies pursuant to this Agreement in substitution
therefor, as the same may be amended from time to time.
1.54 "Obligations" means any and all Indebtedness, obligations and
liabilities of the Companies to the Lender of every kind and description, direct
or indirect, secured or unsecured, joint or several, absolute or contingent, due
or to become due, whether for payment or performance, now existing or hereafter
arising, regardless of how the same arise or by what instrument, agreement or
book account they may be evidenced, or whether evidenced by any instrument,
agreement or book account, including, without limitation, all indebtedness and
obligations under the Consignment Facility, Revolving Loan, and Forward
Contracts; all indebtedness, liabilities or obligations owing from the Companies
to others which the Lender may have obtained by purchase, negotiation, discount,
assignment or otherwise; and all interest, taxes, fees, charges, expenses and
attorneys' fees chargeable to the Companies or incurred by the Lender hereunder,
or any other document or instrument delivered hereunder or as a supplement
hereto.
1.55 "Operating Cash Flow" means the net profit of the Parent and
Companies (and Alloy Tradings S.A.) on a consolidated basis (as determined by
GAAP on a first in-first out basis) before reduction for interest, consignment
fees, depreciation and amortization and other non-cash expenses, less capital
expenditures, less dividends paid, less cash taxes paid.
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1.56 "Parent" means Westbury Metals Group, Inc., a Delaware
corporation.
1.57 "Parent Guaranty" means the Unlimited Guaranty of even date
executed by the Parent in favor of the Lender pursuant to which the Parent
unconditionally guaranteed the payment and performance of all Obligations of the
Companies to the Lender.
1.58 "Parent Stock Pledge Agreement" means the Stock Pledge Agreement
of even date executed by the Parent pursuant to which the Parent pledged to the
Lender all of its ownership interest in the Companies to secure the payment and
performance of the Obligations and the Parent Guaranty.
1.59 "Permitted Liens" means, so long as execution thereon has been
stayed:
(a) Liens for taxes, assessments or similar charges,
incurred in the ordinary course of business, which
either are not yet due or are being contested in good
faith by appropriate proceedings, and as to which the
Companies shall have set aside adequate reserves, and
for which a notice of lien has not been filed;
(b) Pledges or deposits made in the ordinary course of
business to secure payment of worker's compensation,
or to participate in any fund in connection with
worker's compensation, unemployment insurance,
old-age pensions or other social security payments;
(c) Liens of mechanics, materialmen, warehousemen,
carriers, or other like liens, securing obligations
incurred in the ordinary course of business that are
not yet due and payable;
(d) Good faith pledges or deposits made in the ordinary
course of business to secure performance of bids,
tenders, contracts (other than for the repayment of
borrowed money) or leases, not in excess of ten
percent (10%) of the aggregate amount due thereunder,
or to secure statutory obligations, or surety,
appeal, indemnity, performance or other similar bonds
required in the ordinary course of business;
(e) Encumbrances consisting of zoning restrictions,
easements, or other restrictions on the use of real
property, none of which materially impairs the use of
such property by the Companies or any Subsidiary in
the operation of their business, and none of which is
violated in any material respect by existing or
proposed structures of land use;
(f) Restrictions, easements and minor irregularities in
title which do not and will not interfere with the
occupation, use and enjoyment by the Companies of
such properties and assets in the normal course of
their businesses as presently conducted or materially
impair the value of such properties and assets for
the purpose of such business;
(g) Liens in favor of the Lender; and
(h) Existing liens set forth or described on Exhibit E
attached hereto and made a part hereof.
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1.60 "Precious Metal" means (i) fine gold, having a minimum degree of
fineness of ninety-nine and 95/100 percent (99.95%), or being of such quality
and in such form as agreed upon by the Lender and the Companies, (ii) fine
silver, having a minimum degree of fineness of ninety nine and 99/100 percent
(99.9%), or being of such quality and in such form as agreed upon by the Lender
and the Companies, (iii) fine platinum, having a minimum degree of fineness of
ninety nine and 99/100 percent (99.9%), or being of such quality and in such
form as agreed upon by the Lender and the Companies, and (iv) fine palladium,
having a minimum degree of fineness of ninety nine and 95/100 percent (99.5%),
or such quality and in such form as agreed upon by the Lender and the Companies.
1.61 "Premises" means any real estate owned, used or leased by any of
the Companies.
1.62 "Prime Rate" means the rate of interest designated by the Lender
from time to time as being its so-called "base rate" of interest.
1.63 "Receivables" means all now owned and hereafter acquired, present
and future accounts (within the meaning of Section 9-106 of the Uniform
Commercial Code) of the Companies, any other obligations or indebtedness owed to
the Companies from whatever source arising and all rights of the Companies to
receive any payments in money or kind; and all records, documents and
instruments evidencing or relating to any of the foregoing, all cash and
non-cash proceeds of the foregoing.
1.64 "Reliable Acquisition" means the acquisition by West Tech of
Reliable Corporation, a Connecticut corporation, for the purchase price of
$2,100,000.00 as adjusted for inventory and accounts receivable.
1.65 "Revolving Loan" means the facility under Paragraph 3 hereof,
whereby the Companies may request Advances from the Lender and may request that
the Lender issue Letters of Credit.
1.66 "Revolving Loan Indebtedness" means (a) the outstanding principal
balance of the Advances made by the Lender under the Revolving Loan; and (b) the
undrawn amount of Letters of Credit issued by the Lender for the account of the
Companies.
1.67 "Security Agreement" means that certain security agreement of each
of the Companies dated the date hereof in favor of the Lender which secure the
payment and performance of the Obligations.
1.68 "Subordinated Indebtedness" means Indebtedness of the Companies
which is subordinated in writing to all indebtedness of the Companies to the
Lender on terms satisfactory to the Lender.
1.69 "Subsidiary" means any corporation of which more than fifty (50%)
percent of the outstanding voting securities shall, at the time of
determination, be owned by a corporation directly or indirectly through one or
more Subsidiaries.
1.70 "Suspension Event" means any occurrence which (a) is an Event of
Default or (b) would become an Event of Default if the notice and/or the running
of the period of time specified for that occurrence were to be given and/or were
to run and such occurrence was not cured within any applicable grace period.
1.71 "Tangible Net Worth" means the excess of the Parent's and
Companies' total assets on a consolidated basis (less any loans or other
indebtedness to any shareholder of the Companies), valuing inventory on a marked
to market basis (including the value of all Consigned Precious Metal,
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whether or not such Precious Metal would be included as an asset of the
Companies in accordance with GAAP) over their total liabilities (including their
liabilities to the Lender under the Consignment Facility, Forward Contracts and
the Revolving Loan) computed in accordance with GAAP plus the amount of any
Subordinated Indebtedness, less all intangible assets and deferred charges,
including, without limitation, goodwill, debt discount, organization expenses,
trademarks and tradenames, patents, deferred product development costs and
similar items.
1.72 "Total Debt" means the total Indebtedness of the Parent and
Companies on a consolidated basis which is or which, in accordance with GAAP,
should be included on the Parent's and Companies' balance sheets plus
Consignment Facility Indebtedness.
1.73 "Total Debt Service" means the total of the Parent's and
Companies' (and Alloy Tradings S.A.'s) interest expense on a consolidated basis
(including consignment fees) on all interest bearing debt and current maturities
of long term debt, tested on a rolling four quarter basis.
1.74 "Trademark Security Agreement" means the Trademark Security
Agreement of even date executed by the Parent and the Companies in favor of the
Lender granting to the Lender a first perfected security interest in all
trademarks and tradenames of the Companies.
1.75 "Type" means, as to any Advance under the Revolving Loan, its
nature as a Prime Rate Advance or a LIBOR Rate Advance.
To the extent not defined in this Paragraph 1, unless the context
otherwise requires, accounting and financial terms used in this Agreement shall
have the meanings attributed to them by GAAP, and all other terms contained in
this Agreement shall have the meanings attributed to them by Article 9 of the
Uniform Commercial Code in force in the Commonwealth of Massachusetts, as of the
date hereof to the extent the same are used or defined therein.
2. CONSIGNMENT FACILITY.
2.1 Consigned Precious Metal; Insurance; Title.
(a) The commodities to be consigned to the Companies by the Lender under the
Consignment Facility will consist of Precious Metal as defined herein. EXCEPT
FOR THE FINENESS OF THE PRECIOUS METAL AS DEFINED HEREIN, THE LENDER MAKES NO
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE
GOODS CONSIGNED OR TO BE SOLD HEREUNDER, WHETHER AS TO MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR ANY OTHER MATTER, AND THE LENDER HEREBY DISCLAIMS
ALL SUCH WARRANTIES.
(b) Precious Metal shall be consigned to the Companies by the
Lender in amounts as requested by the Companies from time to time in
accordance, and in compliance, with the terms and provisions hereof. It
is understood that at no time shall the Consignment Facility
Indebtedness exceed the Consignment Limit.
(c) All deliveries requested by the Companies of Precious
Metal shall be made at the Companies' expense and risk by a recognized
reputable carrier of the Lender's selection. Following the delivery of
Consigned Precious Metal to the Companies, at the Approved Locations,
the Companies shall insure the Consigned Precious Metal, including all
Consigned Precious Metal which is in transit, to its full value against
all risks of loss and shall, as between the Lender and the Companies,
accept all risk of loss until its return to the Lender, as hereinafter
provided. All such insurance policies shall provide at least thirty
(30)
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days' prior written notice to the Lender of any cancellation or
alteration thereof and shall insure all Consigned Precious Metal
wherever it is located. At the Lender's request, the Companies will
furnish the Lender with the certificate of an insurance company or
companies reasonably satisfactory to the Lender and a true and complete
copy of all insurance policies evidencing the satisfaction of the
Companies' insurance obligations hereunder and the inclusion of the
Lender as an additional insured and loss payee under any applicable
policy as its interest may appear; provided, however, that the Lender
shall be under no duty either to ascertain the existence of or to
examine any such policy or certificate or to advise the Companies in
the event such policy shall not comply with the requirements hereof.
(d) Title to Consigned Precious Metal shall remain in the
Lender until such Consigned Precious Metal is purchased and withdrawn
from consignment by the Companies, and Consigned Precious Metal shall
for the purposes of this Agreement be deemed to be outstanding on
consignment until paid for in full by the Companies as provided in
Paragraph 2.3(b) hereof, whereupon title to such purchased Consigned
Precious Metal shall pass to the Companies. Upon request by the Lender,
the Companies will execute such financing statements and other
documents as may be reasonably requested by the Lender to protect the
Lender's interests as a consignor and a secured party under the Uniform
Commercial Code.
(e) Until such time as title to Consigned Precious Metal shall
pass to the Companies as hereinabove provided, all Consigned Precious
Metal shall at all times be physically located at Approved Locations,
or in transit to or from an Approved Location.
(f) The Companies shall pay all license fees, assessments and
sales, use, excise, property and other taxes now or hereafter imposed
by any governmental body or authority with respect to the possession,
use, sale, transfer, consignment, delivery or ownership of the
Consigned Precious Metal.
(g) The Lender shall not be liable for any delay in delivery
or for any inability to deliver Precious Metal hereunder directly or
indirectly resulting from any unavailability or scarcity of precious
metals, foreign or domestic embargoes, seizure, acts of God,
insurrections, strikes, war, the adoption or enactment of any law,
ordinance, regulation, ruling or order directly or indirectly
interfering with the production, sale, consignment or delivery of
Precious Metal hereunder, lack of transportation, fire, flood,
explosions or other accidents, events or contingencies beyond the
Lender's reasonable control.
2.2 Valuation.
For the purpose of this Agreement, the value of the Consigned Precious
Metal shall be determined on the basis of (i) the London Bullion Brokers' Second
Fixing Price with respect to gold, (ii) the Handy & Harmon Price with respect to
silver, (iii) the Merc Palladium Price with respect to palladium, and (iv) the
Merc Platinum Price with respect to platinum, each, as applicable, on the
valuation date, or, if no price is available for such date, then on the basis of
said second fixing price on the next previous day for which such price was
available. In the event that any of the foregoing pricing indices, as
applicable, shall discontinue or alter its usual practice of quoting a price on
any day for which such a price is necessary for the purposes hereof, the Lender
shall so notify the Companies and the Lender shall at its option announce a
substituted index or mechanism which shall thereupon become the method of
valuation hereunder.
2.3 Payments by the Companies.
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(a) During such time as Consigned Precious Metal is consigned
to the Companies hereunder and until the same is withdrawn from
consignment and paid for in full by the Companies as hereinafter
provided, the Companies will pay to the Lender a fee computed daily on
the value of such Consigned Precious Metal at the rate of the Lender's
cost of funds plus 2.50% per annum or at such other rate as the Lender
shall announce from time to time in writing in substantially the form
of Exhibit D attached hereto and made a part hereof, such fee to be
accrued on a daily basis and paid to the Lender not later than the
fifth Business Day following the receipt of billing.
(b) At such time as the Companies shall request the
consignment and delivery of Consigned Precious Metal under the
Consignment Facility, they shall become obligated to pay to the Lender
a market premium per troy ounce announced by the Lender at the time of
such consignment. Such payment is to be made within five (5) Business
Days of the Companies' receipt of the Lender's monthly invoice by bank
wire to a bank of the Lender's choice. At such time as the Companies
shall purchase and withdraw Consigned Precious Metal from consignment
under the Consignment Facility, they shall become obligated to pay to
the Lender (i) a purchase price computed in accordance with Paragraph
2.2 hereof if such purchase is effected by the Companies prior to 2:30
P.M., Greenwich Mean Time, on any Business Day, or (ii) such other
purchase price as shall be mutually agreed upon by the Lender and the
Companies. All payments of purchase price for Consigned Precious Metal
are to be made within two (2) Business Days of such purchase by bank
wire to a bank of the Lender's choice, provided, however, title to such
Consigned Precious Metal shall not pass until the payment of such
purchase price. Consigned Precious Metal shall be deemed to have been
purchased and withdrawn from consignment at the earlier of (i) such
time as either Consigned Precious Metal or inventory containing
Consigned Precious Metal is shipped from an Approved Location, or (ii)
such time as the Companies shall notify the Lender they elect to
purchase such Consigned Precious Metal from the Lender, or (iii) such
time as the Companies sell such Consigned Precious Metal in the
ordinary course of their business.
(c) The Companies hereby agree to pay upon demand, to the
extent permitted by law, late charges on any sum or amount not paid
when due under the Consignment Facility at a rate per annum equal to
the Prime Rate plus five percent (5%), from the date of delinquency
until payment in full.
(d) The Companies hereby authorize the Lender from time to
time to charge any demand deposit account(s) of the Companies
maintained with the Lender at any time and from time to time for the
purpose of paying any amounts which are at any time properly payable by
the Companies hereunder. The Lender shall be entitled to rely upon this
authorization.
2.4 Requests for Consignments.
(a) The Companies shall give to the Lender telephonic notice
(confirmed in writing by the Lender) of each request for a consignment
under the Consignment Facility.
(b) Requests for any consignments under the Consignment
Facility shall be furnished to the Lender no later than 12:00 noon
(Boston time) on the same Business Day of the proposed consignment.
2.5 Maintenance of Consignment Limit.
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(a) If the Consignment Facility Indebtedness at any time
exceeds the Consignment Limit, the Companies will promptly, without
further notice or demand by the Lender, either:
(i) make payment to the Lender, as provided in
Paragraph 2.3(b) hereof, for Consigned Precious Metal having
an aggregate value sufficient to result in the remaining
Consignment Facility Indebtedness being not more than the
Consignment Limit, or
(ii) deliver to the Lender, either physically to the
Lender's vault in Boston, Massachusetts or through a
recognized third party, sufficient of such Consigned Precious
Metal to result in the remaining Consignment Facility
Indebtedness being not more than the Consignment Limit.
(b) Any physical return of Consigned Precious Metal shall be
at the Companies' expense and risk and shall only be credited to the
Companies' account upon the Lender's assaying the value thereof.
2.6 True Consignment, Grant of Security Interest.
(a) The parties hereto intend that this Agreement shall
provide for a true consignment and that all transactions hereunder
shall constitute true consignments of the Consigned Precious Metal.
(b) To secure the prompt and punctual payment and performance
of all the Obligations, whether now existing or hereafter incurred,
each of the Companies hereby grants to the Lender a continuing security
interest in (i) the Consigned Precious Metal from time to time
delivered hereunder by the Lender to the Companies, whether now
existing or hereafter arising, (ii) all inventory of the Companies
which contains Consigned Precious Metal, whether now existing or
hereafter arising, and (iii) all proceeds and products of the
foregoing. Nothing contained in the foregoing grant is intended to
conflict with the true consignment nature of this Agreement.
2.7 Termination, Return of Consigned Precious Metal.
(a) The Consignment Facility shall terminate on the Maturity Date. ALL SUMS
OUTSTANDING UNDER THE CONSIGNMENT FACILITY WILL BE DUE AND PAYABLE UPON THE
EARLIER OF THE OCCURRENCE OF AN EVENT OF DEFAULT AND ACCELERATION OF THE
OBLIGATIONS OR THE MATURITY DATE. Termination of the Consignment Facility shall
not affect the Companies' duty to pay and perform their obligations to the
Lender under the Consignment Facility in full. Notwithstanding termination,
until all Obligations have been fully satisfied, the Lender shall retain the
security granted under the Security Agreements, and, except for those specific
covenants and conditions dealing with the consigning of Precious Metal, all
terms and conditions of this Agreement shall remain in full force and effect.
(b) Upon termination of the Consignment Facility for any
reason, the Companies shall within twenty-four (24) hours following
such effective date of termination (i) deliver to the Lender any
Consigned Precious Metal theretofore consigned to but not purchased and
paid for in full by the Companies; or (ii) make payment for all
Consigned Precious Metal theretofore consigned to but not purchased and
paid for in full by the Companies, the purchase price thereof to be
determined in accordance with Paragraph 2.3(b) hereof, or (iii) deliver
to Lender, through a recognized third party, any Consigned Precious
Metal
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theretofore consigned to but not purchased and paid for in full by the
Companies. Any physical return of Consigned Precious Metal to the
Lender shall be at the Companies' expense and risk and shall only be
credited to the Companies' account upon the Lender's assaying the value
thereof.
3. REVOLVING LOAN
3.1 Revolving Loan
(a) Subject to the terms and conditions herein set forth, the
Lender hereby agrees that it will lend to the Companies from time to
time such sums, and issue such Letters of Credit in such amounts, as
applicable, as are requested by the Companies in the manner set forth
herein, so long as the sum of the Revolving Loan Indebtedness does not
exceed at any time the Borrowing Limit. From the date hereof until the
termination of the Revolving Loan in accordance with the terms hereof,
and within the Borrowing Limit upon notice by the Companies to the
Lender given in accordance with the provisions hereof, the Companies
may borrow, repay and reborrow under this Paragraph 3. 1.
(b) The Revolving Loan will be evidenced by the Note of the
Companies in the form attached hereto as Exhibit A. The Companies
irrevocably authorize the Lender to make or cause to be made, at or
about the time of the Drawdown Date of any Advance or at the time of
receipt of any payment of principal on the Lender's Note, an
appropriate notation on the Lender's books and records reflecting the
making of such Advance or (as the case may be) the receipt of such
payment. The outstanding amount of the Advances set forth in the
Lender's books and records shall be prima facie evidence of the
principal amount thereof owing and unpaid to the Lender, but the
failure to record, or any error in so recording, any such amount on the
Lender's books and records shall not limit or otherwise affect the
obligations of the Companies hereunder or under the Note to make
payments of principal of or interest on the Note when due.
3.2 Interest.
(a) Each Advance under the Revolving Loan shall bear interest,
at the option of the Companies and subject to the terms and conditions
hereinafter set forth, at an interest rate based on either the Prime
Rate or the LIBOR Rate.
(b) Each Prime Rate Advance shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate equal to the
aggregate of the Prime Rate plus one-half percent (1/2%) per annum.
(c) Each LIBOR Rate Advance shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate equal to the
aggregate of the LIBOR Rate determined for such Interest Period plus
two and one half percent (2 1/2%) per annum.
3.3 Funds for Advances.
Not later than 3:00 p.m. (Boston time) on the proposed
Drawdown Date of any Advance, subject to the satisfaction of the
conditions set forth in Paragraph 4.2 and Paragraph 8.1 hereof, to the
extent applicable, the Lender will make available to the Companies the
amount of such requested Advances.
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3.4 Late Fee
If the entire amount of a required principal and/or interest payment
under the Revolving Loan is not paid in full within ten (10) business days after
the same is due, the Companies shall pay to the Lender a late fee equal to five
percent (5%) of the required payment.
3.5 Use of Proceeds
The proceeds of the Revolving Loan will be used to pay off the
Companies' existing institutional lenders and the balance shall be used for
working capital purposes.
3.6 Loan Account
The Companies will open and maintain with the Lender an account.
Advances under the Revolving Loan will be made by the Lender to the Companies
upon telephonic request to credit such advance to the Companies' account made by
an Authorized Representative of the Companies. Such request shall be confirmed
in writing by the Lender indicating the date and the amount requested. The
Companies hereby authorize the Lender to charge or debit at any time and from
time to time any demand deposit account maintained by the Companies with the
Lender in order to pay sums properly payable hereunder. The Lender shall be
entitled to rely upon this authorization.
3.7 Letter of Credit
(a) Subject to and upon the terms and conditions set forth
herein, the Lender shall, at any time and from time to time, issue
Letters of Credit, in form and substance satisfactory to the Lender in
accordance with its usual and customary practice, for the account of
the Companies and for the use of the Companies in the ordinary course
of their business provided that at no time shall the aggregate face
amount of issued Letters of Credit exceed $1,000,000.00 nor shall the
Revolving Loan Indebtedness exceed the Borrowing Limit. No Letters of
Credit shall have an expiration of later than the Maturity Date. The
Letters of Credit shall be governed by the terms of this Agreement and
the Letter of Credit Documents signed or guaranteed or otherwise
verified by the Companies in a manner satisfactory to the Lender at the
time of issuance, extension or renewal thereof. In the event of any
inconsistency between this Agreement and the Letter of Credit
Documents, the Letter of Credit Documents shall prevail and govern.
(b) Each Letter of Credit issued by the Lender shall
constitute a utilization of the Borrowing Limit, except that such
utilization shall not create an outstanding balance under the Note for
purposes of imposing an interest charge until the time (and to the
extent) of any drawing under the Letter of Credit. To the extent that
any draw on a Letter of Credit is not immediately repaid by the
Companies to the Lender, it shall be deemed that the Companies have
requested a Prime Rate Advance under the Revolving Loan.
(c) The Companies shall pay to the Lender, on demand, all
drawing fees, acceptances, transfer fees, other administrative fees and
all other usual and customary fees and transaction charges of the
Lender in connection with Letters of Credit as described in Letter of
Credit Documents as in effect from time to time. The Companies hereby
irrevocably authorize the Lender to, and the Lender is hereby
irrevocably authorized to, debit any demand deposit account or checking
account of the Companies with the Lender for the purpose of making such
payments.
(d) If any restriction is imposed upon the Lender or the
Companies by any federal, state or other regulatory authority or any
applicable law which, in the sole judgment
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of the Lender, prevents the Lender from issuing any further Letter of
Credit, then the Lender shall so notify the Companies or the Companies
shall notify the Lender, as the case may be, and the Lender shall not
thereafter be obligated to issue any further Letters of Credit in
violation of any restriction so long as such restriction shall remain
in effect.
3.8 Excess Borrowings
If at any time the Revolving Loan Indebtedness shall exceed the
Borrowing Limit, the Companies shall immediately pay cash to the Lender to be
credited to the Revolving Loan in such amount as shall be necessary to reduce
the Revolving Loan Indebtedness to the Borrowing Limit.
3.9 Facility Fee.
As a condition precedent to the effectiveness of this Agreement, the
Companies shall pay the Lender a closing fee in the amount of $60,000.00. In
addition, the Companies shall pay to the Lender a facility fee in an amount
equal to .375% of Twelve Million Dollars ($12,000,000) minus the sum of (a) the
Revolving Loan Indebtedness, plus (b) the Consignment Facility Indebtedness.
Such fee shall be payable quarterly in arrears, shall be computed on the basis
of a year of 360 days, counting the actual number of days elapsed and shall be
payable within fifteen (15) days of the end of each calendar quarter, commencing
with the calendar quarter ending September, 1999, and upon payment in full of
the Note.
3.10 Termination of Revolving Loan.
The Revolving Loan shall terminate on the Maturity Date. ALL SUMS
OUTSTANDING UNDER SAID REVOLVING LOAN WILL BE DUE AND PAYABLE UPON THE EARLIER
OF (1) THE OCCURRENCE OF AN EVENT OF DEFAULT AND ACCELERATION OF THE OBLIGATIONS
BY THE LENDER, OR (II) THE MATURITY DATE. Upon termination of the Revolving
Loan, the Lender may credit any amounts then held by it to reduce the amount of
such indebtedness in accordance with the provisions of Paragraph 15 hereof.
Notwithstanding termination, until all Obligations have been fully satisfied,
except for those specific covenants and conditions dealing with the making of
Advances and the issuance of Letters of Credit, all terms and conditions of this
Agreement shall remain in full force and effect.
3.11 Default Interest Rate.
The Companies hereby agree to pay upon demand, to the extent permitted
by law, late charges on any sum or amount not paid when due under the Revolving
Loan at a rate per annum equal to the Prime Rate plus five percent (5%), from
the date of delinquency until payment in full.
4. GENERAL PROVISIONS REGARDING ADVANCES UNDER REVOLVING LOAN.
4.1 Interest.
(a) The Companies shall pay interest on each Advance under the
Revolving Loan in arrears on each Interest Payment Date with respect
thereto.
(b) Interest shall be calculated daily as to the outstanding
principal balance on the basis of a 360 day year counting the actual
number of days elapsed. Interest based upon the Prime Rate shall change
on the effective date of each change in the Prime Rate.
(c) The Companies hereby authorize the Lender to charge or
debit at any time and from time to time any demand deposit account
maintained by the Companies with the Lender
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in order to pay sums properly payable under the Revolving Loan. The
Lender shall be entitled to rely upon this authorization.
4.2 Requests for Advances under the Revolving Loan.
(a) The Companies shall give to the Lender telephonic notice
(confirmed in writing by the Lender) of each Advance under the
Revolving Loan requested hereunder. Each such notice shall be
irrevocable and binding on the Companies and shall obligate the
Companies to accept the Advance requested from the Lender on the
proposed Drawdown Date.
(b) Requests for any Advances with an interest rate based upon
the Prime Rate shall be furnished to the Lender no later than 10:00
a.m. (Boston time) on the same Business Day as the proposed Drawdown
Date. Each such notice shall specify (i) the principal amount of the
Advance requested, and (ii) the proposed Drawdown Date of such Advance
.
(c) Requests for any Advances with an interest rate based upon
the LIBOR Rate shall be furnished to the Lender by 12:00 noon (Boston
time) three (3) Eurodollar Business Days prior to the proposed Drawdown
Date. Each such notice shall specify (i) the principal amount of the
Advance requested, (ii) the proposed Drawdown Date of such Advance,
(iii) the Interest Period for such Advance, and (iv) whether it is an
Advance under the Revolving Loan.
4.3 Conversion Options.
(a) The Companies may elect from time to time to convert any
outstanding Advance to an Advance of another Type, provided that (i)
with respect to any such conversion of a LIBOR Rate Advance into an
Advance of another Type, such conversion shall only be made on the last
day of the Interest Period with respect thereto; (ii) with respect to
any such conversion of a Prime Rate Advance to a LIBOR Rate Advance,
the Companies shall give the Lender at least three (3) Eurodollar
Business Days' prior written notice of the day on which such election
is effective; and (iii) no Advance may be converted into a LIBOR Rate
Advance when the Lender has declared the existence of an Event of
Default hereunder. The Companies shall give to the Lender telephonic
notice (confirmed in writing by the Lender) of their decision to
convert an outstanding Advance to an Advance of another Type. All or
any part of outstanding Advances of any Type may be converted as
provided herein. Each Conversion Request shall be irrevocable by the
Companies.
(b) Any Advances of any Type may be continued as such upon the
expiration of an Interest Period with respect thereto by giving to the
Lender telephonic notice (confirmed in writing by the Lender) of the
Companies' decision to continue an outstanding Advance as such;
provided that no LIBOR Rate Advance may be continued as such when the
Lender has declared the existence of an Event of Default hereunder, but
shall be automatically converted to a Prime Rate Advance on the last
day of the first Interest Period relating thereto ending during the
continuance of such Event of Default.
(c) In the event that the Companies do not notify the Lender
of their election hereunder with respect to any Advance, such Advance
shall be automatically converted to a Prime Rate Advance at the end of
the applicable Interest Period.
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4.4 Optional Repayments of Advances.
The Companies shall have the right, at their election, to repay the
outstanding amount of the Advances, as a whole or in part, at any time without
penalty or premium; provided that the full or partial prepayment of the
outstanding amount of any LIBOR Rate Advances pursuant to this Paragraph may be
made only on the last day of the Interest Period relating thereto. At the time
of any repayment of a LIBOR Rate Advance, the Companies shall give the Lender
notice that they are repaying a LIBOR Rate Advance and shall specify the
principal amount to be paid. Each such partial prepayment of the Advances shall
be accompanied by the payment of accrued interest on the principal repaid to the
date of payment. In the event that the Companies do not notify the Lender at the
time of a repayment of any Advance under this Paragraph whether they intend to
repay a Prime Rate Advance or a LIBOR Rate Advance, it shall be deemed that they
are repaying a Prime Rate Advance.
4.5 Inability to Determine LIBOR Rate,.
In the event, prior to the commencement of any Interest Period relating
to any LIBOR Rate Advance, the Lender shall determine that adequate and
reasonable methods do not exist for ascertaining the LIBOR Rate that would
otherwise determine the rate of interest to be applicable to any LIBOR Rate
Advance during any Interest Period, the Lender shall forthwith give notice of
such determination (which shall be conclusive and binding on the Companies) to
the Companies. In such event, (a) any request for a LIBOR Rate Advance shall be
automatically withdrawn and shall be deemed a request for a Prime Rate Advance,
(b) each LIBOR Rate Advance will automatically, on the last day of the then
current Interest Period thereof, become a Prime Rate Advance, and (c) the
obligation of the Lender to make LIBOR Rate Advances shall be suspended until
the Lender determines that the circumstances giving rise to such suspension no
longer exist, whereupon the Lender shall so notify the Companies.
4.6 Illegality.
Notwithstanding any other provisions herein, if any present or future
law, regulation, treaty or directive or in the interpretation or application
thereof shall make it unlawful for the Lender to make or maintain LIBOR Rate
Advances, the Lender shall forthwith give notice of such circumstances to the
Companies and thereupon (a) the agreement of the Lender to make LIBOR Rate
Advances shall forthwith be suspended and (b) the LIBOR Rate Advances then
outstanding shall be converted automatically to Prime Rate Advances on the last
day of each Interest Period applicable to such LIBOR Rate Advances or within
such earlier period as may be required by law. The Companies shall promptly pay
the Lender any additional amounts necessary to compensate the Lender for any
costs incurred by the Lender in making any conversion in accordance with this
Paragraph, including any interest or fees payable by the Lender to lenders of
funds obtained by it in order to make or maintain its LIBOR Rate Advances
hereunder.
4.7 Indemnity.
The Companies shall indemnify the Lender and hold the Lender harmless
from and against any reasonable loss, cost or expense (including loss of
anticipated profits) that the Lender may sustain or incur as a consequence of
(a) default by the Companies in payment of the principal amount of, or any
interest on, any LIBOR Rate Advances as and when due and payable, including any
such loss or expense arising from interest or fees payable by the Lender to
lenders of funds obtained by it in order to maintain its LIBOR Rate Advances;
(b) default by the Companies in making a borrowing or conversion after the
Companies have given (or are deemed to have given) a request for Advance or a
Conversion Request; and (c) the making of any payment of a LIBOR Rate Advance or
the making of any conversion of any such Advance to a Prime Rate Advance on a
day that is not
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the last day of the applicable Interest Period with respect thereto, including
interest or fees payable by the Lender to lenders of funds obtained by it in
order to maintain any such Advances.
5. FORWARD CONTRACTS.
5.1 Forward Contracts. Subject to the terms, conditions and provisions
of this Agreement, the Lender, at the request of the Companies, shall provide
for Forward Contracts with respect to Precious Metals.
5.2 Limitations on Forward Contracts.
(a) The Lender's obligation to provide Forward Contracts to
the Companies is subject to the following:
(i) No Suspension Event is then existing; and
(ii) The aggregate Forward Contract Exposure does not
exceed $1,500,000.00.
(b) No Forward Contract shall have a maturity which is less
than ten (10) Business Days prior to the Maturity Date.
5.3 Procedures Concerning Forward Contracts. The Lender shall give
notice to the Companies of the terms and procedures which the Lender requires in
connection with the Forward Contracts and the payments required thereunder
(including the Breakage Fees).
6. AUTHORIZED REPRESENTATIVES.
The Companies shall deliver to the Lender a certificate or letter
certifying to the Lender the name(s) of all Authorized Representatives, in the
form attached hereto as Exhibit B. The Lender may conclusively rely on such
certificate or letter until it shall receive a further certificate from the
Companies in form acceptable to the Lender canceling or amending the prior list
of Authorized Representatives. Any person identifying himself or herself as an
Authorized Representative of the Companies shall have the right to effect
transactions under this Agreement. The Lender shall have no responsibility or
obligation to ascertain whether the person is in fact the Authorized
Representative of the Companies which he or she claims to be or is, in fact,
authorized to effect the transaction. At its option, the Lender may verify any
telephonic or telegraphic request for transaction by calling an Authorized
Representative, and where more than one Authorized Representative is so
authorized, by calling an Authorized Representative or other individual other
than the caller or the individual initiating the transaction. The Companies
authorize the Lender at its option to record electronically all telephonic
requests for transactions that the Lender may receive from the Companies or any
other person purporting to act on behalf of the Companies.
7. CONDITIONS.
7.1 Conditions to the Lender's Obligations Hereunder.
The obligation of the Lender to perform hereunder is subject to the
following conditions precedent:
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(a) The representations and warranties set forth in Paragraph
8 hereof shall be true and correct on and as of the date hereof and the
date each Advance, consignment or other accommodation is requested and
is to occur.
(b) The Parent and the Companies shall have executed and
delivered to the Lender, or shall have caused to be executed and
delivered to the Lender in form and substance acceptable to the Lender,
upon the execution of this Agreement, all agreements required by the
Lender for the purpose of securing payment and performance of the
Parent's and/or Companies' obligations under this Agreement, together
with any other documents required by the terms hereof or thereof,
including, without limitation, the Security Agreements, and all
insurance required by the terms hereof and the Security Agreements, the
Parent Guaranty, the Parent Stock Pledge Agreement, the Trademark
Security Agreement, the Company Guaranties, the Assignment of the Key
Man Life Insurance and the Lockbox Agreement, all of which shall at all
times remain in full force and effect.
(c) The Lender shall have received on the date hereof (i) the
favorable written opinion of special counsel for the Parent and the
Companies, dated the date hereof, satisfactory to the Lender and its
counsel in scope and substance; and (ii) such other supporting
documents and certificates as the Lender or its special counsel may
request.
(d) There shall have been no material adverse change in the
Parent's or Companies' financial condition or their financial or
business prospects, from those represented in any financial statement
or other information submitted to the Lender or upon which the Lender
has relied.
(e) All legal matters incident to the transactions hereby
contemplated shall be satisfactory to counsel for the Lender.
(f) The Lender shall have completed an adequate pre-funding
examination of the Parent and the Companies evidencing, among other
things, satisfactory precious metal controls, physical security
controls and satisfactory account receivables.
(g) The Lender shall have received the Parent's and the
Companies' Financial Statements, which Financial Statements shall be
satisfactory to the Lender in all respects.
(h) The Lender shall have received the updated budget for the
Parent and the Companies, which shall be satisfactory to the Lender in
all respects.
(i) No Event of Default as specified in Paragraph 12.1 hereof,
nor any event which upon notice or lapse of time or both would
constitute such an Event of Default, shall have occurred and be
continuing.
7.2 Companies' Confirmation.
The Companies' request to the Lender for (i) the delivery of Precious
Metal under the Consignment Facility, or (ii) the making of an Advance under the
Revolving Loan, (iii) the entering into a Forward Contract, or (iv) the issuance
of a Letter of Credit, shall be deemed to be a representation and warranty to
the Lender that the respective conditions specified in Paragraph 6.1 for such
consignment and/or Advance and/or Forward Contract and/or Letters of Credit have
been satisfied.
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8. SECURITY.
The Obligations of the Companies under this Agreement and the Company
Guaranties shall be secured by the Security Agreement and the Trademark Security
Agreement and the obligations of the Parent under the Parent Guaranty shall be
secured by the Parent Stock Pledge Agreement.
9. REPRESENTATIONS AND WARRANTIES.
As a material inducement to the Lender, the Parent and the Companies
hereby represent and warrant to the Lender (which representations and warranties
shall survive the execution of this Agreement and the consignment of Consigned
Precious Metals, the making of Advances, the entering into of Forward Contracts
and the issuance of Letters of Credit that:
9.1 Corporate Authority. The Parent and each Company (i) is duly
organized, validly existing and in good standing under the laws of its state of
incorporation, (ii) has the requisite corporate power and authority to own its
properties and to carry on business as now being conducted, and holds all
material permits, authorizations and licenses, without material restrictions or
limitations, which are necessary for such ownership or business activity, and
(iii) is qualified to do business in every jurisdiction where such failure to
qualify would have a material adverse effect on the Company, and has the
requisite corporate power to execute, deliver and perform this Agreement and the
Security Agreements. The Parent and Companies have no reason to believe that any
such material permits, authorizations or licenses will be revoked, canceled,
rescinded, modified or lost.
9.2 No Conflict. The execution, delivery and performance by the Parent
and the Companies of the terms and provisions of this Agreement, the Note, the
Security Agreement, the Parent Guaranty, the Parent Stock Pledge Agreement and
each other Loan Document have been duly authorized by all requisite corporate
action and will not violate any material provision of law, any order of any
court or other agency of government, the corporate charter, articles of
incorporation or by-laws of the Parent or any of the Companies or any material
term of any indenture, agreement or other instrument to which the Parent or any
Company is a party, or by which the Parent or any Company is bound, or be in
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under, or, except as may be provided by this Agreement,
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the property or assets of the Parent or the
Companies pursuant to, any such indenture, agreement or other instrument.
9.3 Litigation. There is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency now
pending or, to the knowledge of any of the Companies threatened, against or
affecting the Parent or any of the Companies which, if adversely determined,
would have a material adverse effect on the business, operations, properties,
assets or condition, financial or otherwise, of the Parent or the Companies.
9.4 Other Agreements. Neither the Parent nor any Company is a party to
any agreement or instrument or subject to any charter or other corporate
restriction adversely affecting its business, properties or assets, operations
or conditions, financial or otherwise.
9.5 Default. Neither the Parent nor any Company is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which it is a party.
9.6 Financing Statements. Other than the financing statements
identified on Schedule C, no financing statement or agreement is on file in any
public office pertaining to or affecting the Consigned Precious Metal,
Receivables, Inventory, or any assets of the Parent or the Companies,
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now owned or hereafter acquired, except for financing statements in favor of the
Lender.
9.7 Assets. The Parent and each Company have good title to all of its
properties and assets, free and clear of all mortgages, security interests,
restrictions, liens and encumbrances of any kind, except for Permitted Liens.
9.8 Representations. No statement of fact made by or on behalf of the
Parent or any Company in this Agreement or in any certificate or schedule
furnished to the Lender pursuant hereto, contains any untrue statement of a
material fact or omits to state any material fact necessary to make statements
contained therein or herein not misleading. There is no fact presently known to
the Parent or any Company which has not been disclosed to the Lender which
materially affects adversely, nor as far as the Parent or the Companies can
reasonably foresee, will materially affect adversely the property, business,
operations or condition (financial or otherwise) of any Company.
9.9 Taxes. The Parent and each Company have filed all federal, state
and local tax returns required to be filed and has paid or made adequate
provision for the payment of all federal, state and local taxes, charges and
assessments, except those contested in good faith.
9.10 Binding Obligations. This Agreement, the Note, the Security
Agreements and all other agreements securing this Agreement have been duly
executed and delivered by the Parent and the Companies and constitute legal,
valid and binding obligations of the Parent and the Companies, enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization and other similar laws of general application affecting the
rights of creditors generally.
9.11 No Event of Default. No Event of Default as defined in Paragraph
10.1 hereof, and no event which, with the passage of time or the giving of
notice, or both, would become such an Event of Default, has occurred and is
continuing.
9.12 ERISA. No "prohibited transaction" or "accumulated funding
deficiency" or "reportable event" has occurred with respect to any "single
employer plan" of the Parent or any Company. Neither the Parent or any Company
has received notice that any "multi-employer plan" as to which it or any
"commonly controlled entity" would have liability if it or any "commonly
controlled entity" were to withdraw therefrom, is in "reorganization" or
"insolvent" (as each of the quoted terms is defined or used in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the Internal
Revenue Code of 1986, as amended (the "Code")).
9.13 Hazardous Substances. The Parent and each of the Companies are in
compliance in all material respects with all federal, state and local statutes
relating to the handling, storage, use or disposal of chemicals and other
hazardous substances used in the course of its business.
9.14 Financial Statements. The Parent and each of the Companies have
furnished to the Lender the Financial Statements which have been prepared in
accordance with GAAP on a basis consistent with that of preceding periods and
which are complete and correct and fairly present the financial condition of the
Companies as at said dates, and the results of their operations for the year or
other period ended on said date. Since the date of the Financial Statements,
there has been no material adverse change in the financial condition of the
Parent or any Companies.
9.15 Year 2000 Compliance: The Parent and each of the Companies have
(i) reviewed the areas within their business and operations which could be
adversely affected by failure to become "Year 2000 Compliant" (that is that
computer application, imbedded microchips and other systems used by the Parent
and the Companies will be able to properly recognize and perform date sensitive
functions involving certain dates prior to and any date after December 31,
1999); (ii) developed a
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detailed plan and timetable to become Year 2000 Compliant in a timely manner;
and (iii) committed adequate resources to support their Year 2000 plan. Based on
such review and plans the Parent and each of the Companies reasonably believe
that they will become Year 2000 Compliant on a timely basis except to the extent
that a failure to do so will not have a material adverse effect on the business
and operations of the Parent and the Companies.
10. AFFIRMATIVE AND NEGATIVE COVENANTS.
From the date hereof and until (a) the Obligations have been paid in
full, (b) the Consignment Facility has been terminated, (c) no Letters of Credit
are outstanding, and (d) the Lender has no obligation to make Advances, consign
Precious Metal, provide Forward Contracts or issue Letters of Credit, the Parent
and the Companies shall:
10.1 Licenses and Permits. Do or cause to be done all things necessary
to preserve, renew and keep in full force and effect their corporate existence,
rights, licenses, permits and franchises and comply with all laws and
regulations applicable to the Parent and each Company; at all times maintain,
preserve and protect all franchises and trade names and preserve all the
remainder of their property used or useful in the conduct of their respective
businesses and keep the same in good repair, working order and condition, and
from time to time, make, or cause to be made, all needful and proper repairs,
renewals, replacements, betterments and improvements thereto, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
10.2 Taxes. Pay and discharge or cause to be paid and discharged all
taxes, assessments and governmental charges or levies imposed upon them or upon
their respective income and profits or upon any of their property, real,
personal or mixed, or upon any part thereof, before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might become a lien or charge upon such properties
or any part thereof, provided that the Parent and Companies shall not be
required to pay and discharge or cause to be paid and discharged any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and they shall have set aside
on their books adequate reserves with respect to any such tax, assessment,
charge, levy or claim, so contested, and provided, further, that payment with
respect to any such tax, assessment, charge, levy or claim shall be made before
any notice of lien has been filed.
10.3 Financial Condition. Furnish to the Lender promptly, from time to
time, such information regarding their operations, assets, business affairs and
financial condition, as the Lender may reasonably request and promptly advise
the Lender of any material adverse change in their condition, financial or
otherwise.
10.4 Litigation. Give prompt written notice to the Lender of any
proceedings instituted against the Parent or any Company or any entity with whom
the Parent or any Company is in partnership by or in any Federal or state court
or before any commission or other regulatory body, Federal, state or local,
which, if adversely determined, would have a materially adverse effect upon
their business, operations, properties, assets, or condition, financial or
otherwise.
10.5 Inspections. Permit agents or representatives of the Lender to
inspect, at reasonable hours and upon reasonable notice in the case of the
annual audit, the Consigned Precious Metal and the Parent's and Companies' books
and records and to make abstracts or reproductions of such books and records and
permit the Lender's audit staff to conduct audits and field examinations of the
Parent and the Companies at the Companies' expense and semi-annual field
examinations of the Corporation.
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10.6 Inventories. Permit agents or representatives of the Lender, (i)
at reasonable times and upon reasonable notice in the case of the annual audit,
and at any time in case of emergency, to take a physical inventory of the
Consigned Precious Metal, at the Companies' expense, which physical inventory
shall take place not more frequently than twice every year; provided, however,
that if an Event of Default has occurred and is continuing, the Companies shall
permit agents or representatives of the Lender to take such physical inventory
at any time; and (ii) to make one unannounced spot check each year, at the
Companies' expense.
10.7 Financing Statements. Promptly join with the Lender from time to
time in executing one or more financing statements pursuant to the Uniform
Commercial Code in form satisfactory to the Lender, and execute such other
instruments in form suitable for recording or filing as may be reasonably
required by the Lender hereunder.
10.8 Liens. Not create, incur, assume or suffer to exist any mortgage,
pledge, lien, charge or other encumbrance of any nature whatsoever on (i) any of
the Consigned Precious Metal, (ii) any products or property now or hereafter
owned which does or will include Consigned Precious Metal, or (iii) any of the
Parent's or any of the Companies' assets and properties, whether now owned or
hereafter acquired except for:
(a) purchase money security interests securing no more than
Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate at any
time; and
(b) Permitted Liens.
10.9 Disposition of Property. Not sell, lease, transfer or otherwise
dispose of the Parent's or any of the Companies' properties, assets, rights,
licenses and franchises to any person, except for sales of inventory and other
assets in the ordinary course of the Parent's or such Company's business, and
sales or dispositions of machinery and equipment which are obsolete or no longer
useful to such Company in its business.
10.10 Corporate Status. Not dissolve, liquidate, consolidate with or
merge with, or otherwise acquire all or substantially all of the assets or
properties of, any other person or business other than (i) the purchase of
assets of failed businesses in the ordinary course of the Parent's or any of the
Companies' business and (ii) the Reliable Acquisition; or make any substantial
change in the Parent's or any Company's executive management or ownership (e.g.,
in excess of 10%); and not change the Parent's or any Company's corporate name
unless it has provided the Lender with forty-five (45) days' prior written
notice thereof.
10.11 Management Contract. Not turn over the management of, or enter
into a management contract with respect to, the Parent's or any of the
Companies' properties, assets, rights, licenses and franchises.
10.12 Consigned Precious Metal. Not grant any security interest or
ownership rights to any customer with respect to any of the Consigned Precious
Metal whether or not such customers have prepaid orders for the Consigned
Precious Metal or any products or property which does or will include the
Consigned Precious Metal.
10.13 Guaranties. Not guarantee, endorse or otherwise in any way become
or be responsible for obligations of any other person, except endorsements of
negotiable instruments for collection in the ordinary course of business, and in
connection herewith.
10.14 Sale - Leaseback. Not enter into any arrangement, directly or
indirectly, with any person whereby the Parent or any Company shall sell or
transfer any property, real, personal or
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mixed, used or useful in the Parent's or such Company's business, whether now
owned or hereafter acquired, and thereafter rent or lease such property.
10.15 Loans and Investments. Not purchase, invest in or otherwise
acquire or hold securities, including, without limitation, capital stock and
evidences of indebtedness of, or make loans or advances to, or enter into any
arrangement for the purpose of providing funds or credit to, any other person,
including loans and investments to any Affiliates whether in the ordinary course
of business or not, except:
(a) advances to officers, employees with respect to reasonable
expenses incurred by such officers and employees for the benefit of the
Companies, which expenses are properly reimbursable by the Companies;
(b) investments in short-term obligations of the United States or certificates
of deposit of the Lender;
(c) loans and advances from one Company to another Company;
(d) advance payments made to the Companies' suppliers in amounts not to exceed
One Hundred Thousand Dollars ($100,000.00) in the aggregate outstanding at any
time.
10.16 Business. Not engage, directly or indirectly, in a business
substantially different from the business now being conducted.
10.17 Receivables. Not sell, assign, discount or dispose in any way of
any accounts receivable, promissory notes or trade acceptances held by the
Companies, with or without recourse, except:
(a) security interests granted pursuant to the Security Agreement, and
(b) for collection (including endorsements) in the ordinary course of business;
and
(c) security interests granted to Alliance Capital Investments Corp., which
security interests are junior in priority to the security interests granted to
the Lender pursuant to the Security Agreement.
10.18 Dividends. If (i) an Event of Default has occurred and is
continuing or (ii) the payment of cash dividends, redemption of capital stock,
or making of distributions shall immediately or solely with the passage of time
trigger an Event of Default, not declare or pay any dividends to, or redeem
capital stock held by, or make any distributions of cash or property to, any of
the stockholders of the Parent or the Companies (other than the payment of usual
and ordinary salaries to employees who are also stockholders).
10.19 Consignments. Not obtain Precious Metal on consignment or credit
from any supplier, lender, consignor or financial institution other than the
Lender or another Company unless, if required by the Lender, such consignor
enters into an intercreditor agreement reasonably satisfactory to the Lender.
10.20 Financial Statements. Unless otherwise explicitly waived by the Lender in
writing, furnish to the Lender:
(a) within forty-five (45) days after the end of each quarter
of the Parent's and each of the Companies' Fiscal Years, an unaudited
balance sheet as of the end of such
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quarter, and an unaudited statement of earnings for the Fiscal Year
through the end of such quarter, including combined and combining
statements, prepared by the Parent or such Companies and certified by
their chief financial officers, which certification shall include a
calculation of compliance with all financial covenants, and
(b) within ninety (90) days after the end of each of the
Companies' Fiscal Years, (i) similar audited statements as of the end
of such Fiscal Year and for such Fiscal Year, prepared and certified by
an independent certified public accountant selected by the Companies
and acceptable to the Lender; such statements to be accompanied by such
accountant's written confirmation of the balance of all Consigned
Precious Metal as of the end of such Fiscal Year, and such accountant's
statement to the effect that such accountant has examined the
provisions of this Agreement and that, to the best of his knowledge,
the Companies are in compliance with all financial covenants contained
herein, and (ii) internally generated consolidated combined statements
of the Parent and the Companies as of the end of each Fiscal Year, and
(c) on Monday of each week, a weekly borrowing base
certificate as of the preceding Friday, in form acceptable to the
Lender, and
(d) within twenty (20) days of the end of each month, a
borrowing base certificate containing inventory reports and accounts
receivable and accounts payable reports and agings in the form attached
hereto as Exhibit F, and
(e) within thirty (30) days after the end of the Parent's and
Companies' Fiscal Year, financial projections, including balance sheets
and income statements, for the following Fiscal Year;
(f) within twenty (20) day of each month end, an internally
prepared monthly financial statement for the Parent and each of the
Companies setting forth comparisons with the projections to be
furnished in accordance with subsection (e) above; and
(g) promptly, from time to time, such other information
regarding its operations, assets, business, affairs and financial
condition, including, without limitation, accounts receivable reports
and agings as the Lender may reasonably request.
10.21 ERISA. Not permit any pension plan maintained by the Parent or
the Companies or by any member of a "controlled group" (ERISA 210(c)) or
"corporation or group of trades or businesses under common control" (ERISA
210(d)) of which the Companies is a member to: (i) engage in any "prohibited
transaction" (ERISA 406 that is not exempt under ERISA 408); (ii) fail to report
to the Lender a "reportable event" (ERISA 4043) within thirty (30) days after
its occurrence; (iii) incur any "accumulated funding deficiency" (ERISA 302);
(iv) terminate its existence at any time in a manner which could result in the
imposition of a lien on the property of the Parent or the Companies or any of
its Subsidiaries; or (v) fail to report to the Lender any "complete withdrawal"
or "partial withdrawal" by the Companies or any of its Subsidiaries of an
affiliate from a "multi-employer plan" (ERISA 4203, 4205 and 4001 respectively)
(the quoted terms are defined in the respective sections of ERISA cited above).
10.22 Environmental Matters. With respect to environmental matters:
(a) comply strictly and in all respects with the requirements
of all federal, state, and local environmental laws; notify the Lender
promptly upon knowledge thereof in the event of any spill, hazardous
waste pollution or contamination affecting the Premises;
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(b) forward to the Lender promptly any notices relating to
such matters received from any governmental agency; and pay promptly
when due any fine or assessment against the Premises for which it or
they are responsible; immediately contain and remove any hazardous or
toxic material found on the Premises in violation of applicable law,
which work must be done in compliance with applicable laws and at the
Parent and the Companies' expense; and the Parent and the Companies
hereby agree that the Lender has the right, at its sole option but at
the Companies' expense, to have an environmental engineer or other
representative review the work being done;
(c) promptly upon the reasonable request of the Lender,
provide the Lender with an environmental site assessment report or an
update of any existing report, all in scope, form and content and
performed by such company as may be reasonably satisfactory to the
Lender; and
(d) indemnify, defend, and hold the Lender harmless from and
against any claim, cost, damage (including, without limitation,
consequential damages), expense (including, without limitation,
attorneys' fees and expenses), loss, liability, or judgment now or
hereafter arising as a result of any claim for environmental cleanup
costs, any resulting damage to the environment and any other
environmental claims against the Parent or Companies, the Lender, or
the Premises. The provisions of this subparagraph (d) shall continue in
effect and shall survive (among other events) any termination of this
Agreement, foreclosure, a deed in lieu of foreclosure transaction,
payment and satisfaction of the obligations evidenced hereby or
incurred pursuant hereto, and release of any collateral.
10.23 Insurance. Keep their insurable properties adequately insured at
all times, by financially sound and reputable insurers, to such extent and
against such risks, including fire and other risks insured against by extended
coverage, and maintain liability and such other insurance as is customarily
maintained by companies engaged in similar businesses.
10.24 Debt to Worth Covenant. Maintain a ratio of Total Debt to
Tangible Net Worth of not more than 3.50:1.00 as of the end of each fiscal
quarter.
10.25 Cash Flow. Maintain a ratio of the Operating Cash Flow to the
Total Debt Service of not less than 1.50:1.00 at the end of each fiscal quarter,
tested on a quarterly basis for each fiscal quarter ending prior to June 30,
2000, and thereafter on a rolling four quarter basis.
10.26 Minimum Excess Availability. Upon the execution of this
Agreement, have a minimum borrowing availability of $500,000.00 in excess of the
Borrowing Limit after payment of all closing costs.
10.27 Indebtedness. Not incur, create, assume, become or be liable in
any manner with respect to, or permit to exist, any Indebtedness or liability,
including indebtedness incurred as the lessee of goods or services under leases
whether or not, in accordance with GAAP, such leases should be reflected on the
lessee's balance sheet, except:
(a) Indebtedness to the Lender;
(b) Indebtedness with respect to trade obligations and other
normal accruals in the ordinary course of business not yet due and
payable, or with respect to which they are contesting in good faith the
amount or validity thereof by appropriate proceedings, and then only to
the extent they have set aside on their books adequate reserves
therefor;
(c) Indebtedness from one Company to any other Company;
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(d) purchase money Indebtedness of no more than Two Hundred
Fifty Thousand Dollars ($250,000) in the aggregate at any time;
(e) Indebtedness incurred as the lessee of goods or services
under leases not to exceed Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate at any time; and
(f) Indebtedness set forth on Exhibit G.
10.28 Transactions with Affiliates. Not, directly or indirectly, enter
into any transaction (including the transfer or lease of any property or the
rendering of any service) with any Affiliate of a Company unless (a) such
transaction is in the ordinary course of business of such Company, and (b) such
transaction is on fair and reasonable terms no less favorable to such Company
than those terms that might be obtained at the time in a comparable arm's length
transaction with an entity who is not an Affiliate of such Company or, if such
transaction is not one that by its nature could be obtained from such other
entity, is on fair and reasonable terms and was negotiated in good faith.
10.29 Use of Proceeds. Not use for, pay or distribute to, or for the
benefit of, any Affiliate of the Companies, directly or indirectly, as a payment
or as a loan or investment, or in any other manner, any of the Consigned
Precious Metal or any of the proceeds of the Revolving Loan.
10.30 Lockbox Agreement. The Companies shall comply with the terms and
conditions of the Lockbox Agreement to be entered into with the Lender in the
form of Exhibit H prior to the effectiveness of this Agreement pursuant to
which, among other things, all domestic cash receipts of the Companies shall be
deposited, with the collection proceeds to be applied to the Advances on a daily
basis.
11. EVENTS OF DEFAULT AND ACCELERATION.
11.1 Events of Default. In each case of the occurrence of any one or
more of the following events (each of which is herein called an "Event of
Default"):
(a) the Companies shall fail to pay the purchase price for
Consigned Precious Metal pursuant to Section 2.3(b) hereof when the
same becomes due and payable as set forth in Section 2.3(b); or
(b) the Companies shall fail to pay any other principal,
interest, consignment fees or other charges in respect of any of the
Obligations within three (3) day of when due; or
(c) default in the performance of any of the Companies' other obligations or
agreements hereunder; or
(d) any representation or warranty made herein or in any
certificate, statement or agreement furnished by the Companies in
connection with this Agreement shall prove to be false or misleading in
any material respect; or
(e) default in the payment or performance of any other
obligation or indebtedness of the Companies to the Lender, whether now
or hereafter existing and howsoever arising, incurred or evidenced; or
(f) any of the Companies shall (A) make an assignment for the
benefit of creditors, or (B) file or, (for a period of ninety (90)
continuous days), suffer the filing of any voluntary or involuntary
petition under any chapter of the Bankruptcy Act by or against the
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Companies, or (C) apply for or permit the appointment of a receiver,
trustee or custodian of any of the property or business of any of the
Companies; or (D) become insolvent to suffer the entry of an order for
relief under Title 11 of the United States Code; or (E) make an
admission of its inability to pay its debts as they become due; or
(g) the occurrence of any loss, theft or destruction of or
damage to any of the Consigned Precious Metal for which there is no
insurance acceptable to the Lender; or
(h) the occurrence of any attachment on any of the Consigned Precious Metal;
or
(i) the occurrence of any attachment on any collateral for the Companies'
obligations hereunder; or
(j) default with respect to any evidence of Indebtedness of
the Companies in excess of One Hundred Thousand Dollars ($100,000)
(other than to the Lender), if the effect of such default is to
accelerate the maturity of such indebtedness or to permit the holder
thereof to cause such indebtedness to become due prior to the stated
maturity thereof, or if any indebtedness of the Companies in excess of
One Hundred Thousand Dollars ($100,000) (other than to the Lender) is
not paid, when due and payable, whether at the due date thereof or a
date fixed for prepayment or otherwise; or
(k) the determination by the Lender in good faith that a
Company has suffered a material adverse change in its business or
financial condition; or
(l) the occurrence of any event of default (after the
expiration of any applicable grace period) under any agreement now or
at any time hereafter securing or guaranteeing performance of this
Agreement, including, without limitation, the Security Agreements; or
(m) The occurrence of any of the foregoing by or with respect
to the Parent.
then in any such event, at the option of the Lender (A) the obligations of the
Lender hereunder shall terminate, (B) the Companies shall promptly return to the
Lender all Consigned Precious Metal theretofore consigned to but not purchased
and paid for by the Companies, and (C) all the Companies' obligations to the
Lender (including, without limitation, those under the Consignment Facility and
the Revolving Loan shall become immediately due and payable without presentment,
demand or notice, all of which are hereby expressly waived, notwithstanding any
credit or time allowed to the Companies or any instrument evidencing any of the
Companies obligations to the Lender. The Lender shall in addition have all of
the rights and remedies of a secured party under the Uniform Commercial Code
with respect to any collateral now or hereafter securing the Companies'
obligations hereunder. The Companies shall, at the Lender's request, immediately
assemble all such collateral and Consigned Precious Metal, and the Lender may go
upon the Companies' premises to take immediate possession thereof. The Companies
shall pay all reasonable legal expenses and attorneys' fees incurred by the
Lender in enforcing the Lender's rights, powers and remedies under this
Agreement.
11.2 Waiver. No failure or delay on the Lender's part to exercise or to
enforce any of the Lender's rights hereunder or under any other instruments or
agreement evidencing any of the Companies' obligations to the Lender or to
require strict compliance with the terms hereof or thereof in any one or more
instances and no course of conduct on the Lender's part shall constitute or be
deemed to constitute a waiver or relinquishment of any such rights hereunder
unless it shall have signed a waiver thereof in writing and no such waiver,
unless expressly stated therein, shall be effective as to any transaction which
occurs after the date of such waiver or as to any continuance
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of a breach after such waiver. The Lender's rights hereunder shall continue
unimpaired notwithstanding any extension of time, compromise or other indulgence
granted by the Lender, to the Companies with respect to any of the Companies'
obligations to the Lender or any instrument given the Lender in connection
therewith, and the Companies hereby waive notice of any such extension,
compromise or other indulgence and consent to be bound thereby as if they had
expressly agreed thereto in advance.
12. INDEMNIFICATION.
The Companies agree to indemnify and hold harmless the Lender from and
against any and all claims, actions and suits whether groundless or otherwise,
and from and against any and all liabilities, losses, damages and expenses of
every nature and character arising out of this Agreement or any other documents
or agreements executed or delivered in connection herewith and any related
documents or the transactions contemplated hereby other than to the extent that
such liability, claim, action, suit, loss, damages or expense is the result of
gross negligence or willful misconduct of the Lender, and excluding any of the
foregoing which arise out of claims, actions, and suits brought by the
Companies, including, without limitation, (a) any actual or proposed use by the
Companies or any of their Subsidiaries of the proceeds of any of the Advances,
(b) the Companies or any of their Subsidiaries entering into or performing this
Agreement or any of the other documents or agreements executed or delivered in
connection herewith and any related documents or (d) with respect to the
Companies and their Subsidiaries and their respective properties and assets, in
each case including, without limitation, the reasonable fees and disbursements
of counsel and allocated costs of internal counsel incurred in connection with
any such investigation, litigation or other proceeding. In litigation, or the
preparation therefor, the Lender shall be entitled to select its own counsel
and, in addition to the foregoing indemnity, the Companies agree to pay promptly
the reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Companies under this Paragraph are unenforceable for any
reason, the Companies hereby agree to make the maximum contribution to the
payment in satisfaction of such obligations which is permissible under
applicable law. The provisions of this Paragraph shall survive the repayment of
the Advance and the termination of the obligations of the Lender hereunder.
13. SET OFF
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits (general or specific, time or demand,
provisional or final, regardless of currency, maturity, or the branch of where
such deposits are held) or other sums credited by or due from the Lender to the
Companies and any securities or other property of the Companies in the
possession of the Lender may be applied to or set off against the payment of
Obligations and any and all other liabilities, direct, or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, of the
Companies to the Lender. The Lender agrees to furnish the Companies with notice
of set off after the occurrence of an Event of Default promptly after the
exercise of such right.
14. NO ASSIGNMENT.
The rights of the Companies under this Agreement may not be assigned to
any third party without the prior written consent of the Lender. All covenants
and agreements of the Companies contained herein shall bind the Companies and
their successors and assigns, and shall inure to the benefit of the Lender, and
its successors and assigns.
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15. EXPENSES.
The Companies will upon request by the Lender pay the reasonable legal
and other expenses incurred by the Lender (including, without limitation, the
fees and disbursements of the Lender's special counsel) in connection with the
preparation, implementation, amendment or enforcement, if any, of this
Agreement.
16. GOVERNING LAW; MISCELLANEOUS.
16.1 Governing Law. This Agreement shall be governed by and shall be
construed under the laws of the Commonwealth of Massachusetts. 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 provision in any other
jurisdiction.
16.2 Waiver of Jury Trial. To the extent that they may lawfully do so,
the Companies hereby submit to the jurisdiction of the court of the Commonwealth
of Massachusetts and the United States District Court for the District of
Massachusetts, as well as to the jurisdiction of all courts from which an appeal
may be taken from the aforesaid courts, for the purpose of any suit, action or
other proceeding arising out of the breach by the Companies of any of its
obligations under and with respect to this Agreement, and expressly waives any
and an objections they may have as to venue in any of such courts. THE
COMPANIES, TO THE EXTENT THEY MAY LAWFULLY DO SO, HEREBY EXPRESSLY WAIVE TRIAL
BY JURY IN CONNECTION WITH ANY SUIT OR ACTION ARISING OUT OF OR CONCERNING THEIR
OBLIGATIONS IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT SECURING THIS
AGREEMENT.
16.3 Survival of Representations and Covenants. This Agreement and all
covenants, agreements, representations and warranties made herein and in the
certificates delivered pursuant hereto, shall survive the consigning of
Consigned Precious Metal by the Lender to the Companies, the making of Advances,
the issuing of Letters of Credit, and the execution and delivery to the Lender
of this Agreement, and shall continue in full force and effect so long as any
indebtedness or obligation of the Companies to the Lender is outstanding and
unpaid. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements contained in this Agreement by
or on behalf of the Companies shall inure to the benefit of the successors and
assigns of the Lender.
16.4 Notices. All notices and other communications hereunder shall be
in writing, except as otherwise provided in this Agreement; and shall be sent by
any one of the following: certified mail, return receipt requested; overnight
courier; confirmed telecopier; or by hand and shall be addressed (i) if to the
Companies, to them at the Companies' Address and (ii) if to the Lender, to the
Lender's Address set forth herein. Notices shall be deemed effective three (3)
days after deposit in the mail, if sent by certified mail; the next Business
Day, if sent by overnight courier; upon confirmation, if sent by confirmed
telecopier; and upon delivery, if sent by hand. The address of any party hereto
for such demands, notices and other communications may be changed by giving
notice in writing at any time to the other party hereto.
16.5 Amendments. No modification or waiver of any provision of this
Agreement, nor consent to any departure by the Companies therefrom, shall in any
event be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance, and for the purpose,
for which given. No notice to, or demand, on the Companies, in any case, shall
entitle the Companies to any other or future notice or demand in the same,
similar or other circumstances.
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16.6 Waiver. Neither any failure or any delay on the part of the Lender
in exercising any right, power or privilege hereunder or under any other
instrument given as security therefor, shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or future
exercise, or the exercise of any right, power or privilege.
16.7 Federal Reserve Bank. The Lender may at any time pledge or assign
all or any portion of the Lender's rights under this Agreement and the other
Loan Documents to a Federal Reserve bank; provided, however, that no such pledge
or assignment shall release the Lender form the Lender's obligations hereunder
or any other Loan Document.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WITNESS: WESTBURY METALS GROUP, INC.
____________________________________ By:________________________________
Title:
WITNESS: WESTBURY ALLOYS, INC.
____________________________________ By:________________________________
Title:
WITNESS: RELIABLE-WEST TECH, INC.
____________________________________ By:________________________________
Title:
WITNESS: WESTBURY INTERNATIONAL, INC.
____________________________________ By:______________________________
Title:
WITNESS: BANKBOSTON, N.A.
____________________________________ By:________________________________
Title:
501297.3
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EXHIBIT INDEX
Exhibit A Secured Promissory Note
Exhibit B Authorized Representative Letter
Exhibit C Change in Consignment Limit Letter
Exhibit D Change in Consignment Rate
Exhibit E Liens
Exhibit F Borrowing Base Certificate
Exhibit G Indebtedness
Exhibit H Lockbox Agreement
SCHEDULE INDEX
Schedule A Financing Statements
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EXHIBIT C
, 1999
WESTBURY ALLOYS, INC.
RELIABLE-WEST TECH, INC.
WESTBURY INTERNATIONAL, INC.
Ladies and Gentlemen:
Upon your acceptance of the terms of this letter agreement as evidenced
by your execution and delivery to BANKBOSTON, N.A. ("BKB") on or before
_______________, 199_, of a copy of this letter, WESTBURY ALLOYS, INC.,
RELIABLE-WEST TECH, INC., and WESTBURY INTERNATIONAL, INC., (together, the
"Companies"), and BKB agree, effective _______________, 199_, to amend the
definition of the Consignment Limit contained in Paragraph 1.15 of that certain
Loan and Consignment Agreement dated ______________, 1999, as the same may have
been heretofore amended (as amended, the "Loan and Consignment Agreement"), by
and among BKB and the Companies to read as follows:
1.19. "Consignment Limit" means an amount equal to:
(a) the least of :
(i) , or
(ii) , or
(iii) ;
(b) such limit as BKB and the Companies may agree upon from
time to time as evidenced by an amendment in substantially the form of
Exhibit D attached hereto and made a part hereof or in such other form
as BKB shall require; or
(c) such other limit as BKB may approve in its sole
discretion.
Except as amended hereby, the Loan and Consignment Agreement and an
agreements securing or guaranteeing the Loan and Consignment Agreement shall
remain in full force and effect and are in all respect hereby ratified and
affirmed.
Very truly yours,
BANKBOSTON, N.A.
__________________________________ By:_______________________
Title:________
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<PAGE>
Accepted and agreed as of the ____ day of ________, 199_.
WESTBURY ALLOYS, INC.
By:_________________________________
Title:_______________________________
RELIABLE-WEST TECH, INC.
By:_________________________________
Title:_______________________________
WESTBURY INTERNATIONAL, INC.
By:_________________________________
Title:_______________________________
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EXHIBIT D
, 1999
WESTBURY ALLOYS, INC.
RELIABLE-WEST TECH, INC.
WESTBURY INTERNATIONAL, INC.
Ladies and Gentlemen:
Pursuant to Paragraph 2.3(a) of that certain Loan and Consignment
Agreement dated _______________. 1999, as the same may have been heretofore
amended (as amended, the "Loan and Consignment Agreement") by and among Westbury
Alloys, Inc., Reliable-West Tech, Inc., and Westbury International, Inc.
(collectively, the "Companies"), and BankBoston, N.A., the undersigned hereby
gives notice to the Companies that, effective _______________ the consignment
rate set forth in said Paragraph _____ shall be changed from _______________
percent (_____%) per annum to ______________ percent _____%) per annum.
Except as amended hereby, the Loan and Consignment Agreement shall
remain in full force and effect.
Very truly yours,
BANKBOSTON, N.A.
____________________________________ By:___________
Title:________
38
SECURED PROMISSORY NOTE
$12,000,000.00 Boston, Massachusetts
July __, 1999
FOR VALUE RECEIVED, WESTBURY ALLOYS, INC., a Delaware corporation
having its principal place of business at 750 Shames Drive, Westbury, New York,
RELIABLE-WEST TECH, INC., a Delaware corporation having its principal place of
business at 750 Shames Drive, Westbury, New York , and WESTBURY INTERNATIONAL,
INC., a Rhode Island corporation having its principal place of business at 750
Shames Drive, Westbury, New York,(individually and collectively, jointly and
severally, the "Borrower"), jointly and severally promise to pay to the order of
BANKBOSTON, N.A., a national banking association with its principal place of
business at 100 Federal Street, Boston, Massachusetts (the "Lender"), the
principal sum of TWELVE MILLION DOLLARS ($12,000,000) or, if less, the aggregate
unpaid principal amount of Advances outstanding to the Lender pursuant to that
certain Loan and Consignment Agreement hereinafter referred to, made by the
Lender to the Borrower under the Revolving Loan (as defined in the Loan and
Consignment Agreement) outstanding from time to time, together with interest in
arrears on any and all principal amounts outstanding and remaining unpaid
hereunder from time to time from the date hereof until payment in full hereof,
said interest to be payable at the rates and in the manner set forth in the Loan
and Consignment Agreement. Interest shall be calculated on the basis of a three
hundred sixty (360) day year counting the actual number of days elapsed.
All principal amounts outstanding hereunder, together with all unpaid
interest thereon, shall be due and payable on July 15, 2001 (the "Maturity
Date"), or on such earlier date or dates as said principal or interest, or any
part thereof, may become due and payable pursuant to the Loan and Consignment
Agreement.
Reference is made to the Loan and Consignment Agreement for rights and
obligations as to (i) advances and readvances of the principal sums evidenced
hereby, (ii) interest rate(s) applicable to principal amounts outstanding
hereunder, (iii) mandatory and voluntary prepayment of principal and interest
hereunder, and (iv) acceleration of the Maturity Date. The occurrence and
continuation of an Event of Default (as defined in the Loan and Consignment
Agreement) shall constitute a
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default under this Note and shall entitle the Lender to accelerate the entire
indebtedness hereunder and to take such other action as may be provided for in
the Loan and Consignment Agreement.
If the entire amount of a required principal and/or interest payment is
not paid in full within ten (10) business days after the same is due, the
Borrower shall pay to the Lender a late fee equal to five percent (5%) of the
required payment.
Both principal and interest are payable in lawful money of the United
States of America at the office of the Lender at the address shown above in
immediately available funds.
Each Borrower hereby jointly and severally agrees to pay upon demand,
to the extent permitted by law, late charges on any sum or amount not paid when
due hereunder at a rate per annum equal to five percent (5%) in excess of the
floating base rate of interest (the "Base Rate") designated from time to time by
the Lender, as being its Base Rate of interest, from the date of delinquency
until payment in full.
The Borrower shall have the right to prepay the Note in whole or in
part at any time and from time to time, without premium or penalty, in
accordance with the terms of the Loan and Consignment Agreement.
This Note is the "Note" referred to in the Loan and Consignment
Agreement (the "Loan and Consignment Agreement") dated the date hereof among the
Borrower and the Lender, and is in all respects subject to the provisions
thereof. This Note is secured by a Security Agreement of the Borrowers dated the
date hereof and is guarantied by Westbury Metals Group, Inc. pursuant to a
certain instrument of Unlimited Guaranty of even date.
If this Note shall not be paid when due and shall be placed by the
holder hereof in the hands of any attorney for collection, through legal
proceedings or otherwise, the Borrower will pay a reasonable attorney's fee to
the holder hereof together with reasonable costs and expenses of collection.
This Note is to be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts. The Borrower, to the extent that it
may lawfully do so, hereby submits to the jurisdiction of the courts of the
Commonwealth of Massachusetts and the United
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States District Courts for the District of Massachusetts, as well as to the
jurisdiction of all courts from which an appeal may be taken from the aforesaid
courts, for the purpose of any suit, action or other proceeding arising out of
the breach by the Borrower of any of its obligations under and with respect to
this Note, and expressly waives any and all objections it may have as to venue
in any of such courts. THE BORROWER, TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY
EXPRESSLY WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUIT OR ACTION ARISING OUT
OF OR CONCERNING ITS OBLIGATIONS IN CONNECTION WITH THIS NOTE.
The Borrower expressly waives presentment, demand for payment, protest
and notice of nonpayment and any other notice otherwise required to be given
under law in connection with the delivery, acceptance, performance, default,
enforcement or collection of this Note.
No consent or waiver by the holder hereof with respect to any action or
failure to act which, without such consent or waiver, would constitute a breach
of any provision of this Note shall be valid and binding unless in writing and
signed by both the Borrower and the holder hereof.
All agreements between the Borrower and the Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness or otherwise, shall the amount paid
or agreed to be paid to the Lender for the use, forbearance or detention of the
indebtedness evidenced hereby exceed the maximum permissible under applicable
law. As used herein, the term "applicable law" shall mean the law in effect as
of the date hereof, provided, however, that in the event there is a change in
the law which results in a higher permissible rate of interest, than this Note
shall be governed by such law as of its effective date. If, from any
circumstances whatsoever, fulfillment of any provision hereof or of any
agreement related to or securing the Note at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any circumstance the Lender
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and
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<PAGE>
not to the payment of interest. This provision shall control every other
provision of all agreements between the Borrower and the Lender.
IN WITNESS WHEREOF, each of the Borrowers has caused this Note to be
duly executed by its corporate officer, hereunto duly authorized, on the date
first above written.
WITNESS: WESTBURY ALLOYS, INC.
________________________ By:___________________
Title:________________
GUARANTY, dated as of July __, 1999 by WESTBURY METALS GROUP, INC., a
Delaware corporation (the "Guarantor"), in favor of BANKBOSTON, N.A., a national
banking association with its head office at 100 Federal Street, Boston,
Massachusetts 02110, and its foreign branches (the "Bank"). In consideration of
the Bank's giving, in its discretion, time, credit or banking facilities or
accommodations to WESTBURY ALLOYS, INC., a Delware corporation, RELIABLE-WEST
TECH, INC., a Delaware corporation, and WESTBURY INTERNATIONAL, INC., a Rhode
Island corporation (together with their successors, individually and
collectively, the "Customer"), the Guarantor agrees as follows:
1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby guarantees
to the Bank the full and punctual payment when due (whether at maturity, by
acceleration or otherwise), and the performance, of all liabilities, agreements
and other obligations of the Customer to the Bank, whether direct or indirect,
absolute or contingent, due or to become due, secured or unsecured, now existing
or hereafter arising or acquired (whether by way of discount, letter of credit,
lease, loan, overdraft or otherwise) (the "Obligations"). This Guaranty is an
absolute, unconditional and continuing guaranty of the full and punctual payment
and performance of the Obligations and not of their collectibility only and is
in no way conditioned upon any requirement that the Bank first attempt to
collect any of the Obligations from the Customer or resort to any security or
other means of obtaining their payment. Should the Customer default in the
payment or performance of any of the Obligations, the obligations of the
Guarantor hereunder shall become immediately due and payable to the Bank,
without demand or notice of any nature, all of which are expressly waived by the
Guarantor. Payments by the Guarantor hereunder may be required by the Bank on
any number of occasions.
2. GUARANTOR'S AGREEMENT TO PAY. The Guarantor further agrees, as the
principal obligor and not as a guarantor only, to pay to the Bank, on demand,
all costs and expenses (including court costs and reasonable legal expenses)
incurred or expended by the Bank in connection with the Obligations, this
Guaranty and the en forcement thereof, together with interest on amounts
recoverable under this Guaranty from the time such amounts become past due until
payment, at the rate of interest announced by the Bank from time to time at its
head office as its Base Rate, plus 5%; provided that if such interest exceeds
the maximum amount permitted to be paid under applicable law, then such interest
shall be reduced to such maximum permitted amount.
3. UNLIMITED GUARANTY. The liability of the Guarantor hereunder shall
be unlimited.
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4. WAIVERS BY GUARANTOR; BANK'S FREEDOM TO ACT. The Guarantor agrees
that the Obligations will be paid and performed strictly in accordance with
their respective terms regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Bank with respect thereto. The Guarantor waives presentment,
demand, protest, notice of acceptance, notice of Obligations incurred and all
other notices of any kind, all defenses which may be available by virtue of any
valuation, stay, moratorium law or other similar law now or hereafter in effect,
any right to require the marshalling of assets of the Customer, and all
suretyship defenses generally. Without limiting the generality of the foregoing,
the Guarantor agrees to the provisions of any instrument evidencing, securing or
otherwise executed in connection with any Obligation and agrees that the
obligations of the Guarantor hereunder shall not be released or discharged, in
whole or in part, or otherwise affected by (i) the failure of the Bank to assert
any claim or demand or to enforce any right or remedy against the Customer; (ii)
any extensions or renewals of any Obligation; (iii) any rescissions, waivers,
amendments or modifications of any of the terms or provisions of any agreement
evidencing, securing or otherwise executed in connection with any Obligation;
(iv) the substitution or release of any entity primarily or secondarily liable
for any Obligation; (v) the adequacy of any rights the Bank may have against any
collateral or other means of obtaining repayment of the Obligations; (vi) the
impairment of any collateral securing the Obligations, including without
limitation the failure to perfect or preserve any rights the Bank might have in
such collateral or the substitution, exchange, surrender, release, loss or
destruction of any such collateral; or (vii) any other act or omission which
might in any manner or to any extent vary the risk of the Guarantor or otherwise
operate as a release or discharge of the Guarantor, all of which may be done
without notice to the Guarantor.
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST CUSTOMER. If for
------------------------------------------------
any reason the Customer has no legal existence or is under no legal obligation
to discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from the Customer by operation of law or for any other reason,
this Guaranty shall nevertheless be binding on the Guarantor to the same extent
as if the Guarantor at all times had been the principal obligor on all such
Obligations. In the event that acceleration of the time for payment of the
Obligations is stayed upon the insolvency, bank ruptcy or reorganization of the
Customer, or for any other reason, all such amounts otherwise subject to
acceleration under the terms of any agreement evidencing, securing or otherwise
executed in connection with any Obligation shall be immediately due and payable
by the Guarantor.
6. SUBROGATION; SUBORDINATION. The Guarantor shall not exercise any
rights against the Customer arising as a result of payment by the Guarantor
hereunder, by way of subrogation or
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otherwise, and will not prove any claim in competition with the Bank or its
affiliates in respect of any payment hereunder in bankruptcy or insolvency
proceedings of any nature; the Guarantor will not claim any set-off or
counterclaim against the Customer in respect of any liability of the Guarantor
to the Customer; and the Guarantor waives any benefit of and any right to
participate in any collateral which may be held by the Bank or any such
affiliate. The payment of any amounts due with respect to any indebtedness of
the Customer now or hereafter held by the Guarantor is hereby subordinated to
the prior payment in full of the Obligations, provided that so long as no
default in the payment or performance of the Obligations has occurred and is
continuing, or no demand for payment of any of the Obligations has been made
that remains unsatisfied, the Customer may make, and the Guarantor may demand
and accept, any scheduled payments of principal of and interest on such
subordinated indebtedness in the amounts, at the rates and on the dates
specified in such instruments, securities or other writings as shall evidence
such subordinated indebtedness. The Guarantor agrees that after the occurrence
of any default in the payment or performance of the Obligations, the Guarantor
will not demand, sue for or otherwise attempt to collect any such indebtedness
of the Customer to the Guarantor until the Obligations shall have been paid in
full. If, notwithstanding the foregoing sentence, the Guarantor shall collect,
enforce or receive any amounts in respect of such indebtedness, such amounts
shall be collected, enforced and received by the Guarantor as trustee for the
Bank and be paid over to the Bank on account of the Obligations without
affecting in any manner the liability of the Guarantor under the other
provisions of this Guaranty.
7. SECURITY; SET-OFF. The Guarantor grants to the Bank, as security for
the full and punctual payment and performance of the Guarantor's obligations
hereunder, a continuing lien on and security interest in all securities or other
property belonging to the Guarantor now or hereafter held by the Bank and in ail
deposits (general or special, time or demand, provisional or final) and other
sums credited by or due from the Bank to the Guarantor or subject to withdrawal
by the Guarantor; and regardless of the adequacy of any collateral or other
means of obtaining repayment of the Obligations, the Bank is hereby authorized
at any time and from time to time, without notice to the Guarantor (any such
notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, to set off and apply such deposits and other sums against the
obligations of the Guarantor under this Guaranty, whether or not the Bank shall
have made any demand under this Guaranty and although such obligations may be
contingent or unmatured.
8. FURTHER ASSURANCES. The Guarantor agrees, upon demand after any
change in the condition or affairs (financial or otherwise) of the Guarantor
deemed by the Bank to be adverse and material, to secure the payment and
performance of its obligations hereunder by delivering, assigning or
transferring to the Bank or
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granting the Bank a security interest in additional collateral of a value and
character satisfactory to the Bank, and authorizes the Bank to file any
financing statement deemed by the Bank to be necessary or desirable to perfect
any security interest granted by the Guarantor to the Bank, and as agent for the
Guarantor, to sign the name of the Guarantor thereto. The Guarantor also agrees
to do all such things and execute all such documents, including financing
statements, as the Bank may consider necessary or desirable to give full effect
to this Guaranty and to perfect and preserve the rights and powers of the Bank
hereunder. In addition, the Guarantor agrees to furnish the Bank with such
financial information concerning the Guarantor as the Bank may require from time
to time.
9. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force
and effect until the Bank is given written notice of the Guarantor's intention
to discontinue this Guaranty, notwithstanding any intermediate or temporary
payment or settlement of the whole or any part of the Obligations. No such
notice shall be effective unless received and acknowledged by an officer of the
Bank at its head office or at the branch of the Bank where this Guaranty is
given. No such notice shall affect any rights of the Bank or of any affiliate
hereunder including, without limitation, the rights set forth in Sections 4 and
6, with respect to Obligations incurred prior to the receipt of such notice or
Obligations incurred pursuant to any contract or commitment in existence prior
to such receipt, and all checks, drafts, notes, instruments (negotiable or
otherwise) and writings made by or for the account of the Customer and drawn on
the Bank or any of its agents purporting to be dated on or before the date of
receipt of such notice, although presented to and paid or accepted by the Bank
after that date, shall form part of the Obligations. This Guaranty shall
continue to be effective or be reinstated, notwithstanding any such notice, if
at any time any payment made or value received with respect to an Obligation is
rescinded or must otherwise be returned by the Bank upon the insolvency,
bankruptcy or reorganization of the Customer, or otherwise, all as though such
payment had not been made or value received.
10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantor, its successors and assigns, and shall inure to the benefit of and be
enforceable by the Bank and its successors, transferees and assigns. Without
limiting the generality of the foregoing sentence, the Bank may assign or
otherwise transfer any agreement or any note held by it evidencing, securing or
otherwise executed in connection with the Obligations, or sell participations in
any interest therein, to any other person or entity, and such other person or
entity shall thereupon become vested, to the extent set forth in the agreement
evidencing such assignment, transfer or participation, with all the rights in
respect thereof granted to the Bank herein.
11. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by the
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Guarantor therefrom shall be effective unless the same shall be in writing and
signed by the Bank. No failure on the part of the Bank to exercise, and no delay
in exercising, any right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.
12. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first class mail postage prepaid or, in the case of telegraphic or telexed
notice, when transmitted, answer back received, addressed as follows: if to the
Guarantor, at the address set forth beneath its signature hereto, and if to the
Bank, at 100 Federal Street, Boston, Massachusetts 02110, Telex: 940581 BOSTONBK
BSN Attention: Ms. Elizabeth Sousa, Vice President, or at such address as either
party may designate in writing.
13. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is intended
to take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts. The Guarantor
agrees that any suit for the enforcement of this Guaranty may be brought in the
courts of The Commonwealth of Massachusetts 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 the Guarantor by mail at the address
specified in Section 12 hereof. The Guarantor hereby waives any objection that
it may now or hereafter have to the venue of any such suit or any such court or
that such suit was brought in an inconvenient court.
14. MISCELLANEOUS. This Guaranty constitutes the entire agreement of
the Guarantor with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in addition
to any other guaranty of the Obligations. The invalidity or unenforceability of
any one or more sections of this Guaranty shall not affect the validity or
enforceability of its remaining provisions. Captions are for the ease of
reference only and shall not affect the meaning of the relevant provisions. The
meanings of all defined terms used in this Guaranty shall be equally applicable
to the singular and plural forms of the terms defined.
15. JURY WAIVER. THE BANK (BY ITS ACCEPTANCE HEREOF) AND THE GUARANTOR
AGREE THAT NEITHER OF THEM, INCLUDING ANY ASSIGNEE OR SUCCESSOR SHALL SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION
PROCEDURE BASED UPON, OR ARISING OUT OF, THIS GUARANTY, ANY RELATED INSTRUMENTS,
ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM.
NEITHER THE BANK NOR THE GUARANTOR SHALL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY
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TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE
BEEN FULLY DISCUSSED BY THE BANK AND THE GUARANTOR, AND THESE PROVISIONS SHALL
BE SUBJECT TO NO EXCEPTIONS. NEITHER THE BANK NOR THE GUARANTOR HAS AGREED WITH
OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE
FULLY ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, the Guarantor has executed and delivered this
Guaranty, or caused this Guaranty to be executed and delivered by its duly
authorized officer, as of the date appearing on page one.
WITNESS: GUARANTOR:
WESTBURY METALS GROUP, INC.
______ By:___________________________
Title:
Name:____________________
Print/Type Full Name Address:750 Shames Drive
Address:_________________ Westbury, New York
_________________ 11590
-----------------
LOAN AGREEMENT
LOAN AGREEMENT, dated as of July 13, 1999, by and among Westbury Metals
Group, Inc., a Delaware corporation (the "Company"), and Westbury International,
Inc., a Delaware corporation, Westbury Alloys, Inc., a Delaware corporation, and
Reliable - West Tech, Inc., a Rhode Island corporation (the Company and such
corporations being collectively referred to as the "Borrowers" and each as a
"Borrower"), and Alliance Capital Investment Corp., a Nevada corporation (the
"Lender").
W I T N E S S E T H:
WHEREAS, the Borrowers have requested the Lender to make a loan (the
"Loan") of two million dollars ($2,000,000) on the terms and conditions set
forth in this Agreement; and
WHEREAS, the proceeds of the Loan shall be used for working capital and/or
payment of indebtedness; and
WHEREAS, in addition to the foregoing, in order to induce the Lender to
make the Loan, the Borrowers have agreed to make the representations, warranties
and covenants hereinafter set forth, and to accept the other terms, conditions
and provisions hereinafter set forth;
NOW, THEREFORE, intending to be legally bound, all of the parties
hereto agree as follows:
1. Definitions. As used in this Agreement, the following words and terms shall
have the following meanings:
(a) "Approved Subordinated Debt" shall mean Indebtedness
subordinated, on terms and conditions satisfactory to the Lender, as evidenced
by the Lender's written approval of the amount of such Indebtedness and the
terms of subordination, to all indebtedness or other obligations of the
Borrowers to the Lender and the execution of a subordination agreement among the
Borrowers, the Lender and the holder of such indebtedness satisfactory in form
and substance to the Lender.
(b) "Bank" shall mean BankBoston, N.A. or any successor to the
business of BankBoston, N.A.
(c) "Business Day" shall mean any day not a Saturday, Sunday
or any other day on which the Banks in New York City are authorized to be closed
for the transaction of business.
(d) "Capital Lease Obligation" shall mean, with respect to any
Borrower, the obligation of such Borrower to pay rent or other amounts under a
lease of (or other agreement conveying the right to use) real and/or personal
property, which obligation is, or in accordance with Generally Accepted
Accounting Principles is required to be, classified and accounted for as a
capital lease on a balance sheet of such Borrower, and, for purposes of this
Agreement, the amount of such obligation shall be the capitalized amount thereof
determined in accordance with such principles.
(e) "Closing Date" shall mean the date of the execution and
delivery of this Agreement.
(f) "Collateral" shall have the meaning set forth in the
Security Agreement.
(g) "Commission" shall mean the United States Securities and
Exchange Commission.
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(h) "Default" shall mean any event which, which the passage of
time or the giving of notice, would result in an Event of Default.
(i) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as the same may be amended.
(j) "ERISA Affiliate" shall mean, with respect to any Person,
any entity that is a member of a "controlled group of corporations" with, or is
under "common control" with, or is a member of the same "affiliated service
group" with such Person as defined in Section 414(b), 414(c) or 414(m) of the
Code.
(k) "Event of Default" shall mean any Event of Default set forth in Section 7 of
this Agreement.
(l) "Extended Maturity Date" shall mean the date determined
pursuant to Paragraph 2(c) of this Agreement.
(m) "Generally Accepted Accounting Principles" shall mean the
accepted accounting principles and practices which, as of the date and for the
period in question are recognized as such by the American Institute of Certified
Public Accountants acting through the Financial Accounting Standards Board or
through other appropriate board or committees thereof for such period so as to
reflect properly the financial condition, the results of operations,
stockholders' equity and cash flows of the Borrowers.
(n) "Indebtedness" shall have the meaning set forth in
Paragraph 6(b) of this Agreement.
(o) "Interest Rate" shall mean an annual rate of interest
equal to the Prime Rate plus 4%.
(p) "Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended.
(q) "Loan Documents" shall mean this Agreement, the Note, the
Security Agreement, the UCC-1 Financing Statements, those other agreements as to
which the Lender is a party or a beneficiary on the Closing Date, and all other
agreements, instruments, documents and certificates, including, without
limitation, pledges, powers of attorney, consents, assignments, contracts,
notices, financing statements and all other written matter whether heretofore,
now or hereafter executed by or on behalf of any Borrower or others, or any
employee of any Borrower, which by their terms apply to the Loan and the
transaction contemplated by this Agreement, or which are delivered to the Lender
in connection with this Agreement or the transactions contemplated by this
Agreement.
(r) "Long Term Debt" shall mean any Indebtedness, including
Capital Lease Obligations, having a maturity date more than one year from the
date as of which the determination is made, determined in accordance with
Generally Accepted Accounting Principles consistently applied.
(s) "Material Adverse Effect" shall mean a material adverse
effect on the business, operations, assets (including levels of working capital
and components thereof), condition (financial or otherwise), operating results,
liabilities, property, employee and customer relations or prospects of the
Borrowers or any Borrower or would impair the rights of the Lender under this
Agreement, the Note, the Security Agreement or the other Loan Documents.
(t) "Maturity Date" shall mean the Stated Maturity Date or the
Extended Maturity Date, as the case may be.
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<PAGE>
(u) "Permitted Encumbrance" shall have the meaning set forth
in Paragraph 6(a) of this Agreement.
(v) "Person" shall mean any natural person, corporation,
business trust, joint venture, association, company, partnership, limited
liability company or government, or any agency or political subdivision thereof.
(w) "Plan" shall mean any employee benefit plan within the
meaning of Section 3(3) of ERISA which is maintained for employees of any
Borrower or any Subsidiary, if any, or any other Person which is under common
control with any Borrower within the meaning of Section 414(c) of the Internal
Revenue Code or the regulations thereunder.
(x) "Prepayment Demand Event" shall have the meaning set forth
in Paragraph 2(e) of this Agreement.
(y) "Prime Rate" shall mean the rate per annum announced by
the Bank from time to time as its prime rate in effect at its principal office
on a 360-day basis, regardless of whether such rate is the lowest rate charged
by such bank. The Prime Rate in effect at the on the opening of business on the
first Business Day of each week shall be the Prime Rate in effect for the week.
(z) "Reportable Event" shall mean any Reportable Event as
defined in Section 4043(b) of ERISA or the regulations thereunder for which the
30 days' notice requirement has not been waived by the Pension Benefit Guaranty
Corporation.
(aa) "SEC Documents" shall mean the Company's Form 10-K Annual
Report for the fiscal year ended June 30, 1998, its proxy statement relating to
its 1998 Annual Meeting of Stockholders, and any Form 10-Q and 8-K Reports filed
by the Company with the Commission subsequent to June 30, 1998.
(bb) "Stated Maturity Date" shall mean July 15, 2001.
(cc) "Subsidiary" shall mean any corporation, association,
partnership, limited liability company, business trust or other business entity
more than 50% of the voting stock or other voting rights of which, or more than
50% of the equity interest in which, is at the time owned or controlled,
directly or indirectly, by any one or more Borrowers or one or more Subsidiaries
of any Borrower or their other Subsidiaries.
(dd) "Term Note" shall mean the joint and several promissory
note of the Borrowers delivered pursuant to Paragraph 2(a) of this Agreement.
(ee) "UCC" shall mean the Uniform Commercial Code as the same
may, from time to time, be in effect in the State of New York; provided,
however, in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of the Lender's security interest in
any Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or priority and
for purposes of definitions related to such provisions.
(ff) "UCC-1 Financing Statements" shall have the meaning set forth in the
Security Agreement.
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<PAGE>
2. The Loan.
(a) The Loan shall be evidenced by the joint and several
promissory note of the Borrowers (the "Term Note") in the form attached as
Exhibit A to this Agreement, appropriately completed on behalf of the Borrowers,
dated the Closing Date and in the principal amount of the Loan. The principal
balance shall be due and payable on the Maturity Date.
(b) The Term Note will bear interest at the Interest Rate.
Interest will be paid monthly on the first day of each month, commencing August
1, 1999. Interest shall be calculated on the basis of a 360-day year, based on
the number of days elapsed.
(c) The Lender shall have the right, on one occasion, to
extend the Maturity Date for a period of not more than three years on notice
given not less than thirty (30) days nor more than ninety (90) days prior to the
Stated Maturity Date. The date to which the Maturity Date is extended pursuant
to this Paragraph 2(c) is the "Extended Maturity Date."
(d) Borrowers may prepay the Term Note in full at any time or
in part from time to time, on not less than three (3) days' written notice;
provided, that any prepayment shall be accompanied by interest to the date of
prepayment.
(e) The Lender shall have the right to demand prepayment of
the Term Note, in whole or in part, on five (5) days' written notice if a
Prepayment Demand Event shall occur. A Prepayment Demand Event shall occur if:
(i) The Borrowers or any of them raises at least five million dollars
($5,000,000) (in the aggregate) from the public or private sale of equity or
debt securities in one or more transactions subsequent to the Closing Date,
except that this provision shall not relate to the Company's loan and
consignment facility from the Bank.
(ii) The Company or any other Borrower sells all or substantially all of its
business and assets or all or substantially all of the capital stock of any
other Borrower.
(iii) The Company merges or consolidated with or into any other
corporation or entity.
(iv) Any stockholder or group of stockholders of the Company who do not, as of
the Closing Date, own ten percent (10%) or more of the Company's common stock
acquires in one or more transactions directly or indirectly the ownership of or
the right to vote or to dispose of thirty percent (30%) of the Company's common
stock.
(f) Unless otherwise specified in this Agreement, each payment
and prepayment of principal of and interest on the Term Note shall be made not
later than noon, New York City time, on the date on which it is payable. Payment
shall be made in United States dollars to the Lender at its address as provided
in Paragraph 8(a) of this Agreement.
(g) The Loan shall be made at a closing to be held
contemporaneously with the execution of this Agreement at the offices of Esanu
Katsky Korins & Siger, LLP, 605 Third Avenue, New York, New York 10158 or at
such other location at may be determined by the Lender and the Borrowers.
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<PAGE>
3. Representations and Warranties. The Borrowers jointly and severally
represent and warrant to the Lender that:
(a) Corporate. Each Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has the power and authority (corporate and other) to own
its properties and to carry on its business as now being conducted, (ii) is duly
qualified to conduct its business in the state of its incorporation and in each
other jurisdiction wherein the conduct of its business or the ownership of its
properties are such as to require such qualification and the failure to so
qualify would have a Material Adverse Effect, and (iii) has the power to borrow
as contemplated by this Agreement and to execute and perform its obligations
under the Loan Documents.
(b) Authorization of Borrowing. The execution, delivery and
performance by each Borrower of this Agreement and the other Loan Document, the
borrowings made by each Borrower, and the execution and delivery of the Term
Note by the Borrowers have been duly authorized by all requisite corporate
action. The execution and delivery of this Agreement and the other Loan
Documents by the Borrowers will not violate (i) any provision of law or any
governmental rule or regulation applicable to any Borrower or the certificates
of incorporation or by-laws and/or other organizational documents of any
Borrower, or (ii) any order of any court or other agency of government binding
on any Borrower or any indenture, agreement or other instrument to which any
Borrower is a party, or by which any Borrower or any of their respective
properties are bound, in either case where the violation would have a Material
Adverse Effect, and will not be in conflict with, result in a breach of or
constitute (with due notice and/or lapse of time) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the property or assets of any Borrower other than as contemplated by this
Agreement. Each of this Agreement and the other Loan Documents, and all other
documents, certificates or instruments related thereto are legal, valid and
binding and enforceable against each Borrower in accordance with their terms.
(c) Financial Condition.
(i) The audited consolidated financial statements for the Company and its
Subsidiaries (including the other Borrowers) for the fiscal year ended June 30,
1998 and the unaudited financial statements for the nine months ended March 31,
1999 (collectively, the "Financial Statements"), are included in the Company's
filings with the Commission. The Financial Statements present fairly and
accurately the consolidated financial condition of the Company and its
Subsidiaries as of the balance sheet dates and the results of operations,
changes in stockholders' equity and cash flows for the respective periods then
ended. Since March 31, 1999, there has been no material adverse change in the
financial condition or the business or the operations of any Borrower.
(ii) There is no obligation or liability, contingent or otherwise of any
Borrower which is material in amount and which is not reflected in the Financial
Statements except for obligations or liabilities incurred in connection with
Permitted Encumbrances. As of the date of this Agreement, no Borrower has any
direct or contingent obligations or liabilities apart from those reflected on
the Financial Statements, other than obligations or liabilities therefor
incurred in the ordinary course of their respective businesses which are not
materially different from the past practices of such Borrower.
(d) SEC Documents. The SEC Documents, as of their respective
dates, complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder, and none of the SEC Documents contain any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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<PAGE>
(e) Taxes. Each Borrower has filed or caused to be filed all
Federal, state, local and other tax returns which are required to be filed, and
have paid or has caused to be paid all taxes as shown on said returns or on any
assessment received by them, to the extent that such taxes have become due,
except any such taxes that are immaterial in amount and reserved against, or any
such taxes, levies, assessments, deficiencies or claims which are being
contested in good faith by appropriate proceedings on terms which are disclosed
in the Financial Statements and satisfactory to the Lender and as to which such
Borrower has set aside on its books adequate reserves with respect to any such
tax, levy assessment, deficiency or claim so contested. No Borrower has received
notice of any proposed audit or has been requested to, or has granted, any
extensions of the statute of limitations relating to any Federal, state, local
or other taxes.
(f) Title to Properties. Each Borrower has good and marketable
title to its properties and assets reflected on the latest of the applicable
Financial Statements, and all such properties and assets are free and clear of
mortgages, pledges, liens, charges and other encumbrances, except as required or
permitted by this Agreement. No Borrower owns any real property.
(g) Litigation. There are no actions, suits or proceedings
(whether or not purportedly on behalf of any Borrower) pending or, to the
knowledge of any Borrower, threatened against or affecting any Borrower at law
or in equity or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign ("Actions"), which involve any of the transactions contemplated by this
Agreement or the other Loan Documents or which, if adversely determined against
any Borrower, would result in any materially adverse change in the business,
operations, prospects, properties or assets or in the condition, financial or
otherwise, of any of them. Schedule 3(g) to this Agreement sets forth a true and
accurate description of each pending or threatened Action. Unless otherwise
indicated on said Schedule 3(g), each Borrower has established adequate reserves
in respect of each such Action, which reserves are reflected on the March 31,
1999 Financial Statements.
(h) No Defaults. No Borrower is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court or Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic of foreign, which in any instance or in the
aggregate would have a materially adverse effect on the condition (financial or
otherwise) of any Borrower.
(i) Agreements. No Borrower is a party to any agreement or
instrument or subject to any charter or other corporate restriction, or to any
judgment, order, writ, injunction, decree or regulation materially and adversely
affecting its business, properties or assets, operations or condition (financial
or otherwise). No Borrower is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party in any manner which would
materially and adversely affect the business, properties or assets, operations
or condition (financial or otherwise) of any Borrower.
(j) Employee Benefit Plans. Each Borrower and each of the each
Borrower's ERISA Affiliates are in compliance in all material respects with the
terms of each Plan and each Plan complies in all material respects with the
applicable provisions of the Internal Revenue Code and ERISA and the regulations
and published interpretations thereunder. Within the times and in the manner
prescribed by law, each Borrower has filed all returns (including, without
limitation, Forms 5500) required by law for all Plans maintained by the Company.
No Reportable Event, as defined in Section 4043(b) of ERISA or the regulations
thereunder for which the thirty (30) days' notice requirement has not been
waived by the Pension Benefit Guaranty Corporation, has occurred with respect to
any Plan administered by any Borrower or any administrator designated by any
Borrower or any ERISA Affiliate. As of March 31, 1999, there is, and on the
Closing Date there will be, no unfunded liability under any Plan. Neither any
Borrower nor any ERISA Affiliate has engaged in any prohibited transaction
(within the meaning of Section 406 of ERISA or Section
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<PAGE>
4975 of the Internal Revenue Code, excluding any transactions which are exempt
under Section 408 of ERISA or Section 4975 of the Internal Revenue Code) with
respect to any Plan which any Borrower or any ERISA Affiliate maintains, or to
which any Borrower or any ERISA Affiliate contributes, which could subject it or
any such other person to any material liability. There are no material actions,
suits or claims pending or, to any Borrower's knowledge, any material actions,
suits or claims which could reasonably be expected to be asserted, against any
Plan maintained by any Borrower or any ERISA Affiliate, the assets thereof, or
against it in connection with any Plan. No Borrower is a participant in or
contributor to any multiemployer benefit plan, and no Borrower has any formal or
informal agreement requiring contribution to, any multiemployer benefit plan.
Each Borrower and each ERISA Affiliate have made all payments due with respect
to each Plan not later than the date such payments were due, and the Borrowers
do not have any liability for any penalties or other assessments relating to the
Plans or otherwise under ERISA.
(k) Federal Reserve Regulations. No Borrower is engaged
principally in, nor has as one of its important activities the business of,
extending credit for the purpose of purchasing or carrying any margin stock. No
part of the proceeds of the Loan will be used, whether directly or indirectly,
and whether immediately, incidentally or ultimately, (i) to purchase or to carry
margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock, or to refund indebtedness originally incurred for such
purpose, or (ii) for any purpose which violates or is inconsistent with the
provisions of the Regulations G, T, U, or X of the Board of Governors of the
Federal Reserve System.
(l) Governmental Approval; Licenses. No registration with or
consent or approval of, or other action by, any Federal, state or other
governmental authority or regulatory body is required in connection with the
borrowing and guarantee contemplated by this Agreement or the execution,
delivery and performance by the Borrowers of this Agreement, or the Term Note,
the Security Agreement and the other Loan Documents. The Borrowers possess all
licenses, permits, certificates, approvals and the like ("Licenses") necessary
for the lawful operation of their respective businesses. All such Licenses are
in full force and effect and there exists no threat (whether formal or informal)
of a revocation or suspension of any of the Licenses.
(m) Compliance with Applicable Laws. Each Borrower is in
compliance with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority applicable to it including, without
limitation, laws, rules and regulations, relating to hazardous waste, hazardous
substances and materials, asbestos and other environmental matters, health and
safety, employment and labor relations, pension and employee benefit (including
ERISA) and all other laws, rules and regulations the breach of which or
noncompliance with which would have a Material Adverse Effect. No Borrower has
received any formal or informal notice or advice to the effect that any Borrower
has become or may become primarily responsible for any the environmental
clean-up and remediation work or any similar obligations or responsibilities
which may be imposed subsequent to the date of this Agreement.
(n) Insurance. The Borrowers maintain insurance policies in
such amounts and against such risks and with such insurers, as is necessary to
protect the Company's assets and properties.
4. Conditions of Lending. The obligation of the Lender to make the Loan
is subject to the following conditions precedent:
(a) Representations and Warranties. The representations and
warranties of the Borrowers set forth in Paragraph 3 of this Agreement shall be
true and correct as of the Closing Date.
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(b) No Default. Each Borrower shall be in compliance with all
the terms and provisions set forth in this Agreement on its part to be observed
or performed, and no Default or Event of Default shall have occurred and be
continuing.
(c) Executed Documents. The Borrowers shall have delivered to
the Lender on the Closing Date the following documents in form and substance
satisfactory to the Lender, each dated (except as otherwise set forth below) as
of the Closing Date:
(i) The Term Note payable to the order of the Lender in the form of Exhibit A to
this Agreement duly completed and executed by the Borrowers and dated as of the
Closing Date.
(ii) The Security Agreement duly executed by the Borrowers.
(iii) UCC-1 Financing Statements duly executed by the Borrowers in a form
satisfactory to the Lender and which shall be filed by the Lender at the expense
of the Borrowers.
(iv) The certificate of the chief executive and financial officers of the
Borrowers as to the matter set forth in Paragraphs 4(a) and (b) of this
Agreement.
(v) Copies of following supporting documents, to the extent that such documents
are provided to the Bank:
(A) Copies of the certificate of incorporation of each Borrower certified by the
Secretary of State of the state of organization;
(B) Certificate of good standing (or
equivalent) for each of the Borrowers
from the respective jurisdictions of their incorporation or organization;
(C) Certificate of good standing (or
equivalent) for the Borrowers from
each jurisdictions in which the ownership or lease of their respective
properties and the conduct of their respective businesses requires qualification
as a foreign corporation;
(D) Certificates of resolution, incumbency and corporate documents for the
Borrowers in form and substance satisfactory to the Lender;
(E) Copies of the by-laws of each Borrower,
certified by the corporate
secretary; and
(F) Such other documents as the Lender may
reasonably request.
(d) Cancellation of Letters of Credit. The Borrowers shall
have caused the termination, cancellation and return to the Lender of any and
all letters of credit issued, guaranteed or otherwise provided, directly or
indirectly, by the Lender or any affiliate of the Lender such that, at the
Closing, neither the Lender nor such affiliate shall have any obligation, either
direct or contingent, under any letters of credit on behalf of or otherwise
benefitting any of the Borrowers.
(e) Lien Searches. UCC and other lien searches and other proof
satisfactory to the Lender that the Collateral is free and clear of all liens,
claims, security interests and other encumbrances, except Permitted
Encumbrances.
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<PAGE>
(f) Payments. Payment to Lender's counsel of its reasonable
fees and disbursements relating to the Loan Document and the related
transactions.
5. Affirmative Covenants. The Borrowers jointly and severally covenant
and agree with the Lender that, so long as this Agreement shall remain in effect
or any of the principal of or interest on the Term Note or other obligations or
amount payable pursuant to this Agreement, the Term Note, the Security Agreement
or any of the other Loan Documents shall be unpaid, as follows:
(a) Existence; Properties. They shall do or cause to be done,
all things necessary at all times (i) to preserve and keep in full force and
effect the existence of each Borrower as a corporation organized under the laws
of the jurisdiction of its incorporation, (ii) to comply with all laws
applicable to them and each of them; (iii) to maintain, preserve and protect all
franchises and trade names, license rights, trademarks and patents owned or
licensed by any of the Borrowers; (iv) to preserve all of the property used or
useful by any of the Borrowers in the conduct of their respective businesses and
keep the same in good repair, working order and condition, and from time to time
make, or cause to be made, all needful and proper repairs, renewals,
replacements, betterments and improvements thereto so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times; (v) to maintain (A) property and business interruption insurance to such
extent and against such risks, including fire, as is customary with companies in
the same or similar businesses, (B) worker's compensation insurance in the
amount required by applicable law, (C) public liability and errors and omissions
insurance in an amount customary with companies in the same or similar business
against claims for personal injury, death, property damage and otherwise, and
(D) such other insurance as may be required by law. The insurance referred to in
clauses (v)(A) and (C) of this Paragraph 5(a) shall not be less than the amount
carried on the date of this Agreement.
(b) Payment of Indebtedness and Taxes. Each Borrower shall (i)
pay all of its Indebtedness and obligations, including, but not limited to, all
principal and interest on all notes and other obligations whether now existing
or hereafter arising, as and when due and payable, and (ii) pay and discharge or
cause to be paid and discharged promptly all taxes, assessments and governmental
charges or levies imposed upon its income and profits, or upon any of its
respective property, real, personal or mixed, or upon any part thereof, before
the same shall become delinquent, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might become a lien or
charge upon such properties or any part thereof; provided, however, that the
Borrowers shall not be required to pay and discharge or cause to be paid and
discharged any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings on
terms satisfactory to the Lender, and the Borrower in question shall have set
aside on its books adequate reserves with respect to any such tax, assessment,
charge, levy or claim so contested.
(c) Notice of Adverse Change. The Borrowers shall, promptly,
but not later than three (3) Business Days after any change or information shall
have come to the attention of any officer of any Borrower, notify the Lender in
writing of (i) any change in the corporate status, business, operations or
financial condition of any Borrower or any other development relating to any
Borrower which, in the good faith judgment of such Executive Officer, may be
materially adverse to such Borrower disclosing the nature thereof, and (ii) any
information which indicates that any financial statement or certificate which is
the subject of any representation contained in this Agreement, or which is
furnished to the Lender pursuant to this Agreement, fails, to any material
extent, to present fairly the financial condition and results of operations
purported to be presented therein, disclosing the nature thereof.
(d) SEC Filings. The Company shall deliver to the Lender a
copy of all material filed with the Commission within five (5) Business Days
after such material is filed with the Commission;
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<PAGE>
provided, however, that the Company shall not be required to deliver preliminary
proxy material to the Lender. The Company shall also deliver to the Lender any
material that it sends to its stockholders at the same time such material is
provided to stockholders.
(e) Notice of Default. In the event any Borrower or any
officer of any Borrower knows of any Default or Event of Default which shall
have occurred, or knows of a material default (or event which, with the passage
of time or the giving of notice would result in a default) under any other
agreement, indenture, mortgage or other instrument to which any Borrower is a
party, regardless of whether such default would constitute a Default or Event of
Default, promptly upon such knowledge furnish to the Lender a written statement
as to such occurrence or event, specifying the nature and extent thereof and the
action (if any) which is proposed to be taken with respect thereto.
(f) Prepayment Demand Event. The Borrowers shall promptly
notify the Lender of any Prepayment Demand Event. Such notice shall be given not
later than ten (10) days prior to the earlier of (i) the date of the agreement
relating to a Prepayment Demand Event, or, if no agreement is executed, the
scheduled closing date, or (ii) if stockholder approval is required, the date
that notice is given to stockholders. If the Lender demands prepayment as a
result of a Prepayment Demand Event, the Borrowers shall prepay the Term Note
within five (5) days after notice demanding prepayment is given by the Lender,
but not earlier than the date of the Prepayment Demand Event if the occurrence
of the Prepayment Demand Event is necessary for the Borrowers to have the funds
to prepay the Note.
(g) Compliance with Applicable Laws. Each Borrower shall
comply with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, including, without limitation, hazardous
waste, hazardous substance and material, asbestos and other environmental,
health and safely, employee and labor relations laws, employee benefit
(including ERISA) the breach of which or noncompliance with which would
materially and adversely affect the business, operations, prospects, properties
or assets or the condition, financial or otherwise, of any Borrower, except to
the extent that such violation or failure of compliance would have a Material
Adverse Effect.
(h) Use of Proceeds. The Borrowers shall use the proceeds of
the Loan only for the purpose set forth in the recitals at the outset of this
Agreement. No portion of the proceeds of the Loan shall be used to pay any of
any Borrower's obligations to its officers, directors and principal
stockholders.
6. Negative Covenants. The Borrowers, jointly and severally, covenant
and agree with the Lender as follows:
(a) Liens. No Borrower shall incur, create, assume or suffer
to exist any mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever (including conditional sales or other title retention agreements) on
any assets now or hereafter owned by it, other than the following ("Permitted
Encumbrances"):
(i) A secured loan from the Bank in the amount of not more than fifteen million
dollars ($15,000,000) to be made pursuant to a certain Loan and Consignment
Agreement dated the date of this Agreement between the Borrowers and the Bank
(which agreement, together with the related loan documents, is referred to as
the "Bank Loan Agreement"), which facility includes a one million five hundred
thousand dollar ($1,500,000) loan for the purchase by the Borrowers of forward
metals contracts; provided, however, that such loan and the related lien shall
only be a Permitted Encumbrance as long as the principal amount of the note to
the Bank does not exceed fifteen million dollars ($15,000,000).
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<PAGE>
(ii) A secured note to Reliable Corporation
("Reliable") in the principal amount
of not more than one million one hundred thousand dollars ($1,100,000), issued
as part of the purchase price of certain assets ("Reliable Assets") purchased
from Reliable, which note is secured only by the Reliable Assets; provided,
however, that such loan and the related lien shall only be a Permitted
Encumbrance as long as the principal amount of the note to the Bank does not
exceed one million one hundred thousand dollars ($1,100,000).
(iii) Deposits under worker's compensation,
unemployment insurance, pension
and social security laws.
(iv) Liens for taxes not yet due, or liens for taxes contested as permitted by
Paragraph 5(b) of this Agreement.
(v) Liens contemplated by this Agreement and the Loan Documents.
(vi) Carriers' and warehousemen's liens or, subject to Paragraph 5(b) of this
Agreement, other liens imposed by law provided such liens are incurred in good
faith and in the ordinary course of business and not as a result of either a
violation of or a failure to comply with any applicable Federal, state or local
laws, rules or regulations or a breach of or default under any Indebtedness or
agreement, and are discharged as reasonably required by the Lender.
(vii) Purchase money mortgages and Capital Lease Obligations;
provided that (A) no other terms, covenants or conditions of this Agreement or
the other Loan Documents are violated as a result of the incurrence of such
purchase money mortgage or Capital Lease Obligation, (B) the principal amount of
any purchase money mortgage or the amount financed with any Capital Lease
Obligation, determined in accordance with Generally Accepted Accounting
Principles, consistently applied, secured by such lien does not exceed 90% of
the lesser of (I) the purchase price or (II) the fair market value of the asset
being acquired or leased, and (C) no asset other than the acquired or leased
asset secures the underlying Indebtedness.
(viii) Other liens, security interests, mortgages or
pledges granted to the Lender.
(b) Indebtedness. No Borrower shall incur, create, assume or
suffer to exist or otherwise become liable in respect of (i) any indebtedness
for borrowed money or otherwise, (ii) deferred purchase price of property, (iii)
on account of deposits (other than in the normal course of business), (iv)
advance or progress payments under contracts, (v) liability, contingent or
otherwise, evidenced by notes, bonds, debentures, or similar obligations, (vi)
purchase money mortgages, (vii) Capital Lease Obligations, or (viii) face
amount(s) of all letters of credit issued for the account of such Person (all of
which are referred to as "Indebtedness"), other than:
(i) Indebtedness described in Schedule 6(b) to this Agreement.
(ii) Indebtedness which secures the obligations referred to in Paragraphs
6(a)(i) and (ii) of this Agreement, but only if the principal amount of such
Indebtedness is not in excess of the amounts set forth in said Paragraphs
6(a)(i) and (ii).
(iii) Indebtedness incurred in connection with this Agreement.
(iv) Trade payables incurred in the ordinary course
of the business.
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<PAGE>
(v) Indebtedness incurred in connection with purchase money mortgages or Capital
Lease Obligations permitted by Paragraph 6(a)(vii) of this Agreement.
(vi) Approved Subordinated Debt.
(vii) Other Indebtedness to the Lender.
(c) Guarantees. No Borrower shall guarantee, endorse, become
surety for, or otherwise in any way become or be responsible for the obligations
of any Person, whether by agreement to purchase the indebtedness of any other
Person, or agreement for the furnishing of funds, directly or indirectly,
including working capital maintenance, take-or-pay contracts or through the
purchase of goods, supplies or services for the purpose of discharging the
Indebtedness of any other Person or otherwise, or enter into or be a party to
any contract for the purchase of merchandise, materials, supplies or other
property if such contract provides that payment for such merchandise, materials,
supplies or other property shall be made regardless of whether delivery of such
merchandise, supplies or other property is ever made or tendered except
endorsements of negotiable instruments for collection or deposit in the ordinary
course of business and guaranties of any other Indebtedness to the Lender,
except that the Borrowers may guarantee the obligations of the other Borrowers
pursuant to the Bank Loan Agreement.
(d) Nature of Business. No Borrower shall materially change or
alter the nature of its business from the nature of the business engaged in by
it on the date of this Agreement.
(e) No Material Adverse Events. There shall be no material
adverse change to the business, financial condition or prospects of any
Borrower.
(f) No Change of Address. No Borrower shall, without twenty
(20) Business Days prior notice to the Lender and execution by such Borrowers of
new UCC-1 Financing Statements, (i) change the address of its principal
executive office, (ii) change the location of the place at which records
concerning accounts receivable, inventory and equipment are maintained, or (iii)
maintain inventory at any location not provided for in the applicable Security
Agreement.
7. Events of Default.
(a) Events of Default Defined. As used in this Agreement, an
"Event of Default" shall mean the happening of any of the following events
(whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of any subordination agreement or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) Any failure of the Borrowers to pay principal on the Term Note when due,
whether on the Maturity Date or upon the happening of a Prepayment Demand Event,
regardless of the reason for such failure, if such failure continues for a
period of three (3) days from the Maturity Date.
(ii) Any failure to pay interest on the Term Note when due,
regardless of the reason for such failure, if such failure continues for a
period of five (5) days from the date such interest payment is due.
(iii) Any other breach by any Borrower of any representations,
warranties or covenants contained in the Loan Agreements, the Security
Agreement, the Note or any other Loan Documents which has not been cured within
thirty (30) days after notice thereof is given by the Lender.
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<PAGE>
(iv) Any Borrower shall (i) voluntarily commence any proceeding or file any
petition seeking relief under Title 11 of the United States Code or any other
Federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to
the institution of, or fail to controvert in a timely and appropriate manner,
either any such proceeding or the filing of any such petition which shall have
been filed against any Borrower, (iii) apply for or consent to the employment of
a receiver, trustee, custodian, sequestrator or similar official for itself or
for a substantial part of its property, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors, (vi) become unable or
admit in writing the inability or the failure generally to pay its debts as they
become due, or (vii) take any corporate action for the purpose of effecting any
of the foregoing.
(v) An involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (i) relief in
respect of any Borrower or of a substantial part of the property of any of them
under Title 11 of the United States Code or any other Federal, state or foreign
bankruptcy, insolvency or similar law (U.S. or foreign), (ii) the appointment of
a receiver, trustee, custodian, sequestrator or similar official for any
Borrower or for a substantial part of the property of any of them, or (iii) the
winding-up or liquidation of any Borrower which, in any such case, is not
dismissed or vacated within ninety (90) days after the commencement or the
filing thereof.
(vi) The Security Agreement shall not be in full force or effect
at any time.
(vii) A material adverse change shall occur with
respect to any Borrower.
(b) Rights of Lender Upon Events of Default. In the case of
the happening of any Event of Default then, at any time thereafter, (x) if
notice was required originally under Paragraph 7(a) in order for the Event of
Default to have occurred, then without notice or demand upon, or (y) if notice
was not so required, then immediately upon notice given to any one or more of
the Borrowers, the Lender may take any of or all of the following actions, at
the same or different times: (i) declare the Term Note and all fees and the
other sums accrued under this Agreement, the Term Note, the Security Agreement
and the other Loan Documents, all obligations of the Borrowers, contingent or
matured, to be forthwith due and payable, both as to principal and interest,
without presentment, demand, protest or other notice of any kind, all of which
are expressly waived, anything contained in this Agreement or in the Term Note
to the contrary notwithstanding, and (ii) exercise any or all of the rights and
remedies afforded to the Lender in the Security Agreement, by the UCC or other
law, or otherwise possessed by the Lender, and realize upon, dispose of or sell
all or any part of the Collateral, and the Lender may apply the net proceeds of
such realization, disposal or sale to the payment of any liabilities of the
Borrowers under the Term Note, the Security Agreement, the other Loan Documents
or this Agreement in such order as the Lender may elect.
(c) Lender as Secured Creditor under UCC. At all times until
all of the Borrowers' obligations pursuant to this Agreement, the Term Note, the
Security Agreement and the other Loan Documents have been satisfied in full, the
Lender may exercise all rights of a secured creditor pursuant to the UCC. No
Borrower shall take any action with respect to any Collateral which is
inconsistent with the Lender's rights pursuant to this Agreement and the
Security Agreement, and they shall comply fully, at their cost and expense, with
all of their obligations set forth in the Security Agreement. The foregoing is
not intended to limit any provision of any of the Security Agreement in any way.
8. Miscellaneous.
(a) Notices. Any notice, request, demand, statement,
authorization, approval or consent made hereunder shall be in writing and shall
be in writing signed by the party giving such notice, and
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<PAGE>
delivered personally or sent by overnight courier, mail or messenger against
receipt thereof or sent by registered or certified mail, return receipt
requested, or by facsimile transmission or similar means of communication if
receipt is confirmed or if transmission of such notice is confirmed by mail or
overnight courier service as provided in this Paragraph 8(a). Notices shall be
deemed to have been received on the date of personal delivery or telecopy or, if
sent by certified or registered mail, return receipt requested, shall be deemed
to be delivered on the fifth (5th) business day after the date of mailing.
Notices shall be sent to the parties as follows:
If to the Borrowers: c/o Westbury Metals Group, Inc.
750 Shames Drive
Westbury, New York 11590
Attention of Mr. Mandel Sherman, President
Fax: (516) 997-8943
With a copy to: Edwards & Angell, LLP
2800 BankBoston Plaza
Providence, Rhode Island 02903
Attention of Susan A. Keller, Esq.
Fax: (401) 276-6611
If to the Lender: Alliance Capital Investment Corp.
125 West Shore Road
Huntington, New York 11743
Attention of Ms. Stacie Greene, President
Fax: (516) 547-9524
With a copy to: Esanu Katsky Korins & Siger, LLP
605 Third Avenue
New York, New York 10158
Attention of Asher S. Levitsky P.C.
Fax: (212) 953-6899
Any party may, by like notice, change the address, person or telecopier number
to which notice shall be sent.
(b) Survival of Agreement. All covenants, agreements,
representations and warranties made in this Agreement and in the certificates
delivered pursuant to this Agreement shall survive the making by the Lender of
the Loan and the execution and delivery to the Lender of the Term Note, and
shall continue in full force and effect so long as the Term Note is outstanding
or any amount due thereunder or under this Agreement, the Security Agreement or
any other Loan Document remains unpaid. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Borrower which are contained in this Agreement shall bind
and inure to the benefit of the respective successors and assigns of the Lender.
No Borrower may assign or transfer any of its interest under this Agreement or
the Term Note or under the Security Agreement or other Loan Documents without
the prior written consent of the Lender.
(c) Expenses of the Lender. The Borrowers shall pay, on the
Closing Date, the reasonable legal fees and disbursements of Lender in
connection with the negotiation, execution and consummation of the transactions
contemplated by this Agreement and related transactions. In addition, the
Borrowers shall jointly and severally pay all reasonable out-of-pocket expenses
incurred by the Lender in
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<PAGE>
connection with the enforcement of the rights of the Lender in connection with
this Agreement, the Security Agreement, the other Loan Documents, or with
respect to the Loan or the Term Note, and with respect to any action which may
be instituted by any Person against the Lender in respect of any of the
foregoing, or as a result of any transaction, action or non-action arising from
any of the foregoing, including, but not limited to, the fees and disbursements
of counsel to the Lender.
(d) Applicable Law. THIS AGREEMENT AND THE TERM NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
(e) No Waiver of Rights by the Lender. Neither any failure nor
any delay on the part of the Lender in exercising any right, power or privilege
under this Agreement or the Term Note, the Security Agreement, or any other Loan
Document shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of any other right,
power or privilege.
(f) Adjustment of Maturity. Whenever a payment to be made
hereunder shall fall due and payable on any day other than a Business Day, such
payment shall be made on the next succeeding Business Day, and such adjustment
of time shall be included in computing interest.
(g) Modification of Agreement. No modification, amendment or
waiver of any provision of this Agreement, the Term Note, the Security Agreement
or any other Loan Documents, nor any consent to any departure by any Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender and the party against whom enforcement of any such
modification, amendment or waiver is sought, and expressly refers to this
Agreement and states that it is a modification, amendment or waiver, as the case
may be, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on any
Borrower in any case shall entitle any Borrower to any other or further notice
or demand in the same, similar or other circumstances.
(h) Severability. In case any one or more of the provisions
contained in this Agreement, the Term Note, the Security Agreement or the other
Loan Documents should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby.
(i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument.
(j) Headings. Paragraph headings used herein are for
convenience of reference only and are not to affect the construction of or be
taken into consideration in interpreting this Agreement.
(k) Indemnification. The Borrowers jointly and severally agree
to indemnify the Lender from and hold it harmless against any and all
liabilities, claims (including, without limitation, any claim under
environmental legislation), damages or expenses ("Liabilities") incurred by the
Lender, arising out of, or by reason of the entering into, this Agreement, or
the consummation of the transaction contemplated by this Agreement and the Term
Note or the use or contemplated use of proceeds of the Loan, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any investigation, litigation or other proceedings (whether or
not the Lender is a party thereto) arising out of or by reason of any of the
aforesaid, other than Liabilities resulting from the willful misconduct of the
Lender.
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<PAGE>
The Lender will promptly give the Borrowers a written statement specifying the
amount of any claim which it believes is subject to the indemnity set forth in
this Paragraph 8(k) which notice shall be conclusive, absent manifest error, and
binding upon the Borrowers. The provisions of this Paragraph 8(k) shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement or the Term Note or any investigation made by or on behalf of
the Lender. Without limiting the foregoing, the Borrowers jointly and severally
further agree to indemnify and hold harmless the Lender, its officers and
directors, each Person who controls the Lender within the meaning of Section 15
of the Securities Act of 1933 or any applicable state securities law and their
respective successors, from and against any and all claims, damages, losses,
liabilities, costs or expense, joint or several, to which they or any of them
may become subject under any Federal or state securities law, rule or
regulation, at common law or otherwise, insofar as such claims, damages, losses,
liabilities, costs or expenses arise out of or are based upon performance by the
Lender hereunder, including the execution and delivery of any other document in
connection therewith. The Borrowers upon demand by the Lender made at any time,
shall reimburse the Lender for any reasonable legal or other expenses incurred
in connection with investigating or defending against any of the foregoing. The
indemnities contained herein shall survive the expiration or termination of this
Agreement and the payment of the Term Note and any obligations of the Borrowers
to the Lender under this Agreement, the Security Agreement, the Term Note and
the other Loan Documents.
(l) Default Interest. Upon the occurrence of an Event of
Default, the Borrowers shall, regardless of whether the Lender has exercised any
of the remedies provided for in this Agreement, the Term Note, the Security
Agreement or any of the other Loan Documents, pay interest, to the extent
permitted by law (i) on the outstanding principal and (ii) on any amounts
advanced by the Lender pursuant to this Agreement, the Term Note, the Security
Agreement or any of the other Loan Documents to protect its security interest in
any of the Collateral, or for any other reason (after as well as before
judgment), at a per annum rate (based on a 360-day year) of ten (10) percentage
points in excess of the Prime Rate.
(m) Usury Savings Clause. All payment obligations arising
under this Agreement or the Term Note are subject to the express condition that
at no time shall any Borrower be obligated or required to pay interest at a rate
which could subject the Lender to either civil or criminal liability as a result
of being in excess of the maximum rate which the Borrowers are permitted by law
to contract or agree to pay. If by the terms of this Agreement or the Term Note,
any Borrower is at any time required or obligated to pay interest at a rate in
excess of such maximum rate, the applicable rate of interest shall be deemed to
be immediately reduced to such maximum rate, and interest thus payable shall be
computed at such maximum rate, and the portion of all prior interest payments in
excess of such maximum rate shall be applied and shall be deemed to have been
payments in reduction of principal.
(n) Waiver of Jury Trial. THE LENDER AND THE BORROWERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE
RELATING TO THIS AGREEMENT, THE TERM NOTE, THE SECURITY AGREEMENT OR THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT, THE TERM NOTE,
THE SECURITY AGREEMENT OR THE OTHER LOAN DOCUMENTS. EXCEPT AS PROHIBITED BY LAW,
EACH BORROWERS HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN
ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. EACH BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(B) ACKNOWLEDGES THAT THE LENDER HAS BEEN INDUCED TO ENTER INTO THIS
- 16 -
<PAGE>
AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS SET FORTH IN
THIS PARAGRAPH 8(n).
(o) Conflicts. Any conflict between any term or provision of
this Agreement and any term, covenant, condition or provision of the Security
Agreement shall be resolved in favor of the term, covenant, condition or
provision which is more likely to enlarge the scope of the Collateral or to
enhance better the financial security provided to the Lender by the Collateral.
(p) Gender and Number. All references to any gender shall be
deemed to include the masculine, feminine or neuter gender, the singular shall
include the plural, and the plural shall include the singular.
(q) Consent to Jurisdiction; Waiver of Immunities. The
Borrowers hereby irrevocably submit to the jurisdiction of any New York State or
Federal court sitting in New York, Nassau or Suffolk County in any action or
proceeding arising out of or relating to this Agreement, and each of them hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such New York State or Federal court. The Borrowers
hereby irrevocably waive the defense of an inconvenient forum to the maintenance
of such action or proceeding. Such service may be made by mailing or delivering
a copy of such process to the Borrowers at their respective addresses set forth
in Paragraph 8(a) of this Agreement, including, without limitation, copies of
the summons and complaint and any other process which may be served in any such
action or proceeding. The Borrowers agree that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any manner provided by law. Nothing
in this Paragraph 8(q) shall affect the right of the Lender to serve legal
process in any other manner permitted by law or affect the right of the Lender
to bring any action or proceeding against any Borrower or their respective
property in the courts of any other jurisdictions. Notwithstanding anything to
the contrary contained herein, in no event shall any Borrower commence any
action relating to this Agreement, the Security Agreement, the Term Note or any
other Loan Document except in the Federal or New York State courts located in
New York City or Nassau or Suffolk County, New York.
[Signatures on Following Page]
- 17 -
<PAGE>
IN WITNESS WHEREOF, each Borrower and the Lender have executed this
Agreement or has caused this Agreement to be duly executed by its duly
authorized officer, all as of the day and year first above written.
THE BORROWERS:
WESTBURY METALS GROUP, INC. WESTBURY INTERNATIONAL, INC.
By:_____________________________ By:_______________________________
Name: Mandel Sherman Name: Mandel Sherman
Title: President Title: President
WESTBURY ALLOYS, INC. RELIABLE - WEST TECH, INC.
By:_____________________________ By:_______________________________
Name: Mandel Sherman Name: Mandel Sherman
Title: President Title: President
LENDER:
ALLIANCE CAPITAL INVESTMENT CORP.
By:_____________________________
Name: Stacie Greene
Title: President
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<PAGE>
STATE OF NEW YORK )
:ss:
COUNTY OF NEW YORK )
On the th day of July, 1999, before me personally came Mandel
Sherman, to me known, who, being by me duly sworn, did depose and say that he is
the President of Westbury Metals Group, Inc., a Delaware corporation, Westbury
International, Inc., a Delaware corporation, Westbury Alloys, Inc., a Delaware
corporation, and Reliable - West Tech, Inc., a Rhode Island corporation, the
corporations described in and which executed the above instrument; and that he
signed his name thereto by authority of the Board of Directors of said
corporations.
Notary Public
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On the th day of July, 1999, before me personally came Stacie
Greene, to me known, who, being by me duly sworn, did depose and say that she is
the President of Alliance Capital Investment Corp., a Nevada corporation, the
corporation described in and which executed the above instrument; and that she
signed her name thereto by authority of the Board of Directors of said
corporation.
Notary Public
- 19 -
<PAGE>
Exhibit A
TERM NOTE
$2,000,000 New York, New York
July , 1999
FOR VALUE RECEIVED, Westbury Metals Group, Inc., Westbury
International, Inc., a Delaware corporation, Westbury Alloys, Inc., a Delaware
corporation, and Reliable - West Tech, Inc., a Rhode Island corporation (the
"Makers"), DO HEREBY JOINTLY AND SEVERALLY PROMISE to pay to the order of
Alliance Capital Investment Corp. (the "Payee"), at the office of Payee in
lawful money of the United States of America, in immediately available funds,
the principal amount of two million dollars ($2,000,000) on July 15, 2001 or on
such earlier date or dates as said principal amount may become due and payable
pursuant to the Loan Agreement dated as of the date hereof, among the Makers and
the Payee(the "Agreement"), and pay interest from the date hereof, in like
money, on the dates specified in, and at the Interest Rate as defined in and
pursuant to, the Agreement, and, upon default, on demand as provided in
Paragraphs 8(l) of the Agreement. This Note is subject in all respects to the
Agreement including, without limitation, the Usury Savings Clause in Paragraph
8(m) thereof.
All payments required hereunder shall be made on or before noon New
York City time on the day in question.
This Note is the Term Note referred to in Paragraph 2(a) of the
Agreement, and is subject to prepayment provisions and acceleration of maturity
as set forth in the Agreement.
This Note is secured by a security interest in certain Collateral all
as set forth in the Agreement, the Security Agreement and the other Loan
Documents referred to therein.
In the event that the Payee engages counsel in order to enforce its
rights under this Note, the Borrowers shall jointly and severally pay all
reasonable legal fees and expenses incurred by the Payee, regardless of whether
litigation is commenced.
The Makers waive presentment, demand for payment, protest and notice of
protest or nonpayment and any other notice required to be given under applicable
law (other than notice expressly provided by the Agreement) in connection with
the enforcement of this Note.
This Note shall be governed by the laws of the State of New York
applicable to agreements executed and to be performed wholly within such State
without regard to principles of conflicts of law. To the extent that they may
legally do so, the Makers hereby (a) consent to the jurisdiction of the United
States District Court for the Southern and Eastern District of New York and
Supreme Court of the State of New York in the County of New York, Nassau or
Suffolk in any action relating to or arising out of this Note, (b) agrees that
any process in any action commenced in such court under this Agreement may be
served upon him personally, by certified or registered mail, return receipt
requested, or by an overnight courier service which obtains evidence of
delivery, with the same full force and effect as if personally served upon him
in New York City, Nassau County or Suffolk County, as the case may be, in
addition to any other method of service permitted by law, and (c) waives any
claim that the jurisdiction of any such tribunal is not a convenient forum for
any such action and any defense of lack of in personam jurisdiction with respect
thereto. MAKERS WAIVE RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY SUIT OR
ACTION ARISING OUT OF OR IN CONNECTION WITH THIS NOTE, TO THE EXTENT THAT THEY
MAY LEGALLY DO SO.
A-1
<PAGE>
IN WITNESS WHEREOF, the Makers have executed this Note by their duly
authorized officers on the date first aforesaid.
WESTBURY METALS GROUP, INC. WESTBURY INTERNATIONAL, INC.
By:_____________________________ By:_______________________________
Name: Mandel Sherman Name: Mandel Sherman
Title: President Title: President
WESTBURY ALLOYS, INC. RELIABLE - WEST TECH, INC.
By:_____________________________ By:_______________________________
Name: Mandel Sherman Name: Mandel Sherman
Title: President Title: President
TERM NOTE
$2,000,000 New York, New York
July 15, 1999
FOR VALUE RECEIVED, Westbury Metals Group, Inc., Westbury
International, Inc., a Delaware corporation, Westbury Alloys, Inc., a Delaware
corporation, and Reliable - West Tech, Inc., a Rhode Island corporation (the
"Makers"), DO HEREBY JOINTLY AND SEVERALLY PROMISE to pay to the order of
Alliance Capital Investment Corp. (the "Payee"), at the office of Payee in
lawful money of the United States of America, in immediately available funds,
the principal amount of two million dollars ($2,000,000) on July 15, 2001 or on
such earlier date or dates as said principal amount may become due and payable
pursuant to the Loan Agreement dated as of the date hereof, among the Makers and
the Payee(the "Agreement"), and pay interest from the date hereof, in like
money, on the dates specified in, and at the Interest Rate as defined in and
pursuant to, the Agreement, and, upon default, on demand as provided in
Paragraphs 8(l) of the Agreement. This Note is subject in all respects to the
Agreement including, without limitation, the Usury Savings Clause in Paragraph
8(m) thereof.
All payments required hereunder shall be made on or before noon New
York City time on the day in question.
This Note is the Term Note referred to in Paragraph 2(a) of the
Agreement, and is subject to prepayment provisions and acceleration of maturity
as set forth in the Agreement.
This Note is secured by a security interest in certain Collateral all
as set forth in the Agreement, the Security Agreement and the other Loan
Documents referred to therein.
In the event that the Payee engages counsel in order to enforce its
rights under this Note, the Borrowers shall jointly and severally pay all
reasonable legal fees and expenses incurred by the Payee, regardless of whether
litigation is commenced.
The Makers waive presentment, demand for payment, protest and notice of
protest or nonpayment and any other notice required to be given under applicable
law (other than notice expressly provided by the Agreement) in connection with
the enforcement of this Note.
This Note shall be governed by the laws of the State of New York
applicable to agreements executed and to be performed wholly within such State
without regard to principles of conflicts of law. To the extent that they may
legally do so, the Makers hereby (a) consent to the jurisdiction of the United
States District Court for the Southern and Eastern District of New York and
Supreme Court of the State of New York in the County of New York, Nassau or
Suffolk in any action relating to or arising out of this Note, (b) agrees that
any process in any action commenced in such court under this Agreement may be
served upon him personally, by certified or registered mail, return receipt
requested, or by an overnight courier service which obtains evidence of
delivery, with the same full force and effect as if personally served upon him
in New York City, Nassau County or Suffolk County, as the case may be, in
addition to any other method of service permitted by law, and (c) waives any
claim that the jurisdiction of any such tribunal is not a convenient forum for
any such action and any defense of lack of in personam jurisdiction with respect
thereto. MAKERS WAIVE RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY SUIT OR
ACTION ARISING OUT OF OR IN CONNECTION WITH THIS NOTE, TO THE EXTENT THAT THEY
MAY LEGALLY DO SO.
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<PAGE>
IN WITNESS WHEREOF, the Makers have executed this Note by their duly
authorized officers on the date first aforesaid.
WESTBURY METALS GROUP, INC. WESTBURY INTERNATIONAL, INC.
By:___________________________ By:_______________________________
Name: Mandel Sherman Name: Mandel Sherman
Title: President Title: President
WESTBURY ALLOYS, INC. RELIABLE - WEST TECH, INC.
By:___________________________ By:_______________________________
Name: Mandel Sherman Name: Mandel Sherman
Title: President Title: President
Alliance Capital Investment Corp.
July 13, 1999
Page 1
Westbury Metals Group, Inc.
750 Shames Drive
Westbury, New York 11590
July 13, 1999
Alliance Capital Investment Corp.
125 West Shore Road
Huntington, New York 11743
Attention of Ms. Stacie Greene, President
Re: Westbury Metals Group, Inc. -- Common Stock Purchase Warrant
Ladies and Gentlemen:
This Letter will set forth our agreement with respect to the purchase
by Alliance Capital Investment Corp. ("Alliance") of a warrant from Westbury
Metals Group, Inc., a Delaware corporation (the "Company"), as follows.
1. Contemporaneously with the execution of this Letter, Alliance will
purchase from the Company, and the Company will sell to Alliance, a Series A
Common Stock Purchase Warrant (the "Warrant") to purchase ninety thousand
(90,000) shares of the Company's common stock, par value $.001 per share
("Common Stock") at an exercise price of $3.00 per share, subject to adjustment.
The purchase price for the Warrant shall be $90. The Warrant shall be in form
and substance satisfactory to Alliance.
2. Alliance acknowledges that the Warrant and the shares of Common
Stock issuable upon exercise of the Warrant (the "Warrant Shares") are
restricted securities, as defined in Rule 144 of the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and may not be sold except pursuant to an effective registration
statement pursuant to the Securities Act or an exemption from the registration
requirement of the Securities Act.
3. Alliance is purchasing the Warrant for its own account and not with
a view to the sale or distribution of the Warrant or the Warrant Shares;
provided, however that nothing in the Paragraph 3 shall be construed in any
manner to restrict or otherwise affect Alliance's right to have the Warrant and
the Warrant Shares registered pursuant to the Securities Act as provided in the
Warrant.
4. The Company represents and warrants that (a) the Warrant constitutes
the valid and binding obligation of the Company, enforceable in accordance with
its terms and (b) the Warrant Shares have been duly authorized for issuance and,
upon payment of the exercise price as provided in the Warrant, will be duly and
validly authorized and issued, fully paid and non-assessable; and (c) all
corporation action necessary for the execution and delivery of this Letter and
the Warrant has been taken.
5. This Letter and the rights of the parties under this Letter shall be
governed by the laws of the State of New York applicable to agreements executed
and to be performed wholly within such State.
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<PAGE>
Alliance Capital Investment Corp.
July 13, 1999
Page 2
Please confirm your agreement with the foregoing by signing this Letter
and returning it to Alliance.
Very truly yours,
WESTBURY METALS GROUP, INC.
By:_____________________________
Mandel Sherman, President
AGREED TO:
ALLIANCE CAPITAL INVESTMENT CORP.
By:_____________________________
Stacie Greene, President
Warrant to Purchase
WA-1 ** 90,000 **
Shares of Common Stock
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:30 P.M. New York City time on July 15, 2009
SERIES A COMMON STOCK PURCHASE WARRANT
OF
WESTBURY METALS GROUP, INC.
This is to certify that, FOR VALUE RECEIVED, Alliance Capital
Investments Corp. or registered assigns ("Holder"), is entitled to purchase, on
the terms and subject to the provisions of this Warrant, from Westbury Metals
Group, Inc., a Delaware corporation (the "Company"), ninety thousand (90,000)
shares of the common stock, par value $.001 per share ("Common Stock"), of the
Company at an exercise price per share of three and 00/100 dollars ($3.00), at
any time during the period (the "Exercise Period") commencing on the July 15,
2000 and ending at 5:30 P.M. New York City time, on July 15, 2009; provided,
however, that if such date is a day on which banking institutions in the State
of New York are authorized by law to close, then on the next succeeding day on
which such banks are not authorized to be closed. Reference to the Warrants
shall mean all of the Series A Common Stock Purchase Warrants sold by the
Company to Alliance Capital Investments Corp. on or about July 15, 1999 and any
Warrants issued as a result of the transfer or partial exercise of any of such
Warrants.
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole at any
time or in part from time to time during the Exercise Period by presentation and
surrender of this Warrant to the Company at its principal office, or at the
office of its stock transfer agent, if any, with the Purchase Form annexed
hereto duly executed and accompanied by payment of the Exercise Price for the
number of shares of Common Stock specified in such form. Payment of the Exercise
Price shall be made by wire transfer or check (subject to collection) in the
amount of the Exercise Price payable to the order of the Company. If this
Warrant should be exercised in part only, the Company shall, upon surrender of
this Warrant for cancellation, execute and deliver a new Warrant evidencing the
rights of the Holder to purchase the balance of the shares of Common Stock
purchasable hereunder. Upon receipt by the Company of this Warrant at its
office, or by the stock transfer agent of the Company at its office, in proper
form for exercise, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. The shares of Common Stock issued or issuable upon exercise of this
Warrant are referred to as the "Warrant Shares."
(b) RESERVATION OF SHARES. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise or conversion
of this Warrant such number of shares of
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<PAGE>
Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant and that it shall not, without the prior approval of the holders of
a majority of the Warrants then outstanding, increase the par value of the
Common Stock.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise of this Warrant,
the Company shall issue to the Holder the next higher integral number of shares
of Common Stock.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. Subject to the provisions of Paragraph (k) of this
Warrant, upon surrender of this Warrant to the Company or at the office of its
stock transfer agent, if any, with the Assignment Form annexed hereto duly
executed and funds sufficient to pay any transfer tax, the Company shall,
without charge, execute and deliver a new Warrant in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other Warrants which
carry the same rights upon presentation hereof at the office of the Company or
at the office of its stock transfer agent, if any, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued and signed by the Holder hereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue of this
Warrant, be entitled to any rights of a stockholder in the Company, either at
law or equity, and the rights of the Holder are limited to those expressed in
the Warrant and are not enforceable against the Company except to the extent set
forth in this Warrant.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time
and the number and kind of securities purchasable upon exercise of each Warrant
shall be subject to adjustment as follows:
(1) In case the Company shall, subsequent to July 14, 1999,
(A) pay a dividend or make a distribution on its shares of Common Stock in
shares of Common Stock (B) subdivide or reclassify its outstanding Common Stock
into a greater number of shares, or (C) combine or reclassify its outstanding
Common Stock into a smaller number of shares or otherwise effect a reverse
split, the Exercise Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so that the
Holder of this Warrant exercised after such date shall be entitled to receive
the aggregate number and kind of shares which, if this Warrant had been
exercised immediately prior to such time, he would have owned upon such exercise
and been entitled to receive upon such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed in this Paragraph (f)(1) shall occur.
- 2 -
<PAGE>
(2) In case the Company shall, subsequent to July 14, 1999,
issue rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (or having a conversion price per share) less than the
current market price per share of Common Stock (as defined in Paragraph (f)(5)
of this Warrant) on the record date mentioned below, the Exercise Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Exercise Price in effect immediately prior to the date of such issuance by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding on the record date mentioned below plus the number of additional
shares of Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current market price
per share of Common Stock, and of which the denominator shall be the number of
shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock offered for subscription or purchased (or into
which the convertible securities so offered are convertible). Such adjustment
shall be made successively whenever such rights or warrants are issued and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants; and to the extent that
shares of Common Stock or securities convertible into Common Stock are not
delivered after the expiration of such rights or warrants, the Exercise Price
shall be readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.
(3) In case the Company shall, subsequent to July 14, 1999,
distribute to all holders of Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions paid out of current earnings
and dividends or distributions referred to in Paragraph (f)(1) of this Warrant
or subscription rights or warrants (excluding those referred to in Paragraph
(f)(2) of this Warrant), then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
total number of shares of Common Stock outstanding multiplied by the current
market price per share of Common Stock (as defined in Paragraph (f)(5) of this
Warrant), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of such
rights or warrants, and of which the denominator shall be the total number of
shares of Common Stock outstanding multiplied by such current market price per
share of Common Stock. Such adjustment shall be made successively whenever such
a record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(4) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Paragraphs (f)(1), (2) or (3) of this Warrant,
the number of shares of Common Stock purchasable upon exercise of each Warrant
shall simultaneously be adjusted by multiplying the number of shares of Common
Stock issuable upon exercise of each Warrant in effect on the date thereof by
the Exercise Price in effect on the date thereof and dividing the product so
obtained by the Exercise Price, as adjusted. In no event shall the Exercise
Price per share be less than the par value per share, and, if any adjustment
made pursuant to Paragraph (f)(1), (2) or (3) would result in an exercise price
of less than the par value per share, then, in such event, the Exercise Price
per share shall be the par value per share. The Company agrees not to increase
the par value of the Common Stock other than in connection with a reverse split
or combination or shares or other recapitalization, in which event any such
increase shall not be greater that which would result from the application of
the adjustments provided in Paragraph (f)(1) of this Warrant to the par value.
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<PAGE>
(5) For the purpose of any computation under Paragraphs (f)(2)
and (3) of this Warrant, the current market price per share of Common Stock at
any date shall be deemed to be the average of the daily closing prices for
thirty (30) consecutive trading days commencing forty five (45) trading days
before such date. The closing price for each day shall be the reported last sale
price regular way or, in case no such reported sale takes place on such day, the
reported last bid price, in either case on the principal national securities
exchange or market on which the Common Stock is admitted to trading or listed or
on Nasdaq, or if not listed or admitted to trading on such exchange or such
market, the average of the reported closing bid prices as reported by Nasdaq,
the National Quotation Bureau, Inc. or other similar organization if Nasdaq is
no longer reporting such information, or if not so available, the fair market
price as determined in good faith by the Board of Directors.
(6) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least five
cents ($0.05) in such price; provided, however, that any adjustments which by
reason of this Paragraph (f)(6) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Paragraph (f) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this Paragraph (f) to
the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in addition to those
required by this Paragraph (f), as it in its discretion shall determine to be
advisable in order that any dividend or distribution in shares of Common Stock,
subdivision, reclassification or combination of Common Stock, issuance of
warrants to purchase Common Stock or distribution of evidences of indebtedness
or other assets (excluding cash dividends) referred to hereinabove in this
Paragraph (f) hereafter made by the Company to the holders of its Common Stock
shall not result in any tax to the holders of its Common Stock or securities
convertible into Common Stock.
(7) The Company may retain a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular accountants engaged by the Company) to make any computation
required by this Paragraph (f), and a certificate signed by such firm shall be
conclusive evidence of the correctness of such adjustment.
(8) In the event that at any time, as a result of an
adjustment made pursuant to Paragraph (f)(1) of this Warrant, the Holder of any
Warrant thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Paragraphs (f)(1) to
(6), inclusive, of this Warrant.
(9) Irrespective of any adjustments in the Exercise Price or
the number or kind of shares purchasable upon exercise of Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this and similar Warrants initially
issued by the Company.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Paragraph (f) of this Warrant, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price and the adjusted
number of shares of Common Stock issuable upon exercise of each Warrant,
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
shares of Common Stock, if any, and such other facts as shall be necessary to
show the reason for and the manner of computing such
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<PAGE>
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder, and the Company shall, forthwith
after each such adjustment, mail, by first class mail, a copy of such
certificate to the Holder at the Holder's address set forth in the Company's
Warrant Register.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (1) if the Company shall pay any dividend or make any distribution
upon Common Stock (other than a regular cash dividend payable out of retained
earnings) or (2) if the Company shall offer to the holders of Common Stock for
subscription or purchase by them any share of any class or any other rights or
(3) if any capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail, return receipt requested, to the Holder, at least fifteen days
prior to the date specified in clauses (i) and (ii), as the case may be, of this
Paragraph (h) a notice containing a brief description of the proposed action and
stating the date on which (i) a record is to be taken for the purpose of such
dividend, distribution or rights, or (ii) such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed, as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger in which the
Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the class issuable upon exercise of this Warrant) or in case
of any sale, lease or conveyance to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder shall have
the right thereafter by exercising this Warrant, to purchase the kind and amount
of shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Paragraph (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(1) (A) At any time during the period beginning on July 15,
2000 (or earlier with the consent of the Company) and ending on July 15, 2010,
the Company shall advise the Holder of Warrants or the Warrant Shares or any
then holder of the Warrants and the Warrant Shares (each such person being
referred to herein as a "holder") by written notice at least two (2) weeks prior
to the filing of any registration statement under the Securities Act of 1933, as
amended, or any comparable successor law (the "Securities Act") covering
securities of the Company and will upon the request of any such holder include
in any such registration statement such information as may be required to permit
a public offering of Warrants and/or the Warrant Shares (collectively, the
"Registerable Securities") of the holder; provided, however, that, with
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respect to an offering by the Company of securities for its account only, to the
extent that the managing underwriter shall have advised the Company that the
inclusion of such Registerable Securities in the registration statement will
have a material adverse effect upon the ability of the Company to sell
securities for its own account unless the holder agrees not to sell such
securities pursuant to the registration statement for such period (the "Lock-Up
Period"), not to exceed six (6) months, as the managing underwriter may
reasonably require, then the inclusion of the holder's Registerable Securities
shall be contingent upon the agreement of the holder to such lock-up; provided,
however, that in no event shall any holder be treated less favorably than others
having piggyback registration rights. The Company shall keep such registration
statement current for a period of twelve (12) months from the effective date of
such registration statement or the expiration of the Lock-Up Period, as the case
may be, or until such earlier date as all of the registered Registrable
Securities shall have been sold.
(B) If the majority holder, as hereinafter defined, shall give
notice to the Company at any time during the period beginning on July 15, 2000
(or earlier with the consent of the Company) and ending July 15, 2010 to the
effect that such holder contemplates the sale of any of such holder's
Registrable Securities under such circumstances that a public offering
distribution (within the meaning of the Securities Act) of the Registrable
Securities will be involved, then the Company shall, use its best efforts to
file within forty-five (45) days after receipt of such notice, time being of the
essence, a registration statement pursuant to the Securities Act, to the end
that the Registrable Securities may be sold under the Securities Act as promptly
as practicable thereafter, and the Company will use its best efforts to cause
such registration statement to become effective as soon as possible; provided
that such holder shall furnish the Company with appropriate information
(relating to the intentions of such holder) in connection therewith as the
Company shall reasonably request in writing. The Company shall keep such
registration statement current for such time, not to exceed the greater of
twelve (12) months or, if the Company is eligible to register the Registrable
Securities on a Form S-3 (or subsequent similar form) until the Registrable
Securities shall have been sold. Upon receipt of notice, the Company shall
promptly give notice to the other holders of Warrants and shall, at the request
of such holders, include their Registrable Securities in the same manner as if
they had given the notice pursuant to this Paragraph (j)(1)(B). The holders of
the Warrants shall be entitled to one (1) demand registration right pursuant to
this Paragraph (j)(1)(B); provided, that if, for any reason, the holder is not
able to sell Registrable Securities pursuant to the registration statement
because the Company failed to keep the registration statement current and
effective during the period set forth in this Paragraph (j)(1)(B), at the
request of any holder whose Registrable Securities were included in the
registration statement, the Company shall file a new registration statement in
the manner set forth in this Paragraph (j)(1)(B).
(2) The following provision of this Paragraph (j) shall also
be applicable:
(A) The Company shall bear the entire cost and expense of any registration of
securities initiated by it under Paragraph (j)(1)(A) of this Warrant or filed
pursuant to Paragraph (j)(1)(B) of this Warrant. Any holder whose Registrable
Securities are included in any such registration statement pursuant to this
Paragraph (j) shall, however, pay the fees of any counsel or accountants
retained by the holder and any transfer taxes or underwriting discounts or
commissions applicable to the Registrable Securities sold by such holder
pursuant thereto.
(B) The Company shall indemnify and hold harmless each such
holder and each underwriter, within the meaning of the Securities Act, who may
purchase from or sell for any such holder any Registerable Securities from and
against any and all losses, claims, damages and liabilities (including fees and
expenses of counsel, which counsel may, if the holders request, be separate from
counsel for the
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Company) caused by any untrue statement or alleged untrue statement of a
material fact contained in the registration statement or any post-effective
amendment thereto or any registration statement under the Securities Act or any
prospectus included therein required to be filed or furnished by reason of this
Paragraph (j) or any application or other filing under any state securities law
caused by any omission or alleged omissions to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading to which such holder or any such underwriter or any of them may
become subject under the Securities Act, the Securities Exchange Act of 1934, as
amended, or other Federal or state statutory law or regulation, at common law or
otherwise, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished to the Company by the holder
or any underwriter engaged by the holder expressly for use therein, which
indemnification shall include each person, if any, who controls any such
underwriter within the meaning of the Securities Act; provided, however, that
any such holder or underwriter shall at the same time indemnify the Company, its
directors, each officer signing the related registration statement, each person,
if any, who controls the Company within the meaning of the Securities Act and
each other holder, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or any prospectus required
to be filed or furnished by reason of this Paragraph (j) or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or alleged untrue statement or omission based upon information
furnished to the Company by the holder or such underwriter expressly for use
therein.
(C) If any action or claim shall be brought or asserted by a
party entitled to indemnification Paragraph (j)(2)(B) of this Warrant (each, an
"Indemnified Party") in respect of which indemnity may be sought from the
responsible party identified in said Paragraph (j)(2)(B) (the "Indemnifying
Party"), the Indemnified Party shall promptly notify the Indemnifying Party in
writing, and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to each Indemnified Party and
the payment of all reasonable legal and other expenses. The failure of any
Indemnified Party to notify the Indemnifying Party will not relieve the
Indemnifying Party of any liability for indemnification which it may have to any
Indemnified Party unless the Indemnifying Party has been substantially
prejudiced by such failure and in no event will such failure relieve the
Indemnifying Party from any liability it may have to any Indemnified Party
otherwise than under this Paragraph (j)(2)(C). Each Indemnified Party shall have
the right to employ separate counsel in any such action and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (a) the employment thereof has been
specifically authorized by the Indemnifying Party in writing, or (b) the
Indemnifying Party has failed to assume the defense and employ counsel or (c)
the named parties to any such action (including any impleaded parties) include
both (i) any Indemnified Party and (ii) the Indemnifying Party, and, in the
reasonable judgment of counsel to any Indemnified Party, it is advisable for
such Indemnified Party to be represented by separate counsel (in which case the
Indemnifying Party shall not have the right to assume the defense of such action
on behalf of such Indemnified Party; provided, however, it being understood that
the Indemnifying Party shall, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of only one separate firm of attorneys at any time
for the Indemnified Parties in each jurisdiction, and each such firm shall be
designated in writing by the Indemnified Parties). The Indemnifying Party shall
not be liable for any settlement of any such action effected by an Indemnified
Party without the written consent of the Indemnifying Party (which shall not be
withheld unreasonably in light of all factors of importance to such Indemnified
Party and the Indemnifying Party), but if settled with such written consent, or
if there
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be a final judgment or decree for the plaintiff in any such action by a court of
competent jurisdiction and the time to appeal shall have expired or the last
appeal shall have been denied, the Indemnifying Party agrees to indemnify and
hold harmless each Indemnified Party from and against any loss or liability by
reason of such settlement or judgment. Any person to whom or to which the
Company has an indemnification obligations other than pursuant to Paragraph
(j)(2)(C) of this Warrant or the other Warrants shall not be deemed an
Indemnified Person pursuant this Paragraph (j)(2)(D).
(D) If the indemnification provided for in this Paragraph
(j)(2) is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any holder is obligated to contribute
pursuant to this Agreement shall be limited to the net proceeds to such holder
from the Registrable Securities sold pursuant to the registration statement
which gives rise to such obligation to contribute (less the aggregate amount of
any damages which the holder has otherwise been required to pay in respect of
such loss, claim, damage, liability or action or any substantially similar loss,
claim, damage, liability or action arising from the sale of such Registrable
Securities). The foregoing contribution agreement shall in no way affect the
contribution liabilities of any persons having liability under Section 11 of the
Securities Act other than the Company and the holders. No contribution shall be
requested with regard to the settlement of any matter from any party who did not
consent to the settlement, provided, however, that such consent shall not be
unreasonably withheld in light of all factors of importance to the parties.
Notwithstanding any provisions of this Paragraph (j)(2)(D), no person liable for
a fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
liable for such fraudulent misrepresentation.
(E) The indemnification provided by this Agreement shall be a
continuing right to indemnification and shall survive the registration and sale
of any Shares by any person entitled to indemnification hereunder and the
expiration or termination of this Agreement.
(F) Neither the giving of any notice by any holder nor the making
of any request for prospectuses shall impose any upon any holder making such
request any obligation to sell any Registerable Securities or exercise any
Warrants.
(G) In connection with any registration statement filed pursuant
to this Paragraph (j), the Company shall supply prospectuses and qualify the
Registerable Securities for sale in such states as the holders may reasonably
designates, provided, that the Company shall not be required to qualify or
register the Registerable Securities in any jurisdiction where such
qualification or registration would require the Company to submit generally to
the jurisdiction of such state.
(H) The Company's obligation to register the holder's Warrant Shares shall
terminate at such time as all of the Warrant Shares may be sold by the holder
pursuant to Rule 144 of the
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Securities and Exchange Commission (or any subsequent similar rule) without
limitation or restriction on volume or method of sale.
(3) The term "majority holder" shall mean the holders of at
least a majority of the shares of Common Stock for which the Warrants
(considered in the aggregate) are exercisable and shall include any owner or
combination of owners of such securities, which ownership shall be calculated by
determining the number of shares of Common Stock held by such owner or owners
resulting from the exercise of any Warrant after giving effect to any stock
dividend, split, reverse split or other recapitalization and the number of
shares of Common Stock issuable upon exercise of any unexercised Warrants.
(4) The Company's agreements with respect to Warrants or
Warrant Shares in this Paragraph (j) shall continue in effect regardless of the
exercise and surrender of this Warrant, and shall be available to any transferee
of Warrants or Warrant Shares, other than a person who may sell such securities
without restriction.
(5) In connection with any registration of the Warrants
pursuant to this Paragraph (j), the Company shall not be required to maintain
any public market in the Warrants.
(k) TRANSFER TO COMPLY WITH THE SECURITIES ACT. This Warrant or the
Warrant Shares or any other security issued or issuable upon exercise of this
Warrant may not be sold or otherwise disposed of except as follows:
(1) To a person who, in the opinion of counsel for the
Company, is a person to whom this Warrant or Warrant Shares may legally be
transferred without registration and without the delivery of a current
prospectus under the Securities Act and in compliance with applicable state
securities laws with respect thereto and then only against receipt of an
agreement of such person to comply with the provisions of this Paragraph (k)
with respect to any resale or other disposition of such securities which
agreement shall be satisfactory in form and substance to the Company and its
counsel; or
(2) to any person upon delivery of a prospectus then meeting
the requirements of the Securities Act and state securities laws relating to
such securities and the offering thereof for such sale or disposition.
Dated as of July 15, 1999
WESTBURY METALS GROUP, INC.
By:
Mandel Sherman, President
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PURCHASE FORM
Dated: , 20
The undersigned hereby irrevocably exercises this Warrant to the extent of
purchasing shares of Common Stock and hereby makes payment of $ in payment of
the Exercise Price therefor.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
(Please typewrite or print in block letters)
Signature
Social Security or Employer Identification No.
ASSIGNMENT FORM
FOR VALUE RECEIVED,
hereby sells, assigns and transfer unto
Name
(Please typewrite or print in block letters)
Address
Social Security or Employer Identification No.
The right to purchase Common Stock represented by this Warrant to the extent of
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint attorney to transfer the same on the books of the Company
with full power of substitution.
Dated: , 19
Signature
Signature Medallion Guaranteed:
