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 June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20686
UNIROYAL TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 65-0341868
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 N. Tamiami Trail, Suite 900
Sarasota, FL 34236
(Address of principal executive offices) (Zip Code)
(941) 366-5282
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock as of the latest
practicable date.
Total number of shares of outstanding stock as of August 2, 1996
Common stock 13,176,050
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIROYAL TECHNOLOGY CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, October 1,
1996 1995
-------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (including restricted cash
and cash equivalents of $2,807 at June 30, 1996) $ 5,516 $ 291
Trade accounts receivable (less estimated reserve
for doubtful accounts of $362 and $437, respectively) 22,094 27,042
Inventories (Note 2) 33,111 32,632
Prepaid expenses and other current assets 1,877 1,903
Deferred income taxes 6,541 6,541
-------- --------
Total current assets 69,139 68,409
Property, plant and equipment - net 81,046 90,728
Note receivable (Note 9) 5,000 -
Reorganization value in excess of amounts allocable
to identifiable assets - net 8,476 9,228
Other assets 11,000 12,118
-------- --------
TOTAL ASSETS $174,661 $180,483
======== ========
</TABLE>
- 1 -
<PAGE>
UNIROYAL TECHNOLOGY CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, October 1,
1996 1995
--------- ----------
<C> <C> <C>
Current liabilities:
Current portion of long-term debt $ 653 $ 4,290
Accounts payable 15,110 16,686
Accrued expenses:
Compensation and benefits 8,499 8,145
Interest 713 2,930
Taxes, other than income 1,917 2,061
State income taxes 352 253
Other 7,030 2,752
-------- --------
Total current liabilities 34,274 37,117
Long-term debt (Note 4) 72,241 72,473
Other liabilities 11,766 6,804
Deferred income taxes 3,433 6,420
-------- --------
Total liabilities 121,714 122,814
-------- --------
Commitments and contingencies (Note 6)
Stockholders' equity (Note 5):
Preferred stock - par values $0.01; 1,000 shares authorized:
Series B - 35 shares issued and outstanding
(redemption value of $150,000 per share) 5,250 5,250
Common stock - par value $0.01; 35,000,000 shares
authorized: 13,203,922 shares issued at June 30, 1996
and 13,103,113 shares issued or to be issued at
October 1, 1995 133 131
Additional paid-in capital 52,509 52,331
Deficit (4,945) -
-------- --------
52,947 57,712
Less treasury stock at cost - 38,368 and 52,369
shares, respectively - (43)
-------- --------
Total stockholders' equity 52,947 57,669
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $174,661 $180,483
======== ========
</TABLE>
See notes to condensed financial statements.
- 2 -
<PAGE>
UNIROYAL TECHNOLOGY CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 56,296 $ 54,900 $ 156,464 $ 158,767
Costs, expenses and (other income):
Costs of goods sold 44,742 42,973 126,604 123,532
Selling and administrative 7,044 5,349 21,466 19,530
Depreciation and other amortization 2,519 2,388 7,506 7,023
Amortization of reorganization value in
excess of amounts allocable to
identifiable assets 193 193 577 577
Reorganization professional fees
subsequent to effective date 87 312 465 488
Excess facility expense 206 274 855 1,034
Gain on sale of division (Note 9) (2,282) - (2,282) -
Strike settlement and training expense - - 808 -
-------- -------- -------- --------
Operating income 3,787 3,411 465 6,583
Interest expense (2,462) (2,439) (7,630) (7,521)
-------- -------- -------- --------
Income (loss) before income taxes
and extraordinary item 1,325 972 (7,165) (938)
Income tax (expense) benefit (Note 3) (789) (460) 2,220 419
-------- -------- -------- --------
Income (loss) before extraordinary item 536 512 (4,945) (519)
Extraordinary gain on the extinguishment
of debt (Note 4) - - - 363
-------- -------- -------- --------
Net income (loss) $ 536 $ 512 $ (4,945) $ (156)
======== ======== ======== ========
Income (loss) per common share and
common stock equivalent (Note 7) -
Primary and fully diluted:
Income (loss) before extraordinary item $ 0.04 $ 0.04 $ (0.38) $ (0.04)
Extraordinary gain - - - 0.03
-------- -------- -------- --------
Net income (loss) $ 0.04 $ 0.04 $ (0.38) $ (0.01)
======== ======== ======== ========
Average number of shares used in
computation 14,722,675 14,492,701 13,157,809 12,998,599
========== ========== ========== ==========
</TABLE>
See notes to condensed financial statements.
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<PAGE>
UNIROYAL TECHNOLOGY CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
June 30, July 2,
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (4,945) $ (156)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 7,506 7,023
Deferred tax benefit (2,987) (541)
Provision for doubtful accounts - 9
Amortization of reorganization value in excess of
amounts allocable to identifiable assets 577 577
Amortization of Senior Secured Notes discount 74 69
Amortization of refinancing and debt issuance costs 357 349
Gain on sale of division (2,282) -
Extraordinary gain on the extinguishment of debt - (363)
Other 128 245
Changes in assets and liabilities:
Decrease (increase) in trade accounts receivable 1,136 (1,610)
Increase in inventories (2,397) (1,301)
Decrease in prepaid expenses and other assets 450 19
(Decrease) increase in accounts payable (682) 47
Decrease in other accrued expenses (1,242) (1,553)
Increase (decrease) in other liabilities 858 (696)
-------- --------
Net cash (used in) provided by operating activities (3,449) 2,118
-------- --------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (Note 8) (6,190) (4,966)
Proceeds from sale of division 19,641 -
-------- --------
Net cash provided by (used in) investing activities 13,451 (4,966)
-------- --------
FINANCING ACTIVITIES:
Repurchase of Senior Secured Notes - (6,223)
Other (decrease) increase in debt, net (4,789) 4,865
Stock options exercised 12 -
-------- --------
Net cash used in financing activities (4,777) (1,358)
-------- --------
Net increase (decrease) in cash 5,225 (4,206)
Cash and cash equivalents at beginning of period 291 4,249
-------- --------
Cash and cash equivalents at end of period $ 5,516 $ 43
======== ========
</TABLE>
See notes to condensed financial statements.
- 4 -
<PAGE>
UNIROYAL TECHNOLOGY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Three Months and Nine Months Ended
June 30, 1996 and July 2, 1995
1. BASIS OF PRESENTATION
The interim Condensed Financial Statements of Uniroyal Technology
Corporation (the "Company") are unaudited and should be read in
conjunction with the Company's audited financial statements and notes
thereto for the fiscal years ended October 1, 1995, October 2, 1994, and
September 26, 1993. The Company's fiscal year ends on the Sunday after the
last Friday in September.
Certain reclassifications were made to the prior year financial statements
to conform to current period presentations. In the opinion of the Company,
all adjustments necessary for a fair presentation of such Condensed
Financial Statements have been included. Such adjustments consist only of
normal recurring items. Interim results are not necessarily indicative of
results for a full year. The interim Condensed Financial Statements and
notes thereto are presented as permitted by the Securities and Exchange
Commission and do not contain certain information included in the
Company's annual Financial Statements and notes thereto.
Cash and cash equivalents include all highly liquid investments purchased
with an original maturity of three months or less. Restricted cash and
cash equivalents are the net proceeds from the sale of the Ensolite
division placed in escrow in accordance with the terms of the indenture
agreement for the Company's Senior Secured Notes. See Note 9.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, October 1,
1996 1995
-------- --------
<S> <C> <C>
Raw materials and supplies $ 16,594 $ 14,926
Work in process 4,528 5,253
Finished goods 11,989 12,453
-------- --------
Total $ 33,111 $ 32,632
======== ========
</TABLE>
3. INCOME TAXES
The provisions for income tax benefit (expense) for the three months and
nine months ended June 30, 1996 and July 2, 1995 were calculated through
the use of the estimated annual income tax rates based on projected
annualized income.
4. LONG-TERM DEBT
On June 5, 1996, the Company entered into a revolving credit agreement
(the "Agreement") with the CIT Group/Business Credit Inc., pursuant to
which, subject to the satisfaction of certain borrowing
- 5 -
<PAGE>
conditions, the Company may borrow the lesser of $25,000,000 or 85% of
eligible accounts receivable but in no event at any time more than 75% of
the Company's Accounts, as defined in the Agreement, determined in
accordance with generally accepted accounting principles. Interest is
payable monthly at prime plus .5% per annum or at the Libor rate plus
2.75% if the Company elects to borrow funds under a Libor Loan as defined
in the Agreement. The loan matures on June 5, 2001. All of the Company's
accounts receivable are pledged as collateral for this loan. The Company
repaid in full its obligations to Heller Financial, Inc. with borrowings
under this Agreement.
During the first nine months of Fiscal 1995, the Company acquired
$7,497,000 of face value of the Company's Senior Secured Notes resulting
in extraordinary gains (net of the write-off of applicable debt issuance
costs and unamortized debt discount) of approximately $363,000 (net of
income taxes of $310,000). The Company did not acquire any such securities
during the first nine months of Fiscal 1996.
5. STOCKHOLDERS' EQUITY
During the nine months ended June 30, 1996, the Board of Directors
declared dividends on the Series B Preferred Stock equal to 8% per annum
of the redemption price for the shares of Series B Preferred Stock
($150,000 per share). Pursuant to the Company's Amended and Restated
Certificate of Incorporation, the dividends were paid by the delivery of
the Company's common stock.
The following table summarizes the dividends declared during the nine
months ended June 30, 1996:
<TABLE>
<CAPTION>
Common
Common Share
Dividend Shares Price
Date Declared Period Covered Declared Delivered Used Paid
----------------- -------------------------- -------- --------- ------- ------------
(in thousands)
<S> <C> <C>
October 2, 1995 July 3, 1995
through October 1, 1995 $105 26,469 $3.97 October 1995
December 16, 1995 October 2, 1995
through December 31, 1995 105 31,104 3.38 January 1996
April 1, 1996 January 1, 1996
through March 31, 1996 105 31,063 3.38 April 1996
---- ------
$315 88,636
==== ======
</TABLE>
The $315,000 of dividends declared was charged to additional paid-in
capital.
The dividend for the period April 1, 1996 through June 30, 1996 as
declared as of July 1, 1996 is approximately $105,000, which resulted in
the issuance of 27,021 shares of common stock based on a share price of
$3.89.
- 6 -
<PAGE>
6. COMMITMENTS AND CONTINGENCIES
Bankruptcy Proceedings
Certain predecessor companies of the Company (the "Predecessor Companies")
sought protection under the Bankruptcy Code and subsequently filed a plan
of reorganization (the "Predecessor Companies' Plan") which became
effective on September 27, 1992. See the notes to the Company's audited
financial statements as of October 1, 1995 and for the year then ended for
a discussion of the bankruptcy proceedings. Notwithstanding the
confirmation and effectiveness of the Predecessor Companies' Plan, the
Bankruptcy Court continues to have jurisdiction to, among other things,
resolve disputed prepetition claims and to resolve other matters that may
arise in connection with or relate to the Predecessor Companies' Plan. The
Company has resolved, through negotiation or through dismissal by the
Bankruptcy Court, approximately $38,000,000 in disputed claims. During
June and July 1996, pursuant to the Plan of Reorganization, the Company
distributed the remaining shares of common stock reserved for the
satisfaction of disputed claims; a total of 928,273 shares to the holders
of unsecured claims against the Predecessor Companies in settlement of the
allowed unsecured claims against the estates of the Predecessor Companies.
56,893 shares of common stock were retained by the Company and are
included in treasury stock.
Litigation
Uniroyal Retiree Benefits, Inc. ("URBI"), an organization that is
unaffiliated with the Company, which administers a medical, prescription
drug and life insurance program for certain retired employees of the
Predecessor Companies and certain affiliates of the Predecessor Companies,
commenced an action in the United States District Court for the Northern
District of Indiana, South Bend Division (the "South Bend District
Court"), on November 16, 1994, claiming that the Company had breached its
agreement relating to funding of the plaintiff's operations. The plaintiff
had claimed damages in excess of $1,000,000 and a declaration of its
rights under the agreement in question. By order dated January 23, 1995
the District Court referred the action to the Bankruptcy Court as a matter
in the bankruptcy proceedings. The Company then filed counterclaims
against the plaintiff for breach of contract, fraud, negligent
misrepresentation, unjust enrichment, declaratory judgment and
clarification or reformation of contract. A trial of the issues in this
matter was conducted before the Bankruptcy Court on June 28-30, 1995. On
October 20, 1995, the Bankruptcy Court issued a Memorandum of Decision and
Final Judgment awarding the plaintiff a judgment in the amount of
$1,757,591 to be reduced by the judgment in favor of the Company in the
amount of $1,060,925. After consideration of amounts already paid by the
Company to the plaintiff, the net judgment against the Company was
approximately $285,000. On October 30, 1995, the Company filed a motion to
reconsider, to alter or amend judgment, for additional findings and
conclusions, and a new trial. A hearing was held on the Company's motion
on December 1, 1995, and on December 20, 1995 the Bankruptcy Court ruled
against all of the Company's motions except to reduce pre-judgment
interest. The result of this decision was to reduce the Company's
obligation to URBI by approximately $74,000. On November 28, 1995, the
plaintiff filed an additional complaint with the Bankruptcy Court
concerning payments due in Fiscal 1996. On December 28, 1995, the Company
filed a notice of appeal to the South Bend District Court from the
December 20, 1995 judgment. On January 12, 1996 the Bankruptcy Court
stayed the plaintiff's appeal pending the outcome of the Company's appeal
in the first proceeding. On February 6, 1996 the Bankruptcy Court ordered
the Company to increase its monthly payments to URBI to $159,853 beginning
in February 1996 and continuing through September 1996. Management
believes that the ultimate resolution of these claims should not have a
material adverse effect upon the Company's results of operations, cash
flows or financial position.
- 7 -
<PAGE>
Approximately 130 hourly employees at the Company's acrylic sheet
manufacturing facility in Stamford, Connecticut are represented by
Teamsters Local 191, which is affiliated with the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America
(the "Teamsters"), under a collective bargaining agreement which expired
on April 16, 1994. The Teamsters declared a strike on July 11, 1994 and
called off the strike December 10, 1994. The Company and the Teamsters
settled their dispute in June 1996. The Company has agreed to settle the
claim of the striking employees for back pay following the receipt of
release of claims from such employees. The Company has established a
reserve of $808,000 for estimated back pay and related employment taxes
and retraining costs as of June 30, 1996.
Environmental Factors
The Company is subject to a wide range of federal, state and local laws
and regulations designed to protect the environment and worker health and
safety. The Company's management emphasizes compliance with these laws and
regulations. The Company has instituted programs to provide guidance and
training and to audit compliance with environmental laws and regulations
at Company owned or operated facilities. The Company's policy is to accrue
environmental and cleanup-related costs of a non-capital nature when it is
probable both that a liability has been incurred and that the amount can
be reasonably estimated.
In connection with the acquisition of a manufacturing facility in South
Bend, Indiana, the Company assumed costs of remediation of soil and ground
water contaminations which the Company estimates will cost not more than
$1.0 million over a five year period. Such amount is included in the
approximately $1.8 million purchase price. See Note 10.
7. INCOME (LOSS) PER COMMON SHARE
The computations of primary and fully diluted income (loss) per common
share for the three and nine month periods ended June 30, 1996 and July 2,
1995 are based on the weighted average number of common shares issued and
outstanding (or to be issued pursuant to the Predecessor Companies' Plan)
less the average number of shares held in treasury for the period. Primary
and fully diluted income per common share for the three months ended June
30, 1996 and July 2, 1995 include the assumed conversion of the then
outstanding Preferred Stock and the exercise of all stock options and
warrants having exercise prices less than the average market price of the
common stock using the treasury stock method. Primary and fully diluted
loss per common share for the nine months ended June 30, 1996 and July 2,
1995 do not include the assumed conversion of the then outstanding
Preferred Stock nor the exercise of the warrants and the employee stock
options since their inclusion would have been anti-dilutive. The
convertible preferred stock issued to the PBGC, the warrants and stock
options are considered to be common stock equivalents.
- 8 -
<PAGE>
8. STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information are as follows (in
thousands):
<TABLE>
<CAPTION>
Nine Months Ended
June 30, July 2,
1996 1995
------- -------
<S> <C> <C>
Interest payments $ 9,474 $ 9,543
Income tax payments 654 188
</TABLE>
The purchase of property, plant and equipment and net cash used in
financing activities for the nine months ended June 30, 1996 and July 2,
1995 do not include $846,000 and $788,000, respectively, related to
property held under capitalized leases that were entered into during the
nine months ended June 30, 1996 and July 2, 1995.
Net cash used in financing activities does not include the dividends
declared on the Series B Preferred Stock since they were paid with the
issuance of 88,636 shares of the Company's common stock.
9. SALE OF ENSOLITE DIVISION
Pursuant to an asset purchase agreement, the Company sold on June 10, 1996
substantially all of its assets net of certain liabilities of its Ensolite
closed-cell foam division to Rubatex Corporation ("Rubatex") for $25.0
million consisting of cash in the amount of $20.0 million and a promissory
note of the parent of Rubatex in the amount of $5.0 million (the "Ensolite
Sale"). Interest on the promissory note is payable semi-annually at 11.75%
per annum. The promissory note matures on May 1, 2006. Cash proceeds from
the sale were used to pay off the Company's borrowings under its revolving
credit agreement. The remaining cash proceeds, net of amounts placed in
escrow in accordance with its indenture agreement for the Senior Secured
Notes, were invested in short-term highly liquid investments. The Company
recognized a pre-tax gain on the sale of approximately $2,282,000 net of
transaction costs, the write-down of certain fixed assets not acquired by
Rubatex and after consideration of reserves for severance and incentive
packages for Ensolite employees, facility clean-up costs and the
recognition of Ensolite's pro rata share of the Company's transition
obligation in accordance with Statement of Financial Accounts Standards
No. 106 " Employer's Accounting for Postretirement Benefits Other Than
Pensions". Rubatex has an option to purchase certain additional equipment
housed at the Company's Mishawaka, Indiana manufacturing facility for
$250,000. The option expires on December 1, 1996. The purchase price was
adjusted for changes in working capital, as defined in the asset purchase
agreement, between October 1, 1995 and June 10, 1996. The change in
working capital resulted in additional proceeds and selected assets due to
the Company from Rubatex of approximately $700,000. Such amount has been
included in the pre-tax gain on sale. The Company and Rubatex also entered
into an earn-out agreement whereby the Company could earn between $.15 and
$.20 per board foot of Ensolite products produced by Rubatex in excess of
the base volume as defined in such agreement during each of the four year
periods following the closing of the Ensolite Sale. In no event will the
total amount earned by the Company under the earn-out agreement during the
forty-eight month period following the closing of the sale exceed $3.0
million.
In conjunction with the Ensolite Sale, the Company entered into a toll
manufacturing agreement with Rubatex. The Company will produce Ensolite
products for the benefit of Rubatex at its Mishawaka,
- 9 -
<PAGE>
Indiana manufacturing facility for an initial period of approximately
twelve months, and in no event beyond July 31, 1997. The Company will be
reimbursed by Rubatex for the variable costs incurred in the production of
Ensolite products and will be paid a fixed amount for manufacturing period
costs based on actual costs incurred by the Company during Fiscal 1995 and
adjusted for inflation. In addition the Company will provide certain
support services to Rubatex and will be reimbursed by Rubatex for the
costs of certain of such services.
10. SUBSEQUENT EVENTS
Agreement to Sell Polycast Division
On July 24, 1996 the Company entered into an agreement to sell
substantially all the assets and certain liabilities of its Polycast
Technology acrylic products division to Polycast Technology Corporation,
an affiliate of Cortec Group Fund II, L.P. The completion of the
transaction is expected during the fourth quarter of Fiscal 1996.
Acquisition of Manufacturing Facility
On July 17, 1996 the Company acquired a manufacturing facility in South
Bend, Indiana for cash of approximately $1.8 million. The new facility
will house the Company's Uniroyal Adhesives and Sealants division and the
Royalite thermoplastic products division's headquarters as well as certain
other Company operations. The Company plans to move all these operations
from their existing leased facility in Mishawaka, Indiana during the first
six months of fiscal 1997. See Note 6.
- 10 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter Fiscal 1996 Compared with
the Third Quarter Fiscal 1995
Net Sales. The Company's net sales increased in the third quarter of Fiscal 1996
by approximately 3% ($1,396,000) to $56,296,000 from $54,900,000 in the third
quarter of Fiscal 1995. The Company's High Performance Plastics and Coated
Fabrics segments each experienced increased sales which were partially offset by
decreased sales by the Specialty Foams and Adhesives segment.
Net sales by the High Performance Plastics Segment increased in the third
quarter of Fiscal 1996 by approximately 4% ($1,098,000) to $29,908,000 from
$28,810,000 in the third quarter of Fiscal 1995. The increase was principally
due to increases in unit volume of both Royalite(R) thermoplastic products and
Polycast(R) acrylic products.
Net sales by the Coated Fabrics Segment increased in the third quarter of Fiscal
1996 approximately 6% ($795,000) to $14,659,000 from $13,864,000 in the third
quarter of Fiscal 1995 principally due to increased selling prices of
NAUGAHYDE(R) coated vinyl products and increased unit volume sales of automotive
products to domestic customers.
Net sales of the Specialty Foams and Adhesives Segment decreased in the third
quarter of Fiscal 1996 by approximately 4% ($497,000) to $11,729,000 from
$12,226,000 in the third quarter of Fiscal 1995. The decrease was primarily due
to the sale of substantially all of the assets of the Ensolite closed-cell foam
division on June 10, 1996 (the "Ensolite Sale") and a decrease in the average
unit selling price of Adhesives products principally in the commercial EPDM
roofing market. Unit volume sales of Adhesives products were comparable for the
respective periods.
Operating income. Operating income for the third quarter of Fiscal 1996 was
$3,787,000, compared to $3,411,000 for the third quarter of Fiscal 1995.
Included in operating income for the third quarter of Fiscal 1996 is the gain
from the Ensolite Sale of $2,282,000.
The High Performance Plastics Segment's operating income for the third quarter
of Fiscal 1996 decreased to $2,770,000 from $4,421,000 in the third quarter of
Fiscal 1995. The decrease was primarily due to a change in product mix in the
Polycast acrylic division and increased professional and development costs at
the Royalite thermoplastics division.
The Coated Fabrics Segment's operating loss decreased in the third quarter of
Fiscal 1996 to $1,314,000 from a loss of $1,493,000 in the third quarter of
Fiscal 1995 primarily due to increased net sales and reduced raw material
prices.
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<PAGE>
The Specialty Foams and Adhesives Segment's operating income increased in the
third quarter of Fiscal 1996 to $2,524,000 from $676,000 in the third quarter of
Fiscal 1995 primarily due to the Ensolite Sale on June 10, 1996. The Company
recognized a pre-tax gain of $2,282,000 on the sale. After consideration of the
gain on sale operating income decreased to $242,000. The decrease is principally
due to decreased selling prices of roofing adhesives and the timing of the sale
of the Ensolite division as compared to the three months in the prior year.
Amortization of reorganization value in excess of amounts allocable to
identifiable assets in the third quarter of Fiscal 1996 and 1995 was $193,000.
Interest Expense. Interest expense in the third quarter of Fiscal 1996 increased
to $2,462,000 from $2,439,000 in the third quarter of Fiscal 1995. The increase
is primarily due to the increased total interest expense on the Company's
revolving credit agreement as a result of increased borrowings under the
Company's revolving credit agreement. See Liquidity and Capital Resources.
Income Tax Expense. Income tax expense in the third quarter of Fiscal 1996 was
$789,000 as compared to $460,000 in the third quarter of Fiscal 1995. The
provisions for income tax expense were calculated through the use of the
estimated income tax rates based on projected annualized income.
First Three Fiscal Quarters 1996 Compared with
the First Three Fiscal Quarters 1995
Net Sales. The Company's net sales decreased in the first three quarters of
Fiscal 1996 by approximately 1% ($2,303,000) to $156,464,000 from $158,767,000
in the first three quarters of Fiscal 1995. Increased net sales in the Company's
High Performance Plastics and Coated Fabrics segments were partially offset by
decreased net sales in the Specialty Foams and Adhesives segment.
Net sales by the High Performance Plastics Segment increased in the first three
quarters of Fiscal 1996 by approximately 2% ($1,548,000) to $85,054,000 from
$83,506,000 in the first three quarters of Fiscal 1995. The increase was
principally due to increases in selling prices of Royalite(R) thermoplastics
products and increased unit volume of Polycast(R) acrylic products. The increase
was partially offset by decreased unit volume of Royalite(R) thermoplastic sheet
products.
Net sales by the Coated Fabrics Segment increased in the first three quarters of
Fiscal 1996 approximately 1% ($620,000) to $42,578,000 from $41,958,000 in the
first three quarters of Fiscal 1995 principally due to increased unit volume
sales of automotive products and increased selling prices of NAUGAHYDE(R) coated
vinyl products. This increase was partially offset by decreased unit volume
sales of NAUGAHYDE(R).
Net sales of the Specialty Foams and Adhesives Segment decreased in the first
three quarters of Fiscal 1996 by approximately 13% ($4,471,000) to $28,832,000
from $33,303,000 in the first three quarters of Fiscal 1995. The decrease was
principally due to a decrease in Adhesives' total unit volume principally in the
commercial EPDM roofing market which resulted from severe weather the past
winter. Also contributing to the decrease were decreases in Ensolite(R) foam
sales of artificial turf underlayment and the Ensolite Sale on June 10, 1996.
Operating Income. Operating Income for the first three quarters of Fiscal 1996
was $465,000, compared to $6,583,000 for the first three quarters of Fiscal
1995. The decrease was primarily due to the
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<PAGE>
decreased net sales in the Specialty Foams and Adhesives Segment and changes in
product mix for both the High Performance Plastics and Coated Fabrics Segments.
Also contributing to the decrease was the establishment of an $808,000 reserve
for estimated back pay and related employment and retraining costs in settlement
of a strike by Polycast employees and manufacturing inefficiencies at the Coated
Fabrics Segment's Port Clinton, Ohio, manufacturing facility. The decreases were
partially offset by a $2,282,000 gain from the Ensolite Sale and reduced raw
material prices.
The High Performance Plastics Segment's operating income for the first three
quarters of Fiscal 1996 decreased to $5,874,000 from $9,426,000 in the first
three quarters of Fiscal 1995. This decrease was primarily due to the
establishment of a $808,000 reserve for estimated back pay and related
employment and retraining costs in settlement of a strike of Polycast employees
and increased professional and development costs at the Royalite thermoplastics
division. Also contributing to the decrease was a change in product sales mix of
Polycast(R) acrylic products.
The Coated Fabrics Segment's operating loss increased in the first three
quarters of Fiscal 1996 to $5,184,000 from a loss of $2,966,000 in the first
three quarters of Fiscal 1995 primarily due to increased costs at the Company's
Port Clinton, Ohio facility due to manufacturing inefficiencies incurred by the
production of products for an automotive customer.
The Specialty Foams and Adhesives Segment's operating income decreased in the
first three quarters of Fiscal 1996 to $352,000 from $628,000 in the first three
quarters of Fiscal 1995 principally due to decreased sales and increased energy
costs at the Company's Mishawaka, Indiana manufacturing facility due to the
severe winter weather. The effects of these items were partially offset by
reduced raw material prices and a $2,282,000 gain from the Ensolite Sale.
Amortization of reorganization value in excess of amounts allocable to
identifiable assets in the first three quarters of Fiscal 1996 and 1995 was
$577,000.
Not allocated to the segments in the first three quarters of Fiscal 1995 was
approximately $73,000 of miscellaneous income. There were no such amounts in the
first three quarters of Fiscal 1996.
Interest Expense. Interest expense in the first three quarters of Fiscal 1996
increased to $7,630,000 from $7,521,000 in the first three quarters of Fiscal
1995. The increase is primarily due to additional interest expense from
increased borrowings under the Company's revolving credit agreement. See
Liquidity and Capital Resources.
Income Tax Benefit. Income tax benefit in the first three quarters of Fiscal
1996 was $2,220,000 as compared to $419,000 in the first three quarters of
Fiscal 1996. The provisions for income tax benefit were calculated through the
use of the estimated income tax rates based on projected annualized income.
Extraordinary Gain on the Extinguishment of Debt. Extraordinary gain on the
extinguishment of debt for the first three quarters of Fiscal 1995 was $363,000.
The amount represents the gain recognized when the Company acquired $7,497,000
of face value of the Company's Senior Secured Notes net of the write-off of
applicable debt issuance costs and unamortized debt discount and approximately
$310,000 of income taxes.
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<PAGE>
Liquidity and Capital Resources
For the first three quarters of Fiscal 1996, operating activities used
$3,449,000 of cash as compared to $2,118,000 provided during the first three
quarters of Fiscal 1995. The increase in cash used in operating activities for
the Fiscal 1996 period is primarily attributable to the increased net loss,
increases in inventories and the timing of payments of trade accounts payable
and partially offset by increases in other liabilities resulting from the
establishment of reserves in connection with the sale of the Company's Ensolite
division and decreases in trade accounts receivable.
Net cash provided by investing activities for the first three quarters of Fiscal
1996 was $13,451,000 as compared to $4,966,000 used during the first three
quarters of Fiscal 1995. Approximately $19,641,000 of cash was provided from the
sale of the Company's Ensolite division during the Fiscal 1996 period. Cash was
used to purchase property, plant and equipment during the comparable periods.
The Company does not have any significant specific commitments for the purchase
of property, plant and equipment.
Net cash used in financing activities was $4,777,000 during the first three
quarters of Fiscal 1996 as compared to $1,358,000 used during the first three
quarters of Fiscal 1995. Cash was used during the Fiscal 1996 period to repay
the Company's obligation under its revolving credit agreement. At June 30, 1996
the Company did not have any borrowings under this agreement. The principal use
of cash during the first three quarters of Fiscal 1995 was to acquire on the
open market approximately $7,497,000 of face value of the Company's Senior
Secured Notes.
The Company on June 30, 1996, had approximately $5,516,000 in cash and cash
equivalents as compared to approximately $291,000 at October 1, 1995. Working
capital at June 30, 1996 was $34,865,000 compared to $31,292,000 at October 1,
1995. The Company had short-term borrowings of $3,761,000 under a $15,000,000
revolving credit facility at October 1, 1995. The Company had no outstanding
borrowings under its $25,000,000 revolving credit facility at June 30, 1996. The
Company believes that it currently has sufficient liquidity to finance its
existing level of operations.
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<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
(a) The Company knows of no material pending legal proceedings to
which the Company or any of its subsidiaries is a party or of
which any of their property is the subject other than routine
litigation incidental to the Company's business.
(b) No legal proceedings were terminated during the third quarter
ended June 30, 1996, other than routine litigation incidental to
the Company's business.
Item 2. Changes in Securities
None.
Item 3. Default upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Financing Agreement dated as of June 5, 1996 by and between The
CIT Group/Business Credit, Inc. (as Lender) and Uniroyal
Technology Corporation (as Borrower).
(b) Reports on Form 8-K
Report on Form 8-K dated June 10, 1996 related to the sale of
certain assets and liabilities of the Company's Ensolite specialty
foams division to Rubatex was filed with the Commission on June
24, 1996.
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<PAGE>
SIGNATURE
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.
DATE: August 13, 1996 By: \s\ George J. Zulanas, Jr.
------------------ --------------------------
George J. Zulanas, Jr.
Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
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<PAGE>
Exhibit Index
-------------
Exhibit No. Description
- - ----------- -------------------------------------
10 Financing Agreement dated as of June 5, 1996 by and between
The CIT Group/Business Credit Inc. (as lender) and Uniroyal
Technology Corporation (as borrower).
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not filed.
FINANCING AGREEMENT
The CIT Group/Business Credit, Inc.
(as Lender)
And
Uniroyal Technology Corporation
(as Borrower)
Dated: June 5, 1996
<PAGE>
TABLE OF CONTENTS
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . .
SECTION 2. Conditions Precedent . . . . . . . . . . . . . . . .
SECTION 3. Revolving Loans . . . . . . . . . . . . . . . . . . .
SECTION 4. Letters of Credit . . . . . . . . . . . . . . . . . .
SECTION 5. Collateral . . . . . . . . . . . . . . . . . . . . . .
SECTION 6. Representations, Warranties and Covenants . . . . . .
SECTION 7. Interest, Fees and Expenses . .. . . . . . . . . . . .
SECTION 8. Powers. . . .. .. .. . . . . . . . . . . . . . . . . .
SECTION 9. Events of Default and Remedies. . . . . . . . . . . .
SECTION 10. Termination . . . . . . . . . . . . . . . . . . . .
SECTION 11. Miscellaneous . . . . . . . . . . . . . . . . . . . .
Schedules
Schedule 1 - Existing Liens
Schedule 2 - Collateral Locations and Chief Executive Office
Schedule 3 - Specified Customers
Exhibits
Exhibit A - Borrowing Base Certificate
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<PAGE>
THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation,
(hereinafter "CITBC") with offices located at 1211 Avenue of the Americas, New
York, New York 10036, is pleased to confirm the terms and conditions under which
CITBC shall make revolving loans, advances and other financial accommodations to
Uniroyal Technology Corporation (herein the "Company"), a Delaware corporation
with a principal place of business at 2 North Tamiami Trail, Sarasota, Florida
34236- 5568.
SECTION 1. Definitions
Accounts shall mean all of the Company's now existing and future: (a) accounts
(as defined in the U.C.C.) and any and all other receivables (whether or not
specifically listed on schedules furnished to CITBC) created by or arising from
all of the Company's sales of Inventory or rendition of services to its
customers, including, without limitation, all such accounts and receivables
arising from sales of Inventory or rendition of services made under any of the
Company's trade names or styles, or through any of the Company's divisions,
together with any and all instruments, documents, contract rights, chattel paper
and general intangibles (as such terms are defined in the U.C.C.) created by or
arising from such sales of Inventory or renditions of services; (b) unpaid
seller's rights (including rescission, replevin, reclamation and stoppage in
transit) relating to the foregoing or arising therefrom; (c) reserves and credit
balances arising hereunder; (d) guarantees or collateral for any of the
foregoing; (e) insurance policies or rights relating to any of the foregoing;
and (f) all proceeds of any and all the foregoing.
Accounts Advance Percentage shall mean eighty-five percent (85%), provided that
such percentage may be reduced by CITBC, in its sole discretion exercised in a
reasonable manner from time to time, to a percentage not less than seventy-five
percent (75%), as a result of (i) negative forecasts and/or trends in the
Company's business, industry, prospects, profits, operations or financial
condition or (ii) other issues, circumstances or facts that could otherwise
negatively impact the Company, its business, profits, operations, industry,
financial condition or assets.
Anniversary Date shall mean the date occurring five (5) years from the date
hereof and the same date in every year thereafter.
Availability shall mean at any time the excess of the sum of Eligible Accounts
Receivable multiplied by the Accounts Advance Percentage over the sum of x) the
outstanding aggregate amount of all Obligations of the Company (other than the
outstanding amount of all Letters of Credit) and y) the Availability Reserve.
Availability Reserve shall mean, at any time of determination, the sum of (x)
the then outstanding amount of all Letters of Credit, and (y) an amount equal to
$500,000, provided that such reserve under this clause (y) shall be released
upon execution and delivery to CITBC of an appropriate amendment to this
Financing Agreement (together with all other documentation reasonably requested
by CITBC in connection therewith including, without limitation, UCC financing
statements) pursuant to which CITBC is granted a first priority and fully
perfected security interest
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<PAGE>
in all present and future returned and repossessed goods arising in connection
with or relating to all Accounts, minus the then outstanding amount of L/C Cash
Collateral (as defined in Paragraph 1(b) of Section 4 hereof).
Borrowing Base Certificate shall mean the Borrowing Base Certificate in the form
of Exhibit A attached hereto.
Business Day shall mean any day on which both CITBC and Chemical Bank and/or its
successor in interest are open for business.
Chemical Bank Rate shall mean the rate of interest per annum announced by
Chemical Bank and/or its successor in interest from time to time as its prime
rate in effect at its principal office in the City of New York. (The prime rate
is not intended to be the lowest rate of interest charged by Chemical Bank
and/or its successor in interest to its borrowers).
Collateral shall mean all present and future Accounts and Other Collateral.
Collateral Management Fee shall mean the sum which shall be paid to CITBC in
accordance with Paragraph 8 of Section 7 hereof to offset the expenses and costs
of CITBC in connection with record keeping, periodic examinations, analyzing and
evaluating the Collateral.
Consolidating Balance Sheet shall mean a consolidated balance sheet plus
individual balance sheets for the Company, and the subsidiaries of each showing
all eliminations of inter-company transactions and prepared in accordance with
GAAP and including a balance sheet for the Company exclusively.
Customarily Permitted Liens shall mean
(a) liens of local or state authorities for franchise or other like taxes
provided the aggregate amounts of such liens shall not exceed $250,000 in the
aggregate at any one time;
(b) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen and other like liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary course of business
(including, without limitation, security deposits for leases, surety bonds,
appeal bonds and other deposits required in connection with litigation) in
connection with workers' compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids,
contracts (other than for the repayment or guarantee of borrowed money or
purchase money obligations),
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<PAGE>
statutory obligations and other similar obligations arising as a result of
progress payments under government contracts; and
(d) easements (including, without limitation, reciprocal easement agreements
and utility agreements), encroachments, minor defects or irregularities in
title, variation and other restrictions, charges or encumbrances (whether or not
recorded) affecting the Real Estate and which in the aggregate (x) do not
materially interfere with the occupation, use or enjoyment by the Company in its
business of the property so encumbered and (y) in the reasonable business
judgment of CITBC do not materially and adversely affect the value of such Real
Estate.
Default shall mean any event specified in Section 9 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
Default Rate of Interest shall mean a rate of interest per annum equal to the
sum of: a) three percent (3%) and b) the Chemical Bank Rate, which CITBC shall
be entitled to charge the Company on all Obligations due CITBC by the Company to
the extent provided in Paragraph 2 of Section 9 of this Financing Agreement.
Depository Account shall mean any accounts owned by CITBC and designated for the
deposit of proceeds of Collateral.
Eligible Accounts Receivable shall mean the gross amount of the Company's
Accounts that conform to the warranties contained herein and at all times
continue to be acceptable to CITBC in the exercise of its reasonable business
judgment, less, without duplication, the sum of a) any returns, discounts,
claims, credits and allowances of any nature (whether issued, owing, granted or
outstanding) and b) reserves for: i) sales to the United States of America or
any other state or local governmental authority, or to any agency, department or
division thereof unless the Company has fully complied with the Assignment of
Claims Act of 1940 or any applicable state or local governmental authority law
with respect to such Account; ii) foreign sales other than sales x) secured by
stand-by letters of credit (in form and substance satisfactory to CITBC) issued
or confirmed by, and payable at, banks having a place of business in the United
States of America and payable in United States currency, and which sales
otherwise comply with all other criteria for eligibility hereunder or y) to
customers residing in Canada provided such sales otherwise comply with all of
the other criteria for eligibility hereunder, are payable in United States
currency and the total amount of such sales included within Eligible Accounts
Receivable shall not exceed 10%of total Eligible Accounts Receivable at any
time; iii) accounts that remain unpaid more than ninety (90) days from invoice
date provided that, upon the Company's request, CITBC may (in CITBC's sole
discretion) from time to time include within Eligible Accounts Receivable,
Accounts subject to extended dating terms provided further that such Accounts
comply with all the other relevant criteria of eligibility hereunder and any
additional eligibility criteria established by CITBC with respect to such
Accounts; iv) contras and other potential offsets; v) sales to any subsidiary,
or to any company affiliated with the Company in any way; vi) bill and hold
(deferred shipment) or consignment sales; vii) sales to any customer which is a)
insolvent, b) the debtor in any bankruptcy,
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<PAGE>
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law, c) negotiating, or has called a meeting of its
creditors for purposes of negotiating, a compromise of its debts or d)
financially unacceptable to CITBC or has a credit rating unacceptable to CITBC;
viii) all sales to any customer if fifty percent (50%) or more of the aggregate
dollar amount of all outstanding invoices are unpaid more than ninety (90) days
from invoice date, provided that valid charge-backs relating to merchandise
disputes made by customers of the Company in the ordinary course of its business
on a basis consistent with the Company's past business practices shall be
excluded for the purposes of this clause viii); ix) an amount representing,
historically, returns, discounts, claims, credits and allowances (herein the
"Dilution Reserve"), provided that no such Dilution Reserve shall be established
or maintained unless and until the actual dilution with respect to the Company's
Accounts exceeds 4% thereof (computed as at the end of each month for the 12
month period then ending) and then only to the extent of the excess over such
4%; x) all Accounts arising from sales to customers located in the state of
Alabama prior to the earlier to occur of the Company (A) qualifying to do
business in the state of Alabama or (B) closing its office in the state of
Alabama; and xi) such other reserves determined by CITBC in its sole discretion
exercised in a reasonable manner.
Equipment shall mean all present and hereafter acquired machinery, equipment,
furnishings and fixtures, and all additions, substitutions and replacements
thereof, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto and all proceeds
of whatever sort.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
Event(s) of Default shall have the meaning provided for in Section 9 of this
Financing Agreement.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply.
Indebtedness shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, or (b) lease obligations which, in accordance with
GAAP, have been, or which should be capitalized.
Inventory shall mean all of the Company's present and hereafter acquired
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same; in all
stages of production- from raw materials through work-in-process to finished
goods and all proceeds thereof of whatever sort.
Issuing Bank shall mean the bank issuing Letters of Credit for the Company.
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<PAGE>
L/C Sub-Line shall mean $2,000,000.
Letters of Credit shall mean all letters of credit issued with the assistance of
CITBC by the Issuing Bank for or on behalf of the Company.
Letter of Credit Guaranty shall mean the guaranty delivered by CITBC to the
Issuing Bank of the Company's reimbursement obligation under the Issuing Bank's
Reimbursement Agreement, Application for Letter of Credit or other like
document.
Letter of Credit Guaranty Fee shall mean the fee CITBC may charge the Company
under Paragraph 3 of Section 7 of this Financing Agreement for: i) issuing the
Letter of Credit Guaranty or ii) otherwise aiding the Company in obtaining
Letters of Credit.
Libor shall mean at any time of determination, and subject to availability, for
each interest period the higher of the applicable London Interbank Offered rate
paid in London on dollar deposits from other banks (x) quoted by Chemical Bank
and/or its successor in interest, (y) published under "Money Rates" in the New
York City edition of the Wall Street Journal or if there is no such publication
or statement therein as to Libor then in any other financial publication used in
the New York City financial community or (z) determination by CITBC based upon
information presented on Telerate Systems at Page 3750 as of 11:00 a.m. (London
Time).
Libor Loan shall mean those Revolving Loans, for which the Company has elected
to use Libor for interest rate computations.
Libor Period shall mean the Libor for one month, two month, three month or six
month U.S. dollar deposits, as selected by the Company.
Line of Credit shall mean the commitment of CITBC to make Revolving Loans
pursuant to Section 3 of this Financing Agreement and to assist the Company in
obtaining Letters of Credit under Section 4 of this Financing Agreement in the
aggregate amount equal to the sum of $25,000,000.
Line of Credit Fee shall: i) mean the fee due CITBC at the end of each month for
the Line of Credit, and ii) be determined by multiplying the difference between
$19,500,000 and the sum of (x) the average daily Revolving Loans of the Company
plus (y) the average daily balance of outstanding Letters of Credit for said
month by one-quarter of one percent (1/4 of 1%) per annum for the number of days
in said month.
Loan Facility Fee shall mean the fee payable to CITBC in accordance with, and
pursuant to, the provisions of Paragraph 7 of Section 7 of this Financing
Agreement.
Obligations shall mean all loans and advances made or to be made by CITBC to the
Company or to others for the Company's account; any and all indebtedness and
obligations which may at any time be owing by the Company to CITBC howsoever
arising, whether now in existence or incurred by
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the Company from time to time hereafter; whether secured by pledge, lien upon or
security interest in any of the Company's assets or property or the assets or
property of any other person, firm, entity or corporation; whether such
indebtedness is absolute or contingent, joint or several, matured or unmatured,
direct or indirect and whether the Company is liable to CITBC for such
indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations
shall also include indebtedness owing to CITBC by the Company under this
Financing Agreement or under any other agreement or arrangement now or hereafter
entered into between the Company and CITBC; indebtedness or obligations incurred
by, or imposed on, CITBC as a result of environmental claims arising out of the
Company's operation, premises or waste disposal practices or sites; the
Company's liability to CITBC as maker or endorser on any promissory note or
other instrument for the payment of money; the Company's liability to CITBC
under any instrument of guaranty or indemnity, or arising under any guaranty,
endorsement or undertaking which CITBC may make or issue to others for the
Company's account, including any accommodation extended with respect to
applications for Letters of Credit, CITBC's acceptance of drafts or CITBC's
endorsement of notes or other instruments for the Company's account and benefit.
Other Collateral shall mean all now owned and hereafter acquired deposits
accounts maintained with any bank or financial institutions into which proceeds
of Collateral are or may be deposited; all cash and other monies and property in
the possession or control of CITBC; all books, records, ledger cards, disks and
related data at any time evidencing or containing information relating to any of
the Collateral described herein or otherwise necessary or helpful in the
collection thereof or realization thereon, and all proceeds of the foregoing.
Out-of-Pocket Expenses shall mean all of CITBC's present and future expenses
incurred relative to this Financing Agreement, whether incurred heretofore or
hereafter, which expenses shall include, without being limited to, the cost of
record searches, all costs and expenses incurred by CITBC in opening bank
accounts, depositing checks, receiving and transferring funds, and any charges
imposed on CITBC due to "insufficient funds" of deposited checks and CITBC's
standard fees relating thereto, any amounts paid by, incurred by or charged to,
CITBC by the Issuing Bank under the Letter of Credit Guaranty or the Company's
Reimbursement Agreement, Application for Letter of Credit or other like document
which pertain either directly or indirectly to such Letters of Credit, and
CITBC's standard fees relating to the Letters of Credit and any drafts
thereunder, local counsel fees, fees and taxes relative to the filing of
financing statements and all expenses, costs and fees set forth in Paragraph 3
of Section 9 of this Financing Agreement.
Permitted Acquisition shall mean the purchase by the Company of the stock or
other equity or ownership interest of any entity, provided that after giving
effect thereto (i) no Default or Event of Default has occurred or would occur
hereunder and (ii) the Company's Availability hereunder is $3,750,000 or more.
Availability shall be computed on the basis of the Company's debts, obligations
and payables being current in accordance with its usual business practices.
Permitted Acquisition Indebtedness shall mean any Indebtedness incurred in
connection with consummating a Permitted Acquisition.
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<PAGE>
Permitted Advances shall mean (i) any loan or advance to officers or employees
for business travel purposes in the ordinary course of business; (ii) any loan
or advance to any other person or entity, provided that such loan or advance is
made by the Company in the ordinary course of its business on a basis consistent
with the Company's past business practices for a business purpose beneficial to
the Company and the aggregate amount of such loans and advances under this
clause (ii) during any fiscal year does not exceed $500,000; and (iii) any other
loan or advance to any person or entity, provided that with respect to this
clause (iii) after giving effect thereto (x) no Default or Event of Default has
occurred or would occur hereunder and (y) the Company's Availability hereunder
is $3,750,000 or more. Availability shall be computed on the basis of the
Company's debts, obligations and payables being current in accordance with its
usual business practices.
Permitted Encumbrances shall mean: i) liens on the Company's assets and property
(other than Collateral hereunder) securing the Senior Note Indenture or any
indenture in connection with financing replacing the Senior Note Indenture,
other liens on the Company's assets or property (other than Collateral
hereunder) existing on the date hereof and listed on Schedule 1 attached hereto
and other liens expressly permitted, or consented to, by CITBC; ii) Purchase
Money Liens and liens on assets or property of the Company (other than
Collateral hereunder) securing Permitted Indebtedness under clause vii) of the
definition of Permitted Indebtedness hereunder; iii) Customarily Permitted
Liens; iv) liens granted CITBC by the Company; v) liens of judgment creditors
provided such liens do not exceed, in the aggregate, at any time, $50,000 (other
than liens bonded or insured to the reasonable satisfaction of CITBC); and vi)
liens for taxes not yet due and payable or which are being diligently contested
in good faith by the Company by appropriate proceedings and which liens are not
x) senior to the liens of CITBC or y) for taxes due the United States of
America.
Permitted Indebtedness shall mean: i) current indebtedness maturing in less than
one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, taxes or labor; ii) the indebtedness secured by
Purchase Money Liens; iii) indebtedness of the Company which is subordinated to
the prior payment and satisfaction of the Company's Obligations to CITBC by
means of a subordination agreement in form and substance satisfactory to CITBC;
iv) indebtedness arising under the Letters of Credit and this Financing
Agreement; v) deferred taxes and other expenses incurred in the ordinary course
of business; vi) the Permitted Acquisition Indebtedness; vii) any other
Indebtedness provided that the aggregate outstanding amount thereof does not
exceed $5,000,000 at any time; and viii) other indebtedness existing on the date
of execution of this Financing Agreement and listed in the most recent financial
statement delivered to CITBC or otherwise disclosed to CITBC in writing.
Purchase Money Liens shall mean liens on any item of Equipment acquired or
leased after the date of this Financing Agreement provided that each such lien
shall attach only to the property to be acquired or leased.
Real Estate shall mean the Company's fee and/or leasehold interests in real
property.
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<PAGE>
Revolving Loans shall mean the loans and advances made, from time to time, to or
for the account of the Company by CITBC pursuant to Section 3 of this Financing
Agreement.
Revolving Loan Account shall have the meaning specified in Section 3, Paragraph
6 hereof.
Senior Note Indenture shall mean the Indenture between the Company and The Bank
of New York as Trustee dated as of June 1, 1993 pursuant to which the Company's
11 3/4% Senior Secured Notes due 2003 were issued.
Senior Notes Limitation shall mean seventy-five percent (75%) of the book value
of the Company's Accounts determined in accordance with GAAP, provided that the
Senior Notes Limitation shall terminate upon the earlier of (i) payment in full
of the Senior Notes or (ii) amendment of the Senior Notes Indenture to delete
such limitation as to permitted Indebtedness thereunder, provided further that
such percentage shall be adjusted to reflect any amendment to the Senior Note
Indenture with respect to such limitation as to permitted Indebtedness
thereunder.
U.C.C. shall mean the Uniform Commercial Code as in effect from time to time in
the state of New York.
SECTION 2. Conditions Precedent
The obligation of CITBC to make the initial advance of loans hereunder is
subject to the satisfaction of, or waiver of, immediately prior to or
concurrently with the making of such loans, the following conditions precedent:
a) Lien Searches - CITBC shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to CITBC for all locations presently
occupied or used by the Company.
b) UCC Filings - Any documents (including without limitation, financing
statements) required to be filed in order to create, in favor of CITBC, a first
and exclusive perfected security interest in the Collateral with respect to
which a security interest may be perfected by a filing under the Uniform
Commercial Code shall have been properly filed in each office in each
jurisdiction required in order to create in favor of CITBC a perfected lien on
the Collateral. CITBC shall have received acknowledgement copies of all such
filings (or, in lieu thereof, CITBC shall have received other evidence
satisfactory to CITBC that all such filings have been made); and CITBC shall
have received evidence that all necessary filing fees and all taxes or other
expenses related to such filings have been paid in full.
c) Examination & Verification- CITBC shall have completed to the satisfaction
of CITBC an examination and verification of the Accounts, books and records of
the Company.
d) Opinions - Counsel for the Company shall have delivered to CITBC opinions
satisfactory to CITBC opining, inter alia, that, subject to the i) filing,
priority and remedies provisions of the Uniform Commercial Code, ii) the
provisions of the Bankruptcy Code, insolvency statutes or other like laws, iii)
the equity powers of a court of law and iv) such other matters as may be agreed
upon with CITBC: a) this Financing Agreement and b) all other loan documents of
the Company are x) valid,
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binding and enforceable according to their terms, y) are duly authorized and z)
do not violate any terms, provisions, representations or covenants in the
charter or by-laws of the Company or, to the best knowledge of such counsel, of
any loan agreement, mortgage, deed of trust, note, security or pledge agreement
or indenture to which the Company is a signatory or by which the Company or its
assets are bound.
e) Additional Documents - The Company shall have executed and delivered to
CITBC all loan documents necessary to consummate the lending arrangement
contemplated between the Company and CITBC.
f) Board Resolution - CITBC shall have received a copy of the resolutions of
the Board of Directors of the Company authorizing the execution, delivery and
performance of (i) this Financing Agreement, and (ii) any related agreements, in
each case certified by the Secretary or Assistant Secretary of the Company as of
the date hereof, together with a certificate of the Secretary or Assistant
Secretary of the Company as to the incumbency and signature of the officers of
the Company executing this Financing Agreement and any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary.
g) Corporate Organization - CITBC shall have received (i) a copy of the
Certificate of Incorporation of the Company certified by the Secretary of State
of its incorporation, and (ii) a copy of the By-Laws (as amended through the
date hereof) of the Company and certified by the Secretary or Assistant
Secretary of the Company.
h) Officer's Certificate - CITBC shall have received an executed Officer's
Certificate of the Company, satisfactory in form and substance to CITBC,
certifying that (i) the representations and warranties contained herein are true
and correct in all material respects on and as of the date hereof; (ii) the
Company is in compliance with all of the terms and provisions set forth herein;
and (iii) no Event of Default or Default has occurred.
i) Absence of Default - No Default, Event of Default or material adverse
change in the financial condition, business, prospects, profits, operations or
assets of the Company shall have occurred.
j) Legal Restraints/Litigation - At the date of execution of this Financing
Agreement, there shall be no x) litigation, investigation or proceeding
(judicial or administrative) pending or threatened against the Company or its
assets, by any agency, division or department of any county, city, state or
federal government arising out this Financing Agreement, y) injunction, writ or
restraining order restraining or prohibiting the consummation of the financing
arrangements contemplated under this Financing Agreement or z) suit, action,
investigation or proceeding (judicial or administrative) pending or threatened
against the Company or its assets, which, in the opinion of CITBC, if adversely
determined could have a material adverse effect on the business, operation,
assets, financial condition or Collateral of the Company.
k) Disbursement Authorization - The Company shall have delivered to CITBC all
information necessary for CITBC to issue wire transfer instructions on behalf of
the Company for the initial and subsequent loans and/or advances to be made
under this Agreement including, but not limited to, disbursement authorizations
in form acceptable to CITBC.
l) CITBC Commitment Letter - The Company has fully complied, to the
satisfaction of CITBC, with all of the terms and conditions of the commitment
letter, dated May 21, 1996, issued by CITBC to, and accepted by, the Company.
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Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as the Company and CITBC shall otherwise agree herein or in a
separate writing.
SECTION 3. Revolving Loans
1. CITBC agrees, subject to the terms and conditions of this Financing
Agreement from time to time, and within x) the Availability and y) the Line of
Credit, but subject to CITBC's right to make "overadvances", to make loans and
advances to the Company on a revolving basis (i.e. subject to the limitations
set forth herein, the Company may borrow, repay and re-borrow Revolving Loans).
Such loans and advances shall be in amounts up to an amount equal to total
outstanding Eligible Accounts Receivable of the Company multiplied by the
Accounts Advance Percentage but in no event at any time more than the Senior
Notes Limitation. Each request shall constitute, unless otherwise disclosed in
writing to CITBC, a representation and warranty by the Company that after giving
to the requested advance no Default or Event of Default has occurred and (ii)
such requested Revolving Loan is within the Revolving Loan and Availability. All
requests for loans and advances must be received by an officer of CITBC no later
than 1 P.M. for requests of $5,000,000 or more and 2 P.M. for all other
requests, New York time, of the Business Day on which such loans and advances
are required. Should CITBC for any reason honor requests for advances in excess
of the limitations set forth herein, such advances shall be considered
"overadvances" and shall be made in CITBC's sole discretion, subject to any
additional terms CITBC deems necessary.
2. In furtherance of the continuing assignment and security interest in the
Company's Accounts, the Company will, within four (4) days after the end of each
week, deliver to CITBC a Borrowing Base Certificate. In addition, upon CITBC's
request the Company shall provide CITBC with such other appropriate reports
designating, identifying and describing the Accounts as CITBC may reasonably
request from time to time, copies of agreements with, or purchase orders from,
the Company's customers, and copies of invoices to customers, proof of shipment
or delivery and such other documentation and information relating to said
Accounts and other collateral as CITBC may reasonably require. Failure to
provide CITBC with any of the foregoing shall in no way affect, diminish, modify
or otherwise limit the security interests granted herein. The Company hereby
authorizes CITBC to regard the Company's printed name or rubber stamp signature
on assignment schedules or invoices as the equivalent of a manual signature by
one of the Company's authorized officers or agents.
3. The Company hereby represents and warrants that: each Account is based on
an actual and bona fide sale and delivery of goods or rendition of services to
customers, made by the Company in the ordinary course of its business; the
Inventory being sold and the Accounts created are the exclusive property of the
Company and are not and shall not be subject to any lien, consignment
arrangement, encumbrance, security interest or financing statement whatsoever,
other than the Permitted Encumbrances; the invoices evidencing such Accounts are
in the name of the Company; and the customers of the Company have accepted the
goods or services, owe and are obligated to
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pay the full amounts stated in the invoices according to their terms, without
dispute, offset, defense, counterclaim or contra, except for disputes and other
matters arising in the ordinary course of business of which the Company has
complied with its notice requirements pursuant to Paragraph 5 of this Section 3.
The Company confirms to CITBC that any and all taxes or fees relating to its
business, its sales, the Accounts or goods relating thereto, are its sole
responsibility and that same will be paid by the Company when due and that none
of said taxes or fees represent a lien on or claim against the Accounts. The
Company also warrants and represents that it is a duly and validly existing
corporation and is qualified in all states where the failure to so qualify would
have a material adverse effect on the business of the Company or the ability of
the Company to enforce collection of any material Account or any material
portion of the Accounts. The Company agrees to maintain such books and records
regarding Accounts as CITBC may reasonably require and agrees that the books and
records of the Company will reflect CITBC's interest in the Accounts. All of the
books and records of the Company will be available to CITBC at normal business
hours, including any records handled or maintained for the Company by any other
company or entity.
4. The Company may and will enforce, collect and receive all amounts owing on
the Accounts for CITBC's benefit and on CITBC's behalf, but at the Company's
expense, however, such privilege shall terminate automatically upon the
institution by or against the Company of any proceeding under any bankruptcy or
insolvency law or, at the election of CITBC, upon the occurrence of any other
Event of Default and until such Event of Default is waived. Any checks, cash,
notes or other instruments or property received by the Company with respect to
any Accounts (herein "Collections") shall be held by the Company in trust for
CITBC, separate from the Company's own property and funds, and immediately
turned over to CITBC with proper assignments or endorsements by deposit to the
Depository Accounts. Each of the institutions holding Depository Accounts will
be instructed to remit such funds on deposit therein to the Company's operating
account, which shall be an account (other than a payroll account) with a
financial institution in the United States. Notwithstanding the foregoing or
anything to the contrary contained herein or in any agreement with any
institution holding a Depository Account, immediately upon the occurrence of
either of the following events: (x) the occurrence of a Default and/or Event of
Default hereunder or (y) the Company's Availability (computed on the basis of
all of the Company's debts, obligations and payables being current in accordance
with the Company's usual business practices) hereunder being less than
$5,000,000, CITBC may notify the institutions holding Depository Accounts to
remit all amounts then or thereafter on deposit in such Depository Account to
CITBC to be applied by CITBC to the reduction of the Obligations in such order
as CITBC may determine, all as more fully set forth in Paragraph 6 of this
Section 3. In addition, it is hereby agreed that, with respect to the
Collections received directly by the Company from the Specified Customers listed
on Schedule 3 hereto as amended from time to time in writing signed by both the
Company and CITBC, the Company may continue to receive such Collections and
deposit them to the Company's operating account in accordance with its usual
business practice, provided that immediately upon the occurrence of either of
the following events: (x) the occurrence of a Default and/or Event of Default
hereunder or (y) the Company's Availability (computed on the basis of all of the
Company's debts, obligations and payables being current in accordance with the
Company's usual business practices) hereunder being less than $5,000,000, the
Company shall, upon notice from CITBC, turn over all
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such Collections then or thereafter coming into its possession to CITBC by
deposit to the Depository Accounts. In addition, in the event such Availability
is less than $3,000,000 CITBC shall have right by notice to the Company to have
the Company instruct all Specified Customers to make all future payments
directly to the Depository Accounts until such time as the Company has had an
Availability of $3,000,000 or more for a period of 30 consecutive days. The
Company further agrees to provide to CITBC, from time to time upon CITBC's
reasonable request, all such reports with respect to such Collections from
Specified Customers as CITBC may reasonably require. All such amounts received
by CITBC in payment of Accounts will be credited to the Company's accounts upon
CITBC's receipt of "collected funds" at CITBC's bank account in New York, New
York on the Business Day of receipt if received no later than 2:00 pm, or on the
next succeeding Business Day if received after 2:00 pm, New York time. No
checks, drafts or other instrument received by CITBC shall constitute final
payment to CITBC unless and until such instruments have actually been collected.
5. The Company agrees to notify CITBC promptly of any matters materially
affecting the value, enforceability or collectibility of any material Account or
the Accounts taken as a whole and of all material customer disputes, offsets,
defenses, counterclaims, returns, rejections and all material reclaimed or
repossessed merchandise or goods. The Company agrees to issue credit memoranda
promptly in the ordinary course of its business on a consistent basis with its
past practices (with duplicates to CITBC upon request after the occurrence of an
Event of Default) upon accepting returns or granting allowances, and may
continue to do so until CITBC has notified the Company that an Event of Default
has occurred and that, until such Event of Default is cured to CITBC's
satisfaction or waived by CITBC in writing, all future credits or allowances are
to be made only after CITBC's prior written approval.
6. CITBC shall maintain a separate account on its books in the Company's name
(herein the "Revolving Loan Account") in which the Company will be charged with
loans and advances made by CITBC to it or for its account, and with any other
Obligations, including any and all costs, expenses and reasonable attorney's
fees which CITBC may incur in connection with the exercise by or for CITBC of
any of the rights or powers herein conferred upon CITBC, or in the prosecution
or defense of any action or proceeding to enforce or protect any rights of CITBC
in connection with this Financing Agreement or the Collateral assigned
hereunder, or any Obligations owing to CITBC by the Company. Subject to the
provisions of Paragraph 4 of this Section 3, the Company will be credited with
all amounts received by CITBC from the Company or from others for the Company's
account, including, as above set forth, all amounts received by CITBC in payment
of assigned Accounts and such amounts will be applied to payment of the
Obligations. In no event shall prior recourse to any Accounts or other security
granted to or by the Company be a prerequisite to CITBC's right to demand
payment of any Obligation. Further, it is understood that CITBC shall have no
obligation whatsoever to perform in any respect any of the Company's contracts
or obligations relating to the Accounts.
7. After the end of each month, CITBC shall promptly send the Company a
statement showing the accounting for the charges, loans, advances and other
transactions occurring between CITBC
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and the Company during that month. The monthly statements shall be deemed
correct and binding upon the Company and shall constitute an account stated
between the Company and CITBC unless CITBC receives a written statement of the
exceptions within forty-five (45) days of the date of the monthly statement.
8. In the event that the sum of (i) the outstanding balance of Revolving Loans
and (ii) outstanding balance of Letters of Credit exceeds (x) the maximum amount
thereof available under Sections 3 and 4 hereof or (y) the Line of Credit
(herein the amount of any such excess shall be referred to as the "Excess") such
Excess shall be due and payable to CITBC immediately upon CITBC's demand
therefor.
SECTION 4. Letters of Credit
In order to assist the Company in establishing or opening standby
Letters of Credit with an Issuing Bank, the Company has requested CITBC to join
in the applications for such Letters of Credit, and/or guarantee payment or
performance of such Letters of Credit and any drafts or acceptances thereunder
through the issuance of the Letters of Credit Guaranty, thereby lending CITBC's
credit to the Company and CITBC has agreed to do so. These arrangements shall be
handled by CITBC subject to the terms and conditions set forth below.
1. (a) Within the Line of Credit and Availability, CITBC shall assist the
Company in obtaining documentary and standby Letter(s) of Credit in an amount
not to exceed the L/C Sub-Line in the aggregate outstanding at any one time.
CITBC's assistance for amounts in excess of the limitation set forth herein
shall at all times and in all respects be in CITBC's sole discretion. It is
understood that the form and purpose of each Letter of Credit must be acceptable
to CITBC in its reasonable business judgment. Any and all outstanding Letters of
Credit shall be treated as a Revolving Loan for Availability purpose.
Notwithstanding anything herein to the contrary, upon the occurrence of a
Default and/or Event of Default, CITBC's assistance in connection with the
Letter of Credit Guaranty shall be in CITBC's sole discretion unless such
Default and/or Event of Default is cured to CITBC's satisfaction or waived by
CITBC in writing.
(b) Notwithstanding any provision to the contrary contained in
subparagraph (a) above, so long as the Company is prohibited under the Senior
Note Indenture from having Letters of Credit for self insurance purposes in
excess of $1,000,000 unless such Letters of Credit are cash collateralized,
CITBC shall have no obligation to assist the Company in opening any Letter of
Credit for self insurance purposes hereunder if after giving effect thereto the
total outstanding Letters of Credit for self insurance purposes would exceed
$1,000,000 in the aggregate (herein such excess shall be referred to as the "L/C
Excess") unless as collateral security for the Company's Obligations hereunder
including, without limitation, its indemnity and reimbursement obligations with
respect to such L/C Excess, the Company pledges, assigns, transfers and delivers
to CITBC cash collateral equal to within (i) 101% of the face amount of each
such standby Letter of Credit and (ii) 105% of the face amount of each such
documentary Letter of Credit included within the L/C Excess (herein the "L/C
Cash Collateral). The L/C Cash Collateral shall at all times (x) be held by
CITBC or
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its designee, (y) be under CITBC's sole dominion and control and (z) accrue
interest at a rate equal to three percent (3%) below the Chemical Bank Rate used
to compute interest hereunder. CITBC hereby is irrevocably authorized by the
Company at any time and from time to time, without notice to the Company or any
other party, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all of the L/C Cash Collateral against and an
account of the Company's Obligations as such Obligations come due hereunder
including, without limitation, its indemnity and reimbursement Obligations with
respect to such Letters of Credit included within the L/C Excess. The L/C Cash
Collateral shall be released and returned to the Company upon the earlier of (i)
the L/C Excess being reduced to zero (ii) termination of this Financing
Agreement and payment of all Obligations, as more fully provided in Section 10
hereof.
2. CITBC shall have the right, without notice to the Company, to charge the
Company's Revolving Loan Account on CITBC's books with the amount of any and all
indebtedness, liability or obligation of any kind incurred by CITBC under the
Letters of Credit Guaranty at the earlier of a) payment by CITBC under the
Letters of Credit Guaranty, or b) the occurrence of an Event of Default. Any
amount charged to Company's loan account shall be deemed a Revolving Loan
hereunder and shall incur interest at the rate provided in Section 7, Paragraph
1 of this Financing Agreement.
3. The Company unconditionally indemnifies CITBC and holds CITBC harmless from
any and all loss, claim or liability incurred by CITBC arising from any
transactions or occurrences relating to Letters of Credit established or opened
for the Company's account, the collateral relating thereto and any drafts or
acceptances thereunder, and all Obligations thereunder, including any such loss
or claim due to any action taken by any Issuing Bank, other than for any such
loss, claim or liability arising out of the gross negligence or willful
misconduct by CITBC under the Letters of Credit Guaranty. The Company further
agrees to hold CITBC harmless from any errors or omission, negligence or
misconduct by the Issuing Bank. The Company's unconditional obligation to CITBC
hereunder shall not be modified or diminished for any reason or in any manner
whatsoever, other than as a result of CITBC's gross negligence or willful
misconduct. The Company agrees that any charges incurred by CITBC for the
Company's account with the Issuing Bank shall be conclusive on CITBC and may be
charged to the Company's Revolving Loan Account.
4. CITBC shall not be responsible for: the existence, character, quality,
quantity, condition, packing, value or delivery of the goods purporting to be
represented by any documents; any difference or variation in the character,
quality, quantity, condition, packing, value or delivery of the goods from that
expressed in the documents; the validity, sufficiency or genuineness of any
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
the time, place, manner or order in which shipment is made; partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with the goods covered thereby or the shipping thereof; or any breach
of contract between the shipper or vendors and the Company. Furthermore, without
being limited by the foregoing, CITBC shall not be responsible for any act or
omission with respect to or in connection with any goods covered by Letters of
Credit.
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5. The Company agrees that any action taken by CITBC, if taken in good faith,
or any action taken by any Issuing Bank, under or in connection with the Letters
of Credit, the guarantees, the drafts or acceptances, or the goods covered
thereby, shall be binding on the Company and shall not put CITBC in any
resulting liability to the Company. In furtherance thereof but subject to
paragraph 6 below, CITBC shall have the full right and authority to clear and
resolve any questions of non-compliance of documents; to give any instructions
as to acceptance or rejection of any documents or goods; to execute any and all
steamship or airways guaranties (and applications therefor), indemnities or
delivery orders; to grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or documents; and to
agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; all in CITBC's sole name, and the
Issuing Bank shall be entitled to comply with and honor any and all such
documents or instruments executed by or received solely from CITBC, all without
any notice to or any consent from the Company. The Company further agrees that
any claim it may have arising out of any possible dispute with the Issuing Bank
and/or the beneficiary of a Letter of Credit will not be asserted against CITBC
and the Company's liability to CITBC as set forth herein shall be absolute and
complete.
6. Without CITBC's express consent and endorsement in writing, the Company
agrees: a) not to execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders; to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; and b) after the
occurrence of an Event of Default which is not waived by CITBC, not to i) clear
and resolve any questions of non-compliance of documents, or ii) give any
instructions as to acceptances or rejection of any documents or goods.
7. The Company agrees that any necessary import, export or other licenses or
certificates for the import or handling of the goods covered by such Letters of
Credit will have been promptly procured; all foreign and domestic governmental
laws and regulations in regard to the shipment and importation of the goods
covered by such Letters of Credit, or the financing thereof will have been
promptly and fully complied with; and any certificates in that regard that CITBC
may at any time request will be promptly furnished. In this connection, the
Company warrants and represents that all shipments made under any such Letters
of Credit are in accordance with the laws and regulations of the countries in
which the shipments originate and terminate, and are not prohibited by any such
laws and regulations. The Company assumes all risk, liability and responsibility
for, and agrees to pay and discharge, all present and future applicable local,
state, federal or foreign taxes, duties, or levies. Any embargo, restriction,
laws, customs or regulations of any country, state, city, or other political
subdivision, where the goods covered by such Letters of Credit are or may be
located, or wherein payments are to be made, or wherein drafts may be drawn,
negotiated, accepted, or paid, shall be solely the Company's risk, liability and
responsibility.
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8. Upon any payments made to the Issuing Bank under the Letter of Credit
Guaranty, CITBC shall acquire by subrogation, any rights, remedies, duties or
obligations granted or undertaken by the Company to the Issuing Bank in any
application for Letters of Credit, any standing agreement relating to Letters of
Credit or otherwise, all of which shall be deemed to have been granted to CITBC
and apply in all respects to CITBC and shall be in addition to any rights,
remedies, duties or obligations contained herein.
SECTION 5. Collateral
1. As security for the prompt payment in full of all loans and advances made
and to be made to the Company from time to time by CITBC pursuant hereto, as
well as to secure the payment in full of the other Obligations, the Company
hereby pledges and grants to CITBC a continuing general lien upon and security
interest in all of its:
(a) present and future Accounts; and
(b) present and future Other Collateral
2. The security interests granted hereunder shall extend and attach to all
Collateral which is presently in existence and which is owned by the Company or
in which the Company has any interest, whether held by the Company or others for
its account.
3. The Company agrees at its own cost and expense to keep the Equipment in as
good and substantial repair and condition as the same is now or at the time the
lien and security interest granted herein shall attach thereto, reasonable wear
and tear excepted, making any and all repairs and replacements when and where
necessary.
4. The rights and security interests granted to CITBC hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the account maintained in the Company's
name on the books of CITBC may from time to time be temporarily in a credit
position, until the final payment in full to CITBC of all Obligations and the
termination of this Financing Agreement. Any delay, or omission by CITBC to
exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such waiver be in writing and signed by
CITBC. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any future occasion.
5. To the extent that the Obligations are now or hereafter secured by any
assets or property other than the Collateral or by the guarantee, endorsement,
assets or property of any other person, then CITBC shall have the right in its
sole discretion to determine which rights, security, liens, security interests
or remedies CITBC shall at any time pursue, foreclose upon, relinquish,
subordinate, modify or take any other action with respect to, without in any way
modifying or affecting any of them, or any of CITBC's rights hereunder.
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6. Any reserves or balances to the credit of the Company and any other
property or assets of the Company in the possession of CITBC may be held by
CITBC as security for any Obligations and applied in whole or partial
satisfaction of such Obligations when due. The liens and security interests
granted herein and any other lien or security interest CITBC may have in any
other assets of the Company, shall secure payment and performance of all now
existing and future Obligations. CITBC may in its discretion charge any or all
of the Obligations to the account of the Company when due.
SECTION 6. Representations, Warranties and Covenants
1. The Company hereby warrants and represents and/or covenants that: i) the
fair value of the Company's assets exceeds the book value of the Company's
liabilities; ii) the Company is generally able to pay its debts as they become
due and payable; and iii) the Company does not have unreasonably small capital
to carry on its business as it is currently conducted absent extraordinary and
unforeseen circumstances. The Company further warrants and represents that
Schedule 2 hereto correctly and completely sets forth the location of the
Company's Chief Executive Office and all Collateral locations; that except for
the Permitted Encumbrances, the security interests granted herein constitute and
shall at all times constitute the first and only liens on the Collateral; that,
except for the Permitted Encumbrances, the Company is or will be at the time
additional Collateral is acquired by it, the absolute owner of the Collateral
with full right to pledge, sell, consign, transfer and create a security
interest therein, free and clear of any and all claims or liens in favor of
others; that the Company will at its expense forever warrant and, at CITBC's
request, defend the same from any and all claims and demands of any other person
other than the Permitted Encumbrances; that the Company will not grant, create
or permit to exist, any lien upon or security interest in the Collateral, or any
proceeds thereof, in favor of any other person other than the holders of the
Permitted Encumbrances.
2. The Company agrees to maintain books and records pertaining to the
Collateral in such detail, form and scope as CITBC shall reasonably require. The
Company agrees that CITBC or its agents may enter upon the Company's premises at
any time during normal business hours, and from time to time, for the purpose of
inspecting the Collateral, and any and all records pertaining thereto. The
Company agrees to afford CITBC prior written notice of any change in the
location of any Collateral, other than to locations, that as of the date hereof,
are known to CITBC and at which CITBC has filed financing statements and
otherwise fully perfected its liens thereon. The Company is also to advise CITBC
promptly, in sufficient detail, of any material adverse change relating to the
type, quantity or quality of the Collateral or on the security interests granted
to CITBC therein.
3. The Company agrees to: execute and deliver to CITBC, from time to time,
solely for CITBC's convenience in maintaining a record of the Collateral, such
written statements, and schedules as CITBC may reasonably require, designating,
identifying or describing the Collateral pledged to CITBC hereunder. The
Company's failure, however, to promptly give CITBC such statements, or schedules
shall not affect, diminish, modify or otherwise limit CITBC's security interests
in the Collateral.
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4. The Company agrees to comply with the requirements of all state and federal
laws in order to grant to CITBC valid and perfected first security interests in
the Collateral, subject only to the Permitted Encumbrances. CITBC is hereby
authorized by the Company to file any financing statements covering the
Collateral whether or not the Company's signature appears thereon. The Company
agrees to do whatever CITBC may reasonably request, from time to time, by way
of: filing notices of liens, financing statements, amendments, renewals and
continuations thereof; cooperating with CITBC's agents and employees; keeping
Collateral records; transferring proceeds of Collateral to CITBC's possession;
and performing such further acts as CITBC may reasonably require in order to
effect the purposes of this Financing Agreement.
5. The Company agrees to maintain insurance on the Real Estate, Equipment and
Inventory under such policies of insurance, with such insurance companies, in
such reasonable amounts and covering such insurable risks as are at all times
reasonably satisfactory to CITBC, consistent with the Company's past practices
with respect thereto.
6. The Company agrees to pay, when due, all taxes, assessments, claims and
other charges (herein "taxes") lawfully levied or assessed upon the Company or
the Collateral and if such taxes remain unpaid after the date fixed for the
payment thereof unless such taxes are being diligently contested in good faith
by the Company by appropriate proceedings or if any lien shall be claimed
thereunder x) for taxes due the United States of America or y) which in CITBC's
opinion might create a valid obligation having priority over the rights granted
to CITBC herein, CITBC may, on the Company's behalf, pay such taxes, and the
amount thereof shall be an Obligation secured hereby and due to CITBC on demand.
7. The Company: (a) agrees to comply with all acts, rules, regulations and
orders of any legislative, administrative or judicial body or official, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the Company's
business, provided that the Company may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will not, in CITBC's reasonable opinion, materially and adversely effect CITBC's
rights or priority in the Collateral; (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the ownership and/or use
of its real property and operation of its business, which the failure to comply
with would have a material and adverse impact on the Collateral, or any material
part thereof, or on the operation of the business of the Company. The Company
hereby indemnifies CITBC and agrees to defend and hold CITBC harmless from and
against any and all loss, damage, claim, liability, injury or expense which
CITBC may sustain or incur in connection with: any claim or expense asserted
against CITBC as a result of any environmental pollution, hazardous material or
environmental clean-up of the Company's real property; or any claim or expense
which results from the Company's operations (including, but not limited to, the
Company's off-site disposal practices) and the Company further agrees that this
indemnification shall survive termination of this Financing Agreement as well as
the payment of all Obligations or amounts payable hereunder; and (c) shall not
be deemed to have breached any provision of this paragraph 7 if (i) the failure
to comply with the requirements of this paragraph 7
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resulted from good faith error or innocent omission, (ii) the Company promptly
commences and diligently pursues a cure of such breach and (iii) such failure is
cured within fifteen (15) Business Days following the Company's receipt of
notice of such failure.
8. Until termination of the Financing Agreement and payment and satisfaction
of all Obligations due hereunder, the Company agrees that, unless CITBC shall
have otherwise consented in writing, the Company will furnish to CITBC, within
ninety (90) days after the end of each fiscal year of the Company, a
Consolidating Balance Sheet as at the close of such year, and statements of
profit and loss, cash flow and reconciliation of surplus of the Company and all
subsidiaries for such year, audited by independent public accountants selected
by the Company and satisfactory to CITBC; within sixty (60) days after the end
of each fiscal quarter a Consolidating Balance Sheet as at the end of such
period and statements of profit and loss, cash flow and surplus of the Company
and all subsidiaries, certified by an authorized financial or accounting officer
of the Company; and within thirty (30) days after the end of each month a
Consolidating Balance Sheet as at the end of such period and statements of
profit and loss cash flow and surplus of the Company and all subsidiaries for
such period, certified by an authorized financial or accounting officer of the
Company; and from time to time, such further information regarding the business
affairs and financial condition of the Company and its subsidiaries as CITBC may
reasonably request, including, without limitation, (a) the accountant's
management practice letter and (b) annual cash flow projections in form
satisfactory to CITBC. Each financial statement which the Company is required to
submit hereunder must be accompanied by an officer's certificate, signed by the
President, Vice President, Controller, or Treasurer, pursuant to which any one
such officer must certify that: (i) the financial statement(s) fairly and
accurately represent(s) the Company's financial condition at the end of the
particular accounting period, subject to year-end audit adjustments; and (ii)
during the particular accounting period: (x) there has been no default or
condition which, with the passage of time or notice, or both, would constitute a
Default or Event of Default under this Financing Agreement, provided, however,
that if any such officer has knowledge that any such Default or Event of
Default, has occurred during such period, the existence of and a detailed
description of same shall be set forth in such officer's certificate; and (y)
the Company has not received any notice of cancellation with respect to its
property insurance policies.
9. Until termination of this Financing Agreement and payment and satisfaction
of all Obligations due hereunder, the Company agrees that, without the prior
written consent of CITBC, except as otherwise herein provided, the Company will
not:
A. Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment, (whether as a
result of a purchase money or title retention transaction, or other
security interest, or otherwise) to exist on any of its assets or
goods, whether real, personal or mixed, whether now owned or hereafter
acquired, except for the Permitted Encumbrances;
B. Incur or create any Indebtedness other than the Permitted Indebtedness;
C. Borrow any money on the security of the Company's Collateral from
sources other than CITBC;
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D. Sell, lease, assign, transfer or otherwise dispose of i) Collateral,
except as otherwise specifically permitted by this Financing Agreement,
or ii) either all or substantially all of the Company's assets, which
do not constitute Collateral;
E. Merge, consolidate or otherwise alter or modify its corporate name,
principal place of business, structure, status or existence, or enter
into or engage in any operation or activity materially different from
that presently being conducted by the Company (except to the extent
that any entity acquired in a Permitted Acquisition is engaged in a
different operation or activity than the Company); or
F. Make any advance or loan to, or any investment in, any firm, entity,
person or corporation, except for Permitted Acquisitions and Permitted
Advances.
SECTION 7. Interest, Fees and Expenses
1. Interest on the Revolving Loan shall be (a) payable monthly as of the end
of each month in an amount equal to one half of one percent (1/2 of 1%) plus the
Chemical Bank Rate per annum on the average of the net balances owing by the
Company to CITBC in the Company's Revolving Loan Account at the close of each
day during such month on balances other than Libor Loans and (b) payable at the
end of the applicable Libor Period (provided that for Libor Periods in excess of
3 months interest shall be payable at the end of each 3 month period therein and
at the end thereof), in an amount equal to two and three quarters percent (2
3/4%) plus the applicable Libor on any Libor Loan, on a per annum basis, on the
average of the net balances owing by the Company to CITBC in the Company's
Revolving Loan Account at the close of each day during such month. In the event
of any change in said Chemical Bank Rate, the rate under clause (a) above shall
change, as of the first of the month following any change, so as to remain one
half of one percent (1/2 of 1%) above the Chemical Bank Rate. The rate hereunder
shall be calculated based on a 360-day year. CITBC shall be entitled to charge
the Company's Revolving Loan Account at the rate provided for herein when due
until all Obligations have been paid in full.
2. The Company may elect to use Libor as to any other outstanding Revolving
Loans provided A) there is then no Default or Event of Default, B) the Company
has so advised CITBC of its election to use Libor and the Libor Period selected
no later than three (3) Business Days preceding the first day of a Libor Period
and C) the election and Libor shall be effective, provided, there is then no
Default or Event of Default, on the fourth Business Day following said notice.
The Libor elections must be for $1,000,000 or whole multiples thereof and there
shall be no more than four (4) Libor Loans outstanding and in effect at one
time. If no such election is timely made or can be made, or if the Libor rate
can not be determined, then CITBC shall use the Chemical Bank Rate to compute
interest. In addition, the Company shall pay to CITBC, upon the request of CITBC
such amount or amounts as shall compensate CITBC for any loss, costs or expenses
incurred by CITBC (as reasonably determined by CITBC) as a result of: (i) any
payment or prepayment on a date other than the last day of a Libor Period for
such Libor Loan, or (ii) any failure of the Company to borrow a Libor Loan on
the date for such borrowing specified in the relevant notice; such compensation
to include, without limitation, an amount equal to any loss or expense suffered
by CITBC during the period from the date of receipt of such payment or
prepayment or the date of such failure to borrow
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to the last day of such Libor Period if the rate of interest obtained by CITBC
upon the reemployment of an amount of funds equal to the amount of such payment,
prepayment or failure to borrow is less than the rate of interest applicable to
such Libor Loan for such Libor Period. The determination by CITBC of the amount
of any such loss or expense, when set forth in a written notice to the Company,
containing CITBC calculations thereof in reasonable detail, shall be conclusive
on the Company, in the absence of manifest error. Calculation of all amounts
payable to the CITBC under this paragraph with regard to Libor Loans shall be
made as though CITBC had actually funded the Libor Loans through the purchase of
deposits in the relevant market and currency, as the case may be, bearing
interest at the rate applicable to such Libor Loans in an amount equal to the
amount of the Libor Loans and having a maturity comparable to the relevant
interest period provided, however, that CITBC may fund each of the Libor Loans
in any manner CITBC sees fit and the foregoing assumption shall be used only for
calculation of amounts payable under this paragraph. In addition,
notwithstanding anything to the contrary contained herein, CITBC shall apply all
proceeds of Collateral, including the Accounts, and all other amounts received
by it from or on behalf of the Companies (i) initially to the Chemical Bank Rate
loans and (ii) subsequently to Libor Loans; provided, however, x) upon the
occurrence of an Event of Default or y) in the event the aggregate amount of
outstanding Libor Rate Loans exceeds Availability or the applicable maximum
levels set forth therefor, CITBC may apply all such amounts received by it to
the payment of Obligations in such manner and in such order as CITBC may elect
in its reasonable business judgment. In the event that any such amounts are
applied to Revolving Loans which are Libor Loans, such application shall be
treated as a prepayment of such loans and CITBC shall be entitled to
indemnification hereunder.
3. In consideration of the Letter of Credit Guaranty of CITBC, the Company
shall pay CITBC the Letter of Credit Guaranty Fee which shall be an amount equal
to one and one-quarter of one percent (1 1/4%) per annum, payable monthly, on
the face amount of each Letter of Credit less the amount of any and all amounts
previously drawn under the Letter of Credit.
4. Any charges, fees, commissions, costs and expenses charged to CITBC for the
Company's account by any Issuing Bank in connection with or arising out of
Letters of Credit issued pursuant to this Financing Agreement or out of
transactions relating thereto will be charged to the Company's account in full
when charged to or paid by CITBC and when made by any such Issuing Bank shall be
conclusive on CITBC.
5. The Company shall reimburse or pay CITBC, as the case may be, for all
Out-of-Pocket Expenses of CITBC.
6. Upon the last Business Day of each month, commencing with the last day of
the month in which this Financing Agreement is executed, the Company shall pay
CITBC the Line of Credit Fee.
7. To induce CITBC to enter into this Financing Agreement and to extend to the
Company the loans, advances and extensions of credit contemplated herein and to
compensate CITBC for the use of its in house legal department and facilities in
the preparation of this Financing Agreement and all
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related loan documentation, the Company shall pay to CITBC a Loan Facility Fee
in the amount of $75,000 payable upon execution of this Financing Agreement,
provided that the Commitment Fee in the amount of $37,500 previously paid to
CITBC in conjunction with the CITBC Commitment Letter and the balance of the
Required Deposit in the amount of $25,000 (net of expenses incurred by CITBC)
previously paid to CITBC in conjunction with the Proposed Term Sheet dated April
26, 1996, shall be credited against such Loan Facility Fee.
8. Upon the date hereof and on each annual anniversary thereof during the term
of this Financing Agreement, the Company shall pay to CITBC the applicable
Collateral Management Fee. The Collateral Management Fee shall be equal to (a)
$50,000 with respect to the payment due on the date hereof and (b) $15,000 with
respect to all payments due thereafter.
9. Upon the occurrence of an Event of Default, the Company shall pay CITBC's
standard charges for, and the fees and expenses of, the CITBC personnel used by
CITBC for reviewing the books and records of the Company and for verifying,
testing, protecting, safeguarding, preserving or disposing of all or any part of
the Collateral which shall be in addition to the Collateral Management Fee.
10. The Company hereby authorizes CITBC to charge the Company's Revolving Loan
Account with CITBC with the amount of all payments due hereunder as such
payments become due. The Company confirms that any charges which CITBC may so
make to the Company's account as herein provided will be made as an
accommodation to the Company and solely at CITBC's discretion. CITBC agrees to
use its best efforts to give the Company prior notice of all charges to be made
to the Company's Revolving Loan Account with respect to Out-of-Pocket Expenses
in excess of $1,000, provided that CITBC's failure to give any such notice shall
not (i) affect, modify or diminish CITBC's right to receive payment and
reimbursement from the Company with respect to any such Out-of-Pocket Expenses
or to charge the Company's Revolving Loan Account therefor, or (ii) result in
any liability by CITBC to the Company as a result of such failure.
SECTION 8. Powers
The Company hereby constitutes CITBC or any person or agent CITBC may
designate as its attorney-in-fact, at the Company's cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all of the Company's Obligations to CITBC have been
paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in the name of
CITBC or the Company, any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the Company and to
notify postal authorities to change the address for delivery thereof to such
address as CITBC may designate;
(c) To request from customers indebted on Accounts at any time, in the name
of CITBC or the Company or that of CITBC's designee, information concerning the
amounts owing on the Accounts;
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(d) To transmit to customers indebted on Accounts notice of CITBC's interest
therein and to notify customers indebted on Accounts to make payment directly to
CITBC for the Company's account; and
(e) To take or bring, in the name of CITBC or the Company, all steps,
actions, suits or proceedings deemed by CITBC necessary or desirable to enforce
or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the powers
set forth in (b), (d) and (e) above may only be exercised after the occurrence
of an Event of Default and until such time as such Event of Default is waived.
SECTION 9. Events of Default and Remedies
1. Notwithstanding anything hereinabove to the contrary, CITBC may terminate
this Financing Agreement immediately upon the occurrence of any of the following
(herein "Events of Default"):
a) cessation of the business of the Company or the calling of a meeting of
the creditors of the Company for purposes of compromising the debts and
obligations of the Company;
b) the failure of the Company to generally meet debts as they mature;
c) the commencement by or against the Company of any bankruptcy,insolvency,
arrangement, reorganization, receivership or similar proceedings under
any federal or state law, provided that any suc involuntary proceeding
commenced against the Company is not dismissed or discharged within
forty-five (45) days after commencement thereof;
d) breach by the Company of any warranty, representation or covenant
contained herein (other than those referred to in sub-paragraph e below)
or in any other written agreement between the Company or CITBC, provided
that such Default by the Company of any of the warranties,
representations or covenants referred to in this clause d shall not be
deemed to be an Event of Default unless and until such Default shall
remain unremedied to CITBC's satisfaction for a period of thirty (30)
days from the date of such Default;
e) breach by the Company of any warranty, representation or covenant of
Section 3, Paragraphs 3 (other than the third sentence of paragraph 3)
and 4; Section 6, Paragraphs 1,5,6, and 9;
f) failure of the Company to pay any of the Obligations within five (5)
Business Days of the due date thereof, provided that nothing contained
herein shall prohibit CITBC from charging such amounts to the Company's
account on the due date thereof;
g) the Company shall i) engage in any "prohibited transaction" as defined
in ERISA, ii) have any "accumulated funding deficiency" as defined in
ERISA, iii) have any Reportable Event as defined in ERISA, iv) terminate
any Plan, as defined in ERISA or v) be engaged in any proceeding in
which the Pension Benefit Guaranty Corporation shall seek appointment,
or is appointed, as trustee or administrator of any Plan, as defined in
ERISA, and with respect to this sub-paragraph g such event or condition
x) remains uncured for a period of thirty (30) Business Days from date
of occurrence and y) could, in the reasonable opinion of CITBC,
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subject the Company to any tax, penalty or other liability material
to the business, operations or financial condition of the Company; or
h) the occurrence of a default and/or event of default under any instrument
or agreement evidencing Indebtedness of the Company in excess of
$5,000,000.
2. Upon the occurrence of a Default and/or an Event of Default, at the option
of CITBC, all loans, advances and extensions of credit provided for in Sections
3 and 4 of this Financing Agreement shall be thereafter in CITBC's sole
discretion and the obligation of CITBC to make Revolving Loans and/or open
Letters of Credit shall cease unless such Default is cured to CITBC's reasonable
satisfaction within the applicable grace period or Event of Default is waived by
CITBC in writing and at the option of CITBC upon the occurrence of an Event of
Default: i) all Obligations shall become immediately due and payable; ii) CITBC
may charge the Company the Default Rate of Interest on all then outstanding or
thereafter incurred Obligations in lieu of the interest provided for in
paragraphs one and two of Section 7 of this Financing Agreement provided a)
CITBC has given the Company written notice of the Event of Default, provided,
however, that no notice is required if the Event of Default is the Event listed
in paragraph 1(c) of this Section 9 and b) the Company has failed to cure the
Event of Default within ten (10) Business Days after x) CITBC deposited such
notice in the United States mail or y) the occurrence of the Event of Default
listed in paragraph 1(c) of this Section 9; and iii) CITBC may immediately
terminate this Financing Agreement upon notice to the Company, provided,
however, that no notice of termination is required if the Event of Default is
the Event listed in paragraph 1(c) of this Section 9. The exercise of any option
is not exclusive of any other option which may be exercised at any time by
CITBC.
3. Immediately upon the occurrence of any Event of Default, CITBC may to the
extent permitted by law: (a) remove from any premises where same may be located
any and all documents, instruments, files and records, and any receptacles or
cabinets containing same, relating to the Accounts, or CITBC may use, at the
Company's expense, such of the Company's personnel, supplies or space at the
Company's places of business or otherwise, as may be necessary to properly
administer and control the Accounts or the handling of collections and
realizations thereon; (b) bring suit, in the name of the Company or CITBC, and
generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Company or CITBC; (c) sell, assign
and deliver the Collateral with or without advertisement, at public or private
sale, for cash, on credit or otherwise, at CITBC's sole option and discretion,
and CITBC may bid or become a purchaser at any such sale, free from any right of
redemption, which right is hereby expressly waived by the Company; (d) foreclose
the security interests created herein by any available judicial procedure, or to
take possession of any or all of the Collateral without judicial process, and to
enter any premises where any Collateral may be located for the purpose of taking
possession of or removing the same and (e) exercise any other rights and
remedies provided in law, in equity, by contract or otherwise. CITBC shall have
the right, without notice or advertisement, to sell, lease, or otherwise dispose
of all or any part of the Collateral whether in its then condition or after
further preparation or processing, in the name of the Company or CITBC, or in
the name of such other party as CITBC may designate, either at public or
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private sale or at any broker's board, in lots or in bulk, for cash or for
credit, with or without warranties or representations, and upon such other terms
and conditions as CITBC in its sole discretion may deem advisable, and CITBC
shall have the right to purchase at any such sale. The Company agrees, at the
request of CITBC, to assemble the Collateral and to make it available to CITBC
at premises of the Company or elsewhere and to make available to CITBC the
premises and facilities of the Company for the purpose of CITBC's taking
possession of, removing or putting the Collateral in saleable form. However, if
notice of intended disposition of any Collateral is required by law, it is
agreed that ten (10) Business Days notice shall constitute reasonable
notification and full compliance with the law. The net cash proceeds resulting
from CITBC's exercise of any of the foregoing rights, (after deducting all
charges, costs and expenses, including reasonable attorneys' fees) shall be
applied by CITBC to the payment of the Company's Obligations, whether due or to
become due, in such order as CITBC may elect, and the Company shall remain
liable to CITBC for any deficiencies, and CITBC in turn agrees to remit to the
Company or its successors or assigns, any surplus resulting therefrom. The
enumeration of the foregoing rights is not intended to be exhaustive and the
exercise of any right shall not preclude the exercise of any other rights, all
of which shall be cumulative.
SECTION 10. Termination
Except as otherwise permitted herein, CITBC may terminate this Financing
Agreement and the Line of Credit only as of an Anniversary Date and then only by
giving the Company at least ninety (90) days prior written notice of
termination. Notwithstanding the foregoing CITBC may terminate the Financing
Agreement immediately upon the occurrence of an Event of Default, provided,
however, that if the Event of Default is an event listed in paragraph 1(c) of
Section 9 of this Financing Agreement, CITBC may regard the Financing Agreement
as terminated and notice to that effect is not required. This Financing
Agreement, unless terminated as herein provided, shall automatically continue
from Anniversary Date to Anniversary Date. The Company may terminate this
Financing Agreement and the Line of Credit at any time upon at least ninety (90)
days' prior written notice to CITBC. All Obligations shall become due and
payable as of any termination hereunder or under Section 9 hereof and, pending a
final accounting, CITBC may withhold any balances in the Company's account
(unless supplied with an indemnity satisfactory to CITBC) to cover all of the
Company's Obligations, whether absolute or contingent. All of CITBC's rights,
liens and security interests shall continue after any termination until all
Obligations have been paid and satisfied in full.
SECTION 11. Miscellaneous
1. The Company hereby waives diligence, demand, presentment and protest and
any notices thereof as well as notice of nonpayment. No delay or omission of
CITBC or the Company to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by CITBC of any right or remedy precludes any
other or further exercise thereof, or precludes any other right or remedy.
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2. This Financing Agreement and the documents executed and delivered in
connection therewith constitute the entire agreement between the Company and
CITBC; supersede any prior agreements; can be changed only by a writing signed
by both the Company and CITBC; and shall bind and benefit the Company and CITBC
and their respective successors and assigns.
3. In no event shall the Company, upon demand by CITBC for payment of any
indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, CITBC shall never be entitled to receive, charge or apply,
as interest on any indebtedness relating hereto, any amount in excess of the
maximum amount of interest permissible under applicable law. If CITBC ever
receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Company. This paragraph shall
control every other provision hereof and of any other agreement made in
connection herewith.
4. If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.
5. THE COMPANY AND CITBC EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF THIS FINANCING AGREEMENT. THE COMPANY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED.
6. Except as otherwise herein provided, any notice or other communication
required hereunder shall be in writing, and shall be deemed to have been validly
served, given or delivered when hand delivered or sent by facsimile, or three
Business Days after deposit in the United State mails, with proper first class
postage prepaid and addressed to the party to be notified as follows:
(A) if to CITBC, at:
The CIT Group/Business Credit, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attn: Regional Manager
Fax # (212) 536-1295
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(B) if to the Company at:
Uniroyal Technology Corporation
2 North Tamiami Trail
Sarasota, Florida 34236-5568
Attn: George J. Zulanas, Chief Financial Officer and
Oliver J. Janney, Vice President, General Counsel and Secretary
Fax # (941) 361-2214
or to such other address as any party may designate for itself by like notice.
7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the parties hereto have caused this Financing Agreement to
be executed, agreed to, accepted and delivered in New York by their proper and
duly authorized officers as of the date set forth above.
THE CIT GROUP/BUSINESS
CREDIT, INC.
By: /S/ Christopher D. O'Donnell
------------------------------
Vice President
UNIROYAL TECHNOLOGY CORPORATION
By: /S/ George J. Zulanas, Jr.
------------------------------
Vice President, Treasurer and
Chief Financial Officer
/S/ Oliver J. Janney
------------------------------
Secretary
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EXHIBIT A - BORROWING BASE CERTIFICATE
SEE ATTACHED
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Schedule 1 - Existing Liens
Filing Filing Secured
Location Debtor Number Date Party Collateral
- - -------- ------ ------ ------ ------- ----------
ALL LIENS DISCLOSED IN LIEN SEARCHES PERFORMED BY
NATIONAL CODE CORPORATION AND DELIVERED TO
CITBC ON OR BEFORE THE DATE HEREOF.
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Schedule 2 - Collateral Locations and Chief Executive Office
Uniroyal Technology Corporation
Corporate Headquarters
2 North Tamiami Trail, Suites 800 & 900
Sarasota, Florida 34236-5568
(Sarasota County)
DIVISIONS
1. Polycast Technology Division
70 Carlisle Place
Stamford, Connecticut 06902
(Fairfield County)
215 South Newman Street
Hackensack, New Jersey 07601
(Bergen County)
Four Stirling Road
Stirling, New Jersey 07980
(Morris County)
621 Lafayette Street
Decatur, Alabama 07980
(Morgan County)
2. Ensolite
312 North Hill Street
Mishawaka, Indiana 46544
(St. Joseph County)
3. Uniroyal Adhesives and Sealants
312 North Hill Street
Mishawaka, Indiana 46544
(St. Joseph County)
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Schedule 2 - Collateral Locations and Chief Executive Office
Uniroyal Technology Corporation
Corporate Headquarters
2 North Tamiami Trail, Suites 800 & 900
Sarasota, Florida 34236-5568
(Sarasota County)
DIVISIONS
4. Royalite 5. Uniroyal Engineered Products
312 North Hill Street Headquarters
Mishawaka, Indiana 46544 2 North Tamiami Trial
(St. Joseph County) Sarasota, Florida 34236-5568
(Sarasota County)
300 Kansas Street
Redlands, California 92373 501 South Water Street
(San Bernardino County) P.O. Box 208
Stoughton, Wisconsin 53589
3 Southern Industrial Boulevard (Dane County)
Rome, Georgia 30161
(Floyd County) Erie Industrial Park
Bldg. 146
Port Clinton, Ohio 43452
State Road 15 (Ottawa County)
Warsaw, Indiana 46580
(Kosciusko County) 3250 West Big Beaver Road
Ste. 510
Troy, Michigan 48084
(Oakland County)
-34-
<PAGE>
Schedule 3 - Specified Customers
SEE ATTACHED
-35-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Condensed Balance
Sheet as of June 30, 1996 (unaudited) and the Condensed Statement of Operations
for the Nine Months Ended June 30, 1996 (unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000890096
<NAME> Uniroyal Technology Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-START> OCT-2-1995
<PERIOD-END> JUN-30-1996
<CASH> 5,516
<SECURITIES> 0
<RECEIVABLES> 22,456
<ALLOWANCES> 362
<INVENTORY> 33,111
<CURRENT-ASSETS> 69,139
<PP&E> 108,303
<DEPRECIATION> 27,257
<TOTAL-ASSETS> 174,661
<CURRENT-LIABILITIES> 34,274
<BONDS> 72,241
<COMMON> 133
0
5,250
<OTHER-SE> 47,564
<TOTAL-LIABILITY-AND-EQUITY> 174,661
<SALES> 56,296
<TOTAL-REVENUES> 58,578
<CGS> 44,742
<TOTAL-COSTS> 54,791
<OTHER-EXPENSES> 10,049
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,462
<INCOME-PRETAX> 1,325
<INCOME-TAX> 789
<INCOME-CONTINUING> 536
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 536
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
