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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 For
the quarterly period ended March 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES ACT OF 1934
Commission File Number 0-24884
CANNONDALE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-0871823
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 BROOKSIDE PLACE, GEORGETOWN, CT 06829-0122
(Address of principal executive offices, including zip code)
(203) 544-9800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), Yes X No ___ and (2) has been subject to such
filing requirements for the past 90 days Yes X No ___ .
The number of shares outstanding of the issuer's Common Stock, $.01 par value,
as of April 30, 1996 was 8,584,008.
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CANNONDALE CORPORATION
INDEX
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Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 30, 1996,
July 1, 1995 and April 1, 1995 3
Condensed Consolidated Statements of Operations for the three
months and nine months ended March 30, 1996 and April 1, 4
1995
Condensed Consolidated Statement of Stockholders' Equity for
the nine months ended March 30, 1996 5
Condensed Consolidated Statements of Cash Flows for the nine
months ended March 30, 1996 and April 1, 1995 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II Other Information 11
</TABLE>
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CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 30, July 1, April 1,
1996 1995 1995
---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ................................................................ $ 2,105 $ 2,255 $ 1,136
Trade accounts receivable, less
allowances of $5,396, $3,693 and $3,871 .......................... 62,847 37,927 45,020
Inventory ........................................................... 32,354 21,259 25,279
Deferred income taxes ............................................... 2,413 1,513 2,214
Prepaid expenses and other current assets ........................... 1,791 1,110 946
-------- -------- --------
Total current assets .................................................... 101,510 64,064 74,595
Property, plant and equipment, net ...................................... 18,528 18,213 18,089
Other assets ............................................................ 1,341 1,731 1,437
-------- -------- --------
Total assets ............................................................ $121,379 $ 84,008 $ 94,121
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit advances ........................................... $ 9,116 $ 4,806 $ 8,518
Accounts payable .................................................... 12,272 9,802 10,178
Income taxes payable ................................................ 2,768 214 1,870
Warranty and other accrued expenses ................................. 7,824 7,062 7,349
Current installments of long-term debt .............................. 1,567 1,876 2,026
-------- -------- --------
Total current liabilities ............................................... 33,547 23,760 29,941
Long-term debt, less current installments ............................... 22,101 23,593 31,263
Deferred income taxes ................................................... 386 152 175
Other noncurrent liabilities ............................................ 469 415 315
-------- -------- --------
Total liabilities ....................................................... 56,503 47,920 61,694
-------- -------- --------
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 18,000,000
Issued and outstanding shares - 8,573,554, 7,127,181
and 7,109,332................................................... 86 71 71
Additional paid-in capital .......................................... 55,673 33,294 33,256
Retained earnings (deficit) ......................................... 9,043 2,401 (1,198)
Cumulative translation adjustment ................................... 74 322 298
-------- -------- --------
Total stockholders' equity .............................................. 64,876 36,088 32,427
-------- -------- --------
Total liabilities and stockholders' equity .............................. $121,379 $ 84,008 $ 94,121
======== ======== ========
</TABLE>
See accompanying notes
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CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER-SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
MARCH 30, APRIL 1, MARCH 30, APRIL 1,
1996 1995 1996 1995
----------- ----------- ----------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales....................................... $ 45,050 $ 39,520 $ 106,968 $ 86,031
Cost of sales................................... 27,511 25,173 68,159 56,980
--------- --------- --------- --------
Gross profit.................................... 17,539 14,347 38,809 29,051
--------- --------- --------- --------
Expenses:
Selling, general and administrative........... 9,233 7,753 23,884 19,763
Research and development...................... 667 511 2,151 1,179
--------- --------- --------- -------
9,900 8,264 26,035 20,942
--------- --------- --------- -------
Operating income................................ 7,639 6,083 12,774 8,109
--------- --------- --------- -------
Other income (expense):
Interest expense.............................. (644) (994) (1,775) (3,068)
Loss from foreign exchange and other.......... (7) (23) (12) (118)
---------- --------- --------- --------
(651) (1,017) (1,787) (3,186)
---------- ---------- --------- --------
Income before income taxes and extraordinary
item.......................................... 6,988 5,066 10,987 4,923
Income tax expense.............................. (2,764) (143) (4,345) (289)
---------- --------- --------- -------
Income before extraordinary item................ 4,224 4,923 6,642 4,634
Extraordinary income (loss)..................... -- 456 -- (685)
---------- --------- --------- -------
Net income...................................... 4,224 5,379 6,642 3,949
Accumulated preferred stock dividends........... -- -- -- (400)
---------- --------- --------- --------
Income applicable to common shares and
equivalents.................................. $ 4,224 $ 5,379 $ 6,642 $ 3,549
--------- --------- -------- -------
Income (loss) per share:
Income before extraordinary item............. $ .48 $ .66 $ .79 $ .67
Extraordinary income (loss).................. .00 .06 .00 (.11)
--------- --------- -------- -------
Net income..................................... $ .48 $ .72 $ .79 $ .56
========= ========= ======== =======
Weighted average common and common
equivalent shares outstanding................ 8,892 7,464 8,446 6,318
========= ========= ======== ======
</TABLE>
See Accompanying Notes.
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CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON STOCK PAID-IN RETAINED TRANSLATION
SHARES PAR VALUE CAPITAL EARNINGS ADJUSTMENT TOTAL
------ --------- ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1995 ................ 7,127,181 $ 71 $ 33,294 $ 2,401 $ 322 $ 36,088
Net income ......................... - - - 6,642 - 6,642
Issuance of common stock (net
of $1,490 of offering costs)... 1,366,666 14 22,071 - - 22,085
Exercise of options ................ 79,707 1 308 - - 309
Foreign currency adjustment ........ - - - - (248) (248)
--------- --------- --------- --------- --------- ---------
Balance at March 30, 1996 .............. 8,573,554 $ 86 $ 55,673 $ 9,043 $ 74 $ 64,876
========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes.
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CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
March 30, 1996 April 1, 1995
-------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES ............ $(22,792) $(14,525)
-------- --------
INVESTING ACTIVITIES
Capital expenditures ............................. (2,183) (1,813)
-------- --------
FINANCING ACTIVITIES
Net proceeds from the issuance of common stock ... 22,394 26,826
Redemption of subordinated debt .................. - (10,000)
Redemption of preferred stock .................... - (6,718)
Dividend payment to preferred stockholders ....... - (1,408)
Purchase and retirement of common shares ......... - (3)
Net proceeds from borrowings under short-term
revolving credit agreements .................. 4,603 1,701
Net proceeds from (repayments of) borrowings under
long-term debt and capital lease agreements .. (2,014) 5,697
-------- --------
Net cash provided by financing activities ........ 24,983 16,095
-------- --------
Effect of exchange rate changes on cash .......... (158) 22
-------- --------
Net decrease in cash ............................. (150) (221)
Cash at beginning of period ...................... 2,255 1,357
-------- --------
Cash at end of period ............................ $ 2,105 $ 1,136
======== ========
</TABLE>
See accompanying notes.
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CANNONDALE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Cannondale Corporation (the Company) have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three- and nine-month periods ended March 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ending June 29, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended July 1, 1995
included in the Company's Annual Report on Form 10-K.
Certain prior-period amounts have been reclassified to conform to the
current year's presentation.
2. INVENTORY
The components of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
March 30, July 1, April 1,
1996 1995 1995
---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Raw materials ....................... $ 15,564 $ 11,247 $ 14,872
Work-in-process ..................... 2,026 1,088 1,436
Finished goods ...................... 16,137 10,180 10,357
Less reserve for obsolete inventory.. (1,373) (1,256) (1,386)
-------- -------- --------
$ 32,354 $ 21,259 $ 25,279
======== ======== ========
</TABLE>
3. EARNINGS PER SHARE AMOUNTS
Earnings (loss) per share of common stock are computed using the
weighted average number of shares of common stock and common stock equivalents
outstanding for each period. The weighted average number of shares of common
stock used in the computation of earnings (loss) per share was 8,891,986 and
7,464,027 for the three-month periods ended March 30, 1996 and April 1, 1995,
respectively, and 8,446,056 and 6,317,973 for the nine-month periods ended March
30, 1996 and April 1, 1995, respectively. Common stock equivalents include
warrants to purchase common stock and stock options. In computing the income per
common share for fiscal 1995, dividends applicable to Series A preferred stock
reduce the income applicable to common shares and common stock equivalents.
4. SALE OF COMMON STOCK
On September 27, 1995, the Company completed a public offering of
1,300,000 shares of common stock. The net proceeds to the Company, at the public
offering price of $17.25 per share, were approximately $21.0 million after
deducting the underwriting discount and offering expenses. In addition, on
October 25, 1995, the Company issued an additional 66,666 shares of common
stock, upon the partial exercise of the over-allotment option granted to the
underwriters in connection with the September 1995 public offering. The net
proceeds to the Company from the additional shares issued, at the public
offering price of $17.25 per share, were approximately $1.1 million after
deducting the underwriting discount and expenses. The net proceeds of the
offering were used to reduce outstanding borrowings under the Company's
revolving credit facility.
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales. Net sales increased from $39.5 million in the third quarter of fiscal
1995 to $45.1 million in the third quarter of fiscal 1996, an increase of $5.6
million, or 14.0%. For the first nine months, net sales increased 24.3% from
$86.0 million in fiscal 1995 to $107.0 million in fiscal 1996, an increase of
$21.0 million. The increased sales for both periods was a result of the
continued worldwide growth of the Company's specialty bicycle market and
increased selling prices.
Gross Profit. Gross profit as a percentage of net sales increased to 38.9% for
the third quarter of fiscal 1996 compared to 36.3% for the third quarter of
fiscal 1995. The gross profit for the 1996 quarter was $17.5 million, an
increase of $3.2 million, or 22.2%, over the gross profit of $14.3 million for
the third quarter of fiscal 1995. For the first nine months of fiscal 1996,
gross profit as a percentage of net sales increased to 36.3% ($38.8 million)
compared to 33.8% ($29.1 million) in fiscal 1995. The improvement in gross
profit was primarily the result of the Company's growth in international
markets, the further implementation of cost-reduction programs, and more
favorable product mix, with higher-end, higher-margin full suspension bicycles
representing a larger portion of overall sales .
Operating Expenses. Operating expenses were $9.9 million for the third quarter
of fiscal 1996, an increase of approximately $1.6 million, or 19.8%, over the
third quarter of fiscal 1995 operating expenses of $8.3 million. For the first
nine months of fiscal 1996, operating expenses were $26.0 million, an increase
of approximately $5.1 million, or 24.3%, over the $20.9 million of operating
expenses for the first nine months of fiscal 1995. For both periods, increases
in selling, general and administrative expenses accounted for a significant
portion of the increase and were directly associated with increased sales, and
additional personnel, advertising, and marketing costs required to support the
Company's growth. As a percentage of sales, year-to-date selling, general and
administrative expenses improved from 23.0% in fiscal 1995 to 22.3% in fiscal
1996. The increase in research and development expenses reflects the Company's
commitment to further investments in innovation.
Interest Expense. Interest expense for the third quarter of fiscal 1996 was
$644,000, a decrease of approximately $350,000 from the third quarter of fiscal
1995. For the first nine months, interest expense was $1.8 million, a decrease
of approximately $1.3 million from the first nine months of fiscal 1995. For
both periods, the decrease resulted from lower interest rates and lower
borrowings. See "Liquidity and Capital Resources," below, regarding the
retirement of debt in connection with the Company's initial public offering in
November 1994, and a second offering of common shares in September 1995.
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Income Before Income Taxes and Extraordinary Item. Income before taxes and
extraordinary item for the third quarter of fiscal 1996 was $7.0 million
compared to $5.1 million for the third quarter of fiscal 1995. For the first
nine months of fiscal 1996, income before income taxes and extraordinary item
was $11.0 million compared to $4.9 million in the comparable period in fiscal
1995. For both periods, the improvement in fiscal 1996 was a result of increased
volume, a higher gross-profit percentage, and lower interest charges, partially
offset by increased selling, general and administrative expenses to support the
Company's growth.
Income Taxes. Income tax expense for the third quarter of fiscal 1996 was $2.8
million, a $2.6 million increase from $143,000 in the third quarter of fiscal
1995. For the first nine months of fiscal 1996, income tax expense was $4.3
million, a $4.1 million increase from $289,000 in the first nine months of
fiscal 1995. For both periods, the increase in income tax expense is the result
of higher pre-tax income in fiscal 1996 and the recognition of $2.0 million of
net deferred tax assets in the third quarter of fiscal 1995 in accordance with
the provisions of FASB Statement 109, "Accounting for Income Taxes."
Extraordinary Income (Loss). In the third quarter of fiscal 1995, an
extraordinary credit of $456,000 was recorded for the recognition of the tax
benefit associated with the second quarter extraordinary charge ($1.1 million),
in accordance with the provisions of FASB Statement 109, "Accounting for Income
Taxes." The second quarter extraordinary charge related to the early retirement
of subordinated debt with a portion of the net proceeds of the Company's initial
public offering.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $22.8 million for the first nine
months of fiscal 1996, an increase of $8.3 million over the $14.5 million used
for the first nine months of fiscal 1995. The net use of cash is typical for the
first nine months of the fiscal year due to seasonal activity. The increase over
the prior year was related to sales growth, and primarily reflects the increases
in accounts receivable and inventory. Capital expenditures were $2.2 million for
the first nine months of fiscal 1996, an increase of $370,000 over the
comparable period of fiscal 1995.
Net cash provided by financing activities for the first nine months of fiscal
1996 was $25.0 million, an increase of $8.9 million over the $16.1 million for
the first nine months of fiscal 1995. In both periods, the net cash provided by
financing activities represented the net proceeds from the Company's public
offerings during the respective periods after the repayment of a portion of the
Company's outstanding indebtedness, and net proceeds of borrowings under the
Company's revolving credit agreements
In March 1996, the Company renegotiated its domestic revolving credit facility
and term loan, to provide for lower interest rates and the improvement of
certain covenants.
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The Company plans certain expansion projects at its Bedford and Philipsburg
facilities, which will be financed in part with approximately $3.0 million in
loans from the Pennsylvania Industrial Development Authority ("PIDA") The
Company expects that the PIDA loan, cash flow generated by its operations and
borrowings under the revolving credit facilities will be sufficient to meet its
planned operating and capital requirements for at least the next twelve months;
the Company does not have any present plans which would require it to seek
financing from other sources.
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Page
(a) Exhibit Index 13
(b) Reports on Form 8-K
None
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CANNONDALE CORPORATION
Date: May 10, 1996 /s/ William A. Luca
--------------------
William A. Luca
Vice President of Finance, Treasurer
and Chief Financial Officer
(Principal Financial Officer
and authorized signatory)
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
10.1.3 Amended and Restated Loan and Security Agreement,
dated March 29, 1996, Between the Company and
Fleet Capital Corporation (Formerly Shawmut Capital
Corporation)
10.2.2 Revolving Credit Note--$35,000,000, dated March 29, 1996, from
the Company to Fleet Capital Corporation (Formerly Shawmut
Capital Corporation)
10.3.2 Second Open-End Mortgage Modification Agreement, dated March
29, 1996, by and between the Company and Fleet Capital
Corporation (Formerly Shawmut Capital Corporation)
11 Statement re: Computation
of Earnings per Common
Share
27 Financial Data Schedule
13
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EXHIBIT 10.1.3
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------------------------------
--------------------------------------------------
CANNONDALE CORPORATION
==================================================
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated: As of March 29, 1996
$35,000,000
==================================================
--------------------------------------------------
FLEET CAPITAL CORPORATION
--------------------------------------------------
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TABLE OF CONTENTS
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SECTION 1. CREDIT FACILITY . . . . . . . . . . . . . . . . . . 1
1.1 Revolving Credit Loans . . . . . . . . . . . . . . . . . . . 1
1.2 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Letters of Credit; LC Guaranties . . . . . . . . . . . . . . 3
SECTION 2. INTEREST, FEES AND CHARGES . . . . . . . . . . . . 3
2.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Computation of Interest and Fees . . . . . . . . . . . . . . 6
2.3 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . 6
2.4 Letter of Credit and LC Guaranty Fees . . . . . . . . . . . 6
2.5 Annual Facility Fee . . . . . . . . . . . . . . . . . . . . 6
2.6 Audit and Appraisal Fees . . . . . . . . . . . . . . . . . . 6
2.7 Reimbursement of Expenses . . . . . . . . . . . . . . . . . 6
2.8 Bank Charges . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Capital Adequacy Charge. . . . . . . . . . . . . . . . . . . 7
2.10 Indemnity re: LIBOR. . . . . . . . . . . . . . . . . . . . 7
SECTION 3. LOAN ADMINISTRATION . . . . . . . . . . . . . . . . 8
3.1 Manner of Borrowing Revolving Credit Loans . . . . . . . . . 8
3.2 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . 10
3.4 Application of Payments and Collections . . . . . . . . . . 11
3.5 All Loans to Constitute One Obligation . . . . . . . . . . . 11
3.6 Loan Account . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 Statements of Account . . . . . . . . . . . . . . . . . . . 11
SECTION 4. TERM AND TERMINATION . . . . . . . . . . . . . . . 11
4.1 Term of Agreement . . . . . . . . . . . . . . . . . . . . . 11
4.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5. SECURITY INTERESTS . . . . . . . . . . . . . . . . 13
5.1 Security Interest in Collateral . . . . . . . . . . . . . . 13
5.2 Lien Perfection; Further Assurances . . . . . . . . . . . . 13
5.3 Lien on Realty . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<TABLE>
<CAPTION>
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SECTION 6. COLLATERAL ADMINISTRATION . . . . . . . . . . . . . 14
6.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Administration of Accounts . . . . . . . . . . . . . . . . . 15
6.3 Administration of Inventory . . . . . . . . . . . . . . . . 17
6.4 Administration of Equipment . . . . . . . . . . . . . . . . 17
6.5 Payment of Charges . . . . . . . . . . . . . . . . . . . . . 17
SECTION 7. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 18
7.1 General Representations and Warranties . . . . . . . . . . . 18
7.2 Continuous Nature of Representations and Warranties . . . . 24
7.3 Survival of Representations and Warranties . . . . . . . . . 24
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS . . . . . . . . 24
8.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . 24
8.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . 26
8.3 Specific Financial Covenants . . . . . . . . . . . . . . . . 29
SECTION 9. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . 30
9.1 Documentation . . . . . . . . . . . . . . . . . . . . . . . 30
9.2 No Default . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Other Loan Documents . . . . . . . . . . . . . . . . . . . . 30
9.4 Availability . . . . . . . . . . . . . . . . . . . . . . . . 31
9.5 No Litigation . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT . 31
10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . 31
10.2 Acceleration of the Obligations . . . . . . . . . . . . . . 33
10.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 33
10.4 Remedies Cumulative; No Waiver . . . . . . . . . . . . . . . 34
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 35
11.1 Power of Attorney . . . . . . . . . . . . . . . . . . . . . 35
11.2 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.3 Modification of Agreement; Sale of Interest . . . . . . . . 36
11.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . 36
11.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . 37
11.6 Cumulative Effect; Conflict of Terms . . . . . . . . . . . . 37
11.7 Execution in Counterparts . . . . . . . . . . . . . . . . . 37
11.8 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.9 Lender's Consent . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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<TABLE>
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11.10 Credit Inquiries . . . . . . . . . . . . . . . . . . . . . 38
11.11 Time of Essence . . . . . . . . . . . . . . . . . . . . . 38
11.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 38
11.13 Interpretation . . . . . . . . . . . . . . . . . . . . . . 38
11.14 GOVERNING LAW; CONSENT TO FORUM . . . . . . . . . . . . . 38
11.15 WAIVERS BY BORROWER . . . . . . . . . . . . . . . . . . 39
</TABLE>
(iii)
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made as of the
29th day of March, 1996, by and between FLEET CAPITAL CORPORATION, f/k/a SHAWMUT
CAPITAL CORPORATION, successor to BARCLAYS BUSINESS CREDIT, INC. ("Lender"), a
Connecticut corporation with an office at 200 Glastonbury Blvd., Glastonbury,
Connecticut 06033; and CANNONDALE CORPORATION ("Borrower"), a Delaware
corporation with its chief executive office and principal place of business at 9
Brookside Place, Georgetown, Connecticut 06829. Capitalized terms used in this
Agreement have the meanings assigned to them in Appendix A, General Definitions.
Accounting terms not otherwise specifically defined herein shall be construed in
accordance with GAAP consistently applied.
BACKGROUND
A. On or about July 2, 1993, Borrower and Lender's predecessor in
interest entered into a certain Loan and Security Agreement pursuant to which
Lender agreed to make revolving credit loans and a term loan available to
Borrower in an aggregate maximum amount not to exceed $30,000,000. The Loan and
Security Agreement, as amended from time to time, is hereafter referred to as
the "Existing Loan Agreement". The Existing Loan Agreement, along with all
agreements, instruments and documents executed and/or delivered in connection
therewith, are collectively referred to as the "Existing Loan Documents".
B. Borrower desires to further amend and to restate the Existing Loan
Agreement and to obtain other credit accommodations from Lender and Lender is
willing to make such amendments and to make available additional funds and
extend such other credit accommodations pursuant to the terms and conditions set
forth below.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in this Agreement and the other Loan
Documents, Lender agrees to make a Total Credit Facility of up to $35,000,000
available upon Borrower's request therefor, as follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. Lender agrees, for so long as no
Default or Event of Default exists, to make Revolving Credit Loans to Borrower
from time to time, as requested by Borrower in the manner set forth in
subsection 3.1.1 hereof, up to a maximum principal amount at any time
outstanding equal to the Borrowing Base at such time minus reserves, if any as
provided herein, which Revolving Credit Loans shall be repayable in accordance
with the terms of the Revolving Credit Note. If the unpaid balance of the
Revolving Credit Loans should exceed the Borrowing
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Base or any other limitation set forth in this Agreement, such Revolving Credit
Loans, to the extent in excess of the Borrowing Base, shall nevertheless
constitute Obligations that are due and payable on demand, secured by the
Collateral and entitled to all benefits thereof. Lender shall have the right to
establish reserves in such amounts, and with respect to such matters, as Lender
shall deem necessary or appropriate, against the amount of Revolving Credit
Loans which Borrower may otherwise request under this subsection 1.1.1,
including, without limitation, with respect to (i) price adjustments, damages,
unearned discounts, returned products or other matters for which credit
memoranda are issued in the ordinary course of Borrower's business; (ii)
shrinkage, spoilage and obsolescence of Inventory; (iii) slow moving Inventory;
(iv) other sums chargeable against Borrower's Loan Account as Revolving Credit
Loans under any section of this Agreement; and (v) such other matters, events,
conditions or contingencies as to which Lender, in its sole credit judgment,
determines reserves should be established from time to time hereunder.
1.1.2 Overadvances. In so far as Borrower may request and
Lender may be willing in its sole and absolute discretion to make Revolving
Credit Loans to Borrower at a time when the unpaid balance of Revolving Credit
Loans exceeds, or would exceed with the making of any such Revolving Credit
Loan, the Borrowing Base (any such Loans or Loans being herein referred to
individually as an "Overadvance" and collectively as "Overadvances"), Lender
shall enter such Overadvances as debits in the Loan Account. All Overadvances
shall be repaid on demand, shall be deemed to be secured by the Collateral and
shall bear interest as provided in this Agreement for Revolving Credit Loans
generally.
1.1.3 Use of Proceeds. The Revolving Credit Loans shall be
used solely for Borrower's general operating capital needs in a manner
consistent with the provisions of this Agreement and all applicable laws.
1.2 Term Loan. In conjunction with the Existing Loan Agreement,
Lender made a Term Loan to Borrower in the original principal amount of
$3,500,000. As of the date hereof, the outstanding principal balance of the Term
Loan is $1,644,000. The principal balance of the Term Loan shall continue to be
paid in successive monthly installments of $58,000 each, each of which shall be
payable on the first day of each month, which payments commenced on August 1,
1993, followed by a final installment due and payable on the earlier to occur of
the date upon which the outstanding principal balance of the Term Loan shall
have been paid in full or the Maturity Date. Notwithstanding the foregoing, the
entire unpaid principal balance of the Term Loan, and any accrued and unpaid
interest thereon, shall be immediately due and payable upon the occurrence of an
Event of Default in consequence of which Lender elects to accelerate the
maturity and payment of the Obligations or termination of this Agreement
pursuant to Section 4 hereof. All amounts outstanding under the Term Note shall
be secured by all of the Collateral. The proceeds of the Term Loan shall be used
solely for purposes for which the proceeds of the Revolving Credit Loans are
authorized to be used.
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1.3 Letters of Credit; LC Guaranties. Lender agrees, for so
long as no Default or Event of Default exists and if requested by Borrower, to
(i) issue its, or cause to be issued its Affiliate's, Letters of Credit for the
account of Borrower or (ii) execute LC Guaranties by which Lender or its
Affiliate shall guaranty the payment or performance by Borrower of its
reimbursement obligations with respect to letters of credit issued for
Borrower's account by other Persons in support of Borrower's obligations (other
than obligations for the repayment of Money Borrowed), provided that the
LC Amount at any time shall not exceed $2,000,000. No Letter of Credit or LC
Guarantee may have an expiration date that is after the Maturity Date. Any
amounts paid by Lender under any LC Guaranty or in connection with any Letter of
Credit shall be treated as Revolving Credit Loans, shall be secured by all of
the Collateral and shall bear interest and be payable at the same rate and in
the same manner as Revolving Credit Loans.
1.4 Foreign Currency Purchase Contracts. If requested to do so
by Borrower, and provided that no Default or Event of Default exists at the time
of, or would exist after giving effect to, such request, Lender shall issue or
cause its Affiliates to issue, one or more guaranties, all in form and substance
acceptable to Lender, by which Lender or an Affiliate of Lender shall guaranty
the payment or performance of Borrower's obligations to other persons in
connection with foreign currency purchase contracts entered into in the ordinary
course of Borrower's business, provided, however, that in no event shall Lender
or any Affiliate of Lender be obligated to issue any such guaranty in respect of
any such foreign currency purchase contract if (a) any such foreign currency
purchase contract has a settlement date of more than 18 months after its
issuance date, or (b) the settlement date of any such foreign currency purchase
contract shall or may under any circumstances occur on or after the Maturity
Date, unless Borrower shall have delivered to Lender an irrevocable letter of
credit naming Lender as beneficiary, in a face amount equal to or greater than
any liability of Lender in respect of such foreign currency purchase contract,
issued by an issuer acceptable to Lender and otherwise in form and substance
acceptable to Lender, or (c) Lender's liability in respect of all such
guaranties outstanding would exceed $5,000,000 in the aggregate. Borrower's
obligations to Lender in respect of such guaranties of foreign currency purchase
contracts, including, without limitation, any costs or expenses incurred by
Lender or its Affiliates due to the failure of Borrower to perform its duties
under such contracts shall constitute Revolving Credit Loans hereunder, shall be
secured by the Collateral and shall be payable in accordance with the terms of
this Agreement.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest:
(a) Rate Options. At the time of each Revolving Credit Loan
under this Agreement, and thereafter from time to time, Borrower shall have the
right, subject to the terms and conditions of this Agreement and provided no
Default or Event
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of Default has occurred, to designate to Lender in writing that all, or a
portion of the Loans shall bear interest at either the LIBOR Rate or Base Rate.
Interest on each portion thereof shall accrue and be paid at the time and rate
applicable to the respective option selected by Borrower or otherwise governing
under the terms of this Agreement. If for any reason the LIBOR Rate option is
unavailable, the Base Rate shall apply. The rate of interest on Base Rate Loans
shall increase or decrease by an amount equal to any increase or decrease in the
Base Rate effective as of the opening of business on the day that any such
change in the Base Rate occurs.
(i) LIBOR Rate Option:
(A) Requests. Provided no Default or Event of
Default has occurred, and subject to the provisions of this Section 2.1.1(a)(i),
if Borrower desires to have the LIBOR Rate apply to all or a portion of the
Loans, Borrower shall give Lender a written irrevocable request no later than
11:00 A.M. Eastern time on the third (3rd) Business Day prior to the requested
borrowing date specifying (i) the date the LIBOR Rate shall apply (which shall
be a Business Day), (ii) the LIBOR Interest Period, and (iii) the amount to be
subject to the LIBOR Rate provided that such amount shall be a minimum amount of
One Million Dollars ($1,000,000.00).
(B) LIBOR Interest Periods. LIBOR Rate Loans
shall be selected by Borrower for a LIBOR Interest Period; provided, however,
that if the LIBOR Interest Period would otherwise end on a day which shall not
be a London Business Day, such LIBOR Interest Period shall be extended to the
next preceding or succeeding London Business Day as is the Bank's custom in the
market to which such LIBOR Rate Loan relates. All accrued and unpaid interest on
a LIBOR Rate Loan shall be repaid in full on the day the applicable LIBOR Rate
Period expires. In addition, interest shall also be due and payable, with
respect to LIBOR Rate Loans having a LIBOR Interest Period of six (6) months on
the last day of third month of such six (6) month period, as if such six (6)
month period were actually two three (3) month periods. No LIBOR Interest Period
may end after the Maturity Date. Subject to all of the terms and conditions
applicable to a request to convert all or a portion of the Loans to a LIBOR Rate
Loan, Borrower may extend a LIBOR Rate Loan to a new LIBOR Rate Loan. If
Borrower fails to notify the Lender of the LIBOR Interest Period for a
subsequent LIBOR Rate Loan at least three (3) Business Days prior to the last
day of the then current LIBOR Interest Period of an outstanding LIBOR Rate Loan,
then such outstanding LIBOR Rate Loan shall, at the end of the applicable LIBOR
Interest Period accrue interest at the Base Rate.
(C) Adjustments. The Adjusted LIBOR Rate may be
automatically adjusted by Lender on a prospective basis to take into account the
additional or increased cost of maintaining any necessary reserves for
Eurodollar deposits or increased costs due to changes in applicable law or
regulation or the interpretation thereof by Lender based on the Federal Reserve
Board's or any other applicable agency's or governing body's directive, mandate
or interpretation, occurring subsequent to
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the commencement of the then applicable LIBOR Interest Period, including but not
limited to changes in tax laws (except changes of general applicability in
corporate income tax laws) and changes in the reserve requirements imposed by
the Board of Governors of the Federal Reserve System (or any successor or other
applicable governing body), excluding the Reserve Percentage and any Reserve
which has resulted in a payment pursuant to Section 2.9 below, that increase the
cost to Lender of funding the LIBOR Rate Loan. Lender shall promptly give
Borrower notice of such a determination and adjustment, which determination
shall be prima facie evidence of the correctness of the fact and the amount of
such adjustment.
(D) Unavailability. If Borrower shall have
requested the rate based on the Adjusted LIBOR Rate in accordance with this
Section 2.1.1(a)(i) and Lender shall, in good faith, have determined that
Eurodollar deposits equal to the amount of the principal of the requested LIBOR
Rate Loan and for the LIBOR Interest Period specified are unavailable,
impractical or unlawful, or that the rate based on the Adjusted LIBOR Rate will
not adequately and fairly reflect the cost to the Lender of making or
maintaining the principal amount of the requested LIBOR Rate Loan during the
LIBOR Interest Period specified, or that by reason of circumstances affecting
Eurodollar markets, adequate means do not exist for ascertaining the rate based
on the Adjusted LIBOR Rate applicable to the specified LIBOR Interest Period,
Lender shall promptly give notice of such determination to Borrower that the
rate based on the Adjusted LIBOR Rate is not available. A determination by
Lender hereunder shall be prima facie evidence of the correctness of the fact
and amount of such additional costs or unavailability. Upon such a
determination, (i) the obligation to convert to, or maintain a LIBOR Rate Loan
at the rate based on the Adjusted LIBOR Rate shall be suspended until Lender
shall have notified Borrower that such conditions shall have ceased to exist,
and (ii) the portion of the Loan subject to the request or requested conversion
shall accrue interest at the Base Rate.
2.1.2 Default Rate of Interest. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, the
principal amount of all Loans shall bear interest at a rate per annum equal to
2.0% above the interest rate otherwise applicable thereto (the "Default Rate")
and all LIBOR Rate Loans shall convert to Base Rate Loans, subject to the
Default Rate.
2.1.3 Maximum Interest. In no event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under the Notes and
charged or collected pursuant to the terms of this Agreement or pursuant to the
Notes exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
If any provisions of this Agreement or the Notes are in contravention of any
such law, such provisions shall be deemed amended to conform thereto.
2.1.4 Maximum LIBOR Rate Loans. In no event may Borrower
have outstanding at any time more than 5 LIBOR Rate Loans.
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2.2 Computation of Interest and Fees. Interest, Letter of
Credit, LC Guaranty and foreign currency purchase contract guaranty fees and the
facility fee hereunder shall be calculated daily and shall be computed on the
actual number of days elapsed over a year of 360 days. For the purpose of
computing interest hereunder, all items of payment received by Lender shall be
deemed applied by Lender on account of the Obligations (subject to final payment
of such items) on the first Business Day after receipt by Lender of good funds.
2.3 [Intentionally Omitted].
2.4 Letter of Credit and LC Guaranty Fees. Borrower shall pay
to Lender in conjunction with the issuance of each Letter of Credit and LC
Guaranty, pursuant to Section 1.3 hereof, a fee equal to one percent (1%) per
annum of the aggregate face amount of such Letter of Credit and/or LC Guaranty
outstanding from time to time during the term of this Agreement, plus
all normal and customary charges associated with the issuance thereof, which
fees and charges shall be deemed fully earned upon issuance of each such Letter
of Credit and/or LC Guaranty, shall be due and payable on the first Business Day
of each month and shall not be subject to rebate or proration upon the
termination of this Agreement for any reason.
2.5 Annual Facility Fee. Borrower shall pay to Lender a fee
equal to one quarter of one percent (1/4%) per annum of the average monthly
unused amount of the Revolving Credit Loans available to Borrower pursuant to
Section 1.1 hereof. The facility fee shall be payable monthly in arrears on the
first day of each calendar month hereafter.
2.6 Audit and Appraisal Fees. Borrower shall pay to Lender
audit and appraisal fees in accordance with Lender's current schedule of fees in
effect from time to time in connection with audits and appraisals of Borrower's
books and records and such other matters as Lender shall deem appropriate, plus
all out-of-pocket expenses incurred by Lender in connection with such audits and
appraisals; provided, that Borrower shall not be obligated to pay any
such audit fees in excess of $5,000 during any fiscal year in which no Default
or Event of Default shall have occurred. Audit fees shall be payable on the
first day of the month following the date of issuance by Lender of a request for
payment thereof to Borrower.
2.7 Reimbursement of Expenses. If, at any time or times
regardless of whether or not an Event of Default then exists, Lender or any
Participating Lender incurs legal or accounting expenses or any other costs or
out-of-pocket expenses in connection with (i) the negotiation and preparation of
this Agreement or any of the other Loan Documents, any amendment of or
modification of this Agreement or any of the other Loan Documents, or any sale
or attempted sale of any interest herein to a Participating Lender; (ii) the
administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; (iii) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Lender, Borrower or
any other
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Person) in any way relating to the Collateral, this Agreement or any of the
other Loan Documents or Borrower's affairs; (iv) any attempt to enforce any
rights of Lender or any Participating Lender against Borrower or any other
Person which may be obligated to Lender by virtue of this Agreement or any of
the other Loan Documents, including, without limitation, the Account Debtors; or
(v) any attempt to inspect, verify, protect, preserve, restore, collect, sell,
liquidate or otherwise dispose of or realize upon the Collateral; then all such
legal and accounting expenses, other costs and out of pocket expenses of Lender
shall be charged to Borrower. All amounts chargeable to Borrower under this
Section 2.7 shall be Obligations secured by all of the Collateral, shall be
payable on demand to Lender or to such Participating Lender, as the case may be,
and shall bear interest from the date such demand is made until paid in full at
the rate applicable to Revolving Credit Loans from time to time. Borrower shall
also reimburse Lender for expenses incurred by Lender in its administration of
the Collateral to the extent and in the manner provided in Section 6 hereof.
2.8 Bank Charges. Borrower shall pay to Lender, on demand, any
and all fees, costs or expenses which Lender or any Participating Lender pays to
a bank or other similar institution (including, without limitation, any fees
paid by Lender to any Participating Lender) arising out of or in connection with
(i) the forwarding to Borrower or any other Person on behalf of Borrower, by
Lender or any Participating Lender, of proceeds of loans made by Lender to
Borrower pursuant to this Agreement and (ii) the depositing for collection, by
Lender or any Participating Lender, of any check or item of payment received or
delivered to Lender or any Participating Lender on account of the Obligations.
2.9 Capital Adequacy Charge. In the event that Lender shall
determine that the adoption of any law, rule or regulation regarding capital
adequacy, or any change therein or in the interpretation or application thereof
or compliance by Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or governmental
authority, does or shall have the effect of reducing the rate of return on
Lender's capital as a consequence of its obligations hereunder to a level below
that which Lender could have achieved but for the adoption, change or compliance
(taking into consideration Lender's policies with respect to capital adequacy)
by an amount deemed by Lender, in its sole discretion, to be material, then from
time to time, after submission by Lender to Borrower of a written demand
therefore, Borrower shall pay to Lender such additional amount or amounts as
will compensate Lender for such reduction. A certificate of Lender claiming
entitlement to payment as set forth above shall be conclusive in the absence of
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such payment, the additional amount or amounts to be paid to
Lender, and the method by which such amounts were determined. In determining
such amount, Lender may use any reasonable averaging and attribution method.
2.10 Indemnity re: LIBOR. Borrower hereby indemnifies Lender and holds
Lender harmless from and against any and all losses or expenses that Lender may
sustain
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or incur as a consequence of any prepayment or any default by the Borrower in
the payment of the principal of or interest on any LIBOR Rate Loan or failure by
Borrower to complete a borrowing of, a prepayment of or conversion of or to a
LIBOR Rate Loan after notice thereof has been given, including (but not limited
to) any interest payable by Lender to lenders of funds obtained by it in order
to make or maintain its LIBOR Rate Loans hereunder, and any other loss or
expense incurred by Lender by reason of the liquidation or reemployment of
deposits or other funds acquired by Lender to make, continue, convert or
maintain a LIBOR Rate Loan following any such prepayment, default or failure
referred to above.
2.11 Existing Indebtedness. Borrower acknowledges and confirms
that as of the close of business on March 27, 1996, it is indebted to Lender
under the Existing Loan Documents, without defense, set-off or counterclaim, in
the principal amount of $16,808,257.88, for Revolving Credit Loans, in the
principal amount of $1,644,000 with respect to the Term Loan, as well as for
reimbursements for draws which may hereafter be made on existing Letters of
Credit and LC Guaranties in the aggregate face amount of $659,554.40 and amounts
guaranteed in connection with all foreign currency purchase contracts in the
aggregate face amount of $0 (collectively as may be adjusted for advances and
paydowns after March 27, 1996 and prior to the date hereof, "Existing
Indebtedness"). This Agreement amends and restates the Existing Loan Agreement
evidencing and/or securing the Existing Indebtedness. The execution and delivery
of this Agreement and the other Loan Documents, however, does not evidence or
represent a refinancing, repayment, accord and/or satisfaction or novation of
the Existing Indebtedness. All of Lender's obligations to Borrower with respect
to Loans or advances of credit to be made concurrently herewith or after the
date hereof, including without limitation, all Revolving Credit Loans, Letters
of Credit, LC Guaranties, and guaranties of foreign currency purchase contracts,
are set forth in this Agreement. All liens and security interests previously
granted to Lender pursuant to the Existing Loan Documents are acknowledged and
reconfirmed, remain in full force and effect and are not intended to be
released, replaced or impaired. The Existing Indebtedness shall be deemed to be
Revolving Credit Loans, Letters of Credit, LC Guaranties and guaranties of
foreign currency purchase contracts hereunder (as applicable) and shall be taken
into account with respect to calculation of the Borrowing Base. The Term Loan
shall continue to be evidenced by the Term Note.
SECTION 3. LOAN ADMINISTRATION.
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the
credit facility established pursuant to Section 1 hereof shall be as follows:
3.1.1 Loan Requests. A request for a Revolving Credit Loan
shall be made, or shall be deemed to be made, in the following manner: (i)
Borrower may give Lender notice of its intention to borrow, in which notice
Borrower shall specify the amount of the proposed borrowing and the proposed
borrowing date, no later than 11:00 a.m. Eastern time on the proposed borrowing
date if such Revolving Credit Loan shall be
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a Base Rate Loan, and at least three (3) Business Days prior to the proposed
borrowing date if such Revolving Credit Loan shall be a LIBOR Rate Loan,
provided, however, that no such request may be made at a time when there
exists a Default or an Event of Default; and (ii) the becoming due of any amount
required to be paid under this Agreement or the Notes, whether as interest or
for any other Obligation, shall be deemed irrevocably to be a request for a
Revolving Credit Loan subject to the Base Rate on the due date of such
Obligation in the amount required to pay such interest or other Obligation. As
an accommodation to Borrower, Lender may permit telephonic requests for Loans
and electronic transmittal of instructions, authorizations, agreements or
reports to Lender by Borrower. Unless Borrower specifically directs Lender in
writing not to accept or act upon telephonic or electronic communications from
Borrower, Lender shall have no liability to Borrower for any loss or damage
suffered by Borrower as a result of Lender's honoring of any requests, execution
of any instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Lender by Borrower and Lender shall have no duty to verify the origin of
any such communication or the authority of the person sending it. Each notice of
borrowing shall be irrevocable by and binding on Borrower. Borrower at its
option, may choose to borrow Revolving Credit Loans as either Base Rate Loans or
LIBOR Rate Loans, subject to the provisions set forth in Section 2.1.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes
Lender to disburse the proceeds of each Revolving Credit Loan requested, or
deemed to be requested, pursuant to this subsection 3.1.2 as follows: (i) the
proceeds of each Revolving Credit Loan requested under subsection 3.1.1(i) shall
be disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in accordance
with the terms of the written disbursement letter from Borrower, and in the case
of each subsequent borrowing, by wire transfer to such bank account as may be
agreed upon by Borrower and Lender from time to time or elsewhere if pursuant to
a written direction from Borrower; and (ii) the proceeds of each Revolving
Credit Loan requested under subsection 3.1.1(ii) shall be disbursed by Lender by
way of direct payment of the relevant interest or other Obligation.
3.1.3 Authorization. Borrower hereby irrevocably authorizes
Lender, in Lender's sole discretion, to advance to Borrower, and to charge to
Borrower's Loan Account hereunder as a Revolving Credit Loan, a sum sufficient
to pay all interest accrued on the Obligations during the immediately preceding
month and to pay all costs, fees and expenses at any time owed by Borrower to
Lender hereunder.
3.1.4 Borrowing Base Certificates. Borrower shall provide
Lender with a Borrowing Base Certificate on a monthly basis, no later than the
twentieth day of the month immediately following the month for which the
Borrowing Base was calculated, or on a more frequent basis as Lender may
request.
3.2 Payments. Except where otherwise set forth in this Agreement or
where evidenced by notes or other instruments issued or made by Borrower to
Lender
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specifically containing payment provisions which are in conflict with this
Section 3.2 (in which event the conflicting provisions of said notes or other
instruments shall govern and control), the Obligations shall be payable as
follows:
3.2.1 Principal. Principal payable on account of Revolving
Credit Loans shall be payable by Borrower to Lender immediately upon the
earliest of (i) the time at which the aggregate outstanding balance of all
Revolving Credit Loans exceeds the Borrowing Base (to the extent of such excess)
(unless Lender permits such amounts to remain outstanding as an Overadvance),
(ii) following the occurrence of a Default or Event of Default, the receipt by
Lender or Borrower of any proceeds of any of the Collateral, to the extent of
said proceeds, (iii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the Obligations,
or (iv) termination of this Agreement pursuant to Section 4 hereof; provided,
however, that if an Overadvance shall exist at any time, Borrower shall, on
demand, repay the Overadvance.
3.2.2 Interest. Interest accrued on the Revolving Credit
Loans shall be due on the earliest of (i) the first calendar day of each month
(for the immediately preceding month), computed through the last calendar day of
the preceding month, (ii) the occurrence of an Event of Default in consequence
of which Lender elects to accelerate the maturity and payment of the Obligations
or (iii) termination of this Agreement pursuant to Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges
payable pursuant to this Agreement shall be payable by Borrower as and when
provided in Section 2 hereof, to Lender or to any other Person designated by
Lender in writing.
3.2.4 Other Obligations. The balance of the Obligations
requiring the payment of money, if any, shall be payable by Borrower to Lender
as and when provided in this Agreement, the Other Agreements or the Security
Documents, or on demand, whichever is later.
3.3 Mandatory Prepayments.
3.3.1 Proceeds of Sale, Loss, Destruction or Condemnation of
Collateral. Except as provided in subsection 6.4.2 hereof, if Borrower sells any
of the Equipment or real Property constituting Collateral, or if any of the
Collateral is lost or destroyed or taken by condemnation, Borrower shall pay to
Lender, unless otherwise agreed by Lender, as and when received by Borrower and
as a mandatory prepayment of the Term Loan, a sum equal to the proceeds
(including insurance payments) received by Borrower from such sale, loss,
destruction or condemnation.
3.3.2 LIBOR Rate Loans. No portion of the LIBOR Rate Loans
may be prepaid during a LIBOR Interest Period unless Borrower first satisfies in
full its obligations under Section 2.10 above arising from such prepayment.
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3.4 Application of Payments and Collections. All items of
payment received by Lender by 12:00 noon, Eastern time, on any Business Day
shall be deemed received on that Business Day. All items of payment received
after 12:00 noon, Eastern time, on any Business Day shall be deemed received on
the following Business Day. Borrower irrevocably waives the right to direct the
application of any and all payments and collections at any time or times
received by Lender from or on behalf of Borrower, provided however, that
Borrower may, prior to the occurrence of an Event of Default, voluntarily prepay
all or a portion of the outstanding balance of the Term Loan. Borrower
irrevocably agrees that Lender shall, following the occurrence of a Default or
Event of Default hereunder, have the continuing exclusive right to apply and
reapply any and all payments (whether on Revolving Credit Loans, the Term Loan
or otherwise) and collections received at any time or times thereafter by Lender
or its agent against the Obligations, in such manner as Lender may deem
advisable, notwithstanding any entry by Lender upon any of its books and
records.
3.5 All Loans to Constitute One Obligation. The Loans shall
constitute one general Obligation of Borrower, and shall be secured by Lender's
Lien upon all of the Collateral.
3.6 Loan Account. Lender shall enter all Loans as debits to the
Loan Account and shall also record in the Loan Account all payments made by
Borrower on any Obligations and all proceeds of Collateral which are finally
paid to Lender, and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrower.
3.7 Statements of Account. Lender will account to Borrower
monthly with a statement of Loans, charges and payments made pursuant to this
Agreement, and such account rendered by Lender shall be deemed conclusive upon
Borrower, absent manifest error, unless Lender is notified by Borrower in
writing to the contrary within 30 days of the date each accounting is mailed to
Borrower. Such notice shall only be deemed an objection to those items
specifically objected to therein.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to Lender's right to cease
making Loans to Borrower upon or after the occurrence of any Default or Event of
Default, this Agreement shall be in effect through and including December 31,
1997 (the "Original Term"), and this Agreement shall automatically renew itself
for one-year periods thereafter (the "Renewal Terms"), unless terminated as
provided in Section 4.2 hereof.
4.2 Termination.
4.2.1 Termination by Lender. Upon at least 90 days prior
written notice to Borrower, Lender may terminate this Agreement as of the last
day of the
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Original Term or the then current Renewal Term and Lender may terminate this
Agreement without notice upon or after the occurrence of an Event of Default.
4.2.2 Termination by Borrower. Upon at least 90 days prior
written notice to Lender, Borrower may, at its option, terminate this Agreement;
provided, however, no such termination shall be effective until Borrower has
paid all of the Obligations in immediately available funds and all Letters of
Credit, LC Guaranties and guaranties of foreign currency purchase contracts have
expired or have been cash collateralized to Lender's satisfaction. Any notice of
termination given by Borrower shall be irrevocable unless Lender otherwise
agrees in writing, and Lender shall have no obligation to make any Loans or
issue or procure any Letters of Credit, LC Guaranties or guaranties of foreign
currency purchase contracts on or after the termination date stated in such
notice. Borrower may elect to terminate this Agreement in its entirety only. No
section of this Agreement or type of Loan available hereunder may be terminated
singly.
4.2.3 Termination Charges. At the effective date of
termination of this Agreement for any reason, Borrower shall pay to Lender (in
addition to the then outstanding principal, accrued interest and other charges
owing under the terms of this Agreement and any of the other Loan Documents) as
liquidated damages for the loss of the bargain and not as a penalty, an amount
equal to 1% of the Average Monthly Loan Balances (including the LC Amount for
such periods) outstanding hereunder during the immediately preceding twelve
month period if termination occurs at any time prior to January 1, 1997. If
termination occurs on or after January 1, 1997 or if the termination results
from prepayment of the Obligations with the proceeds of a public offering, no
termination charge shall be payable.
4.2.4 Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination given in accordance with this Agreement. All undertakings,
agreements, covenants, warranties and representations of Borrower contained in
the Loan Documents shall survive any such termination and Lender shall retain
its Liens in the Collateral and all of its rights and remedies under the Loan
Documents notwithstanding such termination until Borrower has paid the
Obligations to Lender, in full, in immediately available funds, together with
the applicable termination charge, if any. Notwithstanding the payment in full
of the Obligations, Lender shall not be required to terminate its security
interests in the Collateral unless, with respect to any loss or damage Lender
may incur as a result of dishonored checks or other items of payment received by
Lender from Borrower or any Account Debtor and applied to the Obligations,
Lender shall, at its option, (i) have received a written agreement, executed by
Borrower and by any Person whose loans or other advances to Borrower are used in
whole or in part to satisfy the Obligations, indemnifying Lender from any such
loss or damage; or (ii) have retained such monetary reserves and Liens on the
Collateral for such period of time as Lender, in its reasonable discretion, may
deem necessary to protect Lender from any such loss or damage.
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<PAGE> 18
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt
payment and performance to Lender of the Obligations, Borrower hereby confirms
its prior grant of, and assigns and grants to Lender, a continuing Lien upon all
of Borrower's assets, including all of the following Property and interests in
Property of Borrower, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located:
(i) Accounts;
(ii) Inventory;
(iii) Equipment;
(iv) General Intangibles;
(v) All monies and other Property of any kind now or at any time
or times hereafter in the possession or under the control of Lender or
a bailee or Affiliate of Lender;
(vi) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other
computer materials and records) of Borrower pertaining to any of (i)
through (v) above; and
(vii) All accessions to, substitutions for and all
replacements, products and cash and non-cash proceeds of (i) through
(vi) above, including, without limitation, proceeds of and unearned
premiums with respect to insurance policies insuring any of the
Collateral.
5.2 Lien Perfection; Further Assurances. Borrower shall execute
such UCC-1 financing statements as are required by the Code and such other
instruments, assignments or documents as are necessary to perfect Lender's Lien
upon any of the Collateral and shall take such other action as may be required
to perfect or to continue the perfection of Lender's Lien upon the Collateral.
Unless prohibited by applicable law, Borrower hereby authorizes Lender to
execute and file any such financing statement on Borrower's behalf. The parties
agree that a carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement and may be filed in any appropriate
office in lieu thereof. At Lender's request, Borrower shall also promptly
execute or cause to be executed and shall deliver to Lender any and all
documents, instruments and agreements deemed necessary by Lender to give effect
to or carry out the terms or intent of the Loan Documents.
5.3 Lien on Realty. The due and punctual payment and performance of the
Obligations shall also be secured by the Lien created by the Mortgage upon all
real Property of Borrower described therein. The Mortgage has been or shall be
executed by
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Borrower in favor of Lender and has been or shall be duly recorded, at
Borrower's expense, in each office where such recording is required to
constitute a fully perfected Lien on the real Property covered thereby. Borrower
shall deliver to Lender such other documents, including, without limitation,
as-built survey prints of the real Property, as Lender and its counsel may
request relating to the real Property subject to the Mortgage. If Borrower shall
acquire at any time or times hereafter any interest in any other real Property,
Borrower agrees promptly to execute and deliver to Lender, as additional
security and Collateral for the Obligations, deeds of trust, security deeds,
mortgages or other collateral assignments satisfactory in form and substance to
Lender and its counsel (collectively "New Mortgages") covering such real
Property. Each New Mortgage shall be duly recorded in each office where such
recording is required to constitute a valid Lien on the real Property covered
thereby.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General
6.1.1 Location of Collateral. All Collateral, other than
Inventory in transit and motor vehicles, will at all times be kept by Borrower
and its Subsidiaries at one or more of the business locations set forth in
Exhibit B hereto and shall not, without the prior written approval of Lender, be
moved therefrom except, prior to an Event of Default and Lender's acceleration
of the maturity of the Obligations in consequence thereof, for (i) sales of
Inventory in the ordinary course of business; and (ii) removals in connection
with dispositions of Equipment that are authorized by subsection 6.4.2 hereof.
6.1.2 Insurance of Collateral. Borrower shall maintain and
pay for insurance upon all Collateral wherever located and with respect to
Borrower's business, covering casualty, hazard, public liability and such other
risks in such amounts and with such insurance companies as are reasonably
satisfactory to Lender. Borrower shall deliver to Lender a certified copy or
original insurance certificate with satisfactory lender's loss payable
endorsements, naming Lender as lender loss payee, assignee or additional
insured, as appropriate. Each policy of insurance, certificate or endorsement
shall contain a clause requiring the insurer to give not less than 30 days prior
written notice to Lender in the event of cancellation of the policy for any
reason whatsoever and a clause specifying that the interest of Lender shall not
be impaired or invalidated by any act or neglect of Borrower or the owner of the
Property or by the occupation of the premises for purposes more hazardous than
are permitted by said policy. If Borrower fails to provide and pay for such
insurance, Lender may, at its option, but shall not be required to, procure the
same and charge Borrower therefor. Borrower agrees to deliver to Lender,
promptly as rendered, true copies of all reports made in any reporting forms to
insurance companies.
6.1.3 Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on
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<PAGE> 20
any of the Collateral or in respect of the sale thereof shall be borne and paid
by Borrower. If Borrower fails to promptly pay any portion thereof when due,
Lender may, at its option, but shall not be required to, pay the same and charge
Borrower therefor. Lender shall not be liable or responsible in any way for the
safekeeping of any of the Collateral or for any loss or damage thereto (except
for reasonable care in the custody thereof while any Collateral is in Lender's
actual possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other person
whomsoever, but the same shall be at Borrower's sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts.
Borrower shall keep accurate and complete records of its Accounts and all
payments and collections thereon and shall submit to Lender on such periodic
basis as Lender shall request a sales and collections report for the preceding
period, in form satisfactory to Lender. On or before the twentieth day of each
month from and after the date hereof, Borrower shall deliver to Lender, in form
acceptable to Lender, a detailed aged trial balance of all Accounts existing as
of the last day of the preceding month, specifying the names, addresses, face
value, dates of invoices and due dates for each Account Debtor obligated on an
Account so listed ("Schedule of Accounts"), and, upon Lender's request therefor,
copies of proof of delivery and the original copy of all documents, including,
without limitation, repayment histories and present status reports relating to
the Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if Accounts not already reported as ineligible in an aggregate face
amount in excess of $500,000 become ineligible because they fall within one of
the specified categories of ineligibility set forth in the definition of
Eligible Accounts or otherwise established by Lender, Borrower shall notify
Lender of such occurrence on the first Business Day following such occurrence
and the Borrowing Base shall thereupon be adjusted to reflect such occurrence.
If requested by Lender, Borrower shall execute and deliver to Lender formal
written assignments of all of its Accounts weekly or daily, which shall include
all Accounts that have been created since the date of the last assignment,
together with copies of invoices or invoice registers related thereto.
6.2.2 Discounts, Allowances, Disputes. If Borrower grants
any discounts, allowances or credits that are not shown on the face of the
invoice for the Account involved, Borrower shall report such discounts,
allowances or credits, as the case may be, to Lender as part of the next
required Schedule of Accounts. If any amounts due and owing in excess of
$500,000 are in dispute between Borrower and any Account Debtor, Borrower shall
provide Lender with written notice thereof at the time of submission of the next
Schedule of Accounts, explaining in detail the reason for the dispute, all
claims related thereto and the amount in controversy. Upon and after the
occurrence of an Event of Default, Lender shall have the right to settle or
adjust all disputes and claims directly with the Account Debtor and to
compromise the amount or extend the time for payment of the Accounts upon such
terms and conditions as Lender
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may deem advisable, and to charge the deficiencies, costs and expenses thereof,
including attorney's fees, to Borrower.
6.2.3 Taxes. If an Account includes a charge for any tax
payable to any governmental taxing authority, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge Borrower therefor, provided, however that
Lender shall not be liable for any taxes to any governmental taxing authority
that may be due by Borrower.
6.2.4 Account Verification. Whether or not a Default or an
Event of Default has occurred, any of Lender's officers, employees or agents
shall have the right, at any time or times hereafter, in the name of Lender, any
designee of Lender or Borrower, to verify the validity, amount or any other
matter relating to any Accounts by mail, telephone, telegraph or otherwise.
Borrower shall cooperate fully with Lender in an effort to facilitate and
promptly conclude any such verification process.
6.2.5 Maintenance of Dominion Account. Following the
occurrence of a Default or Event of Default hereunder, Borrower shall establish
and maintain a Dominion Account pursuant to a lockbox arrangement acceptable to
Lender with such banks as may be selected by Borrower and be acceptable to
Lender. Borrower shall issue to all such banks an irrevocable letter of
instruction directing such banks to deposit all payments or other remittances
received in the lockbox to the Dominion Account for application on account of
the Obligations. All funds deposited in the Dominion Account shall immediately
become the property of Lender and Borrower shall obtain the agreement by such
banks in favor of Lender to waive any offset rights against the funds so
deposited. Lender assumes no responsibility for such lockbox arrangement,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.
6.2.6 Collection of Accounts, Proceeds of Collateral. To
expedite collection, Borrower shall collect all of its Accounts. Following the
occurrence of a Default or Event of Default, Borrower and/or Lender shall notify
Account Debtors to make all payments of Accounts directly to the lockbox
established pursuant to Section 6.2.5, and all remittances received by Borrower
following the occurrence of such Default or Event of Default, on account of
Accounts, together with the proceeds of any other Collateral, shall be held as
Lender's property by Borrower as trustee of an express trust for Lender's
benefit and Borrower shall immediately deposit same in kind in the Dominion
Account. Lender retains the right at all times after the occurrence of a Default
or an Event of Default to notify Account Debtors that Accounts have been
assigned to Lender and to collect Accounts directly in its own name
notwithstanding the terms of subsections 6.2.5 and 6.2.6 and in any event,
Lender may charge the collection costs and expenses, including attorneys' fees
to Borrower.
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6.3 Administration of Inventory.
6.3.1 Records and Reports of Inventory. Borrower shall keep
accurate and complete records of its inventory. Borrower shall to furnish Lender
Inventory reports in form and detail satisfactory to Lender at such times as
Lender may request, but at least once each month, not later than the twentieth
day of such month. Borrower shall conduct a physical inventory no less
frequently than annually and shall provide to Lender a report based on each such
physical inventory promptly thereafter, together with such supporting
information as Lender shall request.
6.3.2 Returns of Inventory. If at any time or times
hereafter any Account Debtor returns any Inventory valued in excess of $500,000
to Borrower, the shipment of which generated an Account on which such Account
Debtor is obligated in excess of $500,000, Borrower shall immediately notify
Lender of the same, specifying the reason for such return and the location,
condition and intended disposition of the returned Inventory.
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Borrower shall
keep accurate records itemizing and describing the kind, type, quality, quantity
and value of its Equipment and all dispositions made in accordance with
subsection 6.4.2 hereof, and shall furnish Lender with a current schedule
containing the foregoing information on at least an annual basis and more often
if requested by Lender. Immediately on request therefor by Lender, Borrower
shall deliver to Lender any and all evidence of ownership, if any, of any of the
Equipment.
6.4.2 Dispositions of Equipment. Borrower will not sell,
lease or otherwise dispose of or transfer any of the Equipment constituting
Collateral or any part thereof without the prior written consent of Lender;
provided, however, that the foregoing restriction shall not apply, for so long
as no Default or Event of Default exists, to (i) dispositions of Equipment
which, in the aggregate during any consecutive twelve-month period, has a fair
market value or book value, whichever is less, of $500,000.00 or less, provided
that all proceeds thereof are remitted to Lender for application to the Loans,
or (ii) replacements of Equipment that is substantially worn, damaged,
destroyed, or obsolete with Equipment of like kind, function and value, provided
that the replacement Equipment shall be acquired prior to or concurrently with
any disposition of the Equipment that is to be replaced (or promptly following
the damage or destruction thereof), the replacement Equipment shall be free and
clear of Liens other than Permitted Liens that are not Purchase Money Liens, and
Borrower shall have given Lender at least 5 days prior written notice of such
disposition if the value of such Equipment exceeds $500,000.00.
6.5 Payment of Charges. All amounts chargeable to Borrower under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall
be payable on demand
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and shall bear interest from the date such advance was made until paid in full
at the rate applicable to Revolving Credit Loans from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Lender to
enter into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Lender that:
7.1.1 Organization and Qualification. Each of Borrower and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of
Borrower and its Subsidiaries is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in each state or jurisdiction
listed on Exhibit C hereto and in all other states and jurisdictions in which
the failure of Borrower or any of its Subsidiaries to be so qualified would have
a material adverse effect on the financial condition, business or Properties of
Borrower or any of its Subsidiaries.
7.1.2 Corporate Power and Authority. Borrower is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and each of the other Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents have been duly authorized by all necessary corporate action and do not
and will not (i) require any consent or approval of the shareholders of
Borrower; (ii) contravene Borrower's charter, articles or certificate of
incorporation or by-laws; (iii) violate, or cause Borrower to be in default
under, any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award in effect having applicability to
Borrower; (iv) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other agreement, lease or instrument to which
Borrower is a party or by which it or its Properties may be bound or affected;
or (v) result in, or require, the creation or imposition of any Lien (other than
Permitted Liens) upon or with respect to any of the Properties now owned or
hereafter acquired by Borrower.
7.1.3 Legally Enforceable Agreement. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of Borrower enforceable against it in
accordance with its respective terms.
7.1.4 Capital Structure. Exhibit D hereto states (i) the
correct name of each of the Subsidiaries of Borrower, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by Borrower, (ii) the
name of each of Borrower's corporate or joint venture Affiliates and the nature
of the affiliation, (iii) the number, nature and holder of all outstanding
Securities of each Subsidiary of Borrower and (iv) the number of authorized,
issued and treasury shares of Borrower and each Subsidiary of Borrower. Borrower
has good title to all of the shares it purports to own of the stock of
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each of its Subsidiaries, free and clear in each case of any Lien other than
Permitted Liens. All such shares have been duly issued and are fully paid and
non-assessable. Except as set forth on Exhibit D, there are no outstanding
options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any Securities or obligations
convertible into, or any powers of attorney relating to, shares of the capital
stock of any of its Subsidiaries.
7.1.5 Corporate Names. Neither Borrower nor any of its
Subsidiaries has been known as or used any corporate, fictitious or trade names
except those listed on Exhibit E hereto. Except as set forth on Exhibit E,
neither Borrower nor any of its Subsidiaries has been the surviving corporation
of a merger or consolidation or acquired all or substantially all of the assets
of any Person.
7.1.6 Business Locations; Agent for Process. Each of
Borrower's and its Subsidiaries' chief executive office and other places of
business are as listed on Exhibit B hereto. During the preceding one-year
period, neither Borrower nor any of its Subsidiaries has had an office, place of
business or agent for service of process other than as listed on Exhibit B.
Except as shown on Exhibit B, no inventory is stored with a bailee, warehouseman
or similar party, nor is any Inventory consigned to any Person.
7.1.7 Title to Properties; Priority of Liens. Each of
Borrower and its Subsidiaries has good, indefeasible and marketable title to and
fee simple ownership of, or valid and subsisting leasehold interests in, all of
its real Property, and good title to all of the Collateral and all of its other
Property, in each case, free and clear of all Liens except Permitted Liens.
Borrower has paid or discharged all lawful claims which, if unpaid, might become
a Lien against any of Borrower's Properties that is not a Permitted Lien other
than claims which are being contested in good faith by appropriate proceedings.
The Liens granted to Lender under Section 5 hereof are first priority Liens,
subject only to Permitted Liens.
7.1.8 Accounts. Lender may rely, in determining which
Accounts are Eligible Accounts, on all statements and representations made by
Borrower with respect to any Account or Accounts. Unless otherwise indicated in
writing to Lender, with respect to each Account:
(i) It is genuine and in all respects what it purports to
be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and
delivery of goods or rendition of services by Borrower in the ordinary
course of its business and in accordance with the terms and conditions
of all purchase orders, contracts or other documents relating thereto
and forming a part of the contract between Borrower and the Account
Debtor;
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<PAGE> 25
(iii) It is for a liquidated amount maturing as stated in
the duplicate invoice covering such sale or rendition of services, a
copy of which has been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest therein,
is not, and will not (by voluntary act or omission of Borrower) be in
the future, subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition except for disputes arising
in the ordinary course of business or resulting in returned goods,
where the amount in controversy is deemed by Lender to be immaterial,
and each such Account is absolutely owing to Borrower and is not
contingent in any respect or for any reason;
(v) Borrower has made no agreement with any Account Debtor
thereunder for any extension, compromise, settlement or modification of
any such Account or any deduction therefrom, except discounts or
allowances granted prior to shipment and reflected on the balance of
the Account and those which are granted by Borrower in the ordinary
course of its business for prompt payment and which are reflected in
the calculation of the net amount of each respective invoice related
thereto and are reflected in the Schedules of Accounts submitted to
Lender pursuant to subsection 6.2.1 hereof;
(vi) To the best of Borrower's knowledge, there are no
facts, events or occurrences which in any way impair the validity or
enforceability of any Accounts or tend to reduce the amount payable
thereunder from the face amount of the invoice and statements delivered
to Lender with respect thereto;
(vii) To the best of Borrower's knowledge, the Account
Debtor thereunder (1) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed and
(2) such Account Debtor is Solvent; and
(viii) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any
Account Debtor thereunder which might result in any material adverse
change in such Account Debtor's financial condition or the
collectibility of such Account.
7.1.9 Equipment. The Equipment is in good operating
condition and repair, and all necessary replacements of and repairs thereto
shall be made so that the value and operating efficiency of the Equipment shall
be maintained and preserved, reasonable wear and tear excepted. Borrower will
not permit any of the Equipment to become affixed to any real Property leased to
Borrower so that an interest arises therein under the real estate laws of the
applicable jurisdiction unless the landlord of such real Property has executed a
landlord waiver or leasehold mortgage in favor of and in form acceptable to
Lender, and Borrower will not permit any of the Equipment to become an
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<PAGE> 26
accession to any personal Property other than Equipment that is subject to first
priority (except for Permitted Liens) Liens in favor of Lender.
7.1.10 Financial Statements; Fiscal Year. The Consolidated
and consolidating balance sheets of Borrower and such other Persons described
therein (including the accounts of all Subsidiaries of Borrower for the
respective periods during which a Subsidiary relationship existed) as of July 1,
1995, and the related statements of income, changes in stockholder's equity, and
changes in financial position for the periods ended on such dates, have been
prepared in accordance with GAAP, and present fairly the financial positions of
Borrower and such Persons at such dates and the results of Borrower's and such
Person's operations for such periods. Since July 1, 1995, there has been no
material adverse change in the condition, financial or otherwise, of Borrower
and such other Persons as shown on the Consolidated balance sheet as of such
date and no change in the aggregate value of Equipment and real Property owned
by Borrower or such other Persons, except changes in the ordinary course of
business, none of which individually or in the aggregate has been materially
adverse. The fiscal year of Borrower and each of its Subsidiaries ends on the
Saturday closest to June 30 of each year.
7.1.11 Full Disclosure. Neither this Agreement nor any other
written statement of Borrower to Lender, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which Borrower has
failed to disclose to Lender in writing which materially affects adversely or,
so far as Borrower can now foresee, will materially affect adversely the
Properties, business, prospects, profits or condition (financial or otherwise)
of Borrower or any of its Subsidiaries or the ability of Borrower or its
Subsidiaries to perform this Agreement or the other Loan Documents.
7.1.12 Solvent Financial Condition. Each of Borrower and its
Subsidiaries is now and, after giving effect to the Loans to be made and the
Letters of Credit, LC Guaranties and guaranties of foreign currency purchase
contracts to be issued hereunder, at all times will be, Solvent.
7.1.13 Surety Obligations. Neither Borrower nor any of its
Subsidiaries is obligated as surety or indemnitor under any surety or similar
bond or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person.
7.1.14 Taxes. Borrower's federal tax identification number
is 06-0871823. The federal tax identification number of each of Borrower's
Subsidiaries is shown on Exhibit F hereto. Borrower and each of its Subsidiaries
has filed all federal, state and local tax returns and other reports it is
required by law to file and has paid, or made provision for the payment of, all
taxes, assessments, fees, levies and other governmental charges upon it, its
income and Properties as and when such taxes, assessments, fees, levies and
charges that are due and payable, unless and to the extent any thereof are being
contested in good faith and by appropriate proceedings and
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<PAGE> 27
Borrower maintains reasonable reserves on its books therefor. The provision for
taxes on the books of Borrower and its Subsidiaries are adequate for all years
not closed by applicable statutes, and for its current fiscal year.
7.1.15 Brokers. There are no claims for brokerage
commissions, finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement.
7.1.16 Patents, Trademarks, Copyrights and Licenses. Except
as set forth on Exhibit G hereto, each of Borrower and its Subsidiaries owns or
possesses all the patents, trademarks, service marks, trade names, copyrights
and licenses necessary for the present and planned future conduct of its
business without any known conflict or claim of conflict with the rights of
others. All such patents, trademarks, service marks, trade names, copyrights,
licenses and other similar rights are listed on Exhibit G hereto.
7.1.17 Governmental Consents. Each of Borrower and its
Subsidiaries has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates,
inspections and franchises necessary to continue to conduct its business as
heretofore or proposed to be conducted by it and to own or lease and operate its
Properties as now owned or leased by it.
7.1.18 Compliance with Laws. Each of Borrower and its
Subsidiaries has duly complied with, and its Properties, business operations and
leaseholds are in compliance, in all material respects with, the provisions of
all federal, state and local laws, rules and regulations applicable to Borrower
or such Subsidiary, as applicable, its Properties or the conduct of its business
and there have been no citations, notices or orders of noncompliance issued to
Borrower or any of its Subsidiaries under any such law, rule or regulation which
have or may reasonably be likely to result in a material adverse effect on
Borrower's liquidity position. Borrower has established and maintains an
adequate monitoring system to insure that it remains in compliance with all
federal, state and local laws, rules and regulations applicable to it. No
Inventory has been produced in violation of the Fair Labor Standards Act (29
U.S.C. Section 201 et seq.), as amended.
7.1.19 Restrictions. Neither Borrower nor any of its
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which materially and adversely affects its business
or the use or ownership of any of its Properties. Borrower is not a party nor is
it subject to any contract or agreement which restricts its right or ability to
incur Indebtedness, other than as set forth on Exhibit H hereto, none of which
prohibit the execution of or compliance with this Agreement or the other Loan
Documents by Borrower.
7.1.20 Litigation. There are no actions, suits, proceedings
or investigations pending, or to the knowledge of Borrower, threatened, against
or affecting Borrower or any of its Subsidiaries, or the business, operations,
Properties, prospects,
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<PAGE> 28
profits or condition of Borrower or any of its Subsidiaries which, if determined
adversely to Borrower, might result in a Default or Event of Default hereunder
or which may materially and adversely affect the ability of Borrower to perform
this Agreement. Neither Borrower nor any of its Subsidiaries is in default with
respect to any order, writ, injunction, judgment, decree or rule of any court,
governmental authority or arbitration board or tribunal.
7.1.21 No Defaults. No event has occurred and no condition
exists which would, upon or after the execution and delivery of this Agreement
or Borrower's performance hereunder, constitute a Default or an Event of
Default. Neither Borrower nor any of its Subsidiaries is in default, and no
event has occurred and no condition exists which constitutes, or which with the
passage of time or the giving of notice or both would constitute, a default in
the payment of any Indebtedness to any Person for Money Borrowed in an amount in
excess of $1,000,000.
7.1.22 Leases. Exhibit J hereto is a complete listing of all
capitalized leases of Borrower and its Subsidiaries and Exhibit K hereto is a
complete listing of all operating leases of Borrower and its Subsidiaries. Each
of Borrower and its Subsidiaries is in full compliance with all of the material
terms of each of its respective capitalized and operating leases.
7.1.23 Pension Plans. Except as disclosed on Exhibit L
hereto, neither Borrower nor any of its Subsidiaries has any Plan. Borrower and
each of its Subsidiaries is in full compliance with the requirements of ERISA
and the regulations promulgated thereunder with respect to each Plan. No fact or
situation that could result in a material adverse change in the financial
condition of Borrower or any of its Subsidiaries exists in connection with any
Plan. Neither Borrower nor any of its Subsidiaries has any withdrawal liability
in connection with a Multiemployer Plan.
7.1.24 Trade Relations. To the best of Borrower's knowledge,
there exists no actual or threatened termination, cancellation or limitation of,
or any modification or change in, the business relationship between Borrower or
any of its Subsidiaries and any customer or any group of customers whose
purchases individually or in the aggregate are material to the business of
Borrower or any of its Subsidiaries, or with any material supplier, and to the
best of Borrower's knowledge, there exists no present condition or state of
facts or circumstances which would materially affect adversely Borrower or any
of its Subsidiaries or prevent Borrower or any of its Subsidiaries from
conducting such business after the consummation of the transaction contemplated
by this Agreement in substantially the same manner in which it has heretofore
been conducted.
7.1.25 Labor Relations. Except as described on Exhibit M
hereto, neither Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Borrower's or any of
its Subsidiaries' employees, or threats
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<PAGE> 29
of strikes, work stoppages or any asserted pending demands for collective
bargaining by any union or organization.
7.2 Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading in any material respect at all times during the term of this
Agreement, except for changes in the nature of Borrower's or its Subsidiaries'
business or operations that would render the information in any exhibit attached
hereto either inaccurate, incomplete or misleading, so long as Lender has
consented to such changes or such changes are expressly permitted by this
Agreement.
7.3 Survival of Representations and Warranties. All
representations and warranties of Borrower contained in this Agreement or any of
the other Loan Documents shall survive the execution, delivery and acceptance
thereof by Lender and the parties thereto and the closing of the transactions
described therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1 Visits and Inspections. Permit representatives of
Lender, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the Properties of Borrower
and each of its Subsidiaries, inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its independent
accountants, Borrower's and each of its Subsidiaries' business, assets,
liabilities, financial condition, business prospects and results of operations.
8.1.2 Notices. Promptly notify Lender in writing of the
occurrence of any event or the existence of any fact which renders any
representation or warranty in this Agreement or any of the other Loan Documents
inaccurate, incomplete or misleading.
8.1.3 Financial Statements. Keep, and cause each Subsidiary
to keep, adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with GAAP reflecting
all its financial transactions; and cause to be prepared and furnished to Lender
the following (all to be prepared in accordance with GAAP applied on a
consistent basis, unless Borrower's certified public accountants concur in any
change therein and such change is disclosed to Lender and is consistent with
GAAP):
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<PAGE> 30
(i) not later than 90 days after the close of each fiscal
year of Borrower, unqualified audited financial statements of Borrower
and its Subsidiaries as of the end of such year, on a Consolidated and
consolidating basis, certified (as to the Consolidated statements) by a
firm of independent certified public accountants of recognized standing
selected by Borrower but acceptable to Lender (except for a
qualification for a change in accounting principles with which the
accountant concurs);
(ii) not later than 30 days after the end of each month
hereafter (other than: (x) the first and second month of each fiscal
year, as to which the financial statements hereinafter described for
each of such months shall be furnished to Lender not later than 90 days
after the end of the first such month; (y) the last month of each of
the first three fiscal quarters, as to which such financial statements
shall be furnished to Lender not later than 45 days after the end of
each such fiscal quarter; and (z) the last month of each fiscal year,
as to which such financial statements shall be furnished to Lender not
later than 90 days after the end of such fiscal year), unaudited
interim financial statements of Borrower and its Subsidiaries as of the
end of such month and of the portion of Borrower's financial year then
elapsed, on a Consolidated and consolidating basis, certified by the
principal financial officer of Borrower as prepared in accordance with
GAAP and fairly presenting the Consolidated financial position and
results of operations of Borrower and its Subsidiaries for such month
and period subject only to changes from audit and year-end adjustments
and except that such statements need not contain notes;
(iii) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or
reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration
statements which Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted
therefor, or any national securities exchange;
(iv) promptly after the filing thereof, copies of any annual
report to be filed with ERISA in connection with each Plan; and
(v) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request,
bearing upon or related to the Collateral or Borrower's and each of its
Subsidiaries' financial condition or results of operations.
Concurrently with the delivery of the financial statements
described in clause (i) of this subsection 8.1.3, Borrower shall forward to
Lender a copy of the accountants' letter to Borrower's management that is
prepared in connection with such financial statements and also shall cause to be
prepared and shall furnish to Lender a certificate of the aforesaid certified
public accountants certifying to Lender that, based
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<PAGE> 31
upon their examination of the financial statements of Borrower and its
Subsidiaries performed in connection with their examination of said financial
statements, they are not aware of any Default or Event of Default, or, if they
are aware of such Default or Event of Default, specifying the nature thereof,
and acknowledging, in a manner satisfactory to Lender, that they are aware that
Lender is relying on such financial statements in making its decisions with
respect to the Loans. Concurrently with the delivery of the financial statements
described in clauses (i) and (ii) of this subsection 8.1.3, or more frequently
if requested by Lender, Borrower shall cause to be prepared and furnished to
Lender a Compliance Certificate in the form of Exhibit N hereto executed
by the Chief Financial Officer of Borrower.
8.1.4 Landlord and Storage Agreements. Provide Lender with
copies of all agreements between Borrower or any of its Subsidiaries and any
landlord or warehouseman which owns any premises at which any Collateral valued
in the aggregate in excess of $500,000 may, from time to time, be kept.
8.1.5 Projections. No later than 90 days after the end of
each fiscal year of Borrower, deliver to Lender Projections of Borrower for the
forthcoming fiscal year on a month by month and cumulative basis.
8.2 Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
8.2.1 Mergers; Consolidations; Acquisitions. Merge or
consolidate, or permit any Subsidiary of Borrower to merge or consolidate, with
any Person; nor so long as Borrower's Availability is less than the Availability
Requirement, acquire, nor permit any of its Subsidiaries to acquire, all or any
substantial part of the Properties of any Person; provided however that
notwithstanding Borrower's Availability, Borrower may acquire Property of a
Person so long as the aggregate value of such Property does not exceed
$1,000,000; provided further that under no circumstances may Borrower or any
Subsidiary make any acquisitions following the occurrence and continuance of a
Default or Event of Default hereunder or if as a result of such acquisition a
Default or Event of Default will occur.
8.2.2 Total Indebtedness. Create, incur, assume, or suffer
to exist, or permit any Subsidiary of Borrower to create, incur or suffer to
exist, any Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Subordinated Debt existing on the date of this
Agreement;
(iii) Indebtedness of any Subsidiary of Borrower to
Borrower;
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<PAGE> 32
(iv) Accounts payable to trade creditors which are on terms
of not more than 120 days from billing date and are incurred in the
ordinary course of business, or which have terms in excess of 120 days,
provided such payment terms shall have been agreed to between Borrower
and any such trade creditor in the ordinary course of business and in
accordance with the historical practices of each, and in each case are
not more than 60 days past due, and current operating expenses (other
than for Money Borrowed) which are incurred in the ordinary course of
business and are not more than 60 days past due, unless the payment of
any such accounts payable or operating expenses is actively being
contested in good faith and by appropriate and lawful proceedings;
(v) Permitted Purchase Money Indebtedness;
(vi) contingent liabilities arising out of endorsements of
checks and other negotiable instruments for deposit or collection in
the ordinary course of business;
(vii) so long as no Default or Event of Default has occurred
and is continuing or would result after giving effect thereto, Borrower
may incur Indebtedness not included in paragraphs (i) through (vi)
above which does not exceed at any time, in the aggregate, the sum of
$10,000,000; and
(viii) so long as no Default or Event of Default has
occurred and is continuing or would result after giving effect thereto,
provided Borrower's Availability exceeds the Availability Requirement,
Borrower may incur additional Indebtedness not included in paragraphs
(i) through (vii) above.
8.2.3 Affiliate Transactions. Enter into, or be a party to,
or permit any Subsidiary of Borrower to enter into or be a party to, any
transaction with any Affiliate of Borrower or stockholder, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's or
such Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Lender and are no less favorable to Borrower than would obtain in a
comparable arm's length transaction with a Person not an Affiliate or
stockholder of Borrower or such Subsidiary; provided however that Borrower shall
be permitted to maintain Accounts from its Affiliates and Subsidiaries in an
aggregate amount outstanding not to exceed the amount set forth below for the
periods corresponding thereto:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
The fiscal period beginning nearest May 1st
and ending nearest November 30th of each fiscal
year of Borrower $9,500,000.00
The fiscal months of Borrower ending nearest
</TABLE>
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<PAGE> 33
<TABLE>
<S> <C>
January 31st, February 28th, April 30th and
December 31st of each year $11,300,000.00
The fiscal month of Borrower ending nearest
March 31st of each year $11,500,000.00
</TABLE>
provided further, that Borrower may maintain Accounts from its Affiliates and
Subsidiaries in excess of the amounts set forth above so long as Borrower's
Availability exceeds the Availability Requirement. Commencing on July 3, 1994,
and continuing thereafter, the amounts set forth above shall be increased for
each period corresponding thereto by an amount equal to 50% of Borrower's Cash
Flow in excess of $250,000.00 for the previous fiscal year, provided however
that solely for purposes of calculating such Cash Flow pursuant to this Section
8.2.3, the aggregate amount of Net Proceeds in the form of cash received by
Borrower in connection with a public offering of its common stock, to the extent
such proceeds have been utilized by Borrower for working capital purposes, shall
be included in the calculation of Borrower's Cash Flow for each such fiscal
year.
8.2.4 Limitation on Liens. Create or suffer to exist, or
permit any Subsidiary of Borrower to create or suffer to exist, any Lien upon
any of its Property, income or profits, whether now owned or hereafter acquired,
except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed pursuant to
any of the provisions of ERISA) not yet due, or being contested in the
manner described in subsection 7.1.14 hereto, but only if in Lender's
judgment such Lien does not materially adversely affect Lender's rights
or the priority of Lender's Lien in the Collateral;
(iii) Liens arising in the ordinary course of Borrower's
business by operation of law or regulation, and minor defects in title
with respect to Borrower's real Property, but only if payment in
respect of any such Lien or minor title defect is not at the time
required and such Liens and minor title defects do not, in the
aggregate, materially detract from the value of the Property (both real
and personal) of Borrower or materially impair the use of any such
Property in the operation of Borrower's business;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) Liens securing Indebtedness of one of Borrower's
Subsidiaries to Borrower or another such Subsidiary;
(vi) such other Liens as appear on Exhibit O hereto; and
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<PAGE> 34
(vii) such other Liens as Lender may hereafter approve in
writing.
8.2.5 Subordinated Debt. Make, or permit any Subsidiary of
Borrower to make, any payment of any part or all of any Subordinated Debt or
take any other action or omit to take any other action in respect of any
Subordinated Debt, except in accordance with the Subordination Agreement
relative thereto.
8.2.6 Distributions. So long as Borrower's Availability does
not exceed the Availability Requirement, declare or make, or permit any
Subsidiary of Borrower to declare or make, any Distributions.
8.2.7 Subsidiaries. So long as Borrower's Availability does
not exceed the Availability Requirement, create any subsidiary or divest itself
of any material assets by transferring them to a subsidiary to whose existence
Lender has consented.
8.2.8 Disposition of Assets. Sell, lease or otherwise
dispose of any of, or permit any Subsidiary of Borrower to sell, lease or
otherwise dispose any Collateral, including any disposition of Collateral as
part of a sale and leaseback transaction, to or in favor of any Person, except
(i) sales of Inventory in the ordinary course of business for so long as no
Event of Default exists hereunder, (ii) a transfer of Property to Borrower by a
Subsidiary of Borrower or (iii) dispositions expressly authorized by this
Agreement.
8.2.9 Restricted Investment. Make or have, or permit any
Subsidiary of Borrower to make or have, any Restricted Investment.
8.2.10 Tax Consolidation. File or consent to the filing of
any consolidated income tax return with any Person other than a Subsidiary of
Borrower.
8.3 Specific Financial Covenants. During the term of this
Agreement, and thereafter for so long as there are any Obligations to Lender,
Borrower covenants that, unless otherwise consented to by Lender in writing, it
shall:
(A) Minimum Working Capital. Maintain at all times working capital
of not less than the amounts shown below for the period corresponding thereto;
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
From January 31, 1996 thru March 31, 1996 $1,500,000.00
From April 1, 1996 and at all times thereafter $2,000,000.00
</TABLE>
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<PAGE> 35
(B) Minimum Adjusted Tangible Amount Worth. Maintain at all times
an Adjusted Tangible Net Worth of not less than the amounts shown below for the
period corresponding thereto:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
The three fiscal months ending nearest to March 31, 1996 $18,000,000.00
At all times thereafter $19,000,000.00
</TABLE>
(C) Current Ratio. Maintain at all times a ratio of Current Assets
to Current Liabilities of not less than 1.05 to 1.00; provided, however, that
for purposes of this Section 8.3(C) only, the balance of all intercompany
Accounts and other intercompany Indebtedness shall be calculated on a net basis.
(D) Cash Flow. Achieve Cash Flow of not less than $250,000.00 as of
the last day of each fiscal quarter, for the immediately proceeding four fiscal
quarters, provided however, that solely for purposes of calculating such Cash
Flow pursuant to this Section 8.3(D) for any fiscal period, Borrower may exclude
from the calculation thereof (i) the non-cash effective compensation paid during
such fiscal period, if any, in the form of equity securities or options to
purchase equity securities and (ii)(A) the extraordinary expense recorded during
such fiscal period, if any, (B) the aggregate amount of the principal repaid
during such period and (C) the aggregate amount of accrued interest paid during
such period, in each case incurred or paid by Borrower, as the case may be, in
connection with its prepayment of Indebtedness for borrowed money with the
proceeds of a public offering of Borrower's common stock.
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Lender
under the other sections of this Agreement, Lender shall not be required to make
any Loan under this Agreement unless and until each of the following conditions
has been and continues to be satisfied:
9.1 Documentation. Lender shall have received, in form and
substance satisfactory to Lender and its counsel, a duly executed copy of this
Agreement and the other Loan Documents, together with such additional documents,
instruments and certificates as Lender and its counsel shall require in
connection therewith from time to time, all in form and substance satisfactory
to Lender and its counsel.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Loan Documents. Each of the conditions precedent set forth in
the other Loan Documents shall have been satisfied.
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<PAGE> 36
9.4 Availability. Lender shall have determined that immediately
after Lender has made the initial Loans and issued the initial Letters of Credit
and LC Guaranties contemplated hereby, and paid all closing costs incurred in
connection with the transactions contemplated hereby, Availability shall not be
less than $5,000,000.
9.5 No Litigation. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or arises
out of this Agreement or the consummation of the transactions contemplated
hereby.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1 Payment of Term Note. Borrower shall fail to pay any
installment of principal, interest or premium, if any, owing on the Term Note on
or within 10 days after the due date of such installment.
10.1.2 Payment of Other Obligations. Borrower shall fail to
pay any of the Obligations that are not evidenced by the Term Note on the due
date thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise).
10.1.3 Misrepresentations. Any representation, warranty or
other statement made or furnished to Lender by or on behalf of Borrower, any
Subsidiary of Borrower or Guarantor in this Agreement, any of the other Loan
Documents or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto proves to have been false or misleading
in any material respect when made or furnished or when reaffirmed pursuant to
Section 7.2 hereof.
10.1.4 Breach of Specific Covenants. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in Sections 5.2, 5.3,
6.1.1, 6.2, 8.1.1, 8.1.3, 8.2 or 8.3 hereof on the date that Borrower is
required to perform, keep or observe such covenant.
10.1.5 Breach of Other Covenants. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in Section
10.1 hereof) and the breach of such other covenant is not cured to Lender's
satisfaction within 15 days after the sooner to occur of Borrower's receipt of
notice of such breach from Lender or the date on which such failure or neglect
first becomes known to any officer of Borrower.
10.1.6 Default Under Security Documents/Other Agreements.
Any event of default shall occur under, or Borrower shall default in the
performance or
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<PAGE> 37
observance of any term, covenant, condition or agreement contained in, any of
the Security Documents or the Other Agreements and such default shall continue
beyond any applicable grace period.
10.1.7 Other Defaults. There shall occur any default or
event of default on the part of Borrower under any agreement, document or
instrument to which Borrower is a party or by which Borrower or any of its
Property is bound, creating or relating to any Indebtedness in excess of
$5,000,000 (other than the Obligations) if the payment or maturity of such
Indebtedness is accelerated in consequence of such event of default or demand
for payment of such Indebtedness is made.
10.1.8 Uninsured Losses. Any material loss, theft, damage or
destruction of any of the Collateral not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance if following such loss,
theft, damage or destruction, Borrower's Availability does not exceed $0.
10.1.9 [Intentionally Omitted].
10.1.10 Insolvency and Related Proceedings. Borrower shall
cease to be Solvent or shall suffer the appointment of a receiver, trustee,
custodian or similar fiduciary, or shall make an assignment for the benefit of
creditors, or any petition for an order for relief shall be filed by or against
Borrower under the Bankruptcy Code (if against Borrower, the continuation of
such proceeding for more than 60 days), or Borrower shall make any offer of
settlement, extension or composition to their respective unsecured creditors
generally.
10.1.11 ERISA. A Reportable Event shall occur which Lender,
in its sole discretion, shall determine in good faith constitutes grounds for
the termination by the Pension Benefit Guaranty Corporation of any Plan or for
the appointment by the appropriate United States district court of a trustee for
any Plan, or if any Plan shall be terminated or any such trustee shall be
requested or appointed, or if Borrower or any Subsidiary of Borrower is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from Borrower's or such Subsidiary's complete
or partial withdrawal from such Plan.
10.1.12 Challenge to Agreement. Borrower or any Subsidiary
of Borrower or any Affiliate of any of them, shall challenge or contest in any
action, suit or proceeding the validity or enforceability of this Agreement, or
any of the other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Lender.
10.1.13 Criminal Forfeiture. Borrower or any Subsidiary of
Borrower shall be criminally indicted or convicted under any law that could lead
to a forfeiture of any Collateral valued in the aggregate in excess of
$5,000,000.
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<PAGE> 38
10.1.14 Judgments. Any money judgment, writ of attachment or
similar process is filed against Borrower or any Subsidiary of Borrower, or any
of their respective Property in an amount equal to or greater than $1,000,000,
if after giving effect thereto, Borrower's Availability does not exceed the
Availability Requirement.
10.2 Acceleration of the Obligations. Without in any way
limiting the right of Lender to demand payment of any portion of the Obligations
payable on demand in accordance with Section 3.2 hereof, upon or at any time
after the occurrence of an Event of Default, all or any portion of the
Obligations shall, at the option of Lender and without presentment, demand
protest or further notice by Lender, become at once due and payable and Borrower
shall forthwith pay to Lender, the full amount of such Obligations,
provided, that upon the occurrence of an Event of Default specified in
subsection 10.1.10 hereof, all of the Obligations shall become automatically due
and payable without declaration, notice or demand by Lender.
10.3 Other Remedies. Upon and after the occurrence of an Event
of Default, Lender shall have and may exercise from time to time the following
rights and remedies:
10.3.1 All of the rights and remedies of a secured party
under the Code or under other applicable law, and all other legal and equitable
rights to which Lender may be entitled, all of which rights and remedies shall
be cumulative and shall be in addition to any other rights or remedies contained
in this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2 The right to take immediate possession of the
Collateral, and to (i) require Borrower to assemble the Collateral, at
Borrower's expense, and make it available to Lender at a place designated by
Lender which is reasonably convenient to both parties, and (ii) enter any
premises where any of the Collateral shall be located and to keep and store the
Collateral on said premises until sold (and if said premises be the Property of
Borrower, Borrower agrees not to charge Lender for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Lender, in
its sole discretion, may deem advisable. Borrower agrees that 10 days written
notice to Borrower of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Lender may designate in said notice. Lender shall have the right to
conduct such sales on Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with applicable law.
Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or any part of the Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Obligations. The
proceeds realized from the sale of any Collateral may be applied, after allowing
2
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Business Days for collection, first to the costs, expenses and attorneys' fees
incurred by Lender in collecting the Obligations, in enforcing the rights of
Lender under the Loan Documents and in collecting, retaking, completing,
protecting, removing, storing, advertising for sale, selling and delivering any
Collateral, second to the interest due upon any of the Obligations; and third,
to the principal of the Obligations. If any deficiency shall arise, Borrower
shall remain liable to Lender therefor.
10.3.4 Lender is hereby granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to Lender's benefit.
10.3.5 Lender may, at its option, require Borrower to
deposit with Lender funds equal to the LC Amount and the amount of quantities of
foreign currency purchase contracts outstanding, and, if Borrower fails to
promptly make such deposit, Lender may advance such amount as a Revolving Credit
Loan (whether or not an Overadvance is created thereby). Any such deposit or
advance shall be held by Lender as a reserve to fund future payments on such LC
Guaranties and guaranties of foreign currency purchase contracts and future
drawings against such Letters of Credit. At such time as all LC Guaranties and
guaranties of foreign currency purchase contracts have been paid or terminated
and all Letters of Credit have been drawn upon or expired, any amounts remaining
in such reserve shall be applied against any outstanding Obligations, or, if all
Obligations have been indefeasibly paid in full, returned to Borrower.
10.4 Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule given to Lender or contained in any other agreement between
Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall
be deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions, or agreements of Borrower herein contained. The
failure or delay of Lender to require strict performance by Borrower of any
provision of this Agreement or to exercise or enforce any rights, Liens, powers,
or remedies hereunder or under any of the aforesaid agreements or other
documents or security or Collateral shall not operate as a waiver of such
performance, Liens, rights, powers and remedies, but all such requirements,
Liens, rights, powers, and remedies shall continue in full force and effect
until all Loans and all other Obligations owing or to become owing from Borrower
to Lender shall have been fully satisfied. None of the undertakings, agreements,
warranties, covenants and representations of Borrower contained in this
Agreement or any of the other Loan Documents and no Event of Default by Borrower
under this Agreement or any other Loan Documents shall be deemed to have been
suspended or waived by Lender, unless such suspension or
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waiver is by an instrument in writing specifying such suspension or waiver and
is signed by a duly authorized representative of Lender and directed to
Borrower.
SECTION 11. MISCELLANEOUS
11.1 Power of Attorney. Borrower hereby irrevocably designates,
makes, constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower and in either Borrower's or Lender's
name, but at the cost and expense of Borrower:
11.1.1 At such time or times upon or after the occurrence of
a Default or an Event of Default as Lender or said agent, in its sole
discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Lender or under Lender's
control.
11.1.2 At such time or times upon or after the occurrence of
an Event of Default as Lender or its agent in its sole discretion may determine:
(i) demand payment of the Accounts from the Account Debtors, enforce payment of
the Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Lender
deems advisable; (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (v) prepare, file and sign Borrower's name
to a proof of claim in bankruptcy or similar document against any Account Debtor
or to any notice of lien, assignment or satisfaction of lien or similar document
in connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Lender may designate; (vii)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Lender on
account of the Obligations; (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors; (x) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, Inventory, Equipment
and any other Collateral; (xi) make and adjust claims under policies of
insurance; and (xii) do all other acts and things necessary, in Lender's
determination, to fulfill Borrower's obligations under this Agreement.
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11.2 Indemnity. Borrower hereby agrees to indemnify Lender and hold
Lender harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender (including reasonable attorneys
fees and legal expenses) as the result of Borrower's failure to observe, perform
or discharge Borrower's duties hereunder. In addition, Borrower shall defend
Lender against and save it harmless from all claims of any Person with respect
to the Collateral. Without limiting the generality of the foregoing, these
indemnities shall extend to any claims asserted against Lender by any Person
under any Environmental Laws or similar laws by reason of Borrower's or any
other Person's failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances, it being understood that the
foregoing indemnity shall not extend to environmental claims arising as a direct
result of Lender's gross negligence or wilful misconduct after the date on which
Lender takes title to, or exercises dominion and control over, the affected
Property. Notwithstanding any contrary provision in this Agreement, the
obligation of Borrower under this Section 11.2 shall survive the payment in full
of the Obligations and the termination of this Agreement.
11.3 Modification of Agreement; Sale of Interest. This Agreement may
not be modified, altered or amended, except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including, without limitation, Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrower hereby
consents to Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof, including, without
limitation, Lender's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. In the case of an assignment, the assignee shall have,
to the extent of such assignment, the same rights, benefits and obligations as
it would if it were "Lender" hereunder and Lender shall be relieved of all
obligations hereunder upon any such assignments. Borrower agrees that it will
use its best efforts to assist and cooperate with Lender in any manner
reasonably requested by Lender to effect the sale of participations in or
assignments of any of the Loan Documents or any portion thereof or interest
therein, including, without limitation, assisting in the preparation of
appropriate disclosure documents. Borrower further agrees that Lender may
disclose credit information regarding Borrower and its Subsidiaries to any
potential participant or assignee.
11.4 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
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11.5 Successors and Assigns. This Agreement, the Other Agreements and
the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender permitted under Section 11.3
hereof.
11.6 Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
11.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
11.8 Notice. Except as otherwise provided herein, all notices, requests
and demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, one
Business Day after deposit in the mail, postage prepaid, or with an overnight
courier or, in the case of facsimile notice, when sent, addressed as follows:
If to Lender: Fleet Capital Corporation
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: Northeast Loan
Administration
Facsimile No.: 860-657-7759
With a copy to: Blank, Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attention: Harvey I. Forman, Esquire
Facsimile No.: 215-569-5555
If to Borrower: Cannondale Corporation
9 Brookside Place
Georgetown, Connecticut 06829
Attention: William F. Schmalkuche,
Assistant Treasurer
Facsimile No.: 203-544-9906
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With a copy to: Levett, Rockwood & Sanders,
Professional Corporation
33 Riverside Avenue
Westport, CT 06880
Attention: John Sanders, Esquire
Facsimile No.: 203-226-8025
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8; provided, however, that
any notice, request or demand to or upon Lender pursuant to subsection 3.1.1 or
4.2.2 hereof shall not be effective until received by Lender.
11.9 Lender's Consent. Whenever Lender's consent is required to
be obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
Lender shall be authorized to give or withhold such consent in its sole and
absolute discretion and to condition its consent upon the giving of additional
collateral security for the Obligations, the payment of money or any other
matter.
11.10 Credit Inquiries. Borrower hereby authorizes and permits
Lender to respond to usual and customary credit inquiries from third parties
concerning Borrower or any of its Subsidiaries.
11.11 Time of Essence. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
11.12 Entire Agreement. This Agreement and the other Loan
Documents, together with all other instruments, agreements and certificates
executed by the parties in connection therewith or with reference thereto,
embody the entire understanding and agreement between the parties hereto and
thereto with respect to the subject matter hereof and thereof and supersede all
prior agreements, understandings and inducements, whether express or implied,
oral or written.
11.13 Interpretation. No provision of this Agreement or any of
the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
GLASTONBURY, CONNECTICUT. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CONNECTICUT: PROVIDED, HOWEVER, THAT IF
ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN
CONNECTICUT, THE
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LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR
FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF
LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE
LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF
CONNECTICUT. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS
OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR
LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF HARTFORD,
CONNECTICUT, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF CONNECTICUT, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT
OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH
BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE
ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER
OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION
UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION.
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (I) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL: (II) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT,
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EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER
ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS
WHATEVER LENDER MAY DO IN THIS REGARD; (III) NOTICE PRIOR TO TAKING POSSESSION
OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY
ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; (IV)
THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND (V) NOTICE OF
ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A
MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS
RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER.
BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH
ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, this Agreement has been duly executed in
____________, Connecticut, on the day and year specified at the beginning of
this Agreement.
ATTEST: CANNONDALE CORPORATION
("Borrower")
/s/ Jean M. Benson By William [UNABLE TO READ]
- -------------------------------- ---------------------------------
Asst. Secretary Title Asst. Treasurer
[CORPORATE SEAL] --------------------------
ACCEPTED IN GLASTONBURY, CT:
FLEET CAPITAL CORPORATION
("Lender")
By [UNABLE TO READ]
---------------------------------
Title Vice President
--------------------------
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APPENDIX A
GENERAL DEFINITIONS
When used in the Amended and Restated Loan and Security
Agreement dated as of March 29, 1996, by and between Fleet Capital Corporation
f/k/a Shawmut Capital Corporation, successor to Barclays Business Credit, Inc.
and Cannondale Corporation, the following terms shall have the following
meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):
Account Debtor - any Person who is or may become obligated
under or on account of an Account.
Accounts - all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter created or
acquired by Borrower or in which Borrower now has or hereafter acquired
any interest.
Adjusted LIBOR Rate - For any LIBOR Interest Period, as
applied to a LIBOR Rate Loan, the rate per annum (rounded upwards, if
necessary to the next 1/100 of 1%) determined pursuant to the following
formula:
Adjusted Libor Rate = Libor Rate
---------------------------
(1.00 - Reserve Percentage)
For purposes hereof, "Libor Rate" shall mean the arithmetic average of
the rates of interest per annum (rounded upwards, if necessary to the
next 1/100 of 1%) offered to Bank in the London interbank foreign
currency deposits market on or about 9:00 A.M. Eastern time two (2)
Business Days prior to the commencement of such LIBOR Interest Period
on amounts substantially equal to the LIBOR Rate Loan as to which
Borrower may elect the Adjusted LIBOR Rate to be applicable with a
maturity of comparable duration to the LIBOR Interest Period selected
by Borrower for such LIBOR Rate Loan.
Adjusted Net Earnings From Operations - with respect to
any fiscal period, means the net earnings (or loss) after provision for
income taxes for such fiscal period of Borrower, all as reflected on
the financial statement of Borrower supplied to Lender pursuant to
Section 8.1.3. hereof, but excluding: (i) any gain or loss arising from
the sale of capital assets; (ii) any non-cash gain or non-cash loss
arising from any write-up or write-down of assets; (iii) earnings of
any Subsidiary accrued prior to the date it became a Subsidiary; (iv)
earnings of any corporation, substantially all the assets of which have
been acquired in any manner by Borrower, realized by such corporation
prior to the date of such acquisition; (v) net earnings of any business
entity (other than a Subsidiary) in which Borrower has an ownership
interest unless such net earnings shall have actually been received by
Borrower in the form of cash distributions; (vi) any portion of the net
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earnings of any Subsidiary which for any reason is unavailable for
payment of dividends to Borrower; (vii) the earnings of any Person to
which any assets of Borrower shall have been sold, transferred of,
disposed of, or into which Borrower shall have merged, or been a party
to any consolidation or other form of reorganization, prior to the date
of such transaction; (viii) any gain arising from the acquisition of
any Securities of Borrower; and (ix) any non-cash gain or loss arising
from extraordinary or non-recurring items.
Adjusted Tangible Assets - all assets except: (i) any
surplus resulting from any write-up of assets subsequent to April 30,
1993; (ii) deferred assets, other than prepaid insurance and prepaid
taxes; (iii) patents, copyrights, trademarks, trade names, non-compete
agreements, franchises and other similar intangibles; (iv) goodwill,
including any amounts, however designated on a Consolidated balance
sheet of a Person or its Subsidiaries, representing the excess of the
purchase price paid for assets or stock over the value assigned thereto
on the books of such Person; (v) Restricted Investments; (vi)
unamortized debt discount and expense; (vii) assets located and notes
and receivables due from obligors outside of the United States of
America; and (viii) all investments (whether in cash or otherwise,
provided, however, that intercompany sales and intercompany receivables
shall not constitute investments) of Borrower in its Subsidiaries.
Adjusted Tangible Net Worth - at any date means a sum
equal to: (i) the net book value (after deducting related depreciation,
obsolescence, amortization, valuation, and other proper reserves) at
which the Adjusted Tangible Assets of a Person would be shown on a
balance sheet at such date in accordance with GAAP, minus (ii) the
amount at which such Person's liabilities (other than capital stock,
surplus and Subordinated Debt) would be shown on such balance sheet in
accordance with GAAP, and including as liabilities all reserves for
contingencies and other potential liabilities.
Affiliate - a Person (other than a Subsidiary): (i)
which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, a
Person; (ii) which beneficially owns or holds 10% or more of any class
of the Voting Stock of a Person; or (iii) which has 10% or more of its
Voting Stock (or in the case of a Person which is not a corporation,
10% or more of its equity interest) beneficially owned or held by a
Person or a Subsidiary of a Person. For purposes hereof, "control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock, by contract or otherwise.
Agreement - the Amended and Restated Loan and Security
Agreement referred to in the first sentence of this Appendix A, all
Exhibits thereto and this Appendix A.
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Availability - the amount of money which Borrower is
entitled to borrow from time to time as Revolving Credit Loans, such
amount being the difference derived when the sum of the principal
amount of Revolving Credit Loans then outstanding (including any
amounts which Lender may have paid for the account of Borrower pursuant
to any of the Loan Documents and which have not been reimbursed by
Borrower) and the LC Amount and the amount of guaranties for foreign
currency purchase contracts outstanding, is subtracted from the
Borrowing Base. If the amount outstanding is equal to or greater than
the Borrowing Base, Availability is 0.
Availability Requirement - Borrower's Availability equal to
$5,000,000.00.
Average Monthly Loan Balance - the amount obtained by
adding the unpaid principal balance of Revolving Credit Loans owing by
Borrower to Lender at the end of each day during the month in question
and by dividing such sum by the number of days in such month.
Bank - Fleet National Bank of Connecticut, its successors and
assigns.
Base Rate - the rate of interest announced or quoted by
Bank from time to time as its prime rate for commercial loans, whether
or not such rate is the lowest rate charged by Bank to its most
preferred Borrowers; and, if such prime rate for commercial loans is
discontinued by Bank as a standard, a comparable reference rate
designated by Bank as a substitute therefor shall be the Base Rate.
Base Rate Loan(s) - that portion of each Revolving
Credit Loan and the Term Loan on which interest accrues at the Base
Rate.
Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(a) $35,000,000.00 minus (i) the unpaid principal balance of
the Term Loan at such date (ii) the amount of any reserve
established or amount paid or guaranteed by Lender in
connection with any foreign exchange contract outstanding at
such date and (iii) the LC Amount as of such date; or
(b) an amount equal to:
(i) Eighty-five percent (85%), or such lesser percentage as
Lender may in its reasonable credit judgment determine from
time to time, of the net amount of Eligible Accounts
outstanding at such date;
PLUS
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(ii) the lesser of (A) $15,000,000.00 until June 30,
1996, and $18,000,000.00 commencing on July 1, 1996 and at all
times thereafter or (B) sixty percent (60%), or such lesser
percentage as Lender may in its reasonable credit judgment
determine from time to time, of the value of Eligible Inventory
at such date consisting of raw materials or finished goods,
calculated on the basis of the lower of cost or market with the
cost of raw materials and finished goods calculated on a
first-in, first-out basis.
MINUS (subtract from the sum
of clauses (i) and (ii) above)
(iii) an amount equal to the sum of (A)(1) 100% of all
standby Letters of Credit issued by Lender or Affiliates of
Lender and LC Guaranties issued in respect thereof outstanding
at such date, plus (2) 50% of all documentary Letters of Credit
issued by Lender or Affiliates of Lender and LC Guaranties
issued in respect thereof outstanding at such date, (B) the
amount of all reserves established or funds paid or guaranteed
by Lender or any Affiliate of Lender in connection with all
foreign currency purchase contracts pursuant to Section 1.4 of
the Agreement, and (C) any other amounts which Lender may be
obligated to pay in the future for the account of Borrower.
For purposes hereof, the net amount of Eligible Accounts at any
time shall be the face amount of such Eligible Accounts less any and
all returns, rebates, discounts (which may, at Lender's option, be
calculated on shortest terms), credits, allowances or excise taxes of
any nature at any time issued, owing, claimed by Account Debtors,
granted, outstanding or payable in connection with such Accounts at
such time.
Business Day - any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Connecticut or
is a day on which banking institutions located in such state are
closed.
Capital Expenditures - expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful
life of more than one year, including the total principal portion of
Capitalized Lease Obligations.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
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Cash Flow - with respect to any fiscal period, an amount equal
to (a) the sum of (i) Adjusted Net Earnings From Operations during such
fiscal period, plus (ii) depreciation and amortization of Borrower's
assets during such fiscal period, minus (b) the sum of (i) the current
maturities of Borrower's long-term Indebtedness (excluding payments for
Revolving Credit Loans) for such fiscal period, plus (ii) the sum of
all unfinanced Capital Expenditures made by Borrower during such fiscal
period.
Closing Date - the date on which all of the conditions
precedent in Section 9 of the Agreement are satisfied and the initial
Loan is made or the initial Letter of Credit, LC Guaranty or guaranty
of foreign currency purchase contract is issued under the Agreement.
Code - the Uniform Commercial Code as adopted and in force in
the State of Connecticut, as from time to time in effect.
Collateral - all of the Property and interests in Property
described in Section 5 of the Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and
performance of any of the Obligations.
Consolidated - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
Current Assets - at any date means the amount at which all of
the current assets of a Person would be properly classified as current
assets shown on a balance sheet at such date in accordance with GAAP.
Current Liabilities - at any date means the amount at which all
of the current liabilities of a Person would be properly classified as
current liabilities on a balance sheet at such date in accordance with
GAAP.
Default - an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an
Event of Default.
Default Rate - as defined in subsection 2.1.2 of the Agreement.
Distribution - in respect of any corporation means and
includes: (i) the payment of any dividends or other distributions on
capital stock of the corporation (except distributions in such stock)
and (ii) the redemption or acquisition of Securities unless made
contemporaneously from the net proceeds of the sale of Securities.
Dominion Account - a special account of Lender established by
Borrower pursuant to the Agreement at a bank selected by Borrower, but
acceptable to
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<PAGE> 51
Lender in its reasonable discretion, and over which Lender shall have
sole and exclusive access and control for withdrawal purposes.
EBIT - with respect to any fiscal period, the sum of Borrower's
Consolidated net earnings (or loss) before interest expense and taxes
for said period as determined in accordance with GAAP.
Eligible Account - an Account arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services
which Lender, in its sole credit judgment, deems to be an Eligible
Account. Without limiting the generality of the foregoing, no Account
shall be an Eligible Account if:
(i) it arises out of a sale made by Borrower to a
Subsidiary or an Affiliate of Borrower or to a Person
controlled by an Affiliate of Borrower; or
(ii) it is unpaid more than 300 days after the original
invoice date or more than 60 days after the original due date
shown on the invoice; or
(iii) it is due or unpaid more than 120 days after the
original invoice date, unless such Account is by its terms due
beyond 60 days from the original invoice date in which case
clause (ii) above shall apply; or
(iv) 50% or more of the Accounts from the Account Debtor
are not deemed Eligible Accounts hereunder; or
(v) the total unpaid Accounts of the Account Debtor
exceed 20% of the net amount of all Eligible Accounts, to the
extent of such excess; or
(vi) any covenant, representation or warranty contained
in the Agreement with respect to such Account has been
breached; or
(vii) the Account Debtor is also Borrower's creditor or
supplier, or the Account Debtor has disputed liability with
respect to such Account, or the Account Debtor has made any
claim with respect to any other Account due from such Account
Debtor to Borrower, or the Account otherwise is or may become
subject to any right of setoff by the Account Debtor; or
(viii) the Account Debtor has commenced a voluntary case
under the federal bankruptcy laws, as now constituted or
hereafter amended, or made an assignment for the benefit of
creditors, or a decree or order for relief has been entered by
a court having jurisdiction in the premises in respect of the
Account Debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or
any other petition or other application for relief under the
federal bankruptcy laws
-6-
<PAGE> 52
has been filed against the Account Debtor, or if the Account
Debtor has failed, suspended business, ceased to be Solvent, or
consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant
portion of its assets or affairs; or
(ix) it arises from a sale to an Account Debtor outside
the United States, Canada or Puerto Rico, unless the sale is on
letter of credit, guaranty or acceptance terms, in each case
acceptable to Lender in its sole discretion; or
(x) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment or any other repurchase or return
basis; or
(xi) the Account Debtor is the United States of America
or any department, agency or instrumentality thereof, unless
Borrower assigns its right to payment of such Account to
Lender, in a manner satisfactory to Lender, so as to comply
with the Assignment of Claims Act of 1940 (31 U.S.C. Section
203 et seq., as amended); or
(xii) the Account is subject to a Lien other than a
Permitted Lien; or
(xiii) the goods giving rise to such Account have not
been delivered to and accepted by the Account Debtor or the
services giving rise to such Account have not been performed by
Borrower and accepted by the Account Debtor or the Account
otherwise does not represent a final sale; or
(xiv) the Account is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment; or
(xv) Borrower has made any agreement with the Account
Debtor for any deduction therefrom, except for discounts or
allowances which are made in the ordinary course of business
for prompt payment and which discounts or allowances are
reflected in the calculation of the face value of each invoice
related to such Account; or
(xvi) Borrower has made an agreement with the Account
Debtor to extend the time of payment thereof; or
(xvii) Lender believes, in its reasonable credit
judgment, that collection of such Account is insecure or that
payment thereof is doubtful or will be delayed beyond the
period set forth in clauses (ii) or (iii) of this definition by
reason of the Account Debtor's financial condition; or
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<PAGE> 53
(xviii) The total unpaid Accounts of the Account Debtor
exceed a credit limit determined by Lender, in its sole
discretion, to the extent such Account exceeds such limit; or
(xix) The Account arises from a retail sale of goods to a
Person who is purchasing same primarily for personal, family or
household purposes.
Eligible Inventory - such Inventory of Borrower (other
than packaging materials and supplies) which Lender, in its sole credit
judgment, deems to be Eligible Inventory. Without limiting the
generality of the foregoing, no Inventory shall be Eligible Inventory
if:
(i) it is not raw materials or finished goods that, in
Lender's opinion, is readily marketable in its current form; or
(ii) it is not in good, new and saleable condition; or
(iii) it is slow-moving, obsolete or unmerchantable; or
(iv) it does not meet all standards imposed by any
governmental agency or authority; or
(v) it does not conform in all respects to the warranties
and representations set forth in the Agreement,
(vi) it is not at all times subject to Lender's duly
perfected, first priority security interest and no other Lien
except a Permitted Lien; or
(vii) it is not situated at a location in compliance with
the Agreement or is in transit.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and
consent decrees relating to health, safety and environmental matters.
Equipment - all machinery, apparatus, equipment, fittings,
furniture, fixtures, motor vehicles and other tangible personal
Property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower or in which Borrower has an
interest, whether now owned or hereafter acquired by Borrower and
wherever located, and all parts, accessories and special tools and all
increases and accessions thereto and substitutions and replacements
therefor.
-8-
<PAGE> 54
ERISA - the Employee Retirement Income Security Act of 1974, as
amended, and all rules and regulations from time to time promulgated
thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
GAAP - generally accepted account principles in the United
States of America in effect from time to time, provided that for
purposes of calculating the financial covenants set forth in Section
8.3 of the Agreement, the determination of amounts set forth therein
shall exclude the results of operations, statements of cash flows and
the financial position of Borrower's Subsidiaries and provided further
that the books and records of any foreign Subsidiary may be maintained
in accordance with generally accepted accounting principles in effect
in its country of domicile.
General Intangibles - all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower,
including, without limitation, all choses in action, causes of action,
corporate or other business records, deposit accounts, inventions,
designs, patents, patent applications, trademarks, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to
Borrower to secure payment of any of the Accounts by an Account Debtor,
all rights to indemnification and all other intangible property of
every kind and nature (other than Accounts).
Indebtedness - as applied to a Person means, without
duplication
(i) all items which in accordance with GAAP would be
included in determining total liabilities as shown on the
liability side of a balance sheet of such Person as at the date
as of which Indebtedness is to be determined, including,
without limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person
has guaranteed,
(iii) all reimbursement obligations in connection with
letters of credit or letter of credit guaranties issued for the
account of such Person, and
(iv) in the case of Borrower (without duplication), the
Obligations.
Inventory - all of Borrower's inventory, whether now owned or
hereafter acquired including, but not limited to, all goods intended
for sale or lease by Borrower, or for display or demonstration; all
work in process; all raw materials
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<PAGE> 55
and other materials and supplies of every nature and description used
or which might be used in connection with the manufacture, printing,
packing, shipping, advertising, selling, leasing or furnishing of such
goods or otherwise used or consumed in Borrower's business; and all
documents evidencing and General Intangibles relating to any of the
foregoing, whether now owned or hereafter acquired by Borrower.
LC Amount - at any time, the aggregate undrawn face amount of
all Letters of Credit and the aggregate amount of LC Guaranties then
outstanding.
LC Guaranty - any guaranty pursuant to which Lender or any
Affiliate of Lender shall guaranty the payment or performance by
Borrower of its reimbursement obligation under any letter of credit.
Letter of Credit - any letter of credit issued by Lender or any
of Lender's Affiliates for the account of Borrower.
LIBOR Interest Period - a period of one, two, three or six
months duration during which the LIBOR Rate is applicable.
LIBOR Rate - a per annum rate equal to the sum of the Adjusted
LIBOR Rate plus the corresponding per annum percentage ("LIBOR Margin")
based on Borrower's EBIT calculated on a rolling four quarter basis as
of the most recent four fiscal quarterly financial statements:
<TABLE>
<CAPTION>
EBIT RATE
---- ----
<S> <C>
$0 to $10,000,000 2.00%
Greater than $10,000,000 1.75%
to $15,000,000
Greater than $15,000,000 1.50%
</TABLE>
The applicable LIBOR Margin shall change quarterly based on the
results of Borrower's most current quarterly financial statements, on
the next fiscal quarter following delivery to Lender of such financial
statements. If Lender does not offer Borrower a LIBOR Rate equal to the
Adjusted LIBOR Rate plus 1.25% per annum within 15 Business Days
following receipt of Borrower's financial statements which show
Borrower's EBIT to be greater than $20,000,000.00, Borrower shall no
longer be obligated to pay a termination fee in conjunction with
Section 4.2.3. of the Agreement. For purposes of calculating EBIT in
conjunction with this definition, EBIT shall be determined on a
Consolidated basis, provided however that if Borrower's individual EBIT
does not comprise at least 50% of the
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<PAGE> 56
applicable threshold EBIT requirement set forth above, the
corresponding LIBOR Margin shall be at the next higher level.
LIBOR Rate Loan(s) - that portion of each Revolving Credit Loan
and the Term Loan on which interest accrues at the LIBOR Rate.
Lien - any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether
such interest is based on common law, statute or contract. The term
"Lien" shall also include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases
and other title exceptions and encumbrances affecting Property. For the
purpose of the Agreement, Borrower shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for
security purposes.
Loan Account - the loan account established on the books of
Lender pursuant to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the
Security Documents.
Loans - all loans and advances of any kind (including all
Revolving Credit Loans and the Term Loan) made by Lender pursuant to
the Agreement.
London Business Day - Any Business Day on which banks in
London, England are open for business.
Maturity Date - the last day of the Original Term or, if any
Renewal Term is in effect, then the last day of such Renewal Term.
Money Borrowed - means (i) Indebtedness arising from the
lending of money by any Person to Borrower; (ii) Indebtedness, whether
or not in any such case arising from the lending by any Person of money
to Borrower, (A) which is represented by notes payable or drafts
accepted that evidence extensions of credit, (B) which constitutes
obligations evidenced by bonds, debentures, notes or similar
instruments, or (C) upon which interest charges are customarily paid
(other than accounts payable) or that was issued or assumed as full or
partial payment for Property; (iii) Indebtedness that constitutes a
Capitalized Lease Obligation; (iv) reimbursement obligations with
respect to letters of credit or guaranties of letters of credit and (v)
Indebtedness of Borrower under any guaranty of obligations that would
constitute Indebtedness for Money Borrowed under clauses (i) through
(iii) hereof, if owed directly by Borrower.
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<PAGE> 57
Mortgage - the mortgage executed by Borrower in favor of Lender
and by which Borrower granted and conveyed to Lender, as security for
the Obligations, a Lien upon the real Property of Borrower located at 9
Brookside Place, Georgetown, Connecticut.
Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.
Net Proceeds - a sum equal to (i) the gross proceeds of any
sale or other disposition of any Property of Borrower, minus (ii) the
reasonable costs incurred by Borrower in connection with such sale,
including, without limitation, broker's commissions, legal fees,
transfer and recording fees and taxes, and the reasonably estimated
federal, state and local taxes, if any, payable in respect of any gain
recognized upon such sale or disposition.
New Mortgages - as defined in Section 5.3 hereof.
Notes - collectively the Revolving Credit Note and the Term
Note.
Obligations - all Loans and all other advances, debts,
liabilities, obligations, covenants and duties, including without
limitation all Revolving Credit Loans and the Term Loan, together with
all interest, fees and other charges thereon, owing, arising, due or
payable from Borrower to Lender of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other
instrument, whether arising under the Agreement or any of the other
Loan Documents or otherwise whether direct or indirect (including those
acquired by assignment), absolute or contingent, primary or secondary,
due or to become due, now existing or hereafter arising and however
acquired.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments
and documents (other than the Agreement and the Security Documents),
heretofore, now or hereafter executed by Borrower, any Subsidiary of
Borrower or any other third party and delivered to Lender in respect of
the transactions contemplated by the Agreement.
Overadvance - the amount, if any, by which the outstanding
principal amount of Revolving Credit Loans plus the LC Amount and the
amount of all guaranties of foreign currency purchase contracts,
exceeds the Borrowing Base.
Participating Lender - each Person who shall be granted the
right by Lender to participate in any of the Loans described in the
Agreement and who shall have entered into a participation agreement in
form and substance satisfactory to Lender.
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<PAGE> 58
Patent Assignment - the Patent Collateral Assignment executed
by Borrower in favor of Lender and by which Borrower assigned to Lender
as security for the Obligations all of Borrower's right, title and
interest in and to all of its patents.
Permitted Liens - any Lien of a kind specified in subsection
8.2.4 of the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money
Indebtedness of Borrower incurred after the date hereof which is
secured by a Purchase Money Lien and which, when aggregated with the
principal amount of all other such Purchase Money Indebtedness and
Capitalized Lease Obligations of Borrower at the time outstanding, does
not exceed $25,000,000.00. For the purposes of this definition, the
principal amount of any Purchase Money Indebtedness consisting of
capitalized leases shall be computed as a Capitalized Lease Obligation.
Person - an individual, partnership, corporation, limited
liability company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political
subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Prohibited Transaction - any transaction set forth in Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986.
Projections - Borrower's forecasted Consolidated and
consolidating (a) balance sheets, (b) profit and loss statements, (c)
cash flow statements, and (d) capitalization statements, all prepared
on a consistent basis with Borrower's historical financial statements,
together with appropriate supporting details and a statement of
underlying assumptions.
Property - any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i)
Indebtedness (other than the Obligations) for the payment of all or any
part of the purchase price of any fixed assets, (ii) any Indebtedness
(other than the Obligations) incurred at the time of or within 90 days
prior to or after the acquisition of any fixed assets for the purpose
of financing all or any part of the purchase price thereof, and (iii)
any renewals, extensions or refinancings thereof, but not any increases
in the principal amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures
Purchase Money Indebtedness, but only if such Lien shall at all times
be confined solely to
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<PAGE> 59
the fixed assets the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such Lien.
Regulation D - Regulation D of the Board of Governors of the
Federal Reserve System, comprising Part 204 of Title 12, Code of
Federal Regulations, as amended, and any successor thereto.
Renewal Terms - as defined in Section 4.1 of the Agreement.
Reportable Event - any of the events set forth in Section
4043(b) of ERISA.
Reserve - For any day, that reserve (expressed as a decimal)
which is in effect (whether or not actually incurred) with respect to
Bank on such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor or any other banking authority
to which Bank is subject including any board or governmental or
administrative agency of the United States or any other jurisdiction to
which Bank is subject), for determining the maximum reserve requirement
(including without limitation any basic, supplemental, marginal or
emergency reserves) for Eurocurrency liabilities as defined in
Regulation D.
Reserve Percentage - For Bank on any day, that percentage
(expressed as a decimal) which is in effect on such day, prescribed by
the Board of Governors of the Federal Reserve System (or any successor
or any other banking authority to which Lender is subject, including
any board or governmental or administrative agency of the United States
or any other jurisdiction to which Bank is subject) for determining the
maximum reserve requirement (including without limitation any basic
supplemental, marginal or emergency reserves) for (i) deposits of
United States Dollars or (ii) Eurocurrency liabilities as defined in
Regulation D, in each case used to fund a LIBOR Rate Loan subject to an
Adjusted LIBOR Rate. The Adjusted LIBOR Rate shall be adjusted
automatically on and as of the effective day of any change in the
Reserve Percentage.
Restricted Investment - any investment made in cash or by
delivery of Property to any Person, whether by acquisition of stock,
Indebtedness or other obligation or Security, or by loan, advance or
capital contribution, or otherwise, or in any Property except the
following:
(i) investments otherwise permitted by this Agreement or
investments in one or more Subsidiaries of Borrower to the
extent existing on the Closing Date;
(ii) Property to be used in the ordinary course of
business;
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<PAGE> 60
(iii) Current Assets arising from the sale of goods and
services in the ordinary course of business of Borrower and its
Subsidiaries;
(iv) investments in direct obligations of the United
States of America, or any agency thereof or obligations
guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition
thereof;
(v) investments in certificates of deposit maturing
within one year from the date of acquisition issued by a bank
or trust company organized under the laws of the United States
or any state thereof having capital surplus and undivided
profits aggregating at least $100,000,000; and
(vi) investments in commercial paper given the highest
rating by a national credit rating agency and maturing not more
than 270 days from the date of creation thereof.
Revolving Credit Loan - a Loan made by Lender as provided in
Section 1.1 of the Agreement.
Revolving Credit Note - the secured promissory note to be
executed by Borrower on the Closing Date in favor of Lender to evidence
Borrower's obligation to repay the Revolving Credit Loans, which shall
be in the form of Exhibit A-2 to the Agreement.
Schedule of Accounts - as defined in subsection 6.4.1 of the
Agreement.
Security - shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
Security Documents - the Mortgage, each New Mortgage, the
Patent Assignment and the Trademark Assignment and all other
instruments and agreements now or at any time hereafter securing the
whole or any part of the Obligations.
Solvent - as to any Person, such Person (i) owns Property whose
fair saleable value is greater than the amount required to pay all of
such Person's Indebtedness (including contingent debts), (ii) is able
to pay all of its Indebtedness as such Indebtedness matures and (iii)
has capital sufficient to carry on its business and transactions and
all business and transactions in which it is about to engage.
Subordinated Debt - Indebtedness of Borrower that is
subordinated to the Obligations in a manner satisfactory to Lender.
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<PAGE> 61
Subsidiary - any corporation of which a Person owns, directly
or indirectly through one or more intermediaries, more than 50% of the
Voting Stock at the time of determination.
Term Loan - the Loan described in subsection 1.2 of the
Agreement.
Term Note - the Amended and Restated Secured Promissory Note
executed by Borrower in favor of Lender to evidence the Term Loan,
which is in the form of Exhibit A-1 to the Agreement.
Total Credit Facility - $35,000,000.00.
Trademark Assignment - the Trademark Security Agreement
executed by Borrower in favor of Lender and by which Borrower assigned
to Lender, and granted to Lender a security interest in, as security
for the Obligations all of Borrower's right, title and interest in and
to all of its trademarks.
Voting Stock - Securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors
(or Persons performing similar functions).
Working Capital - at any date means Current Assets minus
Current Liabilities.
OTHER TERMS. All other terms contained in the Agreement shall
have, when the context so indicates, the meanings provided for by the Code to
the extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to the Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. The section titles, table of contents
and list of exhibits appear as a matter of convenience only and shall not affect
the interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
-16-
<PAGE> 62
LIST OF EXHIBITS
Exhibit A-1 Term Note
Exhibit A-2 Revolving Credit Note
Exhibit B Borrower's and each Subsidiary's Business Locations
Exhibit C Jurisdictions in which Borrower and each Subsidiary is
Authorized to do Business
Exhibit D Capital Structure of Borrower
Exhibit E Corporate Names
Exhibit F Tax Identification Numbers of Subsidiaries
Exhibit G Patents, Trademarks, Copyrights and Licenses
Exhibit H Contracts Restricting Borrower's Right to Incur Debts
Exhibit I Litigation
Exhibit J Capitalized Leases
Exhibit K Operating Leases
Exhibit L Pension Plans
Exhibit M Labor Contracts
Exhibit N Compliance Certificate
Exhibit O Permitted Liens
-17-
<PAGE> 1
REVOLVING CREDIT NOTE
$35,000,000.00 As of March 29, 1996
FOR VALUE RECEIVED, and intending to be legally bound, CANNONDALE
CORPORATION ("Borrower"), hereby promises to pay to the order of FLEET CAPITAL
CORPORATION, formerly known as SHAWMUT CAPITAL CORPORATION, successor to
BARCLAYS BUSINESS CREDIT, INC., a Connecticut corporation (hereinafter
"Lender"), in such coin or currency of the United States which shall be legal
tender in payment of all debts and dues, public and private, at the time of
payment, the maximum principal sum of $35,000,000 or such lesser sum which then
represents the aggregate unpaid principal balance of Revolving Credit Loans,
together with interest from and after the date hereof on the unpaid principal
balance outstanding at the rates per annum set forth in the Loan Agreement (as
defined below). Interest shall be computed in the manner provided in subsection
2.2 of the Loan Agreement.
This Revolving Credit Note (the "Note") is the Revolving Credit Note
referred to in, and is issued pursuant to, that certain Amended and Restated
Loan and Security Agreement between Borrower and Lender dated as of March 29,
1996, (as may be amended and/or modified from time to time, the "Loan
Agreement"), and is entitled to all of the benefits and security of the Loan
Agreement. All of the terms, covenants and conditions of the Loan Agreement and
the Security Documents are hereby made a part of this Note and are deemed
incorporated herein in full. All capitalized terms used herein, unless otherwise
specifically defined in this Note, shall have the meanings ascribed to them in
the Loan Agreement.
For so long as no Event of Default shall have occurred, the principal
amount and accrued interest of this Note shall be due and payable on the dates
and in the manner hereinafter set forth:
(a) Interest shall be due and payable monthly, in arrears, on
the first day of each month, commencing on April 1, 1996, and continuing
until such time as the full principal balance, together with all other
amounts owing hereunder, shall have been paid in full.
(b) Principal shall be payable in accordance with the Loan
Agreement and all outstanding principal, together with any and all other
amounts due hereunder, shall be due and payable on the Maturity Date.
Notwithstanding the foregoing, the entire unpaid principal balance and
accrued interest on this Note shall be due and
<PAGE> 2
payable immediately upon acceleration of the Obligations or termination of the
Loan Agreement pursuant to Section 4 thereof.
This Note shall be subject to prepayment (and prepayment premium, if
applicable) in accordance with the provisions of Sections 3.2 and 3.3 of the
Loan Agreement. Borrower may also terminate the Loan Agreement and, in
connection with such termination, prepay this Note in the manner and subject to
the conditions provided in Section 4 of the Loan Agreement.
Upon the occurrence of an Event of Default, Lender shall have all of
the rights and remedies set forth in Section 10 of the Loan Agreement.
Time is of the essence under this Note. To the fullest extent permitted
by applicable law, Borrower, for itself and its legal representatives,
successors and assigns, expressly waives presentment, demand, protest, notice
of dishonor, notice of non-payment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in collection,
and the benefit of any exemption or insolvency laws.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or remaining
provisions of this Note. No delay or failure on the part of Lender in the
exercise of any right or remedy hereunder shall operate as a waiver thereof, nor
as an acquiescence in any default, nor shall any single or partial exercise by
Lender of any right or remedy preclude any other right or remedy. Lender, at
its option, may enforce its rights against any Collateral securing this Note
without enforcing its rights against Borrower or any other property or
indebtedness due or to become due to Borrower. Borrower agrees that, without
releasing or impairing Borrower's liability hereunder, Lender may at any time
release, surrender, substitute or exchange any Collateral securing this Note
and may at any time release any party primarily or secondarily liable for the
indebtedness evidenced by this Note.
IN ANY LITIGATION ARISING OUT OF OR RELATING TO ANY OF THE MATTERS
CONTAINED IN THIS NOTE OR ANY OF THE DOCUMENTS DELIVERED IN CONNECTION HEREWITH
IN WHICH THE LENDER AND BORROWER ARE ADVERSE PARTIES, THE LENDER AND BORROWER
EACH WAIVE TRIAL BY JURY.
This Note evidences, but does not extinguish certain of the indebtedness
described in that certain Loan and Security
-2-
<PAGE> 3
Agreement between Borrower and Lender dated July 2, 1993, as amended.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Connecticut.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
and delivered on the date first above written.
CANNONDALE CORPORATION
By: /s/ William F. Schmalkuche
----------------------------------
Title: Asst. Treasurer
----------------------------------
ATTEST:
/s/ Jean M. Benson
- ------------------------------
Asst. Secretary
[CORPORATE SEAL]
AGREED TO AND ACKNOWLEDGED:
FLEET CAPITAL CORPORATION, f/k/a
SHAWMUT CAPITAL CORPORATION
By:
-----------------------------------------
Title:
-----------------------------------------
-3-
<PAGE> 4
Agreement between Borrower and Lender dated July 2, 1993, as amended.
This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Connecticut.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
and delivered on the date first above written.
CANNONDALE CORPORATION
By:
----------------------------------
Title:
----------------------------------
ATTEST:
- ------------------------------
Asst. Secretary
[CORPORATE SEAL]
AGREED TO AND ACKNOWLEDGED:
FLEET CAPITAL CORPORATION, f/k/a
SHAWMUT CAPITAL CORPORATION
By: /s/
-----------------------------------------
Title: Vice President
-----------------------------------------
-3-
<PAGE> 1
SECOND OPEN-END MORTGAGE MODIFICATION AGREEMENT
SECOND OPEN-END MORTGAGE MODIFICATION AGREEMENT ("Agreement"), dated as
of the 29th day of March, 1996, by and between FLEET CAPITAL CORPORATION,
formerly known as SHAWMUT CAPITAL CORPORATION, a Connecticut corporation,
successor to Barclays Business Credit, Inc., a Connecticut corporation, having
an office at 200 Glastonbury Boulevard, Glastonbury, Connecticut (the
"Grantee") and CANNONDALE CORPORATION, a Delaware corporation, having an office
at 9 Brookside Place, Georgetown, Connecticut ("Grantor").
W I T N E S S E T H:
WHEREAS, Grantor entered into a certain Loan and Security Agreement
dated as of July 2, 1993 (as amended from time to time, collectively the
"Original Loan Agreement") with Grantee;
WHEREAS, pursuant to the Original Loan Agreement, the Grantee agreed to
make available to Grantor a total credit facility of up to $30,000,000;
WHEREAS, the full and prompt payment and performance of all of the
indebtedness, obligations, covenants, agreements and liabilities arising out of
or in connection with the Original Loan Agreement are secured by that certain
Open-End Mortgage dated February 18, 1994 made by Grantor to Grantee and
recorded on March 1, 1994 in Volume 184, Page 852 in the Land Records of the
Town Clerk of the Town of Redding, Connecticut, as amended by that certain
Open-End Mortgage Modification Agreement between Grantor and Grantee dated
February 8, 1995 (collectively, the "Mortgage"), which Mortgage encumbers those
certain premises described on Schedule A annexed hereto;
WHEREAS Grantor, together with the Grantee, have entered into that
certain Amended and Restated Loan and Security Agreement (the "Restated Loan
Agreement") dated as of March 29, 1996, which Restated Loan Agreement has,
among other things, modified the terms and conditions of the Original Loan
Agreement;
WHEREAS, pursuant to the terms of the Restated Loan Agreement, the
Grantee has, among other things, maintained the aggregate financing available
to Grantor, at a maximum credit facility of $35,000,000;
WHEREAS, Grantor and Grantee desire to modify and amend the Mortgage as
hereinafter set forth.
<PAGE> 2
NOW, THEREFORE, in consideration of the covenants set forth herein and
in the Mortgage, and for other good and other valuable consideration, the
receipt and sufficiency of which are hereby conclusively acknowledged, Grantor
and Grantee hereby agree as follows:
1. Modification of Mortgage. Effective as of the date hereof, the
Mortgage is hereby modified as follows:
(a) the term "Loan Agreement" as defined on page 1 of the
Mortgage, shall mean that certain Restated Loan Agreement, as defined herein,
between Grantor and Grantee, as the same may be further amended, modified,
supplemented or restated from time to time.
2. Status of Loan and Loan Documents.
(a) Generally. Grantor hereby represents and warrants to
Grantee that, to the best knowledge and belief of Grantor, as of the Date
hereof, there are no counterclaims, offsets or defenses existing with respect to
Grantor's obligations under the Loan Documents (as such term is defined in the
Restated Loan Agreement) as modified hereby, and all of the terms, covenants,
conditions and provisions contained in the Loan Documents, as modified hereby,
are in full force and effect.
(b) Reaffirmation of Loan Documents. Except as modified and
amended by this Agreement, the Mortgage and all of the other Loan Documents are
hereby ratified and affirmed in all respects.
3. Miscellaneous.
(a) Recordation. Grantee shall, at Grantor's expense, record
a copy of this Agreement. Grantor shall execute and acknowledge any and all
documents as may be reasonably required to effectuate such recording.
(b) Modifications. No provision of this Agreement may be
waived, amended or supplemented except by a written instrument executed by
both Grantor and Grantee.
(c) Successors and Assigns. This Agreement inures to the
benefit of, and shall be binding upon, the parties hereto and their respective
successors and assigns.
(d) Severability. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall
-2-
<PAGE> 3
not affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
(e) Defined Terms. All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Mortgage.
(f) Captions. Captions used in this Agreement are for
convenience of reference only and shall not be deemed a part of this Agreement
nor used in the construction of this meaning.
(g) Counterparts. This Agreement may be executed in
counterparts, all of which when taken together shall constitute one Agreement.
IN WITNESS WHEREOF, Grantor and Grantee have duly executed this
Agreement as of the day and year first above written.
GRANTOR:
In the Presence of: CANNONDALE CORPORATION
/s/ Jean M. Benson
- ------------------------------ By: /s/ William F. Schmalkuche
/s/ Justine E. Zito ----------------------------
- ------------------------------ Name: William F. Schmalkuche
Title: Asst. Treasurer
GRANTEE:
FLEET CAPITAL CORPORATION,
formerly known as
SHAWMUT CAPITAL CORPORATION
- ------------------------------- By:
- ------------------------------- ----------------------------
Name:
Title:
-3-
<PAGE> 4
not affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
(e) Defined Terms. All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings ascribed thereto
in the Mortgage.
(f) Captions. Captions used in this Agreement are for
convenience or reference only and shall not be deemed a part of this Agreement
nor used in the construction of this meaning.
(g) Counterparts. This Agreement may be executed in
counterparts, all of which when taken together shall constitute one Agreement.
IN WITNESS WHEREOF, Grantor and Grantee have duly executed this
Agreement as of the day and year first above written.
GRANTOR:
In the Presence of: CANNONDALE CORPORATION
By:
- --------------------------------- ---------------------------------
Name:
Title:
- ---------------------------------
GRANTEE:
FLEET CAPITAL CORPORATION,
formerly known as
SHAWMUT CAPITAL CORPORATION
/s/ By: /s/
- --------------------------------- ---------------------------------
Name:
/s/ Title:
- ---------------------------------
-3-
<PAGE> 1
EXHIBIT 11
<PAGE> 2
CANNONDALE CORPORATION AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT FOR PER-SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary Earnings per share computation:
Average shares outstanding .................. 8,564 7,104 8,089 5,479
Net effect of stock options -
based on the treasury stock method .......... 328 360 357 362
Net effect of warrants -
based on the treasury stock method .......... - - - 477
------- ------- ------- -------
Weighted average number of common shares
and equivalents outstanding during the
period ................................... 8,892 7,464 8,446 6,318
======= ======= ======= =======
Income before extraordinary
item ..................................... $ 4,224 $ 4,923 $ 6,642 $ 4,634
Accumulated preferred stock
dividends ................................ - - - (400)
------- ------- ------- -------
Income applicable to common shares
before extraordinary item ................ 4,224 4,923 6,642 4,234
Extraordinary income (loss) ................. - 456 - (685)
------- ------- ------- -------
Income applicable to common shares
and equivalents .......................... $ 4,224 $ 5,379 $ 6,642 $ 3,549
======= ======= ======= =======
Income per share before extraordinary
item ..................................... $ 0.48 $ 0.66 $ 0.79 $ 0.67
Extraordinary income (loss) per share ....... 0.00 0.06 0.00 (0.11)
------- ------- ------- -------
Net income per share ........................ $ 0.48 $ 0.72 $ 0.79 $ 0.56
======= ======= ======= =======
Fully diluted earnings per share computation (1):
Average shares outstanding .................. 8,564 7,104 8,089 5,479
Net effect of stock options -
based on the treasury stock method .......... 400 360 409 362
Net effect of warrants -
based on the treasury stock method .......... - - - 477
------- ------- ------- -------
Weighted average number of common shares
and equivalents outstanding during the period 8,964 7,464 8,498 6,318
======= ======= ======= =======
Income before extraordinary
item ..................................... $ 4,224 $ 4,923 $ 6,642 $ 4,634
Accumulated preferred stock dividends......... - - - (400)
------- ------- ------- -------
Income applicable to common shares
before extraordinary item ................ 4,224 4,923 6,642 4,234
Extraordinary income (loss) ................. - 456 - (685)
------- ------- ------- -------
Income applicable to common shares
and equivalents .......................... $ 4,224 $ 5,379 $ 6,642 $ 3,549
======= ======= ======= =======
Income per share before extraordinary
item ..................................... $ 0.47 $ 0.66 $ 0.78 $ 0.67
Extraordinary income (loss) per share ....... 0.00 0.06 0.00 (0.11)
------- ------- ------- -------
Net income per share ........................ $ 0.47 $ 0.72 $ 0.78 $ 0.56
======= ======= ======= =======
</TABLE>
(1) No effect has been given to the Series A Preferred Stock (redeemed in
December 1994) as their effect would be anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-02-1995
<PERIOD-END> MAR-30-1996
<CASH> 2,105
<SECURITIES> 0
<RECEIVABLES> 68,243
<ALLOWANCES> 5,396
<INVENTORY> 32,354
<CURRENT-ASSETS> 101,510
<PP&E> 33,377
<DEPRECIATION> 14,849
<TOTAL-ASSETS> 121,379
<CURRENT-LIABILITIES> 33,547
<BONDS> 22,101
0
0
<COMMON> 86
<OTHER-SE> 64,790
<TOTAL-LIABILITY-AND-EQUITY> 121,379
<SALES> 106,968
<TOTAL-REVENUES> 106,968
<CGS> 68,159
<TOTAL-COSTS> 68,159
<OTHER-EXPENSES> 26,035
<LOSS-PROVISION> 5,513
<INTEREST-EXPENSE> 1,775
<INCOME-PRETAX> 10,987
<INCOME-TAX> 4,345
<INCOME-CONTINUING> 6,642
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,642
<EPS-PRIMARY> .79
<EPS-DILUTED> .78
</TABLE>
