<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10938
SEMX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-3584740
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 LABRIOLA COURT, ARMONK, NY 10504
(Address of principal executive offices, including zip code)
(914) 273-5500
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes [X] No [ ]
(2) Yes [X] No [ ]
The number of shares outstanding of the Registrant's sole class of
common stock, as of October 31, 1999 was 6,055,391 shares.
<PAGE>
TABLE OF CONTENTS
PAGE NO
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheet at
September 30, 1999 and December 31, 1998. 3
Consolidated Statement of Operations and
Comprehensive Income (Loss) for the three and nine
months ended September 30, 1999 and 1998. 4
Consolidated Statement of Cash Flows
for the nine months ended
September 30, 1999 and 1998. 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 15
FORWARD LOOKING INFORMATION
Portions of the narrative set forth in this document that are not historical in
nature are forward looking statements. These forward-looking statements speak
only as of the date of this document, and the Company expressly disclaims any
obligation or undertaking to publicly release any updates or revisions to any
forward-looking statements contained herein. The Company's actual performance
may differ materially from that contemplated by the forward looking statements
as a result of a variety of factors that include, but are not limited to, the
general economic or business climate, business conditions of the microelectronic
and semiconductor markets and the automotive and communications industry which
the Company serves and the economic volatility in geographic markets, such as
Asia.
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEMX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 1999 1998
(UNAUDITED) (AUDITED)
-------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,774 $ 1,141
Accounts receivable, less allowance for doubtful accounts of $511 and
$245, respectively 7,571 8,007
Inventories 5,263 10,447
Prepaid expenses and other current assets 1,452 948
Deferred income tax assets -- 5,643
-------- --------
Total current assets 16,060 26,186
-------- --------
Property, Plant and Equipment-at cost, net of accumulated depreciation
and amortization of $15,746 and $13,974, respectively 35,060 38,352
-------- --------
Other Assets-net of accumulated amortization
Technology rights and intellectual property 914 963
Goodwill 8,411 15,938
Other 764 885
-------- --------
Total other assets 10,089 17,786
-------- --------
Total Assets $ 61,209 $ 82,324
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,163 $ 5,262
Current portion of long-term debt (Note 5) 2,367 29,393
Current portion of obligations under capital leases 2,576 2,648
Accrued expenses 3,012 2,947
Income Taxes Payable 879 --
-------- --------
Total current liabilities 11,997 40,250
Deferred income taxes 1,897 2,329
Long-term debt (Note 5) 10,104 6,657
Obligations under capital leases 4,506 6,398
-------- --------
Total Liabilities 28,504 55,634
-------- --------
Minority Interest in Subsidiary 1,132 1,319
-------- --------
Shareholders' Equity:
Preferred stock-$.10 par value;authorized 1,000,000 shares, none issued -- --
Common stock-$.10 par value; authorized 20,000,000
shares, issued 6,389,991 and 6,375,616 shares 639 638
Additional paid-in-capital 28,237 28,199
Accumulated other comphrehensive income (469) (322)
Retained earnings (accumulated deficit) 3,378 (2,932)
-------- --------
31,785 25,583
Less: Treasury stock: 334,600 shares at cost 212 212
-------- --------
Shareholders' Equity 31,573 25,371
-------- --------
Total Liabilities And Shareholders' Equity $ 61,209 $ 82,324
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
page 3
<PAGE>
SEMX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------- -----------------------
1999 1998 1999 1998
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $12,188 $ 11,504 $ 34,893 $ 36,988
Service Revenue 4,170 4,510 12,406 13,917
------- -------- -------- --------
Total Revenue 16,358 16,014 47,299 50,905
Cost of Goods Sold 7,247 8,749 22,041 26,144
Cost of Services Performed 3,269 3,566 9,583 11,380
------- -------- -------- --------
Total 10,516 12,315 31,624 37,524
------- -------- -------- --------
Gross Profit 5,842 3,699 15,675 13,381
Selling, General and Administrative Expense 3,569 3,676 10,258 10,983
Restructuring Charge -- -- -- 1,950
------- -------- -------- --------
Operating Income (Loss) 2,273 23 5,417 448
Gain on Sale of Connector Business -- -- 8,430 --
Interest Expense (Net) 442 989 1,653 2,697
------- -------- -------- --------
Income (Loss) Before Provision for Income
Taxes and Minority Interest in
Consolidated Subsidiary 1,831 (966) 12,194 (2,249)
Provision (Credit) for Income Taxes 695 (317) 5,908 (751)
------- -------- -------- --------
Income (Loss) Before Minority Interest in
Consolidated Subsidiary 1,136 (649) 6,286 (1,498)
Minority Interest in Loss of Consolidated Subsidiary 30 49 24 255
------- -------- -------- --------
Net Income (Loss) $ 1,166 $ (600) $ 6,310 $ (1,243)
======= ======== ======== ========
Other Comprehensive Income:
Foreign currency translation net of tax benefit (expense)
of $(82) and $(116); and $75 and $105, respectively 159 224 (147) 203
------- -------- -------- --------
Comprehensive Income (Loss) $ 1,325 $ (376) $ 6,163 $ (1,040)
======= ======== ======== ========
Basic Income (Loss) per Common Share $ .19 $ (.10) $ 1.04 $ (.21)
Diluted Income (Loss) per Common Share $ .19 $ (.10) $ 1.01 $ (.21)
Weighted Average Number of Common
Shares Outstanding - Basic 6,048 6,041 6,043 6,057
Weighted Average Number of Common
Shares Outstanding - Diluted 6,281 6,041 6,262 6,057
</TABLE>
See Notes To Consolidated Financial Statements
page 4
<PAGE>
SEMX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30
----------------------
1999 1998
-------- -------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 6,310 $(1,243)
Adjustments To Reconcile Net Income To Net
Cash Used In Operating Activities:
(Gain) Loss on Sales of Connector Business (8,430) 52
Depreciation And Amortization of Property And Equipment 3,771 3,671
Other Amortization 481 742
Deferred Income Taxes (357) (131)
Minority Interest in Subsidiary (Income) Loss (24) (255)
Changes In Operating Assets And Liabilities:
(Increase) Decrease In Accounts Receivable (1,879) 2,227
Increase In Inventory (881) (1,294)
(Increase) Decrease In Prepaid Expenses And
Other Current Assets 5,640 (265)
Decrease In Accounts Payable (1,235) (2,043)
Increase (Decrease) In Accrued Expenses 238 (302)
Increase (Decrease) In Income Taxes Payable 877 (985)
-------- -------
Net Cash Provided By (Used In) Operating Activities 4,511 174
-------- -------
Cash Flows From Investing Activities:
Purchase Of Property And Equipment (1,732) (2,289)
Proceeds From Sale of Connector Business 22,191 12
(Increase) Decrease In Other Assets (687) (682)
Acquisition of Subsidiary --
-------- -------
Net Cash Provided by (Used In) Investing Activities 19,772 (2,959)
-------- -------
Cash Flows From Financing Activities:
Purchase of Treasury Stock -- (212)
Proceeds From Exercise Of Stock Options 38
Proceeds From Long-Term Debt -- 2,240
(Repayment) Borrowing Under Revolving Credit (6,173) 4,925
Payment Under Capital Leases (2,017) (1,631)
Payment Under Term Loan Agreements (15,558) (3,224)
Borrowing under Term Loan Agreements -- --
-------- -------
Net Cash Provided By (Used In) Financing Activities (23,710) 2,098
-------- -------
Effect of Exchange Rate Change on Cash 60 (44)
Net Increase (Decrease) In Cash 633 (731)
Cash At Beginning Of Period 1,141 2,260
-------- -------
Cash At End Of Period $ 1,774 $ 1,529
======== =======
Supplemental schedule of noncash investing and financing activity:
Machinery and equipment acquired under capital leases $ 900 $ 2,806
</TABLE>
See Notes to Consolidated Financial Statements
page 5
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SEMX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of SEMX Corporation
("SEMX") and its wholly and majority owned subsidiaries. As used herein, the
term "Company" refers to SEMX, its predecessors and its subsidiaries unless the
context indicates otherwise. The Consolidated Balance Sheet at September 30,
1999, and the Consolidated Statement of Operations and Cash Flows for the three
and nine months ended September 30, 1999 and 1998, have been prepared by the
Company and are unaudited. In the opinion of management, the financial
statements reflect all adjustments necessary to present fairly the results for
the interim periods. Such results are not necessarily indicative of results to
be expected for the year. The Consolidated Balance Sheet at December 31, 1998
has been derived from the audited financial statements at that date. These
financial statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1998. The comparative
financial statements for 1998 have been reclassified to conform to the current
period's presentation.
NOTE 2. EARNINGS PER SHARE
Basic earnings per share are computed based on the weighted average number of
common shares outstanding during the period. Diluted earnings per share gives
effect to all dilutive potential common shares outstanding during the period.
Potential dilutive common shares include shares issuable upon exercise of the
Company's stock options.
NOTE 3. DISPOSITIONS
In February 1999, the Company sold its connector businesses, Retconn
Incorporated ("Retconn") and ST Electronics, Inc. ("ST") to Litton Corporation
("Litton"). Litton acquired the specified assets and assumed certain liabilities
of Retconn and ST, as defined in the purchase agreement, in consideration for a
cash payment to the Company of $23,871. The liabilities assumed by Litton
amounted to approximately $3,500. The purchase price is subject to adjustment
for changes in Retconn's closing date balance sheet. The Company expects to make
a payment to Litton of approximately $310 during the fourth quarter of 1999 in
final settlement of the purchase price. In addition, the Company is prevented
from directly competing in the connector business for a period of three years.
The Company recorded a gain of $3,903 on the transaction, net of applicable
income taxes of $4,527.
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NOTE 4. INVENTORY
Inventories consisted of the following:
September 30, December 31,
1999 1998
------- -------
Precious Metals $ 1,086 $ 1,245
Non Precious Metals 4,177 9,202
------- -------
$ 5,263 $10,447
------- -------
Inventories, which consist principally of work-in-process inventory, include raw
materials, labor and manufacturing expenses and are stated at the lower of cost,
determined by the first-in, first-out method, or market.
NOTE 5. DEBT
On February 19, 1999, the Company entered into an agreement with First Union and
Fleet (the "Bank") concerning the distribution of $23,871 in proceeds from the
sale of Retconn and ST. Pursuant to the agreement, the Company repaid $15,050 of
term indebtedness and $7,141 of revolving credit borrowings. In addition, the
Company paid approximately $1,680 of transaction-related fees and severance
payments. The agreement, as amended also provided for the Bank's forbearance of
noncompliance with certain existing covenants, repayment of principal and an
extension of its revolving credit and interim term loan facilities through
October 31, 1999.
On November 1, 1999 the company entered into a Revolving Credit, Term Loan and
Security Agreement with PNC Bank, National Association as lender and agent ("the
Credit Facility"). The Credit Facility, replaced the existing revolving credit
and interim term loan facilities with First Union and Fleet. The Credit
Facility, which has a three year term, consists of a formula based $8,500
revolving credit facility and a $6,234 term loan which are secured by
substantially all of the Company's domestic assets. Revolving credit facility
availibility of up to $5,000 Singapore dollars (approximately $3,000 US) is
reserved for possible issuance of a standby letter of credit in support of the
Company's continuing guarantee of a foreign subsidiaries debt. The interest rate
on revolving credit borrowings are, at the Company's option, based on either the
prime rate or a floating eurodollar rate plus a margin of 2.75%. At the
Company's option, the term loan interest rate is based on either prime plus 0.5%
or a floating eurodollar rate plus a margin of 3.0%. Principal payments under
the $6,234 term loan are due in equal monthly installments of $74 over the three
year term.
The refinancing with PNC Bank has been given effect to on the accompanying
September 30, 1999 Balance Sheet, in accordance with FASB Statement No. 6,
"Classification of Short-Term Obligations Expected to Be Refinanced."
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS (for the three and nine month periods ended September 30,
1999 compared to the three and nine month periods ended September 30, 1998)
REVENUE:
Total revenue for the three month period ended September 30, 1999 of
$16,358,000 increased $344,000 or 2% and decreased $3,606,000 or 7% for the
nine month period as compared to the comparable 1998 periods. On February 19,
1999, the Company sold its connector business, ("Retconn") as described
herein. Retconn had sales through the February 1999 disposition date of
$2,122,000 compared to sales of $4,410,000 for the three months and
$9,707,000 for the nine months ended September 30, 1998. Excluding Retconn
sales for all periods presented, total revenue for the 1999 third quarter
increased $4,754,000 or 41% and for the nine month period ended September 30,
1999, increased 8,389,000 or 23% from the prior year periods.
Excluding Retconn, the Materials Groups 1999 third quarter sales of $12,188,000
increased $5,094,000, or 72% and nine month sales of $32,771,000 increased
$9,900,000 or 43%, from the comparable 1998 periods. SPM's 1999 sales increased
by $191,000 or 6% in the third quarter and decreased by $267,000 or 3% in the
nine months period, as compared to the comparable 1998 periods. The decrease in
SPM's 1999 nine month sales was caused by lower sales to a customer serving the
cellular market, partially offset by increased sales of gold wire during the
third quarter. Polese Company's 1999 sales increased by $4,903,000 or 123% for
the third quarter and increased by $10,167,000, or 79% for the nine month period
as compared to the prior year periods. Polese sales have increased due to
improved sales of microprocessor lids, cellular base station heat dissipation
products and the introduction of new assembly products.
The Company's Services Group 1999 revenues decreased $340,000 to $4,170,000 for
the third quarter and decreased $1,511,000 to $12,406,000 for the nine month
period as compared to the prior year periods. The Services Group nine month
revenue decrease was the result of a slowdown in the demand for reclaimed wafers
and pricing pressures caused by a downturn in the semiconductor industry.
Further, in July of 1998, the Company closed its Texas operations and
consolidated all of ASP's domestic business into its Rhode Island facility. The
three and nine month periods ended September 30, 1998, included $0 and
$1,537,000, respectively, in revenue from the Texas operation. The Service
Group's revenue from ASP's U.S. and European operations for the third quarter
decreased by $460,000, or 12% and decreased $2,198,000 or 17%, for the nine
month period ended September 30, 1999 as compared to the comparable 1998
periods. Revenue from International Semiconductor Products Pte. Ltd ("ISP") of
$665,000 for the third quarter of 1999 increased by $120,000 or 22% and nine
month revenue of $1,964,000 increased $687,000, or 54% over the comparable 1998
periods.
Direct sales of the Company's products into foreign markets as a percentage of
consolidated revenue during 1999 was 25% for the third quarter and 25% for the
nine month period, as compared to 17% and 17%, respectively, for the three and
nine month periods ended September 30, 1998. The Company currently maintains
foreign manufacturing operations in the Netherlands ("ASP B.V."), in Morocco,
("S.A.R.L."), and in Singapore,("ISP"). In the three and nine month periods
ended September 30, 1999, the Company derived revenue from ASP B.V. of $755,000
and $2,402,000
8
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respectively, from S.A.R.L. of $266,205 and $555,467, respectively, and from ISP
of $665,000 and $1,964,000, respectively. Foreign sales made through the
Company's domestic operations are made through foreign manufacturer's
representatives and are priced and paid for in U.S. dollars. Sales for ASP B.V.,
S.A.R.L. and ISP are conducted in the local currencies of Dutch Guilders,
Dirhams, and Singapore Dollars, respectively, and account for 14% in the third
quarter and 10% in the nine months ended September 30, 1999.
The Company's consolidated backlog as of September 30, 1999 was $19,459,000
excluding backlog from the Retconn business which was sold February 19, 1999.
Excluding Retconn, the Company's backlog was $13,666,000 at September 30, 1998
and $15,161,000 at December 31, 1998. The Polese backlog which was $5,003,000 at
the end of 1998, has improved to $10,506,000 as of September 30, 1999. The
backlogs for ASP and SPM have decreased $594,000 and $611,000 respectively,
since the end of 1998 but have increased from beginning of year levels. The
Company expects the consolidated backlog to remain strong for the remainder of
1999.
GROSS PROFIT:
Gross profit of $5,842,000 for the three month period and $15,675,000 for nine
month period ended September 30, 1999 increased $2,143,000 or 58% and
$2,294,000, or 17%, respectively, from the comparable 1998 periods. Excluding
Retconn from all periods presented, 1999 gross profit increased by $3,432,000,
or 142% during the third quarter, and increased by $6,066,000, or 68% for the
nine months period from the comparable 1998 periods. The Materials Group's gross
profit of $4,941,000 and $12,144,000 for the three and nine month periods ended
September 30, 1999, increased $3,475,000 or 237% and $5,780,000 or 91%
respectively, as compared to the comparable periods in 1998. The Materials
Group's gross profit increases primarily reflected the increased sales at Polese
Company. The Service Group's gross profit of $901,000 and $2,823,000 for the
three and nine month periods ended September 30, 1999, decreased $43,000 or 5%
and increased $286,000 or 11% respectively, as compared to the comparable
periods in 1998 The increase for the 1999 nine month period was primarily due to
the effects of cost reductions during 1999.
GROSS MARGINS:
The Company's gross margins increased from 23% to 36% and 26% to 33 %,
respectively, for the three and nine month periods ended September 30, 1999 over
the comparable 1998 periods. Excluding Retconn, the Company's gross margin for
the three and nine month periods increased from 21% to 36% and 24% to 33%,
respectively. The Materials Group's gross margin increased from 21% to 41% and
28% to 37%, respectively, for the three and nine month periods ended September
30, 1999 from the comparable 1998 periods. The Service Group's gross margins
increased from 21% to 22% and 18% to 23%, respectively, for the three and nine
month periods ended September 30, 1999 from the comparable 1998 periods,
reflecting the consolidation of domestic operations and improved performance at
ISP.
SELLING, GENERAL AND ADMINISTRATIVE:
Selling, general and administrative ("SG&A") expenses in the three and nine
month periods ended September 30, 1999 decreased $107,000, or 3% and decreased
$725,000 or 7%, respectively, from the comparable 1998 periods. The decrease
in SG&A in the nine month period reflects savings realized by the closing of the
Services Group Texas Plant during the third quarter of 1998 as well as
reductions in SG&A due to the sale of Retconn. Excluding Retconn, 1999 SG&A
increased by $636,000 or 22% for the third quarter and increased by $1,132,000,
or 12% for the nine month period ending September 30, 1999. The increase in SG&A
during 1999 was due to increased sales and
9
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includes bank charges related to extensions of the Company's lending facilities
of $40,000 and $183,000 during the third quarter and nine months periods,
respectively. Excluding Retconn, SG&A expenses as a percentage of revenue
decreased from 25% to 22% for the third quarter and decreased from 23% to 22%
for the nine months ended September 30, 1999 from the comparable 1998 periods.
RESTRUCTURING CHARGE:
The nine month period ended September 30, 1998 includes a restructuring charge
of $1,950,000 associated with the closing of ASP's Texas operation and the
relocation of the equipment and other assets.
GAIN ON SALE OF CONNECTOR BUSINESS
Income before Income Taxes and Minority Interest for the six months ended
September 30, 1999 include a before tax gain of $8,430,000 on the sale of the
Company's Connector Business to Litton Corporation on February 19, 1999 as
described below in Liquidity and Capital Resources.
INTEREST EXPENSE (NET):
Net interest expense for the three and nine month periods ended September 30,
1999 decreased $547,000 and $1,044,000 respectively, from the comparable 1998
periods . The decrease in net interest expense is due to reduced debt levels
from February 19, 1999 forward due to the principal repayments from proceeds
from the sale of the Retconn business.
PROVISION (CREDIT) FOR INCOME TAXES:
A provision of $695,000 and $5,908,000 for income taxes has been made for the
three and nine month periods ended September 30, 1999 as compared to credits of
$317,000 and $751,000 for the comparable 1998 periods. The provision for the
nine month period ended September 30, 1999 includes a provision of $4,527,000
associated with the gain on the sale of the Connector business. However, the
Company has Federal Net Operating Loss carryforwards which will offset a
substantial portion of the income tax return liability associated with the gain.
The credit for the nine month period ended September 30, 1998 includes a
$759,000 income tax credit associated with the restructuring charge.
MINORITY INTEREST:
In the three and nine month periods ended September 30, 1999 and 1998, the
Company has included gains of $30,000 and $49,000, and gains of $24,000 and
$255,000 respectively, associated with ISP in its income (loss) before minority
interest in loss of consolidated subsidiary, net of tax. The Company has a 50.1%
interest in the joint venture and has accordingly, excluded 49.9% of such loss
from its consolidated net income.
NET INCOME:
As a result of the above, Net Income of $1,166,000 for the third quarter
increased by $1,766,000 from the comparable 1998 period. Net Income of
$6,310,000 for the nine month period ended September 30, 1999 increased by
$7,553,000 from the comparable period in 1998.
YEAR 2000
The year 2000 problem arises since many computer programs and some pieces of
computer hardware manipulate and store dates as a two-digit field and are unable
to recognize dates past December 31, 1999.
The Company has completed its assessment of the systems and software at all of
its operations, including
10
<PAGE>
external interfaces with critical suppliers and customers. The Company has
replaced non-compliant hardware, installed new manufacturing enterprise computer
software systems at SPM and installed software upgrades that are year 2000
compliant at its other locations. As of September 30, 1999, the Company has
substantially completed the installation and Year 2000 testing of these new
systems and upgrades. Outside suppliers, and customers have been contacted and
have completed the Company's assessment questionnaire. Based on the Company's
review of the assessment questionnaires received, the Company believes a large
majority of its outside suppliers and customers will be Year 2000 compliant by
the end of 1999.
The Company has expended approximately $530,000 to date and estimates that the
remaining incremental cost of addressing the potential Year 2000 problem beyond
those expenditures already incurred will be less than $50,000 based upon the
information assembled to date.
The Company believes that as of September 30, 1999, its new systems and software
have achieved operational Year 2000 compliance. In the event of an unforseen
Year 2000 problem, the Company believes its business processes could
continue functioning without undue business interruption while any problems
are remedied. Although the Company believes it has achieved operational year
2000 compliance, the Company can not predict the potential effect of third
parties "Year 2000" issues on its business for those third parties that either
do not complete their own Year 2000 compliance or do not respond to the
Company's assessment questionnaire in a timely manner.
LIQUIDITY AND CAPITAL RESOURCES
General
To support the Company's growth the Company has historically made significant
capital expenditures to support its facilities and manufacturing processes as
well as working capital needs. The Company had financed its capital needs
through cash flow from operations, its line of credit facility, term loans from
the Bank, other bank financing including gold consignment supply agreements, and
capital leases. The Company had Bank short term debt maturities, standby letter
of credit maturities, gold consignment agreements and debt service requirements
which were deferred until October 31, 1999 under a limited forbearance
agreement with its banks. The Company completed the sale of its Retconn business
on February 19, 1999 and repaid $22,191,000 of its then existing Bank debt. On
November 1, 1999 the Company entered into a Revolving Credit, Term Loan and
Security Agreement with PNC Bank, National Association as lender and agent ("the
Credit Facility"). The Credit Facility, replaced the existing revolving credit
and interim term loan facilities with First Union and Fleet.
Summary of 1999 Activity
At September 30, 1999, the Company had cash and cash equivalents of $1,774,000
and an available balance on its revolving credit facility of $500,000 as
compared to $1,141,000 and $200,000 respectively at December 31, 1998.
Net cash provided by operating activities in the three months ended September
30, 1999 amounted $4,511,000 as compared to cash provided of $174,000 in the
comparable 1998 period. Cash provided by operations increased compared to the
first three months of 1998 principally as a result of 1999 income and working
capital changes. The decrease in the deferred tax assets is due to utilization
of net operating loss carryforwards generated by the 1998 losses.
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Cash provided by investing activities amounted to $19,772,000 in the period
ended September 30, 1999. On February 19, 1999 the Company completed the sale of
its Connector business and realized cash proceeds of $22,191,000. During the
nine months ended September 30, 1999 and 1998, the Company invested $1,732,000
and $2,289,000, respectively, in property and equipment. This investment
excludes $900,000 and $2,806,000, respectively, in the 1999 and 1998 periods for
equipment acquired under capital leases. At September 30, 1999, the Company had
capital expenditure commitments of approximately $100,000 .
Net Cash used by financing activities amounted to $23,710,000 in the period
ended September 30, 1999 as compared to cash provided of $2,098,000 during the
1998 period. During the nine months ended September 30, 1999 the Company's
repaid $15,558,000 under a Bank term loan facility and $6,173,000 under its Bank
revolving line of credit . In addition, the Company made payments of $2,017,000
under capital leases obligations.
Current Credit Facilities
On November 1, 1999 the company entered into a Revolving Credit, Term Loan and
Security Agreement with PNC Bank, National Association as lender and agent ("the
Credit Facility"). The Credit Facility, replaced the existing revolving credit
and interim term loan facilities with First Union and Fleet. The Credit
Facility, which has a three year term, consists of a formula based $8,500,000
revolving credit facility and a $6,234,000 term loan which are secured by
substantially all of the Company's domestic assets. Revolving credit facility
availability of up to $5,000,000 Singapore dollars (approximately $3,000,000 US)
is reserved for possible issuance of a standby letter of credit in support of
the Company's continuing guarantee of a foreign subsidiaries debt. The interest
rate on revolving credit borrowings are, at the Company's option, based on
either the prime rate or a floating eurodollar rate plus a margin of 2.75%. At
the Company's option, the term loan interest rate is based on either prime plus
0.5% or a floating eurodollar rate plus a margin of 3.0%. Principal payments
under the $6,234,000 term loan are due in equal monthly installments of $74,214
over the three year term.
Upon the November 2, 1999 funding of the Credit Facility, the Company repaid its
$7,664,000 remaining indebtedness to First Union and Fleet, with a combination
of $6,234,000 borrowed under the PNC term loan and $1,430,000 of the Company's
cash. Upon closing, the Company had no borrowings outstanding under the PNC
revolving credit facility and had excess borrowing availability of over
$2,000,000.
The Company has guaranteed S$5,000,000 (approximately $2,938,000 US) of the debt
of its 50.1% owned Singapore operation ("ISP"). The guarantee is secured by a
standby letter of credit of up to S$5,000,000 Singapore dollars issued by the
First Union and Fleet in favor of ISP's lenders. In the event of default, as
defined by ISP's lending agreements, ISP's bank could draw down the S$5,000,000
standby letter of credit provided by the Company's Bank. On November 1, 1999 in
conjunction with the closing of the Credit Facilities, PNC Bank issued a backup
letter of credit in support of First Union and Fleet's existing S$5,000,000
standby letter of credit. The Company is currently in discussions with ISP's
lenders to accept a PNC Bank sponsored standby letter of credit in place of the
existing instrument.
In December 1996, the Company entered into a consignment agreement (the "Gold
Consignment Agreement") with Fleet Precious Metals ("FPM") which expired
December 23, 1998. As part of the limited Forbearance Agreement, as amended, the
FPM and the Bank extended the maturity to October 31, 1999. Under the Gold
Consignment Agreement, the Company purchases gold used in its manufacturing of
materials. The Gold Consignment Agreement provides for gold on consignment not
to exceed the lesser of 5,000 troy ounces of gold or gold having a market value
of $1,870,000. The Gold
12
<PAGE>
Consignment Agreement requires the Company to pay a consignment fee of 7.0 % per
annum based upon the value of all gold consigned to the Company. On November 1,
1999, in conjunction with the closing of the Credit Facilities, the FPM and the
Bank granted a 90-day extension of the Gold Consignment Agreement to permit the
Company time to negotiate terms of a new agreement with Fleet Precious Metals.
Former Credit Facilities - refinanced on November 1, 1999
In January 1997, the Company entered into a $21,000,000 five-year term loan
("Term Loan") with First Union Bank and Fleet National Bank (collectively the
"Bank"). Under a limited forbearance agreement, as amended, the Bank extended a
previous waiver of the Term Loan's financial ratio covenants, agreed to waive
principal payments of $350,000 per month from August 1, 1998 forward and set the
maturity of the Term Loan at June 30, 1999. On February 19, 1999 the Company
repaid the remaining $15,050,000 principal balance outstanding under this term
loan.
In January 1997, the Company entered into a $15,000,000 line of credit with the
Bank that originally expired in February 1999. As part of the limited
Forbearance Agreement, as amended, the Bank extended the maturity to October 31,
1999. This credit line includes a standby letter of credit for ISP in the amount
of approximately $3,000,000. On February 19, 1999 the Company repaid $7,141,000
of the outstanding borrowings under this facility.
On June 19, 1998 the Company entered into a 90-day note for $1,000,000 ("Interim
Term Loan") with the Bank to supplement the Company's working capital
requirements. The Interim Term Loan note provided for the payment of interest
monthly and for the repayment of principal on October 1, 1998. As part of the
limited Forbearance Agreement, as amended, the Bank extended the maturity to
October 31, 1999.
Other
In conjunction with the Company's acquisition of Polese Company on May 27, 1993,
the Company acquired from Frank J. Polese, the former sole shareholder of Polese
Company, all of the rights, including a subsequently issued patent, for certain
powdered metal technology and its application to the electronics industry. For a
period of ten years from May 1993, Mr. Polese has the right to receive 10% of
(i) the pre-tax profit from the copper tungsten product line, after allocating
operating costs and (ii) the proceeds of the sale, if any, by the Company of the
powdered metal technology. During 1999, the Company charged against operations a
total of $421,100 under this agreement, $200,000 of which has been paid through
September 30, 1999.
On December 18, 1997, the Board of Directors authorized the Company to
repurchase up to $2,000,000 of SEMX common stock on the open market. Repurchased
shares will be held as Treasury shares and may be reissued in the future or may
be reissued pursuant to the Company's stock option programs. During 1998 the
Company had repurchased 34,600 shares at a cost of $212,000. The Company has
suspended the repurchase of any further stock at this time.
The Company continually seeks to broaden its product lines by various means,
including through acquisitions. The Company intends to pursue only those
acquisitions for which it will be able to arrange the necessary financing by
means of the issuance of additional equity, the use of its cash or, through bank
or other debt financing.
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Revolving Credit, Term Loan and Security Agreement between the
Company and Subsidiaries and PNC Bank National Association (as
agent and lender) dated November 1, 1999
27 Financial Data Schedule (Edgar filing copy only)
(b) Current Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEMX CORPORATION
Date: October 12, 1999 By: /s/ Gilbert D. Raker
---------------------------------
Name: Gilbert D. Raker
Title: Chairman of the Board and
Chief Executive Officer
Date: October 12, 1999 By: /s/ Mark A. Koch
---------------------------------
Name: Mark A. Koch
Title: Controller and Secretary
(Principal Financial and
Accounting Officer)
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<PAGE>
EXECUTION COPY
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
WITH
SEMX CORPORATION,
POLESE COMPANY, INC.,
AMERICAN SILICON PRODUCTS, INC.
SPM HOLDINGS CORPORATION,
TYPE III, INC.
AND
THERMAL PACKAGING SOLUTIONS INC.
(AS BORROWERS)
November 1, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
I. DEFINITIONS........................................................................1
1.1. Accounting Terms.....................................................1
1.2. General Terms........................................................1
1.3. Uniform Commercial Code Terms.......................................16
1.4. Certain Matters of Construction.....................................17
II. ADVANCES, PAYMENTS................................................................18
2.1. (a) Revolving Advances.......................................18
(b) Individual Revolving Advances............................19
(c) Discretionary Rights.....................................19
2.2. Procedure for Revolving Advances Borrowing..........................19
2.3. Disbursement of Advance Proceeds....................................20
2.4. Term Loan...........................................................20
2.5. Maximum Advances....................................................20
2.6. Repayment of Advances...............................................20
2.7. Repayment of Excess Advances........................................21
2.8. Statement of Account................................................21
2.9. Letters of Credit...................................................21
2.10. Issuance of Letters of Credit.......................................22
2.11. Requirements For Issuance of Letters of Credit......................22
2.12. Additional Payments.................................................24
2.13. Manner of Borrowing and Payment.....................................24
2.14. Mandatory Prepayments...............................................25
2.15. Use of Proceeds.....................................................26
2.16. Defaulting Lender...................................................26
2.27. Taxes...............................................................27
III. INTEREST AND FEES.................................................................29
3.1. Interest............................................................29
3.2. Letter of Credit Fees...............................................29
3.3. (a) Closing Fee..............................................30
(b) Facility Fee.............................................30
3.4. Collateral Management Fee...........................................30
3.5. Computation of Interest and Fees....................................30
3.6. Maximum Charges.....................................................30
3.7. Increased Costs.....................................................31
3.8. Unavailability of Eurodollar Rate Loans.............................31
3.9. Capital Adequacy....................................................32
IV. COLLATERAL: GENERAL TERMS........................................................33
4.1. Security Interest in the Collateral.................................33
4.2. Perfection of Security Interest.....................................33
</TABLE>
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<TABLE>
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4.3. Disposition of Collateral...........................................33
4.4. Preservation of Collateral..........................................33
4.5. Ownership of Collateral.............................................34
4.6. Defense of Agent's and Lenders' Interests...........................34
4.7. Books and Records...................................................35
4.8. Financial Disclosure................................................35
4.9. Compliance with Laws................................................35
4.10. Inspection of Premises..............................................35
4.11. Insurance...........................................................35
4.12. Failure to Pay Insurance............................................36
4.13. Payment of Taxes....................................................37
4.14. Payment of Leasehold Obligations....................................37
4.15. Receivables.........................................................37
(a) Nature of Receivables....................................37
(b) Solvency of Customers....................................37
(c) Locations of Borrower....................................37
(d) Collection of Receivables................................37
(e) Notification of Assignment of Receivables................38
(f) Power of Agent to Act on Borrowers' Behalf...............38
(g) No Liability.............................................39
(h) Establishment of a Lockbox Account, Dominion Account.....39
(i) Adjustments..............................................39
4.16. Inventory...........................................................39
4.17. Maintenance of Equipment............................................39
4.18. Exculpation of Liability............................................40
4.19. Environmental Matters...............................................40
4.20. Financing Statements................................................42
V. REPRESENTATIONS AND WARRANTIES....................................................42
5.1. Authority...........................................................42
5.2. Formation and Qualification.........................................42
5.3. Survival of Representations and Warranties..........................42
5.4. Tax Returns.........................................................43
5.5. Financial Statements................................................43
5.6. Corporate Name......................................................44
5.7. O.S.H.A. and Environmental Compliance...............................44
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.........44
5.9. Patents, Trademarks, Copyrights and Licenses........................45
5.10. Licenses and Permits................................................46
5.11. Default of Indebtedness.............................................46
5.12. No Default..........................................................46
5.13. No Burdensome Restrictions..........................................46
5.14. No Labor Disputes...................................................46
5.15. Margin Regulations..................................................46
5.16. Investment Company Act..............................................47
5.17. Disclosure..........................................................47
</TABLE>
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<TABLE>
<S> <C> <C>
5.18. Swaps...............................................................47
5.19. Conflicting Agreements..............................................47
5.20. Application of Certain Laws and Regulations.........................47
5.21. Business and Property of Borrower...................................47
5.22. Singapore Joint Venture.............................................47
VI. AFFIRMATIVE COVENANTS.............................................................48
6.1. Payment of Fees.....................................................48
6.2. Conduct of Business and Maintenance of Existence and Assets.........48
6.3. Violations..........................................................48
6.4. Government Receivables..............................................48
6.5. Fixed Charge Ratio..................................................48
6.6. Execution of Supplemental Instruments...............................48
6.7. Payment of Indebtedness.............................................49
6.8. Standards of Financial Statements...................................49
6.9. Year 2000...........................................................49
6.10 ISP Net Worth.......................................................49
6.11 Default Notices.....................................................49
6.12 Post Closing Items..................................................49
VII. NEGATIVE COVENANTS................................................................49
7.1. Merger, Consolidation, Acquisition and Sale of Assets...............49
7.2. Creation of Liens...................................................50
7.3. Guarantees..........................................................50
7.4. Investments.........................................................50
7.5. Loans...............................................................50
7.6. Capital Expenditures................................................50
7.7. Dividends...........................................................51
7.8. Indebtedness........................................................51
7.9. Nature of Business..................................................51
7.10. Transactions with Affiliates........................................51
7.11. Leases..............................................................51
7.12. Subsidiaries........................................................51
7.13. Fiscal Year and Accounting Changes..................................51
7.14. Pledge of Credit....................................................51
7.15. Amendment of Articles of Incorporation, By-Laws.....................51
7.16. Compliance with ERISA...............................................52
7.17. Prepayment of Indebtedness..........................................52
7.18. Subordinated Debt Payments..........................................52
7.19. Other Agreements....................................................52
VIII. CONDITIONS PRECEDENT..............................................................52
8.1. Conditions to Initial Advances......................................52
(a) Note.....................................................53
(b) Filings, Registrations and Recordings....................53
(c) Corporate Proceedings of Borrowers.......................53
(d) Incumbency Certificates of Borrowers.....................53
</TABLE>
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<TABLE>
<S> <C> <C>
(e) Certificates.............................................53
(f) Good Standing Certificates...............................53
(g) Legal Opinion............................................53
(h) No Litigation............................................54
(i) Financial Condition Certificates.........................54
(j) Collateral Examination...................................54
(k) Fees.....................................................54
(l) Pro Forma Financial Statements...........................54
(m) Intercreditor Agreement..................................54
(n) First Union Payoff Letter; UCC-3 Termination Statements..54
(o) Pledge Agreement, Other Documents........................54
(p) Insurance................................................54
(q) Title Insurance..........................................54
(r) Environmental Reports....................................55
(s) Payment Instructions.....................................55
(t) Blocked Accounts.........................................55
(u) Consents.................................................55
(v) No Adverse Material Change...............................55
(w) Leasehold Agreements.....................................55
(x) Mortgage.................................................55
(y) Subordinated Debt Documentation..........................55
(z) Contract Review..........................................55
(aa) Closing Certificate......................................56
(bb) Undrawn Availability.....................................56
(cc) Other....................................................56
(dd) Trade Payables...........................................56
8.2. Conditions to Each Advance..........................................56
(a) Representations and Warranties...........................56
(b) No Default...............................................56
(c) Maximum Advances.........................................56
IX. INFORMATION AS TO BORROWER........................................................57
9.1. Disclosure of Material Matters......................................57
9.2. Schedules...........................................................57
9.3. Environmental Reports...............................................57
9.4. Litigation..........................................................57
9.5. Material Occurrences................................................57
9.6. Government Receivables..............................................58
9.7. Annual Financial Statements.........................................58
9.8. Quarterly Financial Statements......................................58
9.9. Monthly Financial Statements........................................59
9.10. Other Reports.......................................................59
9.11. Additional Information..............................................59
9.12. Projected Operating Budget..........................................59
9.13. Variances From Operating Budget.....................................59
9.14. Notice of Suits, Adverse Events.....................................60
</TABLE>
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<TABLE>
<S> <C> <C>
9.15. ERISA Notices and Requests..........................................60
9.16. Additional Documents................................................60
X. EVENTS OF DEFAULT.................................................................61
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT........................................63
11.1. Rights and Remedies.................................................63
11.2. Agent's Discretion..................................................64
11.3. Setoff..............................................................64
11.4. Rights and Remedies not Exclusive...................................64
XII. WAIVERS AND JUDICIAL PROCEEDINGS..................................................64
12.1. Waiver of Notice....................................................64
12.2. Delay...............................................................64
12.3. Jury Waiver.........................................................64
XIII. EFFECTIVE DATE AND TERMINATION....................................................66
13.1. Term................................................................66
13.2. Termination.........................................................65
XIV. REGARDING AGENT...................................................................65
14.1. Appointment.........................................................65
14.2. Nature of Duties....................................................66
14.3. Lack of Reliance on Agent and Resignation...........................66
14.4. Certain Rights of Agent.............................................67
14.5. Reliance............................................................67
14.6. Notice of Default...................................................67
14.7. Indemnification.....................................................68
14.8. Agent in its Individual Capacity....................................68
14.9. Delivery of Documents...............................................68
14.10. Borrowers' Undertaking to Agent.....................................68
XV. BORROWING AGENCY..................................................................68
15.1. Borrowing Agency Provisions.........................................68
15.2. Waiver of Subrogation...............................................69
XVI. MISCELLANEOUS.....................................................................69
16.1. Governing Law.......................................................69
16.2. Entire Understanding................................................70
16.3. Successors and Assigns; Participations; New Lenders.................71
16.4. Application of Payments.............................................73
16.5. Indemnity...........................................................73
16.6. Notice..............................................................73
16.7. Survival............................................................74
16.8. Severability........................................................74
16.9. Expenses............................................................75
</TABLE>
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<TABLE>
<S> <C> <C>
16.10. Injunctive Relief...................................................75
16.11. Consequential Damages...............................................75
16.12. Captions............................................................75
16.13. Counterparts; Telecopied Signatures.................................75
16.14. Construction........................................................75
16.15. Confidentiality.....................................................75
16.16. Publicity...........................................................76
</TABLE>
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<PAGE>
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
Revolving Credit, Term Loan and Security Agreement dated November 1, 1999 among
SEMX CORPORATION, a corporation organized under the laws of the State of
Delaware ("SEMX"), POLESE COMPANY, INC. a corporation organized under the laws
of the State of California ("PCI"), AMERICAN SILICON PRODUCTS, INC., a
corporation organized under the laws of Delaware ("ASPI"), SPM HOLDINGS
CORPORATION., a Delaware corporation ("SPM"), TYPE III, INC., a California
corporation ("Type III") and THERMAL PACKAGING SOLUTIONS INC., a Nevada
corporation ("TPS") (SEMX, PCI, ASPI, SPM, Type III and TPS each a "Borrower"
and collectively "Borrowers"), the financial institutions which are now or which
hereafter become a party hereto (collectively, the "Lenders" and individually a
"Lender") and PNC BANK, NATIONAL ASSOCIATION, ("PNC"), as agent for Lenders
(PNC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings
herein contained, Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. ACCOUNTING TERMS. As used in this Agreement, the Note, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; PROVIDED,
HOWEVER, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended December 31,
1998.
1.2. GENERAL TERMS. For purposes of this Agreement the
following terms shall have the following meanings:
"ACCOUNTANTS" shall have the meaning set forth in
Section 9.7 hereof.
"ADVANCES" shall mean and include the Revolving
Advances, Letters of Credit, as well as the Term Loan.
"ADVANCE RATES" shall have the meaning set forth in
Section 2.1(a) hereof.
"AFFILIATE" of any Person shall mean (a) any Person
(other than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a director or officer (i) of such Person, (ii) of any Subsidiary of such
Person or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, direct or indirect,
(x) to vote 5% or more of the securities having ordinary voting power for the
election of directors of such Person, or (y) to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
<PAGE>
"AGENT" shall have the meaning set forth in the
preamble to this Agreement and shall include its successors and assigns.
"ALTERNATE BASE RATE" shall mean, for any day, a rate
per annum equal to the higher of (i) the Base Rate in effect on such day and
(ii) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
"ASP, B.V." shall mean American Silicon Products, B.V.,
a Netherlands corporation.
"AUTHORITY" shall have the meaning set forth in Section
4.19(d).
"BASE RATE" shall mean the base commercial lending rate
of PNC as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate. This rate of interest is determined from time to time by PNC as a
means of pricing some loans to its customers and is neither tied to any external
rate of interest or index nor does it necessarily reflect the lowest rate of
interest actually charged by PNC to any particular class or category of
customers of PNC.
"BLOCKED ACCOUNTS" shall have the meaning set forth in
Section 4.15(h).
"BORROWER" or "BORROWERS" shall have the meaning set
forth in the preamble to this Agreement and shall extend to all permitted
successors and assigns of such Persons.
"BORROWERS ON A CONSOLIDATED BASIS" shall mean SEMX,
PCI, ASPI, SPM, TPS and Type III.
"BORROWERS' ACCOUNT" shall have the meaning set forth
in Section 2.8.
"BORROWING AGENT" shall mean SEMX.
"BORROWING BASE CERTIFICATE" shall have the meaning set
forth in Section 9.2.
"BUSINESS DAY" shall mean with respect to Eurodollar
Rate Loans, any day on which commercial banks are open for domestic and
international business, including dealings in Dollar deposits in London, England
and New York, New York and with respect to all other matters, any day other than
a day on which commercial banks in New York are authorized or required by law to
close.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. "9601 ET
SEQ.
"CHANGE OF CONTROL" shall mean (a) the occurrence of
any event (whether in one or more transactions) which results in a transfer of
control of PCI or ASPI to a Person who is not an Original Owner, (b) SEMX is no
longer a company publicly traded on a national exchange, or (c) any merger or
consolidation of or with any Borrower or sale of all or substantially all of the
property or assets of any Borrower. For purposes of this definition, "control "
shall mean the power,
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direct or indirect (x) to vote 50% or more of the securities having ordinary
voting power for the election of directors of such Borrower or (y) to direct or
cause the direction of the management and policies of such Borrower by contract
or otherwise.
"CHANGE OF OWNERSHIP" shall mean (a) 50% or more of
the common stock of PCI or ASPI is no longer owned or controlled by (including
for the purposes of the calculation of percentage ownership, any shares of
common stock into which any capital stock of PCI or ASPI held by any of the
Original Owners is convertible or for which any such shares of the capital stock
of such Borrower or of any other Person may be exchanged and any shares of
common stock issuable to such Original Owners upon exercise of any warrants,
options or similar rights which may at the time of calculation be held by such
Original Owners) a Person who is either an Original Owner or an Affiliate of an
Original Owner or (b) any merger, consolidation or sale of substantially all of
the property or assets of SEMX, PCI and ASPI.
"CHARGES" shall mean all taxes, charges, fees,
imposts, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation and property taxes, custom duties, fees, assessments, liens, claims
and charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts, imposed by any taxing or
other authority, domestic or foreign (including, without limitation, the Pension
Benefit Guaranty Corporation or any environmental agency or superfund), upon the
Collateral, any Borrower or any of its Affiliates.
"CLOSING DATE" shall mean November 1, 1999 or such
other date as may be agreed to by the parties hereto.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated thereunder.
"COLLATERAL" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Real Property;
(f) the Leasehold Interests;
(g) all of each Borrower's right,
title and interest in and to (i) its respective goods and other property
including, but not limited to, all merchandise returned or rejected by
Customers, relating to or securing any of the Receivables; (ii) all of each
Borrower's
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rights as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or
other lienor, including stoppage in transit, setoff, detinue, replevin,
reclamation and repurchase; (iii) all additional amounts due to any Borrower
from any Customer relating to the Receivables; (iv) other property, including
warranty claims, relating to any goods securing this Agreement; (v) all of each
Borrower's contract rights, rights of payment which have been earned under a
contract right, instruments, documents, chattel paper, warehouse receipts,
deposit accounts, money, securities and investment property; (vi) if and when
obtained by any Borrower, all real and personal property of third parties in
which such Borrower has been granted a lien or security interest as security for
the payment or enforcement of Receivables; and (vii) any other goods, personal
property or real property now owned or hereafter acquired in which any Borrower
has expressly granted a security interest or may in the future grant a security
interest to Agent hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Agent and any Borrower;
(h) all of each Borrower's ledger
sheets, ledger cards, files, correspondence, records, books of account, business
papers, computers, computer software (owned by any Borrower or in which it has
an interest), computer programs, tapes, disks and documents relating to (a),
(b), (c), (d), (e), (f) or (g) of this Paragraph; and
(i) all proceeds and products of (a),
(b), (c), (d), (e), (f), (g) and (h) in whatever form, including, but not
limited to: cash, deposit accounts (whether or not comprised solely of
proceeds), certificates of deposit, insurance proceeds (including hazard, flood
and credit insurance), negotiable instruments and other instruments for the
payment of money, chattel paper, security agreements, documents, eminent domain
proceeds, condemnation proceeds and tort claim proceeds.
"COMMITMENT PERCENTAGE" of any Lender shall mean the
percentage set forth below such Lender's name on the signature page hereof as
same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(b)
hereof.
"COMMITMENT TRANSFER SUPPLEMENT" shall mean a
document in the form of EXHIBIT 16.3 hereto, properly completed and otherwise in
form and substance satisfactory to Agent by which the Purchasing Lender
purchases and assumes a portion of the obligation of Lenders to make Advances
under this Agreement.
"CONSENTS" shall mean all filings and all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and other third parties, domestic or foreign,
necessary to carry on any Borrower's business, including, without limitation,
any Consents required under all applicable federal, state or other applicable
law.
"CONTRACT RATE" shall mean, as applicable, the
Revolving Interest Rate or the Term Loan Rate.
"CONTROLLED GROUP" shall mean all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with any Borrower, are
treated as a single employer under Section 414 of the Code.
"CUSTOMER" shall mean and include the account
debtor with respect to any
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Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.
"DEFAULT" shall mean an event which, with the
giving of notice or passage of time or both, would constitute an Event of
Default.
"DEFAULT RATE" shall have the meaning set forth in
Section 3.1 hereof.
"DEFAULTING LENDER" shall have the meaning set forth in
Section 2.16(a) hereof.
"DEPOSITORY ACCOUNTS" shall have the meaning set forth
in Section 4.15(h) hereof.
"DOCUMENTS" shall have the meaning set forth in Section
8.1(c) hereof.
"DOLLAR" and the sign "$" shall mean lawful money of
the United States of America.
"DOMESTIC RATE LOAN" shall mean any Advance that bears
interest based upon the Alternate Base Rate.
"EARLY TERMINATION DATE" shall have the meaning set
forth in Section 13.1 hereof.
"EARNINGS BEFORE INTEREST AND TAXES" shall mean for
any period the sum of (i) net income (or loss) of Borrowers on a Consolidated
Basis for such period (excluding extraordinary gains and losses, PLUS (ii) all
interest expense of Borrowers on a Consolidated Basis for such period, PLUS
(iii) all charges against income of Borrowers on a Consolidated Basis for such
period for federal, state and local taxes.
"EBITDA" shall mean for any period the sum of (i)
Earnings Before Interest and Taxes for such period PLUS (ii) depreciation
expenses for such period, PLUS (iii) amortization expenses for such period.
"ELIGIBLE INVENTORY" shall mean and include Inventory,
excluding work in process, with respect to each Borrower valued at the lower of
cost or market value, determined on a first-in-first-out basis, which is not, in
Agent's opinion, obsolete, slow moving or unmerchantable and which Agent, in its
sole discretion exercised in a commercially reasonable manner, shall not deem
ineligible Inventory, based on such considerations as Agent may from time to
time deem appropriate including, without limitation, whether the Inventory is
subject to a perfected, first priority security interest in favor of Agent and
whether the Inventory conforms to all standards imposed by any governmental
agency, division or department thereof which has regulatory authority over such
goods or the use or sale thereof. Eligible Inventory shall include all Inventory
in-transit for which title has passed to a Borrower, which is insured to the
full value thereof and for which Agent shall have in its possession (a) all
negotiable bills of lading properly endorsed and (b) all non-
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negotiable bills of lading issued in Agent's name.
"ELIGIBLE RECEIVABLES" shall mean and include with
respect to each Borrower, each Receivable of such Borrower arising in the
ordinary course of such Borrower's business and which Agent, in its sole credit
judgment, shall deem to be an Eligible Receivable, based on such considerations
as Agent may from time to time deem appropriate. A Receivable shall not be
deemed eligible unless such Receivable is subject to Agent's first priority
perfected security interest and no other Lien (other than Permitted
Encumbrances), and is evidenced by an invoice or other documentary evidence
satisfactory to Agent. In addition, no Receivable shall be an Eligible
Receivable if:
(a) it arises out of a sale made by any Borrower to an
Affiliate of any Borrower or to a Person controlled by an Affiliate of any
Borrower;
(b) it is due or unpaid more than ninety (90) days
after the original invoice date;
(c) fifty percent (50%) or more of the Receivables from
such Customer are not deemed Eligible Receivables hereunder. Such percentage
may, in Agent's sole discretion exercised in a commercially reasonable manner,
be increased or decreased from time to time;
(d) any covenant, representation or warranty contained
in this Agreement with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property or call a meeting of its creditors, (ii) admit in writing its
inability, or be generally unable, to pay its debts as they become due or cease
operations of its present business, (iii) make a general assignment for the
benefit of creditors, (iv) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt
or insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, any petition which is filed against it in any involuntary case under
such bankruptcy laws, or (viii) take any action for the purpose of effecting any
of the foregoing;
(f) except as provided in Section 2.1(a) (i), the sale
is to a Customer outside the continental United States of America, unless the
sale is on letter of credit, guaranty or acceptance terms, in each case
acceptable to Agent in its sole discretion;
(g) the sale to the Customer is on a bill-and-hold,
guaranteed sale, sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by chattel paper;
(h) Agent believes, in its sole judgment, that
collection of such Receivable is insecure or that such Receivable may not be
paid by reason of the Customer's financial inability to pay;
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(i) the Customer is the United States of America, any
state or any department, agency or instrumentality of any of them, unless the
applicable Borrower assigns its right to payment of such Receivable to Agent
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sub-Section 3727 ET SEQ. and 41 U.S.C. Sub-Section 15 ET SEQ.) or has otherwise
complied with other applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have not
been shipped and delivered to and accepted by the Customer or the services
giving rise to such Receivable have not been performed by the applicable
Borrower and accepted by the Customer or the Receivable otherwise does not
represent a final sale;
(k) the Receivables of the Customer exceed a credit
limit determined by Agent, in its sole discretion exercised in a commercially
reasonable manner, to the extent such Receivable exceeds such limit;
(l) the Receivable is subject to any offset, deduction,
defense, dispute, or counterclaim, the Customer is also a creditor or supplier
of a Borrower or the Receivable is contingent in any respect or for any reason
except where such dispute is resolved and a credit has been issued, to the
extent of any remaining Receivable balance, such balance shall be considered an
Eligible Receivable unless otherwise disqualified pursuant to another section
hereof ;
(m) the applicable Borrower has made any agreement with
any Customer for any deduction therefrom, except for discounts or allowances
made in the ordinary course of business as disclosed in writing to the Bank, all
of which discounts or allowances are reflected in the calculation of the face
value of each respective invoice related thereto;
(n) shipment of the merchandise or the rendition of
services has not been completed;
(o) any return, rejection or repossession of the
merchandise has occurred;
(p) such Receivable is not payable to a Borrower; or
(q) such Receivable is not otherwise satisfactory to
Agent as determined in good faith by Agent in the exercise of its discretion in
a reasonable manner.
"ENVIRONMENTAL COMPLAINT" shall have the meaning set
forth in Section 4.19(d) hereof.
"ENVIRONMENTAL LAWS" shall mean all federal, state and
local environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the protection of
the environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"EQUIPMENT" shall mean and include as to each Borrower
all of such
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Borrower's goods (other than Inventory) whether now owned or hereafter acquired
and wherever located including, without limitation, all equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts,
accessories and all replacements and substitutions therefor or accessions
thereto.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time and the rules and regulations
promulgated thereunder.
"EURODOLLAR RATE LOAN" shall mean an Advance at any
time that bears interest based on the Eurodollar Rate.
"EURODOLLAR RATE" shall mean for any Eurodollar Rate
Loan for the then current Interest Period relating thereto the interest rate per
annum determined by PNC by dividing (the resulting quotient rounded upwards, if
necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest
determined by PNC in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) to be the eurodollar rate two (2)
Business Days prior to the first day of such Interest Period for an amount
comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Reserve Percentage.
"EVENT OF DEFAULT" shall mean the occurrence and
continuance of any of the events set forth in Article X hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such rate
is not so published for any day which is a Business Day, the average of
quotations for such day on such transactions received by PNC from three Federal
funds brokers of recognized standing selected by PNC.
"FEE LETTER" shall mean the fee letter dated September
28, 1999 between Borrower and PNC.
"FIRST UNION" shall mean First Union National Bank, a
national banking association.
"FIRST UNION CREDIT AGREEMENT": shall mean the Credit
Agreement dated January 23, 1997 among SEMX, ASPI, PCI, Retconn Incorporated, a
Connecticut corporation. Type III, Inc., a California corporation, S.T.
Electronics, Inc., a California corporation, SPM Holdings Corporation, a
Delaware corporation, American Silicon Products, B.V., a Netherlands
corporation, Thermal Packaging Solutions, Inc., a Nevada corporation, and First
Union as Lender and agent for Fleet National Bank.
"FIXED CHARGE COVERAGE" shall mean and include, with
respect to any fiscal period, the ratio of (a) EBITDA, MINUS capital
expenditures (calculated on a cash basis) made during such period and MINUS the
amount of federal, state and local taxes actually paid, to (b) all
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Senior Debt Payments PLUS all Subordinated Debt Payments during such period.
"FLEET" shall mean Fleet Precious Metals Inc., a Rhode
Island corporation.
"FLEET AGREEMENT[S]": shall mean that certain
Consignment Agreement and Security Agreement dated as of December 23, 1996
between SEMX and Fleet.
"FOREIGN SUBSIDIARIES" shall mean Semiconductor
Materials S.A.R.L., a Morrocco corporation, SPM (M) SMD BHD, a Malaysian
corporation and ASP, B.V and ISP.
"FORMULA AMOUNT" shall have the meaning set forth in
Section 2.1(a).
"GAAP" shall mean generally accepted accounting
principles in the United States of America in effect from time to time.
"GENERAL INTANGIBLES" shall mean and include as to each
Borrower all of such Borrower's general intangibles, whether now owned or
hereafter acquired including, without limitation, all choses in action, causes
of action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures, quality
control procedures, trademarks, service marks, trade secrets, goodwill,
copyrights, design rights, registrations, licenses, franchises, customer lists,
tax refunds, tax refund claims, computer programs, all claims under guaranties,
security interests or other security held by or granted to such Borrower to
secure payment of any of the Receivables by a Customer all rights of
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"GOVERNMENTAL BODY" shall mean any nation or
government, any state or other political subdivision thereof or any entity
exercising the legislative, judicial, regulatory or administrative functions of
or pertaining to a government.
"GUARANTOR" shall mean any Person who may hereafter
guarantee payment or performance of the whole or any part of the Obligations and
"GUARANTORS" means collectively all such Persons.
"GUARANTOR SECURITY AGREEMENT" shall mean any Security
Agreement executed by any Guarantor in favor of Agent securing the Guaranty of
such Guarantor.
"GUARANTY" shall mean any guaranty of the obligations
of Borrowers executed by a Guarantor in favor of Agent for the ratable benefit
of Lenders.
"HAZARDOUS DISCHARGE" shall have the meaning set forth
in Section 4.19(d) hereof.
"HAZARDOUS SUBSTANCE" shall mean, without limitation,
any flammable explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum
products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic
Substances or related materials as defined in CERCLA, the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, ET SEQ.), RCRA,
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Articles 15 and 27 of the New York State Environmental Conservation Law or any
other applicable Environmental Law and in the regulations adopted pursuant
thereto.
"HAZARDOUS WASTES" shall mean all waste materials
subject to regulation under CERCLA, RCRA or applicable state law, and any other
applicable Federal and state laws now in force or hereafter enacted relating to
hazardous waste disposal.
"INDEBTEDNESS" of a Person at a particular date shall
mean all obligations of such Person which in accordance with GAAP would be
classified upon a balance sheet as liabilities (except capital stock and surplus
earned or otherwise) and in any event, without limitation by reason of
enumeration, shall include all indebtedness, debt and other similar monetary
obligations of such Person whether direct or guaranteed, and all premiums, if
any, due at the required prepayment dates of such indebtedness, and all
indebtedness secured by a Lien on assets owned by such Person, whether or not
such indebtedness actually shall have been created, assumed or incurred by such
Person. Any indebtedness of such Person resulting from the acquisition by such
Person of any assets subject to any Lien shall be deemed, for the purposes
hereof, to be the equivalent of the creation, assumption and incurring of the
indebtedness secured thereby, whether or not actually so created, assumed or
incurred.
"INDIVIDUAL FORMULA AMOUNT" shall mean at the date of
determination thereof, with respect to each Borrower an amount equal to: (a) up
to the Receivables Advance Rate of Eligible Receivables of such Borrower, PLUS
(b) up to the Inventory Advance Rate of the value of Eligible Inventory of such
Borrower; plus (c) the product of (i) the aggregate amount of outstanding
Letters of Credit issued or caused to be issued on behalf of such Borrower
(excluding the Singapore Letter of Credit) times (ii) the Inventory Advance
Rate, MINUS (d) such reserves as Agent may reasonably deem proper and necessary
from time to time. The Individual Formula Amount for SPM, Type III and TPS shall
be deemed to be zero (0).
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor
Agreement dated November 1, 1999 among Lenders, Borrowers and Fleet.
"INTEREST PERIOD" shall mean the period provided for
any Eurodollar Rate Loan pursuant to Section 2.2(b).
"INVENTORY" shall mean and include as to each Borrower
all of such Borrower's now owned or hereafter acquired goods, merchandise and
other personal property, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in such Borrower's business or used in selling or
furnishing such goods, merchandise and other personal property, and all
documents of title or other documents representing them.
"INVENTORY ADVANCE RATE" shall have the meaning set
forth in Section 2.1(a)(y)(ii) hereof.
"ISP" shall mean International Semiconductor Products
Pte Ltd., a joint venture organized under the laws of Singapore.
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"ISP-JOINT VENTURE AGREEMENT" shall mean the joint
venture agreement dated August 28, 1996 among Semiconductor Alliance Pte. Ltd.,
International Semiconduc tor Products Pte Ltd and SEMX (formerly Semiconductor
Packaging Materials Co. Inc.).
"ISSUER" shall mean any Person who issues a Letter of
Credit and/or accepts a draft pursuant to the terms hereof.
"LEASEHOLD INTERESTS" shall mean collectively, all of
each Borrower's right, title and interest in and to the premises located at:
10103 Carroll Canyon Road, San Diego, California
10111 Carroll Canyon Road, San Diego, California
8680 Miralani Drive, San Diego, California
"LENDER" and "LENDERS" shall have the meaning ascribed
to such term in the preamble to this Agreement and shall include each Person
which becomes a transferee, successor or assign of any Lender.
"LETTER OF CREDIT FEES" shall have the meaning set
forth in Section 3.2.
"LETTERS OF CREDIT" shall have the meaning set forth in
Section 2.9.
"LIEN" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on (a) the condition, operations, assets, business or prospects of the
applicable Person or Persons, (b) any Borrower's ability to pay the Obligations
in accordance with the terms thereof, (c) the value of the Collateral, or
Agent's Liens on the Collateral or the priority of any such Lien or (d) the
practical realization of the benefits of Agent's and each Lender's rights and
remedies under this Agreement and the Other Documents.
"MAXIMUM LOAN AMOUNT" shall mean $14,734,512 less
repayments of the Term Loan.
"MAXIMUM REVOLVING ADVANCE AMOUNT" shall mean
$8,500,000.
"MONTHLY ADVANCES" shall have the meaning set forth in
Section 3.1 hereof.
"MORTGAGE" shall mean the mortgage on the Real Property
securing the principal amounts outstanding hereunder together with all
extensions, renewals, amendments,
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supplements, modifications, substitutions and replacements thereto and thereof.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan"
as defined in Sections 3(37) and 4001(a)(3) of ERISA.
"NET WORTH" at a particular date, shall mean (a) the
aggregate amount of all assets of ISP as may properly be classified as such in
accordance with GAAP consistently applied and such other assets as are properly
classified as "intangible assets", less (b) the aggregate amount of all
Indebtedness of ISP.
"NOTE" shall mean collectively, the Term Note and the
Revolving Credit Note.
"OBLIGATIONS" shall mean and include any and all of
each Borrower's Indebtedness and/or liabilities to Agent or Lenders or any
corporation that directly or indirectly controls or is controlled by or is under
common control with Agent of every kind, nature and description, direct or
indirect, secured or unsecured, joint, several, joint and several, absolute or
contingent, due or to become due, now existing or hereafter arising, contractual
or tortious, liquidated or unliquidated, regardless of how such indebtedness or
liabilities arise or by what agreement or instrument they may be evidenced or
whether evidenced by any agreement or instrument, including, but not limited to,
any and all of any Borrower's Indebtedness and/or liabilities under this
Agreement, the Other Documents or under any other agreement between Agent or
Lenders and any Borrower and all obligations of any Borrower to Agent or Lenders
to perform acts or refrain from taking any action.
"ORIGINAL OWNERS" shall mean SEMX Corporation.
"OTHER DOCUMENTS" shall mean the Mortgage, the Note,
the Questionnaire, any Guaranty, any Guarantor Security Agreement and any and
all other agreements, instruments and documents, including, without limitation,
guaranties, pledges, powers of attorney, consents, and all other writings
heretofore, now or hereafter executed by any Borrower or any Guarantor and/or
delivered to Agent or any Lender in respect of the transactions contemplated by
this Agreement.
"PARENT" of any Person shall mean a corporation or
other entity owning, directly or indirectly at least 50% of the shares of stock
or other ownership interests having ordinary voting power to elect a majority of
the directors of the Person, or other Persons performing similar functions for
any such Person.
"PARTICIPANT" shall mean each Person who shall be
granted the right by any Lender to participate in any of the Advances and who
shall have entered into a participation agreement in form and substance
satisfactory to such Lender.
"PAYMENT OFFICE" shall mean initially Two Tower Center
Boulevard, East Brunswick, New Jersey 08816; thereafter, such other office of
Agent, if any, which it may designate by notice to Borrowing Agent and to each
Lender to be the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
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"PERMITTED ENCUMBRANCES" shall mean (a) Liens in favor
of Agent for the benefit of Agent and Lenders; (b) Liens for taxes, assessments
or other governmental charges not delinquent or being contested in good faith
and by appropriate proceedings and with respect to which proper reserves have
been taken by Borrowers; PROVIDED, THAT, the Lien shall have no effect on the
priority of the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5; (d) deposits or pledges to secure obligations under worker's compensation,
social security or similar laws, or under unemployment insurance; (e) deposits
to secure licenses with respect to which the Agent has received written notice
and which have been appropriately reflected on the books and records of the
depositing entity, (f) easements, rights of way and other encumbrances on title
to real property that are relected on the title insurance received pursuant to
Section 8.1(q) hereof, (g) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of any Borrower's business; (h) judgment Liens
that have been stayed or bonded and mechanics', workers', materialmen's or other
like Liens arising in the ordinary course of any Borrower's business with
respect to obligations which are not due or which are being contested in good
faith by the applicable Borrower; (i) Liens placed upon fixed assets hereafter
acquired to secure a portion of the purchase price thereof, provided that (x)
any such lien shall not encumber any other property of the Borrowers and (y) the
aggregate amount of Indebtedness secured by such Liens incurred as a result of
such purchases during any fiscal year shall not exceed the amount provided for
in Section 7.6; (j) other Liens incidental to the conduct of Borrowers' business
or the ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or credit,
and which do not in the aggregate materially detract from Agent's or Lenders'
rights in and to the Collateral or the value of Borrowers' property or assets or
which do not materially impair the use thereof in the operation of Borrowers'
business; and (k) Liens disclosed on SCHEDULE 1.2.
"PERSON" shall mean any individual, sole
proprietorship, partnership, corporation, business trust, joint stock company,
trust, unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"PLAN" shall mean any employee benefit plan within the
meaning of Section 3(3) of ERISA, maintained for employees of Borrowers or any
member of the Controlled Group or any such Plan to which any Borrower or any
member of the Controlled Group is required to contribute on behalf of any of its
employees.
"PRO FORMA BALANCE SHEET" shall have the meaning set
forth in Section 5.5(a) hereof.
"PRO FORMA FINANCIAL STATEMENTS" shall have the meaning
set forth in Section 5.5(b) hereof.
"PROJECTIONS" shall have the meaning set forth in
Section 5.5(b) hereof.
"PURCHASING LENDER" shall have the meaning set forth in
Section 16.3 hereof.
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"QUESTIONNAIRE" shall mean the responses and materials
delivered to the Agent in connection with the due diligence memorandum dated
October 7, 1999 of Pryor Cashman Sherman & Flynn LLP.
"RCRA" shall mean the Resource Conservation and
Recovery Act, 42 U.S.C. " 6901 ET SEQ., as same may be amended from
time to time.
"REAL PROPERTY" shall mean all of each Borrower's
right, title and interest in and to the owned and leased premises identified on
SCHEDULE 4.19 hereto.
"RECEIVABLES" shall mean and include, as to each
Borrower, all of such Borrower's accounts, contract rights, instruments
(including those evidencing indebtedness owed to Borrowers by their Affiliates),
documents, chattel paper, general intangibles relating to accounts, drafts and
acceptances, and all other forms of obligations owing to such Borrower arising
out of or in connection with the sale or lease of Inventory or the rendition of
services, all guarantees and other security therefor, whether secured or
unsecured, now existing or hereafter created, and whether or not specifically
sold or assigned to Agent hereunder.
"RECEIVABLES ADVANCE RATE" shall have the meaning set
forth in Section 2.1(a)(y)(i) hereof.
"RELEASE" shall have the meaning set forth in Section
5.7(c)(i) hereof.
"REPORTABLE EVENT" shall mean a reportable event
described in Section 4043(b) of ERISA or the regulations promulgated thereunder.
"REQUIRED LENDERS" shall mean Lenders holding at least
sixty-six and two-thirds percent (66 2/3%) of the Advances and, if no Advances
are outstanding, shall mean Lenders holding at lease sixty-six and two-thirds
(66 2/3%) of the Commitment Percentages.
"RESERVE PERCENTAGE" shall mean the maximum effective
percentage in effect on any day as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the reserve
requirements (including, without limitation, supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding.
"REVOLVING ADVANCES" shall mean Advances made other
than Letters of Credit and the Term Loan.
"REVOLVING CREDIT NOTE" shall mean, collectively, the
promissory notes referred to in Section 2.1(a) hereof.
"REVOLVING INTEREST RATE" shall mean an interest rate
per annum equal to (a) the sum of the Alternate Base Rate percent with respect
to Domestic Rate Loans, or (b) the Eurodollar Rate plus two and three-quarters
percent (2.75%) with respect to Eurodollar Rate Loans.
"SENIOR DEBT PAYMENTS" shall mean and include all cash
actually expended by
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Borrowers to make (a) interest payments on any Advances hereunder, PLUS, (b)
scheduled principal payments on the Term Loan, PLUS (c) payments for all fees,
commissions and charges set forth herein and with respect to any Advances, PLUS
(d) capitalized lease payments, PLUS (e) payments with respect to any other
Indebtedness for borrowed money.
"SETTLEMENT DATE" shall mean the Closing Date and
thereafter Wednesday of each week unless such day is not a Business Day in which
case it shall be the next succeeding Business Day.
"SINGAPORE LETTER OF CREDIT" shall mean the Letter of
Credit issued to the Development Bank of Singapore for the account of
Semiconductor Packaging Materials Co., a division of SEMX for an amount not
exceeding the lesser of (i) SDP5,000,000 (calculated at the then current
exchange rate) and (ii) US$3,000,000.
"SUBORDINATED DEBT DOCUMENTATION" shall mean the Fleet
Agreement[s] and the Intercreditor Agreement.
"SUBORDINATED DEBT PAYMENTS" shall mean and include all
cash actually expended to make payments of principal and interest under the
Subordinated Debt Documents.
"SUBSIDIARY" shall mean a corporation or other entity
of whose shares of stock or other ownership interests having ordinary voting
power (other than stock or other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the directors
of such corporation, or other Persons performing similar functions for such
entity, are owned, directly or indirectly, by such Person.
"TERM" shall have the meaning set forth in Section 13.1
hereof.
"TERM LOAN" shall mean the Advances made pursuant to
Section 2.4 hereof.
"TERM LOAN RATE" shall mean an interest rate per annum
equal to (a) the sum of the Alternate Base Rate plus one-half percent (0.5%)
with respect to Domestic Rate Loans or (b) the sum of the Eurodollar Rate plus
three percent (3.0%) with respect to Eurodollar Rate Loans.
"TERM NOTE" shall mean, collectively, the promissory
notes described in Section 2.4 hereof.
"TERMINATION EVENT" shall mean (i) a Reportable Event
with respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any
Borrower or any member of the Controlled Group from a Plan or Multiemployer Plan
during a plan year in which such entity was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan; (v) any event or condition (a) which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may
result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (vi) the partial or complete withdrawal within the meaning of Sections
4203 and 4205 of ERISA, of any Borrower or
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any member of the Controlled Group from a Multiemployer Plan.
"TOXIC SUBSTANCE" shall mean and include any material
present on the Real Property or the Leasehold Interests which has been shown to
have significant adverse effect on human health or which is subject to
regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. " 2601 ET
SEQ., applicable state law, or any other applicable Federal or state laws now in
force or hereafter enacted relating to toxic substances. "Toxic Substance"
includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and
lead-based paints.
"TRANSACTIONS" shall have the meaning set forth in
Section 5.5 hereof.
"TRANSFEREE" shall have the meaning set forth in
Section 16.3(b) hereof.
"UNDRAWN AVAILABILITY" at a particular date shall mean
an amount equal to (a) the lesser of (i) the Formula Amount (plus cash on hand)
or (ii) the Maximum Revolving Advance Amount MINUS (b) the sum of (i) the
outstanding amount of Advances (other than the Term Loan), including without
limitation, the Singapore Letter of Credit, PLUS (ii) all amounts due and owing
to Borrowers' trade creditors which are outstanding beyond normal trade terms,
PLUS (iii) fees and expenses for which Borrowers are liable but which have not
been paid or charged to Borrowers' Account.
"WEEK" shall mean the time period commencing with the
opening of business on a Wednesday and ending on the end of business the
following Tuesday.
"WORKING CAPITAL" at a particular date, shall mean the
excess, if any, of Current Assets over Current Liabilities at such date.
1.3. UNIFORM COMMERCIAL CODE TERMS. All terms used herein and
defined in the Uniform Commercial Code as adopted in the State of New York shall
have the meaning given therein unless otherwise defined herein.
1.4. CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. Wherever appropriate in the context,
terms used herein in the singular also include the plural and VICE VERSA. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) REVOLVING ADVANCES. Subject to the terms and conditions
set forth in this Agreement, each Lender, severally and not jointly, will make
including, without limitation, Section 2.1(b), Revolving Advances to Borrowers
in aggregate amounts outstanding at any time
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equal to such Lender's Commitment Percentage of the lesser of (x) the Maximum
Revolving Advance Amount less the aggregate amount of outstanding Letters of
Credit or (y) an amount equal to the sum of:
(i) up to 85% subject to the provisions of Section
2.1(c) hereof ("Receivables Advance Rate"), of Eligible
Receivables provided however that no more than $750,000
in the aggregate at any one time may be based on
Eligible Receivables consisting of foreign accounts
receivable not backed by a letter of credit or credit
insurance in form and on terms satisfactory to Agent in
its sole discretion, PLUS
(ii) up to the lesser of (A) 60% subject to the
provisions of Section 2.1(c) hereof ("Inventory Advance
Rate"), of the value of the Eligible Inventory (the
Receivables Advance Rate and the Inventory Advance Rate
shall be referred to collectively, as the "Advance
Rates") or (B) the lesser of (x) $3,000,000 in the
aggregate at any one time, and (y) 50% of aggregate
Revolving Advances PLUS
(iii) the product of (a) the aggregate amount of
outstanding Letters of Credit (excluding the Singapore
Letter of Credit) TIMES (b) the Inventory Advance Rate,
MINUS
(iv) the aggregate amount of outstanding Letters of
Credit, MINUS
(v) such reserves as Agent may reasonably deem in a
commercially reasonable manner proper and necessary
from time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii)
and (iii) MINUS (y) Section 2.1 (a)(y)(v) at any time and from time to time
shall be referred to as the "Formula Amount". The Revolving Advances shall be
evidenced by the secured promissory note ("Revolving Credit Note") substantially
in the form attached hereto as EXHIBIT 2.1(a).
(b) INDIVIDUAL REVOLVING ADVANCES. Each Lender,
severally and not jointly, will make Revolving Advances to each Borrower in
aggregate amounts outstanding at any time not greater than such Lender's
Commitment Percentage of the lesser of (x) such Borrower's Individual Maximum
Revolving Advance Amount less the aggregate amount of outstanding Letters of
Credit or (y) such Borrower's Individual Formula Amount less the aggregate
amount of outstanding Letters of Credit.
(c) DISCRETIONARY RIGHTS. The Advance Rates may be
increased or decreased by Agent at any time and from time to time in the
exercise of its discretion in a commercially reasonable manner on not less than
five Business Day's Notice to Borrower. Each Borrower consents to any such
increases or decreases and acknowledges that decreasing the Advance Rates or
increasing the reserves may limit or restrict Advances requested by Borrowing
Agent.
2.2. PROCEDURE FOR REVOLVING ADVANCES BORROWING.
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(a) Borrowing Agent on behalf of any Borrower may
notify Agent prior to 11:00 a.m. on a Business Day of a Borrower's request to
incur, on that day, a Revolving Advance hereunder. Should any amount required to
be paid as interest hereunder, or as fees or other charges under this Agreement
or any other agreement with Agent or Lenders, or with respect to any other
Obligation, become due, same shall be deemed a request for a Revolving Advance
as of the date such payment is due, in the amount required to pay in full such
interest, fee, charge or Obligation under this Agreement or any other agreement
with Agent or Lenders, and such request shall be irrevocable.
(b) Notwithstanding the provisions of (a) above, in the
event any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent
shall give Agent at least three (3) Business Days' prior written notice,
specifying (i) the date of the proposed borrowing (which shall be a Business
Day), (ii) the type of borrowing and the amount on the date of such Advance to
be borrowed, which amount shall be an integral multiple of $100,000, and (iii)
the duration of the first Interest Period therefor. Interest Periods for
Eurodollar Rate Loans shall be for one, two, three or six months; PROVIDED, if
an Interest Period would end on a day that is not a Business Day, it shall end
on the next succeeding Business Day unless such day falls in the next succeeding
calendar month in which case the Interest Period shall end on the next preceding
Business Day. No Eurodollar Rate Loan shall be made available to Borrower during
the continuance of a Default or an Event of Default.
(c) Each Interest Period of a Eurodollar Rate Loan
shall commence on the date such Eurodollar Rate Loan is made and shall end on
such date as Borrowing Agent may elect as set forth in (b)(iii) above provided
that the exact length of each Interest Period shall be determined in accordance
with the practice of the interbank market for offshore Dollar deposits and no
Interest Period shall end after the last day of the Term.
Borrowing Agent shall elect the initial Interest Period applicable
to a Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d), as the case may be. Borrowing Agent shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Agent does
not receive timely notice of the Interest Period elected by Borrowing Agent,
Borrowers shall be deemed to have elected to convert to a Domestic Rate Loan
subject to Section 2.2(d) hereinbelow.
(d) Provided that no Event of Default shall have
occurred and be continuing, any Borrower may, on the last Business Day of the
then current Interest Period applicable to any outstanding Eurodollar Rate Loan,
or on any Business Day with respect to Domestic Rate Loans, convert any such
loan into a loan of another type in the same aggregate principal amount provided
that any conversion of a Eurodollar Rate Loan shall be made only on the last
Business Day of the then current Interest Period applicable to such Eurodollar
Rate Loan. If a Borrower desires to convert a loan, Borrowing Agent shall give
Agent not less than three (3) Business Days' prior written notice to convert
from a Domestic Rate Loan to a Eurodollar Rate Loan or one (1) Business Day's
prior written notice to convert from a Eurodollar Rate Loan to a Domestic Rate
Loan, specifying the date of such conversion, the loans to be converted and if
the conversion is from a Domestic Rate Loan to any other type of loan, the
duration of the first Interest Period
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therefor. After giving effect to each such conversion, there shall not be
outstanding more than six (6) Eurodollar Rate Loans, in the aggregate.
(e) At its option and upon three (3) Business Days'
prior written notice, any Borrower may prepay the Eurodollar Rate Loans in whole
at any time or in part from time to time, without premium or penalty, but with
accrued interest on the principal being prepaid to the date of such repayment.
Such Borrower shall specify the date of prepayment of Advances which are
Eurodollar Rate Loans and the amount of such prepayment. In the event that any
prepayment of a Eurodollar Rate Loan is required or permitted on a date other
than the last Business Day of the then current Interest Period with respect
thereto, such Borrower shall indemnify Agent and Lenders therefor in accordance
with Section 2.2(f) hereof.
(f) Each Borrower shall indemnify Agent and Lenders and
hold Agent and Lenders harmless from and against any and all losses or expenses
that Agent and Lenders may sustain or incur as a consequence of any prepayment,
conversion of or any default by any Borrower in the payment of the principal of
or interest on any Eurodollar Rate Loan or failure by any Borrower to complete a
borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan
after notice thereof has been given, including, but not limited to, any interest
payable by Agent or Lenders to lenders of funds obtained by it in order to make
or maintain its Eurodollar Rate Loans hereunder. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by Agent
or any Lender to Borrowing Agent shall be prima facie conclusive.
(g) Notwithstanding any other provision hereof, if any
applicable law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain
its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate
Loans hereunder, shall forthwith be cancelled and Borrowers shall, if any
affected Eurodollar Rate Loans are then outstanding, promptly upon request from
Agent, either pay all such affected Eurodollar Rate Loans or convert such
affected Eurodollar Rate Loans into loans of another type. If any such payment
or conversion of any Eurodollar Rate Loan is made on a day that is not the last
day of the Interest Period applicable to such Eurodollar Rate Loan, Borrowers
shall pay Agent, upon Agent's request, such amount or amounts as may be
necessary to compensate Lenders for any loss or expense sustained or incurred by
Lenders in respect of such Eurodollar Rate Loan as a result of such payment or
conversion, including (but not limited to) any interest or other amounts payable
by Lenders to lenders of funds obtained by Lenders in order to make or maintain
such Eurodollar Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lenders to Borrowing Agent shall
be prima facie conclusive.
2.3. DISBURSEMENT OF ADVANCE PROCEEDS. All Advances shall be
disbursed from whichever office or other place Agent may designate from time to
time and, together with any and all other Obligations of Borrowers to Agent or
Lenders, shall be charged to Borrowers' Account on Agent's books. During the
Term, Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowers or deemed to have been
requested by Borrowers under Section 2.2(a) hereof shall, with respect to
requested Revolving Advances to the extent
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Lenders make such Revolving Advances, be made available to the applicable
Borrower on the day so requested by way of credit to such Borrower's operating
account at PNC, or such other bank as Borrowing Agent may designate following
notification to Agent, in immediately available federal funds or other
immediately available funds or, with respect to Revolving Advances deemed to
have been requested by any Borrower, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request.
2.4. TERM LOAN. Subject to the terms and conditions of this
Agreement, each Lender, severally and not jointly, will make a Term Loan to
Borrowers in the sum equal to such Lender's Commitment Percentage of $6,234,512.
The Term Loan shall be advanced on the Closing Date and shall be, with respect
to principal, payable as follows, subject to acceleration upon the occurrence of
an Event of Default under this Agreement or termination of this Agreement, and
in addition to mandatory payments required hereby: commencing on December 1,
1999, and thereafter on the first Business Day of each consecutive month, in
equal monthly installments of $74,220.38 of the outstanding principal balance of
the Term Loan, with the remaining balance due on the last day of the Term
subject to prepayment as herein provided; and shall be evidenced by a secured
promissory note (the "Term Note") in substantially the form attached hereto as
EXHIBIT 2.4.
2.5. MAXIMUM ADVANCES. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) Maximum Revolving
Advance Loan Amount or (b) the Formula Amount.
2.6. REPAYMENT OF ADVANCES.
(a) The Advances shall be due and payable in full on
the last day of the Term subject to earlier prepayment as herein provided. The
Term Loan shall be due and payable as provided in Section 2.4 hereof and in the
Term Note.
(b) Each Borrower recognizes that the amounts evidenced
by checks, notes, drafts or any other items of payment relating to and/or
proceeds of Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Borrowers' Account as
of the Business Day on which Agent receives those items of payment, each
Borrower agrees that, in computing the charges under this Agreement, all items
of payment shall be deemed applied by Agent on account of the Obligations one
(1) Business Day after the Business Day Agent receives such payments via wire
transfer or electronic depository check. Agent is not, however, required to
credit Borrowers' Account for the amount of any item of payment which is
unsatisfactory to Agent and Agent may charge Borrowers' Account for the amount
of any item of payment which is returned to Agent unpaid.
(c) All payments of principal, interest and other
amounts payable hereunder, or under any of the related agreements shall be made
to Agent at the Payment Office not later than 1:00 P.M. (New York Time) on the
due date therefor in lawful money of the United States of America in federal
funds or other funds immediately available to Agent. Agent shall have the right
to effectuate payment on any and all Obligations due and owing hereunder by
charging Borrowers' Account or by making Advances as provided in Section 2.2
hereof.
(d) Borrowers shall pay principal, interest, and all
other amounts payable
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hereunder, or under any related agreement, without any deduction whatsoever,
including, but not limited to, any deduction for any setoff or counterclaim.
2.7. REPAYMENT OF EXCESS ADVANCES. The aggregate balance of
Advances outstanding at any time in excess of the maximum amount of Advances
permitted hereunder shall be immediately due and payable without the necessity
of any demand, at the Payment Office, whether or not a Default or Event of
Default has occurred.
2.8. STATEMENT OF ACCOUNT. Agent shall maintain, in accordance with
its customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; PROVIDED,
HOWEVER, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrowing Agent a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrowers, during such month. The monthly statements shall be deemed
prima facie correct and binding upon Borrowers and shall constitute an account
stated between Lenders and Borrowers unless Agent receives a written statement
of Borrowers' specific exceptions thereto within sixty (60) days after such
statement is received by Borrowing Agent. The records of Agent with respect to
the loan account shall be prima facie conclusive evidence of the amounts of
Advances and other charges thereto and of payments applicable thereto.
2.9. LETTERS OF CREDIT . Subject to the terms and conditions
hereof, Agent shall issue or cause the issuance of Letters of Credit ("Letters
of Credit") on behalf of any Borrower, PROVIDED, HOWEVER, that Agent will not be
required to issue or cause to be issued any Letters of Credit to the extent that
the face amount of such Letters of Credit would then cause the sum of (i) the
outstanding Revolving Advances PLUS (ii) outstanding Letters of Credit to exceed
the lesser of (x) the Maximum Revolving Advance Amount or (y) the Formula
Amount; PROVIDED, FURTHER, HOWEVER, that Agent will not be required to issue or
cause to be issued any Letters of Credit to the extent that the face amount of
such Letters of Credit issued for such Borrower would then cause the sum of (i)
the outstanding Revolving Advances to such Borrower PLUS (ii) the outstanding
Letters of Credit issued or caused to be issued on behalf of such Borrower to
exceed the lesser of (x) such Borrower's Individual Maximum Revolving Advance
Amount or (y) such Borrower's Individual Formula Amount. The maximum amount of
outstanding Letters of Credit shall not exceed the lesser of (i) US$3,000,000
and (ii) SDP$5,000,0000 (calculated at the then current exchange rate), in the
aggregate at any time, which amount shall be allocated among the Borrowers in
the manner to be determined by the Agent. All disbursements or payments related
to Letters of Credit shall be deemed to be Domestic Rate Loans consisting of
Revolving Advances and shall bear interest at the applicable Revolving Interest
Rate for Domestic Rate Loans; Letters of Credit that have not been drawn upon
shall not bear interest.
2.10. ISSUANCE OF LETTERS OF CREDIT.
(a) Borrowing Agent, on behalf of Borrowers, may
request Agent to issue or cause the issuance of a Letter of Credit by delivering
to Agent at the Payment Office, Agent's form of Letter of Credit Application
(the "Letter of Credit Application") completed to the satisfaction of Agent;
and, such other certificates, documents and other papers and information as
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Agent may reasonably request. Borrowing Agent, on behalf of Borrowers, also has
the right to give instructions and make agreements with respect to any
application, any applicable letter of credit and security agreement, any
applicable letter of credit reimbursement agreement and/or any other applicable
agreement, any letter of credit and the disposition of documents, disposition of
any unutilized funds, and to agree with Agent upon any amendment, extension or
renewal of any Letter of Credit.
(b) Each Letter of Credit shall, among other things,
(i) provide for the payment of sight drafts when presented for honor thereunder
in accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than one (1) year after
such Letter of Credit's date of issuance and in no event later than the last day
of the Term. Each Letter of Credit shall be subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, and any amendments or revision thereof adhered to
by the Issuer and, to the extent not inconsistent therewith, the laws of the
State of New Jersey.
(c) Agent shall use its reasonable efforts to notify
Lenders of the request by Borrowing Agent for a Letter of Credit hereunder.
2.11. REQUIREMENTS FOR ISSUANCE OF LETTERS OF CREDIT.
(a) In connection with the issuance of any Letter of
Credit, Borrowers shall indemnify, save and hold Agent, each Lender and each
Issuer harmless from any loss, cost, expense or liability, including, without
limitation, payments made by Agent, any Lender or any Issuer and expenses and
reasonable attorneys' fees incurred by Agent, any Lender or Issuer arising out
of, or in connection with, any Letter of Credit to be issued for any Borrower.
Borrowers shall be bound by Agent's or any Issuer's regulations and good faith
interpretations of any Letter of Credit issued for Borrowers' Account, although
this interpretation may be different from its own; and, neither Agent, nor any
Lender, nor any Issuer nor any of their correspondents shall be liable for any
error, negligence, or mistakes, whether of omission or commission, in following
Borrowing Agent's or any Borrower's instructions or those contained in any
Letter of Credit or of any modifications, amendments or supplements thereto or
in issuing or paying any Letter of Credit, except for Agent's, any Lender's, any
Issuer's or such correspondents' willful misconduct.
(b) Borrowing Agent shall authorize and direct any
Issuer to name the applicable Borrower as the "Applicant" or "Account Party" of
each Letter of Credit. If Agent is not the Issuer of any Letter of Credit,
Borrower shall authorize and direct the Issuer to deliver to Agent all
instruments, documents, and other writings and property received by the Issuer
pursuant to the Letter of Credit and to accept and rely upon Agent's
instructions and agreements with respect to all matters arising in connection
with the Letter of Credit or any application therefor.
(c) In connection with all Letters of Credit issued or
caused to be issued by Agent under this Agreement, each Borrower hereby appoints
Agent, or its designee, as its attorney, with full power and authority,
following the occurrence of an Event of Default, (i) to sign and/or endorse such
Borrower's name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign such Borrower's name on bills of
lading; (iii) to clear Inventory through the United States of America Customs
Department ("Customs") in the name of such Borrower or
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Agent or Agent's designee, and to sign and deliver to Customs officials powers
of attorney in the name of such Borrower for such purpose; and (iv) to complete
in such Borrower's name or Agent's, or in the name of Agent's designee, any
order, sale or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof. Neither Agent nor its attorneys
will be liable for any acts or omissions nor for any error of judgment or
mistakes of fact or law, except for Agent's or its attorney's willful
misconduct. This power, being coupled with an interest, is irrevocable as long
as any Letters of Credit remain outstanding.
(d) Each Lender shall to the extent of the percentage
amount equal to the product of such Lender's Commitment Percentage times the
aggregate amount of all unreimbursed reimbursement obligations arising from
disbursements made or obligations incurred with respect to the Letters of Credit
be deemed to have irrevocably purchased an undivided participation in each such
unreimbursed reimbursement obligation. In the event that at the time a
disbursement is made the unpaid balance of Revolving Advances exceeds or would
exceed, with the making of such disbursement, the lesser of the Maximum
Revolving Advance Amount or the Formula Amount, and such disbursement is not
reimbursed by Borrowers within two (2) Business Days, Agent shall promptly
notify each Lender and upon Agent's demand each Lender shall pay to Agent such
Lender's proportionate share of such unreimbursed disbursement together with
such Lender's proportionate share of Agent's unreimbursed costs and expenses
relating to such unreimbursed disbursement. Upon receipt by Agent of a repayment
from any Borrower of any amount disbursed by Agent for which Agent had already
been reimbursed by Lenders, Agent shall deliver to each Lender that Lender's pro
rata share of such repayment. Each Lender's participation commitment shall
continue until the last to occur of any of the following events: (A) Agent
ceases to be obligated to issue or cause to be issued Letters of Credit
hereunder; (B) no Letter of Credit issued hereunder remains outstanding and
uncancelled or (C) all Persons (other than the applicable Borrower) have been
fully reimbursed for all payments made under or relating to Letters of Credit.
2.12. ADDITIONAL PAYMENTS. Any sums expended by Agent or any Lender
due to any Borrower's failure to perform or comply with its obligations under
this Agreement or any Other Document including, without limitation, any
Borrower's obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof,
may be charged to Borrowers' Account as a Revolving Advance and added to the
Obligations.
2.13. MANNER OF BORROWING AND PAYMENT.
(a) Each borrowing of Revolving Advances shall be
advanced according to the applicable Commitment Percentages of Lenders. The Term
Loan shall be advanced according to the Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by
Borrowers on account of the principal of and interest on the Revolving Advances,
shall be applied to the Revolving Advances pro rata according to the applicable
Commitment Percentages of Lenders. Each payment (including each prepayment) by
Borrowers on account of the principal of and interest on the Term Note, shall be
made from or to, or applied to that portion of the Term Loan evidenced by the
Term Note pro rata according to the Commitment Percentages of Lenders. Except as
expressly provided herein, all payments (including prepayments) to be made by
any Borrower on account of principal, interest and fees shall be made without
set off or counterclaim and shall be made to Agent on behalf of the
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Lenders to the Payment Office, in each case on or prior to 1:00 P.M., New York
time, in Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the
contrary contained in Sections 2.13(a) and (b) hereof, commencing with the first
Business Day following the Closing Date, each borrowing of Revolving Advances
shall be advanced by Agent and each payment by any Borrower on account of
Revolving Advances shall be applied first to those Revolving Advances advanced
by Agent. On or before 1:00 P.M., New York time, on each Settlement Date
commencing with the first Settlement Date following the Closing Date, Agent and
Lenders shall make certain payments as follows: (I) if the aggregate amount of
new Revolving Advances made by Agent during the preceding Week (if any) exceeds
the aggregate amount of repayments applied to outstanding Revolving Advances
during such preceding Week, then each Lender shall provide Agent with funds in
an amount equal to its applicable Commitment Percentage of the difference
between (w) such Revolving Advances and (x) such repayments and (II) if the
aggregate amount of repayments applied to outstanding Revolving Advances during
such Week exceeds the aggregate amount of new Revolving Advances made during
such Week, then Agent shall provide each Lender with funds in an amount equal to
its applicable Commitment Percentage of the difference between (y) such
repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn
interest at the applicable Contract Rate on outstanding Advances which it has
funded.
(iii) Promptly following each Settlement Date,
Agent shall submit to each Lender a certificate with respect to payments
received and Advances made during the Week immediately preceding such Settlement
Date. Such certificate of Agent shall be conclusive in the absence of manifest
error.
(d) If any Lender or Participant (a "benefitted
Lender") shall at any time receive any payment of all or part of its Advances,
or interest thereon, or receive any Collateral in respect thereof (whether
voluntarily or involuntarily or by set-off) in a greater proportion than any
such payment to and Collateral received by any other Lender, if any, in respect
of such other Lender's Advances, or interest thereon, and such greater
proportionate payment or receipt of Collateral is not expressly permitted
hereunder, such benefitted Lender shall purchase for cash from the other Lenders
a participation in such portion of each such other Lender's Advances, or shall
provide such other Lender with the benefits of any such Collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Lender to share
the excess payment or benefits of such Collateral or proceeds ratably with each
of Lenders; PROVIDED, HOWEVER, that if all or any portion of such excess payment
or benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. Each Lender so purchasing a portion of
another Lender's Advances may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone,
confirmed in writing, by any Lender that such Lender will not make the amount
which would constitute its applicable Commitment Percentage of the Advances
available to Agent, Agent may (but shall not be obligated to) assume that such
Lender shall make such amount available to Agent on the next
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Settlement Date and, in reliance upon such assumption, make available to
Borrowers a corresponding amount. Agent will promptly notify Borrowers of its
receipt of any such notice from a Lender. If such amount is made available to
Agent on a date after such next Settlement Date, such Lender shall pay to Agent
on demand an amount equal to the product of (i) the daily average Federal Funds
Rate (computed on the basis of a year of 360 days) during such period as quoted
by Agent, times (ii) such amount, times (iii) the number of days from and
including such Settlement Date to the date on which such amount becomes
immediately available to Agent. A certificate of Agent submitted to any Lender
with respect to any amounts owing under this paragraph (e) shall be conclusive,
in the absence of manifest error. If such amount is not in fact made available
to Agent by such Lender within three (3) Business Days after such Settlement
Date, Agent shall be entitled to recover such an amount, with interest thereon
at the rate per annum then applicable to such Revolving Advances hereunder, on
demand from Borrowers; PROVIDED, HOWEVER, that Agent's right to such recovery
shall not prejudice or otherwise adversely affect Borrowers' rights (if any)
against such Lender.
2.14. MANDATORY PREPAYMENTS.
When any Borrower sells or otherwise disposes of any
Collateral other than Inventory in the ordinary course of business, Borrowers
shall repay the Advances in an amount equal to the net proceeds of such sale
(i.e., gross proceeds less the reasonable costs of such sales or other
dispositions), provided however that Borrowers (taken as a whole) may be
permitted to retain $50,000 on an annual aggregate basis, such repayments to be
made promptly but in no event more than one (1) Business Day following receipt
of such net proceeds, and until the date of payment, such proceeds shall be held
in trust for Agent. The foregoing shall not be deemed to be implied consent to
any such sale otherwise prohibited by the terms and conditions hereof. Such
repayments shall be applied first, to the outstanding principal installments on
the Term Loan in the order of the maturities thereof and, second, to the
remaining Advances in such order as Agent may determine, subject to Borrowers'
ability to reborrow Revolving Advances in accordance with the terms hereof.
2.15. USE OF PROCEEDS. Borrowers shall apply the proceeds of
Advances to (i) repay existing indebtedness owed under the First Union Credit
Agreement, (ii) pay fees and expenses relating to this transaction, and (iii) to
provide for their working capital needs.
2.16. DEFAULTING LENDER.
(a) Notwithstanding anything to the contrary contained
herein, in the event any Lender (x) has refused (which refusal constitutes a
breach by such Lender of its obligations under this Agreement) to make available
its portion of any Advance or (y) notifies either Agent or Borrowing Agent that
it does not intend to make available its portion of any Advance (if the actual
refusal would constitute a breach by such Lender of its obligations under this
Agreement) (each, a "Lender Default"), all rights and obligations hereunder of
such Lender (a "Defaulting Lender") as to which a Lender Default is in effect
and of the other parties hereto shall be modified to the extent of the express
provisions of this Section 2.16 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders
(the "Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be
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advanced by any Lender shall be increased as a result of such Lender Default.
Amounts received in respect of principal of any type of Advances shall be
applied to reduce the applicable Advances of each Lender pro rata based on the
aggregate of the outstanding Advances of that type of all Lenders at the time of
such application; provided, that, such amount shall not be applied to any
Advances of a Defaulting Lender at any time when, and to the extent that, the
aggregate amount of Advances of any Non-Defaulting Lender exceeds such
Non-Defaulting Lender's Commitment Percentage of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give
instructions to Agent or to approve, disapprove, consent to or vote on any
matters relating to this Agreement and the Other Documents. All amendments,
waivers and other modifications of this Agreement and the Other Documents may be
made without regard to a Defaulting Lender and, for purposes of the definition
of "Required Lenders," a Defaulting Lender shall be deemed not to be a Lender
and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section
2.16, the rights and obligations of a Defaulting Lender (including the
obligation to indemnify Agent) and the other parties hereto shall remain
unchanged. Nothing in this Section 2.16 shall be deemed to release any
Defaulting Lender from its obligations under this Agreement and the Other
Documents, shall alter such obligations, shall operate as a waiver of any
default by such Defaulting Lender hereunder, or shall prejudice any rights which
any Borrower, Agent or any Lender may have against any Defaulting Lender as a
result of any default by such Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively
cures to the satisfaction of Agent the breach which caused a Lender to become a
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender
and shall be treated as a Lender under this Agreement.
2.17. TAXES. (a) All payments made by any Borrower under this Agreement
and any Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions, liabilities or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Body, excluding all present and future income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on the Agent or
any Lender as a result of a present or former connection between the Agent or
such Lender and the jurisdiction of the Governmental Body imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement or any Note)(all such non-excluded income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions, liabilities or withholdings
being hereinafter referred to as "NON-EXCLUDED TAXES" and all such excluded
income taxes and franchise taxes (imposed in lieu of net income taxes) being
hereinafter referred to as "EXCLUDED TAXES"). If any Non-Excluded Taxes are
required to be withheld from any amounts payable to the Agent or any Lender
hereunder or under any Note, the amounts so payable to the Administrative Agent
or such Lender shall be increased to the extent necessary, and solely to the
extent necessary, to yield to, or cause the receipt by, the Agent or such Lender
(after payment of all Non-Excluded Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement;
PROVIDED, HOWEVER, that a Borrower shall not be required to increase any such
amounts payable to any Lender that is not organized under the laws of the United
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States of America or a state thereof if such Lender fails to comply with the
requirements of Section 2.17(b) (a "NON-COMPLIANT LENDER"). Whenever any
Non-Excluded Taxes are payable by a Borrower, as promptly as possible thereafter
such Borrower shall send to the Agent for its own account or for the account of
such Lender, as the case may be, a certified copy of an original official
receipt showing payment thereof or other documentation reasonably satisfactory
to the Agent. If a Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, such Borrower shall indemnify
the Agent and the Lenders (other than Non-Compliant Lenders) for any incremental
taxes, interest or penalties that may become payable by the Administrative Agent
or any Lender as a result of any such failure. The agreements in this Section
2.17 shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder; PROVIDED, HOWEVER, no Borrower
shall be obligated to pay amounts required by this Section 2.17 that arise from
changes in the laws applicable to Non-Excluded Taxes if such change and payment
do not relate to a taxable period including, or taxable event occurring during,
the period before the termination of this Agreement.
(b) Each Lender that is not organized under the laws of the
United States of America or a state thereof shall:
(i) deliver to the Borrowers and the Agent, on a timely basis
in accordance with the terms thereof (A) two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, and (B) an Internal Revenue Service
Form W-8 or W-9, or successor applicable form, as the case may be;
(ii) deliver to the Borrowers and the Agent two further copies
of any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrowers; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrowers or the Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrowers and the Agent.
Such Lender shall certify (A) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (B) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax; PROVIDED, HOWEVER, that if such Lender advises the Borrowers
that it is not capable of receiving payments without deduction or withholding of
United States federal income tax or establishing an exemption from United States
backup withholding tax (a "MANDATORILY WITHHOLDING LENDER"), the foregoing
documents need not be delivered; PROVIDED FURTHER HOWEVER that any such Lender
which is a Mandatorily Withholding Lender as of the date such Lender becomes a
Lender under this Agreement shall not be entitled to receive such additional
amounts pursuant to Section 2.17(a) or the benefits of the indemnities stated in
Section 2.17(a). Each Person that shall become a Lender shall, upon the
effectiveness of the
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related transfer, be required to provide all of the forms and statements
required pursuant to this Section 2.17(b).
(c) If any Lender shall receive a credit or refund from a
taxing authority with respect to, and actually resulting from, an amount of
Non-Excluded Taxes actually paid to or on behalf of such Lender by a Borrower (a
"TAX CREDIT"), such Lender shall promptly notify such Borrower of such Tax
Credit. If such Lender in the form of cash receives such Tax Credit, such Lender
shall promptly pay to such Borrower the amount so received with respect to the
Tax Credit. If such Tax Credit is not received by such Lender in the form of
cash, such Lender shall pay the amount of such Tax Credit not later than the
time prescribed by applicable law for filing the return (including extensions of
time) for such Lender's taxable period which includes the period in which such
Lender receives the economic benefit of such Tax Credit. In any event, the
amount of any Tax Credit payable by a Lender to a Borrower pursuant to this
clause (c) shall not exceed the actual amount of cash refunded to, or credits
received and usable (in accordance with the actual practices then in use by such
Lender) by, such Lender from a taxing authority. In determining the amount of
any Tax Credit, a Lender may use such apportionment and attribution rules as
such Lender customarily employs in allocating taxes among its various operations
and income sources and such determination shall be presumed conclusively
correct. Each Borrower further agrees promptly to return to a Lender the amount
paid to such Borrower with respect to a Tax Credit by such Lender if such Lender
is required to repay, or is determined to be ineligible for, a Tax Credit for
such amount. Notwithstanding anything to the contrary contained herein, each
Borrower hereby acknowledges and agrees that (i) neither the Agent nor any
Lender shall be obligated to provide such Borrower with details of the tax
position of the Agent or such Lender (as the case may be) and (ii) such Borrower
shall have no right to inspect any records (including tax returns) of the Agent
or such Lender (as the case may be).
III. INTEREST AND FEES.
3.1. INTEREST. Interest on Advances shall be payable in arrears on
the first day of each month with respect to Domestic Rate Loans and, with
respect to Eurodollar Rate Loans, at the end of each Interest Period. Interest
charges shall be computed on the actual principal amount of Advances outstanding
from time to time during the month (the "Monthly Advances") at a rate per annum
equal to (i) with respect to Revolving Advances, the applicable Revolving
Interest Rate and (ii) with respect to the Term Loan, the Term Loan Rate (as
applicable, the "Contract Rate"). Whenever, subsequent to the date of this
Agreement, the Alternate Base Rate is increased or decreased, the applicable
Contract Rate for Domestic Rate Loans shall be similarly changed without notice
or demand of any kind by an amount equal to the amount of such change in the
Alternate Base Rate during the time such change or changes remain in effect. The
Eurodollar Rate shall be adjusted with respect to Eurodollar Rate Loans without
notice or demand of any kind on the effective date of any change in the Reserve
Percentage as of such effective date. Upon and after the occurrence of an Event
of Default, and during the continuation thereof, (i) the Obligations other than
Eurodollar Rate Loans shall bear interest at the applicable Contract Rate for
Domestic Loans plus two percent (2%) per annum and (ii) Eurodollar Rate Loans
shall bear interest at the Revolving Interest Rate for Eurodollar Rate Loans
plus two percent (2%) per annum (as applicable, the "Default Rate").
3.2. LETTER OF CREDIT FEES.
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(a) Borrowers shall pay (x) to Agent, for the benefit
of Lenders, fees for each Letter of Credit for the period from and excluding the
date of issuance of same to and including the date of expiration or termination,
equal to the average daily face amount of each outstanding Letter of Credit
multiplied by one and one-half percent (1.50%) per annum, such fees to be
calculated on the basis of a 360-day year for the actual number of days elapsed
and to be payable monthly in arrears on the first day of each month and on the
last day of the Term and (y) to the Issuer, any and all fees and expenses as
agreed upon by the Issuer and the Borrowing Agent in connection with any Letter
of Credit, including, without limitation, in connection with the opening,
amendment or renewal of any such Letter of Credit and any acceptances created
thereunder and shall reimburse Agent for any and all fees and expenses, if any,
paid by Agent to the Issuer (all of the foregoing fees, the "Letter of Credit
Fees"). All such charges shall be deemed earned in full on the date when the
same are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason. Any such charge
in effect at the time of a particular transaction shall be the charge for that
transaction, notwithstanding any subsequent change in the Issuer's prevailing
charges for that type of transaction. All Letter of Credit Fees payable
hereunder shall be deemed earned in full on the date when the same are due and
payable hereunder and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason.
(b) After and during the continuance of an Event of
Default, on demand, Borrowers will cause cash to be deposited and maintained in
an account with Agent, as cash collateral, in an amount equal to one hundred and
five percent (105%) of the outstanding Letters of Credit, and each Borrower
hereby irrevocably authorizes Agent, in its discretion, on such Borrower's
behalf and in such Borrower's name, to open such an account and to make and
maintain deposits therein, or in an account opened by such Borrower, in the
amounts required to be made by such Borrower, out of the proceeds of Receivables
or other Collateral or out of any other funds of such Borrower coming into any
Lender's possession at any time. Agent will invest such cash collateral (less
applicable reserves) in such short-term money-market items as to which Agent and
such Borrower mutually agree and the net return on such investments shall be
credited to such account and constitute additional cash collateral. No Borrower
may withdraw amounts credited to any such account except upon payment and
performance in full of all Obligations and termination of this Agreement.
(c) To the extent that any Letter of Credit is collateralized
pursuant to Section 3.2(b) hereof, the amount of such Letter of Credit shall not
be deducted from the Formula Amount, except that reserves with respect to such
Letter of Credit may be deducted if required by the Agent in its discretion
exercised in a commercially reasonable manner.
3.3. (a) CLOSING FEE. Upon the execution of this Agreement,
Borrowers shall pay to Agent a closing fee as stated in the Fee Letter.
(b) FACILITY FEE. If, for any month during the Term, the
average daily unpaid balance of the Revolving Advances for each day of such
month does not equal the Maximum Revolving Advance Amount, then Borrowers shall
pay to Agent for the ratable benefit of Lenders a fee at a rate equal to one
quarter of one percent (0.25%) per annum on the amount by which the Maximum
Revolving Advance Amount exceeds such average daily unpaid balance. Such fee
shall be payable to Agent in arrears on the last day of each month.
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3.4. COLLATERAL MANAGEMENT FEE. Borrowers shall pay Agent a
collateral management fee equal to $1,500 per month commencing on the first day
of the month following the Closing Date and on the first day of each month
thereafter during the Term. The collateral management fee shall be deemed earned
in full on the date when same is due and payable hereunder and shall not be
subject to rebate or proration upon termination of this Agreement for any
reason.
3.5. COMPUTATION OF INTEREST AND FEES. Interest and fees hereunder
shall be computed on the basis of a year of 360 days and for the actual number
of days elapsed. If any payment to be made hereunder becomes due and payable on
a day other than a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and interest thereon shall be payable at the
applicable Contract Rate during such extension.
3.6. MAXIMUM CHARGES. In no event whatsoever shall interest and
other charges charged hereunder exceed the highest rate permissible under law.
In the event interest and other charges as computed hereunder would otherwise
exceed the highest rate permitted under law, such excess amount shall be first
applied to any unpaid principal balance owed by Borrowers, and if the then
remaining excess amount is greater than the previously unpaid principal balance,
Lenders shall promptly refund such excess amount to Borrowers and the provisions
hereof shall be deemed amended to provide for such permissible rate.
3.7. INCREASED COSTS. In the event that any applicable law, treaty
or governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.7, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Other Document or change the
basis of taxation of payments to Agent or any Lender of principal, fees,
interest or any other amount payable hereunder or under any Other Documents
(except for changes in the rate of tax on the overall net income of Agent or any
Lender by the jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve,
special deposit, assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other credit
extended by, any office of Agent or any Lender, including (without limitation)
pursuant to Regulation D of the Board of Governors of the Federal Reserve
System; or
(c) impose on Agent or any Lender or the London
interbank Eurodollar market any other condition with respect to this Agreement
or any Other Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in
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respect of any of the Advances by an amount that Agent or such Lender deems to
be material, then, in any case Borrowers shall promptly pay Agent or such
Lender, upon its demand, such additional amount as will compensate Agent or such
Lender for such additional cost or such reduction, as the case may be, provided
that the foregoing shall not apply to increased costs which are reflected in the
Eurodollar Rate. Agent or such Lender shall certify the amount of such
additional cost or reduced amount to Borrowers, and such certification shall be
conclusive absent manifest error.
3.8. UNAVAILABILITY OF EURODOLLAR RATE LOANS. In the event that
Agent or any Lender shall have determined that:
(a) reasonable means do not exist for ascertaining the
Eurodollar Rate applicable pursuant to Section 2.2 hereof for any Interest
Period; or
(b) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank Eurodollar market,
with respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate
Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate
Loan;
then Agent shall give Borrowing Agent prompt written, telephonic or telegraphic
notice of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing
Agent shall notify Agent no later than 10:00 a.m. (New York City time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such borrowing shall be cancelled or made as an unaffected type of Eurodollar
Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have
been converted to an affected type of Eurodollar Rate Loan shall be continued as
or converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify
Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days prior
to the proposed conversion, shall be maintained as an unaffected type of
Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans
shall be converted into a Domestic Rate Loan, or, if Borrowing Agent shall
notify Agent, no later than 10:00 a.m. (New York City time) two (2) Business
Days prior to the last Business Day of the then current Interest Period
applicable to such affected Eurodollar Rate Loan, shall be converted into an
unaffected type of Eurodollar Rate Loan , on the last Business Day of the then
current Interest Period for such affected Eurodollar Rate Loans. Until such
notice has been withdrawn, Lenders shall have no obligation to make an affected
type of Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate
Loans and no Borrower shall have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.
3.9. CAPITAL ADEQUACY.
(a) In the event that Agent or any Lender shall have
determined that any applicable law, rule, regulation or guideline regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any Lender (for purposes of this Section 3.9, the term "Lender"
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender) and the office or branch where Agent or any Lender (as so
defined) makes or maintains any Eurodollar Rate Loans with any
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request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on Agent or any Lender's capital
as a consequence of its obligations hereunder to a level below that which Agent
or such Lender could have achieved but for such adoption, change or compliance
(taking into consideration Agent's and each Lender's policies with respect to
capital adequacy) by an amount deemed by Agent or any Lender to be material,
then, from time to time, Borrowers shall pay upon demand to Agent or such Lender
such additional amount or amounts as will compensate Agent or such Lender for
such reduction. In determining such amount or amounts, Agent or such Lender may
use any reasonable averaging or attribution methods. The protection of this
Section 3.9 shall be available to Agent and each Lender regardless of any
possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition.
(b) A certificate of Agent or such Lender setting forth
such amount or amounts as shall be necessary to compensate Agent or such Lender
with respect to Section 3.9(a) hereof when delivered to Borrowers shall be
conclusive absent manifest error.
IV. COLLATERAL: GENERAL TERMS
4.1. SECURITY INTEREST IN THE COLLATERAL. To secure the prompt
payment and performance to Agent and each Lender of the Obligations, each
Borrower hereby assigns, pledges and grants to Agent for the ratable benefit of
each Lender a continuing security interest in and to all of its Collateral,
whether now owned or existing or hereafter acquired or arising and wheresoever
located. Each Borrower shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause its financial statements to reflect such security interest.
4.2. PERFECTION OF SECURITY INTEREST. Each Borrower shall take all
action that may be necessary or desirable, or that Agent may request, so as at
all times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments of assignment
as Agent may specify, and stamping or marking, in such manner as Agent may
specify, any and all chattel paper, instruments, letters of credits and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Agent, and (v) executing and delivering financing statements, instruments of
pledge, mortgages, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest under the Uniform
Commercial Code or other applicable law. Agent is hereby authorized to file
financing statements signed by Agent instead of Borrower in accordance with
Section 9-402(2) of Uniform Commercial Code as adopted in the State of New York.
All charges, expenses and fees Agent may incur in doing any of the foregoing,
and any local taxes relating thereto, shall be charged to Borrowers' Account as
a Revolving Advance of a Domestic Rate Loan and added to the Obligations, or, at
Agent's option, shall be paid to Agent for the ratable benefit of Lenders
immediately upon demand.
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4.3. DISPOSITION OF COLLATERAL. Each Borrower will safeguard and
protect all Collateral for Agent's general account and make no disposition
thereof whether by sale, lease or otherwise except (a) the sale of Inventory in
the ordinary course of business and (b) the disposition or transfer of obsolete
and worn-out Equipment in the ordinary course of business during any fiscal year
having an aggregate fair market value of not more than $100,000 and only to the
extent that (i) the proceeds of any such disposition are used to acquire
replacement Equipment which is subject to Agent's first priority security
interest or (ii) the proceeds of which are remitted to Agent as a prepayment on
the Term Loan, subject to Section 2.14 hereof.
4.4. PRESERVATION OF COLLATERAL. Following the occurrence of a
Default or Event of Default, in addition to the rights and remedies set forth in
Section 11.1 hereof, Agent: (a) may at any time take such steps as Agent deems
necessary to protect Agent's interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of other security
protection measures as Agent may deem appropriate; (b) may employ and maintain
at any of any Borrower's premises a custodian who shall have full authority to
do all acts necessary to protect Agent's interests in the Collateral; (c) may
lease warehouse facilities to which Agent may move all or part of the
Collateral; (d) may use any Borrower's owned or leased lifts, hoists, trucks and
other facilities or equipment for handling or removing the Collateral; and (e)
shall have, and is hereby granted, a right of ingress and egress to the places
where the Collateral is located, and may proceed over and through any of
Borrower's owned or leased property. Each Borrower shall cooperate fully with
all of Agent's efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may direct. All of Agent's expenses of
preserving the Collateral, including any expenses relating to the bonding of a
custodian, shall be charged to Borrowers' Account as a Revolving Advance of a
Domestic Rate Loan and added to the Obligations.
4.5. OWNERSHIP OF COLLATERAL. With respect to the Collateral, at
the time the Collateral becomes subject to Agent's security interest: (a) each
Borrower shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first priority security interest in each and
every item of the its respective Collateral to Agent; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) each document and agreement executed by each
Borrower or delivered to Agent or any Lender in connection with this Agreement
shall be true and correct in all respects; (c) all signatures and endorsements
of each Borrower that appear on such documents and agreements shall be genuine
and each Borrower shall have full capacity to execute same; and (d) each
Borrower's Equipment and Inventory shall be located as set forth on SCHEDULE 4.5
and shall not be removed from such location(s) without the prior written consent
of Agent except with respect to the sale of Inventory in the ordinary course of
business and Equipment to the extent permitted in Section 4.3 hereof.
4.6. DEFENSE OF AGENT'S AND LENDERS' INTERESTS. Until (a) payment
and performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Agent's interests in the Collateral
against any and all Persons whatsoever. At any time following demand by Agent
for payment of all Obligations, Agent shall have the right to take possession of
the indicia of the
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Collateral and the Collateral in whatever physical form contained, including
without limitation: labels, stationery, documents, instruments and advertising
materials. If Agent exercises this right to take possession of the Collateral,
Borrowers shall, upon demand, assemble it in the best manner possible and make
it available to Agent at a place reasonably convenient to Agent. In addition,
with respect to all Collateral, Agent and Lenders shall be entitled to all of
the rights and remedies set forth herein and further provided by the Uniform
Commercial Code or other applicable law. Each Borrower shall, and Agent may, at
its option, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in which
Agent holds a security interest to deliver same to Agent and/or subject to
Agent's order and if they shall come into any Borrower's possession, they, and
each of them, shall be held by such Borrower in trust as Agent's trustee, and
such Borrower will immediately deliver them to Agent in their original form
together with any necessary endorsement.
4.7. BOOKS AND RECORDS. Each Borrower shall (a) keep proper books
of record and account in which full, true and correct entries will be made of
all dealings or transactions of or in relation to its business and affairs; (b)
set up on its books accruals with respect to all taxes, assessments, charges,
levies and claims; and (c) on a reasonably current basis set up on its books,
from its earnings, allowances against doubtful Receivables, advances and
investments and all other proper accruals (including without limitation by
reason of enumeration, accruals for premiums, if any, due on required payments
and accruals for depreciation, obsolescence, or amortization of properties),
which should be set aside from such earnings in connection with its business.
All determinations pursuant to this subsection shall be made in accordance with,
or as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrowers.
4.8. FINANCIAL DISCLOSURE. Each Borrower hereby irrevocably
authorizes and directs all accountants and auditors employed by such Borrower at
any time during the Term to exhibit and deliver to Agent and each Lender copies
of any of ISP's or any Borrower's financial statements, trial balances or other
accounting records of any sort in the accountant's or auditor's possession, and
to disclose to Agent and each Lender any information such accountants may have
concerning such Borrower's financial status and business operations. ISP and
each Borrower hereby authorizes all federal, state and municipal authorities to
furnish to Agent and each Lender copies of reports or examinations relating to
such Borrower or ISP, as the case may be, whether made by such Borrower or ISP,
as the case may be, or otherwise; however, Agent and each Lender will attempt to
obtain such information or materials directly from such Borrower or ISP, as the
case may be, prior to obtaining such information or materials from such
accountants or such authorities.
4.9. COMPLIANCE WITH LAWS. Each Borrower shall comply in all
material respects with all acts, rules, regulations and orders of any
legislative, administrative or judicial body or official applicable to its
respective Collateral or any part thereof or to the operation of such Borrower's
business the non-compliance with which could reasonably be expected to have a
Material Adverse Effect on such Borrower. Each Borrower may, however, contest or
dispute any acts, rules, regulations, orders and directions of those bodies or
officials in any reasonable manner, provided that any related Lien is inchoate
or stayed and sufficient reserves are established to the reasonable satisfaction
of Agent to protect Agent's Lien on or security interest in the Collateral. The
assets of Borrowers at all times shall be maintained in accordance with the
requirements of all insurance carriers which provide insurance with respect to
the assets of Borrowers so that such
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insurance shall remain in full force and effect.
4.10. INSPECTION OF PREMISES. At all reasonable times Agent and
each Lender shall have full access to and the right to audit, check, inspect and
make abstracts and copies from ISP's and each Borrower's books, records, audits,
correspondence and all other papers relating to the Collateral and the operation
of ISP's or each Borrower's business. Agent, any Lender and their agents may
enter upon ISP's or any of Borrower's premises at any time during business hours
and at any other reasonable time, and from time to time, for the purpose of
inspecting the Collateral and any and all records pertaining thereto and the
operation of ISP's or such Borrower's business.
4.11. INSURANCE. Each Borrower shall bear the full risk of any loss
of any nature whatsoever with respect to the Collateral. At each Borrower's own
cost and expense in amounts and with carriers acceptable to Agent, each Borrower
shall (a) keep all its insurable properties and properties in which each
Borrower has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Borrower's including, without limitation, business
interruption insurance;, (b) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses similar to such Borrower insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of such Borrower either directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker's compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which such Borrower is engaged in business;
(f) furnish Agent with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance satisfactory to Agent, naming Agent as a co-insured and loss
payee as its interests may appear with respect to all insurance coverage
referred to in clauses (a), and (c) above, and providing (A) that all proceeds
thereunder shall be payable to Agent, except to the extent that no Event of
Default has occurred and is continuing, the Agent may determine in its sole
discretion (exercised in a commercially reasonable manner) based on Borrower's
proposal to allow all or a portion of such proceeds to be used by the Borrower
to repair or reconstruct such property (B) no such insurance shall be affected
by any act or neglect of the insured or owner of the property described in such
policy, and (C) that such policy and loss payable clauses may not be cancelled,
amended or terminated unless at least thirty (30) days' prior written notice is
given to Agent. In the event of any loss thereunder, the carriers named therein
hereby are directed by Agent and the applicable Borrower to make payment for
such loss to Agent and not to such Borrower and Agent jointly. If any insurance
losses are paid by check, draft or other instrument payable to any Borrower and
Agent jointly, Agent may endorse such Borrower's name thereon and do such other
things as Agent may deem advisable to reduce the same to cash. Following the
occurrence and during the continuation of an Event of Default, Agent is hereby
authorized to adjust and compromise any and all claims under insurance coverage
referred to in clauses (a), and (b). Provided that no Event of Default has
occurred and is continuing, any claim under insurance coverage referred to in
clauses (a) and (b), which individually or in the aggregate exceeds $250,000 may
only be adjusted or compromised by the Borrowers with the prior written consent
of the Agent. All loss recoveries received by Agent upon any such insurance may
be applied to the Obligations, in such order as Agent in its sole
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discretion shall determine. Any surplus shall be paid by Agent to Borrowers or
applied as may be otherwise required by law. Any deficiency thereon shall be
paid by Borrowers to Agent, on demand.
4.12. FAILURE TO PAY INSURANCE. If any Borrower fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent, if Agent
so elects, may obtain such insurance and pay the premium therefor on behalf of
Borrower, and charge Borrowers' Account therefor as a Revolving Advance of a
Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
4.13. PAYMENT OF TAXES. Each Borrower will pay, when due, all
taxes, assessments and other Charges lawfully levied or assessed upon such
Borrower or any of the Collateral including, without limitation, real and
personal property taxes, assessments and charges and all franchise, income,
employment, social security benefits, withholding, and sales taxes. If any tax
by any governmental authority is or may be imposed on or as a result of any
transaction between any Borrower and Agent or any Lender which Agent or any
Lender may be required to withhold or pay or if any taxes, assessments, or other
Charges remain unpaid after the date fixed for their payment, or if any claim
shall be made which, in Agent's or any Lender's opinion, may possibly create a
valid Lien on the Collateral, Agent may without notice to Borrowers pay the
taxes, assessments or other Charges and each Borrower hereby indemnifies and
holds Agent and each Lender harmless in respect thereof. The amount of any
payment by Agent under this Section 4.13 shall be charged to Borrowers' Account
as a Revolving Advance and added to the Obligations and, until Borrowers shall
furnish Agent with an indemnity therefor (or supply Agent with evidence
satisfactory to Agent that due provision for the payment thereof has been made),
Agent may hold without interest any balance standing to Borrowers' credit and
Agent shall retain its security interest in any and all Collateral held by
Agent.
4.14. PAYMENT OF LEASEHOLD OBLIGATIONS. Each Borrower shall at all
times pay, when and as due, its rental obligations under all leases under which
it is a tenant, and shall otherwise comply, in all material respects, with all
other terms of such leases and keep them in full force and effect and, at
Agent's request will provide evidence of having done so.
4.15. RECEIVABLES.
(a) NATURE OF RECEIVABLES. Each of the Receivables
shall be a bona fide and valid account representing a bona fide indebtedness
incurred by the Customer therein named, for a fixed sum as set forth in the
invoice relating thereto (provided immaterial or unintentional invoice errors
shall not be deemed to be a breach hereof) with respect to an absolute sale or
lease and delivery of goods upon stated terms of a Borrower, or work, labor or
services theretofore rendered by a Borrower as of the date each Receivable is
created. Same shall be due and owing in accordance with the applicable
Borrower's standard terms of sale without dispute, setoff or counterclaim except
as may be stated on the accounts receivable schedules delivered by Borrowers to
Agent.
(b) SOLVENCY OF CUSTOMERS. Each Customer, to the
knowledge of the Borrowers, as of the date each Receivable is created, is and
will be solvent and able to pay all Receivables on which the Customer is
obligated in full when due or with respect to such Customers
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of any Borrower who are not solvent such Borrower has set up on its books and in
its financial records bad debt reserves adequate to cover such Receivables.
(c) LOCATIONS OF BORROWER. Each Borrower's chief
executive office is located at the addresses set forth on SCHEDULE 4.15(c)
hereto. Until written notice is given to Agent by Borrowing Agent of any other
office at which any Borrower keeps its records pertaining to Receivables, all
such records shall be kept at such executive office.
(d) COLLECTION OF RECEIVABLES. Until any Borrower's
authority to do so is terminated by Agent (which notice Agent may give at any
time following the occurrence of an Event of Default or a Default or when Agent
in its sole discretion deems it to be in Lenders' best interest to do so due to
such Borrower's failure to adequately collect such Receivable), each Borrower
will, at such Borrower's sole cost and expense, but on Agent's behalf and for
Agent's account, collect as Agent's property and in trust for Agent all amounts
received on Receivables, and shall not commingle such collections with any
Borrower's funds or use the same except to pay Obligations. Each Borrower shall,
upon request, deliver to Agent, or deposit in the Blocked Account, in original
form and on the date of receipt thereof, all checks, drafts, notes, money
orders, acceptances, cash and other evidences of Indebtedness.
(e) NOTIFICATION OF ASSIGNMENT OF RECEIVABLES.
Following the occurrence and during the continuation of an Event of Default,
Agent shall have the right to send notice of the assignment of, and Agent's
security interest in, the Receivables to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral. Thereafter,
Agent shall have the sole right to collect the Receivables, take possession of
the Collateral, or both. Agent's actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to Borrowers' Account and added to the Obligations.
(f) POWER OF AGENT TO ACT ON BORROWERS' BEHALF.
Agent shall have the right to receive, endorse, assign and/or deliver in the
name of Agent or any Borrower any and all checks, drafts and other instruments
for the payment of money relating to the Receivables, and each Borrower hereby
waives notice of presentment, protest and non-payment of any instrument so
endorsed. Each Borrower hereby constitutes Agent or Agent's designee as such
Borrower's attorney with power to (x) at any time (i) endorse such Borrower's
name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral; (ii) sign such Borrower's name on any
invoice or bill of lading relating to any of the Receivables, drafts against
Customers, assignments and verifications of Receivables; (iii) send
verifications of Receivables to any Customer; (iv) sign such Borrower's name on
all financing statements or any other documents or instruments deemed necessary
or appropriate by Agent to preserve, protect, or perfect Agent's interest in the
Collateral and to file same; (v) to prepare, file and sign such Borrower's name
on a proof of claim in bankruptcy or similar document against any Customer; (vi)
to prepare, file and sign such Borrower's name on any notice of Lien, assignment
or satisfaction of Lien or similar document in connection with the Receivables;
and (vii) to do all other acts and things necessary to carry out this Agreement
and (y) after an Event of Default to (i) demand payment of the Receivables; (ii)
enforce payment of the Receivables by legal proceedings or otherwise; (iii)
exercise all of Borrowers' rights and remedies with respect to the collection of
the Receivables and any other Collateral; (iv) settle, adjust, compromise,
extend or renew the Receivables; and (v) settle,
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adjust or compromise any legal proceedings brought to collect Receivables. All
acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
nor for any error of judgment or mistake of fact or of law, unless done
maliciously or with gross (not mere) negligence; this power being coupled with
an interest is irrevocable while any of the Obligations remain unpaid. After an
Event of Default, Agent shall have the right at any time to change the address
for delivery of mail addressed to any Borrower to such address as Agent may
designate and to receive, open and dispose of all mail addressed to any
Borrower.
(g) NO LIABILITY. Neither Agent nor any Lender shall,
under any circumstances or in any event whatsoever, have any liability for any
error or omission or delay of any kind occurring in the settlement, collection
or payment of any of the Receivables or any instrument received in payment
thereof, or for any damage resulting therefrom. Following the occurrence of an
Event of Default or Default Agent may, without notice or consent from any
Borrower, sue upon or otherwise collect, extend the time of payment of,
compromise or settle for cash, credit or upon any terms any of the Receivables
or any other securities, instruments or insurance applicable thereto and/or
release any obligor thereof. Agent is authorized and empowered to accept
following the occurrence of an Event of Default or Default the return of the
goods represented by any of the Receivables, without notice to or consent by any
Borrower, all without discharging or in any way affecting any Borrower's
liability hereunder.
(h) ESTABLISHMENT OF A LOCKBOX ACCOUNT, DOMINION
ACCOUNT. All proceeds of Collateral shall, at the direction of Agent, be
deposited by Borrowers into a lockbox account, dominion account or such other
"blocked account" ("Blocked Accounts") as Agent may require pursuant to an
arrangement with such bank as may be selected by Borrowers and be acceptable to
Agent. Borrowers shall issue to any such bank, an irrevocable letter of
instruction directing said bank to transfer such funds so deposited to Agent,
either to any account maintained by Agent at said bank or by wire transfer to
appropriate account(s) of Agent. All funds deposited in such "blocked account"
shall immediately become the property of Agent and Borrowers shall obtain the
agreement by such bank to waive any offset rights against the funds so
deposited. Neither Agent nor any Lender assumes any responsibility for such
"blocked account" arrangement, including without limitation, any claim of accord
and satisfaction or release with respect to deposits accepted by any bank
thereunder. Alternatively, Agent may establish depository accounts ("Depository
Accounts") in the name of Agent at a bank or banks for the deposit of such funds
and Borrowers shall deposit all proceeds of Collateral or cause same to be
deposited, in kind, in such Depository Accounts of Agent in lieu of depositing
same to the Blocked Accounts.
(i) ADJUSTMENTS. No Borrower will, without Agent's
consent, compromise or adjust any Receivables (or extend the time for payment
thereof) or accept any returns of merchandise or grant any additional discounts,
allowances or credits thereon except for those compromises, adjustments,
returns, discounts, credits and allowances as have been heretofore customary in
the business of such Borrower.
4.16. INVENTORY. To the extent Inventory held for sale or lease has
been produced by any Borrower, it has been and will be produced by such Borrower
in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.
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4.17. MAINTENANCE OF EQUIPMENT. The Equipment utilized by the
Borrower in the ordinary coursecourse of its business shall be maintained in
good operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of such Equipment shall be maintained and preserved. No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation. Each Borrower shall have the right to sell
Equipment to the extent set forth in Section 4.3 hereof.
4.18. EXCULPATION OF LIABILITY. Nothing herein contained shall be
construed to constitute Agent or any Lender as any Borrower's agent for any
purpose whatsoever, nor shall Agent or any Lender be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof.
Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Borrower's obligations under any contract or
agreement assigned to Agent or such Lender, and neither Agent nor any Lender
shall be responsible in any way for the performance by any Borrower of any of
the terms and conditions thereof.
4.19. ENVIRONMENTAL MATTERS. (a) Borrowers shall ensure that the
Real Property remains in compliance with all Environmental Laws and they shall
not place or permit to be placed any Hazardous Substances on any Real Property
except as not prohibited by applicable law or appropriate governmental
authorities.
(b) Borrowers shall establish and maintain a system to
assure and monitor continued compliance with all applicable Environmental Laws
which system shall include periodic reviews of such compliance.
(c) Borrowers shall (i) employ in connection with the
use of the Real Property appropriate technology necessary to maintain compliance
with any applicable Environmental Laws and (ii) dispose of any and all Hazardous
Waste generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any Borrower obtains, gives or
receives notice of any Release or threat of Release of a reportable quantity of
any Hazardous Substances at the Real Property (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions at the Real Property,
demand letter or complaint, order, citation, or other written notice with regard
to any Hazardous Discharge or violation of Environmental Laws affecting the Real
Property or any Borrower's interest therein (any of the foregoing is referred to
herein as an "Environmental Complaint") from any Person, including any state
agency responsible in whole or in part for environmental matters in the state in
which the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower is aware
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giving rise to the Hazardous Discharge or Environmental Complaint. Such
information is to be provided to allow Agent to protect its security interest in
the Real Property and is not intended to create nor shall it create any
obligation upon Agent or any Lender with respect thereto.
(e) Borrowers shall promptly forward to Agent copies of
any request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by any
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between any Borrower and the Authority regarding such claims
to Agent until the claim is settled. Borrowers shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that any Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Agent to protect Agent's
security interest in the Real Property and the Collateral.
(f) Borrowers shall respond promptly to any Hazardous
Discharge or Environmental Complaint and take all necessary action in order to
safeguard the health of any Person and to avoid subjecting the Collateral or
Real Property to any Lien. If any Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or any Borrower shall fail to
comply with any of the requirements of any Environmental Laws, Agent on behalf
of Lenders may, but without the obligation to do so, for the sole purpose of
protecting Agent's interest in Collateral: (A) give such notices or (B) enter
onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as Agent (or such third parties as directed by
Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrowers, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.
(g) Promptly upon the written request of Agent from
time to time (but absent the occurrence of an Event of Default, no more than
once each year), Borrowers shall provide Agent, at Borrowers' expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within the Real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Agent. If such estimates,
individually or in the aggregate, exceed $100,000, Agent shall have the right to
require Borrowers to post a bond, letter of credit or other security reasonably
satisfactory to Agent to secure payment of these costs and expenses.
(h) Borrowers shall defend and indemnify Agent and
Lenders and hold Agent, Lenders and their respective employees, agents,
directors and officers harmless from and
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against all loss, liability, damage and expense, claims, costs, fines and
penalties, including attorney's fees, suffered or incurred by Agent or Lenders
under or on account of any Environmental Laws, including, without limitation,
the assertion of any Lien thereunder, with respect to any Hazardous Discharge,
the presence of any Hazardous Substances affecting the Real Property, whether or
not the same originates or emerges from the Real Property or any contiguous real
estate, including any loss of value of the Real Property as a result of the
foregoing except to the extent such loss, liability, damage and expense is
attributable to any Hazardous Discharge resulting from actions on the part of
Agent or any Lender. Borrowers' obligations under this Section 4.19 shall arise
upon the discovery of the presence of any Hazardous Substances at the Real
Property, whether or not any federal, state, or local environmental agency has
taken or threatened any action in connection with the presence of any Hazardous
Substances. Borrowers' obligation and the indemnifications hereunder shall
survive the termination of this Agreement.
(i) For purposes of Section 4.19 and 5.7, all
references to Real Property shall be deemed to include all of Borrowers' right,
title and interest in and to its owned and leased premises.
4.20. FINANCING STATEMENTS. Except as respects the financing
statements filed by Agent and the financing statements described on SCHEDULE
1.2, no financing statement covering any of the Collateral or any proceeds
thereof is on file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1. AUTHORITY. Each Borrower has full power, authority and legal
right to enter into this Agreement and the Other Documents and to perform all
its respective Obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within such
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of such Borrower's by-laws, certificate of incorporation or
other applicable documents relating to such Borrower's formation or to the
conduct of such Borrower's business or of any material agreement or undertaking
to which such Borrower is a party or by which such Borrower is bound, and (b)
will not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Borrower under the provisions of
any agreement, charter document, instrument, by-law, or other instrument to
which such Borrower or its property is a party or by which it may be bound.
5.2. FORMATION AND QUALIFICATION. (a) Each Borrower is duly
incorporated and in good standing under the laws of the state listed on SCHEDULE
5.2(a) and is qualified to do business and is in good standing in the states
listed on SCHEDULE 5.2(a) which constitute all states in which qualification and
good standing are necessary for such Borrower to conduct its business and own
its property and where the failure to so qualify could reasonably be expected to
have a Material Adverse Effect on such Borrower. Each Borrower has delivered to
Agent true and complete copies of its certificate of incorporation and by-laws
and will promptly notify Agent of any amendment or changes thereto.
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(b) The only Subsidiaries of each Borrower are listed
on SCHEDULE 5.2(b).
5.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of such Borrower contained in this Agreement and
the Other Documents shall be true at the time of such Borrower's execution of
this Agreement and the Other Documents, and shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.
5.4. TAX RETURNS. Each Borrower's federal tax identification number
is set forth on SCHEDULE 5.4. Each Borrower has filed all federal, state and
local tax returns and other reports each is required by law to file and has paid
all taxes, assessments, fees and other governmental charges that are due and
payable. Federal, state and local income tax returns of each Borrower have been
examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years prior to and including the
fiscal year ending December 31, 1994. The provision for taxes on the books of
each Borrower are adequate for all years not closed by applicable statutes, and
for its current fiscal year, and no Borrower has any knowledge of any deficiency
or additional assessment in connection therewith not provided for on its books.
5.5. FINANCIAL STATEMENTS.
(a) The pro forma balance sheet of Borrowers on a
Consolidated Basis (the "Pro Forma Balance Sheet") furnished to Agent on the
Closing Date reflects the consummation of the transactions contemplated under
this Agreement (the "Transactions") and is accurate, complete and correct and
fairly reflects the financial condition of Borrowers on a Consolidated Basis as
of the Closing Date after giving effect to the Transactions, and has been
prepared in accordance with GAAP, consistently applied. The Pro Forma Balance
Sheet has been certified as accurate, complete and correct in all material
respects by the President, Chief Financial Officer or Chief Accounting Officer
of SEMX. All financial statements referred to in this subsection 5.5(a),
including the related schedules and notes thereto, if any, have been prepared,
in accordance with GAAP, except as may be disclosed in such financial
statements.
(b) The twelve-month cash flow projections of the
Borrowers on a Consolidated Basis and their projected balance sheets as of the
Closing Date, copies of which are annexed hereto as EXHIBIT 5.5(b) (the
"Projections") were prepared by the Chief Financial Officer or Chief Accounting
Officer of SEMX, are based on underlying assumptions which provide a reasonable
basis for the projections contained therein and reflect Borrowers' judgment
based on present circumstances of the most likely set of conditions and course
of action for the projected period. The cash flow Projections together with the
Pro Forma Balance Sheet, are referred to as the "Pro Forma Financial
Statements".
(c) The consolidated and consolidating balance sheets
of the Borrowers, their Subsidiaries and such other Persons described therein
(including the accounts of all Subsidiaries for the respective periods during
which a subsidiary relationship existed) as of September 30, 1999 and the
related statements of income, changes in stockholder's equity, and changes in
cash flow for the period ended on such date, copies of which have been delivered
to Agent, have been prepared in accordance with GAAP, consistently applied
(except for changes in
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application in which such accountants concur) and present fairly the financial
position of the Borrowers and their Subsidiaries at such date and the results of
their operations for such period prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to normal
year end adjustments. Since September 30, 1999 there has been no change in the
condition, financial or otherwise, of Borrowers or their Subsidiaries as shown
on the consolidated balance sheet as of such date and no change in the aggregate
value of machinery, equipment and Real Property owned by Borrowers and their
Subsidiaries, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
(d) Within five Business Days after the same are made public,
all public financial statements and reports of SEMX.
5.6. CORPORATE NAME. No Borrower has been known by any other
corporate name in the past five years and does not sell Inventory under any
other name except as set forth on SCHEDULE 5.6, nor has any Borrower been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person during the preceding five (5)
years.
5.7. O.S.H.A. AND ENVIRONMENTAL COMPLIANCE.
(a) Each Borrower has duly complied with, and its
facilities, business, assets, property, leaseholds and Equipment are in
compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act, the Environmental Protection Act, RCRA and
all other Environmental Laws; there have been no outstanding citations, notices
or orders of non-compliance issued to any Borrower or relating to its business,
assets, property, leaseholds or Equipment under any such laws, rules or
regulations.
(b) Each Borrower has been issued all required federal,
state and local licenses, certificates or permits relating to all applicable
Environmental Laws.
(c) (i) There are no visible signs of releases, spills,
discharges, leaks or disposal (collectively referred to as "Releases") of
Hazardous Substances at, upon, under or within any Real Property or any premises
leased by any Borrower; (ii) there are no underground storage tanks or
polychlorinated biphenyls on the Real Property or any premises leased by any
Borrower; (iii) neither the Real Property nor any premises leased by any
Borrower has ever been used as a treatment, storage or disposal facility of
Hazardous Waste; and (iv) no Hazardous Substances are present on the Real
Property or any premises leased by Borrower, excepting such quantities as are
handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of any Borrower or of its tenants.
5.8. SOLVENCY; NO LITIGATION, VIOLATION, INDEBTEDNESS OR DEFAULT.
(a) Borrowers are solvent, able to pay their debts as
they mature, have capital sufficient to carry on their business and all
businesses in which they are about to engage, and (i) as of the Closing Date,
the fair present saleable value of their assets, calculated on a going concern
basis, is in excess of the amount of their liabilities and (ii) subsequent to
the Closing Date, the fair saleable value of their assets (calculated on a going
concern basis) will be in excess of the
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amount of their liabilities.
(b) Except as disclosed in SCHEDULE 5.8(b), no Borrower
has (i) any pending or threatened litigation, arbitration, actions or
proceedings which involve the possibility of having a Material Adverse Effect on
such Borrower, and (ii) any indebtedness for borrowed money other than the
Obligations.
(c) No Borrower is in violation of any applicable
statute, regulation or ordinance in any respect which could reasonably be
expected to have a Material Adverse Effect on such Borrower, nor is any Borrower
in violation of any order of any court, governmental authority or arbitration
board or tribunal.
(d) No Borrower nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on SCHEDULE 5.8(d)
hereto. Except as set forth in SCHEDULE 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and each Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) no
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan, (v) at this time, the current value of the assets
of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor any member of the Controlled Group
knows of any facts or circumstances which would materially change the value of
such assets and accrued benefits and other liabilities, (vi) no Borrower nor any
member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan, (vii) no
Borrower nor any member of a Controlled Group has incurred any liability for any
excise tax arising under Section 4972 or 4980B of the Code, and no fact exists
which could give rise to any such liability, (viii) no Borrower nor any member
of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has
engaged in a "prohibited transaction" described in Section 406 of the ERISA or
Section 4975 of the Code nor taken any action which would constitute or result
in a Termination Event with respect to any such Plan which is subject to ERISA,
(ix) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan, (x) there exists no
event described in Section 4043(b) of ERISA, for which the thirty (30) day
notice period contained in 29 CFR '2615.3 has not been waived, (xi) no Borrower
nor any member of the Controlled Group has any fiduciary responsibility for
investments with respect to any plan existing for the benefit of persons other
than employees or former employees of any Borrower and any member of the
Controlled Group, and (xii) no Borrower nor any member of the Controlled Group
has withdrawn, completely or partially, from any Multiemployer Plan so as to
incur liability under the Multiemployer Pension Plan Amendments Act of 1980.
5.9. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. All patents,
patent
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applications, trademarks, trademark applications, service marks, service
mark applications, copyrights, copyright applications, design rights,
tradenames, assumed names, trade secrets and licenses owned or utilized by any
Borrower are set forth on SCHEDULE 5.9, are valid and have been duly registered
or filed with all appropriate governmental authorities and constitute all of the
intellectual property rights which are necessary for the operation of its
business; there is no objection to or pending challenge to the validity of any
such material patent, trademark, copyright, design right, tradename, trade
secret or license and no Borrower is aware of any grounds for any challenge,
except as set forth in SCHEDULE 5.9 hereto. Each patent, patent application,
patent license, trademark, trademark application, trademark license, service
mark, service mark application, service mark license, copyright, copyright
application and copyright license owned or held by any Borrower and all trade
secrets used by any Borrower consist of original material or property developed
by such Borrower or was lawfully acquired by such Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof. With respect
to all software used by any Borrower, such software has been properly licensed
or the Borrower owns and has title to such software.
5.10. LICENSES AND PERMITS. Except as set forth in SCHEDULE 5.10,
each Borrower (a) is in compliance with and (b) has procured and is now in
possession of, all material licenses or permits required by any applicable
federal, state or local law or regulation for the operation of its business in
each jurisdiction wherein it is now conducting or proposes to conduct business
and where the failure to procure such licenses or permits could have a Material
Adverse Effect on such Borrower.
5.11. DEFAULT OF INDEBTEDNESS. No Borrower is in default in the
payment of the principal of or interest on any Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has been
issued and no event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving of notice, or
both, constitutes or would constitute an event of default thereunder.
5.12. NO DEFAULT. No Borrower is in default in the payment
or performance of any of its contractual obligations and no Default has
occurred.
5.13. NO BURDENSOME RESTRICTIONS. No Borrower is party to any
contract or agreement the performance of which could have a Material Adverse
Effect on such Borrower. No Borrower has agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien which
is not a Permitted Encumbrance.
5.14. NO LABOR DISPUTES. No Borrower is involved in any labor
dispute; there are no strikes or walkouts or union organization of any
Borrower's employees threatened or in existence and no labor contract is
scheduled to expire during the Term other than as set forth on SCHEDULE 5.14
hereto.
5.15. MARGIN REGULATIONS. No Borrower is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
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from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16. INVESTMENT COMPANY ACT. No Borrower is an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, nor is it controlled by such a company.
5.17. DISCLOSURE. No representation or warranty made by any
Borrower in this Agreement or in any financial statement, report, certificate or
any other document furnished in connection herewith contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact known to
Borrowers or which reasonably should be known to Borrowers which Borrowers have
not disclosed to Agent in writing with respect to the transactions contemplated
by this Agreement which could reasonably be expected to have a Material Adverse
Effect on any Borrower.
5.18. SWAPS. No Borrower is a party to, nor will it be a party to,
any swap agreement whereby such Borrower has agreed or will agree to swap
interest rates or currencies unless same provides that damages upon termination
following an event of default thereunder are payable on an unlimited "two-way
basis" without regard to fault on the part of either party.
5.19. CONFLICTING AGREEMENTS. No provision of any mortgage,
indenture, contract, agreement, judgment, decree or order binding on any
Borrower or affecting the Collateral conflicts with, or requires any Consent
which has not already been obtained to, or would in any way prevent the
execution, delivery or performance of, the terms of this Agreement or the Other
Documents.
5.20. APPLICATION OF CERTAIN LAWS AND REGULATIONS. No Borrower nor
any Affiliate of any Borrower is subject to any statute, rule or regulation
which regulates the incurrence of any Indebtedness, including without
limitation, statutes or regulations relative to common or interstate carriers or
to the sale of electricity, gas, steam, water, telephone, telegraph or other
public utility services.
5.21. BUSINESS AND PROPERTY OF BORROWER. Upon and after the Closing
Date, Borrowers do not propose to engage in any business other than in
connection with providing specialty materials and services to the
microelectronic and semiconductor industries and activities necessary to conduct
the foregoing. On the Closing Date, each Borrower will own all the property and
possess all of the rights and Consents necessary for the conduct of the business
of such Borrower.
5.22. SINGAPORE JOINT VENTURE. The liability of any of the
Borrowers with respect to the indebtedness of ISP is limited to the amount of
the Singapore Letter of Credit.
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VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. PAYMENT OF FEES. Pay to Agent on demand all usual and
customary fees and expenses which Agent incurs in connection with (a) the
forwarding of Advance proceeds and (b) the establishment and maintenance of any
Blocked Accounts or Depository Accounts as provided for in Section 4.15(h).
Agent may, without making demand, charge Borrowers' Account for all such fees
and expenses.
6.2. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS.
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on such Borrower; and
(c) make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof where the failure to do
so could reasonably be expected to have a Material Adverse Effect on such
Borrower.
6.3. VIOLATIONS. Promptly notify Agent in writing of any violation
of any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to any Borrower which could reasonably be expected to
have a Material Adverse Effect on any Borrower.
6.4. GOVERNMENT RECEIVABLES. Take all steps necessary to protect
Agent's interest in the Collateral under the Federal Assignment of Claims Act or
other applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Borrower and the United States,
any state or any department, agency or instrumentality of any of them.
6.5. FIXED CHARGE RATIO. Cause to be maintained as of the end of
each month, on a rolling twelve (12) month basis (except for each monthly
calculation in the fiscal year 1999, which shall be calculated on a cumulative
year to date basis commencing January 1, 1999), a Fixed Charge Ratio equal to or
greater than 1.05 to 1.0.
6.6. EXECUTION OF SUPPLEMENTAL INSTRUMENTS. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
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6.7. PAYMENT OF INDEBTEDNESS. Pay, discharge or otherwise satisfy
at or before maturity (subject, where applicable, to specified grace periods
and, in the case of the trade payables, to normal payment practices) all its
obligations and liabilities of whatever nature, except when the failure to do so
could not reasonably be expected to have a Material Adverse Effect or when the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and each Borrower shall have provided for such reserves
as Agent may reasonably deem proper and necessary, subject at all times to any
applicable subordination arrangement in favor of Lenders.
6.8. STANDARDS OF FINANCIAL STATEMENTS. Cause all financial
statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and
9.14 as to which GAAP is applicable to be complete and correct in all material
respects (subject, in the case of interim financial statements, to normal
year-end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as concurred in by such reporting accountants or officer, as the
case may be, and disclosed therein).
6.9. YEAR 2000. Each Borrower hereby represents, warrants and
covenants that such Borrower's computer systems and equipment containing
embedded microchips (including systems and equipment supplied by others that are
material to the operation of the businesses of Borrower) will function on
December 31, 1999 and thereafter to the extent that no Material Adverse Effect
will occur at any time, and that such Borrower have taken and will take all
commercially reasonable action to reasonably ensure the same.
6.10. ISP NET WORTH. ISP shall maintain at all times a Net Worth in
an amount not less than $1.00.
6.11. DEFAULT NOTICES. Borrowers shall promptly provide notice to
the Agent of any default under the Loan Agreement dated January 15 1997 between
ISP and The Development Bank of Singapore Ltd.
6.12 POST CLOSING ITEMS. Perform the Items stated on Schedule 6.12
hereto on or before the dates stated on such Schedule.
VII. NEGATIVE COVENANTS.
No Borrower shall, until satisfaction in full of the Obligations
and termination of this Agreement:
7.1. MERGER, CONSOLIDATION, ACQUISITION AND SALE OF ASSETS.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or stock of any Person or permit any other Person to
consolidate with or merge with it unless the Borrowers prepay any and all
amounts outstanding hereunder simultaneously with the closing of such
transaction.
(b) Sell, lease, transfer or otherwise dispose of any
of its properties or assets, except in the ordinary course of its business.
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7.2. CREATION OF LIENS. Create or suffer to exist any Lien or
transfer upon or against any of its property or assets now owned or hereafter
acquired, except Permitted Encumbrances.
7.3. GUARANTEES. Become liable upon the obligations of any Person
by assumption, endorsement or guaranty thereof or otherwise (other than to
Lenders) except (a) as disclosed on SCHEDULE 7.3, (b) guarantees made in the
ordinary course of business up to an aggregate amount at any time of $100,000
(on an aggregate basis for all Borrowers), (c) guarantees by SEMX of
indebtedness of the other Borrowers and (d) the endorsement of checks in the
ordinary course of business.
7.4. INVESTMENTS. Purchase or acquire obligations or stock of, or
any other interest in, any Person, except (a) obligations issued or guaranteed
by the United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
7.5. LOANS. Make advances, loans or extensions of credit to any
Person, including without limitation, any Parent, Subsidiary or Affiliate,
except with respect to (a) the extension of commercial trade credit in
connection with the sale of Inventory in the ordinary course of its business,
(b) loans to its employees in the ordinary course of business not to exceed the
aggregate amount of $100,000 (in an aggregate basis for all Borrowers) at any
time outstanding, (c) loans from SEMX to other Borrowers or (d) loans to SEMX
from the other Borrowers provided that a note, in form and substance
satisfactory to the Agent is executed evidencing such loan and such note is
pledged to the Agent as collateral hereunder.
7.6. CAPITAL EXPENDITURES. Contract for, purchase or make any
expenditure or commitments for fixed or capital assets (including capitalized
leases) in any fiscal year in an amount in excess of $4,000,000 on an aggregate
basis for all Borrowers, excluding however from such calculation, the amount of
any refinanced capital leases.
7.7. DIVIDENDS. Declare, pay or make any dividend or distribution
on any shares of the common stock or preferred stock of any Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of any Borrower except that so long as (a) a notice of termination with
regard to this Agreement shall not be outstanding, (b) no Event of Default or
Default shall have occurred, and (c) the purchase, redemption or dividend shall
be as set forth in the monthly report provided to Agent in assordance with
Section 9.9 hereof, any Subsidiary of SEMX shall be permitted to pay dividends
to SEMX, provided, however, that after giving effect to the payment of such
dividends there shall not exist any Event of Default or Default.
7.8. INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness
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(exclusive of trade debt) except in respect of (i) Indebtedness to Lenders, (ii)
Indebtedness incurred with respect to Loans permitted pursuant to Section 7.5(c)
and (ii) Indebtedness incurred for capital expenditures permitted under Section
7.6 hereof; PROVIDED, HOWEVER, that the maximum aggregate amount outstanding at
any time of such Indebtedness shall not exceed $2,000,000 on an annual aggregate
basis for all Borrowers.
7.9. NATURE OF BUSINESS. Substantially change the nature of the
business in which it is presently engaged, nor except as specifically permitted
hereby purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in, necessary for and are to be used in its business as presently
conducted.
7.10. TRANSACTIONS WITH AFFILIATES. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, any Affiliate, except transactions
disclosed in the ordinary course of business, on an arm's-length basis on terms
no less favorable than terms which would have been obtainable from a Person
other than an Affiliate.
7.11. LEASES. Enter as lessee into any lease arrangement for real
or personal property (unless capitalized and permitted under Section 7.6 hereof)
if after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $750,000 in any one fiscal year for all Borrwers on an
aggregate basis.
7.12. SUBSIDIARIES.
(a) Form any Subsidiary unless (i) such Subsidiary
expressly joins in this Agreement as a borrower and becomes jointly and
severally liable for the obligations of Borrowers hereunder, under the Notes,
and under any other agreement between any Borrower and Lenders and (ii) Agent
shall have received all documents, including legal opinions, it may reasonably
require to establish compliance with each of the foregoing conditions.
(b) Enter into any partnership, joint venture or
similar arrangement.
7.13. FISCAL YEAR AND ACCOUNTING CHANGES. Change its fiscal year
from December 31, or make any material change (i) in accounting treatment and
reporting practices except as required by GAAP or (ii) in tax reporting
treatment except as required by law.
7.14. PLEDGE OF CREDIT. Now or hereafter pledge Agent's or any
Lender's credit on any purchases or for any purpose whatsoever or use any
portion of any Advance in or for any business other than the business of the
Borrowers as conducted on the date of this Agreement.
7.15. AMENDMENT OF ARTICLES OF INCORPORATION, BY-LAWS. Amend,
modify or waive any term or material provision of its Articles of Incorporation
or By-Laws unless required by law.
7.16. COMPLIANCE WITH ERISA. (i) (x) Maintain, or permit any member
of the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on SCHEDULE 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any
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non-exempt "prohibited transaction", as that term is defined in section 406 of
ERISA and Section 4975 of the Code, (iii) incur, or permit any member of the
Controlled Group to incur, any "accumulated funding deficiency", as that term is
defined in Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or
permit any member of the Controlled Group to terminate, any Plan where such
event could result in any liability of any Borrower or any member of the
Controlled Group or the imposition of a lien on the property of any Borrower or
any member of the Controlled Group pursuant to Section 4068 of ERISA, (v)
assume, or permit any member of the Controlled Group to assume, any obligation
to contribute to any Multiemployer Plan not disclosed on SCHEDULE 5.8(d), (vi)
incur, or permit any member of the Controlled Group to incur, any withdrawal
liability to any Multiemployer Plan; (vii) fail promptly to notify Agent of the
occurrence of any Termination Event, (viii) fail to comply, or permit a member
of the Controlled Group to fail to comply, with the requirements of ERISA or the
Code or other applicable laws in respect of any Plan, (ix) fail to meet, or
permit any member of the Controlled Group to fail to meet, all minimum funding
requirements under ERISA or the Code or postpone or delay or allow any member of
the Controlled Group to postpone or delay any funding requirement with respect
of any Plan.
7.17. PREPAYMENT OF INDEBTEDNESS. Except as permitted pursuant to
Section 7.18 hereof and as provided on Schedule 7.17, at any time, directly or
indirectly, prepay any Indebtedness (other than to Lenders), or repurchase,
redeem, retire or otherwise acquire any Indebtedness of any Borrower.
7.18. DEBT PAYMENTS. At any time, directly or indirectly, pay,
prepay, repurchase, redeem, retire or otherwise acquire, or make any payment on
account of any principal of, interest on or premium payable in connection with
the repayment or redemption of the Fleet Agreement[s], except as expressly
permitted in the Intercreditor Agreement.
7.19. OTHER AGREEMENTS. Enter into any material amendment, waiver
or modification of (i) the ISP-Joint Venture Agreement without prior notice to
the Bank and to the extent that the result of such amendment, waiver or
modification is to increase any Borrowers' liability under such agreement,
without the prior written consent of the Bank or (ii) the Subordinated Debt
Agreement or any related agreements.
7.20. FOREIGN SUBSIDIARIES. Make any equity contribution or any
other distribution to any Foreign Subsidiary.
VIII. CONDITIONS PRECEDENT.
8.1. CONDITIONS TO INITIAL ADVANCES. The agreement of Lenders to
make the initial Advances requested to be made on the Closing Date is subject to
the satisfaction, or waiver by Lenders, immediately prior to or concurrently
with the making of such Advances, of the following conditions precedent:
(a) NOTE. Agent shall have received the Notes duly
executed and delivered by an authorized officer of each Borrower;
(b) FILINGS, REGISTRATIONS AND RECORDINGS. Each
document (including,
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without limitation, any Uniform Commercial Code financing statement) required by
this Agreement, any related agreement or under law or reasonably requested by
the Agent to be filed, registered or recorded in order to create, in favor of
Agent, a perfected security interest in or lien upon the Collateral shall have
been properly filed, registered or recorded in each jurisdiction in which the
filing, registration or recordation thereof is so required or requested, and
Agent shall have received an acknowledgment copy, or other evidence satisfactory
to it, of each such filing, registration or recordation and satisfactory
evidence of the payment of any necessary fee, tax or expense relating thereto;
(c) CORPORATE PROCEEDINGS OF BORROWERS. Agent shall
have received a copy of the resolutions in form and substance reasonably
satisfactory to Agent, of the Board of Directors of each Borrower authorizing
(i) the execution, delivery and performance of this Agreement, the Notes, the
Mortgage, any related agreements and the Intercreditor Agreement (collectively
the "Documents") and (ii) the granting by each Borrower of the security
interests in and liens upon the Collateral in each case certified by the
Secretary or an Assistant Secretary of each Borrower as of the Closing Date;
and, such certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of such
certificate;
(d) INCUMBENCY CERTIFICATES OF BORROWERS. Agent shall
have received a certificate of the Secretary or an Assistant Secretary of each
Borrower, dated the Closing Date, as to the incumbency and signature of the
officers of each Borrower executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) CERTIFICATES. Agent shall have received a copy of
the Articles or Certificate of Incorporation of each Borrower, and all
amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation together with copies of the
By-Laws of each Borrower and all agreements of each Borrower's shareholders
certified as accurate and complete by the Secretary of each Borrower;
(f) GOOD STANDING CERTIFICATES. Agent shall have
received good standing certificates for each Borrower dated not more than 5 days
prior to the Closing Date, issued by the Secretary of State or other appropriate
official of each Borrower's jurisdiction of incorporation and each jurisdiction
where the conduct of each Borrower's business activities or the ownership of its
properties necessitates qualification;
(g) LEGAL OPINION. Agent shall have received the
executed legal opinion of Salon, Marrow, Dyckman & Newman LLP in form and
substance satisfactory to Agent which shall cover such matters incident to the
transactions contemplated by this Agreement, the Notes, and related agreements
as Agent may reasonably require and each Borrower hereby authorizes and directs
such counsel to deliver such opinions to Agent and Lenders;
(h) NO LITIGATION. (i) No litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect;
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and (ii) no injunction, writ, restraining order or other order of any nature
materially adverse to any Borrower or the conduct of its business or
inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body;
(i) FINANCIAL CONDITION CERTIFICATES. Agent shall have
received an executed Financial Condition Certificate in the form of EXHIBIT
8.1(i).
(j) COLLATERAL EXAMINATION. Agent shall have completed
Collateral examinations and received appraisals, the results of which shall be
satisfactory in form and substance to Lenders, of the Receivables, Inventory,
General Intangibles, Real Property , Leasehold Interest and Equipment of each
Borrower and all books and records in connection therewith;
(k) FEES. Agent shall have received all fees payable to
Agent and Lenders on or prior to the Closing Date pursuant to Article III
hereof;
(l) PRO FORMA FINANCIAL STATEMENTS. Agent shall have
received a copy of the Pro Forma Financial Statements which shall be
satisfactory in all respects to Lenders;
(m) INTERCREDITOR AGREEMENT. Agent shall have entered
into the Intercreditor Agreement with Borrowers and Fleet which shall set forth
the basis upon which the Fleet may receive, and Borrowers may make, payments
under Fleet Agreements, which basis shall be satisfactory in form and substance
to Agent in its sole discretion;
(n) FIRST UNION PAYOFF LETTER; UCC-3 TERMINATION
STATEMENTS. Agent shall have received (i) a payoff letter signed by First Union
and the Borrowers confirming the payment and full and termination of the First
Union Credit Agreement and (ii) UCC-3 Termination Statements signed by First
Union in proper form for filing in all jurisdictions where UCC-1 Financing
Statements were filed with respect to the First Union Credit Agreement;
(o) PLEDGE AGREEMENT, OTHER DOCUMENTS. Agent shall have
received executed Pledge Agreement and all Other Documents, each in form and
substance satisfactory to Lenders;
(p) INSURANCE. Agent shall have received in form and
substance satisfactory to Agent, certified copies of Borrowers' casualty
insurance policies, together with loss payable endorsements on Agent's standard
form of loss payee endorsement naming Agent as loss payee, and certified copies
of Borrowers' liability insurance policies, together with endorsements naming
Agent as a co-insured;
(q) TITLE INSURANCE. Agent shall have received fully
paid mortgagee title insurance policies (or binding commitments to issue title
insurance policies, marked to Agent's satisfaction to evidence the form of such
policies to be delivered with respect to the Mortgage), in standard ALTA form,
issued by a title insurance company satisfactory to Agent, each in an amount
equal to not less than the fair market value of the Real Property subject to the
Mortgage, insuring the Mortgage to create a valid Lien on the Real Property with
no exceptions which Agent shall not have approved in writing and no survey
exceptions;
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(r) ENVIRONMENTAL REPORTS. Agent shall have received
all environmental studies and reports prepared by independent environmental
engineering firms with respect to Real Property owned or leased by Borrowers;
(s) PAYMENT INSTRUCTIONS. Agent shall have received
written instructions from Borrowers directing the application of proceeds of the
initial Advances made pursuant to this Agreement;
(t) BLOCKED ACCOUNTS. Agent shall have received duly
executed agreements establishing the Blocked Accounts or Depository Accounts
with financial institutions acceptable to Agent for the collection or servicing
of the Receivables and proceeds of the Collateral;
(u) CONSENTS. Agent shall have received any and all
Consents necessary to permit the effectuation of the transactions contemplated
by this Agreement and the Other Documents; and, Agent shall have received such
Consents and waivers of such third parties as might assert claims with respect
to the Collateral, as Agent and its counsel shall deem necessary;
(v) NO ADVERSE MATERIAL CHANGE. (i) since December 31,
1998 there shall not have occurred any event, condition or state of facts which
could reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent shall have been proven to
be inaccurate or misleading in any material respect;
(w) LEASEHOLD AGREEMENTS. Agent shall have received
landlord, mortgagee or warehouseman agreements satisfactory to Agent with
respect to all premises leased by Borrowers at which Inventory is located;
(x) MORTGAGE. Agent shall have received in form and
substance satisfactory to Lenders (i) an executed Mortgage and (ii) a title
policy for the Real Property and (iii) surveys;
(y) SUBORDINATED DEBT DOCUMENTATION. Agent shall have
received final executed copies of the Subordinated Debt Documentation which
shall contain such terms and provisions including, without limitation,
subordination terms, satisfactory to Agent;
(z) CONTRACT REVIEW. Agent shall have reviewed all
material contracts of Borrowers including, without limitation, leases, union
contracts, labor contracts, vendor supply contracts, license agreements and
distributorship agreements and such contracts and agreements shall be
satisfactory in all respects to Agent;
(aa) CLOSING CERTIFICATE. Agent shall have received a
closing certificate signed by the Chief Financial Officer or Chief Accounting
Officer of each Borrower dated as of the date hereof, stating that (i) all
representations and warranties set forth in this Agreement and the Other
Documents are true and correct on and as of such date, (ii) Borrowers are on
such date in compliance with all the terms and provisions set forth in this
Agreement and the Other Documents and (iii) on such date no Default or Event of
Default has occurred or is continuing;
(bb) UNDRAWN AVAILABILITY. After giving effect to the
initial Advances hereunder, Borrowers shall have Undrawn Availability of at
least $1,500,000;
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(cc) OTHER. All corporate and other proceedings, and
all documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent and its
counsel; and
(dd) TRADE PAYABLES. No amounts due and owing to
Borrowers' trade creditors by Borrowers shall be outstanding more than 60 days
past due, except as in accordance with the ordinary course of business.
8.2. CONDITIONS TO EACH ADVANCE. The agreement of Lenders to make
any Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by any Borrower in or pursuant to this
Agreement (except for Section 5.5 (a) and (b) and any related agreements to
which it is a party, and each of the representations and warranties contained in
any certificate, document or financial or other statement furnished at any time
under or in connection with this Agreement or any related agreement shall be
true and correct in all material respects on and as of such date as if made on
and as of such date;
(b) NO DEFAULT. No Event of Default or Default shall
have occurred and be continuing on such date, or would exist after giving effect
to the Advances requested to be made, on such date and, in the case of the
initial Advance, after payment in full of all existing indebtedness under the
First Union Credit Agreement; PROVIDED, HOWEVER that Lenders, in their sole
discretion, may continue to make Advances notwithstanding the existence of an
Event of Default or Default and that any Advances so made shall not be deemed a
waiver of any such Event of Default or Default; and
(c) MAXIMUM ADVANCES. In the case of any Advances
requested to be made, after giving effect thereto, the aggregate Advances shall
not exceed the maximum amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
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IX. INFORMATION AS TO BORROWERS.
Each Borrower shall, until satisfaction in full of the Obligations
and the termination of this Agreement:
9.1. DISCLOSURE OF MATERIAL MATTERS. Immediately upon learning
thereof, report to Agent all matters materially affecting the value,
enforceability or collectibility of any portion of the Collateral including,
without limitation, any Borrower's reclamation or repossession of, or the return
to any Borrower of, a material amount of goods or claims or disputes asserted by
any Customer or other obligor.
9.2. SCHEDULES. Deliver to Agent on or before the fifteenth (15th)
day of each month as and for the prior month (a) accounts receivable ageings,
(b) accounts payable schedules, (c) Inventory reports, (d) a reconciliation of
accounts receivables, accounts payable and inventory against the general ledger
and (e) a completed Borrowing Base Certificate in substantially the form of
Exhibit 9.2 (which shall not be for the purpose of determining Advances). In
addition, each Borrower will deliver to Agent at such intervals as Agent may
require: (i) confirmatory assignment schedules, (ii) copies of Customer's
invoices, (iii) evidence of shipment or delivery, and (iv) such further
schedules, documents and/or information regarding the Collateral as Agent may
require including, without limitation, trial balances and test verifications.
Agent shall have the right to confirm and verify all Receivables by any manner
and through any medium it considers advisable and do whatever it may deem
reasonably necessary to protect its interests hereunder. The items to be
provided under this Section are to be in form satisfactory to Agent and executed
by each Borrower and delivered to Agent from time to time solely for Agent's
convenience in maintaining records of the Collateral, and any Borrower's failure
to deliver any of such items to Agent shall not affect, terminate, modify or
otherwise limit Agent's Lien with respect to the Collateral.
9.3. ENVIRONMENTAL REPORTS. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of each Borrower stating, to the best of his
knowledge, that each Borrower is in compliance in all material respects with all
federal, state and local laws relating to environmental protection and control
and occupational safety and health. To the extent any Borrower is not in
compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
9.4. LITIGATION. Promptly notify Agent in writing of any
litigation, suit or administrative proceeding affecting any Borrower, whether or
not the claim is covered by insurance, and of any suit or administrative
proceeding, which in any such case could reasonably be expected to have a
Material Adverse Effect on any Borrower.
9.5. MATERIAL OCCURRENCES. Promptly notify Agent in writing upon
the occurrence of (a) any Event of Default or Default; (b) any event of default
under the Fleet Agreements; (c) any event which with the giving of notice or
lapse of time, or both, would constitute an event of default under the Fleet
Agreements; (d) any event, development or circumstance whereby any financial
statements or other reports furnished to Agent fail in any material respect to
present fairly, in accordance with GAAP consistently applied, the financial
condition or operating results of any Borrower as of the date of such
statements; (e) any accumulated retirement plan funding deficiency
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which, if such deficiency continued for two plan years and was not corrected as
provided in Section 4971 of the Code, could subject any Borrower to a tax
imposed by Section 4971 of the Code; (f) each and every default by any Borrower
which might result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (g) any other development in the business or affairs of any Borrower which
could reasonably be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrowers propose to take with
respect thereto.
9.6. GOVERNMENT RECEIVABLES. Notify Agent immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
9.7. ANNUAL FINANCIAL STATEMENTS. Furnish Agent within ninety (90)
days after the end of each fiscal year of Borrowers, financial statements of
Borrowers on a consolidating and Consolidated Basis including, but not limited
to, statements of income and stockholders' equity and cash flow from the
beginning of the current fiscal year to the end of such fiscal year and the
balance sheet as at the end of such fiscal year, all prepared in accordance with
GAAP applied on a basis consistent with prior practices, and in reasonable
detail and with respect to the consolidated financial statements, reported upon
without qualification by an independent certified public accounting firm
selected by Borrowers and satisfactory to Agent (the "Accountants"). The report
of the Accountants shall contain or have appended thereto calculations which set
forth Borrowers' compliance with the requirements or restrictions imposed by
Sections 6.5, 7.6 and 7.11 hereof. In addition, the reports shall be accompanied
by a certificate of each Borrower's Chief Financial Officer or Chief Accounting
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by such
Borrower with respect to such event, and such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Sections 6.5, 7.6 and 7.11 hereof.
9.8. QUARTERLY FINANCIAL STATEMENTS. Furnish Agent within 45 days
after the end of each fiscal quarter, an unaudited balance sheet of Borrowers on
a consolidated and consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate signed by the Chief Financial Officer or Chief
Accounting Officer of each Borrower, which shall state that, based on an
examination sufficient to permit him to make an informed statement, no Default
or Event of Default exists, or, if such is not the case, specifying such Default
or Event of Default, its nature, when it occurred, whether it is continuing and
the steps being taken by Borrowers with respect to such default and, such
certificate shall have appended thereto calculations which set forth Borrowers'
compliance with the requirements or restrictions imposed by Sections 6.5, 7.6
and 7.11 hereof.
9.9. MONTHLY FINANCIAL STATEMENTS. Furnish Agent within thirty (30)
days after the
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end of each month, an unaudited balance sheet of Borrowers on a consolidated and
consolidating basis and unaudited statements of income and stockholders' equity
and cash flow of Borrowers on a consolidated and consolidating basis reflecting
results of operations from the beginning of the fiscal year to the end of such
month and for such month, prepared on a basis consistent with prior practices
and complete and correct in all material respects, subject to normal year end
adjustments. The reports shall be accompanied by a certificate of each
Borrower's Chief Financial Officer or Chief Accounting Officer of each Borrower,
which shall state that, based on an examination sufficient to permit him to make
an informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrowers with
respect to such event and, such certificate shall have appended thereto
calculations which set forth Borrowers' compliance with the requirements or
restrictions imposed by Sections 6.5, 7.6 and 7.11 hereof.
9.10. OTHER REPORTS. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as each Borrower shall send to its
stockholders and (ii) copies of all notices sent pursuant to the Fleet
Agreements.
9.11. ADDITIONAL INFORMATION. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Notes have been complied with by Borrowers including, without
limitation and without the necessity of any request by Agent, (a) copies of all
environmental audits and reviews, (b) at least thirty (30) days prior thereto,
notice of any Borrower's opening of any new office or place of business or any
Borrower's closing of any existing office or place of business, and (c) promptly
upon any Borrower's learning thereof, notice of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
any Borrower is a party or by which any Borrower is bound.
9.12. PROJECTED OPERATING BUDGET. Furnish Agent, no later than
thirty (30) days prior to the beginning of each Borrower's fiscal years
commencing with fiscal year 1999, a month by month projected operating budget
and cash flow of Borrowers on a consolidated and consolidating basis for such
fiscal year (including an income statement for each month and a balance sheet as
at the end of the last month in each fiscal quarter), such projections to be
accompanied by a certificate signed by the President, Chief Financial Officer or
Chief Accounting Officer of each Borrower to the effect that such projections
have been prepared on the basis of sound financial planning practice consistent
with past budgets and financial statements and that such officer has no reason
to question the reasonableness of any material assumptions on which such
projections were prepared.
9.13. VARIANCES FROM OPERATING BUDGET. Furnish Agent, concurrently
with the delivery of the financial statements referred to in Section 9.7 and
each monthly report, a written report summarizing all material variances from
budgets submitted by Borrowers pursuant to Section 9.12 and, if requested by the
Bank, a discussion and analysis by management with respect to such variances.
9.14. NOTICE OF SUITS, ADVERSE EVENTS. Furnish Agent with prompt
notice of (i) any lapse or other termination of any Consent issued to any
Borrower by any Governmental Body or any
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other Person that is material to the operation of any Borrower's business, (ii)
any refusal by any Governmental Body or any other Person to renew or extend any
such Consent; and (iii) copies of any periodic or special reports filed by any
Borrower with any Governmental Body or Person, if such reports indicate any
material change in the business, operations, affairs or condition of any
Borrower, or if copies thereof are requested by Lender, and (iv) copies of any
material notices and other communications from any Governmental Body or Person
which specifically relate to any Borrower.
9.15. ERISA NOTICES AND REQUESTS. Furnish Agent with immediate
written notice in the event that (i) any Borrower or any member of the
Controlled Group knows or has reason to know that a Termination Event has
occurred, together with a written statement describing such Termination Event
and the action, if any, which such Borrower or member of the Controlled Group
has taken, is taking, or proposes to take with respect thereto and, when known,
any action taken or threatened by the Internal Revenue Service, Department of
Labor or PBGC with respect thereto, (ii) any Borrower or any member of the
Controlled Group knows or has reason to know that a prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Code) has occurred together
with a written statement describing such transaction and the action which such
Borrower or any member of the Controlled Group has taken, is taking or proposes
to take with respect thereto, (iii) a funding waiver request has been filed with
respect to any Plan together with all communications received by any Borrower or
any member of the Controlled Group with respect to such request, (iv) any
increase in the benefits of any existing Plan or the establishment of any new
Plan or the commencement of contributions to any Plan to which any Borrower or
any member of the Controlled Group was not previously contributing shall occur,
(v) any Borrower or any member of the Controlled Group shall receive from the
PBGC a notice of intention to terminate a Plan or to have a trustee appointed to
administer a Plan, together with copies of each such notice, (vi) any Borrower
or any member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
of each such letter; (vii) any Borrower or any member of the Controlled Group
shall receive a notice regarding the imposition of withdrawal liability,
together with copies of each such notice; (viii) any Borrower or any member of
the Controlled Group shall fail to make a required installment or any other
required payment under Section 412 of the Code on or before the due date for
such installment or payment; (ix) any Borrower or any member of the Controlled
Group knows that (a) a Multiemployer Plan has been terminated, (b) the
administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan.
9.16. ADDITIONAL DOCUMENTS. Execute and deliver to Agent, upon
request, such documents and agreements as Agent may, from time to time,
reasonably request to carry out the purposes, terms or conditions of this
Agreement.
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X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. failure by any Borrower to pay (i) all or any portion of
principal when due in accordance with the terms thereof or hereof, including
without limitation any failure to make a mandatory prepayment due pursuant to
the provisions of Section 2.14 or (ii) any interest on the Obligations or any
other amount payable hereunder, within three Business Days after any such
interest or other amount becomes due in accordance with the terms thereof or
hereof when due, whether at maturity or by reason of acceleration pursuant to
the terms of this Agreement or by notice of intention to prepay, or by required
prepayment or failure to pay any other liabilities or make any other payment,
fee or charge provided for herein when due or in any Other Document;
10.2. any representation or warranty made or deemed made by any
Borrower in this Agreement or any related agreement or in any certificate,
document or financial or other statement furnished at any time in connection
herewith or therewith shall prove to have been misleading in any material
respect on the date when made or deemed to have been made;
10.3. failure by any Borrower to (i) furnish financial information
when due or when requested, or (ii) permit the inspection of its books or
records;
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower's property;
10.5. except as otherwise provided for in Sections 10.1 and 10.3,
failure or neglect of any Borrower to perform, keep or observe any term,
provision, condition, covenant herein contained, or contained in any other
agreement or arrangement, now or hereafter entered into between any Borrower and
Agent or any Lender except for a failure or neglect of Borrower to perform, keep
or observe any term, provision, condition or covenant, contained in Sections
4.6, 4.7, 4.9, 4.11, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is cured within
thirty (30) days from the occurrence of such failure or neglect;
10.6. any judgment or judgments are rendered or judgment liens
filed against any Borrower for an aggregate amount in excess of $250,000 except
to the extent such liens (i) are being contested in good faith and for which
adequate reserves have been established and (ii) are either satisfied, stayed or
discharged of record within forty (40) days of such rendering or filing;
10.7. any Borrower shall be named as a party in any bankruptcy, any
other insolvency proceeding or any other material litigation involving a Foreign
Subsidiary;
10.8. any Borrower shall admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business;
10.9. any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect),
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(iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vi) acquiesce
to, or fail to have dismissed, within thirty (30) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (vii) take any
action for the purpose of effecting any of the foregoing;
10.10. any change in any Borrower's condition or affairs (financial
or otherwise) which in Agent's opinion, exercised in a commercially reasonable
manner, has a Material Adverse Effect;
10.11. any Lien created hereunder or provided for hereby or under
any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;
10.12. an event of default has occurred and been declared under the
Fleet Agreement[s] which default shall not have been cured or waived within any
applicable grace period and for which Fleet Lender is permitted to take action
under the Intercreditor Agreement;
10.13 an event of default has occurred and been declared under the
ISP-Joint Venture Agreement which default shall not have been cured or waived
within any applicable grace period and which default would result in any
Borrowers' liability exceeding the amount of the Singapore Letter of Credit;
10.14. a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which materially adversely affects
its condition, affairs or prospects (financial or otherwise) which default is
not cured within any applicable grace period;
10.15. any Change of Ownership or Change of Control shall occur;
10.16. any material provision of this Agreement shall, for any
reason, cease to be valid and binding on any Borrower, or any Borrower shall so
claim in writing to Agent;
10.17. (i) any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or tradename
of any Borrower, the continuation of which is material to the continuation of
any Borrower's business, or (B) commence proceedings to suspend, revoke,
terminate or adversely modify any such license, permit, trademark, tradename or
patent and such proceedings shall not be dismissed or discharged within sixty
(60) days, the continuation of which is material to the continuation of any
Borrower's business, or (c) schedule or conduct a hearing on the renewal of any
license, permit, trademark, tradename or patent necessary for the continuation
of any Borrower's business and the staff of such Governmental Body issues a
report recommending the termination, revocation, suspension or material, adverse
modification of such license, permit, trademark, tradename or patent; (ii) any
agreement which is necessary or material to the operation of any Borrower's
business shall be revoked or terminated and not replaced by a substitute
acceptable to Agent within thirty (30) days after the date of such revocation or
termination, and such revocation or termination and non-replacement would
reasonably be expected to have a Material Adverse Effect on any Borrower;
10.18. any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or the title and rights of any Borrower or
any Original Owner which is the owner of any material portion of the Collateral
shall have become the subject matter of litigation which might, in the
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opinion of Agent, upon final determination, result in impairment or loss of the
security provided by this Agreement or the Other Documents;
10.19. the operations of any Borrower's manufacturing facility are
interrupted at any time and such interruption results in a Material Adverse
Effect.
10.13. an event or condition specified in Sections 7.16 or 9.15
hereof shall occur or exist with respect to any Plan and, as a result of such
event or condition, together with all other such events or conditions, any
Borrower or any member of the Controlled Group shall incur, or in the opinion of
Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both)
which, in the reasonable judgment of Agent, would have a Material Adverse Effect
on any Borrower.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. RIGHTS AND REMEDIES. Upon the occurrence of (i) an Event of
Default pursuant to Section 10.9 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; and, (ii) any of the other Events of Default and at any
time thereafter (such default not having previously been cured), at the option
of Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
Borrower in any involuntary case under any state or federal bankruptcy laws, the
obligation of Lenders to make Advances hereunder shall be terminated other than
as may be required by an appropriate order of the bankruptcy court having
jurisdiction over any Borrower. Upon the occurrence of any Event of Default,
Agent shall have the right to exercise any and all other rights and remedies
provided for herein, under the Uniform Commercial Code and at law or equity
generally, including, without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by any available
judicial procedure and/or to take possession of and sell any or all of the
Collateral with or without judicial process. Agent may enter any of Borrower's
premises or other premises without legal process and without incurring liability
to any Borrower therefor, and Agent may thereupon, or at any time thereafter, in
its discretion without notice or demand, take the Collateral and remove the same
to such place as Agent may deem advisable and Agent may require Borrowers to
make the Collateral available to Agent at a convenient place. With or without
having the Collateral at the time or place of sale, Agent may sell the
Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms,
either for cash, credit or future delivery, as Agent may elect. Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Agent shall
give Borrowers reasonable notification of such sale or sales, it being agreed
that in all events written notice mailed to Borrowers at least ten (10) days
prior to such sale or sales is reasonable notification. At any public sale Agent
or any Lender may bid for and become the purchaser, and Agent, any Lender or any
other purchaser at any such sale thereafter shall hold the Collateral sold
absolutely free from any claim or right of whatsoever kind, including any equity
of redemption and such right and equity are hereby expressly waived and released
by each Borrower. In connection with the exercise of the foregoing remedies,
Agent is granted permission to use all of each Borrower's trademarks, trade
styles, trade names, patents, patent applications, licenses, franchises and
other proprietary rights which are used in connection with (a) Inventory for the
purpose of disposing of such Inventory and (b) Equipment for the
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purpose of completing the manufacture of unfinished goods. The proceeds realized
from the sale of any Collateral shall be applied as follows: first, to the
reasonable costs, expenses and attorneys' fees and expenses incurred by Agent
for collection and for acquisition, completion, protection, removal, storage,
sale and delivery of the Collateral; second, to interest due upon any of the
Obligations and any fees payable under this Agreement; and, third, to the
principal of the Obligations. If any deficiency shall arise, Borrowers shall
remain liable to Agent and Lenders therefor.
11.2. AGENT'S DISCRETION. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. SETOFF. In addition to any other rights which Agent or any
Lender may have under applicable law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right to apply any Borrower's
property held by Agent and such Lender to reduce the Obligations.
11.4. RIGHTS AND REMEDIES NOT EXCLUSIVE. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. WAIVER OF NOTICE. Each Borrower hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
12.2. DELAY. No delay or omission on Agent's or any Lender's part
in exercising any right, remedy or option shall operate as a waiver of such or
any other right, remedy or option or of any default.
12.3. JURY WAIVER. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY
HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS
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AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. TERM. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until October 31, 2002 (the "Term")
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon ninety (90) days' prior written notice upon payment
in full of the Obligations. In the event (i) the Obligations are prepaid in full
prior to the last day of the Term for any reason including without limitation
upon demand by the Agent following the occurrence of an Event of Default
hereunder and (ii) with respect to an non-mandatory prepayment, the Agreement is
terminated; (the date of such prepayment hereinafter referred to as the "Early
Termination Date"), Borrowers shall pay to Agent for the benefit of Lenders an
early termination fee in an amount equal to (x) $300,000 if the Early
Termination Date occurs on or after the Closing Date to and including the date
immediately preceding the first anniversary of the Closing Date, (y) $150,000 if
the Early Termination Date occurs on or after the first anniversary of the
Closing Date to and including the date immediately preceding the second
anniversary of the Closing Date, and (z) $75,000 if the Early Termination Date
occurs on or after the second anniversary of the Closing Date to and including
the date immediately preceding the third anniversary of the Closing Date.
13.2. TERMINATION. The termination of the Agreement shall not
affect any Borrower's, Agent's or any Lender's rights, or any of the Obligations
having their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers' Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of each Borrower (other than those provisions hereof which expressly
survive the termination of this Agreement) have been paid or performed in full
after the termination of this Agreement or each Borrower has furnished Agent and
Lenders with an indemnification satisfactory to Agent and Lenders with respect
thereto. Accordingly, each Borrower waives any rights which it may have under
Section 9-404(1) of the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Agent shall not be
required to send such termination statements to each Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations paid in full in
immediately available funds. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XIV. REGARDING AGENT.
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14.1. APPOINTMENT. Each Lender hereby designates PNC to act as
Agent for such Lender under this Agreement and the Other Documents. Each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.3(a) and 3.4), charges and collections (without giving effect to any
collection days) received pursuant to this Agreement, for the ratable benefit of
Lenders. Agent may perform any of its duties hereunder by or through its agents
or employees. As to any matters not expressly provided for by this Agreement
(including without limitation, collection of the Note) Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; PROVIDED, HOWEVER, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
14.2. NATURE OF DUTIES. Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
Other Documents. Neither Agent nor any of its officers, directors, employees or
agents shall be (i) liable for any action taken or omitted by them as such
hereunder or in connection herewith, unless caused by their gross (not mere)
negligence or willful misconduct, or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Borrower or any
officer thereof contained in this Agreement, or in any of the Other Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Other Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of any Borrower to perform its obligations hereunder. Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the Other Documents, or to inspect the
properties, books or records of any Borrower. The duties of Agent as respects
the Advances to Borrowers shall be mechanical and administrative in nature;
Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon Agent any obligations in
respect of this Agreement except as expressly set forth herein.
14.3. LACK OF RELIANCE ON AGENT AND RESIGNATION. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of each Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
each Borrower. Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before
making of the Advances or at any time or times thereafter except as shall be
provided by any Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility
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or sufficiency of this Agreement or any Other Document, or of the financial
condition of any Borrower, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement, the Note, the Other Documents or the financial condition of any
Borrower, or the existence of any Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each of
Lenders and Borrowing Agent and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Borrowers.
Any such successor Agent shall succeed to the rights, powers and
duties of Agent, and the term "Agent" shall mean such successor agent effective
upon its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent. After any Agent's resignation as Agent, the provisions of
this Article XIV shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
14.4. CERTAIN RIGHTS OF AGENT. If Agent shall request instructions
from Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. NOTICE OF DEFAULT. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder or under the Other Documents, unless Agent has received notice from a
Lender or a Borrower referring to this Agreement or the Other Documents,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that Agent receives such a notice, Agent shall
give notice thereof to Lenders. Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
Lenders; PROVIDED, THAT, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
14.7. INDEMNIFICATION. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs,
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expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against Agent in performing its duties hereunder, or
in any way relating to or arising out of this Agreement or any Other Document;
PROVIDED THAT, Lenders shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Agent's gross (not mere) negligence or
willful misconduct.
14.8. AGENT IN ITS INDIVIDUAL CAPACITY. With respect to the
obligation of Agent to lend under this Agreement, the Advances made by it shall
have the same rights and powers hereunder as any other Lender and as if it were
not performing the duties as Agent specified herein; and the term "Lender" or
any similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
any Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
14.9. DELIVERY OF DOCUMENTS. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, and 9.9 from any Borrower pursuant
to the terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
14.10. BORROWERS' UNDERTAKING TO AGENT. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall PRO TANTO
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
XV. BORROWING AGENCY.
15.1. BORROWING AGENCY PROVISIONS.
(a) Each Borrower hereby irrevocably designates
Borrowing Agent to be its attorney and agent and in such capacity to borrow,
sign and endorse notes, and execute and deliver all instruments, documents,
writings and further assurances now or hereafter required hereunder, on behalf
of such Borrower or Borrowers, and hereby authorizes Agent to pay over or credit
all loan proceeds hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a
co-borrowing facility with a borrowing agent in the manner set forth in this
Agreement is solely as an accommodation to Borrowers and at their request.
Neither Agent nor any Lender shall incur liability to Borrowers as a result
thereof. To induce Agent and Lenders to do so and in consideration thereof, each
Borrower hereby indemnifies Agent and each Lender and holds Agent and each
Lender harmless from and against any and all liabilities, expenses, losses,
damages and claims of damage or injury asserted against Agent or any Lender by
any Person arising from or incurred by reason of the handling of the financing
arrangements of Borrowers as provided herein, reliance by Agent or any Lender on
any request or instruction from Borrowing Agent or any other action taken by
Agent or any Lender with respect to this Section 15.1
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except due to willful misconduct or gross (not mere) negligence by the
indemnified party.
(c) All Obligations shall be joint and several, and
each Borrower shall make payment upon the maturity of the Obligations by
acceleration or otherwise, and such obligation and liability on the part of each
Borrower shall in no way be affected by any extensions, renewals and forbearance
granted to Agent or any Lender to any Borrower, failure of Agent or any Lender
to give any Borrower notice of borrowing or any other notice, any failure of
Agent or any Lender to pursue or preserve its rights against any Borrower, the
release by Agent or any Lender of any Collateral now or thereafter acquired from
any Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by prior recourse by Agent or
any Lender to the other Borrowers or any Collateral for such Borrower's
Obligations or the lack thereof.
15.2. WAIVER OF SUBROGATION. Each Borrower expressly waives any and
all rights of subrogation, reimbursement, indemnity, exoneration, contribution
of any other claim which such Borrower may now or hereafter have against the
other Borrowers or other Person directly or contingently liable for the
Obligations hereunder, or against or with respect to the other Borrowers'
property (including, without limitation, any property which is Collateral for
the Obligations), arising from the existence or performance of this Agreement,
until termination of this Agreement and repayment in full of the Obligations.
XVI. MISCELLANEOUS.
16.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applied to
contracts to be performed wholly within the State of New York. Any judicial
proceeding brought by or against any Borrower with respect to any of the
Obligations, this Agreement or any related agreement may be brought in any court
of competent jurisdiction in the State of New York, United States of America,
and, by execution and delivery of this Agreement, each Borrower accepts for
itself and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrowing Agent at its address set forth in
Section 16.6 and service so made shall be deemed completed five (5) days after
the same shall have been so deposited in the mails of the United States of
America, or, at the Agent's and/or any Lender's option, by service upon
Borrowing Agent which each Borrower irrevocably appoints as such Borrower's
Agent for the purpose of accepting service within the State of New York. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of Agent or any Lender to bring proceedings against any
Borrower in the courts of any other jurisdiction. Each Borrower waives any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
FORUM NON CONVENIENS. Any judicial proceeding by any Borrower against Agent or
any Lender involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any related
agreement, shall be brought only in a federal or state court located in the
County of New York, State of New York.
16.2. ENTIRE UNDERSTANDING. (a) This Agreement and the documents
executed
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concurrently herewith contain the entire understanding between each Borrower,
Agent and each Lender and supersedes all prior agreements and understandings, if
any, relating to the subject matter hereof. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no
force and effect unless in writing, signed by each Borrower's, Agent's and each
Lender's respective officers. Neither this Agreement nor any portion or
provisions hereof may be changed, modified, amended, waived, supplemented,
discharged, cancelled or terminated orally or by any course of dealing, or in
any manner other than by an agreement in writing, signed by the party to be
charged. Each Borrower acknowledges that it has been advised by counsel in
connection with the execution of this Agreement and Other Documents and is not
relying upon oral representations or statements inconsistent with the terms and
provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in
writing of the Required Lenders, and Borrowers may, subject to the provisions of
this Section 16.2 (b), from time to time enter into written supplemental
agreements to this Agreement or the Other Documents executed by Borrowers, for
the purpose of adding or deleting any provisions or otherwise changing, varying
or waiving in any manner the rights of Lenders, Agent or Borrowers thereunder or
the conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
PROVIDED, HOWEVER, that no such supplemental agreement shall, without the
consent of all Lenders:
(i) increase the Commitment Percentage of any
Lender.
(ii) extend the maturity of any Note or the
due date for any amount payable hereunder, or decrease the rate of interest or
reduce any fee payable by Borrowers to Lenders pursuant to this Agreement.
(iii) alter the definition of the term
Required Lenders or alter, amend or modify this Section 16.2(b).
(iv) release any Collateral during any
calendar year (other than in accordance with the provisions of this Agreement)
having an aggregate value in excess of $1,000,000.
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made
if after giving effect thereto the total of Advances outstanding hereunder would
exceed the Formula Amount for more than sixty (60) consecutive Business Days or
exceed one hundred and ten percent (110%) of the Formula Amount.
(vii) increase the Advance Rates above the
Advance Rates in effect on the Closing Date.
(viii) increase the Maximum Revolving Advance
Amount or permit any Revolving Advance to be made if after giving effect thereto
the total of Revolving Advances outstanding hereunder would exceed the Formula
Amount for more than sixty (60) consecutive Business Days or exceed one hundred
ten percent (110%) of the Formula Amount.
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Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant
to this Section 15.2 and such Lender shall not respond or reply to Agent in
writing within five (5) days of delivery of such request, such Lender shall be
deemed to have consented to matter that was the subject of the request. In the
event that Agent requests the consent of a Lender pursuant to this Section 15.2
and such consent is denied, then PNC may, at its option, require such Lender to
assign its interest in the Advances to PNC or to another Lender or to any other
Person designated by the Agent (the "Designated Lender"), for a price equal to
the then outstanding principal amount thereof plus accrued and unpaid interest
and fees due such Lender, which interest and fees shall be paid when collected
from Borrower. In the event PNC elects to require any Lender to assign its
interest to PNC or to the Designated Lender, PNC will so notify such Lender in
writing within forty five (45) days following such Lender's denial, and such
Lender will assign its interest to PNC or the Designated Lender no later than
five (5) days following receipt of such notice pursuant to a Commitment Transfer
Supplement executed by such Lender, PNC or the Designated Lender, as
appropriate, and Agent.
16.3. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.
(a) This Agreement shall be binding upon and inure to
the benefit of Borrowers, Agent, each Lender, all future holders of the
Obligations and their respective successors and assigns, except that (i) no
Borrower may assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of Agent and each Lender and (ii)
provided that no Event of Default has occurred and is continuing, the Commitment
Percentage of the Agent shall not be less than 66 2/3%.
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(b) Each Borrower acknowledges that in the regular
course of commercial banking business one or more Lenders may at any time and
from time to time sell participating interests in the Advances to other
financial institutions (each such transferee or purchaser of a participating
interest, a "Transferee"). Each Transferee may exercise all rights of payment
(including without limitation rights of set-off) with respect to the portion of
such Advances held by it or other Obligations payable hereunder as fully as if
such Transferee were the direct holder thereof provided that Borrowers shall not
be required to pay to any Transferee more than the amount which it would have
been required to pay to Lender which granted an interest in its Advances or
other Obligations payable hereunder to such Transferee had such Lender retained
such interest in the Advances hereunder or other Obligations payable hereunder
and in no event shall Borrowers be required to pay any such amount arising from
the same circumstances and with respect to the same Advances or other
Obligations payable hereunder to both such Lender and such Transferee. Each
Borrower hereby grants to any Transferee a continuing security interest in any
deposits, moneys or other property actually or constructively held by such
Transferee as security for the Transferee's interest in the Advances.
(c) Any Lender may with the consent of Agent which
shall not be unreasonably withheld or delayed sell, assign or transfer all or
any part of its rights under this Agreement and the Other Documents to one or
more additional banks or financial institutions and one or more additional banks
or financial institutions may commit to make Advances hereunder (each a
"Purchasing Lender"), in minimum amounts of not less than $2,000,000 pursuant to
a Commitment Transfer Supplement, executed by a Purchasing Lender, the
transferor Lender, and Agent and delivered to Agent for recording. Upon such
execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Commitment Transfer Supplement, (i)
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Commitment Transfer Supplement, have the rights and obligations of a
Lender thereunder with a Commitment Percentage as set forth therein, and (ii)
the transferor Lender thereunder shall, to the extent provided in such
Commitment Transfer Supplement, be released from its obligations under this
Agreement, the Commitment Transfer Supplement creating a novation for that
purpose. Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Documents. Borrowers hereby consent to the addition
of such Purchasing Lender and the resulting adjustment of the Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement and the Other Documents. Borrowers shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrowers, Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrowers or any Lender at any reasonable time and
from time to time upon reasonable prior notice. Agent shall receive a fee in the
amount of $2,500 payable by the applicable Purchasing Lender upon the effective
date of each transfer
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<PAGE>
or assignment to such Purchasing Lender.
(e) Borrowers authorize each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
Borrowers which has been delivered to such Lender by or on behalf of Borrowers
pursuant to this Agreement or in connection with such Lender's credit evaluation
of Borrowers.
16.4. APPLICATION OF PAYMENTS. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
16.5. INDEMNITY. Each Borrower shall indemnify Agent, each Lender
and each of their respective officers, directors, Affiliates, employees and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against Agent or
any Lender in any litigation, proceeding or investigation instituted or
conducted by any governmental agency or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement or the Other Documents, whether or not
Agent or any Lender is a party thereto, except to the extent that any of the
foregoing arises out of the willful misconduct of the party being indemnified.
16.6. NOTICE. Any notice or request hereunder may be given to any
Borrower or to Agent or any Lender at their respective addresses set forth below
or at such other address as may hereafter be specified in a notice designated as
a notice of change of address under this Section. Any notice or request
hereunder shall be given by (a) hand delivery, (b) overnight courier, (c)
registered or certified mail, return receipt requested, (d) telex or telegram,
subsequently confirmed by registered or certified mail, or (e) telecopy to the
number set out below (or such other number as may hereafter be specified in a
notice designated as a notice of change of address) with electronic confirmation
of its receipt. Any notice or other communication required or permitted pursuant
to this Agreement shall be deemed given (a) when personally delivered to any
officer of the party to whom it is addressed, (b) on the earlier of actual
receipt thereof or three (3) days following posting thereof by certified or
registered mail, postage prepaid, or (c) upon actual receipt thereof when sent
by a recognized overnight delivery service or (d) upon actual receipt thereof
when sent by telecopier to the number set forth below with electronic
confirmation of its receipt, in each case addressed to each party at its address
set forth below or at such other address as has been furnished in writing by a
party to the other by like notice:
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<PAGE>
(A) If to Agent or
PNC at: PNC Bank, National Association
Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Attention: Barry Gillman
Telephone: 732-220-3136
Telecopier: 732-220-3687
with a copy to: Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Lawrence Remmel
Telephone: (212) 326-0881
Telecopier: (212) 326-0806
(B) If to a Lender other than Agent, as specified on the signature
pages hereof.
(C) If to Borrowing Agent
or any Borrower, at: SEMX Corporation
One Labriola Court
Armonk, New York 10504
Attention: Gilbert D. Raker
Telephone: 914-273-5500
Telecopy: 914-273-5860
with a copy to: Salon, Marrow, Dyckman & Newman, LLP
685 Third Avenue
New York, New York 10022
Attention: Joel Salon, Esq.
Telephone: 212-661-7100 (ext.210)
Telecopy: 212-661-3339
16.7. SURVIVAL. The obligations of Borrowers under Sections 2.2(f),
3.7, 3.8, 3.9, 4.19(h), 14.7 and 16.5 shall survive termination of this
Agreement and the Other Documents and payment in full of the Obligations.
16.8. SEVERABILITY. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
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<PAGE>
16.9. EXPENSES. All costs and expenses including, without
limitation, reasonable attorneys' fees (including the allocated costs of in
house counsel) and disbursements incurred by Agent, Agent on behalf of Lenders
and Lenders (a) in all efforts made to enforce payment of any Obligation or
effect collection of any Collateral, or (b) in connection with the entering
into, modification, amendment, administration and enforcement of this Agreement
or any consents or waivers hereunder and all related agreements, documents and
instruments, or (c) in instituting, maintaining, preserving, enforcing and
foreclosing on Agent's security interest in or Lien on any of the Collateral,
whether through judicial proceedings or otherwise, or (d) in defending or
prosecuting any actions or proceedings arising out of or relating to Agent's or
any Lender's transactions with any Borrower, or (e) in connection with any
advice given to Agent or any Lender with respect to its rights and obligations
under this Agreement and all related agreements, may be charged to Borrowers'
Account and shall be part of the Obligations.
16.10. INJUNCTIVE RELIEF. Each Borrower recognizes that, in the
event any Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy at law may prove to be
inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.
16.11. CONSEQUENTIAL DAMAGES. Neither Agent nor any Lender, nor any
agent or attorney for any of them, shall be liable to any Borrower for
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations.
16.12. CAPTIONS. The captions at various places in this Agreement
are intended for convenience only and do not constitute and shall not be
interpreted as part of this Agreement.
16.13. COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
16.14. CONSTRUCTION. The parties acknowledge that each party and
its counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments, schedules or exhibits thereto.
16.15. CONFIDENTIALITY; SHARING INFORMATION. (a) Agent, each Lender
and each Transferee shall hold all non-public information obtained by Agent,
such Lender or such Transferee pursuant to the requirements of this Agreement in
accordance with Agent's, such Lender's and such Transferee's customary
procedures for handling confidential information of this nature; PROVIDED,
HOWEVER, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, affiliates, outside auditors, counsel and
other professional advisors, (b) to Agent, any Lender or to any prospective
Transferees and Purchasing Lenders, and (c) as required or requested by any
Governmental Body or representative thereof or pursuant to legal process;
PROVIDED, FURTHER that (i) unless specifically prohibited by applicable law or
court order, Agent, each Lender and each
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<PAGE>
Transferee shall use its best efforts prior to disclosure thereof, to notify the
applicable Borrower of the applicable request for disclosure of such non-public
information (A) by a Governmental Body or representative thereof (other than any
such request in connection with an examination of the financial condition of a
Lender or a Transferee by such Governmental Body) or (B) pursuant to legal
process and (ii) in no event shall Agent, any Lender or any Transferee be
obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated.
(b) Borrower acknowledges that from time to time
financial advisory, investment banking and other services may be offered or
provided to such Borrower or one or more of its Affiliates (in connection with
this Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each Borrower hereby authorizes each Lender to
share any information delivered to such Lender by such Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender, it being understood that any such Subsidiary or Affiliate of any
Lender receiving such information shall be bound by the provision of Section
16.15 as if it were a Lender hereunder. Such authorization shall survive the
repayment of the other Obligations and the termination of the Loan Agreement.
16.16. PUBLICITY. Each Borrower and each Lender hereby authorizes
Agent to make appropriate announcements of the financial arrangement entered
into among Borrowers, Agent and Lenders, including, without limitation,
announcements which are commonly known as tombstones, in such publications and
to such selected parties as Agent shall in its sole and absolute discretion deem
appropriate.
Each of the parties has signed this Agreement as of the day and
year first above written.
SEMX Corporation
ATTEST:
By:_______________________________
________________________ Name:_____________________________
[SEAL] Title:____________________________
__________________________________
Address
POLESE COMPANY, INC.
ATTEST:
By:_______________________________
________________________ Name:_____________________________
[SEAL] Title:____________________________
__________________________________
Address
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<PAGE>
AMERICAN SILICON PRODUCTS, INC.
ATTEST:
By:_______________________________
________________________ Name:_____________________________
[SEAL] Title:____________________________
__________________________________
Address
SPM HOLDINGS CORPORATION
ATTEST:
By:_______________________________
________________________ Name:_____________________________
[SEAL] Title:____________________________
__________________________________
Address
TYPE III, INC.
ATTEST:
By:_______________________________
________________________ Name:_____________________________
[SEAL] Title:____________________________
__________________________________
Address
THERMAL PACKAGING SOLUTIONS INC.
ATTEST:
By:_______________________________
________________________ Name:_____________________________
[SEAL] Title:____________________________
__________________________________
Address
PNC BANK, NATIONAL ASSOCIATION, as Lender
and as Agent
By:_______________________________
Name:_____________________________
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<PAGE>
Title:____________________________
Two Tower Center Boulevard
East Brunswick, New Jersey 08816
Commitment Percentage: 100%
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 199_, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that she is the __________________ of PNC Bank, National
Association, the corporation described in and which executed the foregoing
instrument; that she knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by order of
the board of directors of said corporation, and that she signed his name thereto
by like order.
________________________________
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 199_, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the board of directors
of said corporation, and that he signed his name thereto by like order.
________________________________
NOTARY PUBLIC
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of November, 1999, before me personally came
_______________, to me known, who being by me duly sworn, did depose and say
that __he is the ______________ of American Silicon Products, Inc., the
corporation described in and which executed the foregoing instrument; and that
__he signed his/her name thereto as the act and deed of such corporation by
order of the board of
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<PAGE>
directors of said corporation.
________________________________
NOTARY PUBLIC
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of November, 1999, before me personally came
_______________, to me known, who being by me duly sworn, did depose and say
that __he is the ______________ of Polese Company, Inc., the corporation
described in and which executed the foregoing instrument; and that __he signed
his/her name thereto as the act and deed of such corporation by order of the
board of directors of said corporation.
________________________________
NOTARY PUBLIC
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of November, 1999, before me personally came
_______________, to me known, who being by me duly sworn, did depose and say
that __he is the ______________ of SPM Holdings Corporation, the corporation
described in and which executed the foregoing instrument; and that __he signed
his/her name thereto as the act and deed of such corporation by order of the
board of directors of said corporation.
________________________________
NOTARY PUBLIC
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of November, 1999, before me personally came
_______________, to me known, who being by me duly sworn, did depose and say
that __he is the ______________ of Type III, Inc., the corporation described in
and which executed the foregoing instrument; and that __he signed his/her name
thereto as the act and deed of such corporation by order of the board of
directors of said corporation.
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<PAGE>
________________________________
NOTARY PUBLIC
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of November, 1999, before me personally came
_______________, to me known, who being by me duly sworn, did depose and say
that __he is the ______________ of Thermal Packaging Solutions Inc., the
corporation described in and which executed the foregoing instrument; and that
__he signed his/her name thereto as the act and deed of such corporation by
order of the board of directors of said corporation.
________________________________
NOTARY PUBLIC
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<PAGE>
List of Exhibits and Schedules
<TABLE>
<CAPTION>
Exhibits
<S> <C>
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.4 Term Note
Exhibit 5.5(b) Financial Projections
Exhibit 8.1(i) Financial Condition Certificate
Exhibit 9.2 Borrowing Base Certificate
Exhibit 16.3 Commitment Transfer Supplement
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
Schedule 4.19 Real Property
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.7 Environmental
Schedule 5.8(b)(i) Litigation
Schedule 5.8(b)(ii) Indebtedness for Borrowed Money
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
Schedule 7.17 Permitted Prepayment of Indebtedness
</TABLE>
-80-
<PAGE>
[SCHEDULES ARE SEPARATE DOCUMENT]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,774
<SECURITIES> 0
<RECEIVABLES> 8,082
<ALLOWANCES> 511
<INVENTORY> 5,263
<CURRENT-ASSETS> 16,060
<PP&E> 50,806
<DEPRECIATION> 15,746
<TOTAL-ASSETS> 61,209
<CURRENT-LIABILITIES> 16,261
<BONDS> 10,346
0
0
<COMMON> 639
<OTHER-SE> 30,859
<TOTAL-LIABILITY-AND-EQUITY> 61,209
<SALES> 34,893
<TOTAL-REVENUES> 47,299
<CGS> 22,041
<TOTAL-COSTS> 31,624
<OTHER-EXPENSES> 10,258
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,653
<INCOME-PRETAX> 12,194
<INCOME-TAX> 5,908
<INCOME-CONTINUING> 6,310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,310
<EPS-BASIC> 1.04
<EPS-DILUTED> 1.01
</TABLE>
