<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From _____ To _____
Commission File Number: 0-25560
ACT Manufacturing, Inc.
-----------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2777507
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(State or other jurisdiction of (IRS Employer ID. No.)
incorporation or organization)
2 Cabot Road 01749
Hudson, Massachusetts -----
--------------------- (Zip code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (978) 567-4000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock 9,058,500 Shares
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(Class) (Outstanding on November 9, 1998)
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ACT MANUFACTURING, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1 -- Financial Statements:
Condensed Consolidated Statements of Operations for the three months ended
September 30, 1998 and 1997 and the nine months ended September 30, 1998
and 1997................................................................. 3
Condensed Consolidated Balance Sheets as of September 30, 1998 and
December 31, 1997........................................................ 4
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998 and 1997........................................ 5
Notes to Condensed Consolidated Financial Statements....................... 6
ITEM 2 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 9
PART II. OTHER INFORMATION
ITEM 6 -- Exhibits and Reports on Form 8-K................................. 19
Signatures................................................................. 20
Exhibit Index.............................................................. 21
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PART I. FINANCIAL INFORMATION
ACT MANUFACTURING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED--IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------
1998 1997
--------------------- ----------------------
<S> <C> <C>
Net sales...................................... $ 78,887 $ 62,306
Cost of goods sold............................. 73,066 58,916
---------- ----------
Gross profit................................... 5,821 3,390
Selling, general and administrative expenses... 3,985 3,915
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Operating income (loss)........................ 1,836 (525)
Interest and other (income) expense, net....... 509 507
---------- ----------
Income (loss) before provision for
income taxes................................. 1,327 (1,032)
Provision (benefit) for income taxes........... 531 (412)
---------- ----------
Net income (loss).............................. $ 796 $ (620)
========== ==========
Basic net income (loss) per common share....... $ 0.09 $ (0.07)
========== ==========
Diluted net income (loss) per common share..... $ 0.09 $ (0.07)
========== ==========
Weighted average shares outstanding--basic..... 9,062,946 9,049,613
========== ==========
Weighted average shares outstanding--diluted... 9,156,061 9,049,613
========== ==========
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------
1998 1997
--------------------- ----------------------
Net sales...................................... $ 214,003 $ 204,919
Cost of goods sold............................. 202,224 182,992
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Gross profit................................... 11,779 21,927
Selling, general and administrative expenses... 10,442 9,728
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Operating income............................... 1,337 12,199
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Interest and other (income) expense, net....... 1,744 1,577
---------- ----------
Income (loss) before provision for
income taxes................................. (407) 10,622
Provision (benefit) for income taxes........... (163) 4,249
---------- ----------
Net income (loss).............................. $ (244) $ 6,373
========== ==========
Basic net income (loss) per common share....... $ (0.03) $ 0.72
========== ==========
Diluted net income (loss) per common share.... $ (0.03) $ 0.69
========== ==========
Weighted average shares outstanding--basic..... 9,062,946 8,852,659
========== ==========
Weighted average shares outstanding--diluted... 9,062,946 9,175,430
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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ACT MANUFACTURING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
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ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents........................... $ 5,735 $ 5,165
Accounts receivable, net............................ 68,271 42,362
Inventory........................................... 48,076 39,951
Prepaid expenses and other assets................... 2,551 1,195
Income taxes refundable............................. 300 8,417
Deferred taxes...................................... 1,729 1,509
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Total current assets............................. 126,662 98,599
PROPERTY AND EQUIPMENT--Net........................... 12,720 8,006
GOODWILL--Net......................................... 5,688 6,129
OTHER ASSETS --Net.................................... 817 805
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TOTAL................................................. $145,887 $113,539
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable bank................................... $ -- $ 40,206
Current portion of long-term debt................... 404 442
Accounts payable.................................... 59,954 18,557
Accrued compensation and related taxes.............. 2,598 1,657
Accrued expenses.................................... 2,757 2,689
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Total current liabilities........................ 65,713 63,551
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LONG-TERM DEBT--Less current portion.................. 530 730
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NOTE PAYABLE BANK 30,728 --
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STOCKHOLDERS' EQUITY:
Common stock........................................ 91 91
Additional paid-in capital.......................... 39,327 39,327
Accumulated other comprehensive income.............. (94) 4
Retained earnings................................... 9,592 9,836
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Total stockholders' equity....................... 48,916 49,258
-------- --------
TOTAL................................................. $145,887 $113,539
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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ACT MANUFACTURING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
------------------------------------
ENDED SEPTEMBER 30,
------------------------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................................... $ (244) $ 6,373
--------- ---------
Adjustments to reconcile net income to net cash provided by (used for) operating
activities:
Deferred taxes................................................................ (220) 148
Depreciation and amortization................................................. 2,186 1,404
Increase (decrease) in cash from:
Accounts receivable--trade................................................... (25,909) (5,030)
Inventory.................................................................... (8,125) (5,683)
Prepaid expenses and other assets............................................ (1,619) (1,288)
Accounts payable............................................................. 41,397 5,765
Accrued expenses............................................................. 1,009 (2,780)
Income tax refundable........................................................ 8,117 --
--------- ---------
Total adjustments........................................................... 16,836 (7,464)
--------- ---------
Net cash provided by (used for) operating activities............................. 16,592 (1,091)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment.......................................... (6,196) (1,691)
Acquisitions, net of cash acquired............................................. -- (1,529)
Increase (decrease) in other assets............................................ (12) (208)
--------- ---------
Net cash used for investing activities......................................... (6,208) (3,428)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line-of-credit agreements..................................... 176,526 187,408
Repayments under line-of-credit agreements..................................... (186,004) (181,104)
Repayments of long-term debt................................................... (238) (1,157)
Net proceeds from sale of stock................................................ -- 479
--------- ---------
Net cash provided by (used for) financing activities............................ (9,716) 5,626
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS.......................... (98) (46)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................ 570 1,061
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..................................... 5,165 5,054
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD......................................... $ 5,735 $ 6,115
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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ACT MANUFACTURING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim condensed consolidated financial statements furnished
herein reflect all adjustments, which in the opinion of management are of a
normal recurring nature, necessary to fairly state the Company's financial
position, cash flows and the results of operations for the periods presented and
have been prepared on a basis substantially consistent with the audited
financial statements.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal year.
These interim condensed consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the period ending
December 31, 1997 filed with the Securities and Exchange Commission.
2. INVENTORIES
Inventories consisted of the following at:
SEPTEMBER 30, 1998 DECEMBER 31, 1997
-------------------- ----------------------
(IN THOUSANDS)
Raw material............ $38,578 $27,904
Work in process......... 9,154 11,370
Finished goods.......... 344 677
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Total................ $48,076 $39,951
======= =======
3. NET INCOME (LOSS) PER COMMON SHARE
In the fourth quarter of 1997, the Company adopted SFAS No. 128, "Earnings per
Share." This Statement requires dual presentation of net income per common
share-basic and diluted. Basic net income per common share is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted net income per common
share reflects the potential dilution as if common equivalent shares outstanding
(common stock options) were exercised and converted into common stock. 1997
figures have been restated to conform to SFAS No. 128.
4. NEW FINANCIAL ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS
No. 130 establishes standards for reporting comprehensive income and its
components in the consolidated financial statements. SFAS No. 131 establishes
standards for reporting information on operating segments in interim and annual
financial statements. The Company adopted SFAS No. 130 during the first quarter
of 1998 and will adopt the disclosure requirements of SFAS 131 in its year end
financial statements. The comprehensive income for the three months ended
September 30, 1998 was $695,000 and the comprehensive loss for the nine months
ended September 30, 1998 was $342,000.
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5. INDEBTEDNESS
On October 16, 1998, the Company announced that it had executed a new $55
million Senior Secured Credit Facility ("Credit Facility") to replace the
Company's $50 million loan and security agreement outstanding on September 30,
1998. This new Credit Facility provides for borrowings up to an aggregate
amount of $55 million, limited to a certain percentage of qualified accounts
receivable and qualified inventory. Interest is payable monthly. Through
December 31, 1998, the Company may choose an interest rate of either (i) 0.25%
above the prime rate as announced by the bank or (ii) 2.25% above the prevailing
Eurodollar rate. Commencing January 1, 1999, the Company may choose an interest
rate which will range from (i) 0 to 0.75% above the prime rate as announced by
the bank or (ii) 1.50% to 2.75% above the prevailing Eurodollar rate depending
upon the average borrowing base availability of the Company. The Credit Facility
requires the Company to maintain certain levels of minimum availability and to
maintain certain minimum fixed charge coverage ratios and maximum leverage
ratios. In addition to certain other prohibited actions, the Credit Facility
also limits capital expenditures by the Company and prohibits the payment of
cash dividends on the Company's capital stock.
The Company leases certain equipment used in its manufacturing operations
under a Master Lease Agreement dated October 27, 1992 between the Company and
BancBoston Leasing, Inc. ("BancBoston Leasing"), as amended from time to time
(the "Equipment Lease"). Since the execution of the Equipment Lease, BancBoson
Leasing has sold and assigned to Citizens Leasing Corporation ("Citizens
Leasing") a portion of the equipment leased to the Company under the Equipment
Lease. The Company has been in default under the Equipment Lease as of
September 30, 1997 because of the default position under its then loan and
security agreement.
On October 14, 1998, the Company entered into a Forbearance Agreement with
BancBoston Leasing pursuant to which the Company has agreed to: (i) provide
additional security for the Equipment Lease; (ii) repay all amounts owed to
BancBoston Leasing under the Equipment Lease on or before February 28, 1999; and
(iii) pay to BancBoston Leasing a forbearance fee in the amount of $25,000.
On October 14, 1998, the Company entered into an Extension and Master Lease
Amendment Agreement with Citizens Leasing pursuant to which the Company has
agreed to: (i) repay all amounts owed to Citizens Leasing under the Equipment
Lease on or before March 1, 1999; and (ii) pay to Citizens Leasing a
forbearance fee in the amount of $75,000.
The Company entered into a $17 million interest rate swap agreement on
October 15, 1998 simultaneous with the execution of the Credit Facility. The
swap agreement provides for payment by the Company of a fixed rate of interest
of 6.32% and matures on October 19, 2001.
The Company had operating losses for the first quarter of 1998 and the third
and fourth quarters of 1997. As a result of such losses, the Company was in
default as of December 31, 1997 and September 30, 1998 with certain financial
covenants under its then loan and security agreement. The Company's banks
waived compliance with such covenants as of December 31, 1997. Due to the nature
of the financial covenants, the Company reclassified all its long-term bank debt
of $40.2 million at December 31, 1997, to a current liability. As the Company
entered into a new Credit Facility on October 15, 1998 the Company classified
all the Credit Facility liability of $30.7 million as a long term liability.
6. CONTINGENCIES
On February 27, 1998 the Company and certain of the Company's officers and
directors were named in a purported securities class action lawsuit filed in the
United States District Court for the District of Massachusetts (the "Class
Action"). On October 16, 1998 an amended complaint was filed in the Class
Action. Like the original complaint, the amended complaint alleges that the
defendants knowingly made misstatements to the investing public about the
Company's inventory and the accuracy of its accounting practices. The amended
complaint claims that those alleged misstatements were made during the period
April 17, 1997 through March 31, 1998. The Company believes the allegations in
the amended complaint are without merit and intends to vigorously contest
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<PAGE>
them.
Although the Company denies all material allegations in the amended complaint
and intends to vigorously defend against all claims brought against it, the
ultimate outcome, including amount of possible loss, if any, of litigation
cannot be determined at this time. No provision for any liability that may
result from this litigation has been made in the Condensed Consolidated
Financial Statements. While the Company does not believe that this litigation
will have a material adverse affect on the Company's business and results of
operations, given the preliminary stages of the litigation there can be no
assurance as to the ultimate outcome of these matters.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the accompanying condensed
consolidated financial statements for the periods specified and the associated
notes. Further reference should be made to the Company's Annual Report on Form
10-K for the period ending December 31, 1997.
OVERVIEW
ACT Manufacturing, Inc. provides value-added electronics manufacturing
services for original equipment manufacturers ("OEMs") in the networking,
computer, telecommunications, industrial and medical equipment markets. The
Company provides OEMs with complex printed circuit board ("PCB") assembly
primarily utilizing advanced surface mount technology ("SMT"), mechanical and
molded cable and harness assembly, electro-mechanical sub-assembly, and total
system assembly and integration. The Company targets moderate-volume production
runs of the complex, leading-edge commercial market applications of emerging and
established OEMs, which generally require technologically-advanced and flexible
manufacturing as well as a higher degree of value-added services. These
applications are generally characterized by multiple configurations and high PCB
densities. As an integral part of its service to OEM customers, the Company
provides advanced manufacturing and test engineering, flexible materials
management, and comprehensive test services, as well as product repair,
packaging, order fulfillment and distribution services.
The Company expanded the geographic scope of its operations through two
strategic acquisitions in June 1997. The Company acquired substantially all of
the assets and liabilities of Electronic Systems International, located in
Norcross, Georgia. Electronic Systems International provides electronics
manufacturing services to OEMs based primarily in the Southeastern United States
consisting of PCB assembly, electro-mechanical subassembly and total system
assembly. The Company also acquired Advanced Component Technologies Limited
(f.k.a. SignMax Limited), located in Dublin, Ireland. Advanced Component
Technologies Limited provides electronics manufacturing services primarily
consisting of cable and harness assembly. The operating results of the acquired
businesses are included in the Company's Condensed Consolidated Statement of
Operations since dates of acquisition.
The Company manufactures at six leased facilities having an aggregate of
258,000 square feet. Four of the facilities are located in Massachusetts. In
the first quarter of 1998, the Company occupied and began manufacturing in a
45,000 square foot addition to its Hudson, Massachusetts facilities. In the
second quarter of 1997, the Company acquired operations with leased facilities
in Norcross, Georgia, and Dublin, Ireland. In the second quarter of 1998, the
Company began manufacturing in a new 45,000 square foot leased facility in
Dublin, Ireland, and consolidated operations from the existing Dublin facility
into the new plant. In the fourth quarter of 1998, the Company expects to
occupy and begin manufacturing in a new 66,000 square foot leased facility in
Norcross, Georgia, and consolidate operations from the existing Norcross
facility into the new plant.
As of September 30, 1998, the Company had 1,035 employees, up from 985
employees at December 31, 1997.
The Company typically recognizes revenue upon shipment to customers. The
Company generally does not obtain long-term purchase orders or commitments from
its customers, and, accordingly, works with its customers to anticipate delivery
dates and future volume of orders based on customer forecasts. The level and
timing of orders placed by the Company's OEM customers vary due to customer
attempts to manage inventory, changes in the OEM's manufacturing strategy and
variation in demand for customer products due to, among other things,
introduction of new products, product life cycles, competitive conditions or
industry or general economic conditions. The Company may source components for
product assemblies based on customer forecasts. However, the Company's policy is
that customers are responsible for materials and associated acquisition costs in
the event of a significant reduction, delay or cancellation of orders from the
forecasted amounts.
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<PAGE>
RESULTS OF OPERATIONS--THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Net sales increased 26.6% to $78.9 million for the three month period ended
September 30, 1998 compared with $62.3 million for the same period in 1997. The
increase was attributable principally to increased sales from the cable and
harness and printed circuit board operations primarily due to additional sales
volume with existing customers and new business development.
Gross profit increased 71.7% to $5.8 million for the three months ended
September 30, 1998 compared with $3.4 million for the same period in 1997. The
gross margin was 7.4% and 5.4% for the three months ended September 30, 1998 and
1997, respectively. This increase was attributable to a higher absorption of
manufacturing overhead, the positive impact of the Company's cost management
programs and a favorable product mix.
Selling, general and administrative ("SG&A") expenses increased 1.8% to $4.0
million, or 5.1% of net sales, for the three months ended September 30, 1998
compared with $3.9 million, or 6.3% of net sales, for the three months ended
September 30, 1997. SG&A as a percent of sales for the three months ended
September 30, 1998 was lower than the corresponding period in 1997 reflecting
the fact that SG&A expense for the two periods remained relatively constant due
to the Company's cost management programs, while net sales increased in the
three months ended September 30, 1998 for the reasons set forth above.
Operating income increased to $1.8 million or 2.3% of net sales, for the
three months ended September 30, 1998 compared with an operating loss of
$525,000 for the same period in 1997 as a result of the above factors.
Interest and other expense of $509,000 and $507,000 remained essentially the
same for the three months ended September 30, 1998 and 1997, respectively.
RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Net sales increased 4.4% to $214.0 million for the nine month period ended
September 30, 1998 from $204.9 million for the same period in 1997. The
increase was attributable principally to increased sales from the cable and
harness and printed circuit board operations due to additional sales volume with
existing customers and new business development.
Gross profit decreased 46.3% to $11.8 million for the nine months ended
September 30, 1998 compared with $21.9 million for the same period in 1997. The
gross margin was 5.5% and 10.7% for the nine months ended September 30, 1998 and
1997, respectively. This decrease was attributable to a change in product mix
with shipments of lower margin products higher than anticipated and lower than
anticipated shipments both in the first half of 1998 resulting in manufacturing
overhead absorption issues, and higher than normal manufacturing efficiency
variances.
Selling, general and administrative ("SG&A") expenses increased 7.3% to $10.4
million, or 4.9% of net sales, for the nine months ended September 30, 1998
compared with $9.7 million, or 4.7% of net sales, for the nine months ended
September 30, 1997. The increase in SG&A expenses as a percentage of net sales
for the nine months ended September 30, 1998 compared with the same period in
1997 reflects the additional investment in the sales and marketing programs at
the Company and increased charges related to banking, legal, audit and
consulting fees.
Operating income decreased to $1.3 million for the nine months ended
September 30, 1998 compared with operating income of $12.2 million for the same
period in 1997 as a result of the above factors.
Interest and other expense of $1.7 million and $1.6 million remained
relatively constant for the nine months ended September 30, 1998 and 1997,
respectively.
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $60.9 million at September 30, 1998
compared with $35.0 million at December 31, 1997. The increase in working
capital at September 30, 1998 is essentially due to the reclassification of the
$30.7 million note payable from short term to long term as a result of the
execution of a new $55 million Senior Secured Credit Facility ("Credit
Facility"). Operating activities provided $16.6 million of cash for the first
nine months of 1998 compared with a use of $1.1 million for the comparable
period in 1997. Net cash provided by operating activities for the first nine
months of 1998 consisted principally of increases in accounts payable and income
tax refundable, offset by increases in accounts receivable and inventory and the
net loss for the period. Cash provided from operating activities in the first
nine months of 1998 was used primarily to purchase equipment and leasehold
improvements of $6.2 million, principally at the Company's new Dublin, Ireland,
facility and to pay down net $9.5 million of the Company's bank line of credit
prior to executing the new Credit Facility.
On a consolidated basis, the Company had secured revolving credit facilities
of $50.0 million at September 30, 1998, of which $30.7 million was then utilized
and an additional $14.0 million would have been available for use as of
September 30, 1998 based upon the applicable borrowing base, subject, however,
to the covenant default as of September 30, 1998 under such credit facility. In
addition, at September 30, 1998 the Company's equipment lease line of $20.0
million had $4.1 million available for use and $15.9 million utilized for
outstanding commitments. In May 1998, the Company entered into a $5.0 million
operating lease line agreement for the purchase of certain equipment in the
Dublin, Ireland, facility. At September 30, 1998, approximately $4.9 million had
been utilized for outstanding commitments.
On October 16, 1998, the Company announced that it had executed a new $55
million Senior Secured Credit Facility ("Credit Facility") to replace the
Company's $50 million loan and security agreement outstanding on September 30,
1998. This new Credit Facility provides for borrowings up to an aggregate amount
of $55 million, limited to a certain percentage of qualified accounts receivable
and qualified inventory. Interest is payable monthly. Through December 31, 1998,
the Company may choose an interest rate of either (i) 0.25% above the prime rate
as announced by the bank or (ii) 2.25% above the prevailing Eurodollar rate.
Commencing January 1, 1999, the Company may choose an interest rate which will
range from (i) 0% to 0.75% above the prime rate as announced by the bank or (ii)
1.50% to 2.75% above the prevailing Eurodollar rate depending upon the average
borrowing base availability of the Company. The Credit Facility requires the
Company to maintain certain levels of minimum availability and to maintain
certain minimum fixed charge coverage ratios and maximum leverage ratios. In
addition to certain other prohibited actions, the Credit Facility also limits
capital expenditures by the Company and prohibits the payment of cash dividends
on the Company's capital stock.
The Company leases certain equipment used in its manufacturing operations
under a Master Lease Agreement dated October 27, 1992 between the Company and
BancBoston Leasing, Inc. ("BancBoston Leasing"), as amended from time to time
(the "Equipment Lease"). Since the execution of the Equipment Lease, BancBoston
Leasing has sold and assigned to Citizens Leasing Corporation ("Citizens
Leasing") a portion of the equipment leased to the Company under the Equipment
Lease. The Company has been in default under the Equipment Lease as of
September 30, 1997 because of the default position under its then loan and
security agreement.
On October 14, 1998, the Company entered into a Forbearance Agreement with
BancBoston Leasing pursuant to which the Company has agreed to: (i) provide
additional security for the Equipment Lease; (ii) repay all amounts owed to
BancBoston Leasing under the Equipment Lease on or before February 28, 1999; and
(iii) pay to BancBoston Leasing a forbearance fee in the amount of $25,000.
On October 14, 1998, the Company entered into an Extension and Master Lease
Amendment Agreement with Citizens Leasing pursuant to which the Company has
agreed to: (i) repay all amounts owed to Citizens Leasing under the Equipment
Lease on or before March 1, 1999; and (ii) pay to Citizens Leasing a forbearance
fee in the amount of $75,000.
The Company entered into a $17 million interest rate swap agreement on
October 15, 1998, simultaneous with the execution of the Credit Facility. The
swap agreement provides for payment by the Company of a fixed rate of interest
of 6.32% and matures on October 19, 2001.
YEAR 2000 READINESS DISCLOSURE STATEMENTS
The Company and the companies with which it does business utilize computer
software programs and operating systems and embedded technology in the conduct
of their operations. Many computer software programs and operating systems and
much technology in use today are unable to distinguish between the year 2000 and
the year 1900 because they use a two-digit shorthand to define the applicable
year. This is commonly known as the Year 2000 problem or issue. If the Company
does not properly identify and correct its Year 2000 issues prior to January 1,
2000, the operations of the Company could be materially disrupted, due to, among
other things, an inability to process transactions, send invoices, receive and
record inventory or payments, or engage in similar normal business activities.
In addition, the Company's operations could also be significantly disrupted if
the companies with which it does business are not Year 2000 compliant on a
timely basis, and such failure adversely affects their ability to do business
with the Company. Any of these Year 2000 failures or disruptions could have a
material adverse effect on the Company's business, financial condition or
results of operations.
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<PAGE>
To address these issues the Company has undertaken an extensive project to
assess and remediate the areas within its business and operations which could be
adversely affected by Year 2000 issues, including its information technology
("IT") and non-IT systems and processes. The first stage of the project is (i)
to determine the extent of the Company's Year 2000 problem by reviewing all of
the Company's software and embedded technology to determine if any of this
software and technology use the two-digit shorthand and (ii) to determine
whether companies with which it does significant business will be Year 2000
compliant on a timely basis. The next stage in the project will be to correct
or replace and test all such software and technology of the Company and to
address the Year 2000 issues identified at the Company's vendors and customers,
as appropriate. The project is being conducted by the Company using internal and
external resources. Finally, the Company will determine the need to formulate
and revise contingency plans based on the results of its assessment and
remediation efforts with regard to its own Year 2000 issues as well as those of
its customers and suppliers.
The Company is near completion of the assessment stage of the project and
will commence the remediation stage promptly upon its completion. The Company
has also begun discussions regarding Year 2000 compliance with its vendors and
customers, and has not been informed by any vendor or customer of material Year
2000 compliance problems which could cause a material disruption in the
Company's operations. The Company expects to complete the assessment phase of
its own Year 2000 issues in the fourth quarter of 1998 and will continue to
assess and monitor the Year 2000 readiness of its customers and suppliers.
Based on its review to date, the Company expects the total cost of its Year
2000 assessment and remediation project to range from approximately $400,000 -
$600,000, of which approximately $100,000 has been expensed to date. The
Company's current expectations regarding the total cost of its Year 2000 project
are subject to change as the project progresses and more detailed information is
developed regarding the remediation efforts necessary to make the Company Year
2000 compliant on a timely basis. The source of the funds for the Company's Year
2000 project is operating cash flow and no other material Company IT project has
been deferred as a result of the Year 2000 project. The Company currently does
not believe that internal Year 2000 issues will have a material adverse effect
on the Company's business.
There can be no assurance, however, that the Company's plans and programs to
become Year 2000 compliant will succeed in their entirety, or be completed on a
timely basis or that the use of the Company's internal resources to complete the
project will not adversely effect other aspects of the Company's business. The
Company's ability to implement its Year 2000 compliance plan and to make the
necessary modifications or replacements may be adversely affected by a number of
factors outside the control of the Company, including the availability and cost
of trained personnel and the ability of such personnel to acquire Year 2000
compliant systems and otherwise to locate and correct all relevant computer
codes. In addition, there can be no assurance that one or more of the Company's
vendors or customers won't have material Year 2000 compliance problems. If
either the Company or any of its customers or suppliers fail to become Year 2000
compliant on a timely basis, or if the costs to the Company are significantly
greater than currently anticipated, the result could be a significant disruption
in the Company's business due to a failure in the systems designed to allow the
Company to process transactions, invoice and receive payments, receive inventory
from suppliers or engage in similar business practices. Such failure would
result in a material adverse effect on the Company's business, financial
condition or results of operations.
NEW FINANCIAL ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards Nos. 130 and 131, "Reporting Comprehensive
Income" and "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 130" and "SFAS 131," respectively). SFAS 130 provides
standards for reporting items considered to be comprehensive income and uses the
term "other comprehensive income" to refer to revenues, expenses, gains and
losses that under generally accepted accounting principles are included in
comprehensive income but excluded from net income. SFAS 131 requires new
standards for reporting information about operating segments. The Company
adopted SFAS No. 130 during the first quarter of 1998 and will adopt the
disclosure requirements of SFAS 131 in its year end financial statements.
- 12 -
<PAGE>
CAUTIONARY STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the "Act") contains
certain safe harbors regarding forward-looking statements. From time to time,
information provided by the Company or statements made by its employees may
contain "forward-looking" information which involve risk and uncertainties.
Any statements in this Quarterly Report on Form 10-Q that are not statements of
historical fact are forward-looking statements (including, but not limited to,
statements concerning the Company's Year 2000 plans, expectations, compliance
and costs, the characteristics and growth of the Company's market and customers,
the Company's expectations, objectives and plans for future operations, the
Company's ability to cost effectively manage manufacturing processes, and the
Company's expected results of operations, financial condition, liquidity and
capital resources). The following cautionary statements should be considered
carefully in evaluating the Company and its business. The factors discussed in
these cautionary statements, among other factors, could cause actual results to
differ materially from those contained in the forward-looking statements made in
this Quarterly Report on Form 10-Q and presented elsewhere by management from
time to time. These cautionary statements are being made pursuant to the
provisions of the Act and with the intention of obtaining the benefits of the
safe harbor provisions of the Act.
Customer and Market Concentration; Dependence on Electronics Industry
For the nine months ended September 30, 1998, the Company's six largest
customers accounted for approximately 73% of the Company's net sales. Sales to
Ascend, EMC and Bay Networks were approximately 19%, 18% and 16%, respectively,
of the Company's net sales for such period. For the first nine months of 1997,
the Company's five largest customers accounted for approximately 75% of the
Company's net sales. Sales to Bay Networks, Ascend, EMC and 3Com were
approximately 32%, 12%, 12%and 12%, respectively, of the Company's net sales for
the same period in 1997. The Company's results will depend to a significant
extent on the success achieved by its OEM customers in marketing their products
and the Company's ability to diversify its customer base in order to reduce its
reliance on particular customers. There can be no assurance that the Company's
principal customers will continue to purchase products and services from the
Company at current levels, if at all, or that the Company will be able to
consistently expand its customer base to make up any sales shortfalls from such
major customers and increase overall revenue. The loss of one or more major
customers, a significant reduction in purchases from such customers,
discontinuance by any major customer of products manufactured by the Company,
the failure to expand its customer base or developments adverse to the Company's
customers or their products could have a material adverse effect on the
Company's business, financial condition and results of operations. For example,
during the second half of 1997 the Company experienced a reduction in, and then
a termination of, business with 3Com. In addition, the Company could be
adversely affected if a major customer were unable or unwilling to pay for
products and services on a timely basis or at all.
The Company's customer base has historically been concentrated in a limited
number of segments within the electronics industry. Net sales to customers
within the networking segment accounted for over 50% of the Company's net sales
in each of 1996, 1997 and and the first nine months of 1998. These industry
segments, and the electronics industry as a whole, are subject to intense
competition, consolidation, rapid technological changes, significant
fluctuations in product demand, relatively short product life-cycles, and
consequent product obsolescence. Developments adverse to such industry segments
could have a negative effect on the Company. The industry segments served by the
Company are also subject to economic cycles and have in the past experienced,
and are likely in the future to experience, recessionary periods. A recessionary
period or other event leading to excess capacity or downturn affecting the
electronics industry generally or one or more of the industry segments served by
the Company would likely result in intensified price competition, reduced gross
margins and a decrease in net sales, all of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
- 13 -
<PAGE>
Variability of Customer Requirements; Nature and Extent of
Customer Commitments on Orders
The level and timing of orders placed by the Company's OEM customers vary due
to customer attempts to manage inventory, changes in the OEM's manufacturing
strategy and variation in demand for customer products due to, among other
things, introduction of new products, product life cycles, competitive
conditions or industry or general economic conditions. The Company generally
does not obtain long-term purchase orders or commitments from its customers and,
accordingly, works with its customers to anticipate delivery dates and future
volume of orders based on customer forecasts. The Company relies on its
estimates of anticipated future volumes when making commitments regarding the
levels of business that it will seek and accept, the timing of production
schedules, the purchase of inventory and the levels and utilization of personnel
and other resources. From time to time, the Company will purchase certain
components without a customer commitment to pay for them. The Company may source
components for product assemblies based on customer forecasts. However, the
Company's policy is that customers are responsible for materials and associated
acquisition costs in the event of a significant reduction, delay or cancellation
of orders from the forecasted amounts. In the event a customer is unwilling or
unable or not obligated to reimburse the Company for materials costs in the case
of a significant variance from forecast, the Company's business, financial
condition and results of operations could be materially and adversely affected.
A variety of conditions, both specific to the individual customer and generally
affecting the customer's industry, may cause customers to cancel, reduce or
delay orders that were either previously made or anticipated. Significant or
numerous cancellations, reductions or delays in orders by a customer or group of
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.
Fluctuations in Operating Results
The Company's operating results have varied and may continue to fluctuate
significantly from period to period, including on a quarterly basis. The
variability of the level and timing of orders from, and shipments to, major
customers may result in significant periodic and quarterly fluctuations in the
Company's results of operations. A substantial portion of net sales in a given
quarter may depend on obtaining and fulfilling orders for assemblies to be
manufactured and shipped in the same quarter in which those orders are received.
Further, a significant portion of net sales in a given quarter may depend on
assemblies configured, completed, packaged and shipped in the final weeks of
such quarter. In addition to the variability resulting from the short-term
nature of its customers' commitments, other factors have contributed, and may in
the future contribute, to such fluctuations. These factors include, among other
things, customers' announcement and introduction of new products or new
generations of products, evolutions in the life cycles of customers' products,
timing of expenditures in anticipation of future orders, cost effectiveness in
managing manufacturing processes, changes in cost and availability of labor and
components, efficiencies achieved by the Company in managing inventory and fixed
assets, a shift in the Company's product assembly mix which results in
fluctuating margins, capacity utilization, inventory obsolescence, currency
exchange rate movements, acquisitions and related charges and expenses,
competition in the electronics manufacturing services market, trends in the
electronics industry and changes or anticipated changes in economic conditions.
An interruption in manufacturing resulting from shortages of parts or equipment,
fire, earthquake or other natural disaster, equipment failure or otherwise could
have a material adverse effect on the Company's business, financial condition
and results of operations. Because the Company's operating expenses are based on
anticipated revenue levels and a high percentage of the Company's operating
expenses are relatively fixed, any unanticipated shortfall in revenue in a
quarter may have a material adverse impact on the Company's business, financial
condition and results of operations for that quarter. Management's failure to
cost effectively manage its manufacturing processes and its level of inventory
also could have a material adverse effect on the Company's business, financial
condition and results of operations. Results of operations in any period should
not be considered indicative of the results to be expected for any future
period.
As a result of the foregoing or other factors, it is possible that in some
future period the Company's results of operations will fail to meet the
expectations of securities analysts or investors, and the price of the Common
Stock would then be materially and adversely affected.
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<PAGE>
Competition
The electronics manufacturing services industry is highly competitive. The
Company competes against numerous U.S. and foreign electronics manufacturing
services providers with global operations. The Company also faces competition
from a number of electronics manufacturing services providers who operate on a
local or regional basis. In addition, current and prospective customers
continually evaluate the merits of manufacturing products internally. Certain of
the Company's competitors have substantially greater manufacturing, financial,
systems, sales and marketing resources than the Company. Also, due to the trend
in consolidation within the industry, the Company faces larger and more
geographically diverse competitors who have combined resources with which to
compete against the Company. In addition, these competitors may have the
ability to respond more quickly to new or emerging technologies, may adapt more
quickly to changes in customer requirements and may devote greater resources to
the development, promotion and sale of their services than the Company. The
Company may be operating at a cost disadvantage compared to manufacturers who
have greater direct buying power from component suppliers or who have lower cost
structures. The Company's manufacturing processes are generally not subject to
significant proprietary protection, and companies with significant resources or
international operations may enter the market. Increased competition could
result in price reductions, reduced margins or loss of market share, any of
which could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company believes that the principal
competitive factors in the segments of the electronics manufacturing services
industry in which it operates are technology, service, manufacturing capability,
quality, geographic location, price, reliability, timeliness in delivering
finished products and flexibility in adapting to customers' needs. There can be
no assurance that competition from existing or potential competitors will not
have a material adverse effect on the Company's business, financial condition
and results of operations.
Management of Growth
The Company has grown rapidly in recent years and expects to continue to
expand its operations. Such growth has placed, and will continue to place,
significant strain on the Company's management, operations, technical,
financial, systems, marketing and other resources. The Company's ability to
manage its growth will require it to continue to invest in its operational,
financial and management information systems, as well as to develop further the
management skills of its managers and supervisors and to retain, motivate and
effectively manage its employees. In addition, as a result of an inventory
shortfall occurring in the fourth quarter of 1997, the Company has reviewed and
continues to review its security procedures and operating and financial controls
and, based upon such review, has implemented and expects to continue to identify
opportunities to implement enhanced procedures and controls. There can be no
assurance, however, that the controls implemented by management will function as
expected or will result in the cost savings anticipated by management. If the
Company's management is unable to manage growth effectively, the quality of the
Company's services and products, its ability to retain key personnel and its
results of operations could be materially and adversely affected. Competition
for personnel is intense, and there can be no assurance that the Company will be
able to attract, assimilate or retain additional highly qualified employees in
the future, especially senior managers, engineering and sales personnel. The
failure to hire and retain such personnel could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Cautionary Statements--Acquisitions and Geographic
Expansion."
Dependence Upon Key Personnel and Skilled Employees
The Company's future success will be largely dependent upon the skills and
efforts of John A. Pino, its President and Chief Executive Officer, and other
key executives as well as its managerial, sales and technical employees. None of
the senior management or other key employees of the Company is subject to any
employment contract or noncompetition agreement and the Company does not
maintain any key-man life insurance on any of its key executives. The loss of
services of any of its executives or other key personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, continued growth of the Company will require that,
despite significant competition, it attract, motivate and retain additional
skilled and experienced managerial, sales and technical personnel. There can be
no assurance that the Company will be able to
- 15 -
<PAGE>
attract, motivate and retain personnel with the skills and experience needed to
successfully manage the Company's business and operations.
Expansion of Facilities and Manufacturing Capacity
The Company believes its long-term competitive position depends in part on its
ability to increase manufacturing capacity. The Company may obtain such
additional capacity through acquisitions or through expansion of its current
facilities. The Company's lease for its Norcross, Georgia, facility expired in
June 1998. The Company has extended the lease term on this facility until the
operation is relocated to a new 66,000 square foot leased facility in Norcross,
Georgia, currently under construction. In the fourth quarter of 1998, the
Company expects to occupy and begin manufacturing in this new facility. There
can be no assurance that such relocation will be successfully completed on time,
within the Company's expected expense budgets or without disruption to its
operation. The acquisition and expansion of additional facilities from time to
time will require substantial additional capital, and there can be no assurance
that such capital will be available. Further, there can be no assurance that the
Company will be able to acquire sufficient capacity or successfully integrate
and manage such additional facilities. In addition, the Company's expansion of
its manufacturing capacity has significantly increased and will continue to
significantly increase its fixed costs, and the future profitability of the
Company will depend on its ability to utilize its manufacturing capacity in an
effective manner. The failure to obtain sufficient capacity or to successfully
integrate and manage additional manufacturing facilities could adversely impact
the Company's relationships with its customers, limit the Company's growth
opportunities and materially and adversely affect the Company's business,
financial condition and results of operations.
Acquisitions and Geographic Expansion
In June 1997, the Company acquired substantially all of the assets and
liabilities of Electronic Systems International, located in Norcross, Georgia.
The acquired company provides electronics manufacturing services, primarily
consisting of PCB assembly, electro-mechanical subassembly and total systems
assembly to customers based primarily in the Southeastern United States. Also in
June 1997, the Company completed the acquisition of Advanced Component
Technologies Limited (f.k.a. SignMax Limited), located in Dublin, Ireland.
Advanced Component Technologies Limited provides electronics manufacturing
services primarily consisting of cable and harness assembly. The Company has
limited experience in managing geographically dispersed operations, in
integrating acquired companies into its operations, in expanding the scope of
operations of acquired businesses, and in operating in the Southeastern United
States or internationally. Therefore, there can be no assurance that the Company
will operate the acquired businesses profitably in the future.
The Company may expand into other geographical areas within the United States
and internationally by acquiring additional electronics manufacturing services
providers or by establishing new manufacturing operations in such areas. The
Company may compete for acquisition and expansion opportunities with entities
having significantly greater resources than the Company. Any such transactions
may result in the potentially dilutive issuance of equity securities, the
incurrence of debt and amortization expenses related to goodwill and other
intangible assets, and other costs and expenses, all of which could materially
and adversely affect the Company's business, financial condition and results of
operations following such a transaction. Such transactions also involve numerous
business risks, including difficulties in the assimilation of the operations,
technologies and products of the acquired companies, the diversion of
management's attention from other business concerns and the potential loss of
key employees from the combined company. Therefore, there can be no assurance
that the key employees and businesses of acquired companies will be successfully
integrated with the Company, that any acquired business will contribute
significantly to the Company's sales or earnings, or that sales and earnings of
the Company will not be adversely effected by the integration process or other
factors.
- 16 -
<PAGE>
Availability of Key Components
The Company and many of its customers rely on a single or limited number of
third-party suppliers for many components used in the assembly process. The
Company does not have any long-term supply agreements. Shortages of certain
electronic components have occurred from time to time. In addition, due to the
Company's utilization of just-in-time inventory techniques, the timely
availability of many components to the Company is dependent on the Company's
ability to continuously develop accurate forecasts of customer volume
requirements. Component shortages could result in manufacturing and shipping
delays or increased component prices which could have a material adverse effect
on the Company's business, financial condition and results of operations. To the
extent that the Company is unable to timely obtain key components for the
reasons cited above or otherwise, the Company's business, financial condition
and results of operations could be materially and adversely affected. See "Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations--Cautionary Statements--Risks of International Operations."
Technological Change and Process Development
The market for the Company's manufacturing services is characterized by
rapidly changing technology and evolving process development. The continued
success of the Company's business will depend in large part upon its ability to
maintain and enhance its technological capabilities, develop and market
manufacturing services which meet changing customer needs and successfully
anticipate or respond to technological changes in manufacturing processes on a
cost-effective and timely basis. Although management believes that the Company's
operations utilize the assembly and testing technologies and equipment currently
required by the Company's customers, there can be no assurance that the
Company's process development efforts will be successful or that the emergence
of new technologies, industry standards or customer requirements will not render
the Company's equipment, inventory or processes obsolete or noncompetitive. In
addition, to the extent that the Company determines that new assembly and
testing technologies and equipment are required to remain competitive, the
acquisition and implementation of such technologies and equipment may require
significant expense or capital investment by the Company.
Risks of International Operations
The Company acquired in 1997 and then expanded operations in Dublin, Ireland,
and may in the future expand into other geographic regions. The Company also
purchases a significant number of components manufactured in foreign countries.
Because of the scope of its international operations, the Company is subject to
numerous risks, including economic or political disruptions and instability,
transportation delays and interruptions, foreign exchange rate fluctuations,
employee turnover and labor unrest, longer payment cycles, greater difficulty in
collecting accounts receivable, and less developed infrastructure, any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations. Changes in policies by the U.S. or foreign
governments resulting in, among other things, increased duties, increased
regulatory requirements, higher taxation, currency conversion limitations,
restrictions on the transfer of funds, the imposition of tariffs, or limitations
on imports or exports could also have a material adverse effect on the Company's
business, financial condition and results of operations. The Company could also
be adversely affected if the current policies encouraging foreign investment or
foreign trade by its host countries were to be reversed.
Litigation
On February 27, 1998 the Company and certain of the Company's officers and
directors were named in a purported securities class action lawsuit filed in the
United States District Court for the District of Massachusetts (the "Class
Action"). On October 16, 1998 an amended complaint was filed in the Class
Action. Like the original complaint, the amended complaint alleges that the
defendants knowingly made misstatements to the investing public about the
Company's inventory and the accuracy of its accounting practices. The amended
complaint claims that those alleged misstatements were made during the period
April 17, 1997 through March 31, 1998. The Company believes the allegations in
the amended complaint are without merit and intends to vigorously contest
- 17 -
<PAGE>
them.
Although the Company denies all material allegations in the amended complaint
and intends to vigorously defend against all claims brought against it, the
ultimate outcome, including amount of possible loss, if any, of litigation
cannot be determined at this time. No provision for any liability that may
result from this litigation has been made in the Condensed Consolidated
Financial Statements. While the Company does not believe that this litigation
will have a material adverse affect on the Company's business and results of
operations, given the preliminary stages of the litigation there can be no
assurance as to the ultimate outcome of these matters.
Significant Influence of Principal Stockholder
John A. Pino, the Company's President and Chief Executive Officer, and
certain trusts for the benefit of members of his family beneficially own
approximately 60% of the outstanding Common Stock. As a result, Mr. Pino will be
able to exert significant influence over the Company through his ability to
influence the election of directors and all other matters that require action by
the Company's stockholders. The voting power of these stockholders under certain
circumstances could have the effect of preventing or delaying a change in
control of the Company.
Environmental Compliance
The Company is subject to a variety of environmental regulations relating to
the use, storage, discharge and disposal of hazardous chemicals used during its
manufacturing process. A failure by the Company to comply with present and
future regulations could subject it to future liabilities or the suspension of
production. Such regulations could also restrict the Company's ability to expand
its facilities or could require the Company to acquire costly equipment or to
incur other significant expenses to comply with environmental regulations.
- 18 -
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT DESCRIPTION
- ------------------- -----------
10.1 Credit Agreement dated October 14, 1998 between the
Company, ACT Manufacturing Securities Corporation and
The Chase Manhattan Bank, as agent.
10.2 Revolving Credit Note from the Company in favor of The
Chase Manhattan Bank.
10.3 Revolving Credit Note from the Company in favor of
National Bank of Canada.
10.4 Security Agreement dated October 14, 1998 between the
Company, ACT Manufacturing Securities Corporation and
The Chase Manhattan Bank, as agent.
10.5 Pledge Agreement dated October 14, 1998 between the
Company and The Chase Manhattan Bank, as agent.
10.6 Share Pledge Agreement dated October 14, 1998 between the
Company and The Chase Manhattan Bank, as agent.
10.7 ISDA Master Agreement dated October 14, 1998 between the
Company and The Chase Manhattan Bank.
10.8 Stock Purchase Agreement dated October 13, 1998 between
the Company and Advanced Component Technologies Limited.
10.9 Subordinated Loan Agreement dated October 13, 1998
between the Company and Advanced Component Technologies
Limited.
10.10 Restated Second Amendment to Agreement of Lease dated
November 6, 1998 between the Company and John A. Pino,
Trustee of Re-Act Realty Trust.
10.11 Restated Lease Amendment and Third Amendment to Agreement
of Lease dated November 6, 1998 between the Company and
John A. Pino, Trustee of Re-Act Realty Trust.
10.12 Letter Agreement dated October 14, 1998 between the
Company and BancBoston Leasing.
10.13 Letter Agreement dated October 14, 1998 between the
Company and Citizens Leasing.
11. Computation of Net Income (Loss) Per Common Share
27. Financial Data Schedule
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the quarter ended
September 30, 1998.
- 19 -
<PAGE>
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.
November 16, 1998 ACT MANUFACTURING, INC.
-----------------------------------
/s/ Douglass C. Greenlaw
-----------------------------------
Douglass C. Greenlaw
Vice President of Finance and Administration
and Chief Financial Officer
(Principal Financial and Accounting Officer)
- 20 -
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------------------- -----------
10.1 Credit Agreement dated October 14, 1998 between the
Company, ACT Manufacturing Securities Corporation and
The Chase Manhattan Bank, as agent.
10.2 Revolving Credit Note from the Company in favor of The
Chase Manhattan Bank.
10.3 Revolving Credit Note from the Company in favor of
National Bank of Canada.
10.4 Security Agreement dated October 14, 1998 between the
Company, ACT Manufacturing Securities Corporation and
The Chase Manhattan Bank, as agent.
10.5 Pledge Agreement dated October 14, 1998 between the
Company and The Chase Manhattan Bank, as agent.
10.6 Share Pledge Agreement dated October 14, 1998 between the
Company and The Chase Manhattan Bank, as agent.
10.7 ISDA Master Agreement dated October 14, 1998 between the
Company and The Chase Manhattan Bank.
10.8 Stock Purchase Agreement dated October 13, 1998 between
the Company and Advanced Component Technologies Limited.
10.9 Subordinated Loan Agreement dated October 13, 1998
between the Company and Advanced Component Technologies
Limited.
10.10 Restated Second Amendment to Agreement of Lease dated
November 6, 1998 between the Company and John A. Pino,
Trustee of Re-Act Realty Trust.
10.11 Restated Lease Amendment and Third Amendment to Agreement
of Lease dated November 6, 1998 between the Company and
John A. Pino, Trustee of Re-Act Realty Trust.
10.12 Letter Agreement dated October 14, 1998 between the
Company and BancBoston Leasing.
10.13 Letter Agreement dated October 14, 1998 between the
Company and Citizens Leasing.
11. Computation of Net Income (Loss) Per Common Share
27. Financial Data Schedule
<PAGE>
Exhibit 10.1
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
by and among
ACT MANUFACTURING, INC.
(THE "BORROWER"),
ACT MANUFACTURING SECURITIES CORPORATION
(THE "SUBSIDIARY GUARANTOR"),
THE LENDING INSTITUTIONS PARTY HERETO
(THE "LENDERS"),
AND
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE, DOCUMENTATION, COLLATERAL AND SYNDICATION AGENT
(THE "AGENT")
DATED AS OF OCTOBER 14, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS ........................... 1
Section 1.01. Definitions ............................................. 1
Section 1.02. Accounting Principles ................................... 18
Section 1.03. Directly or Indirectly .................................. 18
Section 1.04. Construction ............................................ 18
ARTICLE 2. THE CREDIT .............................................. 18
Section 2.01. The Revolving Credit Loans .............................. 18
Section 2.02. Making the Revolving Credit Loans ....................... 19
Section 2.03. Principal Repayment of Revolving Credit Loans ........... 19
Section 2.04. Permitted Acquisitions .................................. 20
Section 2.05. Mandatory Prepayments ................................... 20
Section 2.06. Interest ................................................ 22
Section 2.07. Eurodollar Interest Periods ............................. 22
Section 2.08. Conversions ............................................. 22
Section 2.09. Voluntary Prepayments ................................... 23
Section 2.10. Uncollected Funds Compensation .......................... 23
Section 2.11. Termination of Revolving Credit Commitments ............. 23
Section 2.12. Certain Notices ......................................... 23
Section 2.13. Calculation of Borrowing Base ........................... 24
Section 2.14. Settlement Between Agent and Lenders .................... 24
Section 2.15. Fees .................................................... 24
Section 2.16. Payments Generally ...................................... 25
Section 2.17. Purpose ................................................. 25
ARTICLE 3. YIELD PROTECTION; ILLEGALITY; ETC ....................... 25
Section 3.01. Additional Costs ........................................ 25
Section 3.02. Limitation on Types of Loans ............................ 26
Section 3.03. Illegality .............................................. 27
Section 3.04. Certain Base Rate Loans pursuant to(S)(S) 3.01 and 3.03 . 27
Section 3.05. Certain Compensation..................................... 27
Section 3.06. Mitigation Obligations .................................. 27
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
ARTICLE 4. CONDITIONS PRECEDENT .................................... 28
Section 4.01. Documentary Conditions Precedent ........................ 28
Section 4.02. Additional Conditions Precedent ......................... 30
Section 4.03. Deemed Representations .................................. 30
ARTICLE 5. REPRESENTATIONS AND WARRANTIES .......................... 30
Section 5.01. Incorporation, Good Standing and Due Qualification ...... 30
Section 5.02. Corporate Power and Authority; No Conflicts ............. 31
Section 5.03. Legally Enforceable Agreements .......................... 31
Section 5.04. Litigation .............................................. 31
Section 5.05. Financial Statements .................................... 31
Section 5.06. Ownership and Liens ..................................... 31
Section 5.07. Existing Indebtedness ................................... 32
Section 5.08. Taxes ................................................... 32
Section 5.09. ERISA ................................................... 32
Section 5.10. Subsidiaries and Affiliates ............................. 32
Section 5.11. Operation of Business ................................... 32
Section 5.12. No Default on Outstanding Judgments or Orders ........... 32
Section 5.13. No Defaults on Other Agreements ......................... 32
Section 5.14. Labor Disputes and Acts of God .......................... 33
Section 5.15. Investment Company Act .................................. 33
Section 5.16. Environmental Matters ................................... 33
Section 5.17. Regulation U ............................................ 33
Section 5.18. No Guaranties or Indemnities ............................ 33
ARTICLE 6. AFFIRMATIVE COVENANTS ................................... 33
Section 6.01. Maintenance of Existence ................................ 33
Section 6.02. Conduct of Business...................................... 33
Section 6.03. Maintenance of Properties ............................... 33
Section 6.04. Maintenance of Records; Fiscal Year ..................... 33
Section 6.05. Maintenance of Insurance ................................ 34
Section 6.06. Compliance with Laws..................................... 34
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
Section 6.07. Right of Inspection...................................... 34
Section 6.08. Reporting Requirements .................................. 34
Section 6.09. Special Periodic Reports ................................ 36
Section 6.10. Reports on Disputes and Federal Contracts ............... 36
Section 6.11. Physical Inventories; Inventory and Equipment
Appraisals and Field Audits ......................... 37
Section 6.12. Cooperation and Further Assurance ....................... 37
Section 6.13. Deposits Into Collateral Account ........................ 37
Section 6.14. Lock Box Operation ...................................... 37
Section 6.15. Year 2000 Compliance..................................... 37
ARTICLE 7. NEGATIVE COVENANTS ...................................... 38
Section 7.01. Sale of Assets .......................................... 38
Section 7.02. Stock of Subsidiaries, Etc .............................. 38
Section 7.03. Mergers, Etc ............................................ 38
Section 7.04. Dividends ............................................... 38
Section 7.05. Liens ................................................... 38
Section 7.06. Transactions with Affiliates............................. 39
Section 7.07. Hazardous Materials; Indemnification .................... 39
Section 7.08. Acquisitions ............................................ 40
Section 7.09. Subsidiaries ............................................ 40
Section 7.10. Certain Investments...................................... 40
Section 7.11. Indebtedness ............................................ 40
Section 7.12. Guarantees, Etc ......................................... 40
Section 7.13. Subordinated Indebtedness ............................... 41
Section 7.14. Restrictive Agreements .................................. 41
Section 7.15. Capital Expenditures..................................... 41
Section 7.16. Foreign Exchange Obligations............................. 41
ARTICLE 8. FINANCIAL COVENANTS ..................................... 42
Section 8.01. Minimum Availability..................................... 42
Section 8.02. Fixed Charge Coverage Ratio ............................. 42
-iii-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
Section 8.03. Leverage Ratio .......................................... 42
Section 8.04. Minimum Net Income ...................................... 42
ARTICLE 9. EVENTS OF DEFAULT ....................................... 43
Section 9.01. Events of Default ....................................... 43
Section 9.02. Remedies ................................................ 44
ARTICLE 10. GUARANTY ................................................ 45
Section 10.01. The Guarantee ........................................... 45
Section 10.02. Obligations Unconditional ............................... 45
Section 10.03. Reinstatement ........................................... 46
Section 10.04. Subrogation.............................................. 46
Section 10.05. Remedies ................................................ 46
Section 10.06. Instrument for the Payment of Money ..................... 46
Section 10.07. Continuing Guarantee .................................... 46
Section 10.08. General Limitation on Guarantee Obligations ............. 46
ARTICLE 11. THE AGENT; RELATIONS AMONG LENDERS AND BORROWER ......... 47
Section 11.01. Appointment, Powers and Immunities of Agent ............. 47
Section 11.02. Reliance by Agent ....................................... 47
Section 11.03. Defaults ................................................ 47
Section 11.04. Rights of Agent as a Lender ............................. 48
Section 11.05. Indemnification of Agent ................................ 48
Section 11.06. Documents ............................................... 48
Section 11.07. Non-Reliance on Agent and Other Lenders ................. 48
Section 11.08. Failure of Agent to Act ................................. 49
Section 11.09. Resignation or Removal of Agent ......................... 49
Section 11.10. Amendments Concerning Agency Function ................... 49
Section 11.11. Liability of Agent ...................................... 49
Section 11.12. Transfer of Agency Function ............................. 49
Section 11.13. Non-Receipt of Funds by the Agent ....................... 49
Section 11.14. Withholding Taxes ....................................... 50
Section 11.15. Several Obligations and Rights of Lenders ............... 50
-iv-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
Section 11.16. Pro Rata Treatment of Loans, Etc ....................... 50
Section 11.17. Sharing of Payments Among Lenders ...................... 51
Section 11.18. Enforcement of Facility Documents ...................... 51
Section 11.19. Borrowing Base Statements, Etc ......................... 52
ARTICLE 12. MISCELLANEOUS .......................................... 52
Section 12.01. Amendments and Waivers ................................. 52
Section 12.02. Usury .................................................. 52
Section 12.03. Expenses ............................................... 52
Section 12.04. Survival ............................................... 53
Section 12.05. Assignment; Participations ............................. 53
Section 12.06. Notices ................................................ 55
Section 12.07. Table of Contents; Headings ............................ 55
Section 12.08. Severability ........................................... 55
Section 12.09. Counterparts ........................................... 55
Section 12.10. Governing Law .......................................... 56
Section 12.11. Incorporation By Reference; Conflicts .................. 56
Section 12.12. Jurisdiction, Venue and Service ........................ 56
Section 12.13. Waiver of Jury Trial ................................... 56
-v-
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Authorization Letter
Exhibit C Form of Weekly Collateral Certificate
Exhibit D Form of Monthly Borrowing Base Certificate
Exhibit E Form of Security Agreement
Exhibit F Form of Pledge Agreement
Exhibit G Form of Assignment and Acceptance
Exhibit H Form of Opinion of Counsel
Exhibit I Form of Compliance Certificate
Exhibit J Form of Irish Share Pledge Agreement
Schedule I List of Lenders and Revolving Credit Commitments
Schedule 2.17 List of Indebtedness to be Refinanced
Schedule 4.01(a) List of Security Documents
Schedule 4.01(p) List of Equipment Leases
Schedule 5.04 List of Pending or Threatened Litigation
Schedule 5.06 List of Outstanding Liens
Schedule 5.07 List of Outstanding Indebtedness, Guaranties and Indemnities
Schedule 5.10 List of Subsidiaries and Affiliates
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of October 14, 1998 among ACT MANUFACTURING,
INC., a Massachusetts corporation (the "Borrower"), ACT MANUFACTURING SECURITIES
--------
CORPORATION, a Massachusetts corporation (the "Subsidiary Guarantor"), the
--------------------
financial institutions identified on Schedule I hereto (the "Initial Lenders")
---------- ---------------
and such other financial institutions as may from time to time become parties
hereto, as lenders, and THE CHASE MANHATTAN BANK, as administrative,
documentation, collateral and syndication agent for the Lenders (in such
capacities, together with its successors in such capacities, the "Agent").
-----
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS
Section 1.01. Definitions. As used in this Agreement the following terms
-----------
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa):
---- -----
"Account" means any account receivable or right of the Borrower or any of
-------
its Subsidiaries to payment for goods sold or leased or for services rendered,
regardless of how such right is evidenced and whether or not it has been earned
by performance, whether secured or unsecured, now existing or hereafter arising,
and the proceeds thereof.
"Acquisition" means any transaction pursuant to which the Borrower or any
-----------
of its Subsidiaries: (a) acquires equity securities (or warrants, options or
other rights to acquire such securities) of any corporation (other than the
Borrower or any corporation which is then a Subsidiary of the Borrower),
pursuant to a solicitation of tenders therefor, or in one or more negotiated
block, market or other transactions not involving a tender offer, or a
combination of any of the foregoing; (b) makes any corporation a Subsidiary of
the Borrower, or causes any such corporation to be merged into the Borrower or
any of its Subsidiaries, in any case pursuant to a merger, purchase of assets or
any reorganization providing for the delivery or issuance to the holders of such
corporation's then outstanding securities, in exchange for such securities, of
cash or securities of the Borrower or any of its Subsidiaries, or a combination
thereof; or (c) purchases all or substantially all of the business or assets of
any corporation.
"Adjusted Base Rate" means, for any day, an interest rate per annum
------------------
(rounded upwards, if necessary), to the next 1/16 of 1%) equal to the greater of
(a) the Prime Rate in effect on such day, and (b) the Federal Funds Rate in
effect on such day plus 1/2 of 1%. Any change in the Adjusted Base Rate due to
----
a change in the Prime Rate or the Federal Funds Rate shall be effective from and
including the effective date of such change in the Prime Rate or the Federal
Funds Rate, respectively.
"Adjusted Eurodollar Rate" means, with respect to any Borrowing for any
------------------------
Eurodollar Interest Period, an interest rate per annum (rounded upwards, if
necessary), to the next 1/16 of 1%) equal to (a) the Eurodollar Rate for such
Eurodollar Interest Period multiplied by (b) the Statutory Reserve Rate.
"Affiliate" means any Person which directly or indirectly through one or
---------
more intermediaries Controls, or is Controlled by, or is under common Control
with, the Borrower.
"Agent" has the meaning set forth in the preamble to this Agreement.
-----
<PAGE>
"Agreement" means this Credit Agreement, as amended or supplemented from
---------
time to time. References to Articles, Sections, Exhibits, Schedules and the
like refer to the Articles, Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise indicated.
"Applicable Commitment Fee Rate" means a rate of interest per year
------------------------------
(expressed in basis points), equal to:
(a) For the period from the date hereof through December 31, 1998, thirty-
seven and one-half (37.5) basis points.
(b) For each of the Fiscal Quarters ended March 31, 1999, June 30, 1999 and
September 30, 1999, and the two month period ended November 30, 1999, the
Applicable Commitment Fee Rate set forth below which corresponds to the Average
Availability of the Borrower for the most recently ended Fiscal Quarter:
- --------------------------------------------------------------------------------
Applicable Commitment Fee Rate
Average Availability in Basis Points per year
- --------------------------------------------------------------------------------
Less than $7,500,000 50
- --------------------------------------------------------------------------------
Greater than or equal to $7,500,000
but less than $17,501,000 37.5
- --------------------------------------------------------------------------------
Greater than $17,501,000 25
- --------------------------------------------------------------------------------
(c) For each Applicable Commitment Fee Rate Period (as defined below)
commencing with the Payment Period starting on December 1, 1999, the Applicable
Commitment Fee Rate set forth below which corresponds to the Leverage Ratio of
the Borrower as of the most recently ended Fiscal Quarter:
- --------------------------------------------------------------------------------
Applicable Commitment Fee Rate
Leverage Ratio in Basis Points per year
- --------------------------------------------------------------------------------
Greater than 2.74:1.00 50
- --------------------------------------------------------------------------------
Greater than or equal to 2.50:1.00 37.5
but less than or equal to 2.74:1.00
- --------------------------------------------------------------------------------
Less than 2.50:1.00 25
- --------------------------------------------------------------------------------
Anything in this Agreement to the contrary notwithstanding, after the occurrence
and during the continuance of any Default or Event of Default, then the
Applicable Commitment Fee Rate shall equal fifty (50) basis points.
"Applicable Commitment Fee Rate Period" means each period beginning on the
-------------------------------------
first Banking Day of the month following the date on which the Agent receives
the Compliance Certificate required to be delivered by the Borrower pursuant to
(S) 6.08(d) and the corresponding financial statements required to
-2-
<PAGE>
be delivered by the Borrower pursuant to (S) 6.08(b) for the most recently ended
Fiscal Quarter, and ending on the day immediately preceding the commencement of
the Applicable Commitment Fee Rate Period.
"Applicable Margin" means the Base Rate Margin in respect of each Base Rate
-----------------
Loan and the Eurodollar Margin in respect of each Eurodollar Loan.
"Assignment and Acceptance" means an assignment and acceptance entered into
-------------------------
by a Lender and an Eligible Assignee and accepted by the Agent in accordance
with (S) 11.05 and in substantially the form of Exhibit G hereto.
---------
"Authorization Letter" means the letter agreement executed by the Borrower
--------------------
in the form of Exhibit B hereto.
---------
"Availability" means, as of any date of determination thereof, the amount
------------
by which (a) the Borrowing Base exceeds (b) the sum of the outstanding amount of
all Revolving Credit Loans, the Letter of Credit Exposure, all Reimbursement
Obligations, the Foreign Exchange Exposure, the Interest Rate Protection Reserve
and accrued interest, fees, charges and expenses.
"Available Funds" means all deposits in the Collateral Account which shall
---------------
have been made by 2:00 p.m. on a Banking Day, or such later time in any Banking
Day as the Agent shall have expressly consented to.
"Average Availability" means, for any Fiscal Quarter of the Borrower, the
--------------------
average daily Availability during such period. In determining "Average
Availability" the Agent shall rely upon (a) the Weekly Collateral Certificates
required to be delivered to the Agent by the Borrower pursuant to Section 6.09
hereof, and (b) the actual daily outstanding amount of all Revolving Credit
Loans, the Letter of Credit Exposure, all Reimbursement Obligations, the Foreign
Exchange Exposure, the Interest Rate Protection Reserve and accrued interest,
fees, charges and expenses.
"BancBoston Leasing LC" means that certain standby Letter of Credit issued
---------------------
by Chase for the account of the Borrower and for the benefit of BancBoston
Leasing, Inc. in the principal amount of $750,000.
"Banking Day" means any day on which commercial banks are not authorized or
-----------
are not required to be closed in New York, New York and whenever such day
relates to a Eurodollar Loan or notice with respect to any Eurodollar Loan, a
day on which dealings in Dollar deposits are also carried out in the London
interbank market.
"Base Rate Loan" means any Loan hereunder bearing interest at a rate based
--------------
upon the Adjusted Base Rate.
"Base Rate Margin" means a rate of interest per year (expressed in basis
----------------
points) equal to:
(a) For the period from the date hereof through December 31, 1998, twenty-
five (25) basis points.
(b) For each of the Fiscal Quarters ended March 31, 1999, June 30, 1999 and
September 30, 1999, and the two month period ended November 30, 1999, the Base
Rate Margin set forth below which corresponds to the Average Availability of the
Borrower for the most recently ended Fiscal Quarter:
-3-
<PAGE>
- --------------------------------------------------------------------------------
Base Rate Margin
Average Availability in Basis Points per year
- --------------------------------------------------------------------------------
Less than $4,000,000 75
- --------------------------------------------------------------------------------
Greater than or equal to $4,000,000
but less than $7,501,000 50
- --------------------------------------------------------------------------------
Greater than or equal to $7,501,000
but less than $20,000,000 25
- --------------------------------------------------------------------------------
Greater than $20,000,000 0
- --------------------------------------------------------------------------------
(c) For each Base Rate Margin Period (as defined below) commencing with the
Base Rate Margin Period starting on December 1, 1999, the Base Rate Margin set
forth below which corresponds to the Leverage Ratio of the Borrower as of the
most recently ended Fiscal Quarter:
- --------------------------------------------------------------------------------
Base Rate Margin
Leverage Ratio in Basis Points per year
- --------------------------------------------------------------------------------
Greater than 2.74:1.00 50
- --------------------------------------------------------------------------------
Greater than or equal to 2.25:1.00
but less than or equal to 2.74:1.00 25
- --------------------------------------------------------------------------------
Less than 2.25:1.00 0
- --------------------------------------------------------------------------------
"Base Rate Margin Period" means each period beginning on the first Banking
-----------------------
Day of the month following the date on which the Agent receives the Compliance
Certificate required to be delivered by the Borrower pursuant to (S) 6.08(d) and
the corresponding financial statements required to be delivered by the Borrower
pursuant to (S) 6.08(b) for most recently ended Fiscal Quarter, and ending on
the day immediately preceding the commencement of the next Base Rate Margin
Period.
"Borrower" means the entity identified as the "Borrower" in the preamble to
--------
this Agreement, together with any and all of its successors and assigns.
"Borrowing Base" means the sum in United States Dollars of the following
--------------
determined as of the latest Borrowing Base Certificate delivered to the Agent:
(a) up to 85% of the aggregate amount of Qualified Accounts, plus
(b) the lesser of (i) $15,000,000 and (ii) the sum of (A) up to 60%
of the aggregate amount of Qualified Raw Material and Finished
Goods Inventory and (B) the lesser of (1) up to 25% of the
aggregate amount of Qualified Excess Inventory and (2) the
Qualified Excess Inventory Cap Amount;
-4-
<PAGE>
in each case as calculated by the Agent from time to time; provided, however,
that the Agent, in its sole discretion, may on notice to the Borrower
redetermine the Borrowing Base including, but not limited to, altering the
percentages of Qualified Accounts, Qualified Raw Material and Finished Goods
Inventory, and Qualified Excess Inventory Value included in the Borrowing Base.
"Borrowing Base Certificate" means and includes the Weekly Collateral
--------------------------
Certificate delivered by the Borrower to the Agent in substantially the form of
Exhibit C and the Monthly Borrowing Base Certificate delivered by the Borrower
- ---------
to the Agent in substantially the form of Exhibit D.
---------
"Capital Expenditures" means, for any fiscal period and in respect of any
--------------------
Person, the dollar amount of gross expenditures (including Capitalized Rentals)
made for fixed assets, real property, plant and equipment, and all renewals,
improvements and replacements thereto (but not repairs thereof) which are deemed
to be capital expenditures in accordance with GAAP and which are incurred during
such period.
"Capitalized Lease" means any lease the obligation for Rentals with respect
-----------------
to which is required to be capitalized on a consolidated or combined balance
sheet of the lessee and its subsidiaries or related entities in accordance with
GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
-------------------
determination thereof the amount at which the aggregate present value of future
Rentals due and to become due under all Capitalized Leases under which such
Person is a lessee would be reflected as a liability on a consolidated or
combined balance sheet of such Person in accordance with GAAP.
"Cash Equivalents" means any of the following, to the extent owned by the
----------------
Borrower or any of its Subsidiaries free and clear of all Liens other than Liens
created under the Security Documents: (a) readily marketable direct obligations
of the Government of the United States or any agency or instrumentality thereof
or obligations unconditionally guaranteed by the full faith and credit of the
Government of the United States having a maturity of not greater than 360 days
from the date of issuance thereof: (b) insured certificates of deposit of, or
time deposits having a maturity of not greater than 360 days from the date of
issuance thereof with, any commercial bank that is a Lender or a member of the
Federal Reserve System, issues (or the parent of which issues) commercial paper
rated as described in clause (c), is organized under the laws of the United
States or any State thereof and has combined capital and surplus of at least $1
billion; or (c) commercial paper having a maturity of not greater than 180 days
from the date of issuance thereof in an aggregate amount of no more than
$2,500,000 per issuer outstanding at any time, issued by any corporation
organized under the laws of any State of the United States and rated at least
"Prime-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or
"A-1" (or the then equivalent grade) by Standard & Poor's Ratings Group.
"Casualty Event" means with respect to any property or asset of any person,
--------------
any loss of or damage to, or any condemnation or other taking of, such property
or asset for which such person receives insurance proceeds, or proceeds of a
condemnation award or other compensation.
"Chase" means The Chase Manhattan Bank.
-----
"Chase Office" means the office of Chase at One Chase Square, Rochester,
------------
New York, 14643.
"Closing Date" means the date this Agreement has been executed by the
------------
Borrower, the Subsidiary Guarantor, the Initial Lenders and the Agent.
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time.
-5-
<PAGE>
"Collateral" has the same meaning as ascribed to such term in the Security
----------
Documents.
"Collateral Account" means, collectively, any account of the Borrower
------------------
maintained at Chase as an account into which all proceeds of Collateral shall be
deposited pursuant to and under the Security Agreements, as modified and amended
from time to time, and pursuant to any Lock Box Agreement which the Borrower or
any of its Subsidiaries may enter into with Chase.
"Control" and "Controls" 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 holding or
owning the power to vote, or possessing the power to direct any right to vote,
or as an officer, director, employee or management consultant or other
arrangement where there is the power to direct or cause the direction of the
management and policies of a Person, and "Controlled" means to be under the
----------
Control of another Person.
"Controlled Disbursements Account" means, collectively, the following
--------------------------------
accounts: ACT Manufacturing, Inc. account #6301-494-203-509 maintained at Chase
with respect to the Borrower's Massachusetts operations, ACT Manufacturing, Inc.
account #6301-494-203-509 maintained at Chase with respect to the Borrower's
Georgia operations, and any subsequent accounts of the Borrower maintained at
Chase as a zero balance, cash management account pursuant to and under
controlled disbursement service agreements between the Borrower and Chase, and
through which all disbursements by the Borrower and any designated Subsidiaries
are made and settled on a daily basis with no uninvested balance remaining
overnight.
"Default" means any event, condition or act which, with the giving of
-------
notice or lapse of time, or both, would become an Event of Default.
"Default Margin" means (a) 375 basis points in respect of each Base Rate
--------------
Loan and (b) 575 basis points in respect of each Eurodollar Loan.
"Dollars" and the sign "$" mean lawful money of the United States of
-------
America.
"EBITDA" means for any period and in respect of any Person the sum of (a)
------
the net income of such Person for such period computed in accordance with GAAP,
plus (b) Interest Expense of such Person for such period, plus (c) the income
tax expense, as reported, of such Person for such period, plus (d) the amount
reported as the depreciation of the assets of such Person for such period
computed in accordance with GAAP, plus (e) the amount reported as the
amortization of intangibles assets of such Person for such period computed in
accordance with GAAP, and plus (f) all cash and non-cash extraordinary expenses
and losses of such Person for such period computed in accordance with GAAP,
minus (g) all cash and non-cash extraordinary income and gains of such Person
for such period, in each case as such item is used in the computation of such
Person's net income for such period.
"Effective Date" means the date on which all conditions under Article 4
--------------
shall be fully satisfied.
"Eligible Assignee" means: (a) a Lender; (b) an Affiliate of a Lender; (c)
-----------------
a commercial bank organized under the laws of the United States, or any State
thereof, and having total assets in excess of $1,000,000,000; (d) a savings and
loan association or savings bank organized under the laws of the United States,
or any State thereof, and having total assets in excess of $1,000,000,000; (e) a
commercial bank organized under the laws of any other country that is a member
of the OECD or has concluded special lending arrangements with the International
Monetary Fund associated with its General Arrangements to Borrow or of the
Cayman Islands, or a political subdivision of any such country, and having total
assets in excess of $1,000,000,000, so long as such bank is acting through a
branch or agency
-6-
<PAGE>
located in the United States; (f) the central bank of any country that is a
member of the OECD; (g) a finance company, insurance company or other financial
institution or fund (whether a corporation, partnership, trust or other entity)
that is engaged in making, purchasing or otherwise investing in commercial loans
in the ordinary course of its business and having total assets in excess of
$1,000,000,000; and (h) any other Person approved by the Agent and the Borrower,
such approval not to be unreasonably withheld or delayed; provided that no such
--------
approval of the Borrower shall be required after the occurrence and during the
continuance of a Default); and provided further, that neither the Borrower nor
-------- -------
any of its Affiliates shall qualify as an Eligible Assignee under this
definition.
"Environmental Law" shall mean the Comprehensive Environmental Response,
-----------------
Compensation and Liability Act, 42 U.S.C. Sections 9601-9657, as amended by the
Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, 100
Stat. 1613 (October 17, 1986), the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6991-6991i, as amended by the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (October 17,
1986), as the same may be amended from time to time, and any other presently
existing or hereafter enacted or decided federal, state or local statutory or
common laws relating to pollution or protection of the environment, including
without limitation, any common law of nuisance or trespass, and any law or
regulation relating to emissions, discharges, releases or threatened release of
pollutants, contaminants or chemicals or industrial, toxic or hazardous
substances or wastes into the environment (including without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or chemicals, or
industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
---------------
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"Eurodollar Loan" means any Loan Tranche when and to the extent the
---------------
interest rate therefor is determined on the basis of the "Eurodollar Rate."
"Eurodollar Interest Payment Date" means with respect to any Eurodollar
--------------------------------
Loan the last day of the Eurodollar Interest Period applicable to such
Eurodollar Loan and each day prior to the last day of such Eurodollar Interest
Period that occurs at intervals of three months' duration after the first day of
such Eurodollar Interest Period.
"Eurodollar Interest Period" means the period of time commencing on the day
--------------------------
a Eurodollar Rate is made applicable to a Loan Tranche and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Borrower may select pursuant to (S)(S) 2.07 and 2.08,
provided that each such Eurodollar Interest Period which commences on the last
Banking Day of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Banking Day of the appropriate calendar month; and provided that until such
time as Chase completes its initial syndication of the Loans to a group of banks
acceptable to Chase, the Borrower shall not be entitled to select any Eurodollar
Interest Period having a duration longer than one month.
"Eurodollar Margin" means a rate of interest per year (expressed in basis
-----------------
points) equal to:
-7-
<PAGE>
(a) For the period from the date hereof through December 31, 1998, two
hundred twenty-five (225) basis points.
(b) For each of the Fiscal Quarters ended March 31, 1999, June 30, 1999
and September 30, 1999, and the two month period ended November 30, 1999, the
Eurodollar Margin set forth below which corresponds to the Average Availability
of the Borrower for the most recently ended Fiscal Quarter:
- --------------------------------------------------------------------------------
Eurodollar Margin
Average Availability in Basis Points per year
- --------------------------------------------------------------------------------
Less than $4,000,000 275
- --------------------------------------------------------------------------------
Greater than or equal to $4,000,000
but less than $7,501,000 250
- --------------------------------------------------------------------------------
Greater than or equal to $7,501,000
but less than $17,501,000 225
- --------------------------------------------------------------------------------
Greater than or equal to $17,501,000
but less than $20,000,000 200
- --------------------------------------------------------------------------------
Greater than $20,000,000 175
- --------------------------------------------------------------------------------
(c) For each Eurodollar Margin Period (as defined below) commencing with
the Eurodollar Margin Period starting on December 1, 1999, the Eurodollar Margin
set forth below which corresponds to the Leverage Ratio of the Borrower as of
the most recently ended Fiscal Quarter:
- --------------------------------------------------------------------------------
Eurodollar Margin
Leverage Ratio in Basis Points per year
- --------------------------------------------------------------------------------
Greater than 2.74:1.00 250
- --------------------------------------------------------------------------------
Greater than or equal to 2.50:1.00
but less than or equal to 2.74:1.00 225
- --------------------------------------------------------------------------------
Greater than or equal to 2.25:1.00
but less than 2.50:1.00 200
- --------------------------------------------------------------------------------
Greater than or equal to 2.00:1.00
but less than 2.25:1.00 175
- --------------------------------------------------------------------------------
Less than 2.00: 1.00 150
- --------------------------------------------------------------------------------
To the extent that a Eurodollar Margin Period commences during the pendency of a
Eurodollar Interest Period for an existing Eurodollar Loan, the Eurodollar
Margin shall remain the same for the remainder of the Eurodollar Interest Period
for such existing Eurodollar Loan.
-8-
<PAGE>
"Eurodollar Margin Period" means each period beginning on the first Banking
------------------------
Day of the month following the date on which the Agent receives the Compliance
Certificate required to be delivered by the Borrower pursuant to (S) 6.08(d) and
the corresponding financial statements required to be delivered by the Borrower
pursuant to (S) 6.08(b) for most recently ended Fiscal Quarter, and ending on
the day immediately preceding the commencement of the next Base Rate Margin
Period.
"Eurodollar Rate" means, with respect to any Eurodollar Loan for any
---------------
Eurodollar Interest Period, the rate appearing on Page 3750 of the Telerate
Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Agent from time to time for purposes of providing quotations
of interest rates applicable to dollar deposits in the London interbank market)
at approximately 11:00 a.m., London time, two Banking Days prior to the
commencement of such Eurodollar Interest Period, as the rate for dollar deposits
with a maturity comparable to such Eurodollar Interest Period. In the event
that such rate is not available at such time for any reason, then the
"Eurodollar Rate" with respect to such Eurodollar Loan for such Eurodollar
---------------
Interest Period shall be the rate at which dollar deposits of $5,000,000 and for
a maturity comparable to such Eurodollar Interest Period are offered by the
Agent's principal London office in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, two Banking Days
prior to the commencement of such Eurodollar Interest Period.
"Event of Default" has the meaning given such term in (S) 9.01.
----------------
"Facility Documents" means this Credit Agreement, the Notes, the
------------------
Authorization Letter, all Letter of Credit documents, all Interest Rate
Protection Agreements, all foreign exchange contracts and agreements between
Chase and the Borrower or any of its Subsidiaries, and all Security Documents.
"Federal Funds Rate" means, for any day, the rate per annum (expressed on a
------------------
360 day basis of calculation) equal to the weighted average of the rates on
overnight federal funds transactions as published by the Federal Reserve Bank of
New York for such day (or for any day that is not a Banking Day, for the
immediately preceding Banking Day).
"Fiscal Month" means each fiscal month of the Borrower.
------------
"Fiscal Quarter" means each of the fiscal three month periods commencing on
--------------
the first day of the Fiscal Year and on the first day of each subsequent fiscal
three month period.
"Fiscal Year" means the fiscal year period of the Borrower, each of which
-----------
shall end on the thirty-first of December of each year. "FY" followed by a year
--
means the Fiscal Year ending in that year.
"Fixed Charge Coverage Ratio" means the ratio of the following computed for
---------------------------
any fiscal period in respect of the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP: (a) the sum of: (i) EBITDA for
such period, minus (ii) cash taxes paid during such period, minus (iii) Unfunded
Capital Expenditures made during such period, to (b) the sum of (i) scheduled
principal payments in respect of Funded Indebtedness (including, without
limitation, the Seller Obligations and all Capitalized Leases) during such
period, plus (ii) interest paid or required to be paid in cash in respect of
Funded Indebtedness (including, without limitation, the Revolving Credit Loans,
the Foreign Exchange Obligations, the Seller Obligations, and all Capitalized
Leases) during such period.
"Foreign Exchange Exposure" means, on any date of determination thereof, an
-------------------------
amount (in United States dollars calculated on the basis of the applicable
currency exchange rates in effect on such date) equal to the greater of (i) 15%
of the aggregate dollar amount of all Foreign Exchange Obligations of the
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<PAGE>
Borrower and its Subsidiaries as of such date, and (ii) the net exposure of the
Borrower and its Subsidiaries in respect of all Foreign Exchange Obligations as
of such date computed as if all underlying foreign exchange contracts and
agreements were terminated or declared to be in default as of such date (after
giving effect to all applicable netting provisions).
"Foreign Exchange Obligations" means all obligations of the Borrower or its
----------------------------
Subsidiaries pursuant to and under any and all foreign exchange contracts and
agreements to which the Borrower or any of its Subsidiaries is a party as of any
date of computation as if such foreign exchange agreement were to be terminated
or declared to be in default on such date (after giving effect to any netting
provisions).
"Foreign Intercompany Equity" means equity contributions made by the
---------------------------
Borrower or any Guarantor (as the case may be) to the Foreign Subsidiaries.
"Foreign Intercompany Indebtedness" means Indebtedness of the Foreign
---------------------------------
Subsidiaries to the Borrower or any Guarantor (as the case may be) in respect of
loans made by the Borrower or any Guarantor (as the case may be) to the Foreign
Subsidiaries.
"Foreign Subsidiaries" means Advanced Component Technologies Limited, an
--------------------
entity organized under the laws of Ireland, and such other corporations,
partnerships or limited liability companies organized under the laws of any
jurisdiction other than the United States, as may become Subsidiaries of the
Borrower from time to time with the approval of the Required Lenders.
"Funded Indebtedness" means, in respect of any Person, (a) all Indebtedness
-------------------
of such Person for borrowed money or which has been incurred in connection with
the acquisition of assets (excluding leases defined as "operating leases" under
GAAP), in each case having a final maturity of one or more than one year from
the date of origin thereof (or which is renewable or extendible at the option of
the obligor for a period or periods more than one year from the date of origin),
(b) all payments in respect of item (a) above that were required to be made
within one year prior to the date of any determination of Funded Indebtedness,
if the obligation to make such payments shall constitute a current liability of
the obligor under GAAP, (c) all Capitalized Rentals of such Person, and (d)
interest-bearing Indebtedness for borrowed money (other than Long Term
Indebtedness) having a maturity of less than one year.
"GAAP" means generally accepted accounting principles in the United States
----
of America as in effect from time to time, applied on a basis consistent with
those used in the preparation of the financial statements referred to in (S)
5.05 (except for changes concurred in by the Borrower's independent public
accountants).
"Guaranties" by any Person shall mean all obligations (other than
----------
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (a) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (b) to advance or supply
funds (i) for the purchase or payment of such Indebtedness or obligation, or
(ii) to maintain working capital or other balance sheet condition or otherwise
to advance or make available funds for the purchase or payment of such
Indebtedness or obligation, (c) to lease property or to purchase securities or
other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness or obligation, or (d) otherwise to assure the owner
of the Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect
-10-
<PAGE>
of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal
to the principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
"Guarantors" means the Subsidiary Guarantor and any other Person who from
----------
time to time agrees to guaranty the obligations of the Borrower hereunder by
executing and delivering to the Agent a Loan Guaranty, together with all of
their successors and assigns.
"Hazardous Materials" means any contaminants, hazardous substances,
-------------------
regulated substances, or hazardous wastes which may be the subject of liability
pursuant to any Environmental Law.
"Indebtedness" of any Person means and includes all obligations of such
------------
Person which in accordance with GAAP shall be classified upon a balance sheet of
such Person as liabilities of such Person, and in any event shall include all
(a) obligations of such Person for borrowed money or which have been incurred in
connection with the acquisition of property or assets, (b) obligations secured
by any Lien upon property or assets owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations, (c)
obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to repossession
or sale of property, (d) Capitalized Rentals, and (e) Guaranties of obligations
of others of the character referred to in this definition.
"Interest Expense" means, in respect of any Person for any period, all
----------------
interest paid or accrued, and all amortization of debt discount with respect to,
all Indebtedness of such Person for such period (after giving effect to the net
cost or benefit associated with all Interest Rate Protection Agreements).
"Interest Rate Protection Agreement" means any interest rate cap, swap,
----------------------------------
collar or other, similar protection agreement, foreign currency exchange
agreement, commodity price protection agreement or other interest or currency
exchange rate or commodity price hedging arrangement to which the Borrower or
any of its Subsidiaries is a party or for which the Borrower or any of its
Subsidiaries is liable, including, without limitation, that certain interest
rate swap agreement dated as of October 14, 1998 between the Borrower and Chase
with respect to $17,000,000 notional principal amount of Indebtedness.
"Interest Rate Protection Reserve" means (i) $600,000 on any date that the
--------------------------------
BancBoston Leasing LC remains outstanding, and (ii) $1,350,000 (or such lesser
or greater amount as the Agent may from time to time specify to the Borrower in
writing) on any date from and after the date of expiration or termination of the
BancBoston Leasing LC.
"Leased Premises" means all facilities and other real property leased by
---------------
the Borrower or any of its Subsidiaries.
"Lenders" means the Initial Lenders and each Person, if any, that shall
-------
become a Lender hereunder pursuant to (S) 12.05 other than any Person that
ceases to be a party hereto pursuant to an Assignment and Acceptance.
"Lending Office" means, for each Lender and for each type of Loan, the
--------------
lending office of such Lender (or of an Affiliate of such Lender) designated by
such Lender on the signature pages hereto, as the lending office of such Lender
for such type of Loan, or such other office of such Lender (or of an Affiliate
of such Lender) as such Lender may from time to time specify to the Agent and
the Borrower as the office by which such Lender's Loans of such type are to be
made and maintained.
-11-
<PAGE>
"Letters of Credit" means any standby letters of credit issued by Chase for
-----------------
the Borrower as the account party from time to time.
"Letter of Credit Exposure" means the maximum amount available to be drawn
-------------------------
under all outstanding Letters of Credit (converted to U.S. Dollars based on the
exchange rate in effect at the time the Letter of Credit Exposure is
determined).
"Leverage Ratio" means the ratio of the following computed for any period
--------------
of four consecutive fiscal quarters then ended in respect of the Borrower and
its Subsidiaries on a consolidated basis: (a) Funded Indebtedness as of the end
of such period to (b) the sum of (i) EBITDA for such period minus (ii) Unfunded
Capital Expenditures for such period.
"Lien" means 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 the common law, statute, or contract, and including but not limited
to the security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Borrower or any of its Subsidiaries shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement, Capitalized Lease or other arrangement pursuant to which title
to the property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"Loan Guaranties" means any future Guaranties executed and delivered to the
---------------
Agent by any Person, pursuant to which such Person guaranties all or any part of
the debts, liabilities and obligations of the Borrower under the Facility
Documents, and all modifications and amendments thereto.
"Loan Tranche" means any portion of the Loans outstanding under the Notes
------------
as Base Rate Loans or any portion of the Loans outstanding under the Notes as a
Eurodollar Loan having a particular Eurodollar Interest Period. Each Eurodollar
Loan outstanding under the Notes having a different Eurodollar Interest Period
shall constitute a separate Loan Tranche and all Base Rate Loans shall
constitute a single Loan Tranche. Although there will be separate Notes issued
to each Lender, all Notes taken together shall constitute a single Loan Tranche
in respect of each corresponding Loan outstanding under all Notes. If the
entire principal balance of the Loans shall be outstanding as Base Rate Loans or
as a single Eurodollar Loan, then "Loan Tranche" means the entire amount of the
Loans outstanding.
"Loans" means and includes the Revolving Credit Loans and the Reimbursement
-----
Obligations under (S)2.01(c); and "Loan" means any of the Loans.
----
"Lock Box Agreement" means an agreement pursuant to which the Agent
------------------
maintains a post office box into which customers of the Borrower remit payments
of Accounts and to which the Agent shall have sole means of access.
"Long Term Indebtedness" means, with respect to any Person, all
----------------------
Indebtedness of such Person for borrowed money, including Indebtedness which has
been incurred in connection with the acquisition of assets (excluding leases
defined as "operating leases" under GAAP), in each case having a final maturity
of one or more than one year from the date of origin thereof (or which is
renewable or extendible at the option of the obligor for a period or periods
more than one year from the date of origin).
-12-
<PAGE>
"Material Adverse Effect" means: (a) a material adverse effect on the
-----------------------
business, operations or condition (financial or otherwise) of the Borrower and
its Subsidiaries taken as a whole; (b) a material adverse effect on the ability
of the Borrower or any Guarantor to perform or comply with any of the terms and
conditions contained herein or in any other Facility Document; or (c) a material
adverse effect on the legality, validity, binding effect, enforceability or
admissibility into evidence of any Facility Document, or the ability of the
Agent or the Lenders to enforce any rights or remedies under or in connection
with any Facility Document.
"Minority Interests" means any shares of stock of any class of any
------------------
Subsidiary (other than directors' qualifying shares as required by law) that are
not owned by the Borrower and/or one or more of its Wholly-Owned Subsidiaries.
Minority Interests shall be valued as follows: (a) preferred stock shall be
valued at the voluntary or involuntary liquidating value of such preferred
stock, whichever is greater; and (b) common stock shall be valued at the book
value of capital and surplus applicable thereto adjusted, if necessary, to
reflect any changes from the book value of such common stock required by the
foregoing method of valuing Minority Interests in preferred stock.
"Multiemployer Plan" means a Plan defined as such in Section 3(37) of ERISA
------------------
to which contributions have been made by the Borrower or any ERISA Affiliate and
which is covered by Title IV of ERISA.
"Net Cash Payments" means:
-----------------
(a) with respect to any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received by
the Borrower or any of its Subsidiaries in respect of such Casualty Event net of
(A) reasonable expenses incurred by the Borrower or any of its Subsidiaries in
connection therewith and (B) contractually required repayments of Indebtedness
to the extent secured by a Lien on such property and any income and transfer
taxes payable by the Borrower or any of its Subsidiaries in respect of such
Casualty Event;
(b) with respect to any sale or other disposition of assets, the
aggregate amount of all cash payments received by the Borrower or any of its
Subsidiaries directly or indirectly in connection with such sale or other
disposition, whether at the time of such sale or disposition or thereafter under
deferred payment arrangements, including all cash payments received in respect
of investments entered into or received in connection with any such sale or
other disposition of assets; provided that
(i) Net Cash Payments shall be net of (A) the amount of any
legal, title, transfer and recording tax expenses, commissions and
other fees and expenses payable by the Borrower or any of its
Subsidiaries in connection with such sale or other disposition and (B)
any federal, state and local income or other taxes estimated to be
payable by the Borrower or any of its Subsidiaries as a result of such
sale or other disposition, but only to the extent that such estimated
taxes are in fact paid to the relevant federal, state or local
governmental authority within twelve months of the date of such sale
or other disposition; and
(ii) Net Cash Payments shall be net of any repayments by the
Borrower or any of its Subsidiaries of Indebtedness to the extent that
(I) such Indebtedness is secured by a Lien on the property that is the
subject of such sale or other disposition and (II) the transferee of
(or holder of a Lien on) such property requires that such Indebtedness
be repaid as a condition to the purchase of such property; and
(c) with respect to any sale of debt or equity securities or any
incurrence of Indebtedness, the aggregate amount of all cash proceeds received
by the Borrower or any of its
-13-
<PAGE>
Subsidiaries therefrom less all legal, underwriting, and similar fees and
expenses incurred in connection therewith.
"Notes" means the notes evidencing the Loans hereunder; and "Note" means
----- ----
any one of the Notes.
"Obligations" means all obligations of the Borrower to the Lenders and the
-----------
Agent under this Agreement or any of the other Facility Documents, including,
without limitation, all indebtedness evidenced by the Notes, all obligations
under or in respect of the Letters of Credit, all Reimbursement Obligations, all
Foreign Exchange Obligations and all obligations under or in respect of any
Interest Rate Protection Agreements, together with all accrued and unpaid
interest, fees, expenses and charges payable by Borrower hereunder or under any
of the other Facility Documents.
"OECD" means the Organization for Economic Cooperation and Development.
----
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
----
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business trust,
------
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or maintained,
----
or to which contributions have been made, by the Borrower or any ERISA Affiliate
and which is covered by Title IV of ERISA or to which Section 412 of the Code
applies.
"Prime Rate" means that rate of interest from time to time announced by the
----------
Agent at its principal office as its prime commercial lending rate. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate being charged to any customer of the Agent.
"Prohibited Transaction" means any transaction set forth in Section 406 of
----------------------
ERISA or Section 4975 of the Code.
"Qualified Accounts" means Accounts owing to the Borrower, now existing or
------------------
hereafter arising, each of which Accounts met the following specifications at
the time it came into existence and continues to meet the same until it is
collected in full:
(a) The Account is due and payable in full within 90 days, is not
unbilled or subject to bill and hold, and not more than 90 days have elapsed
since the invoice date;
(b) The Account arose from the outright sale of goods or from the
performance of services by the Borrower; such goods have been shipped to or on
behalf of the account debtor or services have been performed; the Account is
evidenced by such invoices, shipping documents or other instruments ordinarily
used in the trade as shall be reasonably satisfactory to the Agent; and no
rejection or dispute has occurred;
(c) The Account debtor either (i) is a resident of the United States
or Canada, or (ii) is one of the following Persons: EMC Ireland; Hewlett Packard
GmbH; or Omni Plastics PTE Ltd.;
(d) The Account is not subject to any assignment, claim, lien, or
security interest, except in favor of the Agent and the Lenders;
-14-
<PAGE>
(e) The Account is a valid and legally enforceable obligation of the
Account debtor and is not subject to a claim for credit, allowance, defense,
offset, chargeback, counterclaim or adjustment by the Account debtor, other than
any discount allowed for prompt payment;
(f) The Account arose in the ordinary course of business of the
Borrower and no notice of the bankruptcy, insolvency, failure, or suspension or
termination of business of the Account debtor has been received by the Borrower;
(g) The Account debtor is not an Affiliate of the Borrower or any of
its Subsidiaries or a supplier (or an Affiliate of a Supplier) of goods or
services to the Borrower or any of its Subsidiaries;
(h) The Account otherwise conforms to all representations, warranties
and other provisions of this Agreement;
(i) The Account is not due from an individual;
(j) The Account is not due from the federal government of the United
States unless all requirements of the Federal Assignment of Claims Act shall
have been fully complied with to the satisfaction of the Agent;
(k) The Account is subject to an enforceable, perfected, first
priority Lien in favor of the Agent; and
(l) The Agent in its discretion, reasonably exercised, has not deemed
the credit worthiness of the Account or Account debtor unsatisfactory;
provided, however, that if 50% or more of any Account does not meet the above
specifications, the entire amount of such Account shall not be included as a
Qualified Account.
"Qualified Excess Inventory" means "Excess Inventory" of the Borrower as
--------------------------
recorded in the Borrower's books and records, valued at the lower of cost (on
first in, first out basis) or market, excluding (i) work in process, (ii) any
goods that are the subject of any Account, (iii) any goods not in the possession
of the Borrower on premises owned or leased by the Borrower, (iv) any goods
located on premises leased by the Borrower that is not subject to a landlord's
waiver in a form reasonably acceptable to the Agent and in favor of the Lenders
and the Agent, (v) any goods subject to any lien, except a lien in favor of the
Agent, (vi) any goods located outside of the continental United States, (vii)
any goods located in a jurisdiction in which the Agent's lien has not been
perfected, (viii) any goods held by the Borrower on consignment from another
Person, or (ix) any items of inventory held by the Borrower for more than twelve
months from date such items of inventory were first recorded in the Borrower's
books and records as "Excess Inventory"; less any reserves established by the
Agent in its sole discretion.
"Qualified Excess Inventory Cap Amount" means (i) $2,000,000 at all times
-------------------------------------
from the Effective Date through December 31, 1998, (ii) $1,500,000 at all times
from January 1, 1999 through March 31, 1999, (iii) $1,000,000 at all times from
April 1, 1999 through June 30, 1999, (iv) $500,000 at all times from July 1,
1999 through September 30, 1999, and (v) $0 at all times from and after October
1, 1999.
"Qualified Raw Material and Finished Goods Inventory" means raw material
---------------------------------------------------
and finished goods inventory of the Borrower, valued at the lower of cost (on
first in, first out basis) or market, excluding (i)work in process, (ii) any
goods that are the subject of any Account, (iii) Excess Inventory (as identified
in the Borrower's books and records), (iv) any goods not in the possession of
the Borrower on premises owned or leased by the Borrower, (v) any goods located
on premises leased by the Borrower that is not
-15-
<PAGE>
subject to a landlord's waiver in a form reasonably acceptable to the Agent and
in favor of the Lenders and the Agent, (vi) any goods subject to any lien,
except a lien in favor of the Agent, (vii) any goods located outside of the
continental United States, (viii) any goods located in a jurisdiction in which
the Agent's lien has not been perfected, or (ix) any goods held by the Borrower
on consignment from another Person; less any reserves established by the Agent
in its sole discretion for matters similar (but not exclusive) to the following:
in-transit inventory, obsolete or slow moving inventory, general supplies,
seconds, and costs which are not capitalized in accordance with GAAP.
"Register" has the meaning specified in (S)12.05.
--------
"Regulation U" means Regulation U of the Board of Governors of the Federal
------------
Reserve System as in effect from time to time.
"Regulatory Change" means, with respect to any Lender, any change after the
-----------------
date of this Agreement in United States federal, state, municipal or foreign
laws or regulations (including Regulation D) or the adoption or making after
such date of any interpretations, directives or requests applying to a class of
banks including such Lender of or under any United States federal, state,
municipal or foreign laws or regulations (whether or not having the force of
law) by any court, or governmental, or monetary authority charged with the
interpretation or administration thereof.
"Reimbursement Obligation" means any obligation of the Borrower to
------------------------
reimburse the issuer of a Letter of Credit any amount paid by such issuer from
time to time pursuant to and under any Letter of Credit.
"Rentals" means and includes as of the date of any determination thereof
-------
all payments (including as such all payments which the lessee is obligated to
make to the lessor on termination of the lease or surrender of the property, and
all payments, if any, required to be paid by the lessee regardless of sales
volume or gross revenues) payable by the Borrower or any of its Subsidiaries, as
lessee or sublessee under a lease of real or personal property, but shall be
exclusive of any amounts required to be paid by the Borrower or any of its
Subsidiaries (whether or not designated as rents or additional rents) on account
of maintenance, repairs, insurance, taxes and similar charges.
"Reportable Event" has the same meaning as defined in ERISA.
----------------
"Required Lenders" means, at any time, Lenders having Loans and unused
----------------
Revolving Credit Commitments representing at least 51% of the aggregate amount
of all Loans and unused Revolving Credit Commitments Outstanding at such time;
provided that if at any time there shall exist only two Lenders, the term
"Required Lenders" shall mean both such Lenders.
"Revolving Credit Commitments" means initially $55,000,000 in the aggregate
----------------------------
with respect to the Initial Lenders and at any subsequent time, to the extent
that one or more Assignments and Acceptances have been entered into, the amount
set forth for each Lender in the Register maintained by the Agent pursuant to
(S) 12.05 as such Lender's "Revolving Credit Commitment Amount."
----------------------------------
"Revolving Credit Commitment Percentage" means for each Lender the
--------------------------------------
percentage determined by dividing such Lender's Revolving Credit Commitment
Amount by the aggregate amount of Revolving Credit Commitments.
"Revolving Credit Loan" means a Base Rate Loan or a Eurodollar Loan made
---------------------
pursuant to (S)2.01 hereof.
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<PAGE>
"Revolving Credit Obligations" means all Obligations of the Borrower
----------------------------
hereunder in respect of the Revolving Credit Loans and the Revolving Credit
Commitments.
"Revolving Credit Termination Date" means October 14, 2001; provided that
---------------------------------
if such date is not a Banking Day, such date shall be the next succeeding
Banking Day (or, if such next succeeding Banking Day falls in the next calendar
month, the immediately preceding Banking Day).
"Security Agreement" means the Security Agreement granted by the Borrower
------------------
and the Subsidiary Guarantor to the Agent, for the benefit of the Lenders, in
substantially the form of Exhibit E hereto, together with any and all future
---------
Security Agreements executed and delivered to the Agent by any Person which
shall secure any part of the debts, liabilities and obligations of the Borrower
under the Facility Documents, and all modifications and amendments thereto.
"Security Documents" means the Security Agreement, the Pledge Agreement in
------------------
substantially the form of Exhibit F hereto, the Share Pledge Agreement with
---------
respect to 65% of the Borrower's equity in Advanced Component Technologies
Limited in substantially the form of Exhibit J hereto, and the mortgages and
---------
other agreements, instruments and documents identified on Schedule 4.01(a)
----------------
hereto.
"Security Document Party" means each party to a Security Document other
-----------------------
than the Borrower or the Subsidiary Guarantor.
"Seller Obligations" means the obligations of the Borrower to make certain
------------------
payments through August 2003 to Re-Act Consulting, Donald G. Polich and Nelva
Polich under certain non-competition and consulting agreements dated August 4,
1993, the aggregate amount of which payments total approximately $2,100,000 as
of the date hereof.
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
----------------------
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board of Governors of the Federal Reserve to which the Agent
is subject with respect to the Adjusted Eurodollar Rate, for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Board of Governors of the Federal Reserve). Such reserve percentages shall
include those imposed pursuant to such Regulation D. Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Subsidiary" means, with respect to any Person (the "parent") at any date,
---------- ------
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held by the parent, or (b) that is, as of such date,
otherwise Controlled by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subordinated Indebtedness" means Indebtedness of the Borrower incurred
-------------------------
after the Effective Date with the prior written consent of the Required Lenders,
which matures in its entirety later than the
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Loans and by its terms (or by the terms of a subordination agreement) is made
subordinate and junior in right of payment to the Loans and all other
Obligations of the Borrower and its Subsidiaries under the Facility Documents.
"Uncollected Funds" means all deposits of items which shall be on deposit
-----------------
in the Collateral Account from time to time during the period from the date on
which such deposits became Available Funds to the beginning of the second
following Banking Day.
"Uncollected Funds Compensation" means the compensation payable to Chase
------------------------------
pursuant to (S)2.10 hereof.
"Unfunded Capital Expenditures" means, in respect of the Borrower and its
-----------------------------
Subsidiaries, Consolidated Capital Expenditures which are not paid for with Long
Term Indebtedness.
"Unfunded Vested Liabilities" means, with respect to any Plan, the amount
---------------------------
(if any) by which the present value of all vested benefits under the Plan
exceeds the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of the Borrower
or any ERISA Affiliate to PBGC or the Plan under Title IV of ERISA.
"Unused Commitment" means the daily average unused Revolving Credit
-----------------
Commitment of each Lender.
"Voting Stock" means securities of any class or classes, 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).
"Wholly-Owned Subsidiary" means, with respect to any person, any
-----------------------
corporation or other entity of which all of the Voting Stock is at the time of
determination owned directly or indirectly by such Person.
Section 1.02. Accounting Principles. Where the character or amount of any
---------------------
asset or liability or item of income or expense is required to be determined, or
any consolidation, combination or other accounting computation is required to be
made, for the purposes of this Agreement, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
Section 1.03. Directly or Indirectly. Where any provision in this Agreement
----------------------
refers to action to be taken or not to be taken by any Person, such provision
shall be applicable whether the action in question is taken directly or
indirectly by such Person.
Section 1.04. Construction. In the event of any inconsistency between the
------------
covenants contained in the Security Documents and the covenants contained in
this Agreement, the provisions of this Agreement shall govern and be
controlling.
ARTICLE 2. THE CREDIT
Section 2.01. The Revolving Credit Loans.
--------------------------
(a) Subject to the terms and conditions of this Agreement, each of
the Lenders severally agrees to make Revolving Credit Loans to the Borrower from
time to time from and including the date hereof to but excluding the Revolving
Credit Termination Date in an aggregate principal amount
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<PAGE>
at any one time outstanding up to but not exceeding its Revolving Credit
Commitment Amount; provided that the Revolving Credit Commitment of each Lender
to make Revolving Credit Loans hereunder is subject to the condition that (i)
the aggregate amount of all Revolving Credit Obligations (including accrued
interest and charges), all Letter of Credit Exposure, all Reimbursement
Obligations, all Foreign Exchange Exposure and the Interest Rate Protection
Reserve shall not exceed (ii) the Borrowing Base.
(b) The Revolving Credit Loans shall be evidenced by Notes of the
Borrower issued to the Initial Lenders in the form of Exhibit A, dated as of the
---------
Effective Date, payable to the order of the Initial Lenders in the aggregate
principal amount of $55,000,000 as of the Effective Date. The Revolving Credit
Loans may be assigned to, and the corresponding Revolving Credit Commitments may
be assumed by, one or more Eligible Assignees pursuant to (S)12.05, whereupon
the amounts payable to each such Lender in respect of Revolving Credit Loans
shall be evidenced by a Note in the form of Exhibit A issued to each such Lender
---------
in accordance with (S)12.05 dated as of the date of the corresponding Assignment
and Acceptance and duly completed and executed by the Borrower.
(c) Subject to the terms and conditions of this Agreement, the Agent
may issue Letters of Credit from time to time from and including the date hereof
to but excluding the Revolving Credit Termination Date up to but not exceeding
the lesser of (i) the difference between (A) the aggregate amount of all
Revolving Credit Commitments and (B) the aggregate amount of all Revolving
Credit Obligations (including accrued interest and charges), all Letter of
Credit Exposure (after giving effect to the proposed issuance of such Letters of
Credit), all Reimbursement Obligations, all Foreign Exchange Exposure and the
Interest Rate Protection Reserve, and (ii) the difference between (A) $2,000,000
and the (B) aggregate amount of the Letter of Credit Exposure which exists
immediately prior to the issuance of such Letter of Credit. No Letter of Credit
shall have an expiration date which is more than 360 days from its date of
issuance in the case of standby Letters of Credit or more than 180 days from its
date of issuance in the case of commercial Letters of Credit, and in each case,
not later than five (5) days prior to the Revolving Credit Termination Date.
Each Reimbursement Obligation shall be deemed to be a Revolving Credit Loan from
each of the Lenders in accordance with each Lender's Revolving Credit Commitment
percentage. The Agent shall notify the Lenders of the creation of any
Reimbursement Obligation within two Banking Days of any payment made by the
Agent pursuant to and under any Letter of Credit.
Section 2.02. Making the Revolving Credit Loans. Not later than 2:00 p.m.,
---------------------------------
New York, New York time, on each Banking Day, the Agent shall, subject to the
conditions of this Agreement (but without any further written notice required),
make available to the Borrower by a credit to an account of the Borrower
maintained at Chase the proceeds of Revolving Credit Loans to the extent
necessary to pay items to be drawn on the Controlled Disbursements Account that
day after giving effect to all Available Funds to be deposited to the Controlled
Disbursements Account on that day. All other Revolving Credit Loans shall be
made upon notice given in accordance with . The Revolving Credit Loans shall be
deemed to be made by each Lender and to be outstanding to each Lender under the
Note issued to such Lender as of the date that such credit is made available to
the Borrower without regard to the settlement procedures between the Agent and
the Lenders pursuant to Section 2.14.
Section 2.03. Principal Repayment of Revolving Credit Loans.
---------------------------------------------
(a) Each Revolving Credit Loan shall mature and be payable in full on
the Revolving Credit Termination Date.
(b) Except to the extent otherwise expressly provided in the Security
Agreement, the Agent shall, not later than as of 1:00 p.m. on each Banking Day,
transfer out of the Collateral Account all moneys remitted to the Agent by
account debtors of the Borrower pursuant to the Lock Box Agreement,
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<PAGE>
first making payments of the outstanding principal amount of the Revolving
Credit Loans (including all Revolving Credit Loans made or to be made that day)
by a debit to the Collateral Account in an amount equal to the balance of the
Collateral Account after giving effect to all Available Funds deposited to the
Collateral Account on that day and prior to any other transfers from the
Collateral Account. All such payments shall be applied first to the outstanding
principal amount of all Base Rate Loans. Except upon the occurrence and during
the continuance of an Event of Default, no payment of a Eurodollar Loan shall be
made under this section on a date other than the last day of an Interest Period
or the Revolving Credit Termination Date. To the extent that a payment hereunder
creates a credit balance under the Revolving Credit Obligations, such credit
balance shall bear interest and Agent shall credit the Revolving Credit
Obligations at a rate per annum equal to the Prime Rate minus three percent
(3%).
(c) Immediately upon a demand by the Agent, the Borrower shall either:
(i) pay the amount by which all Revolving Credit Obligations exceed the
Borrowing Base, or (ii) provide the Agent and the Lenders with Cash Equivalents
as security for the payment of such excess amount.
Section 2.04. Permitted Acquisitions. The Borrower may utilize up to an
----------------------
aggregate of $10,000,000 of the proceeds of the Revolving Credit Loans to fund
the acquisition of domestic businesses which are substantially similar to that
of the Borrower and which meet the following criteria (collectively, "Permitted
---------
Acquisitions"): (i) the total purchase price of any single acquisition shall not
- ------------
exceed $5,000,000; (ii) in the event the Borrower expends more than $10,000,000
in cash in the aggregate for acquisitions consummated after the Effective Date,
the portion in excess of $10,000,000 shall be funded with equity on terms
satisfactory to the Agent, (iii) in connection with any stock acquisition the
Borrower shall be the surviving corporation; (iv) each business or entity which
the Borrower acquires shall have had positive EBITDA over each of its previous
two most recently completed fiscal years; (v) no acquisition shall be hostile;
(vi) after giving effect to each acquisition, the Borrower shall have pro forma
Availability of not less than $4,000,000; (vii) no Default or Event of Default
shall have occurred and be continuing under the Facility Documents immediately
prior to and after giving effect to the proposed acquisition; (viii) all
businesses being acquired shall be domestic businesses; (ix) the Agent shall
have approved the assumption by the Borrower of any indebtedness for borrowed
money arising from any such acquisition, and any seller debt incurred in
connection with such acquisition shall be in form and substance satisfactory to
the Agent and subordinated to the Obligations on terms satisfactory to the
Agent, and (x) at least eighty percent (80%) of the accounts receivable and
inventory of the business or entity acquired shall meet all eligibility
requirements for inclusion in the Borrowing Base as set forth in the Facility
Documents.
Section 2.05. Mandatory Prepayments. In addition to the payments required
---------------------
under (S)2.03(c), the Borrower shall make the following mandatory prepayments
of the Revolving Credit Loans:
(a) Casualty Events. Within 90 days following the receipt by the
---------------
Borrower or any of its Subsidiaries of the proceeds of insurance, condemnation
award or other compensation in respect of any Casualty Event affecting any
property of the Borrower or any of its Subsidiaries (or upon such earlier date
as the Borrower or any of its Subsidiaries, as the case may be, shall have
determined not to repair or replace the property affected by such Casualty
Event), the Borrower shall prepay the Revolving Credit Loans in an aggregate
amount, if any, equal to 100% of the Net Cash Payments from such Casualty Event
not theretofore applied or committed to be applied to the repair or replacement
of such property (it being understood that if Net Cash Payments committed to be
applied are not in fact applied within 90 days of the respective Casualty Event,
then such Proceeds shall be applied to the prepayment of the Revolving Credit
Loans as provided in this clause (a) at the expiration of such 90 day period)
but only if and to the extent that the aggregate amount of such proceeds
received after the Effective Date on account of all Casualty Events is greater
than $500,000 in excess of the aggregate amount applied or committed to be
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<PAGE>
applied during any Fiscal Year to the repair or replacement of such property,
such prepayment to be effected in each case in the manner and to the extent
specified in paragraph (d) of this (S)2.05.
(b) Incurrence of Indebtedness for Borrowed Money or Sale of
--------------------------------------------------------
Securities. Without limiting the obligation of the Borrower to obtain the
- ----------
consent of the Required Lenders to any incurrence of Indebtedness or sale of
securities not otherwise permitted hereunder, the Borrower agrees, on or prior
to the closing of any incurrence of Indebtedness for borrowed money or sale of
equity by the Borrower or any of its Subsidiaries, to deliver to the Agent a
statement certified by the Chief Financial Officer of the Borrower, in form and
detail reasonably satisfactory to the Agent, of the estimated amount of the Net
Cash Payments of such incurrence of Indebtedness for borrowed money or sale of
securities that will (on the date of such incurrence or sale) be received by the
Borrower or its Subsidiaries in cash, and the Borrower shall prepay the
Revolving Credit Loans (and the Revolving Credit Commitments shall be
irrevocably reduced), within ten (10) days of the date of such incurrence or
sale, in an aggregate amount equal to 100% of the Net Cash Payments of such
incurrence of Indebtedness or sale of securities received by the Borrower or
such Subsidiary, such prepayment to be effected in each case in the manner and
to the extent specified in paragraph (d) of this (S)2.05.
(c) Sale of Assets. Without limiting the obligation of the Borrower
--------------
to obtain the consent of the Required Lenders to any sale or other disposition
of assets not otherwise permitted hereunder, the Borrower agrees, on or prior to
the occurrence of any sale or other disposition of assets by the Borrower or any
of its Subsidiaries, to deliver to the Agent a statement certified by the Chief
Financial Officer of the Borrower, in form and detail reasonably satisfactory to
the Agent, of the estimated amount of the Net Cash Payments of such sale or
other disposition that will (on the date of such sale or other disposition) be
received by the Borrower or its Subsidiaries in cash and the Borrower shall
prepay the Revolving Credit Loans (and the Revolving Credit Commitments shall be
irrevocably reduced), as follows:
(i) within ten (10) days of the date of such sale or other
disposition, in an aggregate amount equal to 100% of such estimated amount
of the Net Cash Payments of such sale or other disposition received by the
Borrower or its Subsidiaries in cash on the date of such sale or other
disposition; and
(ii) thereafter, quarterly, on the date of the delivery of the
financial statements for any Fiscal Quarter or Fiscal Year, by the Borrower
to the Agent pursuant to Section 6.08(a) and 6.08(b) to the extent the
Borrower or any of its Subsidiaries shall receive Net Cash Payments during
the fiscal period ending on the date of such financial statements in cash
under deferred payment arrangements or in respect of investments entered
into or received in connection with any such sale or disposition, an amount
equal to (A) 100% of the aggregate amount of such Net Cash Payments minus
-----
(B) any transaction expenses associated with such sale or dispositions and
not previously deducted in the determination of Net Cash Payments plus (or
----
minus, as the case may be) (C) any other adjustment received or paid by the
-----
Borrower or any of its Subsidiaries pursuant to the respective agreements
giving rise to such sale or dispositions and not previously taken into
account in the determination of the Net Cash Payments.
Prepayments of the Revolving Credit Loans (and the corresponding reduction in
the Revolving Credit Commitments), resulting from any sale or other disposition
of assets shall be effected in each case in the manner and to the extent
specified in paragraph (d) of this (S)2.05. Notwithstanding anything to the
contrary, the Borrower shall not be required to deliver any statement or make
any prepayment under this (S)2.05 with respect to the first $500,000 of the
aggregate amount of Net Cash Payments from sales or other dispositions of assets
received by the Borrower or any of its Subsidiaries during any Fiscal Year and
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<PAGE>
not utilized by the Borrower or it Subsidiaries to replace the property disposed
of within 90 days of such sale or other disposition of assets.
(d) Application. In the event of any mandatory prepayment pursuant
-----------
to this (S)2.05, such prepayment shall be applied, first, to the payment of
accrued interest in respect of outstanding Base Rate Loans, second, to the
principal amount of outstanding Base Rate Loans, third, to interest in respect
of outstanding Eurodollar Loans, and fourth, to the principal amount of
outstanding Eurodollar Loans.
Section 2.06. Interest.
--------
(a) Interest shall accrue on the outstanding and unpaid principal
amount of each Loan for the period from and including the date of such Loan to
but excluding the date such Loan is due, at the following rates per year: (i)
for a Loan Tranche which is outstanding as a Base Rate Loan, at a variable rate
per annum equal to the Adjusted Base Rate plus the Applicable Margin, (ii) for a
Loan Tranche which is outstanding as a Eurodollar Loan, at a fixed rate during
the applicable Eurodollar Interest Period equal to the corresponding Eurodollar
Rate plus the Applicable Margin; provided however that after the occurrence and
during the continuance of any Event of Default and a written demand of the Agent
to the Borrower at the request of the Required Lenders, interest shall accrue at
rates computed as provided in this (S)2.06 plus the Default Margin.
(b) Interest on each Eurodollar Loan shall be calculated on the basis
of a year of 360 days for the actual number of days elapsed. Interest on each
Base Rate Loan shall be calculated on the basis of a year of 360 days for the
actual number of days elapsed. Promptly after the determination of any interest
rate provided for herein or any change therein, the Agent shall notify the
Borrower and the Lenders thereof.
(c) Accrued interest on each Base Rate Loan shall be due and payable
to the Agent for account of each Lender in arrears on the first Banking Day of
each calendar month, regardless of any payment of the principal thereof.
(d) Accrued interest on each Eurodollar Loan shall be due and payable
to the Agent for account of each Lender in arrears upon any payment of principal
and on each corresponding Eurodollar Interest Payment Date.
Section 2.07. Eurodollar Interest Periods. In the case of each Loan other
---------------------------
than a Base Rate Loan, the Borrower shall select a Eurodollar Interest Period of
any duration in accordance with the definition of Eurodollar Interest Period in
(S) 1.01, subject to the following limitations: (a) no Eurodollar Interest
Period shall have a duration of less than one month, and if any such proposed
Eurodollar Interest Period would otherwise be for a shorter period (as a result
of the Revolving Credit Termination Date or otherwise), such Eurodollar Interest
Period shall not be available; and (b) if a Eurodollar Interest Period would end
on a day which is not a Banking Day, such Eurodollar Interest Period shall be
extended to the next Banking Day, unless such next Banking Day would fall in the
next calendar month in which event such Eurodollar Interest Period shall end on
the immediately preceding Banking Day. All elections of a Eurodollar Interest
Period shall be made by the Borrower upon three Banking Days' notice to the
Agent, and the Agent shall quote to the Borrower the actual Eurodollar Rate to
take effect for such Eurodollar Interest Period (based upon the rate quotation
described in the definition of Eurodollar Rate) on the next Banking Day.
Section 2.08. Conversions. Except to the extent specified to the Initial
-----------
Lenders prior to the Effective Date, each Revolving Credit Loan shall be deemed
to be a Base Rate Loan unless and until converted to a Eurodollar Loan in
accordance with terms of this (S)2.08. The Borrower shall have the
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<PAGE>
right to make payments of principal, or to convert a Loan Tranche from a Base
Rate Loan to a Eurodollar Loan or from a Eurodollar Loan to a Base Rate Loan at
any time or from time to time, provided that: (a) if the Loan Tranche is
outstanding as a Eurodollar Loan, it may be converted only on the last day of
the applicable Eurodollar Interest Period; (b) if the Loan Tranche is
outstanding as a Eurodollar Loan, it shall automatically convert to a Base Rate
Loan on the last day of the applicable Eurodollar Interest Period, unless the
Borrower gives notice to the Agent three (3) Banking Days prior to the last day
of the corresponding Eurodollar Interest Period specifying a new Eurodollar
Interest Period to apply to such Loan Tranche; (c) no Loan Tranche comprising a
Eurodollar Loan may be in a principal amount less than $500,000; (d) there may
be no more than four (4) Loan Tranches comprising Eurodollar Loans outstanding
at any one time; and (e) no Loan Tranche comprising a Eurodollar Loan may be
created (or continued after the last day of the applicable Eurodollar Interest
Period) while any Default or Event of Default exists and continues.
Section 2.09. Voluntary Prepayments. In addition to repayments made
---------------------
pursuant to (S) 2.03(b), the Borrower shall have the right to prepay Revolving
Credit Loans at any time or from time to time; provided that: (i) the Borrower
shall give the Agent notice of each such prepayment as provided in (S) 2.12; and
(ii) the Borrower shall be responsible for the payment of such amounts as
provided in (S) 3.05 with respect to the prepayment of any Eurodollar Loans
prepaid on any date other than the last day of the corresponding Eurodollar
Interest Period. In addition, but subject to the foregoing, as a condition to
giving effect to any termination of the Revolving Credit Commitments pursuant to
(S) 2.11, the aggregate principal of all Revolving Credit Loans shall be fully
prepaid, together with interest thereon accrued to the date of such payment and
all amounts payable pursuant to (S) 2.15(c) and/or (S) 3.05 in connection
therewith.
Section 2.10. Uncollected Funds Compensation. The credit extended by
------------------------------
Chase to the Borrower by allowing the Uncollected Funds to be immediately
available funds to the Borrower shall not be deemed to be Loans hereunder.
Uncollected Funds Compensation to Chase shall accrue on the amount of the
Uncollected Funds in existence from time to time at a variable rate per annum
equal to the Adjusted Base Rate plus the Applicable Margin for Base Rate Loans
for two (2) full days. Upon making such computation, the Agent is authorized to
make a Revolving Credit Loan to the Borrower for the amount thereof (or during
the continuance of an Event of Default, debit the Collateral Account) for the
payment thereof to Chase. The Agent shall notify the Borrower of the amount of
the Uncollected Funds Compensation for the preceding calendar month in the next
monthly statement rendered by the Agent to the Borrower.
Section 2.11. Termination of Revolving Credit Commitments. The Borrower
-------------------------------------------
shall have the right to terminate the amount of Revolving Credit Commitments in
whole or in part at any time, provided that the Borrower shall give notice of
such termination to the Agent as provided in (S)2.12. Any portion of the
Revolving Credit Commitments that has been terminated may not be reinstated.
Section 2.12. Certain Notices. Notices by the Borrower to the Agent of
---------------
borrowings other than pursuant to (S) 2.02, each prepayment of a Loan pursuant
to (S) 2.09 (which does not include repayments pursuant to (S) 2.03(b)) or of
termination of the Revolving Credit Commitments pursuant to (S) 2.11 shall be
irrevocable and shall be effective only if received by the Agent in writing on a
Banking Day and (a) in the case of Base Rate Loans and prepayments of Base Rate
Loans given not later than 11:00 a.m. New York City time on the date of such
Base Rate Loan or such prepayment; (b) in the case of Eurodollar Loans and
prepayments of Eurodollar Loans, given not later than 11:00 a.m. New York City
time three (3) Banking Days prior to the date of such Eurodollar Loan or such
prepayment and (c) in the case of termination of the Revolving Credit
Commitments, given not later than 12:00 noon New York City time four Banking
Days prior thereto. Each such notice of borrowing or prepayment shall specify
the amount of the Loans
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<PAGE>
to be borrowed or prepaid and the date of borrowing or prepayment (which shall
be a Banking Day). The Agent shall promptly notify the Lenders of the contents
of each such notice.
Section 2.13. Calculation of Borrowing Base. The Agent shall calculate
-----------------------------
from time to time the amount of the Borrowing Base, based upon the most recent
Borrowing Base Certificate, and such amount shall be the "Borrowing Base"
hereunder; provided, however, that the Agent, in its sole reasonable discretion,
may on written notice to the Borrower, establish additional reserves against the
Borrowing Base, taking into account, among other things, on-going confirmation
of a receivable dilution percentage of not more than 5%, based upon periodic
field examinations.
Section 2.14. Settlement Between Agent and Lenders. The Agent and the
------------------------------------
Lenders shall settle on an aggregated and netted basis (the "Settlement Amount")
on each Banking Day (the "Settlement Date") for all amounts which shall have
become due to and due from the Agent and the Lenders during the preceding day
with respect to any Obligations, other than the Settlement Amount which became
due during the preceding day. The Agent shall notify the Lenders by 11:00 A.M.
on each Settlement Date of the Settlement Amount which is payable by the Agent
or the Lenders, and the Agent or the Lenders, as the case may be, shall make
payment of the Settlement Amount by an electronic funds transfer not later than
5:00 P.M. on the Settlement Date. Nothing in this (S) 2.14 or the settlement
procedures made pursuant to this (S) 2.14 shall be deemed to change, as between
the Borrower and the Lenders, the amount of the Loans which are outstanding
under the Notes to each of the Lenders or the accrual of interest due to each of
the Lenders on such Loans.
Section 2.15. Fees.
----
(a) The Borrower agrees to pay to the Agent quarterly after the
date hereof through the Revolving Credit Termination Date and on the Revolving
Credit Termination Date for the account of each of the Lenders a commitment fee
which shall accrue on the Unused Commitment for the period from and including
the date hereof to the earlier of the date the Revolving Credit Commitments are
terminated in their entirety or the Revolving Credit Termination Date. The
commitment fee shall be calculated on the basis of a 360 day year for the actual
number of days elapsed at a rate per year equal to the Applicable Commitment Fee
Rate. The commitment fee shall be due and payable in arrears quarterly on the
first Banking Day of each October, January, April and July and shall be computed
by Agent. On each such payment date, the Agent is authorized to make a Revolving
Credit Loan to the Borrower for the amount thereof (or during the continuance of
an Event of Default, debit the Collateral Account) for the payment thereof to
the Lenders. The Agent shall notify the Borrower of the amount of the commitment
fee for the preceding quarter in the next monthly statement rendered by the
Agent to the Borrower.
(b) The Borrower agrees to pay to Agent for the benefit of the
Lenders (according to each Lender's Revolving Credit Commitment Percentage) (i)
a letter of credit fee payable in advance on the issuance date of each standby
Letter of Credit in an amount computed by multiplying the face amount of such
Letter of Credit by the applicable Eurodollar Rate, calculated on the basis of a
360 day year for the maximum number of days that such Letter of Credit may be
outstanding from (and including) the issuance date to (but excluding) the
expiration date of such Letter of Credit, and (ii) a letter of credit fee
payable in advance on the issuance date of each trade or documentary Letter of
Credit in an amount equal to one hundred (100) basis points multiplied by the
face amount of such Letter of Credit. Upon making a computation of the amount of
such Letter of Credit fee, the Agent is authorized to make a Revolving Credit
Loan to the Borrower for the amount thereof. The Agent shall notify the Borrower
of the amount of such Letter of Credit fee in the next monthly statement
rendered by the Agent to the Borrower.
(c) In the event the Borrower elects to terminate the Revolving
Credit Commitments at any time prior to October 14, 1999, the Borrower shall pay
to the Agent for the benefit of the Lenders
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<PAGE>
(according to each Lender's Revolving Credit Commitment Percentage), a
prepayment fee in an aggregate amount equal to $275,000.
(d) The Borrower agrees to pay the Agent (for its own account)
such fees payable in such amounts and at the times separately agreed in writing
between the Borrower and the Agent.
Section 2.16. Payments Generally. All payments under this Agreement or the
------------------
Notes shall be made in United States Dollars in funds which are immediately
available not later than 1:00 p.m. New York City time on the relevant dates
specified above (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Banking Day) at the Chase Office
for the account of each Lender, and all such payments may be made by making a
Revolving Credit Loan to the Borrower for the amount thereof (or during the
continuance of an Event of Default, debiting the Collateral Account for the
payment thereof to the Lenders). The Agent, or any Lender for whose account any
such payment is to be made, may (but shall not be obligated to) debit the amount
of any such payment which is not made by such time to any ordinary deposit
account of the Borrower with the Agent or such Lender, as the case may be, and
any Lender so doing shall promptly notify the Agent. Subject to (S) 11.16, the
Borrower shall, at the time of making each payment under this Agreement or the
Notes, specify to the Agent the principal or other amount payable by the
Borrower under this Agreement or the Notes to which such payment is to be
applied and in the event that it fails to so specify, or if a Default or Event
of Default has occurred and is continuing, the Agent may, subject to (S) 11.16,
apply such payment as it may elect in its sole discretion. If the due date of
any payment under this Agreement or the Notes would otherwise fall on a day
which is not a Banking Day, such date shall be extended to the next succeeding
Banking Day and interest shall be payable for any principal so extended for the
period of such extension. Each payment received by the Agent hereunder or under
any Note for the account of a Lender shall be paid promptly to such Lender, in
immediately available funds, for the account of such Lender's Lending Office.
Section 2.17. Purpose. The Borrower shall use the proceeds of the Loans
-------
(a) to refinance the Indebtedness of the Borrower listed on Schedule 2.17
-------------
hereto, (b) to finance Permitted Acquisitions (subject to the limitations set
forth in (S) 2.04), (c) to fund the Borrower's obligations in respect of foreign
exchange contracts (subject to the limitations set forth in (S) 7.16), (d) for
working capital requirements of the Borrower and its Subsidiaries (subject to
the limitations set forth in (S) 7.06 and (S) 7.10), and (e) for other general
corporate purposes.
ARTICLE 3. YIELD PROTECTION; ILLEGALITY; ETC.
Section 3.01. Additional Costs.
-----------------
(a) The Borrower shall pay directly to each Lender from time to
time within five Banking Days of demand therefor such amounts as such Lender may
reasonably determine to be necessary to compensate it for any costs which such
Lender determines are attributable to its making or maintaining any Eurodollar
Loans under this Agreement or its Note or its obligation to make any such Loans
hereunder, or any reduction in any amount receivable by such Lender hereunder in
respect of any such Loans or such obligation (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"),
----------------
resulting from any Regulatory Change which: (i) changes the basis of taxation of
any amounts payable to such Lender under this Agreement or its Note in respect
of any of such Loans (other than taxes imposed on the overall net income of such
Lender or of its Lending Office for any of such Loans by the jurisdiction in
which such Lender has its principal office or such Lending Office); or (ii)
imposes or modifies any reserve, special deposit, deposit insurance or
assessment, minimum capital, capital ratio or similar requirements relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender; or (iii) imposes any other condition affecting this
Agreement or
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<PAGE>
its Note (or any of such extensions of credit or liabilities). Each Lender will
notify the Borrower of any event occurring after the date of this Agreement
which will entitle such Lender to compensation pursuant to this (S) 3.01(a) as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. If any Lender requests compensation from the Borrower
under this (S) 3.01(a), or under (S) 3.01(c), the Borrower may, by notice to
such Lender with a copy to the Agent, suspend the obligation of such Lender to
make Loans of the type with respect to which such compensation is requested (in
which case the provisions of (S) 3.04 shall be applicable).
(b) Without limiting the effect of the foregoing provisions of
this (S) 3.01, in the event that, by reason of any Regulatory Change, any Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Lender which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender which includes Eurodollar
Loans or (ii) becomes subject to restrictions on the amount of such a category
of liabilities or assets which it may hold, then, if such Lender so elects by
notice to the Borrower with a copy to the Agent, the obligation of such Lender
to make Loans of such type hereunder shall be suspended until the date such
Regulatory Change ceases to be in effect (in which case the provisions of (S)
3.04 shall be applicable).
(c) Without limiting the effect of the foregoing provisions of
this (S) 3.01 (but without duplication), the Borrower shall pay directly to each
Lender from time to time within five Banking Days of request therefor such
amounts as such Lender may determine to be necessary to compensate such Lender
for any costs which it determines are attributable to the maintenance by the
Lender or its bank holding company or any of its Affiliates, pursuant to any law
or regulation of any jurisdiction or any interpretation, directive or request
(whether or not having the force of law) of any court or governmental or
monetary authority, whether in effect on the date of this Agreement or
thereafter, of capital in respect of its Loans hereunder or its obligation to
make Loans hereunder (such compensation to include, without limitation, an
amount equal to any reduction in return on assets or equity of such Lender or
its bank holding company or any of its Affiliates to a level below that which it
could have achieved but for such law, regulation, interpretation, directive or
request). Each Lender will notify the Borrower if such Lender is entitled to
compensation pursuant to this (S) 3.01(c) as promptly as practicable after it
determines to request such compensation.
(d) Determinations and allocations by a Lender for purposes of
this (S) 3.01 of the effect of any Regulatory Change pursuant to subsections (a)
or (b), or of the effect of capital maintained pursuant to subsection (c), on
its costs of making or maintaining Loans or its obligation to make Loans, or on
amounts receivable by, or the rate of return to, it in respect of Loans or such
obligation, and of the additional amounts required to compensate such Lender
under this (S) 3.01, shall be conclusive, provided that such determinations and
allocations are made on a reasonable basis. Each Lender demanding payment from
the Borrower pursuant to this (S) 3.01 shall furnish to the Borrower at the time
of such demand a statement showing the basis for and the method of calculation
of such demand.
Section 3.02. Limitation on Types of Loans. Anything herein to the
----------------------------
contrary notwithstanding, if:
(a) the Agent reasonably determines (which determination shall
be conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Rate" in (S) 1.01 are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for any type of Eurodollar Loans as provided in
this Agreement; or
(b) any Lender reasonably determines (which determination shall
be conclusive) and notifies the Agent that the relevant rates of interest
referred to in the definition of "Eurodollar Rate" in
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<PAGE>
(S) 1.01 upon the basis of which the rate of interest for any type of Eurodollar
Loans is to be determined do not adequately cover the cost to such Lender of
making or maintaining such Loans;
then the Agent shall give the Borrower and each Lender prompt notice thereof,
and so long as such condition remains in effect, the Lenders shall be under no
obligation to make Loans of such type.
Section 3.03. Illegality. Notwithstanding any other provision in this
----------
Agreement, in the event that it becomes unlawful for any Lender or its Lending
Office to honor its obligation to make or maintain Eurodollar Loans hereunder,
then such Lender shall promptly notify the Borrower thereof (with a copy to the
Agent) and such Lender's obligation to make or maintain Eurodollar Loans
hereunder shall be suspended until such time as such Lender may again make and
maintain such affected Loans (in which case the provisions of (S) 3.04 shall be
applicable).
Section 3.04. Certain Base Rate Loans pursuant to (S)(S) 3.01 and 3.03. If
--------------------------------------------------------
the obligations of any Lender to make Loans of a particular type (Loans of such
type being herein called "Affected Loans" and such type being herein called the
"Affected Type") shall be suspended pursuant to (S)(S) 3.01 or 3.03, all Loans
which would otherwise be made by such Lender as Loans of the Affected Type shall
be made instead as Base Rate Loans and, if an event referred to in (S) 3.01(b)
or 3.03 has occurred and such Lender so requests by notice to the Borrower with
a copy to the Agent, all Affected Loans of such Lender then outstanding shall be
automatically converted into Base Rate Loans on the date specified by such
Lender in such notice, and, to the extent that Affected Loans are so made as (or
converted into) Base Rate Loans, all payments of principal which would otherwise
be applied to such Lender's Affected Loans shall be applied instead to its Base
Rate Loans.
Section 3.05. Certain Compensation. The Borrower shall pay to the Agent
--------------------
for the account of each Lender, upon the request of such Lender through the
Agent, such amount or amounts as shall be sufficient (in the reasonable opinion
of such Lender) to compensate it for any loss, cost or expense which such Lender
determines is attributable to:
(a) any payment of a Eurodollar Loan made by the Borrower on a
date other than the last day of a Eurodollar Interest Period or the maturity
date, respectively, for such Loan (whether by reason of acceleration or
otherwise) (other than pursuant to Section 3.04); or
(b) any failure by the Borrower to borrow any Loan to be made by
such Lender on the date specified therefor in the relevant notice under (S)2.12.
Without limiting the foregoing, such compensation shall include an amount equal
to the excess, if any, of (i) the amount of interest which otherwise would have
accrued on the principal amount so paid or not borrowed for the period from and
including the date of such payment or failure to borrow to but excluding the
last day of the Eurodollar Interest Period for such Loan (or, in the case of a
failure to borrow, to but excluding the last day of the Eurodollar Interest
Period for such Loan which would have commenced on the date specified therefor
in the relevant notice) at the applicable rate of interest for such Loan
provided for herein over (ii) the amount of interest (as reasonably determined
by such Lender) such Lender would have bid in the London interbank market for
Dollar deposits for amounts comparable to such principal amount and maturities
comparable to such period. A determination of any Lender as to the amounts
payable pursuant to this (S) 3.05 shall be conclusive, provided that such
determination is made on a reasonable basis.
Section 3.06. Mitigation Obligations If any Lender requests compensation
----------------------
under Section 3.01, then such Lender shall use reasonable efforts to designate a
different lending office for funding or booking its Loans hereunder or to assign
its rights and obligations hereunder to another of its offices,
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<PAGE>
branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section
3.01 in the future and (ii) would not subject such Lender to any unreimbursed
cost or expense and would not otherwise be disadvantageous to such Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Lender in connection with any such designation or assignment.
ARTICLE 4. CONDITIONS PRECEDENT
Section 4.01. Documentary Conditions Precedent. The obligations of the
--------------------------------
Initial Lenders to make the Loans constituting the initial borrowings are
subject to the condition precedent that on or before the Effective Date each of
the following documents shall have been delivered to the Agent in form and
substance satisfactory to the Agent and its counsel, and each of the following
actions shall have been performed to the satisfaction of the Agent and its
counsel:
(a) The Agent shall have received the Facility Documents duly
executed by each of the parties thereto, and in full force and effect;
(b) The Agent shall have received a certificate of the Clerk or
Assistant Clerk of the Borrower, dated the Effective Date, attesting to all
corporate action taken by the Borrower, including resolutions of its Board of
Directors authorizing the execution, delivery and performance of the Facility
Documents to which the Borrower is a party and each other document to be
executed and delivered by the Borrower pursuant to this Agreement and certifying
the names and true signatures of the officers of the Borrower authorized to sign
the Facility Documents and the other documents to be executed and delivered by
the Borrower under this Agreement;
(c) The Agent shall have received a certificate of the Secretary
or Assistant Secretary (or equivalent) of the Subsidiary Guarantor, dated the
Effective Date, attesting to all corporate action taken by the Subsidiary
Guarantor, including resolutions of their Board of Directors (or equivalent)
authorizing the execution, delivery and performance of the Facility Documents to
which the Subsidiary Guarantor is a party and each other document to be executed
and delivered by the Subsidiary Guarantor pursuant to this Agreement and
certifying the names and true signatures of the officers of the Subsidiary
Guarantor authorized to sign the Facility Documents and the other documents to
be executed and delivered by the Subsidiary Guarantor under this Agreement;
(d) The Agent shall have received a certificate of a duly
authorized officer of the Borrower dated the Effective Date, stating that the
representations and warranties in Article 5 are true and correct on such date as
though made on and as of such date and that no event has occurred and is
continuing which constitutes a Default or Event of Default;
(e) The Agent shall have received (i) a favorable opinion of
counsel for the Borrower and the Subsidiary Guarantor, dated the Effective Date,
in substantially the form of Exhibit H hereto, and covering such other matters
---------
as the Agent or any Lender may reasonably request, and (ii) a favorable opinion
of local Irish counsel for Advanced Component Technologies Limited regarding the
pledge of the Borrower's equity in Advanced Component Technologies Limited and
covering such other matters as the Agent or any Lender may reasonably request;
(f) The Agent shall have received a certificate of a duly
authorized officer of the Borrower certifying as to the solvency of the Borrower
and its Subsidiaries after giving effect to the funding of the initial Loans.
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<PAGE>
(g) The Agent shall have received insurance certificates in form
satisfactory to the Agent evidencing casualty, all-risk, product liability and
other insurance having coverages and issued by insurance companies satisfactory
to the Agent and naming the Agent as a lender's loss payee and (as appropriate)
an additional insured.
(h) The Agent shall have received an initial Borrowing Base
Certificate, remittance, debit and credit reports, and a statement of accounts
in a form acceptable to the Agent with respect to the Borrower and consistent
with the requirements of (S) 6.09 hereof, dated as of not more than 30 days
prior to the date of the Loan;
(i) The Agent shall be satisfied that the Borrower has on the
Effective Date and will continue to have on the Banking Day subsequent to the
Effective Date, in each case after giving effect to the funding of the initial
Revolving Credit Loans, Availability equal to or exceeding $6,000,000;
(j) The Borrower shall have delivered to the Agent evidence
reasonably satisfactory to the Agent that the Leased Premises do not pose a
violation of any Environmental Laws or any liability to the Borrower under any
Environmental Laws;
(k) The Agent shall be satisfied with its due diligence review
of the Borrower and its Subsidiaries, including, but not limited to,
satisfactory review by the Agent of the projections of the Borrower and its
Subsidiaries;
(l) The Agent shall be satisfied with its review of (i)
estimated closing balance sheets for the Borrower and its Subsidiaries
(including all Foreign Subsidiaries), prepared in accordance with GAAP, and (ii)
consolidated and consolidating monthly profit and loss statements, balance
sheets and cash flow projections for the Borrower and its Subsidiaries
(including all Foreign Subsidiaries), prepared in accordance with GAAP, for the
12-month period from the Closing Date forward, and on an annual basis for Fiscal
Years ending December 31, 1999 and December 31, 2000;
(m) The Borrower shall have delivered to the Agent a schedule of
all fixed assets of the Credit Parties with a value greater than or equal to
$250,000 (which schedule shall identify the net book value of such assets and
identify the amounts of all liens and the identities of lien holders);
(m) The Agent shall be satisfied with the results of its checks
on the suppliers and customers of the Borrower and its Subsidiaries;
(n) The Agent shall be satisfied with the cash management
arrangements (including domestic lock box arrangements) and management
information systems in place with respect to the Borrower and its Subsidiaries;
(o) The Agent shall be satisfied with its review of the
Borrower's and its Subsidiaries' Year 2000 MIS conversion and related matters;
(p) The Agent shall be satisfied with the arrangements between
the Borrower and its equipment lessors with respect to the Borrower's equipment
leases, which equipment leases are listed on Schedule 4.01(p) hereto;
(q) The Borrower shall have entered into an Interest Rate
Protection Agreement with the Agent on such terms as the Agent shall reasonably
require; and
(r) The Agent shall have received letters in form satisfactory
to the Agent from the
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<PAGE>
landlords of all real property leased by the Borrower covering such matters as
the Agent may reasonably request.
Section 4.02. Additional Conditions Precedent. The obligations of the
-------------------------------
Lenders to make any Loans (including the initial Loans) shall be subject to the
further conditions precedent that on the date of such Loan:
(a) The following statements shall be true:
(i) the representations and warranties contained in
Article 5 of this Agreement are true and correct on and as of the date of
such Loan as though made on and as of such date; and
(ii) No Default or Event of Default has occurred and is
continuing, or would result from such Loan;
(b) The Agent shall have received such approvals, opinions or
documents as the Agent or any Lender may reasonably request;
(c) At or before the time of making the first Revolving Credit
Loan hereunder and as of the date of each subsequent Revolving Credit Loan
hereunder, the Agent shall determine that the making of such Revolving Credit
Loan will not cause the amounts outstanding hereunder to exceed the Borrowing
Base , and there shall be delivered or in the possession of the Agent all
documents pertaining to the Qualified Accounts, the Qualified Raw Material and
Finished Goods Inventory and the Qualified Excess Inventory, as the Agent shall
reasonably require, dated as of not more than 30 days prior to the date of the
Loan;
(d) The Borrower shall have paid to the Agent all accrued fees
and expenses payable to the Agent in connection with this Agreement, including
all reasonable fees and disbursements of legal counsel to the Agent.
Section 4.03. Deemed Representations. Each notice of a Loan and acceptance
----------------------
by the Borrower of the proceeds of such Loan shall constitute a representation
and warranty that the conditions set forth in Subsection (a) of (S) 4.02 are
true and correct as of the date of each such Loan. The Agent may from time to
time require certificate(s) of duly authorized officer(s) of one or more of the
Borrower, stating that the representations and warranties in Article 5 are true
and correct on such date as though made on and as of such date and that no event
has occurred and is continuing which constitutes a Default or an Event of
Default.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
The Borrower and the Subsidiary Guarantor hereby jointly and severally
represent and warrant, as of the date hereof and as of the date of each Loan,
that:
Section 5.01. Incorporation, Good Standing and Due Qualification. The
--------------------------------------------------
Borrower and each of its Subsidiaries is an entity which is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged, and
is duly qualified as a foreign corporation and in good standing under the laws
of each other jurisdiction in which such qualification is required, except where
the failure to be so qualified would not have a Material Adverse Effect.
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<PAGE>
Section 5.02. Corporate Power and Authority; No Conflicts. The execution,
-------------------------------------------
delivery and performance of the Facility Documents: (a) have been duly
authorized by all necessary corporate action by the Borrower and the Subsidiary
Guarantor and do not and will not require any consent or approval of the
equityholders of the Borrower or the Subsidiary Guarantor or contravene their
charters or by-laws; (b) will not violate any provision of, or require any
filing, registration, consent or approval under, any law, rule, regulation
(including, without limitation, Regulation U), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower or any of its Subsidiaries; (c) will not result in
a breach of or constitute a default in any material respect or require any
consent which has not been obtained under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Borrower or
the Subsidiary Guarantor is a party or by which the properties of the Borrower
or the Subsidiary Guarantor may be bound or affected; (d) will not result in, or
require, the creation or imposition of any Lien, upon or with respect to any of
the properties now owned or hereafter acquired by the Borrower or any of its
Subsidiaries, except as provided in the Security Documents; or (e) will not
cause the Borrower or any Subsidiary Guarantor or any Security Document Party,
as the case may be, to be in default in any material respect under any such law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award or any such indenture, agreement, lease or instrument.
Section 5.03. Legally Enforceable Agreements. Each Facility Document is,
------------------------------
or when delivered under this Agreement will be, a legal, valid and binding
obligation of the Borrower and the Subsidiary Guarantor, enforceable against the
Borrower and the Subsidiary Guarantor, in accordance with its terms, except to
the extent that enforceability may be subject to limitations imposed by general
principles of equity or applicable bankruptcy, insolvency and other similar laws
affecting creditors' rights generally.
Section 5.04. Litigation. Except as set forth on Schedule 5.04 hereto,
----------
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened, against or affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator, which may, in
any one case or in the aggregate, materially adversely affect the financial
condition, operations, properties or business of the Borrower and its
Subsidiaries taken as a whole or the ability of the Borrower or the Subsidiary
Guarantor to perform their obligations under the Facility Documents.
Section 5.05. Financial Statements. The consolidated balance sheet of the
--------------------
Borrower and its Subsidiaries as at December 31, 1997, and the related
consolidated statements of income, cash flows and stockholders' equity of the
Borrower and its Subsidiaries for the fiscal year then ended, and the
accompanying footnotes, together with the opinion thereon of Deloitte & Touche
LLP, independent certified public accountants, copies of which have been
furnished to each of the Initial Lenders, are complete and correct and fairly
present the financial condition of the Borrower and its Subsidiaries as at
December 31, 1997 and the results of the operations of the Borrower and its
Subsidiaries for the period covered by such statements, all in accordance with
GAAP consistently applied. No information, exhibit or report furnished by the
Borrower to the Lenders in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statement contained therein in the light of
the circumstances in which it was made not materially misleading. Since
December 31, 1997, there has been no material adverse change in the condition
(financial or otherwise), business, operations of the Borrower and its
Subsidiaries taken as a whole.
Section 5.06. Ownership and Liens. The Borrower and its Subsidiaries have
-------------------
title to, or valid leasehold interests in, all of its properties and assets,
real and personal, including the properties and assets, and leasehold interests
reflected in the financial statements referred to in (S) 5.05 (other than any
properties or assets disposed of in the ordinary course of business), and none
of the properties and assets owned by the Borrower or any of its Subsidiaries
(excluding any of its leasehold interests) is subject to any Lien,
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<PAGE>
except as disclosed in such financial statements or as may be permitted
hereunder or as listed in Schedule 5.06 hereto.
-------------
Section 5.07. Existing Indebtedness. Neither the Borrower nor any of its
---------------------
Subsidiaries owes Indebtedness as of the Effective Date for borrowed money or
under any title retention agreements (including conditional sale contracts and
Capital Leases) except as listed on Schedule 5.07 hereto.
-------------
Section 5.08. Taxes. The Borrower and each of its Subsidiaries has filed
-----
all tax returns (federal, state and local) required to be filed and has paid all
taxes, assessments and governmental charges and levies thereon to be due,
including interest and penalties, except for such taxes which are not material
in amount and are being contested by the Borrower in good faith in appropriate
proceedings. The federal income tax liability of the Borrower and its
Subsidiaries has been audited by the Internal Revenue Service through the
Borrower's Fiscal Year ending December 31, 1994, and no tax issues relating to
tax audits prior to such date are outstanding.
Section 5.09. ERISA. The Borrower and its Subsidiaries are in compliance
-----
in all material respects with all applicable provisions of ERISA. Neither a
Reportable Event nor a Prohibited Transaction has occurred with respect to any
Plan; no notice of intent to terminate a Plan has been filed nor has any Plan
been terminated; no circumstance exists which constitutes grounds under Section
4042 of ERISA entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn under Sections 4201 or 4204 of ERISA from a Multiemployer
Plan; the Borrower and each of its ERISA Affiliates has met its minimum funding
requirements under ERISA with respect to all of its Plans and there are no
Unfunded Vested Liabilities in excess of $250,000; and neither the Borrower nor
any ERISA Affiliate has incurred any liability to the PBGC under ERISA in excess
of $250,000.
Section 5.10. Subsidiaries and Affiliates. As of the Effective Date, the
---------------------------
Borrower has no Subsidiaries and no corporate Affiliates except as set forth on
Schedule 5.10 hereto.
- --------------
Section 5.11. Operation of Business. The Borrower and each of its
---------------------
Subsidiaries possesses all licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct its business
substantially as now conducted and as presently proposed to be conducted, and
neither the Borrower nor any of its Subsidiaries is in violation of any valid
rights of others with respect to any of the foregoing which could reasonably be
expected to have a Material Adverse Effect.
Section 5.12. No Default on Outstanding Judgments or Orders. The Borrower
---------------------------------------------
and each of its Subsidiaries has satisfied all judgments and none of the
Borrower or any of its Subsidiaries is in default with respect to any judgment,
writ, injunction, decree, rule or regulation of any court, arbitrator or
federal, state, municipal or other governmental authority, commission, board,
bureau, agency or instrumentality, domestic or foreign, except for judgments
which are not material in amount and are being contested in good faith by the
Borrower in appropriate proceedings.
Section 5.13. No Defaults on Other Agreements. Neither the Borrower nor
-------------------------------
any of its Subsidiaries is a party to any indenture, loan or credit agreement or
any lease or other agreement or instrument or subject to any charter or
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither the Borrower nor any of its Subsidiaries is in default
in any material respect in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any agreement or
instrument material to its business to which it is a party.
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Section 5.14. Labor Disputes and Acts of God. Neither the business nor
------------------------------
the properties of the Borrower or of any of its Subsidiaries have been affected
by any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty (whether or not covered by insurance) which materially and
adversely affects such business or properties or the operations of the Borrower
and its Subsidiaries taken as a whole.
Section 5.15. Investment Company Act. Neither the Borrower nor any of its
----------------------
Subsidiaries is an "investment company" within the meaning of the United States
Investment Company Act of 1940, as amended.
Section 5.16. Environmental Matters. No real property owned or leased by
---------------------
the Borrower or any of its Subsidiaries is in violation of any Environmental
Laws, no Hazardous Materials are present on said real property other than
Hazardous Materials used, generated, treated, stored, disposed of or otherwise
introduced compliance with all applicable Environmental Laws. Neither the
Borrower nor any of its Subsidiaries has been identified in any litigation,
administrative proceedings or investigation as a responsible party or
potentially responsible party for any liability under any Environmental Laws.
Section 5.17. Regulation U. Neither the Borrower nor any of its
------------
Subsidiaries owns, directly or indirectly any "margin stock" (as defined in
Regulation U of the Board of Governors of the Federal Reserve System, as
supplemented from time to time). The proceeds of the Loans are not being used
for the purpose, whether immediate, incidental or ultimate, of buying or
carrying any "margin stock".
Section 5.18. No Guaranties or Indemnities. Except as set forth on
----------------------------
Schedule 5.07 hereto, neither the Borrower nor any of its Subsidiaries is
- -------------
obligated on any Guaranty or any indemnification of any kind for the debts,
liabilities or obligations of any Person, including without limitation any
Affiliate, other than indemnities and hold harmless provisions entered into in
favor of customers, bonding agencies and sureties in the ordinary course of
business.
ARTICLE 6. AFFIRMATIVE COVENANTS
So long as any of the Notes shall remain unpaid or any Lender shall have
any Revolving Credit Commitment under this Agreement, the Borrower shall:
Section 6.01. Maintenance of Existence. Except as permitted by (S) 7.03,
------------------------
preserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its legal existence and good standing in the jurisdiction of its
organization, and qualify and remain qualified, and cause each of its
Subsidiaries to qualify and remain qualified, as a foreign organization in each
jurisdiction in which such qualification is required, except where the failure
to be so qualified could not reasonably be expected to have a Material Adverse
Effect.
Section 6.02. Conduct of Business. Continue, and cause each of its
-------------------
Subsidiaries to continue, to engage in an efficient and economical manner in a
business of the same general type as conducted by it on the date of this
Agreement.
Section 6.03. Maintenance of Properties. Maintain, keep and preserve, and
-------------------------
cause each of its Subsidiaries to maintain, keep and preserve, all of its
properties, (tangible and intangible) necessary or useful in the proper conduct
of its business in good working order and condition, ordinary wear and tear
excepted.
Section 6.04. Maintenance of Records; Fiscal Year. Keep, and cause each
-----------------------------------
of its Subsidiaries to keep, adequate records and books of account, in which
complete entries will be made in accordance with
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GAAP, reflecting all financial transactions of the Borrower and its
Subsidiaries. To enable the ready and consistent determination of compliance
with the covenants set forth in Article 8 of this Agreement, the Borrower shall
maintain, and shall cause each of its Subsidiaries (including each Foreign
Subsidiary) to maintain, December 31st of each year as the end of the Borrower's
or such Subsidiary's Fiscal Year.
Section 6.05. Maintenance of Insurance. Maintain, and cause each of its
------------------------
Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks as
the Agent deems appropriate. The Agent will be named "Lender's Loss Payable"
and/or "Additional Named Insured," as appropriate, on all insurance policies.
Section 6.06. Compliance with Laws. Comply, and cause each of its
--------------------
Subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations and orders (including ERISA and Environmental Laws), such
compliance to include, without limitation, paying all taxes, assessments and
governmental charges imposed upon it or upon its property before the same become
delinquent, except for such taxes, assessments, and governmental charges which
are not material in amount and which are being contested by the Borrower in
appropriate proceedings.
Section 6.07. Right of Inspection. At any reasonable time and from time
-------------------
to time during regular business hours and upon reasonable prior notice (except
that no such prior notice shall be required after the occurrence and during the
continuance of a Default), permit the Agent or any agent or representative
thereof, to examine and make copies and abstracts from the records and books of
account of, and visit the properties of, the Borrower and any of its
Subsidiaries, and the Borrower hereby gives its irrevocable permission to
discuss to the extent necessary the affairs, finances and accounts of the
Borrower and any of its Subsidiaries with the Borrower's or its Subsidiaries'
respective officers and directors and the Borrower's independent accountants.
Section 6.08. Reporting Requirements. Furnish to the Agent which shall in
----------------------
turn furnish to each of the Lenders:
(a) As soon as available and in any event within 90 days after
the end of each Fiscal Year of the Borrower, consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal
Year and consolidated and consolidating statements of income, cash flows and
stockholders' equity of the Borrower and its Subsidiaries for such Fiscal Year,
all in reasonable detail and all prepared in accordance with GAAP, and as to the
consolidated statements, accompanied by an opinion thereon by Deloitte & Touche
LLP or other independent accountants of national standing selected by the
Borrower and reasonably acceptable to Agent, which opinion shall not be
qualified by reason of audit limitations imposed by the Borrower.
(b) As soon as available and in any event within 45 days after
the end of each Fiscal Quarter of the Borrower (including the Fiscal Quarter
ending December 31 of each Fiscal Year), consolidated and consolidating balance
sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter
and consolidated and consolidating statements of income, and cash flows of the
Borrower and its Subsidiaries for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal Quarter, all in
reasonable detail and stating in comparative form the respective consolidated
figures for the corresponding date in the current Fiscal Quarter, and all
prepared in accordance with GAAP and certified by the chief financial officer,
the treasurer or the corporate controller of the Borrower (subject to year-end
adjustments and the absence of footnotes);
(c) As soon as available and in any event within 30 days after
the end of each Fiscal Month of the Borrower, consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal
Month and consolidated and consolidating statements of income,
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and cash flows of the Borrower and its Subsidiaries for the period commencing at
the end of the previous Fiscal Year and ending with the end of such Fiscal
Month, all in reasonable detail and stating in comparative form the respective
consolidated figures for the corresponding date in the current Fiscal Year, and
all prepared in accordance with GAAP and certified by the chief financial
officer, the treasurer or the corporate controller of the Borrower (subject to
year-end adjustments and the absence of footnotes);
(d) Simultaneously with the delivery of the financial statements
referred to above for each Fiscal Year and each Fiscal Quarter of the
Borrower, a certificate of the chief financial officer, the treasurer or
the corporate controller of the Borrower in substantially the form of
Exhibit I hereto (a "Compliance Certificate") (i) certifying that to the
--------- ----------------------
best of his knowledge no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which is
proposed to be taken with respect thereto, (ii) with computations set forth
in reasonable detail satisfactory to the Lenders which demonstrate
compliance with the covenants contained in Article 8, (iii) with a schedule
listing all Liens of which they have knowledge on the assets of the
Borrower and its Subsidiaries which are in addition to those in favor of
the Agent and Lenders or those listed on Schedule 5.06 hereto; and (iv)
-------------
with a schedule listing all environmental matters of the type described in
(S) 5.16 which are in addition to those listed on Schedule 5.04 hereto if
-------------
the aggregate amount of all liabilities, losses, damages, costs and
expenses of such additional environmental matters, including but not
limited to clean-up or remediation costs, is estimated to exceed an
aggregate amount of $100,000;
(e) Promptly after the commencement thereof, notice of all
actions, suits, and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, against the Borrower or any of its Subsidiaries which, if
determined adversely to the Borrower or such Subsidiary, could reasonably
be expected to have a Material Adverse Effect;
(f) As soon as possible and in any event within 10 days after
the occurrence of each Default or Event of Default that becomes known to a
responsible officer of the Borrower, a written notice setting forth the
details of such Default or Event of Default and the action which is
proposed to be taken by the Borrower with respect thereto;
(g) Promptly after the receiving thereof, copies of all reports
and notices which the Borrower or any of its Subsidiaries receives from the
PBGC or the U.S. Department of Labor under ERISA; and as soon as possible
and in any event within 10 days after the Borrower or any of its
Subsidiaries knows or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or that the
PBGC or the Borrower or any of its Subsidiaries has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, the
Borrower will deliver to each of the Lenders a certificate of the chief
financial officer, the treasurer or the corporate controller of the
Borrower setting forth details as to such Reportable Event or Prohibited
Transaction or Plan termination and the action the Borrower propose to take
with respect thereto;
(h) Within 90 days of the end of each Fiscal Year, a forecast of
the balance sheet, income statement and statement of cash flows for the
then current Fiscal Year of the Borrower in a form reasonably acceptable to
the Agent and prepared by management in accordance with GAAP; and
(i) Such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as the Agent at the request of any Lender may from time to
time reasonably request.
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Section 6.09. Special Periodic Reports. The Borrower shall execute and
------------------------
deliver to the Agent the following documents compiled as of the last day of the
applicable fiscal period, and the Borrower acknowledges that the Agent and the
Lenders will rely on such documents in making loans hereunder:
(a) Weekly, by the Monday of the following week:
(i) Weekly Collateral Certificate in substantially the form
of Exhibit C annexed hereto; and
---------
(ii) at the Agent's request, at the same time as delivery of
the Weekly Collateral Certificate, copies of customer's invoices, or the
equivalent, and the original shipping or delivery receipts for all
merchandise sold;
(b) Monthly, by the 10th day of the following month:
(i) a declaration or statement of: (A) inventory levels, (B)
Accounts (identifying both Qualified Accounts and ineligible Accounts), (C)
sales, (D) aging of Accounts, (E) aging of accounts payable, (F) order
backlog, (G) approval or comments on the loan reconciliation provided to
Borrower by the Agent, and (H) an accounts receivable reconciliation; all
as of the prior month end and certified by the chief financial officer of
the Borrower on forms reasonably acceptable to Chase; and
(ii) a Monthly Borrowing Base Certificate in substantially the
form of Exhibit D annexed hereto.
---------
(c) At the Agent's reasonable request, and within a reasonable time
period, certified true copies of customer's invoices, or the equivalent,
and the original shipping or delivery receipts for all merchandise sold;
and
(d) At the Agent's reasonable request, and within a reasonable time
period, certified true copies of all contracts, security agreements,
mortgages and other documents executed by the customers in connection with
all merchandise sold and any other information, reports, reconciliations,
Account debtor's addresses or documents the Agent may call upon the
Borrower to submit from time to time.
The failure by the Agent or the Lenders to request any or all of the foregoing
or the failure of the Borrower to perform the same shall not affect the security
interest of the Agent or the Lenders in or rights to any of the Collateral. The
pledge and assignment of each Account under the Security Agreement shall
constitute and be a transaction separate from and independent of each other, but
all such transactions shall be subject to and governed by each and every one of
the terms and provisions of this Agreement.
Section 6.10. Reports on Disputes and Federal Contracts. The Borrower shall
-----------------------------------------
notify the Agent:
(a) within thirty days of the occurrence of any material dispute or
claim involving Accounts in the amount of $100,000 for any one Account or
$250,000 in the aggregate for all Accounts; and
(b) immediately in writing of each Account which arises out of
contracts with the United States of America or any department, agency, or
instrumentality thereof.
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Section 6.11. Physical Inventories; Inventory and Equipment Appraisals and
------------------------------------------------------------
Field Audits.
- ------------
(a) The Borrower shall conduct a physical examination of its
inventory not less than once each Fiscal Quarter during the period from the
Effective Date through the first anniversary of the Effective Date, and
thereafter with such frequency as the Agent shall reasonably request. The
Borrower shall permit the Agent's representatives to be present at any and all
such inventory examinations if the Agent so requests. Upon completion of each
such inventory examination, the Borrower shall deliver to the Agent an inventory
reconciliation setting forth, with respect to each category of inventory at each
location, the differences between the results of such inventory examination and
the inventory amounts shown on the Borrower's general ledger.
(b) The Agent may, at the request of the Required Lenders,
require a valuation appraisal to be made from time to time of the Borrower's and
its Subsidiaries' inventory and/or Equipment and for this purpose the Agent may
hire an outside appraiser of its choice or use the Agent's personnel. In either
case, the Borrower shall reimburse the Agent for the reasonable costs and
expenses of each such appraisal. The Borrower will permit the Agent to conduct
field audit examinations of the Borrower's and its Subsidiaries' assets,
liabilities, books and records twice every Fiscal Year; provided further that
the Borrower will permit the Agent to conduct such examinations at any time and
with any reasonable frequency upon the occurrence and during the continuance of
a Default. The Borrower will reimburse the Agent for the expense of each field
audit examination at the rate of $650 per person per day, plus out-of-pocket
expenses. In connection with such field audits, the Borrower will permit the
Agent to make test verifications of the Accounts with the Borrower's and its
Subsidiaries' customers.
Section 6.12. Cooperation and Further Assurance. At all times until the
---------------------------------
Loans are repaid in full, the Borrower shall, and shall cause its Subsidiaries
to, cooperate with the Agent and the Lenders to effectuate the intent and
purposes of the Facility Documents. Without limiting the foregoing, the Borrower
agrees to execute and deliver any financing statements or other instruments and
do such other acts and things, as Agent may reasonably deem necessary or
advisable to effectuate the intent and purposes of this Agreement, and shall
cause its Subsidiaries to do likewise.
Section 6.13. Deposits Into Collateral Account. The Borrower shall remit
--------------------------------
immediately to the Agent upon receipt, and shall hold in trust for the Agent and
the Lenders until so remitted, any and all moneys received from any source for
deposit into the Collateral Account, including without limitation any proceeds
from any equity investment or extraordinary transaction.
Section 6.14. Lock Box Operation. The Borrower shall at all times cause
------------------
its account debtors to make all payments directly to the Agent pursuant to the
Lock Box Agreements.
Section 6.15. Year 2000 Compliance. Not later than December 31, 1998, the
--------------------
Borrower and its Subsidiaries shall have taken all actions necessary to assure
that its computer-based systems are able to effectively process data, including
dates, on and after each of September 9, 1999, and January 1, 2000. The Borrower
and its Subsidiaries shall promptly notify the Agent in writing (i) in the event
of any potential "Year 2000 Problem" (as hereinafter defined) and (ii) in the
event the Borrower or any of its Subsidiaries believe that the requirement
specified in the first sentence of this (S)6.15 has not been met or is not
likely to be met by December 31, 1998. Such written notice shall specify and
describe in detail the nature of the Year 2000 Problem, or reason for actual or
anticipated failure to satisfy the requirements set forth in this (S)6.15, as
the case may be, including a description of the equipment or systems involved,
the event causing such Year 2000 Problem or actual or anticipated failure and
the Borrower's plan to address such Year 2000 problem or actual or anticipated
failure. For purposes of this (S)6.15, the term "Year 2000 Problem" means any
significant risk that computer hardware or software used in the business or
operations of the Borrower and its Subsidiaries will not in the case of any
dates or time periods occurring
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<PAGE>
after each of September 9, 1999 and December 31, 1999 function at least as
effectively as in the case of dates or times occurring prior to such dates.
ARTICLE 7. NEGATIVE COVENANTS
So long as any of the Notes shall remain unpaid or any Lender shall have
any Revolving Credit Commitment under this Agreement, the Borrower covenants and
agrees that it shall not (unless waived in accordance with the provisions of (S)
12.01 hereof):
Section 7.01. Sale of Assets. Sell, lease, assign, transfer or otherwise
--------------
dispose of, or permit any of its Subsidiaries to sell, lease, assign, transfer
or otherwise dispose of, any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of such
Subsidiaries, receivables and leasehold interests); except: (a) for inventory
disposed of, or other assets consumed, in the ordinary course of business; (b)
any sale, lease, assignment or other transfer by a Subsidiary of its assets to
the Borrower or to the Subsidiary Guarantor; (c) any sale or other disposition
of assets no longer used or useful in the conduct of its business; and (d) any
other sale, lease, assignment, or other transfer of assets by the Borrower or
its Subsidiaries of assets provided that the aggregate value of such assets,
together with all assets of the type described in clause (c) above shall not
exceed $500,000 during any fiscal year.
Section 7.02. Stock of Subsidiaries, Etc. Sell or otherwise dispose of any
---------------------
shares of capital stock of any of its Subsidiaries, except in connection with a
transaction permitted under (S) 7.03, or permit any such Subsidiary to issue any
additional share of its capital stock, except (a) directors' qualifying shares,
and (b) the issuance of shares by any Subsidiary to the Borrower or to the
Subsidiary Guarantor.
Section 7.03. Mergers, Etc. Merge or consolidate with, or sell, assign,
------------
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person, or permit any of its Subsidiaries to do so,
except that: (a) any Wholly-Owned Subsidiary may merge into the Borrower (so
long as the Borrower is the surviving corporation) or transfer assets to the
Borrower; and (b) any Subsidiary may merge into or consolidate with or transfer
assets to any other Subsidiary.
Section 7.04. Dividends. Declare or pay any dividends, purchase, redeem,
---------
retire or otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such
whether in cash, assets or in obligations of the Borrower, or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of any shares of its capital
stock, or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock or permit any Subsidiary to purchase
or otherwise acquire for value any stock of the Borrower or another Subsidiary,
except that: (a) the Borrower may declare and deliver dividends and make
distributions payable solely in common stock of the Borrower; (b) the Borrower
may purchase or otherwise acquire shares of its capital stock by exchange for or
out of the proceeds received from a substantially concurrent issue of new shares
of its capital stock; and (c) the Borrower may purchase or otherwise acquire
shares of its capital stock from employees or directors in connection with the
termination of their employment or affiliation with the Company provided that
the aggregate cash consideration paid by the Borrower to all such employees and
directors for such shares does not exceed $250,000 during any fiscal year.
Section 7.05. Liens. Create, incur, assume or suffer to exist, or permit
-----
any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien,
upon or with respect to any of its properties, now owned or hereafter acquired,
except:
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(a) Liens in favor of the Agent on behalf of the Lenders securing
the Loans hereunder;
(b) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(c) Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than 30 days, or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(d) Liens under workmen's compensation, unemployment insurance,
social security or similar legislation (other than ERISA);
(e) Liens, deposits or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(f) Judgment and other similar Liens arising in connection with
court proceedings; provided that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(g) Easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use and enjoyment by the Borrower or any of its Subsidiaries of the
property or assets encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto;
(h) Liens in existence on the Effective Date and listed on Schedule
--------
5.06 hereto; or
- ----
(i) Liens consisting only of purchase money security interests
securing purchase money indebtedness of the Borrower or its Subsidiaries or
related to leases of Equipment, provided that the Borrower shall be in
compliance with Article 8 of this Agreement after giving effect to such
transactions.
Section 7.06. Transactions with Affiliates. Enter into any transaction,
----------------------------
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, or permit any Subsidiary to enter into any such
transaction, with any Affiliate, except in the ordinary course of and pursuant
to the reasonable requirements of the Borrower's or any of its Subsidiaries'
business and upon fair and reasonable terms no less favorable to such Borrower
or such Subsidiary than would obtain in a comparable arm's length transaction
with a Person not an Affiliate; provided further, however, that none of the
Borrower or its Subsidiaries shall make any loan, Guaranty or indemnification of
any kind to or on behalf of any Affiliate other than (a) loans and capital
contributions constituting Foreign Intercompany Equity and Foreign Intercompany
Indebtedness in an aggregate outstanding amount not in excess of $6,000,000 at
any time, and (b) Guaranties of the Obligations.
Section 7.07. Hazardous Materials; Indemnification. Use, generate, treat,
------------------------------------
store, dispose of or otherwise introduce, or permit any Subsidiary to use,
generate, treat, store, dispose of or otherwise introduce, any Hazardous
Materials into or on any real property owned or leased by any of them and will
not cause, suffer, allow or permit anyone else to do so, except in compliance
with all applicable
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<PAGE>
Environmental Laws. The Borrower hereby agrees to indemnify, reimburse, defend
and hold harmless the Lenders and their directors, officers, agents and
employees ("Indemnified Parties") for, from and against all demands,
liabilities, damages, costs, claims, suits, actions, legal or administrative
proceedings, interest, losses, expenses and reasonable attorney's fees
(including any such fees and expenses incurred in enforcing this indemnity)
asserted against, imposed on or incurred by any of the Indemnified Parties,
directly or indirectly pursuant to or in connection with the application of any
Environmental Law to acts or omissions occurring at any time on or in connection
with any real estate owned or leased by the Borrower or any Subsidiary or any
business conducted thereon.
Section 7.08. Acquisitions. Make or permit any Subsidiary to make any
------------
Acquisition, other than Permitted Acquisitions.
Section 7.09. Subsidiaries. Create any Subsidiary after the date
------------
hereof unless the Borrower shall (a) have obtained the Agent's prior written
consent, and (b) as soon as possible but in any case not later than fifteen (15)
days subsequent to the creation of such Subsidiary, cause such Subsidiary (other
than a Foreign Subsidiary) to execute and deliver to the Agent a Loan Guaranty
in form satisfactory to the Agent and Security Documents in substantially the
same form as the Security Documents executed concurrently herewith, together
with all supporting documentation in such form as the Lenders may reasonably
require, including a favorable opinion of counsel to such Subsidiary in respect
of such Loan Guaranty and Security Documents.
Section 7.10. Certain Investments. Make after the date of this
-------------------
Agreement any loans, advances (excluding advances for travel and entertainment
in the ordinary course of business, and other ordinary course business advances
and loans to employees) or investments of any kind in or make any distributions
of cash or other assets of any kind to any other Person, except that the
Borrower may make loans and equity contributions to the Foreign Subsidiaries to
enable them to meet their working capital needs, provided that (a) the aggregate
outstanding amount of all Foreign Intercompany Equity and Foreign Intercompany
Indebtedness shall not exceed $6,000,000 at any time, and (b) all Foreign
Intercompany Indebtedness is evidenced by documentation acceptable to the Agent,
and all rights and interests of the Borrower in respect of such Foreign
Intercompany Indebtedness are assigned to the Agent.
Section 7.11. Indebtedness. Create, incur, assume or suffer to exist,
------------
or permit any of its Subsidiaries to create, incur, assume or suffer to exist
any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement or the
Notes; ------------
(b) Capitalized Leases and purchase money Indebtedness in an
aggregate amount not in excess of $5,000,000, provided that the Borrower shall
be in compliance with Article 8 of this Agreement after giving effect to such
transactions;
(c) Subordinated Indebtedness;
(d) Foreign Intercompany Indebtedness;
(e) Receivables factoring/working capital Indebtedness of
Advanced Component Technologies Limited in an aggregate amount not in excess of
$2,000,000; and
(f) Trade debt incurred in the ordinary course of business.
Section 7.12. Guarantees, Etc. Except as set forth in (S)5.1 or
---------------
otherwise expressly permitted by (S)7.06 assume, guarantee, endorse or
otherwise be or become directly or contingently responsible or
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<PAGE>
liable, or permit any of its Subsidiaries to assume, guarantee, endorse or
otherwise be or become directly or contingently responsible or liable
(including, but not limited to, an agreement to purchase any obligation, stock,
assets, goods or services or to supply or advance any funds, assets, goods or
services, or an agreement to maintain or cause such Person to maintain a minimum
working capital or net worth or otherwise to assure the creditors of any Person
against loss) for the obligations of any Person, except (a) guarantees by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, and (b) guarantees by any
Subsidiary of Indebtedness of the Borrower permitted hereunder.
Section 7.13. Subordinated Indebtedness. Purchase, redeem, retire or
-------------------------
otherwise acquire for value, or set apart any money for a sinking, defeasance or
other analogous fund for the purchase, redemption, retirement or other
acquisition of, or make, or permit any of its Subsidiaries to do any of the
foregoing in respect of any voluntary payment or prepayment of the principal of
or interest on, or other amount owing in respect of, any Subordinated
Indebtedness.
Section 7.14. Restrictive Agreements. Enter into, incur or permit to
----------------------
exist, or permit any of its Subsidiaries to enter into, incur or permit to
exist, any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of the Borrower or any Subsidiary to create,
incur or permit to exist any Lien upon any of its property or assets in favor of
the Agent or the Lenders, or (b) the ability of any Subsidiary to pay dividends
or other distributions with respect to any shares of its capital stock or to
make or repay loans or advances to the Borrower or the ability of the Subsidiary
Guarantor to Guarantee Indebtedness of the Borrower; provided that (i) the
foregoing shall not apply to restrictions and conditions imposed by law or by
this Agreement, and (ii) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted to be incurred by the Borrower or its Subsidiaries under
the terms of this Agreement if such restrictions or conditions apply only to the
property or assets securing such Indebtedness.
Section 7.15. Capital Expenditures. Make, directly or indirectly, any
--------------------
Capital Expenditures or permit any Subsidiary to do so, if immediately after
giving effect to any such action the aggregate amount of Capital Expenditures on
a consolidated basis for the Borrower and its Subsidiaries shall exceed the
following amounts in the referenced Fiscal Year:
Fiscal Year Ending Amount
------------------ ------
December 31, 1998 $6,250,000
December 31, 1999 $3,000,000
December 31, 2000 $5,000,000
December 31, 2001 $5,000,000
provided, however, that the maximum amount of Capital Expenditures during any
Fiscal Year after the Fiscal Year ending December 31, 1998 may be increased by
an amount equal to fifty percent (50%) of the amount by which the limitation set
forth in the foregoing table for the immediately preceding Fiscal Year exceeds
the actual amount expended in that preceding Fiscal Year.
Section 7.16. Foreign Exchange Obligations. Enter into, or permit any
----------------------------
Subsidiary to enter into any foreign exchange contract or foreign exchange
agreement if, immediately after giving effect thereto, either (a) the aggregate
Foreign Exchange Obligations of the Borrower and its Subsidiaries would exceed
$3,000,000, or (b) the Foreign Exchange Exposure of the Borrower and its
Subsidiaries would exceed $450,000.
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ARTICLE 8. FINANCIAL COVENANTS
So long as any of the Notes shall remain unpaid or any Lender shall have
any Revolving Credit Commitment under this Agreement:
Section 8.01. Minimum Availability. The Borrower shall have Availability
--------------------
of at least the following minimum amounts at all times during the periods
indicated below:
Time Period Minimum Availability
----------- --------------------
Effective Date-12/15/98 $2,000,000
12/16/98-1/19/99 $4,000,000
1/20/99-3/16/99 $3,000,000
3/17/99-4/13/99 $4,000,000
4/14/99-6/15/99 $3,000,000
6/16/99-9/30/99 $4,000,000
Section 8.02. Fixed Charge Coverage Ratio. The Borrower shall maintain a
---------------------------
Fixed Charge Coverage Ratio at or above the following minimum levels measured at
the following dates for the four quarter period then ended:
Measurement Date Minimum Ratio
---------------- -------------
December 31, 1999 2.25 to 1
March 31, 2000 2.50 to 1
June 30, 2000 2.50 to 1
September 30, 2000 2.75 to 1
December 31, 2000 and 3.00 to 1
at the end of each
Fiscal Quarter Thereafter
Section 8.03. Leverage Ratio. The Borrower shall maintain a Leverage Ratio
--------------
at or below the following maximum levels measured at the following dates for the
four quarter period then ended:
Measurement Date Maximum Ratio
---------------- -------------
December 31, 1999 2.75 to 1
March 31, 2000 2.50 to 1
June 30, 2000 2.50 to 1
September 30, 2000 2.25 to 1
December 31, 2000 and 2.00 to 1
at the end of each
Fiscal Quarter Thereafter
Section 8.04. Minimum Net Income. The Borrower shall have net income
------------------
(determined on a consolidated basis in accordance with GAAP excluding
extraordinary gains) measured at the following dates for the single Fiscal
Quarter then ended:
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Measurement Date Minimum Net Income
---------------- ------------------
December 31, 1998 $450,000
March 31, 1999 $550,000
June 30, 1999 $700,000
September 30, 1999 $800,000
ARTICLE 9. EVENTS OF DEFAULT
Section 9.01. Events of Default. Any of the following events shall be an
-----------------
"Event of Default":
(a) The Borrower shall fail to pay any principal of or interest on the
Loans when due, or any fee or other amount due hereunder within five days of the
due date thereof;
(b) Any representation or warranty made or deemed made by the Borrower
or any of its Subsidiaries in this Agreement or in any other Facility Document
or which is contained in any certificate, document, opinion, financial or other
statement furnished at any time under or in connection with any Facility
Document shall prove to have been incorrect in any material respect on or as of
the date made or deemed made;
(c) The Borrower or any of its Subsidiaries shall fail to perform or
observe any term, covenant or agreement contained in this Agreement or fail to
perform or observe any term, covenant or agreement on its part to be performed
or observed (other than the obligations specifically referred to elsewhere in
this (S)9.01) in any other Facility Document, and such failure shall continue
for 15 consecutive days after notice of such failure shall have been made to the
Borrower by the Agent at the request of the Required Lenders;
(d) The Borrower or any of its Subsidiaries shall: (i) fail to pay any
Funded Indebtedness singly or in the aggregate exceeding $250,000, including but
not limited to Indebtedness for borrowed money (other than the payment
obligations described in (a) above), of the Borrower or such Subsidiary, or any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, demand or otherwise); or (ii) fail to perform or observe any term,
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any such Funded Indebtedness, when required
to be performed or observed, if the effect of such failure to pay, perform or
observe is to accelerate the maturity of such Funded Indebtedness (or, after the
giving of applicable notice or passage of time, or both, to permit the
acceleration of the maturity of such Funded Indebtedness); and in either case,
such failure shall continue for more than ten days, whether or not the holder of
such Funded Indebtedness shall accelerate the payment of such Funded
Indebtedness, or any such Funded Indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
(e) The Borrower or any of its Subsidiaries: (i) shall generally not,
or be unable to, or shall admit in writing its inability to, pay its debts as
such debts become due; or (ii) shall make an assignment for the benefit of
creditors, petition or apply to any tribunal for the appointment of a custodian,
receiver or trustee for it or a substantial part of its assets; or (iii) shall
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (iv) shall have had any
such petition or application filed or any such proceeding shall have been
commenced, against it, in which an adjudication or appointment is made or order
for relief is entered, or which petition, application or proceeding remains
undismissed for a period of 45 days or more; or (v) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or
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order for relief or the appointment of a custodian, receiver or trustee for all
or any substantial part of its property; or (vi) shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for a period
of 45 days or more;
(f) One or more judgments, decrees or orders for the payment of money
in excess of $250,000 in the aggregate shall be rendered against the Borrower or
any of its Subsidiaries and such judgments, decrees or orders shall continue
unsatisfied and in effect for a period of 60 consecutive days without being
vacated, discharged, satisfied or stayed or bonded pending appeal;
(g) Any of the following events shall occur or exist with respect to
the Borrower or any ERISA Affiliate: (i) any Prohibited Transaction involving
any Plan; or (ii) any Reportable Event shall occur with respect to any Plan; or
(iii) the filing under Section 4041 of ERISA of a notice of intent to terminate
any Plan or the termination of any Plan; or (iv) any event or circumstance
exists which might constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution by the PBGC
of any such proceedings; or (v) complete or partial withdrawal under Section
4201 or 4204 of ERISA from a Multiemployer Plan or the reorganization,
insolvency, or termination of any Multiemployer Plan; and in each case above,
such event or condition, together with all other events or conditions, if any,
could subject the Borrower to any tax, penalty, or other liability to a Plan,
Multiemployer Plan, the PBGC, or otherwise (or any combination thereof) which in
the aggregate exceed or may exceed $50,000;
(h) After the date hereof, any Person who does not now possess Control
of the Borrower shall acquire Control of the Borrower, alone or together with
its Affiliates, by stock purchase, tender offer or otherwise, other than
transfers of the capital stock of the Borrower which shall occur by operation of
law;
(i) The Security Documents shall at any time or for any reason cease:
(i) to create a valid and perfected security interest or lien in and to the
property purported to be subject to the same for any reason other than the
failure of the secured parties thereunder to continue any UCC-1 Financing
Statement; or (ii) to be in full force and effect or shall be declared null and
void, or the validity or enforceability thereof shall be contested by any party
thereto or any party thereto shall deny it has any further liability or
obligations to the secured parties thereunder;
(j) The Facility Documents shall at any time or for any reason cease to
be in full force and effect or shall be declared null and void, or the validity
or enforceability thereof shall be contested by the Borrower or any of its
Subsidiaries, or the Borrower or any of its Subsidiaries shall deny it has any
further liability or obligations thereunder;
(k) There shall occur on or after September 9, 1999, any Year 2000
Problem, and such Year 2000 Problem shall not be corrected within 3 Banking
Days; or
(l) The Agent shall have reasonably determined that an event or
condition has occurred which has had a Material Adverse Effect.
Section 9.02. Remedies. If any Event of Default shall occur and be
--------
continuing, the Agent shall, upon request of the Required Lenders, by a written
notice to the Borrower: (a) declare the Revolving Credit Commitments to be
terminated, whereupon the same shall forthwith terminate, and (b) declare the
outstanding principal of the Loans, all interest thereon and all other amounts
payable under this Agreement and the Loans to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided that, in the
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case of an Event of Default referred to in (S) 9.01(e) above, the Revolving
Credit Commitments shall be immediately terminated, and the Loans, all interest
thereon and all other amounts payable under this Agreement and the Notes shall
be immediately due and payable without notice, presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by the
Borrower. Further, upon the occurrence and during the continuance of an Event of
Default, the Agent, acting on behalf of and at the direction of the Required
Lenders (and subject to the provisions of (S) 11.17), may then exercise any and
all rights and remedies available under the Facility Documents or at law or in
equity.
ARTICLE 10. GUARANTY
Section 10.01. The Guarantee. The Subsidiary Guarantor, and each other
-------------
Person who may from time to time become a Guarantor hereunder, hereby jointly
and severally guarantees to each Lender and the Agent and its respective
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the principal of and interest on the
Loans made by the Lenders to the Borrower, all fees and other amounts from time
to time owing from the Borrower to the Lenders hereunder, and all other
Obligations of the Borrower and each of its Subsidiaries under the Facility
Documents (such obligations being herein collectively called the "Guaranteed
----------
Obligations"). The Subsidiary Guarantor and each other Guarantor hereby further
- -----------
agrees that if the Borrower or any of its Subsidiaries shall fail to pay in full
when due (whether at stated maturity, by acceleration or otherwise) any of the
Guaranteed Obligations, the Subsidiary Guarantor and each such other Guarantor
shall promptly pay the same upon demand therefor by the Agent or the Lenders,
without any further demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.
Section 10.02. Obligations Unconditional. The obligations of the Subsidiary
-------------------------
Guarantor and each other Guarantor under (S)10.01 are absolute and unconditional
irrespective of the value, genuineness, validity, regularity or enforceability
of this Agreement, the other Facility Documents or any other agreement or
instrument referred to herein or therein, or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this (S)10.02 that the obligations of the Subsidiary
Guarantor and each other Guarantor hereunder shall be absolute and unconditional
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not, to the extent permitted by applicable law, alter or impair the
liability of the Subsidiary Guarantor and each other Guarantor under this
Article 10 which shall remain absolute and unconditional as described above:
(a) at any time or from time to time, without notice to the Subsidiary
Guarantor or any of the other Guarantors, the time for any performance of or
compliance with any of the Guaranteed Obligations shall be extended, or such
performance or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions hereof or of
the other Facility Documents or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(c) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right hereunder or under the
other Facility Documents or any other agreement or instrument referred to herein
or therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in whole or
in part or otherwise dealt with; or
(d) any lien or security interest granted to, or in favor of, the
Agent or the Lenders as security for any of the Guaranteed Obligations shall
fail to be perfected.
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The Subsidiary Guarantor and each other Guarantor hereby expressly waive, to the
extent permitted by applicable law, diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Agent or the
Lenders exhaust any right, power or remedy or proceed against the Borrower
hereunder or under the other Facility Documents or any other agreement or
instrument referred to herein or therein, or against any other Person under
other guarantee of, or security for, any of the Guaranteed Obligations.
Section 10.03. Reinstatement. The obligations of the Subsidiary Guarantor
-------------
and of each other Guarantor under this Article 10 shall be automatically
reinstated if and to the extent that for any reason any payment in respect of
the Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, and the Subsidiary
Guarantor and each other Guarantor agrees that it will indemnify the Agent and
each Lender on demand for all reasonable costs and expenses (including
reasonable fees and expenses of counsel) incurred by the Agent or any Lender in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
Section 10.04. Subrogation. Unless and until all of the Loans have been
-----------
repaid in full and the Revolving Credit Commitments have been irrevocably
terminated, neither the Subsidiary Guarantor nor any other Guarantor shall have
any rights of subrogation or contribution, whether arising by contract or
operation of law (including, without limitation, any such right arising under
the Federal Bankruptcy Code of 1978, as amended) or otherwise by reason of any
payment by it pursuant to the provisions of this Article 10.
Section 10.05. Remedies. The Subsidiary Guarantor and each other Guarantor
--------
agrees that, as between the Subsidiary Guarantor or such other Guarantor and the
Lenders, the obligations of the Borrower hereunder may be declared to be
forthwith due and payable as provided in (S)9.01 hereof (and shall be deemed to
have become automatically due and payable in the circumstances provided in
(S)9.01) for purposes of (S)10.01 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Borrower) shall forthwith become due and payable by the Subsidiary Guarantor and
such other Guarantor for purposes of (S)10.01.
Section 10.06. Instrument for the Payment of Money. The Subsidiary
-----------------------------------
Guarantor and each other Guarantor hereby acknowledges that the guarantee in
this Article 10 constitutes an instrument for the payment of money, and consents
and agrees that the Agent and the Lenders, in the event of a dispute by the
Subsidiary Guarantor or any other Guarantor in the payment of any moneys due
hereunder, shall have the right to summary judgment or such other expedited
procedure as may be available for a suit on a note or other instrument for the
payment of money.
Section 10.07. Continuing Guarantee. The guarantee in this Article 10 is a
--------------------
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
Section 10.08. General Limitation on Guarantee Obligations. In any action
-------------------------------------------
or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of the Subsidiary Guarantor or any other
Guarantor under (S)10.01 would otherwise, taking into account the provisions of
(S) 10.08, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under (S)10.01, then, notwithstanding any other provision hereof
to
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the contrary, the amount of such liability shall, without any further action by
the Subsidiary Guarantor, any other Guarantor, any Lender, the Agent or any
other Person, be automatically limited and reduced to the highest amount that is
valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
ARTICLE 11. THE AGENT; RELATIONS AMONG LENDERS AND BORROWER
Section 11.01. Appointment, Powers and Immunities of Agent. Each Lender
-------------------------------------------
hereby irrevocably (but subject to removal by the Required Lenders pursuant to
(S) 11.09) appoints and authorizes the Agent to act as its agent hereunder and
under any other Facility Document with such powers as are specifically delegated
to the Agent by the terms of this Agreement and any other Facility Document,
together with such other powers as are reasonably incidental thereto. The Agent
shall have no duties or responsibilities except those expressly set forth in
this Agreement and any other Facility Document, and shall not by reason of this
Agreement be a trustee for any Lender. The Agent shall not be responsible to the
Lenders for any recitals, statements, representations or warranties made by the
Borrower or any officer or official of the Borrower or any other Person
contained in this Agreement or any other Facility Document, or in any
certificate or other document or instrument referred to or provided for in, or
received by any of them under, this Agreement or any other Facility Document, or
for the value, legality, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Facility Document or any other
document or instrument referred to or provided for herein or therein, for the
perfection or priority of any collateral security for the Loans, or for any
failure by the Borrower to perform any of its obligations hereunder or
thereunder. The Agent may employ agents and attorneys-in-fact and shall not be
responsible, except as to money or securities received by it or its authorized
agents, for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. Neither the Agent nor any of its directors,
officers, employees or agents shall be liable or responsible for any action
taken or omitted to be taken by it or them hereunder or under any other Facility
Document or in connection herewith or therewith, except for its or their own
gross negligence or willful misconduct.
Section 11.02. Reliance by Agent. The Agent shall be entitled to rely upon
-----------------
any certification, notice or other communication (including any thereof by
telephone, telex, telegram, telecopier or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent. The Agent may deem and
treat each Lender as the holder of the Loans made by it for all purposes hereof
unless and until a notice of the assignment or transfer thereof satisfactory to
the Agent signed by such Lender shall have been furnished to the Agent but the
Agent shall not be required to deal with any Person who has acquired a
participation in any Loan from a Lender. As to any matters not expressly
provided for by this Agreement or any other Facility Document, the Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder in accordance with instructions signed by the Required Lenders, and
such instructions of the Required Lenders and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and any other holder of
all or any portion of any Loan.
Section 11.03. Defaults. The Agent shall not be deemed to have knowledge of
---------
the occurrence of a Default or an Event of Default (other than the non-payment
of principal of or interest on the Loans to the extent the same is required to
be paid to the Agent for the account of the Lenders) unless the Agent has
received notice from a Lender or the Borrower specifying such Default or Event
of Default and stating that such notice is a "Notice of Default." In the event
that the Agent receives such a notice of the occurrence of a Default or Event of
Default, the Agent shall give prompt notice thereof to the Lenders (and shall
give each Lender prompt notice of each such non-payment). The Agent shall
(subject to (S) 11.08) take such action with respect to such Default or Event of
Default which is continuing as shall be directed by the Required Lenders;
provided that, unless and until the Agent shall have received such
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directions, the Agent may take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interest of the Lenders; and provided further that the Agent shall not
be required to take any such action which it determines to be contrary to law.
Section 11.04. Rights of Agent as a Lender. With respect to any Revolving
---------------------------
Credit Commitment and the Loans made by it, the Agent in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as the Agent, and
the term "Lenders" shall, unless the context otherwise indicates, include the
Agent in its capacity as a Lender. The Agent and its Affiliates may (without
having to account therefor to any Lender) accept deposits from, lend money to
(on a secured or unsecured basis), and generally engage in any kind of banking,
trust or other business with, the Borrower (and any of its Affiliates) as if it
were not acting as the Agent, and the Agent may accept fees and other
consideration from the Borrower for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders. Although
the Agent and its Affiliates may in the course of such relationships and
relationships with other Persons acquire information about the Borrower, its
Affiliates and such other Persons, the Agent shall have no duty to disclose such
information to the Lenders.
Section 11.05. Indemnification of Agent. The Lenders agree to indemnify the
------------------------
Agent (to the extent not reimbursed under (S) 12.03 or under the applicable
provisions of any other Facility Document, but without limiting the obligations
of the Borrower under (S) 12.03 or such provisions), ratably in accordance with
the aggregate unpaid principal amount of the Loans made by the Lenders (without
giving effect to any participations, in all or any portion of such Loans, sold
by them to any other Person) (or, if no Loans are at the time outstanding,
ratably in accordance with their respective Revolving Credit Commitments), for
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of this Agreement, any other Facility
Document or any other documents contemplated by or referred to herein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses which the Borrower is obligated to pay under (S) 12.03 or
under the applicable provisions of any other Facility Document but excluding,
unless a Default or Event of Default has occurred, normal administrative costs
and expenses incident to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or of any such other documents
or instruments; provided that no Lender shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
Agent.
Section 11.06. Documents. The Agent will forward to each Lender, promptly
----------
after the Agent's receipt thereof, a copy of each report, notice or other
document required by this Agreement or any other Facility Document to be
delivered to the Agent for such Lender.
Section 11.07. Non-Reliance on Agent and Other Lenders. Each Lender agrees
---------------------------------------
that it has, independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrower and its Subsidiaries
and its own decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any other Facility Document. The Agent shall not be
required to keep itself informed as to the performance or observance by the
Borrower of this Agreement or any other Facility Document or any other document
referred to or provided for herein or therein or to inspect the properties or
books of the Borrower or any Subsidiary. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning
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the affairs, financial condition or business of the Borrower or any of its
Subsidiaries which may come into the possession of the Agent or any of its
Affiliates. The Agent shall not be required to file this Agreement, any other
Facility Document or any document or instrument referred to herein or therein,
for record or give notice of this Agreement, any other Facility Document or any
document or instrument referred to herein or therein, to anyone.
Section 11.08. Failure of Agent to Act. Except for action expressly
-----------------------
required of the Agent hereunder, the Agent shall in all cases be fully justified
in failing or refusing to act hereunder unless it shall have received further
assurances (which may include cash collateral) of the indemnification
obligations of the Lenders under (S) 11.05 in respect of any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.
Section 11.09. Resignation or Removal of Agent. Subject to the appointment
-------------------------------
and acceptance of a successor Agent as provided below, the Agent may resign at
any time by giving written notice thereof to the Lenders and the Borrower, and
the Agent may be removed at any time with or without cause by the Required
Lenders; provided that the Borrower and the other Lenders shall be promptly
notified thereof. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a bank which has an office in the United States. The Required Lenders
or the retiring Agent, as the case may be, shall upon the appointment of a
successor Agent promptly so notify the Borrower and the other Lenders. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article 11 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.
Section 11.10. Amendments Concerning Agency Function. The Agent shall not
-------------------------------------
be bound by any waiver, amendment, supplement or modification of this Agreement
or any other Facility Document which affects its duties hereunder or thereunder
unless it shall have given its prior consent thereto.
Section 11.11. Liability of Agent. The Agent shall not have any liabilities
------------------
or responsibilities to the Borrower on account of the failure of any Lender to
perform its obligations hereunder or to any Lender on account of the failure of
the Borrower to perform its obligations hereunder or under any other Facility
Document. The Agent shall have no liability to the Borrower or to any Lender by
reason of any error in the computation of the Borrowing Base.
Section 11.12. Transfer of Agency Function. Without the consent of the
---------------------------
Borrower or any Lender, the Agent may at any time or from time to time transfer
its functions as Agent hereunder to any of its offices wherever located,
provided that the Agent shall promptly notify the Borrower and the Lenders
thereof.
Section 11.13. Non-Receipt of Funds by the Agent. Unless the Agent shall
---------------------------------
have been notified by a Lender or the Borrower (either one as appropriate being
the "Payor") prior to the date on which such Lender is to make payment hereunder
to the Agent of the proceeds of a Loan or the Borrower are to make payment to
the Agent, as the case may be (either such payment being a "Required Payment"),
which notice shall be effective upon receipt, that the Payor does not intend to
make the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient on
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such date and, if the Payor has not in fact made the Required Payment to the
Agent, the recipient of such payment (and if such recipient is the Borrower and
the Payor Lender fails to pay the amount thereof to the Agent upon demand, the
Borrower) shall, on demand, repay to the Agent the amount made available to it
together with interest thereon for the period from the date such amount was so
made available by the Agent until the date the Agent recovers such amount at a
rate per annum equal to the average daily Federal Funds Rate for such period;
provided further that as used in this (S) 11.13, "Required Payment" does not
include any amounts due from a Lender to the Agent which are to be settled on
the next Settlement Date pursuant to (S) 2.14, but "Required Payment" shall
include as of each Settlement Date any amounts due from a Lender to the Agent as
part of the Settlement Amount to be paid on such Settlement Date pursuant to (S)
2.14.
Section 11.14. Withholding Taxes. Each Lender represents that it is
-----------------
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to the Agent such forms, certifications,
statements and other documents as the Agent may request from time to time to
evidence such Lender's exemption from the withholding of any tax imposed by any
jurisdiction or to enable the Agent to comply with any applicable laws or
regulations relating thereto. Without limiting the effect of the foregoing, if
any Lender is not created or organized under the laws of the United States of
America or any state thereof, in the event that the payment of interest by the
Borrower is treated for U.S. income tax purposes as derived in whole or in part
from sources from within the U.S., such Lender will furnish to the Agent Form
4224 or Form 1001 of the Internal Revenue Service, or such other forms,
certifications, statements or documents, duly executed and completed by such
Lender as evidence of such Lender's exemption from the withholding of U.S. tax
with respect thereto. The Agent shall not be obligated to make any payments
hereunder to such Lender in respect of any Loan or such Lender's Revolving
Credit Commitment until such Lender shall have furnished to the Agent the
requested form, certification, statement or document.
Section 11.15. Several Obligations and Rights of Lenders. The failure of
-----------------------------------------
any Lender to make any Loan to be made by it on the date specified therefor
shall not relieve any other Lender of its obligation to make its Loan on such
date, but no Lender shall be responsible for the failure of any other Lender to
make a Loan to be made by such other Lender. The amounts payable at any time
hereunder to each Lender shall be a separate and independent debt, and each
Lender shall be entitled to protect and enforce its rights arising out of this
Agreement, and it shall not be necessary for any other Lender to be joined as an
additional party in any proceeding for such purpose.
Section 11.16. Pro Rata Treatment of Loans, Etc.
---------------------------------
(a) Except to the extent otherwise provided, each borrowing under (S)
2.02 shall be made from the Lenders, each payment of commitment fee accruing
under (S) 2.15 shall be made for the account of the Lenders, each prepayment and
payment of principal of or interest on Revolving Credit Loans shall be made for
the account of the Lenders, pro rata according to the relative amounts of the
Revolving Credit Commitment of each Lender.
(b) If the Agent receives funds for application to the Obligations
under the Facility Documents under circumstances for which the Facility
Documents do not specify the Loans or other Obligations to which, or the manner
in which, such funds are to be applied, the Agent may, but shall not be
obligated to, elect to distribute such funds to each Lender ratably in
accordance with such Lender's proportionate share of the principal amount of all
Loans then outstanding, in repayment or prepayment of such of the outstanding
Loans or other Obligations owed to such Lender, and for application to such
principal installments, as the Agent shall direct.
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Section 11.17. Sharing of Payments Among Lenders. If a Lender shall obtain
---------------------------------
payment of any principal of or interest on any Loan made by it through the
exercise of any right of setoff, banker's lien, counterclaim, or by any other
means (including any receipt of proceeds from the Collateral Account), it shall
promptly purchase from the other Lenders participations in (or, if and to the
extent specified by such Lender, direct interests in) the Loans made by the
other Lenders in such amounts, and make such other adjustments from time to time
as shall be equitable to the end that all the Lenders shall share the benefit of
such payment (net of any expenses which may be incurred by such Lender in
obtaining or preserving such benefit) pro rata in accordance with the unpaid
principal and interest on the Loans held by each of them. To such end the
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored. The Borrower agrees that any Lender so purchasing a participation
(or direct interest) in the Loans made by other Lenders may exercise all rights
of setoff, banker's lien, counterclaim or similar rights with respect to such
participation (or direct interest). Nothing contained herein shall require any
Lender to exercise any such right or shall affect the right of any Lender to
exercise, and retain the benefits of exercising, any such right with respect to
any other indebtedness of the Borrower.
Section 11.18. Enforcement of Facility Documents. After the Agent has
---------------------------------
received written notice from any Lender that an Event of Default has occurred
and is continuing, the Agent shall, subject to the other provisions of this
Article 11 and to the terms of the Facility Documents (and subject to the
rights, if any, of other persons holding liens on, security interests in or
claims to the Collateral which are prior to those of the Security Agreement),
take such steps toward collection or enforcement of any Facility Document and
the Collateral (or any portion thereof), including without limitation an action
to enforce the Security Agreements, as may be instructed in writing by the
Required Lenders, provided, however, that in no event shall the Agent be
required, and in all cases it shall be fully justified in failing or refusing,
to take any action under or pursuant to this Agreement (including without
limitation this (S) 11.18) which, in the reasonable opinion of the Agent, would
be contrary to law or to the terms of this Agreement or any Facility Document or
would subject it or its officers, employees or directors to liability, unless
and until the Agent shall be indemnified or tendered security to its
satisfaction by the Lenders, ratably as provided in (S) 11.05 hereof, against
any and all loss, cost, expense or liability in connection therewith, anything
herein or elsewhere contained to the contrary notwithstanding. Except as
expressly provided in this (S) 11.18, the Agent shall not be required to take
steps toward the collection of any amounts becoming payable upon any Collateral,
or to take any action towards enforcing any Facility Document or to institute,
appear in or defend any action, suit or other proceeding in connection
therewith. The foregoing provisions of this paragraph shall not be construed to
limit the power of the Agent to take any action permitted under any Facility
Document to be taken by the Agent, and the Agent may, in accordance with this
agreement, take any aforesaid action without the receipt of indemnity or
security or any request therefor and the taking of any such action shall not be
construed as a waiver of any provision of this Agreement. Each Lender agrees
with the other Lenders and the Agent that (i) such Lender will not take any
action whatsoever to enforce any term or provision of any Facility Document or
otherwise to realize the benefits of the Collateral, except through the Agent in
accordance with this Agreement, and (ii) if the Required Lenders shall instruct
the Agent pursuant to this (S) 11.18 to commence action to enforce any Facility
Document, such Lender (a) shall not thereafter commence any proceeding of its
own seeking payment of the Loans and/or any other Obligation held by such Lender
so long as such enforcement action is ongoing, and (b) if such a proceeding
shall be pending at the time such instructions are given to the Agent, shall
promptly (but in no event later than the commencement of such enforcement
action) cause such proceeding to be discontinued, provided that if such Lender
shall fail to discontinue such proceeding, the Agent is hereby authorized and
directed by such Lender and the other Lenders to commence and maintain such
foreclosure action on behalf of such other Lenders (excluding such Lender) and
any distribution of amounts required by this Agreement or the Facility Documents
shall be made only to such other Lenders and/or the Agent as provided therein
and, notwithstanding anything herein or in the Security Agreement to the
contrary, such Lender shall not be entitled to share therein.
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Section 11.19. Borrowing Base Statements, Etc. The Agent shall provide to
-------------------------------
the Lenders and the Borrower, within thirty (30) days after receipt of the
Borrower's reports required under (S) 6.09, a copy of the computations of the
Borrowing Base made by the Agent on the basis of such reports in substantially
the same format which has been furnished to the Lenders as of the date of this
Agreement; provided, however, that the Agent shall not be liable to the Lenders
for the accuracy of any information contained in such statements. The Agent
shall provide to the Lenders each Borrowing Base Certificate promptly after
receipt thereof from the Borrower.
ARTICLE 12. MISCELLANEOUS
Section 12.01. Amendments and Waivers. Except as otherwise expressly
----------------------
provided in this Agreement, any provision of this Agreement or any of the other
Facility Documents may be amended or modified only by an instrument in writing
signed by the Borrower, the Agent and the Required Lenders, or by the Borrower
and the Agent acting with the consent of the Required Lenders and any provision
of this Agreement or the other Facility Documents for the benefit of the
Required Lenders or the Agent may be waived by the Required Lenders or by the
Agent acting with the consent of the Required Lenders; provided that no
--------
amendment, modification or waiver shall, unless by an instrument signed by all
of the Lenders or by the Agent acting with the consent of all of the Lenders:
(a) increase or extend the term, or extend the time or waive any requirement for
the termination, of the Revolving Credit Commitments, (b) extend the date fixed
for the payment of principal of or interest on any Loan or any fee payable
hereunder, (c) reduce the amount of any payment of principal thereof or the rate
at which interest is payable thereon or any fee payable hereunder, (d) increase
the percentages (or maximum amounts) of Qualified Accounts, Qualified Raw
Material and Finished Goods Inventory or Qualified Excess Inventory included in
the Borrowing Base, (e) release the Liens in favor of the Agent on any material
portion of the Collateral, (f) alter the terms of this (S)12.01, (g) amend the
definition of the term "Required Lenders", or (h) waive any of the documentary
conditions precedent set forth in (S)4.01 hereof and provided, further, that any
-------- -------
amendment of Article 10 hereof or any amendment which increases the obligations
of the Agent hereunder shall require the consent of the Agent. No failure by any
party (Agent, any Lender or the Borrower) to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof or preclude
any other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Section 12.02. Usury. Anything herein to the contrary notwithstanding, the
-----
obligations of the Borrower under this Agreement and the Notes shall be subject
to the limitation that payments of interest shall not be required to the extent
that receipt thereof would be contrary to provisions of law applicable to a
Lender limiting rates of interest which may be charged or collected by such
Lender.
Section 12.03. Expenses. The Borrower shall reimburse the Agent and the
--------
Lenders on demand for all reasonable costs, expenses, and charges (including,
without limitation, reasonable fees and charges of external legal counsel for
the Agent and each Lender and costs allocated by its respective internal legal
departments, which shall include the internal legal department of the Lenders)
incurred in connection with the transactions contemplated by this Agreement,
including without limitation: (a) any such costs, expenses and advances incurred
in the protection of its security interests (including but not limited to
reasonable fees and out-of-pocket expenses incurred in perfection of, or
checking the status of such security interests and examinations to determine the
value of Accounts), (b) in the enforcement and collection of the Notes, the
security interests created by the Security Documents, if any, made in connection
herewith, including court costs; (c) the fees and expenses for services rendered
in connection with this Agreement and the Facility Documents (including the
preparation, execution and administration hereof and thereof, whether or not
consummated); (d) the amount of any taxes which Agent may have been required to
pay either by reason of any assessment made against it as to the assignee
hereunder of any Collateral or to free any Collateral from a lien thereon; (e)
the amount of any and all out-of-pocket
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expenses which Agent may incur in connection with the collection of any item
deposited in the Controlled Disbursement Account or received by Agent in
connection with any Collateral, together with interest on any of the above from
the date of such expenditure to the date of repayment in full to Agent at the
rate of interest payable on the Note; or (f) by the Agent or the Lenders
subsequent to any Default in connection with the enforcement or work-out of the
Loans, including the negotiation and preparation of any other agreements,
instruments or documents pertaining to the Loans or any of the debts,
liabilities or obligations of the Borrower or its Subsidiaries under any of the
Facility Documents. The Borrower agrees to indemnify the Agent and each Lender
and their respective directors, officers, employees and agents (each, an
"Indemnified Party") from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of them arising
out of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to any actual or proposed use by the Borrower or any Subsidiary of the
proceeds of the Loans, including without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation or
litigation or other proceedings (but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of any Indemnified Party). At its option, Agent may charge
such costs, expenses and amounts as a Revolving Credit Loan pursuant to this
Agreement.
Section 12.04. Survival. The obligations of the Borrower under (S)12.03
--------
shall survive the repayment of the Loans and the termination of the Revolving
Credit Commitments.
Section 12.05. Assignment; Participations.
--------------------------
(a) Each Lender may assign to one or more Eligible Assignees all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Revolving Credit Commitment, the
Loans owing to it and the Note or Notes held by it); provided, however, that (i)
-------- -------
each such assignment shall be of a uniform, and not a varying, percentage of all
rights and obligations under and in respect of the Revolving Credit Loans; (ii)
except in the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Revolving Credit Commitment
of the assigning Lender being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $5,000,000; (iii) each such
assignment shall be to an Eligible Assignee; (iv) no such assignments shall be
permitted without the consent of the Agent and the Borrower (not to be
unreasonably withheld) except that if a Default or Event of Default shall have
occurred and be continuing, the consent of the Borrower shall not be required;
and (v) the parties to each such assignment shall execute and deliver to the
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance, together with any Note or Notes subject to such assignment and a
processing and recordation fee of $3,000.
(b) Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in such Assignment and Acceptance,
(i) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and (ii) the Lender assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto
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<PAGE>
as follows: (i) other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any other Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of, or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, this Agreement or any other
Loan Document or any other instrument or document furnished pursuant hereto or
thereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any of its Subsidiaries or the performance or observance by the
Borrower or its Subsidiaries of any of their obligations under any Facility
Document or any other instrument or document furnished pursuant thereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in (S)(S) 5.05 and 6.08(a)
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon the
Agent, such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Loan Documents as are delegated to
the Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) The Agent shall maintain at its address referred to in
(S)12.06 a copy of each Assignment and Acceptance delivered to and accepted by
it and a register for the recordation of the names and addresses of the Lenders
and the Revolving Credit Commitment and principal amount of the Loans owing to
each Lender from time to time (the "Register"). The entries in the Register
--------
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee, together with any Note or Notes subject to
such assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit G hereto, (i) accept such
----------
Assignment and Acceptance; (ii) record the information contained therein in the
Register; and (iii) give prompt notice thereof to the Borrower. In the case of
any assignment by a Lender, within five Banking Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the Agent
in exchange for the surrendered Note or Notes a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it under a
credit facility pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained a Commitment hereunder under such credit facility, a new
Note to the order of the assigning Lender in an amount equal to the Commitment
retained by it hereunder. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note or Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of Exhibit A hereto.
---------
(f) Each Lender may sell participations to one or more Persons
(other than the Borrower or any of its Affiliates) in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Revolving Credit Commitments, the Loans owing to it and
the Note or Notes (if any) held by it); provided, however, that (i) such
-------- -------
Lender's obligations under this Agreement (including, without limitation, its
Revolving Credit Commitments) shall
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<PAGE>
remain unchanged; (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations; (iii) such Lender shall
remain the holder of any such Note for all purposes of this Agreement; (iv) the
Borrower, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement; (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of any Facility Document, or any consent to any departure by the
Borrower or any of its Subsidiaries therefrom, except to the extent that such
amendment, waiver or consent would reduce the principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, in each case to the extent
subject to such participation, postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, or release
all or substantially all of the Collateral; and (vi) the identity of the
participant shall have been approved by the Agent in writing to such Lender.
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
(S)12.05, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower; provided, however, that, prior to any such
-------- -------
disclosure, the assignee or participant or proposed assignee or participant
shall agree in writing to preserve the confidentiality of any confidential
information received by it from such Lender.
(h) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Loans owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
Section 12.06. Notices. All notices and other communications provided for
-------
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made in writing and,
telecopied, mailed or delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature page hereof or, as to any
party, at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
Section 12.07. Table of Contents; Headings. Any table of contents and the
---------------------------
headings and captions hereunder are for convenience only and shall not affect
the interpretation or construction of this Agreement.
Section 12.08. Severability. The provisions of this Agreement are intended
------------
to be severable. If for any reason any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 12.09. Counterparts. This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
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<PAGE>
Section 12.10. Governing Law. Pursuant to Section 5-1401 of the New York
-------------
General Obligations Law, the whole of this Agreement and the rights and
obligations of the parties hereto shall be governed, construed and interpreted
in accordance with, the laws of the State of New York without regard to any
conflicts-of-laws rules which would require the application of the laws of any
other jurisdiction.
Section 12.11. Incorporation By Reference; Conflicts. The rights and
-------------------------------------
remedies of Agent and the Lenders under the other Facility Documents are
incorporated herein by reference and the rights and remedies of the Agent and
the Lenders under this Agreement and all of the terms of this Agreement, are
likewise incorporated in the other Facility Documents by reference. In the case
of any conflict between the terms of this Agreement and the terms of any other
Facility Document, the terms of this Agreement shall govern.
Section 12.12. Jurisdiction, Venue and Service. For purposes of this
-------------------------------
Agreement, each of the Borrower hereby irrevocably consents and submits to the
nonexclusive jurisdiction and venue of all federal and state courts located in
the County of Monroe, State of New York and consents that any order, process,
notice of motion or other application to or by any of said courts or a judge
thereof may be served within or without such court's jurisdiction by registered
mail or by personal service, provided a reasonable time for appearance is
--------
allowed, in connection with any action or proceeding arising out of, under or
relating to this Agreement or the Facility Documents. At the option of the
Agent, upon the instructions of the Required Lenders, the Borrower may be joined
in any action or proceeding commenced by the Agent or the Lenders against any
Security Document Party in connection with or based on the Security Documents,
and recovery may be had against the Borrower in such action or proceeding or in
any independent action or proceeding against the Borrower, without any
requirement that the Agent or the Lenders first assert, prosecute or exhaust any
remedy or claim against any Security Document Party. Each of the Borrower hereby
irrevocably waives (to the fullest extent permitted by applicable law) any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of, under or relating to this Agreement or any
Facility Document brought in any federal or state court located in the County of
Monroe, State of New York, and hereby further irrevocably waives (to the fullest
extent permitted by applicable law) any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Section 12.13. Waiver of Jury Trial.
--------------------
EACH OF THE AGENT, THE LENDERS, THE SUBSIDIARY GUARANTOR AND THE BORROWER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR ANY FACILITY DOCUMENT,
AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A
JURY. IN ADDITION, EACH OF THE AGENT, THE LENDERS, THE SUBSIDIARY GUARANTOR AND
THE BORROWER WAIVES THE RIGHT TO INTERPOSE ANY DEFENSE BASED UPON ANY STATUTE OF
LIMITATIONS OR ANY CLAIM OF LACHES AND ANY SET-OFF OR COUNTER CLAIM OF ANY
NATURE OR DESCRIPTION. EACH OF THE AGENT, THE LENDERS, THE SUBSIDIARY GUARANTOR
AND THE BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE FREELY MADE.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BORROWER:
ACT MANUFACTURING, INC.
By: /s/ John A. Pino
-----------------------------
Name: John A. Pino
---------------------------
Title: President
--------------------------
Address for Notices:
ACT Manufacturing, Inc.
2 Cabot Road
Hudson, MA 01749
Attn: Chief Financial Officer
Facsimile #: 978-567-4099
SUBSIDIARY GUARANTOR:
ACT MANUFACTURING SECURITIES CORPORATION
By: /s/ John A. Pino
-----------------------------
Name: John A. Pino
---------------------------
Title: President
--------------------------
Address for Notices:
c/o ACT Manufacturing, Inc.
2 Cabot Road
Hudson, MA 01749
Attn: Chief Financial Officer
Facsimile #: 978-567-4099
<PAGE>
AGENT:
THE CHASE MANHATTAN BANK, as Administrative,
Documentation, Collateral and Syndication
Agent
By: /s/ Peter N. Langburd
-----------------------------
Name: Peter N. Langburd
---------------------------
Title: Vice President
--------------------------
Address for Notices:
The Chase Manhattan Bank
Asset Based Lending
One Chase Square
Rochester, New York 14643
Attn: ACT Manufacturing
Account Representative
Telecopier #716-258-7440
LENDERS:
THE CHASE MANHATTAN BANK
By: /s/ Peter N. Langburd
-----------------------------
Name: Peter N. Langburd
---------------------------
Title: Vice President
--------------------------
Address for Notices:
The Chase Manhattan Bank
200 Jericho Quadrangle
Jericho, New York 11753
Attn: ACT Manufacturing
Account Representative
Telecopier # 516-828-4658
<PAGE>
NATIONAL BANK OF CANADA
By: /s/ R. Uhrig /s/ Michael R. Brace
-------------------------------------
Name: R. Uhrig Michael R. Brace
-----------------------------------
Title: VP & Mgr. Marketing Officer
----------------------------------
Address for Notices:
National Bank of Canada
Main Place Tower, Suite 2540
350 Main Street
Buffalo, New York 14202
Attn: Robert G. Uhrig,
Vice President and Manager
Telecopier # 716-852-6832
<PAGE>
Exhibit 10.2
------------
Revolving Credit Note
October 14, 1998
$43,000,000.00
ACT Manufacturing, Inc. (the "Borrower"), for value received, hereby
--------
promises to pay to the order of The Chase Manhattan Bank (the "Lender") at the
------
office of The Chase Manhattan Bank at One Chase Square, Rochester, New York
14643, for the account of such Lender, the principal sum of Forty Three Million
and 00/100 Dollars ($43,000,000.00) or, if less, the amount of Revolving Credit
Loans loaned by the Lender to the Borrower pursuant to the Credit Agreement
referred to below, in lawful money of the United States of America and in
immediately available funds, on the date(s) and in the manner provided in said
Credit Agreement. The Borrower also promises to pay interest on the unpaid
principal balance hereof, for the period such balance is outstanding, at said
principal office for the account of said Lender, in like money, at the rates of
interest as provided in the Credit Agreement described below, on the date(s) and
in the manner provided in said Credit Agreement.
The date and amount of each Revolving Credit Loan made by the Lender to the
Borrower under the Credit Agreement referred to below, maturity date and each
payment of principal thereof, shall be recorded by the Lender on its books and,
prior to any transfer of this Note (or, at the discretion of the Lender, at any
other time), endorsed by the Lender on the schedule attached hereto or any
continuation thereof; provided, however, that failure to make any such
endorsement shall not affect the rights of the Lender or the obligations of the
Borrower hereunder in respect of this Note. The Lender's records shall be
presumed to be accurate absent manifest error.
This is one of the Notes referred to in that certain Credit Agreement (as
amended from time to time the "Credit Agreement") dated as of October 14, 1998
----------------
among the Borrower, the Subsidiary Guarantor named therein, the Lenders named
therein (including the Lender), and The Chase Manhattan Bank, as Agent, and
evidences the Revolving Credit Loans made by the Lender to the Borrower
thereunder. All terms not defined herein shall have the meanings given to them
in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
principal upon the occurrence and during the continuance of certain Events of
Default and for prepayments on the terms and conditions specified therein.
The Borrower waives presentment, notice of dishonor, protest and any other
notice or formality with respect to this Note.
This Note shall be governed by, and interpreted and construed in accordance
with, the laws of the State of New York.
ACT MANUFACTURING, INC.
By: /s/ John A. Pino
-------------------------
Name: John A. Pino
-----------------------
Title: President
----------------------
<PAGE>
Exhibit 10.3
------------
Revolving Credit Note
October 14, 1998
$12,000,000.00
ACT Manufacturing, Inc. (the "Borrower"), for value received, hereby
--------
promises to pay to the order of National Bank of Canada (the "Lender") at the
------
office of The Chase Manhattan Bank at One Chase Square, Rochester, New York
14643, for the account of such Lender, the principal sum of Twelve Million
and 00/100 Dollars ($12,000,000.00) or, if less, the amount of Revolving Credit
Loans loaned by the Lender to the Borrower pursuant to the Credit Agreement
referred to below, in lawful money of the United States of America and in
immediately available funds, on the date(s) and in the manner provided in said
Credit Agreement. The Borrower also promises to pay interest on the unpaid
principal balance hereof, for the period such balance is outstanding, at said
principal office for the account of said Lender, in like money, at the rates of
interest as provided in the Credit Agreement described below, on the date(s) and
in the manner provided in said Credit Agreement.
The date and amount of each Revolving Credit Loan made by the Lender to the
Borrower under the Credit Agreement referred to below, maturity date and each
payment of principal thereof, shall be recorded by the Lender on its books and,
prior to any transfer of this Note (or, at the discretion of the Lender, at any
other time), endorsed by the Lender on the schedule attached hereto or any
continuation thereof; provided, however, that failure to make any such
endorsement shall not affect the rights of the Lender or the obligations of the
Borrower hereunder in respect of this Note. The Lender's records shall be
presumed to be accurate absent manifest error.
This is one of the Notes referred to in that certain Credit Agreement (as
amended from time to time the "Credit Agreement") dated as of October 14, 1998
----------------
among the Borrower, the Subsidiary Guarantor named therein, the Lenders named
therein (including the Lender), and The Chase Manhattan Bank, as Agent, and
evidences the Revolving Credit Loans made by the Lender to the Borrower
thereunder. All terms not defined herein shall have the meanings given to them
in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
principal upon the occurrence and during the continuance of certain Events of
Default and for prepayments on the terms and conditions specified therein.
The Borrower waives presentment, notice of dishonor, protest and any other
notice or formality with respect to this Note.
This Note shall be governed by, and interpreted and construed in accordance
with, the laws of the State of New York.
ACT MANUFACTURING, INC.
By: /s/ John A. Pino
-------------------------
Name: John A. Pino
-----------------------
Title: President
----------------------
<PAGE>
Exhibit 10.4
------------
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of October 14, 1998 is granted by ACT
MANUFACTURING, INC. (the "Borrower") and ACT MANUFACTURING SECURITIES
--------
CORPORATION (collectively with the Borrower, the "Debtors") to THE CHASE
-------
MANHATTAN BANK, as collateral agent for the Lenders under the Credit Agreement
defined below (the "Collateral Agent" and, together with the Lenders, the
----------------
"Secured Parties").
---------------
STATEMENT OF THE PREMISES
-------------------------
WHEREAS, the Debtors are entering into a Credit Agreement of even date
herewith (as the same may be modified, amended, supplemented or restated from
time to time, the "Credit Agreement"), with The Chase Manhattan Bank ("Chase")
---------------- -----
as administrative, documentation, collateral and syndication agent, and the
Lenders from time to time party thereto; and
WHEREAS, in connection with the execution and delivery of the Credit
Agreement, the Collateral Agent has requested that the Debtors, and the Debtors
have agreed to, enter into this Security Agreement (this "Security Agreement"),
------------------
pursuant to which the Debtors are pledging and granting a security interests in
favor of the Collateral Agent for the benefit of the Secured Parties;
NOW, THEREFORE, in consideration of the willingness of the Secured Parties
to enter into the Credit Agreement and of the Lenders to agree, subject to the
terms and conditions set forth therein, to make the Loans and issue Letters of
Credit to the Borrower pursuant thereto, and for other good and valuable
consideration, receipt of which is hereby acknowledged, it is hereby agreed as
follows.
STATEMENT OF CONSIDERATION
--------------------------
To induce the Secured Parties to enter into the Credit Agreement and to
induce the Lenders to make Loans and issue Letters of Credit to the Borrower
thereunder, the Debtors hereby execute and deliver this Security Agreement to
the Collateral Agent for the benefit of the Secured Parties, for the purpose of
pledging and granting to the Collateral Agent for the benefit of the Secured
Parties, security interests in substantially all of the Debtors' properties and
assets.
AGREEMENT
---------
1. Definitions.
-----------
1.1 Incorporation by Reference. All terms defined in Schedule A
-------------------------- ----------
annexed hereto are hereby incorporated by reference and all such terms and words
so defined are used herein with the same meanings therein set forth. All
capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement.
1.2 Additional Definitions. The following terms shall have the
----------------------
following meanings for purposes of this Security Agreement (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
<PAGE>
"Collateral" means, collectively, all of the right, title and interest of
----------
the Debtors in and to all tangible and intangible personal property of the
Debtors, whether now owned or existing or hereafter acquired or arising,
including, without limitation, the property described on Schedule A annexed
hereto, together with any and all additions thereto and replacements therefor
and proceeds and products thereof.
"Corresponding", when used in conjunction with any defined term (the
-------------
"referred term"), refers to such specific persons, items or documents to which
such referred term pertains which are related or connected to another defined
term in the context.
"Event of Default" means: (i) any event, condition or act (including notice
----------------
and lapse of time, if specified) which is defined or described as an event of
default in any Secured Loan Document; and (ii) in the case of any evidence of
indebtedness constituting a Secured Loan Document which does not prescribe any
event of default therein, (A) the failure by Debtors to pay when due any such
indebtedness, or (B) the occurrence of any event, condition or act (including
notice and lapse of time, if specified) which pursuant to the terms of any such
Secured Loan Document gives the Secured Parties the right to accelerate the
payment of any Secured Obligation, regardless of whether the Secured Parties
exercise such right.
"Financing Statements" mean all UCC-1 Financing Statements to be filed in
--------------------
any public office to perfect the security interest granted under this Security
Agreement.
"Secured Loan Document" means the Credit Agreement and any other agreement,
---------------------
document or instrument executed by any of the Debtors, delivered to any Lender
or the Collateral Agent and pertaining to any Secured Obligation.
"Secured Obligations" means all debts, liabilities and obligations of the
-------------------
Debtors to the Secured Parties of every nature (including without limitation any
debts, liabilities or obligations pursuant to and under any and all Interest
Rate Protection Agreements), whether now existing or hereafter incurred at any
time or times, absolute or contingent, secured or unsecured, and any and all
renewals or extensions thereof or of any portion thereof, including without
limitation all principal, all interest, all prepayment premiums (if any), all
fees, all late charges and all penalties and all expenses of collection or
enforcement or attempted collection or enforcement thereof, including all
reasonable fees and disbursements of the Secured Parties' counsel in connection
therewith, whether within or apart from any legal action or proceeding.
"Secured Parties" means Chase (or any affiliate of Chase), as
---------------
administrative, documentation, collateral and syndication agent for the Lenders
under the Credit Agreement, the Lenders and the Collateral Agent, collectively;
and "Secured Party" means each of Chase (or any affiliate of Chase), as
-------------
administrative, documentation, collateral and syndication agent for the Lenders
under the Credit Agreement, the Lenders and the Collateral Agent, individually.
"UCC" means the Uniform Commercial Code of the State of New York, as
---
amended and in effect as of the date hereof.
2. Security Interest.
-----------------
2.1 The Debtors hereby grant to the Secured Parties, a security
interest in all of the Collateral as security for the payment of all Secured
Obligations.
2
<PAGE>
2.2 The Debtors irrevocably appoint the Collateral Agent as their
lawful attorney and authorize the Collateral Agent to execute any Financing
Statements in the Debtors' names and on the Debtors' behalf, and to file
Financing Statements against the Debtors signed by the Collateral Agent alone in
any appropriate public office, each to the extent permitted by applicable law.
2.3 This Security Agreement is in addition to and without limitation
of any right of the Secured Parties under any of the Secured Loan Documents or
any other security agreement, mortgage or guaranty granted by the Debtors or any
other person to the Secured Parties.
3. Representation and Warranties.
-----------------------------
The Debtors represent and warrant that:
3.1 Except as listed on the Schedules to the Credit Agreement, the
Debtors have granted no currently effective security interest in the Collateral
to any person other than to the Secured Parties, and no financing statement in
favor of any such other person as a secured party covering any of the Collateral
or any proceeds thereof is on file in any public office, and the Collateral is
free and clear of any Lien, charge or encumbrance, except pursuant to and under
this Security Agreement.
3.2 The Debtors are the lawful owners of the Collateral; and all
information with respect to the Collateral set forth in any schedule,
certificate or other writing furnished by Debtors to the Secured Parties, is
true and correct as of the date furnished. Debtors will have good title to all
Collateral acquired by them in the future and the Secured Parties will acquire
through this Security Agreement a valid, perfected prior security interest
therein, except to the extent that the Collateral is acquired with purchase
money Indebtedness secured by purchase money Liens, as permitted under the
Credit Agreement, in which case the Secured Parties will acquire a valid,
perfected, subordinate security interest. Each statement of Accounts to be
delivered pursuant to the Credit Agreement will constitute a representation by
Debtors that the Accounts forming the basis therefor conform to the definitions
of Qualified Accounts. Debtors will continue to hold all Collateral free and
clear of all Liens excepting the rights of the Collateral Agent hereunder and
those Liens permitted pursuant to the terms of the Credit Agreement.
3.3 The true and correct locations of each Debtor's principal place
of business and chief executive office are set forth on Schedule B.
----------
3.4 The locations of all Equipment and Inventory of the Debtors set
forth on Schedule B hereto is a true and complete listing of all of the
----------
locations of the Debtors' Equipment and Inventory as of the date hereof, subject
to the Debtors' ordinary business practice which requires the temporary
relocation of Equipment from time to time, which shall be disclosed to the
Secured Parties pursuant to Section 4.5 of this Security Agreement.
3.5 Except as noted on Schedule B hereto, the Debtors conduct no
----------
business, whether directly or indirectly or through any subsidiary or division,
under any name or trade name other than the names first recited above.
3
<PAGE>
3.6 Schedule C hereto is a true and complete list of all of the
----------
Debtors' registered patents, trademarks and copyrights.
4. Covenants and Agreements of Debtors.
-----------------------------------
The Debtors covenant and agree that:
4.1 The Secured Parties may examine and inspect the Collateral at
any reasonable time during regular business hours upon reasonable prior notice
and wherever located.
4.2 Subject to the limitations of this Security Agreement, the
Debtors will from time to time upon demand furnish to the Collateral Agent such
further information and will execute, acknowledge and deliver to the Collateral
Agent such financing statements and assignments and other papers, pay any costs
of searches and filing fees, and will do all such other acts and things as the
Collateral Agent may reasonably request as being necessary or appropriate to
establish, perfect and maintain a valid security interest in the Collateral as
security for the Secured Obligations. Without limitation of the foregoing, the
Debtors will execute and deliver to the Secured Parties any document required to
acknowledge, register or perfect the security interest granted in any of the
Patent Rights, Technical Information, Trademark Rights or Copyrights and in any
of the Collateral under the Federal Assignment of Claims Act.
4.3 The Debtors will defend the Collateral against all claims and
demands of all other persons at any time claiming the same or an interest
therein. Except to the extent permitted in the Credit Agreement, Debtors shall
not encumber any Collateral to any person other than the Secured Parties, or
sell, assign or transfer the Collateral or any right, title or interest therein
(other than the sale of Inventory in the ordinary course of the Debtors'
business and the sale or disposal of obsolete or unnecessary equipment).
4.4 If any action or proceeding shall be commenced, other than any
action to collect the Secured Obligations, to which action or proceeding the
Secured Parties are made parties and in which it becomes necessary to defend or
uphold the Secured Parties' security interests hereunder, all costs reasonably
incurred by the Secured Parties for the expenses of such litigation (including
reasonable counsel fees and expenses) shall be deemed part of the Secured
Obligations secured hereby, which the Debtors agree to pay or cause to be paid.
4.5 All records of the Collateral will be located at the Debtors'
principal places of business. No Debtor shall change the location of any
Equipment or Inventory or the records pertaining to any Collateral to any
location not listed on Schedule B hereto unless such Debtor gives the Collateral
----------
Agent not less than 14 days' prior written notice.
4.6 The Debtors will have and maintain Insurance at their expense at
all times in such amounts, in such form, containing such terms and written by
such companies as may be reasonably satisfactory to the Secured Parties (and as
more particularly set forth in the Credit Agreement). All policies of Insurance
shall be payable to the Collateral Agent and the Debtors, as their interests may
appear, and shall provide for thirty (30) days' written notice of cancellation
or modification to the Collateral Agent. The Collateral Agent is authorized by
the Debtors to act as its attorney in collecting, adjusting, settling or
canceling such Insurance and endorsing any drafts drawn by insurers. The
Collateral Agent shall apply the proceeds of Insurance received by
4
<PAGE>
it to the Secured Obligations as provided in the Credit Agreement. The Debtors
will immediately notify the Collateral Agent of any damage to or loss of the
Collateral in excess of $100,000. Not later than the expiration date of each
policy of Insurance then in effect, the Debtors shall deliver to the Collateral
Agent a certificate of Insurance certifying as to (i) the extension of such
policy or the issuance of a renewal policy therefor, describing the same in
reasonable detail satisfactory to the Collateral Agent and (ii) the payment in
full of the portion of the premium therefor then due and payable (or accompanied
by other proof of such payment satisfactory to the Secured Parties). The Debtors
shall be required forthwith to notify the Collateral Agent (by telephone,
confirmed in writing) if the Debtors shall determine at any time not to, or at
any time be unable to, extend or renew any such policy then in effect.
4.7 The Debtors will use the Collateral for business purposes and
not in violation of any statute or ordinance.
4.8 The Debtors will pay promptly when due all taxes and assessments
upon the Collateral or upon its use or sale ("Taxes"), except for any Taxes
-----
which are being contested in good faith and for which adequate reserves under
generally accepted accounting principles have been established.
4.9 The Debtors will at all times keep accurate and complete records
of the Accounts, Instruments and other Collateral and will deliver such
reconciliation reports and other financial information to the Collateral Agent
as the Collateral Agent may at any time reasonably request. The Collateral
Agent, or any of its agents, shall have the right to call at the Debtors' place
or places of business at reasonable intervals during regular business hours and
upon reasonable prior notice (except that no such prior notice shall be required
after the occurrence and during the continuance of a Default) to inspect, audit,
make test verifications and otherwise examine and make extracts from the books,
records, journals, orders, receipts, correspondence and other data relating to
any of the Collateral.
4.10 Upon the occurrence and during a continuance of an Event of
Default, the Debtors agree to stamp all books and records pertaining to
Accounts, Instruments and General Intangibles to evidence the Secured Parties'
security interest therein in form satisfactory to the Collateral Agent
immediately upon the Collateral Agent's written demand.
4.11 At its option, the Collateral Agent may discharge taxes, liens
or other encumbrances at any time levied against or placed on the Collateral
which have not been stayed as to execution and contested with due diligence in
appropriate legal proceedings, and the Collateral Agent may pay for Insurance on
the Collateral and may pay for maintenance and preservation of the Collateral.
The Debtors will, upon demand, remit to the Collateral Agent forthwith:
4.11.1 The amount of any such Taxes, assessments, Insurance or
other expenses which the Collateral Agent shall have
been required or elected to pay; and
4.11.2 The amount of any and all out-of-pocket expenses which
the Collateral Agent may reasonably incur in connection
with the
5
<PAGE>
exercise by the Collateral Agent of any of the powers
conferred upon it hereunder; and
4.11.3 interest on any amounts expended under Subsections
"4.11.1" and "4.11.2" of this Section 4.11 from the date
of such expenditure to the date of repayment in full to
the Collateral Agent at a rate per annum which shall
automatically increase and decrease so that at all times
such rate shall remain two (2) percentage points higher
than the Prime Rate.
4.12 Each Debtor will notify the Collateral Agent in writing at least
thirty (30) days prior to changing its chief executive office or other locations
at which it does business or changing its name or conducting business under any
name or trade name other than as warranted under Sections 3.3, 3.4, and 3.5
hereof, in each case specifying the places or names involved.
4.13 The Debtors will use commercially reasonable efforts to obtain
the consent of any person, governmental instrumentality or agency, or public
body or official to the assignment hereunder of any Account, Instrument,
Document or General Intangible if such consent may be required by the terms of
any contract or statute and if the such consent is reasonably necessary to
support the security interest hereunder and if the Collateral Agent so requests
in its discretion reasonably exercised.
4.14 Upon the occurrence and during the continuance of an Event of
Default, the Collateral Agent shall have the right to notify the account debtors
obligated on any or all of a Debtor's Accounts, Chattel Paper, Instruments,
Documents, Securities or General Intangibles to make payment thereof directly to
the Collateral Agent, and the Collateral Agent may take control of all proceeds
of any thereof. The form of such notice to the account debtors shall be
substantially in the form of Exhibit 1 annexed hereto or such other form as the
---------
Collateral Agent shall require.
5. Events of Default.
-----------------
5.1 Upon the occurrence and during the continuance of an Event of
Default, the Secured Parties shall have all of the rights, powers and remedies
set forth in the Secured Loan Documents, together with the rights and remedies
of Secured Parties under the UCC, including without limitation, the right to
sell, lease or otherwise dispose of any or all of the Collateral, and to take
possession of the Collateral, and for that purpose the Collateral Agent may
enter peaceably any premises on which the Collateral or any part thereof may be
situated and remove the same therefrom and the Debtors will not resist or
interfere with such action. The Collateral Agent may require the Debtors to
assemble the Collateral and make the same available to the Collateral Agent at a
place to be designated by the Collateral Agent which is reasonably convenient to
both parties. The Debtors hereby agree that the place or places of location of
the Collateral are places reasonably convenient to it to assemble the
Collateral. Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, the Collateral
Agent will send the Debtors reasonable notice of the time and place of any
public sale or reasonable notice of the time after which any private sale or any
other disposition thereof is to be made. The requirement of sending reasonable
notice shall be met if such notice is mailed, postage prepaid, to a Debtor at
least ten days before the time of the sale or
6
<PAGE>
disposition, or is personally delivered at least seven days before the time of
the sale or disposition.
5.2 Upon demand by the Collateral Agent after the occurrence and
during the continuance of an Event of Default, the Debtors will immediately
deliver to the Collateral Agent all proceeds of Collateral, and all original
evidences of Accounts, Chattel Paper, Instruments, Documents, Securities or
General Intangibles, including, without limitation, all checks, drafts, cash and
other remittances, notes, trade acceptances or other instruments or contracts
for the payment of money, appropriately endorsed to the Collateral Agent's order
and, regardless of the form of such endorsement, the Debtors hereby waive
presentment, demand, notice of dishonor, protest and notice of protest and all
other notices with respect thereto; and the Debtors hereby appoint the
Collateral Agent as the Debtors' agent and attorney-in-fact to make such
endorsement on behalf of and in the name of the Debtors. Pending such deposit,
the Debtors agree that they will not commingle any such checks, drafts, cash and
other remittances with any of the Debtors' funds or property, but will hold them
separate and apart therefrom and upon an express trust for the Collateral Agent
until delivery thereof is made to the Collateral Agent.
5.3 The reasonable costs of collection and enforcement of Accounts,
Chattel Paper, Instruments, Documents, Securities or General Intangibles
including attorneys' fees and outofpocket expenses, shall be borne solely by the
Debtors, whether the same are incurred by the Collateral Agent or the Debtors.
The Debtors will not, after the occurrence and during the continuance of an
Event of Default, except with the Collateral Agent's express written consent,
extend, compromise, compound or settle any Account, Chattel Paper, Instrument,
Document, Security or General Intangible, or release, wholly or partly, any
person liable for payment thereof, or allow any credit or discount thereon which
is not customarily allowed by the Debtors in the ordinary conduct of its
business.
5.4 Effective immediately upon the occurrence and during the
continuance of an Event of Default, the Debtors hereby appoint the Collateral
Agent to be the Debtors' true and lawful attorney, with full power of
substitution, in the Collateral Agent's name or the Debtors' name or otherwise,
for the Collateral Agent's sole use and benefit, but at the Debtors' cost and
expense, to exercise at any time all or any of the following powers with respect
to all or any of the Accounts, Chattel Paper, Instruments, Documents, Securities
or General Intangibles:
5.4.1 to demand, sue for, collect, receive and give acquittance
for any and all moneys due or to become due upon or by
virtue thereof;
5.4.2 to receive, take, endorse, assign and deliver any and all
checks, notes, drafts and other negotiable and
nonnegotiable instruments taken or received by the
Collateral Agent in connection therewith, and the Debtors
waive notice of presentment, protest and nonpayment of
any instrument so endorsed or assigned;
5.4.3 to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto;
5.4.4 to extend the time of payment of any or all thereof, to
make any allowance and other adjustments with reference
thereto;
7
<PAGE>
5.4.5 to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof or the
relevant goods, as fully and effectually as if the
Collateral Agent were the absolute owner thereof;
5.4.6 to make any reasonable allowance and other reasonable
adjustments with reference thereto;
5.4.7 to sign the Debtors' name on any Document, on invoices
relating to any Account, on drafts against customers, on
schedules of assignments of Accounts, on notices of
assignment, financing statements under the UCC and other
public records, on verifications of Accounts, and on
notices to customers;
5.4.8 to file or record in any public office notices of
assignment or any other public notice required to effect
this Security Agreement;
5.4.9 to notify the post office authorities to change the
address for delivery of the Debtors' mail to an address
designated by the Collateral Agent;
5.4.10 to receive, open and as appropriate to the purposes of
this Security Agreement and the Credit Agreement, respond
to or deal with, all mail addressed to the Debtors;
5.4.11 to discharge Taxes, liens or other encumbrances at any
time levied against or placed thereon;
5.4.12 to send requests for verification of Accounts to the
Debtors' customers; and
5.4.13 to do all other things the Collateral Agent deems
reasonably necessary or desirable to carry out the
purposes of this Security Agreement.
The Debtors hereby ratify and approve all acts of the attorney pursuant to this
Section 5.4, and neither the Collateral Agent nor the attorney will be liable
for any act of commission or omission, nor for any error of judgment or mistake
of fact or law, other than acts, errors or mistakes due to willful malfeasance
or gross negligence by the Collateral Agent or the attorney; provided further,
however, that the Debtors do not waive any right under the UCC against the
Secured Parties for any action taken hereunder which is other than commercially
reasonable. This power, being coupled with an interest, is irrevocable so long
as any of the Secured Obligations remain outstanding.
5.5 After deducting all reasonable expenses incurred by the
Collateral Agent in protecting or enforcing its rights in the Collateral, the
remainder of any proceeds of collection or sale of the Collateral shall be
applied to the payment of principal, interest or other charges comprising the
Secured Obligations in such order as the Collateral Agent may determine, and all
surplus shall be returned to the Debtors and the Debtors shall remain liable for
any deficiency.
8
<PAGE>
Except to the extent provided in Section 2.03(b) of the Credit Agreement for
amounts remitted to Collateral Agent by account debtors of the Borrowers
pursuant to the Lock Box Agreement, the Collateral Agent shall apply the
proceeds of collection or sale of the Collateral, if any, at least once during
each calendar month, and until so applied, shall retain such proceeds in the
Collateral Account. The Collateral Agent alone shall have the power of
withdrawal from the Collateral Account.
5.6 The Secured Parties may exercise their rights with respect to
Collateral without resorting to or regard to other collateral or sources of
reimbursement for the Secured Obligations.
5.7 The exercise by the Secured Parties of or failure to so exercise
any authority granted under this Security Agreement shall in no manner affect
any liability of any Debtor to any Secured Party, and provided, further, that
the Secured Parties shall be under no obligation or duty to exercise any of the
powers hereby conferred upon them and they shall be without liability for any
act or failure to act in connection with the collection of, or the preservation
of any rights under any of the Collateral.
6. Waivers.
-------
6.1 The Debtors waive all demands, notices and protests of every
kind which are not expressly required under this Security Agreement or the
Secured Loan Documents and which are permitted by law to be waived, and which
would, if not waived, impair the Secured Parties' enforcement of this Security
Agreement or release any Collateral from the security interest of the Secured
Parties under this Security Agreement. By way of example, but not in limitation
of the Secured Parties' rights under this Security Agreement, the Secured
Parties do not have to give the Debtors notice of any of the following:
6.1.1 notice of acceptance of this Security Agreement;
6.1.2 notice of advances made, credit extended, Collateral
received or delivered;
6.1.3 any action which the Secured Parties do or do not take
regarding the Debtors, any other person, or any other
collateral securing the Secured Obligations;
6.1.4 enforcement of this Security Agreement against the
Collateral; or
6.1.5 any other action taken in reliance on this Security
Agreement.
6.2 With respect both to Secured Obligations and Collateral, the
Debtors assent to any extension or postponement of the time of payment or any
other indulgence, to any substitution, exchange or release of Collateral, to the
addition or release of any party or person primarily or secondarily liable, to
the acceptance of partial payments thereon and the settlement, compromising or
adjusting of any thereof, all in such time or times as the Secured Parties may
deem advisable.
9
<PAGE>
6.3 The Secured Parties shall have no duty as to the collection or
protection of Collateral not in the Secured Parties' possession or control, and
the Secured Parties' duties with reference to Collateral in its possession or
control shall be to use reasonable care in the custody and preservation of such
Collateral, but such duty shall not require the Secured Parties to do any of the
following (although the Secured Parties are authorized to reasonably undertake
any such action if the Secured Parties deem such action appropriate):
6.3.1 protect any of the Collateral against the claims of
others;
6.3.2 collect any sums due on the Collateral;
6.3.3 exercise any rights under the Collateral;
6.3.4 notify the Debtors of any maturities or other similar
matters concerning the Collateral;
6.3.5 act upon any request the Debtors may make; or
6.3.6 preserve or protect the Debtors' rights in the
Collateral.
6.4 Each Debtor waives all rules of suretyship law and any other law
whatsoever which is legally permitted to be waived and which would, if not
waived, impair the Secured Parties' enforcement of their security interests
hereunder. By way of example, but not in limitation of the Secured Parties'
rights under this Security Agreement, the Secured Parties may do any of the
following without notice to Debtor, except to the extent that notice to Debtor
is required under another Secured Loan Document or in each case in which the
agreement of Debtor is required because Debtor is a principal party to a Secured
Obligation and, as a matter of contract, the agreement of such Debtor is
required:
6.4.1 change, renew or extend the time for repayment of all or
any part of the Secured Obligations;
6.4.2 change the rate of interest or any other provisions with
respect to all or any part of the Secured Obligations;
6.4.3 release, surrender, sell or otherwise dispose of any
money or property which is in the Secured Parties'
possession as collateral security for the Secured
Obligations;
6.4.4 fail to perfect a security interest in any property which
is pledged or mortgaged as security for payment of the
Secured Obligations;
6.4.5 release or discharge any party liable to the Secured
Parties in whole or in part for the Secured Obligations,
or accept any additional parties or guarantors;
6.4.6 delay or refrain from exercising any of the Secured
Parties' rights;
10
<PAGE>
6.4.7 settle or compromise any and all claims pertaining to the
Secured Obligations and the Collateral; and
6.4.8 apply any money or property of a Debtor or that of any
other party liable to the Secured Parties for any part of
the Secured Obligations in any order it chooses.
7. Actions and Proceedings.
-----------------------
IN THE EVENT OF ANY ACTION OR PROCEEDING WITH RESPECT TO ANY MATTER
PERTAINING TO THIS SECURITY AGREEMENT, THE DEBTORS AND THE COLLATERAL AGENT
HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY (BUT DO NOT WAIVE ANY DEFENSES OR
COUNTERCLAIMS). THE DEBTORS HEREBY IRREVOCABLY CONSENT TO THE NONEXCLUSIVE
JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF NEW YORK AND OF ANY FEDERAL
COURT LOCATED IN THE STATE OF NEW YORK IN CONNECTION WITH ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE SECURED LOAN DOCUMENTS.
8. Address for Notices and Service of Process.
------------------------------------------
All notices, requests and demands to be made hereunder shall be made as set
forth in the Credit Agreement.
9. Costs of Collection and Legal Fees.
----------------------------------
The Debtors shall be liable to the Secured Parties and shall pay to the
Collateral Agent immediately on demand as part of their liability under this
Security Agreement all reasonable costs and expenses of the Secured Parties,
including all reasonable fees and disbursements of the Secured Parties' legal
counsel incurred in the collection or enforcement or attempted collection or
attempted enforcement of the Secured Parties' rights under this Security
Agreement, whether within or apart from any legal action or proceeding.
10. No Waiver of Remedies.
---------------------
No failure to exercise and no delay in exercising, on the part of the
Secured Parties, any right, remedy, power or privilege under this Security
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under this Security Agreement
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
provided under this Security Agreement are cumulative and not exclusive of any
other right, remedy, power and privilege provided by law.
11. New York Law.
------------
PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, THE
WHOLE OF THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE DEBTORS
AND THE SECURED PARTIES HEREUNDER SHALL BE GOVERNED, CONSTRUED AND INTERPRETED
IN
11
<PAGE>
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY
CONFLICTS OF LAWS RULES WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION.
12. Entire Agreement; Modifications.
-------------------------------
This Security Agreement contains the entire agreement between the Secured
Parties and the Debtors with respect to all subject matters contained herein.
This Security Agreement cannot be amended, modified or changed in any way except
by a written instrument executed by each of the Secured Parties and Debtors.
13. Successors and Assigns.
----------------------
The covenants, representations, warranties and agreements herein set forth
shall be binding upon the Debtors, their legal representatives, successors and
assigns and shall inure to the benefit of the Secured Parties, their successors
and assigns. Any successor or assign of the Secured Parties shall forthwith
become vested with and entitled to exercise all the powers and rights given by
this Security Agreement to the Secured Parties, as if such successor or assign
were originally named as a secured party herein.
14. Severability.
------------
The unenforceability or invalidity of any provision or provisions of this
Security Agreement or any of the other Secured Loan Documents shall not render
any other provision or provisions herein or therein contained unenforceable or
invalid.
[The Remainder of This Page Has Been Intentionally Left Blank]
12
<PAGE>
IN WITNESS WHEREOF, the Debtors and the Collateral Agent have caused this
Security Agreement to be executed by their duly authorized officer or
representative as of the date and year first above written.
DEBTORS:
ACT MANUFACTURING, INC.
By: /s/ John A. Pino
-------------------------------
Name: John A. Pino
Title: President
ACT MANUFACTURING SECURITIES CORPORATION
By: /s/ John A. Pino
-------------------------------
Name: John A. Pino
Title: President
COLLATERAL AGENT:
THE CHASE MANHATTAN BANK,
as Collateral Agent for the Secured Parties
By: /s/ Peter N. Langburd
-------------------------------
Name: Peter N. Langburd
Title: Vice President
<PAGE>
Exhibit 10.5
------------
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of October 14, 1998, between ACT
MANUFACTURING, INC. (the "Pledgor"), and THE CHASE MANHATTAN BANK ("Chase"),
------- -----
individually and as collateral agent for the Lenders under the Credit Agreement
defined below, having an address at One Chase Square, Rochester, New York 14643
(the "Collateral Agent" and together with the Lenders, the "Secured Parties").
---------------- ---------------
W I T N E S S E T H:
WHEREAS, the Pledgor and its subsidiary, ACT Manufacturing Securities
Corporation, are entering into a Credit Agreement of even date herewith (as the
same may be modified, amended, supplemented or restated from time to time, the
"Credit Agreement"), with Chase, as administrative, documentation, collateral
----------------
and syndication agent, and the Lenders from time to time parties thereto; and
WHEREAS, in connection with the execution and delivery of the Credit
Agreement, the Collateral Agent has requested that the Pledgor, and the Pledgor
has agreed to, enter into this Pledge Agreement (this "Pledge Agreement"),
----------------
pursuant to which the Pledgor is pledging and granting a security interest in
the Pledged Collateral (as hereinafter defined) in favor of the Collateral Agent
for the benefit of the Secured Parties.
NOW, THEREFORE, in consideration of the willingness of the Secured Parties
to enter into the Credit Agreement and of the Lenders to agree, subject to the
terms and conditions set forth therein, to make the Loans and issue Letters of
Credit to the Borrower pursuant thereto, and for other good and valuable
consideration, receipt of which is hereby acknowledged, it is hereby agreed as
follows:
1. Defined Terms. Except as otherwise expressly defined herein, all
-------------
capitalized terms shall have the meanings ascribed to them in the Credit
Agreement.
2. Security Interest. The Pledgor hereby deposits with, and pledges to,
-----------------
the Collateral Agent for itself and for the benefit of the other Secured
Parties: (a) the shares of capital stock listed on Schedule I hereto (the
----------
"Pledged Stock") of the companies listed on Schedule I hereto (the "Companies"),
------------- ---------- ---------
(b) the instruments, agreements and other documents in favor of the Pledgor
listed on Schedule II hereto (the "Pledged Debt Documents"), and (c) any and all
----------- ----------------------
other additional investment property, securities, instruments and chattel paper
which may from time to time be pledged by the Pledgor to the Collateral Agent
for the benefit of the Secured Parties (the Pledged Stock, the Pledged Debt
Documents and all other additional investment property, securities, instruments
and chattel paper are sometimes herein referred to collectively as the "Pledged
-------
Collateral"), and the Pledgor hereby grants to the Collateral Agent for itself
- ----------
and for the benefit of the other Secured Parties a security interest in all of
the Pledged Collateral as security for the due and punctual payment and
performance of the Secured Obligations described in Section 3 hereof.
<PAGE>
3. Secured Obligations. The security interest hereby granted shall secure
-------------------
the due and punctual payment and performance of the following liabilities and
obligations of the Pledgor (herein called the "Secured Obligations"):
-------------------
(a) Principal of and premium, if any, and interest on, and fees,
charges and other amounts due in respect of the Loans;
(b) Any and all other obligations of the Pledgor to the Secured Parties
under the Credit Agreement or under any agreement or instrument relating
thereto, all as amended from time to time, including without limitation any
Interest Rate Protection Agreements; and
(c) Any and all other obligations and Indebtedness of the Pledgor to
the Secured Parties or any of them, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter arising,
including without limitation any and all other fees, premiums, and penalties
owing by the Pledgor to the Secured Parties or any of them.
4. Special Warranties and Covenants of the Pledgor. The Pledgor hereby
-----------------------------------------------
warrants and covenants to the Secured Parties that:
(a) The Pledged Collateral is duly and validly pledged to the Secured
Parties in accordance with law, and the Pledgor warrants and will defend the
Secured Parties' right, title and security interest in and to the Pledged
Collateral against the claims and demands of all Persons whomsoever.
(b) The Pledgor has good title to the Pledged Collateral, free and
clear of all Liens of every nature whatsoever except as expressly set forth or
permitted under the Credit Agreement.
(c) All of the Pledged Stock has been duly and validly issued and is
fully paid and nonassessable.
(d) If any additional shares of capital stock of any class of the
Companies or if any promissory notes of the Companies or other securities of the
Companies are acquired by the Pledgor after the date hereof, the same shall
constitute Pledged Collateral and shall be deposited with and pledged to the
Collateral Agent for itself and for the benefit of the other Secured Parties as
provided in Section 2 hereof simultaneously with such acquisition. The Pledgor
will promptly notify the Collateral Agent of the date and amount of any loans
made from time to time by the Pledgor to the Companies as permitted by the
Credit Agreement.
(e) The Pledgor will not sell, convey or otherwise dispose of any of
the Pledged Collateral, nor will the Pledgor create, incur or permit to exist
any Lien whatsoever with respect to any of the Pledged Collateral or the
proceeds thereof, other than Liens on or in the Pledged Collateral created
hereby or which are otherwise required or permitted under the Credit Agreement.
(f) The Pledgor will not consent to or approve the issuance of any
additional shares of capital stock of any class of the Companies, except for the
issuance of additional shares of capital stock to the Pledgor as permitted by
and in accordance with the terms of the Credit
2
<PAGE>
Agreement, provided that any such additional shares of capital stock shall be
deposited with and pledged to the Collateral Agent for itself and for the
benefit of the other Secured Parties simultaneously with such issuance as
provided in Section 2 hereof.
(g) The Pledged Debt Documents evidence the amount of outstanding
indebtedness for money borrowed of the respective issuers thereof indicated on
Schedule II hereto.
- -----------
(h) If any additional instruments, agreements or other documents are
acquired by the Pledgor evidencing any additional indebtedness owing to the
Pledgor, the same shall constitute a part of the Pledged Debt Documents and
Pledged Collateral and shall be deposited with and pledged to the Collateral
Agent for itself and for the benefit of the other Secured Parties as provided in
Section 2 hereof simultaneously with such acquisition. The Pledgor will promptly
notify the Collateral Agent of any loans made from time to time by the Pledgor
as permitted by the Credit Agreement.
5. Distributions. In case, upon the dissolution, winding up, liquidation
-------------
or reorganization of the Companies whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
any other marshaling of the assets and liabilities of the Companies or
otherwise, any sum shall be paid or any property shall be distributed upon or
with respect to any of the Pledged Collateral, such sum shall be paid over to
the Collateral Agent as collateral security for the Secured Obligations. In case
any stock dividend shall be declared on any of the Pledged Collateral, or any
share of stock or fraction thereof shall be issued pursuant to any stock split
involving any of the Pledged Collateral, or any distribution of capital
(excluding ordinary cash dividends) shall be made on any of the Pledged
Collateral, or any property shall be distributed upon or with respect to the
Pledged Collateral pursuant to recapitalization or reclassification of the
capital of the Companies, the shares or other property so distributed shall be
delivered to the Collateral Agent to be held as collateral security for the
Secured Obligations.
6. Events of Default. There shall exist a default under this Pledge
-----------------
Agreement upon the happening of any of the following events or conditions
(herein called "Events of Default"):
-----------------
(a) Default shall be made in the due and punctual payment of any
principal of or premium, if any, or interest on any of the Secured Obligations
as and when the same shall become due and payable (whether at maturity or at a
date fixed for any prepayment or installment or by declaration or acceleration
or otherwise) and such default shall continue beyond the expiration of the
applicable period of grace, if any; or
(b) The breach, violation or other non-performance of any term,
covenant, condition, agreement or obligation of the Pledgor contained herein; or
(c) Any other event of default (as defined or described in the Credit
Agreement) shall occur.
7. Rights and Remedies of Secured Parties. Upon the occurrence of any
--------------------------------------
Event of Default, such default not having previously been remedied or cured, the
Secured Parties shall have the following rights and remedies:
3
<PAGE>
(a) All rights and remedies provided by law, including, without
limitation, those provided by the Uniform Commercial Code;
(b) All rights and remedies provided in this Pledge Agreement; and
(c) All rights and remedies provided in the Credit Agreement, the
Notes, or in any other Facility Document, or in any other agreement, document or
instrument pertaining to the Secured Obligations.
8. Right to Transfer into Name of Collateral Agent, etc. In case there
----------------------------------------------------
shall exist an Event of Default, but subject to the provisions of the Uniform
Commercial Code or other applicable law, the Collateral Agent may cause all or
any of the Pledged Collateral to be transferred into its name or into the name
of its nominee or nominees, as pledgee(s). So long as no Event of Default shall
exist, the Pledgor shall be entitled to exercise as the Pledgor shall deem fit,
but in a manner not inconsistent with the terms hereof or of the Secured
Obligations, the voting power with respect to its respective Pledged Collateral.
9. Right of Collateral Agent to Exercise Voting Power, etc. In case there
-------------------------------------------------------
shall exist an Event of Default, the Collateral Agent shall be entitled to
exercise the voting power with respect to any or all of the Pledged Collateral,
to receive and retain, as collateral security for the Secured Obligations, any
and all dividends or other distributions at any time and from time to time
declared or made upon any of the Pledged Collateral, and to exercise any and all
rights of payment, conversion, exchange, subscription or any other rights,
privileges or options pertaining to the Pledged Collateral as if it were the
absolute owner thereof, including, without limitation, the right to exchange, at
its discretion, any and all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other readjustment of the
Companies or, upon the exercise of any such right, privilege or option
pertaining to the Pledged Collateral, and in connection therewith, to deposit
and deliver any and all of the Pledged Collateral with any committee,
depositary, transfer Collateral Agent, registrar or other designated agency upon
such terms and conditions as the Collateral Agent may determine, all without
liability except to account for property actually received, but the Collateral
Agent shall have no duty to exercise any of the aforesaid rights, privileges or
options and shall not be responsible for any failure to do so or delay in so
doing.
10. Right of Collateral Agent to Dispose of Collateral, etc. Upon the
-------------------------------------------------------
occurrence of an Event of Default, such default not having previously been
remedied or cured, the Collateral Agent shall have the right at any time or
times thereafter to sell, resell, assign and deliver all or any of the Pledged
Collateral in one or more parcels at any exchange or broker's board or at public
or private sale. Unless the Pledged Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Collateral Agent will give the Pledgor at least ten (10) days' prior
written notice at the address of the Pledgor specified in Section 20 hereof of
the time and place of any public sale thereof or of the time after which any
private sale or any other intended disposition thereof is to be made. Any such
notice shall be deemed to meet any requirement hereunder or under any applicable
law (including the Uniform Commercial Code) that reasonable notification be
given of the time and place of such sale or other disposition. Such notice may
be given without any demand of performance or other demand, all such demands
being hereby expressly waived by the Pledgor. All such sales shall be
4
<PAGE>
at such commercially reasonable price or prices as the Collateral Agent shall
deem best and either for cash or on credit or for future delivery (without
assuming any responsibility for credit risk). At any such sale or sales the
Collateral Agent may purchase any or all of the Pledged Collateral to be sold
upon such terms as the Collateral Agent may deem commercially reasonable. Upon
any such sale or sales the Pledged Collateral so purchased shall be held by the
purchaser absolutely free from any claims or rights of whatsoever kind or
nature, including any equity of redemption and any similar rights, all such
equity of redemption and any similar rights being hereby expressly waived and
released by the Pledgor. In the event any consent, approval or authorization of
any governmental agency will be necessary to effectuate any such sale or sales,
the Pledgor shall execute, and hereby agrees to cause the Companies to execute,
all such applications or other instruments as may be required.
The Pledgor recognizes that the Collateral Agent may be unable to effect a
public sale of all or a part of the Pledged Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act") but may be compelled to resort to one or more private sales to
--------------
a restricted group of purchasers, each of whom will be obligated to agree, among
other things, to acquire such Pledged Collateral for its own account, for
investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges that private sales so made may be at prices and upon other
terms less favorable to the seller than if such Pledged Collateral were sold at
public sales without such restrictions, and that the Collateral Agent has no
obligation to delay sale of any such Pledged Collateral for the period of time
necessary to permit such Pledged Collateral to be registered for public sale
under the Securities Act. The Pledgor agrees that any such private sale shall
not be deemed to have been made in a commercially unreasonable manner solely
because it shall have been made under the foregoing circumstances.
11. Credit Agreement. Notwithstanding any other provision of this Pledge
----------------
Agreement, the rights of the parties hereunder are subject to the provisions of
the Credit Agreement, including the provisions thereof pertaining to the rights
and responsibilities of the Collateral Agent. Unless the context shall otherwise
clearly indicate, the terms "Secured Party" and "Secured Parties" as used herein
shall be deemed to include the Collateral Agent acting for itself and on behalf
of the other Secured Parties pursuant to the Credit Agreement. The term
"Collateral Agent" as used herein shall include The Chase Manhattan Bank or any
other Person acting as Collateral Agent for the Secured Parties pursuant to the
terms of the Credit Agreement.
12. Collection of Amounts Payable on Account of Pledged Collateral, etc.
-------------------------------------------------------------------
Upon the occurrence and during the continuance of any Event of Default or
default hereunder, the Collateral Agent may, but without obligation to do so,
demand, sue for and/or collect any money or property at any time due, payable or
receivable, to which it may be entitled hereunder, on account of, or in exchange
for, any of the Pledged Collateral and shall have the right, for and in the
name, place and stead of the Pledgor, to execute endorsements, assignments or
other instruments of conveyance or transfer with respect to all or any of the
Pledged Collateral.
13. Care of Pledged Collateral in Collateral Agent's Possession. Beyond the
-----------------------------------------------------------
exercise of reasonable care to assure the safe custody and presentation of the
Pledged Collateral while held hereunder, the Collateral Agent shall have no duty
or liability to collect any sums due in respect thereof or to protect or
preserve rights pertaining thereto, and shall be relieved of all responsibility
for the Pledged Collateral upon surrendering the same to the Pledgor.
5
<PAGE>
14. Proceeds of Collateral. The proceeds of any sale or sales of the
----------------------
Pledged Collateral, together with any other additional collateral security at
the time received and held hereunder, shall be received and applied: first, to
the payment of all costs and expenses of such sale, including reasonable
attorneys' fees; second, to the payment of the Secured Obligations in such order
of priority as the Collateral Agent shall determine, and third, any surplus
thereafter remaining shall be paid to the Pledgor or to whomever else may be
legally entitled thereto (including, if applicable, any subordinated creditor of
any Company or the Pledgor). By way of enlargement and not by way of limitation
of the rights of the Collateral Agent under applicable law or the Credit
Agreement, Notes, or other Facility Documents, but not withstanding any
provision of the Credit Agreement, Notes, or other Facility Documents to the
contrary, the Collateral Agent shall be entitled to allocate its application of
the Pledged Collateral, and the proceeds thereof, to the Secured Obligations
(including without limitation the Loans) in such proportions and in such order
as the Collateral Agent, in its sole discretion, shall decide. In the event the
proceeds of any sale, lease or other disposition of the Collateral hereunder are
insufficient to pay all of the Secured Obligations in full, the Pledgor will be
liable for the deficiency, together with interest thereon at the maximum rate
provided in the Loans, and the cost and expenses of collection of such
deficiency, including (to the extent permitted by law), without limitation,
reasonable attorneys' fees, expenses and disbursements.
15. Waivers, etc. The Pledgor hereby waives presentment, demand, notice,
------------
protest and, except as is otherwise provided herein, all other demands and
notices in connection with this Pledge Agreement or the enforcement of the
Secured Parties' rights hereunder or in connection with any Secured Obligations
or any Pledged Collateral; consents to and waives notice of the granting of
renewals, extensions of time for payment or other indulgences to any Company or
the Pledgor or to any third party, or substitution, release or surrender of any
collateral security for any Secured Obligation, the addition or release of
persons primarily or secondarily liable on any Secured Obligation or on any
collateral security for any Secured Obligation, the acceptance of partial
payments on any Secured Obligation or on any collateral security for any Secured
Obligation and/or the settlement or compromise thereof. No delay or omission on
the part of the Secured Parties in exercising any right hereunder shall operate
as a waiver of such right or of any other right hereunder. Any waiver of any
such right on any one occasion shall not be construed as a bar to or waiver of
any such right on any future occasion. The Pledgor further waives any right it
may have under the Constitution of the State of New York, under the constitution
of any state in which any of the Pledged Collateral may be located or which may
govern the Pledged Collateral, or under the Constitution of the United States of
America, to notice (other than any requirement of notice provided herein) or to
a judicial hearing prior to the exercise of any right or remedy provided by this
Pledge Agreement to the Collateral Agent and waives its rights, if any, to set
aside or invalidate any sale duly consummated in accordance with the foregoing
provisions hereof on the grounds (if such be the case) that the sale was
consummated without a prior judicial hearing. The Pledgor's waivers under this
Section have been made voluntarily, intelligently and knowingly and after the
Pledgor has been apprised and counseled by its attorneys as to the nature
thereof and its possible alternative rights.
16. Termination; Assignment, etc. This Pledge Agreement and the security
----------------------------
interest in the Pledged Collateral created hereby shall terminate when all of
the Secured Obligations have been paid and finally discharged in full; provided
that the Lenders are no longer obligated to make Loans or issue Letters of
Credit under the Credit Agreement. No waiver by the Collateral
6
<PAGE>
Agent or by any other holder of Secured Obligations of any default shall be
effective unless in writing nor operate as a waiver of any other default or of
the same default on a future occasion. In the event of a sale or assignment by
any Secured Party of all or any of the Secured Obligations held by it, any
Secured Party may assign or transfer its rights and interest under this Pledge
Agreement in whole or in part to the purchaser or purchasers of such Secured
Obligations, whereupon such purchaser or purchasers shall become vested with all
of the powers and rights of such Secured Party hereunder.
17. Reinstatement. Notwithstanding the provisions of Section 16, this
-------------
Pledge Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time any amount received by any Secured Party in respect of
the Secured Obligations is rescinded or must otherwise be restored or returned
by any such Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of any Company, the Pledgor or any other Credit
Party or upon the appointment of any intervener or conservator of, or trustee or
similar official for, any Company, the Pledgor, or any other Credit Party or any
substantial part of their respective properties, or otherwise, all as though
such payments had not been made.
18. Governmental Approvals, etc. Upon the exercise by the Collateral Agent
---------------------------
of any power, right, privilege or remedy pursuant to this Pledge Agreement which
requires any consent, approval, qualification or authorization of any
governmental authority or instrumentality, the Pledgor will execute and deliver,
or will cause the execution and delivery of, all applications, certificates,
instruments and other documents and papers that the Collateral Agent may be
required to obtain for such governmental consent, approval, qualification or
authorization.
19. Restrictions on Transfer, etc. To the extent that any restriction
-----------------------------
imposed by the charter or by-laws of the Companies or any other document or
instrument would in any way affect or impair the pledge of the Pledged
Collateral hereunder or the exercise by the Collateral Agent of any right
granted hereunder, including, without limitation, the right of the Collateral
Agent to dispose of the Pledged Collateral upon the occurrence and during the
continuance of any Event of Default, the Pledgor hereby waives such
restrictions, and represents and warrants that it has caused the Companies to
take all necessary action to waive such restrictions, and the Pledgor hereby
agrees that it will take any further action which the Collateral Agent may
reasonably request in order that the Collateral Agent may obtain and enjoy the
full rights and benefits granted to the Collateral Agent by this Pledge
Agreement free of any such restrictions.
20. Notices. All notices, consents, approvals, elections and other
-------
communications hereunder shall be in writing (whether or not the other
provisions of this Pledge Agreement expressly so provide) and shall be deemed to
have been duly given if delivered in accordance with the terms of the Credit
Agreement.
21. Miscellaneous. This Pledge Agreement shall inure to the benefit of and
-------------
be binding upon the Collateral Agent and the Pledgor and their respective
successors and assigns, and the term "Secured Parties" shall be deemed to
include any other holder or holders of any of the Secured Obligations. In case
any provision in this Pledge Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. This Pledge
Agreement may be executed in any
7
<PAGE>
number of counterparts and by the different parties hereto on separate
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
22. Governing Law; Jurisdiction; Waiver of Jury Trial. THIS PLEDGE
-------------------------------------------------
AGREEMENT, INCLUDING THE VALIDITY HEREOF AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER, SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. The Pledgor, to the extent that it may lawfully
do so, hereby consents to service of process, and to be sued, in the state of
New York and any federal court located in the state of New York, as well as to
the jurisdiction of all courts to which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations hereunder or with respect to the transactions contemplated
hereby, and expressly waives any and all objections it may have as to venue in
any such courts. The Pledgor further agrees that a summons and complaint
commencing an action or proceeding in any of such courts shall be properly
served and shall confer personal jurisdiction if served personally or by
certified mail to it at its address provided in section 20 hereof or as
otherwise provided under the laws of the state of New York. THE PLEDGOR AND THE
COLLATERAL AGENT IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT,
ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST THE PLEDGOR OR THE
COLLATERAL AGENT IN RESPECT OF ITS OBLIGATIONS HEREUNDER OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
[The Remainder of This Page Has Been Intentionally Left Blank]
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as a
sealed instrument as of the date first above written.
PLEDGOR
ACT MANUFACTURING, INC.
By: /s/ John A. Pino
-------------------------------
Name: John A. Pino
Title: President
COLLATERAL AGENT
THE CHASE MANHATTAN BANK,
as Collateral Agent for the Secured Parties
By: /s/ Peter N. Langburd
-------------------------------
Name: Peter N. Langburd
Title: Vice President
<PAGE>
Exhibit 10.6
------------
ACT MANUFACTURING, INC.
AND
THE CHASE MANHATTAN BANK
SHARE PLEDGE AGREEMENT
----------------------------
dated as of 14 October, 1998
----------------------------
Arthur Cox
Earlsfort Centre
Earls fort Terrace
Dublin 2
WJ1331/MdeC-C 12/10/98
<PAGE>
THIS PLEDGE AGREEMENT, dated as of October, 14, 1998, is made between
ACT MANUFACTURING, INC. (the "Pledgor") of the one part, and
-------
THE CHASE MANHATTAN BANK ("Chase"), individually and as collateral agent for
-----
the Lenders under the Credit Agreement defined below, having an address at One
Chase Square, Rochester, New York 14643 (the "Collateral Agent" and together
----------------
with the Lenders, the "Secured Parties") of the other part.
---------------
WHEREAS, the Pledgor is entering into a Credit Agreement of even date herewith
(as the same may be modified, amended, supplemented or restated from time to
time, the "Credit Agreement"), with Chase, as administrative, documentation,
----------------
collateral and syndication agent, and the Lenders from time to time parties
thereto; and
WHEREAS, in connection with the execution and delivery of the Credit Agreement,
the Collateral Agent has requested that the Pledgor, and the Pledgor has agreed
to, enter into this Pledge Agreement (this "Pledge Agreement"), pursuant to
----------------
which the Pledgor is pledging and granting a security interest in the Pledged
Collateral (as hereinafter defined) in favour of the Collateral Agent for the
benefit of the Secured Parties.
NOW IT IS HEREBY AGREED that in consideration of the willingness of the Secured
Parties to enter into the Credit Agreement and of the Lenders to agree, subject
to the terms and conditions set forth therein, and at the request of the Pledgor
to make the Loans and issue Letters of Credit to the Borrower pursuant thereto,
and for other good and valuable consideration, receipt of which is hereby
acknowledged, it is hereby agreed as follows:
1. Defined Terms
-------------
Except as otherwise expressly defined herein, all capitalized terms shall
have the meanings ascribed to them in the Credit Agreement.
2. Security Interest
-----------------
The Pledgor hereby deposits with, and pledges to. the Collateral Agent for
itself and for the benefit of the other Secured Parties:
(a) the shares of capital stock listed on Schedule I hereto (the "Pledged
---------- -------
Stock") of the companies listed on Schedule I hereto (the
----- ----------
"Companies"),
---------
(b) the instruments, agreements and other documents in favour of the
Pledgor listed on Schedule II hereto (the "Pledged Debt Documents");
----------------------
and
(c) any and all other additional investment property, securities,
instruments and chattel
<PAGE>
2
paper which may from time to time be pledged by the Pledgor to the
Collateral Agent for the benefit of the Secured Parties (the Pledged
Stock, the Pledged Debt Documents and all other additional investment
property, securities, instruments and chattel paper are sometimes
herein referred to collectively as the "Pledged Collateral");
and the Pledgor hereby grants to the Collateral Agent for itself and for
the benefit of the other Secured Parties a security interest in all of
the Pledged Collateral as security for the due and punctual payment and
performance of the Secured Obligations described in Section 3 hereof.
3. Secured Obligations
-------------------
The pledge and security interest hereby granted shall secure the due and
punctual payment and performance of the following liabilities and
obligations of the Pledgor (herein called the "Secured Obligations"):
(a) The principal of and premium, if any, and interest on, and fees,
charges and other amounts due in respect of the Loans;
(b) Any and all other obligations of the Pledgor to the Secured Parties
under the Credit Agreement or under any agreement or instrument
relating thereto, all as amended from time to time, including without
limitation any Interest Rate Protection Agreements; and
(c) Any and all other obligations and Indebtedness of the Pledgor to the
Secured Parties or any of them, whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter
arising, including without limitation any and all other fees,
premiums, and penalties owing by the Pledgor to the Secured Parties or
any of them.
4. Special Warranties and Covenants of the Pledgor
-----------------------------------------------
The Pledgor hereby warrants and covenants to the Secured Parties that:
(a) The Pledged Collateral is duly and validly pledged with the Secured
Parties;
(b) The Pledgor has good title to the Pledged Collateral, free and clear
of all Liens of every nature whatsoever except as expressly set forth
or permitted under the Credit Agreement;
(c) All of the Pledged Stock has been duly and validly issued and is fully
paid;
<PAGE>
3
(d) If any additional shares of capital stock of any class of the
Companies or if any promissory notes of the Companies or other
securities of the Companies are acquired by any Pledgor after the date
hereof, the same shall constitute Pledged Collateral and shall be
deposited and pledged with the Collateral Agent for itself and for the
benefit of the other Secured Parties as provided in Section 2 hereof
simultaneously with such acquisition. The Pledgor will promptly notify
the Collateral Agent of the date and amount of any loans made from
time to time by any Pledgor to the Companies as permitted by the
Credit Agreement;
(e) The Pledgor will not sell, convey or otherwise dispose of any of the
Pledged Collateral, nor will the Pledgor create, incur or permit to
exist any Lien whatsoever with respect to any of the Pledged
Collateral or the proceeds thereof, other than Liens on or in the
Pledged Collateral created hereby or which are otherwise required or
permitted under the Credit Agreement;
(f) The Pledgor will not consent to or approve the issuance of any
additional shares of capital stock of any class of the Companies,
except for the issuance of additional shares of capital stock to a
Pledgor as permitted by and in accordance with the terms of the Credit
Agreement, provided that any such additional shares of capital stock
shall be deposited and pledged with the Collateral Agent for itself
and for the benefit of the other Secured Parties simultaneously with
such issuance as provided in Section 2 hereof;
(g) The Pledged Debt Documents evidence the amount of outstanding
indebtedness for money borrowed of the respective issuers thereof
indicated on Schedule II hereto; and
-----------
(h) If any additional instruments, agreements or other documents are
acquired by any Pledgor evidencing any additional indebtedness owing
to such Pledgor, the same shall constitute a part of the Pledged Debt
Documents and Pledged Collateral and shall be deposited and pledged
with the Collateral Agent for itself and for the benefit of the other
Secured Parties as provided in Clause 2 hereof simultaneously with
such acquisition. The Pledgor will promptly notify the Collateral
Agent of any loans made from time to time by such Pledgor as permitted
by the Credit Agreement.
5. Distributions
-------------
In case, upon the dissolution, winding up, liquidation or reorganization of
the Companies whether in bankruptcy, insolvency or receivership proceedings
or upon an assignment for the benefit of creditors or any other marshaling
of the assets and liabilities of the Companies or otherwise, any sum shall
be paid or any property shall be distributed upon or with respect to any of
the Pledged Collateral, such sum shall be paid over to the
<PAGE>
4
Collateral Agent as collateral security for the Secured Obligations. In
case any stock dividend shall be declared on any of the Pledged Collateral,
or any share of stock or fraction thereof shall be issued pursuant to any
stock split involving any of the Pledged Collateral, or any distribution of
capital (excluding ordinary cash dividends) shall be made on any of the
Pledged Collateral, or any property shall be distributed upon or with
respect to the Pledged Collateral pursuant to recapitalization or
reclassification of the capital of the Companies, the shares or other
property so distributed shall be delivered to the Collateral Agent to be
held as collateral security for the Secured Obligations.
6. Events of Default
-----------------
There shall exist a default under this Pledge Agreement upon the happening
of any of the following events or conditions (herein called "Events of
---------
Default"):
-------
(a) Default shall be made in the due and punctual payment of any principal
of or premium, if any, or interest on any of the Secured Obligations
as and when the same shall become due and payable (whether at maturity
or at a date fixed for any prepayment or instalment or by declaration
or acceleration or otherwise) and such default shall continue beyond
the expiration of the applicable period of grace, if any; or
(b) The breach, violation or other nonperformance of any term, covenant,
condition, agreement or obligation of the Pledgor contained herein; or
(c) Any other event of default (as defined or described in the Credit
Agreement) shall occur.
7. Rights and Remedies of Secured Parties
--------------------------------------
Upon the occurrence of any Event of Default, such default not having
previously been remedied or cured, the Secured Parties shall have the
following rights and remedies:
(a) All rights and remedies provided in this Pledge Agreement; and
(b) All rights and remedies provided in the Credit Agreement, the Notes,
or in any other Facility Document, or in any other agreement, document
or instrument pertaining to the Secured Obligations.
8. Right to Transfer into Name of Collateral Agent, etc.
----------------------------------------------------
In case there shall exist an Event of Default, but subject to the
provisions of applicable law, the Collateral Agent may cause all or any of
the Pledged Collateral to be transferred into its name or into the name of
its nominee or nominees, as pledgee. So long as no
<PAGE>
5
Event of Default shall exist, the Pledgor shall be entitled to exercise as
the Pledgor shall deem fit, but in a manner not inconsistent with the terms
hereof or of the Secured Obligations, the voting power with respect to its
respective Pledged Collateral.
9. Right of Collateral Agent to Exercise Voting Power, etc.
-------------------------------------------------------
In case there shall exist an Event of Default, the Collateral Agent shall
be entitled to exercise the voting power with respect to any or all of the
Pledged Collateral, to receive and retain, as collateral security for the
Secured Obligations, any and all dividends or other distributions at any
time and from time to time declared or made upon any of the Pledged
Collateral, and to exercise any and all rights of payment, conversion,
exchange, subscription or any other rights, privileges or options
pertaining to the Pledged Collateral as if it were the absolute owner
thereof, including, without limitation, the right to exchange, at its
discretion, any and all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other readjustment of
the Companies or, upon the exercise of any such right, privilege or option
pertaining to the Pledged Collateral, and in connection therewith, to
deposit and deliver any and all of the Pledged Collateral with any
committee, depositary, transfer Collateral Agent, registrar or other
designated agency upon such terms and conditions as the Collateral Agent
may determine, all without liability except to account for property
actually received, but the Collateral Agent shall have no duty to exercise
any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.
10. Right of Collateral Agent to Dispose of Collateral, etc.
-------------------------------------------------------
Upon the occurrence of an Event of Default, such default not having
previously been remedied or cured, the power of sale pursuant to Section 19
of the Conveyancing Act 1881 shall arise and be exercisable without the
restrictions contained in Section 20 thereof and the Collateral Agent shall
have the right at any time or times thereafter to sell, resell, assign and
deliver all or any of the Pledged Collateral in one or more parcels by way
of public or private sale. Unless the Pledged Collateral threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Collateral Agent will give the Pledgor at least ten (10) days'
prior written notice at the address of the Pledgor specified in Clause 21
hereof of the time and place of any public sale thereof or of the time
after which any private sale or any other intended disposition thereof is
to be made. Any such notice shall be deemed to meet any requirement
hereunder or under any applicable law that reasonable notification be given
of the time and place of such sale or other disposition. Such notice may be
given without any demand of performance or other demand, all such demands
being hereby expressly waived by the Pledgor. All such sales shall be at
such commercially reasonable price or prices as the Collateral Agent shall
deem best and either for cash or on credit or for future delivery (without
assuming any responsibility for credit risk). At any such sale or sales the
Collateral Agent may purchase any or all of the Pledged Collateral to be
sold upon such terms as the Collateral Agent may deem
<PAGE>
6
commercially reasonable. Upon any such sale or sales the Pledged Collateral
so purchased shall be held by the purchaser absolutely free from any claims
or rights of whatsoever kind or nature, including any equity of redemption
and any similar rights, all such equity of redemption and any similar
rights being hereby expressly waived and released by the Pledgor. In the
event any consent, approval or authorization of any governmental agency
will be necessary to effectuate any such sale or sales, the Pledgor shall
execute, and hereby agrees to cause the Companies to execute, all such
applications or other instruments as may be required.
11. Power of Attorney
-----------------
The Pledgor hereby irrevocably appoints the Collateral Agent to be, while
any Event of Default shall exist, the Pledgor's attorney and in the
Pledgor's name and on its behalf and as the act and deed of the Pledgor to
sign, seal, execute, deliver, perfect and do all deeds, instruments,
mortgages and things as may be, or as the Collateral Agent may consider to
be, requisite for carrying out any obligation imposed on the Pledgor under
the Pledge Agreement, or for enabling the Collateral Agent to exercise its
power of sale or other disposal referred to above or for carrying any such
sale or other disposal made under such power into effect by executing
instruments of transfer (or completing partially-completed instruments
executed by the Pledgor), or exercising (but subject as therein provided
with respect to voting) any of the rights and powers referred to above,
including without limitation the appointment of any person as a proxy of
the Pledgor. The Pledgor hereby undertakes to ratify and confirm all things
done and document executed by the Collateral Agent in the exercise of the
power of attorney conferred by this Clause.
In the event of the Collateral Agent exercising the power of attorney
hereby conferred, or conferred by the Power of Attorney, prior to the
disposition of the Pledged Collateral pursuant to Clause 10 hereof the
Collateral Agent shall immediately on the exercise of such power notify the
Pledgor in writing of such exercise.
12. Credit Agreement
----------------
Notwithstanding any other provision of this Pledge Agreement, the rights of
the parties hereunder are subject to the provisions of the Credit
Agreement, including the provisions thereof pertaining to the rights and
responsibilities of the Collateral Agent. Unless the context shall
otherwise clearly indicate, the terms "Secured Party" and "Secured Parties"
as used herein shall be deemed to include the Collateral Agent acting for
itself and on behalf of the other Secured Parties pursuant to the Credit
Agreement. The term "Collateral Agent" as used herein shall include The
Chase Manhattan Bank or any other Person acting as Collateral Agent for the
Secured Parties pursuant to the terms of the Credit Agreement.
<PAGE>
7
13. Collection of Amounts Payable on Account of Pledged Collateral, etc.
-------------------------------------------------------------------
Upon the occurrence and during the continuance of any Event of Default or
default hereunder, the Collateral Agent may, but without obligation to do
so, demand, sue for and/or collect any money or property at any time due,
payable or receivable, to which it may be entitled hereunder, on account
of, or in exchange for, any of the Pledged Collateral and shall have the
right, for and in the name, place and stead of the Pledgor, to execute
endorsements, assignments or other instruments of conveyance or transfer
with respect to all or any of the Pledged Collateral.
14. Care of Pledged Collateral in Collateral Agent's Possession
-----------------------------------------------------------
Beyond the exercise of reasonable care to assure the safe custody of the
Pledged Collateral while held hereunder, the Collateral Agent shall have no
duty or liability to collect any sums due in respect thereof or to protect
or preserve rights pertaining thereto, and shall be relieved of all
responsibility for the Pledged Collateral upon surrendering the same to the
Pledgor.
15. Proceeds of Collateral
----------------------
The proceeds of any sale or sales of the Pledged Collateral, together with
any other additional collateral security at the time received and held
hereunder, shall be received and applied: first, to the payment of all
costs and expenses of such sale, including reasonable legal fees; second,
to the payment of the Secured Obligations in such order of priority as the
Collateral Agent shall determine, and third, any surplus thereafter
remaining shall be paid to the Pledgor or to whomever else may be legally
entitled thereto (including, if applicable, any subordinated creditor of
any Company or any Pledgor). By way of enlargement and not by way of
limitation of the rights of the Collateral Agent under applicable law or
the Credit Agreement, Notes, or other Facility Documents, but not
withstanding any provision of the Credit Agreement, Notes, or other
Facility Documents to the contrary, the Collateral Agent shall be entitled
to allocate its application of the Pledged Collateral, and the proceeds
thereof, to the Secured Obligations (including without limitation the
Loans) in such proportions and in such order as the Collateral Agent, in
its sole discretion, shall decide. In the event the proceeds of any sale,
lease or other disposition of the Collateral hereunder are insufficient to
pay all of the Secured Obligations in full, the Pledgor will be liable for
the deficiency, together with interest thereon at the maximum rate provided
in the Loans, and the cost and expenses of collection of such deficiency,
including (to the extent permitted by law), without limitation, reasonable
legal fees, expenses and disbursements.
16. Waivers, etc.
------------
The Pledgor hereby waives presentment, demand, notice, protest and, except
as is
<PAGE>
8
otherwise provided herein, all other demands and notices in connection with
this Pledge Agreement or the enforcement of the Secured Parties' rights
hereunder or in connection with any Secured Obligations or any Pledged
Collateral; consents to and waives notice of the granting of renewals,
extensions of time for payment or other indulgences to any Company or the
Pledgor or to any third party, or substitution, release or surrender of any
collateral security for any Secured Obligation, the addition or release of
persons primarily or secondarily liable on any Secured Obligation or on any
collateral security for any Secured Obligation, the acceptance of partial
payments on any Secured Obligation or on any collateral security for any
Secured Obligation and/or the settlement or compromise thereof. No delay or
omission on the part of the Secured Parties in exercising any right
hereunder shall operate as a waiver of such right or of any other right
hereunder. Any waiver of any such right on any one occasion shall not be
construed as a bar to or waiver of any such right on any future occasion.
The Pledgor further waives any right it may have to notice (other than any
requirement of notice provided herein) or to a judicial hearing prior to
the exercise of any right or remedy provided by this Pledge Agreement to
the Collateral Agent and waives its rights, if any, to set aside or
invalidate any sale duly consummated in accordance with the foregoing
provisions hereof on the grounds (if such be the case) that the sale was
consummated without a prior judicial hearing.
17. Termination; Assignment, etc.
----------------------------
This Pledge Agreement and the security interest in the Pledged Collateral
created hereby shall terminate when all of the Secured Obligations have
been paid and finally discharged in full; provided that the Lenders are no
longer obligated to make Loans or issue Letters of Credit under the Credit
Agreement. No waiver by the Collateral Agent or by any other holder of
Secured Obligations of any default shall be effective unless in writing nor
operate as a waiver of any other default or of the same default on a future
occasion. In the event of a sale or assignment by any Secured Party of all
or any of the Secured Obligations held by it, any Secured Party may assign
or transfer its rights and interest under this Pledge Agreement in whole or
in part to the purchaser or purchasers of such Secured Obligations,
whereupon such purchaser or purchasers shall become vested with all of the
powers and rights of such Secured Party hereunder.
18. Reinstatement
-------------
Notwithstanding the provisions of Clause 17, this Pledge Agreement shall
continue to be effective or be reinstated, as the case may be, if at any
time any amount received by any Secured Party in respect of the Secured
Obligations is rescinded or must otherwise be restored or returned by any
such Secured Party upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of any Company, the Pledgor or any other
Credit Party or upon the appointment of any intervener or conservator of,
or trustee or similar official for, any Company, the Pledgor, or any other
Credit Party or any substantial part of their respective properties, or
otherwise, all as though such payments had not been
<PAGE>
9
made.
19. Governmental Approvals, etc.
---------------------------
Upon the exercise by the Collateral Agent of any power, right, privilege or
remedy pursuant to this Pledge Agreement which requires any consent,
approval, qualification or authorization of any governmental authority or
instrumentality, the Pledgor will execute and deliver, or will cause the
execution and delivery of, all applications, certificates, instruments and
other documents and papers that the Collateral Agent may be required to
obtain for such governmental consent, approval, qualification or
authorization.
20. Restrictions on Transfer, etc.
-----------------------------
To the extent that any restriction imposed by the memorandum and articles
of association of the Companies or any other document or instrument would
in any way affect or impair the pledge of the Pledged Collateral hereunder
or the exercise by the Collateral Agent of any right granted hereunder,
including, without limitation, the right of the Collateral Agent to dispose
of the Pledged Collateral upon the occurrence of any Event of Default, the
Pledgor hereby waives such restrictions, and represents and warrants that
it has caused the Companies to take all necessary action to waive such
restrictions, and the Pledgor hereby agrees that it will take any further
action which the Collateral Agent may reasonably request in order that the
Collateral Agent may obtain and enjoy the full rights and benefits granted
to the Collateral Agent by this Pledge Agreement free of any such
restrictions.
21. Notices
-------
All notices, consents, approvals, elections and other communications
hereunder shall be in writing (whether or not the other provisions of this
Pledge Agreement expressly so provide) and shall be deemed to have been
duly given if delivered in accordance with the terms of the Credit
Agreement.
22. Miscellaneous
-------------
This Pledge Agreement shall inure to the benefit of and be binding upon the
Collateral Agent and the Pledgor and its successors and assigns, and the
term "Secured Parties" shall be deemed to include any other holder or
holders of any of the "Secured Obligations. In case any provision in this
Pledge Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby. This Pledge Agreement may be executed
in any number of counterparts and by the different parties hereto on
separate counterparts, each of which shall be an original, but all of
which, together shall constitute one instrument.
<PAGE>
10
23. Governing Law and Jurisdiction.
------------------------------
This Pledge Agreement, including the validity hereof and the rights and
obligations of the parties hereunder, shall be construed in accordance with
and governed by the laws of the Ireland. The Pledgor, to the extent that it
may lawfully do so, hereby consents to service of process, and hereby
submits to the non exclusive jurisdiction of the Courts of Ireland.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Pledge Agreement as a sealed
instrument as of the date first above written.
ACT MANUFACTURING, INC.
in the presence of:
By: /s/ John A. Pino
------------------------
/s/ David L. Ruediger Name: John A. Pino
Title: President
COLLATERAL AGENT
THE CHASE MANHATTEN BANK,
as collateral Agent for the Secured Parties
in the presence of:
By: /s/ Peter N. Langburd
------------------------
/s/ David L. Ruediger Name: Peter N. Langburd
Title: Vice President
<PAGE>
Exhibit 10.7
------------
(Multicurrency--Cross Border)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of October 14, 1998
..................
THE CHASE MANHATTAN BANK and ACT MANUFACTURING, INC.
...................................... .......................................
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement in freely
transferable funds and in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other than by payment),
such delivery will be made for receipt on the due date in the manner
customary for the relevant obligation unless otherwise specified in the
relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing,
(2) the condition precedent that no Early Termination Date in respect of
the relevant Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in this Agreement.
Copyright (C) 1992 by international Swap Dealers Association, Inc.
<PAGE>
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to
which such change applies unless such other party gives timely notice of a
reasonable obligation to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction.
by each party to the other, then on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the
other party, replaced by an obligation upon the party by whom the larger
aggregate amount would have been payable to pay the other party the excess
of the larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified
by the practice of any relevant governmental revenue authority, then in
effect, if a party is so required to deduct or withhold, then that party
("X") will:--
(1) promptly notify the other party ("Y") of such requirement:
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be deducted
or withheld from any additional amount paid by X to Y under this Section
2(d)) promptly upon the earlier of determining that such deduction or
withholding is required or receiving notice that such amount has been
assessed against Y:
(3) promptly forward to Y an official receipt (or a certified copy), or
other documentation reasonably acceptable to Y, evidencing such payment
to such authorities; and
(4) it such Tax is an Indemnifiable Tax, pay to Y, in addition to the
payment to which Y is otherwise entitled under this Agreement. such
additional amount as is necessary to ensure that the net amount actually
received by Y (free and clear of Indemnifable Taxes, whether assessed
against X or Y) will equal the full amount Y would have received had no
such deduction or withholding been required. However, X will not be
required to pay any additional amount to Y to the extent that it would
not be required to be paid but for:--
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation wade by Y pursuant to Section
3(f) to be accurate and true unless such failure would not have
occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such
action is taken or brought with respect to a parry to this Agreement)
or (II) a Change in Tax Law.
2
<PAGE>
(ii) Liability. If:--
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any
deduction or withholding in respect of which X would not be required
to pay an additional amount to Y under Section 2(d)(i)(4):
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X,
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability for interest but including
any related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any other obligations it has under any Credit
Support Document to which it is a party and has taken all necessary action
to authorise such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any provision
of its constitutional documents, any order or judgment of any court or
other agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
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(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
(f) Payee Tax Representations. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation specified in
the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation; and
(iii) upon reasonable demand by such other party, any form or document that
may be required or reasonably requested in writing in order to allow such
other party or its Credit Support Provider to make a payment under this
Agreement or any applicable Credit Support Document without any deduction
or withholding for or on account of any Tax or with such deduction or
withholding at a reduced rate (so long as the completion, execution or
submission of such form or document would not materially prejudice the
legal or commercial position of the party in receipt of such demand), with
any such form or document to be accurate and completed in a manner
reasonably satisfactory to such other party and to be executed and to be
delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) Tax Agreement. It will give notice of any failure of a representation made
by in under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated.
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organised, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before
the third Local Business Day after notice of such failure is given to the
party;
(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party
to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any applicable
grace period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case
other than in accordance with its terms) prior to the satisfaction of
all obligations of such party under each Transaction to which such
Credit Support Document relates without the written consent of the
other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation
under Section 3(e) or (f) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in
this Agreement or any Credit Support Document proves to have been incorrect
or misleading in any material respect when made or repeated or deemed to
have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of an acceleration of obligations under, or an early termination of that
Specified Transaction,(2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however
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described) in respect of such party, any Credit support Provider of such party
or any applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them (individually or
collectively) in an aggregate amount of not less than the applicable Threshold
Amount (as specified in the Schedule) which has resulted in such Specified
Indebtedness becoming, or becoming capable at such time of being declared, due
and payable under such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit Support
Provider or such Specified Entity (individually or collectively) in making one
or more payments on the due date thereof in an aggregate amount of not less than
the applicable Threshold Amount under such agreements or instruments (after
giving effect to any applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or any
applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation, amalgamation or
merger); (2) becomes insolvent or is unable to pay its debts or fails or admits
in writing its inability generally to pay its debts as they become due; (3)
makes a general assignment, arrangement or composition with or for the benefit
of its creditors; (4) institutes or has instituted against it a proceeding
seeking a judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting creditors' rights,
or a petition is presented for its winding-up or liquidation, and, in the case
of any such proceeding or petition instituted or presented against it such
proceeding or petition (A) results in a judgment of insolvency or bankruptcy or
the entry of an order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or restrained in each
case within 30 days of institution or presentation thereof;(5) has a resolution
passed for its winding-up, official management or liquidation (other then
pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional liquidator
conservator, receiver, trustee, custodian or other similar official for it or
for all or substantially all its assets; (7) has a secured party take possession
of all or substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied, enforced or sued on or
against all or substantially all its assets and such secured party maintains
possession, or any such process in not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter; (8) causes or is subject to
any event with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified in clauses
(1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating
its consent to approval of, or acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider of
such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at the
time of such consolidation, amalgamation, merger or transfer.--
(1) the resulting, surviving or transferee entity fails to assume all
the obligations of such party or such Credit Support Provider under this
Agreement or any Credit Support Document to which it or its predecessor was a
party by operation of law or pursuant to an agreement reasonably satisfactory to
the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend (without
the consent of the other party) to the performance by such resulting, surviving
or transferee entity of its obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event
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Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event the event is specified pursuant to (v) below:--
(i) Illegality. Due to the adoption of, or any change in, any applicable
law after the date of which a transaction is entered into, or due to the
promulgation of, or any change in, the interpretation of by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes lawful (other than as a result
of a breach by the party of section 4(b)) for such party (which will be the
Affected Party);--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect of
such Transaction or to comply with any other material provision of
this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether such action is taken
or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount
in respect of an indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withheld for or
on account of a Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by reason of
Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the
other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate, will
be the Affected Party);or
(v) Additional Termination Event. If any "Additional Termination Event"
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
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6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event
of Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day nor earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) Transfer to Avoid Termination Event. If either an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
Affected Party, or if a Tax Event Upon Merger occurs and the Burdened
Party is the Affected Party, the Affected Party will, as a condition to
its right to designate an Early Termination Date under Section 6(b)(iv),
use all reasonable efforts (which will not require such party to incur
a loss, excluding immaterial, incidental expenses) to transfer within 20
days after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected Transactions
to another of its Offices or Affiliates so that such Termination Event
ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party's policies in
effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each party
will use all reasonable efforts to reach agreement within 30 days after
notice thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) Right to Terminate. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected with
respect to all Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected
Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event if
there is only one Affected Party may, by not more than 20 days notice
to the other party and provided that the relevant Termination Event is
then
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continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount,
if any, payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such
quotation will be conclusive evidence of the existence and accuracy of
such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment) in the
Termination Currency, from (and including) the relevant Early Termination
Date to (but excluding) the date such amount is paid, at the Applicable
Rate, such interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss" and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an
Event of Default:
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay the Non-
defaulting Party the excess, if a positive number, of (A) the sum of
the Settlement Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party
over (B) the Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the
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Non-defaulting Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to the Non-
defaulting Party less (B) the Termination Currency Equivalent of the Unpaid
Amounts owing to the Defaulting Party. If that amount is a positive number,
the Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an amount
will be payable equal to the Non-defaulting Party's Loss in respect of this
Agreement. If that amount is a positive number, the Defaulting Party will
pay it to the Non-defaulting Party; if it is a negative number, the Non-
defaulting Party will pay the absolute value of that amount to the
Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the amount payable
will be determined in accordance with Section 6(e)(i)(3), if Market
Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in
either case, references to the Defaulting Party and to the Non-defaulting
Party will be deemed to be references to the Affected Party and the party
which is not the Affected Party, respectively, and, if Loss applies and
fewer than all the Transactions are being terminated, Loss shall be
calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:--
(A) if Market Quotation applies, each party will determine a Settlement
Amount in respect of the Terminated Transactions, and an amount will be
payable equal to (I) the sum of (a) one-half of the difference between
the Settlement Amount of the party with the higher Settlement Amount
("X") and the Settlement Amount of the party with the lower Settlement
Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid
Amounts owing to X less (II) the Termination Currency Equivalent of the
Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in respect of
this Agreement (or, if fewer than all the Transactions are being
terminated, in respect of all Terminated Transactions) and an amount
will be payable equal to one-half of the difference between the Loss of
the party with the higher Loss ("X") and the Loss of the party with the
lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it is a
negative number, X will pay the absolute value of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early Termination
Date occurs because "Automatic Early Termination" applies in respect of a party,
the amount determined under this Section 6(e) will be subject to such
adjustments as are appropriate and permitted by law to reflect any payments or
deliveries made by one party to the other under this Agreement (and retained by
such other party) during the period from the relevant Early Termination Date to
the date for payment determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount
recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not
a penalty. Such amount is payable for the loss of protection against future
risks and except as otherwise provided in this Agreement neither party will be
entitled to recover any additional damages as a consequence of such losses.
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7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer
of all or substantially all its assets to another entity (but without
prejudice to any other right or remedy under this Agreement): and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement will
become in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the
Contractual Currency will not be discharged or satisfied by any tender in
any currency other than the Contractual Currency, except to the extent such
tender results in the actual receipt by the party to which payment is owed,
acting in a reasonable manner and in good faith in converting the currency
so tendered into the Contractual Currency, of the full amount in the
Contractual Currency of all amounts payable in respect of this Agreement.
If for any reason the amount in the Contractual Currency so received falls
short of the amount in the Contractual Currency payable in respect of this
Agreement the party required to make the payment will, to the extent
permitted by applicable law, immediately pay such additional amount in the
Contractual Currency as may be necessary to compensate for the shortfall.
If for any reason the amount in the Contractual Currency so received
exceeds the amount an the Contractual Currency payable in respect of this
Agreement the party receiving the payment will refund promptly the amount
of such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is
rendered (i) for the payment of any amount owing in respect of this
Agreement, (ii) for the payment of any amount relating to any early
termination in respect of this Agreement or (iii) in respect of a judgment
or order of another court for the payment of any amount described in (i)
or (ii) above, the party seeking recovery, after recovery in full of the
aggregate amount to which such party is entitled pursuant to the judgment
or order, will be entitled to receive immediately from the other party the
amount of any shortfall of the Contractual Currency received by such parry
as a consequence of sums paid in such other currency and will refund
promptly to the other party any excess of the Contractual Currency received
by such party as a consequence of sums paid in such other currency if such
shortfall or such excess arises or results from any variation between the
rate of exchange at which the Contractual Currency is converted into the
currency of the judgment or order for the purposes of such judgment or
order and the rate of exchange at which such party is able, acting in a
reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with
the amount of the currency of the judgment or order actually received by
such party. The term "rate of exchange" includes, without limitation, any
premiums and costs of exchange payable in connection with the purchase of
or conversion into the Contractual Currency.
(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and
independent causes of action, will apply notwithstanding any indulgence
granted by the party to which any payment is owed and will not be affected
by judgment being obtained or claim or proof being made for any other sums
payable in respect of this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
11
<PAGE>
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and
supersedes all oral communication and prior writings with respect
thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing
evidenced by a facsimile transmission) and executed by each of the parties
or confirmed by an exchange of telexes or electronic messages on an
electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive
the termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative
and not exclusive of any rights, powers, remedies and privileges provided
by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege
will not be presumed to preclude any subsequent or further exercise, of
that right, power or privilege or the exercise of any other right, power or
privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken
into consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of
booking office or jurisdiction or incorporation or organisation of such
party, the obligations of such party are the same as if it had entered into
the Transaction through its head or home office. This representation will
be deemed to be repeated by such party on each date on which a Transaction
is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office
through which it makes and receives payments or deliveries with respect to
a Transaction will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
12
<PAGE>
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice
or other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine):
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received.
unless the date of that delivery (or attempted delivery) or that receipt as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or re-
enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on
its behalf, service of process in any Proceedings. If for any
13
<PAGE>
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person; any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate:
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate:
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"consent" includes a consent approval, action, authorisation, exemption, notice,
filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" meaning a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14
<PAGE>
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonable determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination
Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or
(3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15
<PAGE>
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (without regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if
each party is so obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined: and
(b) such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
16
<PAGE>
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
17
<PAGE>
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b)
above shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it shall be
the average of the Termination Currency Equivalents of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
THE CHASE MANHATTAN BANK ACT MANUFACTURING, INC.
------------------------------- --------------------------------
(Name of Party) (Name of Party)
By: /s/ Peter N. Langburd By: /s/ John A. Pino
------------------------------- --------------------------------
Name: Peter N. Langburd Name: John A. Pino
Title: Vice President Title: President
Date: October 14, 1998 Date: October 14, 1998
18
<PAGE>
(Multicurrency-Cross Border)
SCHEDULE to the MASTER AGREEMENT
dated as of October 14, 1998 between
THE CHASE MANHATTAN BANK ("Party A")
and
ACT MANUFACTURING,INC. ("Party B")
PART 1: Termination Provisions and Certain Other Matters
------------------------------------------------
(a) "Specified Entity" means in relation to Party A and Party B, for
----------------
the purpose of Section 5(a)(v), Section 5(a)(vi), Section 5(a)(vii) and
Section 5(b)(iv), none.
(b) "Specified Transaction" will have the meaning specified in
---------------------
Section 14.
(c) The "Cross-Default" provisions of Section 5(a)(vi) will not apply
-------------
to Party A. The "Cross-Default" provisions of Section 5(a)(vi) will apply to
-------------
Party B. In connection therewith, "Specified Indebtedness" will have the meaning
----------------------
specified in Section 14, and "Threshold Amount" means USD$250,000.
----------------
(d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv)
------------------------
will not apply to Party A. The "Credit Event Upon Merger" provisions of
------------------------
Section 5(b)(iv) will apply to Party B.
(e) The "Automatic Early Termination" provision of Section 6(a) will
---------------------------
not apply to Party A or Party B.
(f) Payments on Early Termination. For the purpose of section 6(e):
-----------------------------
(i) Loss will apply.
(ii) The Second Method will apply.
(g) "Termination Currency" means United States Dollars.
--------------------
(h) Additional Termination Event. (i) The following shall constitute
----------------------------
an Additional Termination Event (with any event specified in the following
constituting an "Impossibility"):
Due to the occurrence of a natural or man-made disaster, armed conflict, act of
terrorism, riot, labor disruption, act of State, or any other similar
circumstance beyond its control
<PAGE>
after the date on which a Transaction is entered into, it becomes impossible
(other than as a result of its own misconduct) for a party (which will be the
Affected Party):
(1) to perform any absolute or contingent obligation, to make a
payment or delivery or to receive a payment or delivery in respect of
a Transaction or to comply with any other material provision of this
Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party or such
Credit Support Provider has under any Credit Support Document
relating to a Transaction.
(ii) The definition of "Affected Transactions" in Section 14 of this
Agreement is amended by adding the word "Impossibility" immediately before the
word "Illegality" in the first line thereof.
(iii) If an event or circumstance which would otherwise constitute or
give rise to an Event of Default also constitutes an Impossibility, it will be
treated as a Termination Event and will not constitute an Event of Default.
PART 2: Tax Representations
-------------------
Not applicable.
PART 3: Agreement to Deliver Documents
------------------------------
For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents:
(a) Tax forms, documents or certificates to be delivered are: none.
2
<PAGE>
(b) Other documents to be delivered are:
<TABLE>
<CAPTION>
Party required Covered by
to deliver Form/Document/ Date by which Section 3(d)
document Certificate to be delivered Representation
-------- ----------- --------------- --------------
<S> <C> <C> <C>
Party B Opinion of counsel Upon execution and No
satisfactory to Party A delivery of this
substantially in the form of Agreement
Exhibit I hereto
Party B Certified copies of all Upon execution and Yes
corporate authorizations and delivery of this
any other documents with Agreement
respect to the execution,
delivery and performance of
this Agreement
Party B Certificate of authority and Upon execution and Yes
specimen signatures of delivery of this
individuals executing this Agreement and
Agreement and thereafter upon
Confirmations request of Party A
</TABLE>
PART 4: Miscellaneous
-------------
(a) Address for Notices. For the purpose of Section 12(a) of this
-------------------
Agreement:
Address for notice or communications to Party A:
Any notice relating to a particular Transaction shall be delivered to the
address or facsimile or telex number specified in the Confirmation of such
Transaction. Any notice delivered for purposes of Sections 5 and 6 of this
Agreement shall be delivered to the following address:
The Chase Manhattan Bank
Attention: Legal Department-Capital Markets Group
270 Park Avenue, 40th Floor
New York, New York 10017-2070
Telex No.: 232337; Answerback: CBC UR
Facsimile No.: (212) 270-7468
3
<PAGE>
Address for notice or communications to Party B:
ACT Manufacturing, Inc.
Attention: Chief Financial Officer
2 Cabot Road
Hudson, Massachusetts 01749
Facsimile No.: (978) 567-4099
(b) Process Agent. For the purpose of Section 13(c):
-------------
Party A appoints as its Process Agent: Not applicable.
Party B appoints as its Process Agent: Not applicable.
(c) Offices. The provisions of Section 10(a) will apply to this
-------
Agreement.
(d) Multibranch Party. For the purpose of Section 10 of this
-----------------
Agreement.
Party A is a Multibranch Party and may act through any Office
specified in a Confirmation.
Party B is not a Multibranch Party.
(e) Calculation Agent. The Calculation Agent is Party A, unless
-----------------
otherwise specified in a Confirmation in relation to the relevant Transaction.
(f) Credit Support Document. Details of any Credit Support Document:
-----------------------
with respect to Party B, each of the Security Documents delivered pursuant to
the Credit Agreement, and the Guaranty set forth in Article 10 of the Credit
Agreement, shall constitute Credit Support Documents hereunder.
(g) Credit Support Provider. Credit Support Provider means, in
-----------------------
relation to Party B: each of the Guarantors (as defined in the Credit
Agreement).
(h) Governing Law. This Agreement will be governed by and construed
-------------
in accordance with the laws of the State of New York (without reference to
choice of law doctrine).
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) will not
-------------------
apply to any Transaction unless specified in the relevant Confirmation.
(j) "Affiliate" will have the meaning specified in Section 14 of this
---------
Agreement.
4
<PAGE>
PART 5: Other Provisions
----------------
(a) Set-off. Any amount (the "Early Termination Amount") payable to one
-------
party (the "Payee") by the other party (the "Payer") under Section 6(e), in
circumstances where there is a Defaulting Party or one Affected Party in the
case where a Termination Event under Section 5(b)(iv) has occurred will, at the
option of the party (`X') other than the Defaulting Party or the Affected Party
(and without prior notice to the Defaulting Party or the Affected Party), be
reduced by its set-off against any amount(s) (the 'Other Agreement Amount')
payable (whether at such time or in the future or upon the occurrence of a
contingency) by the Payee to the Payer (irrespective of the currency, place of
payment or booking office of the obligation) under any other agreement(s)
between the Payee and the Payer or instrument(s) or undertaking(s) issued or
executed by one party to, or in favor of, the other party (and the Other
Agreement Amount will be discharged promptly and in all respects to the extent
it is so set-off). X will give notice to the other patty of any set-off effected
under this section.
For this purpose, either the Early Termination Amount or the Other Agreement
Amount (or the relevant portion of such amounts) may be converted by X into the
currency in which the other is denominated at the rate of exchange at which such
party would be able, acting in a reasonable manner and in good faith, to
purchase the relevant amount of such currency.
If an obligation is unascertained, X may in good faith estimate that obligation
and set-off in respect of the estimate, subject to the relevant party accounting
to the other when the obligation is ascertained.
Nothing in this section shall be effective to create a charge or other security
interest. This section shall be without prejudice and in addition to any right
of set-off, combination of accounts, lien or other right to which any party is
at any time otherwise entitled (whether by operation of law, contract or
otherwise).
(b) Exchange of Confirmations. For each Transaction entered into
-------------------------
hereunder, Party A shall promptly send to Party B a Confirmation, via telex or
facsimile transmission. Party B agrees to respond to such Confirmation within 10
Business Days (for this purpose, Business Days refers to Business Days in the
location of the recipient), either confirming agreement thereto or requesting a
correction of any error(s) contained therein. Failure by Party B to respond
within such period shall not affect the validity or enforceability of such
Transaction and shall be deemed to be an affirmation of the terms contained in
such Confirmation, absent manifest error. The parties agree that any such
exchange of telexes or facsimile transmissions shall constitute a Confirmation
for all purposes hereunder.
5
<PAGE>
(c) Waiver of Right to Trial by Jury. Each party hereby irrevocably
--------------------------------
waives any and all rights to trial by jury with respect to any legal proceeding
arising out of or relating to this Agreement or any Transaction contemplated
hereby.
(d) Telephonic Recording. Each party (i) consents to the recording of the
--------------------
telephone conversations of trading, marketing and operations personnel of the
parties and their Affiliates in connection with this Agreement or any potential
Transaction and (ii) agrees to obtain any necessary consent of, and give notice
of such recording to, such personnel of it and its Affiliates.
(e) Further Representations. Each party represents to the other party
-----------------------
(which representation will be deemed to be repeated on each date on which a
Transaction is entered into) that it is an "eligible swap participant" as such
term is defined in Part 35 of Chapter I of Title 17 of the Code of Federal
Regulations, promulgated by the Commodity Futures Trading Commission, entitled
"Exemption of Swap Agreements."
(f) Relationship Between Parties. The following representation shall be
----------------------------
inserted as a new Section 3(g) of this Agreement:
"(g) Relationship Between Parties. Bach party will be deemed to represent
to the other party on the date on which it enters into a Transaction that
(absent a written agreement between the parties that expressly imposes
affirmative obligations to the contrary for that Transaction):
(i) Non-Reliance. It is acting for its own account, and it has
made its own independent decisions to enter into that Transaction and as to
whether that Transaction is appropriate or proper for it based upon its own
judgment and upon advice from such advisers as it has deemed necessary. It
is not relying on any communication (written or oral) of the other party as
investment advice or as a recommendation to enter into that Transaction; it
being understood that information and explanations related to the terms and
conditions of a Transaction shall not be considered investment advice or a
recommendation to enter into that Transaction. No communication (written or
oral) received from the other party shall be deemed to be an assurance or
guarantee as to the expected results of that Transaction.
(ii) Assessment and Understanding. It is capable of assessing the
merits of and understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms, conditions
and risks of that Transaction. It is also capable of assuming, and assumes,
the risks of that Transaction.
(iii) Status of Parties. The other party is not acting as a
fiduciary for or an adviser to it in respect of that Transaction."
6
<PAGE>
(g) Negative Interest Rates. (i) Floating Amounts. "Swap Transaction"
-----------------------
means, for the purposes of this provision concerning Negative Interest Rates,
rate exchange or swap transaction, including transactions involving a single
currency or two or more currencies. Party A and Party B agree that, if with
respect to a Calculation Period for a Swap Transaction either party is obligated
to pay a Floating Amount that is a negative number (either due to a quoted
negative Floating Rate or by operation of a Spread that is subtracted from the
Floating Rate), the Floating Amount with respect to that party for that
Calculation Period will be deemed to be zero, and the other party will pay to
that party the absolute value of the negative Floating Amount as calculated, in
addition to any amounts otherwise owed by the other party for that Calculation
Period with respect to that Swap Transaction, on the Payment Date that the
Floating Amount would have been due if it had been a positive number. Any
amounts paid by the other party with respect to the absolute value of a negative
Floating Amount will be paid to such account as the receiving party may
designate (unless such other party gives timely notice of a reasonable objection
to such designation) in the currency in which that Floating Amount would have
been paid if it had been a positive number (and without regard to the currency
in which the other party is otherwise obligated to make payments).
(ii) Compounding. Party A and Party B agree that, if with respect to one
or more Compounding Periods for a Swap Transaction where "Compounding" or Flat
Compounding" is specified to be applicable the Compounding Period Amount, the
Basic Compounding Period Amount or the Additional Compounding Period Amount is a
negative number (either due to a quoted negative Floating Rate or by operation
of a Spread that is subtracted from the Floating Rate), then the Floating Amount
for the Calculation Period in which that Compounding Period or those Compounding
Periods occur will be either the sum of all the Compounding Period Amounts or
the sum of all the Basic Compounding Period Amounts and all the Additional
Compounding Period Amounts in that Calculation Period (whether positive or
negative). If such sum is positive, then the Floating Rate Payer with respect to
the Floating Amount so calculated will pay that Floating Amount to the other
party. If such sum is negative, the Floating Amount with respect to the party
that would be obligated to pay that Floating Amount will be deemed to be zero,
and the other party will pay to that party the absolute value of the negative
Floating Amount as calculated, such payment to be made in accordance with (i)
above.
(h) "Credit Agreement" means the Credit Agreement, dated as of October
----------------
, 1998, among Party B, the Subsidiary Guarantor named therein, the lenders
party thereto and Party A, as agent, as amended, supplemented or otherwise
modified from time to time; provided that if the obligations under the Credit
Agreement are paid in full, the Credit Agreement is otherwise terminated or
cancelled, or Party A shall for any reason cease to remain a party thereto,
Credit Agreement means the Credit Agreement as it existed
7
<PAGE>
immediately prior to such event. Capitalized terms defined therein and not
otherwise defined herein shall have the meanings assigned in the Credit
Agreement.
(i) Further Agreements of Party B. Party B agrees with Party A that
-----------------------------
Party B will comply with each of the covenants set forth in Articles 6, 7 and 8
of the Credit Agreement.
(j) Additional Event of Default. With respect to Party B, it shall
---------------------------
constitute an Event of Default under this Agreement if there shall occur any
Event of Default under the Credit Agreement.
(k) Further Representation of Party B. Party B represents and warrants
---------------------------------
to Party A (which representation will be deemed to be repeated by Party B on
each date on which a Transaction is entered into) that each of the
representations and warranties made by Party B in Article 5 of the Credit
Agreement is true and correct and no Event of Default under the Credit Agreement
has occurred and is continuing.
PART 6: Foreign Exchange Transactions
-----------------------------
(a) Definitions and Application. This Agreement is subject to the 1998
---------------------------
FX and Currency Option Definitions (the "FX Definitions"), as published by the
International Swaps and Derivatives Association, Inc., the Emerging Markets
Traders Association and The Foreign Exchange Committee, as hereinafter amended.
In the event of any inconsistency between the FX Definitions and this Agreement,
this Agreement will govern. Unless otherwise agreed in writing by the parties,
each FX Transaction, whether now existing or hereafter entered into, between the
parties shall be governed by this Agreement, notwithstanding Section 1(b) of
this Agreement, the absence of any reference to this Agreement in the
Confirmation in respect of any such FX Transaction, or the reference to any
other governing terms or law in such Confirmation.
(b) Confirmations. In respect of FX Transactions, the term
-------------
"Confirmation" means a writing (including telex, facsimile or other electronic
means from which it is possible to produce a hard copy) evidencing an FX
Transaction notwithstanding the absence of any reference to this Agreement
therein or the reference therein to any other governing terms or law. In
relation to such Confirmations, unless either party objects to the terms
contained in any Confirmation within three (3) Business Days in its location of
receipt thereof, or such shorter time as may be appropriate given the Settlement
Date of an FX Transaction, the terms of such Confirmation shall be deemed
correct and accepted absent manifest error, unless a corrected Confirmation is
sent by a party within such three (3) Business Days, or shorter period, as
appropriate, in which case the party receiving such corrected Confirmation shall
have three (3) Business Days in its location, or shorter period, as appropriate,
after receipt thereof to object to the terms contained in
8
<PAGE>
such corrected Confirmation. In the event of any conflict between the terms of
such a Confirmation of an FX Transaction and this Agreement, the terms of this
Agreement shall prevail, and the Confirmation shall not modify the terms of this
Agreement.
Accepted and agreed:
THE CHASE MANHATTAN BANK ACT MANUFACTURING, INC.
By: /s/ Peter N. Langburd By: /s/ John A. Pino
------------------------------- -------------------------------
Name: Peter N. Langburd Name: John A. Pino
Title: Vice President Title: President
9
<PAGE>
Exhibit 10.8
------------
STOCK PURCHASE AGREEMENT
Stock Purchase Agreement ("the Agreement") dated as of October 13, 1998 by and
between ACT Manufacturing, Inc. a Massachusetts corporation (the "Purchaser")
and Advanced Component Technologies Limited, a corporation registered under the
laws of Ireland ("the Company").
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the Purchaser and the Company,
intending to be legally bound hereby, agree as follows:
1. The Purchaser hereby agrees to purchase and the Company hereby agrees to
issue and allot to the Purchaser Six Million (6,000,000) ordinary shares,
IR(pound)0.10 each, of the Seller ("the Shares").
2. As full payment for the Shares, the Purchaser hereby surrenders its right
to repayment of IR(pound)600,000 of the intercompany debt between the
Purchaser and the Company.
3. The Company agrees to issue the Shares to the Purchaser and register the
Shares in the name of the Purchaser.
4. Each of the parties hereto covenants and agrees upon the request of the
other, to do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered all such further acts, deeds,
documents, powers of attorney and assurances as may be reasonably necessary
or desirable to give full effect to this Agreement.
5. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
6. This Agreement shall be construed and interpreted according to the laws of
the Commonwealth of Massachusetts without regard to its principles of
conflicts of laws.
7. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the day and year first above written.
<PAGE>
ACT MANUFACTURING, INC.
By: /s/ John A. Pino
----------------------
Name: John A. Pino
Title: President and Chief Executive Officer
ADVANCED COMPONENT
TECHNOLOGIES LIMITED
By: /s/ Aubrey Nuzem
----------------------
Name:
Title:
<PAGE>
Exhibit 10.9
------------
ACT MANUFACTURING, INC.
One Part
ADVANCED COMPONENT TECHNOLOGIES LIMITED
Other Part
SUBORDINATED LOAN AGREEMENT
Arthur Cox,
Arthur Cox Building,
Earlsfort Terrace,
Dublin 2.
DD2B592/sf 08/10/98
<PAGE>
THIS AGREEMENT is made the 13th day of October, 1998 BETWEEN
(1) ACT MANUFACTURING, INC., having its principal office at 108 Forest Avenue,
Hudson, MA 01749, USA (hereinafter called "the Lender") of the One Part;
and
(2) ADVANCED COMPONENT TECHNOLOGIES LIMITED having its principal place of
business in Ireland at Citywest Business Campus, Naas Road, Dublin 24
(hereinafter called "the Borrower") of the Other Part.
WHEREAS:-
A. Under the terms of a Grant Agreement dated the 25th day of May 1998 ("the
Grant Agreement") between the Industrial Development Agency (Ireland)
("IDA") of the first part, the Borrower of the second part and the Lender
of the third part it was provided that Equity Equivalent as defined therein
could be provided inter alia in the form of a loan by the Promoters (as
such term is defined in the Grant Agreement).
B. The Lender has agreed to make available to the Borrower loans not exceeding
IR(pound)1,800,000 ("the Loan") for the Undertaking (as such term is
defined in the Grant Agreement) subject to and upon the terms and
conditions hereinafter contained.
NOW IT IS HEREBY WITNESSED in consideration of these presents and for good and
valuable consideration:-
1. The Lender hereby agrees, subject as hereinafter provided, to make
available to the Borrower the Loan for the Undertaking to be advanced in
tranches of such amounts and at such times as the Borrower may from time to
time require and agree with the Lender on terms that provide in respect of
each advance:-
(i) that no interest or accrued interest on such advance shall be paid
except out of profits which would otherwise be available for
dividend;
(ii) that subject to condition (i) above interest on such advance will
accrue at a rate of 1% above the one month Dublin Inter Bank Offer
Rate (DIBOR) (calculated for the number of days elapsed on the basis
of a 365-day year) on such advance;
(iii) that subject always to condition (i) above, the Borrower will pay to
the Lender quarterly in arrears all accrued interest on each 30th
January, 30th April, 30th July and 30th October during the term
hereof and ending on the date on which the advance is repaid or
prepaid as the case may be;
(iv) that such advance together with all accrued unpaid interest shall be
repaid upon termination of the Grant Agreement;
Page: 1
<PAGE>
(v) that such advance may be prepaid in whole or in part at any time by
the Borrower provided that any such prepayment shall only be paid
out of profits of the Borrower which would otherwise be available
for dividend or out of money received in respect of a new loan
obtained on the same terms for this purpose or out of the proceeds
of a new issue at par of fully paid ordinary shares of the Borrower
made for this purpose;
(vi) that where such advance or any part thereof is prepaid out of the
profits pursuant to paragraph (v) hereof, there will be transferred
out of profits, which could otherwise have been available for
dividend, to a capital reserve fund a sum equal to the amount
prepaid and that there shall be no reduction in the amount of such
capital reserve fund without the prior consent of IDA;
(vii) that where such advance is prepaid out of money received in respect
of the new loan obtained for this purpose the new loan will be
subject to these conditions as if it were the advance;
(viii) that where such advance or any part thereof is prepaid pursuant to
paragraph (v) hereof, the amount of such prepayment shall not be
capable of being drawn down again by the Borrower;
(ix) that in the event of the winding-up of the Borrower at any time
prior to the termination of the Grant Agreement, the amount of such
advance still outstanding will be subordinated to the claims of the
unsecured creditors;
2. Form of Payments
(i) The Borrower agrees that any payments to the Lender (whether for
principal, interest or otherwise) will be made in Irish Pounds.
(ii) If any payment of principal or interest on the Loan becomes due on a
Saturday, Sunday or public holiday under the laws of Ireland, such
payment will be made on the next succeeding business day and such
extension of time will in such case be included in computing
interest in connection with such payment.
(ii) Any payment to be made hereunder will be made in Irish Pounds by
wire transfer of immediately available funds in the manner agreed to
by the Borrower and the Lender.
3. Successors and Assigns
This Agreement applies to, inures to the benefit of and binds the
successors and assigns of the parties hereto.
Page: 2
<PAGE>
4. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of Ireland.
IN WITNESS WHEREOF the Parties hereto have caused their respective seals to be
affixed hereunto the day and year first herein written.
SIGNED for and on behalf of )
ACT MANUFACTURING, INC. ) John A. Pino
in the presence of:- )
Douglass C. Greenlaw
SIGNED for and on behalf of )
ADVANCED COMPONENT )
TECHNOLOGIES LIMITED ) Aubrey Nuzem
in the presence of: )
Page: 3
<PAGE>
Exhibit 10.10
-------------
RESTATED SECOND AMENDMENT TO
AGREEMENT OF LEASE
This Restated Second Amendment to Agreement of Lease (the "Restated Second
Amendment") is made as of the 6th day of November, 1998, by and between John A.
Pino, Trustee of Re-Act Realty Trust, a trust established under a Declaration of
Trust dated September 21, 1984, and recorded in the Middlesex South District
Registry of Deeds at Book 15823, Page 351, as amended by First Amendment dated
October 20, 1988 and recorded with the Middlesex South District Registry of
Deeds at Book 19427, Page 422 (the "Landlord") and ACT Manufacturing, Inc., a
corporation organized under the laws of the Commonwealth of Massachusetts and
having its principal place of business at 108 Forest Avenue, Hudson,
Massachusetts (the "Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Automated Component Technologies, Inc. entered into a
certain Agreement of Lease dated as of October 1, 1988, as amended by a certain
First Amendment to Agreement of Lease dated as of August 4, 1993, whereby
Landlord leased to Automated Component Technologies, Inc. certain premises (the
"Premises") known as and bearing the address of 108 Forest Avenue, Hudson,
Massachusetts. True and complete copies of said Agreement of Lease and First
Amendment are attached hereto as Exhibit A and Exhibit B, respectively.
--------- ---------
WHEREAS, by Assignment of Lease dated as of December 14, 1994, Automated
Component Technologies, Inc. assigned to Advanced Cable Technologies, Inc. all
of its right, title and interest in the Agreement of Lease, as amended by said
First Amendment;
WHEREAS, Advanced Cable Technologies, Inc. by Articles of Merger dated
December 15, 1994, changed its name to ACT Manufacturing, Inc.;
WHEREAS, Landlord and Tenant entered into a certain Second Amendment to
Agreement of Lease dated as of February 7, 1995 (the "Second Amendment"), a true
and complete copy of the Second Amendment is attached hereto as Exhibit C (said
---------
Agreement of Lease, said First Amendment and the Second Amendment are herein
collectively referred to as the "Lease"); and
WHEREAS, Landlord and Tenant desire to restate and amend the Second
Amendment to reflect the understanding and past agreement of the parties
regarding the minimum monthly rental amount and to memorialize such
understanding going forward.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein and in the Lease contained, it is hereby agreed as follows:
1. Landlord and Tenant acknowledge that as of August 1, 1998 Tenant has
been paying minimal monthly rent for the Premises based upon an annual
rate equal to Six Dollars and Fifty Cents ($6.50) per square foot
(based upon a total rentable area of thirty thousand (30,000) square
feet).
2. Paragraph number 2 of the Second Amendment is hereby deleted and the
following shall be inserted in lieu thereof: "Effective as of August 1,
1998 (the beginning of the extension term), the Tenant shall pay a
minimum monthly rental for the Premises based upon an annual rate equal
to Six Dollars and Fifty Cents ($6.50) per square foot (based upon a
total rentable
<PAGE>
-2-
area of thirty thousand (30,000) square feet), in twelve (12) equal
monthly installments in advance on the first day of each calendar month
during the term of the Lease."
3. Except for the replacement of paragraph number 2 of the Second
Amendment as set forth above, the Second Amendment is hereby restated.
As modified by the terms of this Restated Second Amendment, the Lease is,
and shall remain, in full force and effect. Each capitalized term used in this
Restated Second Amendment which is not defined in this Restated Second Amendment
shall have the same meaning ascribed to such term in the Lease. This Restated
Second Amendment contains the entire agreement of the parties, and any and all
agreements and negotiations are merged into and incorporated into this Restated
Second Amendment. This Restated Second Amendment shall be binding upon and
inure to the benefit of Landlord, Tenant, and their respective successors and
permitted assigns.
This Restated Second Amendment is governed by the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, this Restated Second Amendment is executed as of the
day and year first written above.
RE-ACT REALTY TRUST
By: /s/ John A. Pino
----------------------------------------
John A. Pino, Trustee as
aforesaid and not individually
ACT MANUFACTURING, INC.
By: /s/ John A. Pino
----------------------------------------
John A. Pino, President
<PAGE>
Exhibit 10.11
-------------
RESTATED LEASE AMENDMENT AND THIRD AMENDMENT TO
AGREEMENT OF LEASE
This Restated Lease Amendment and Third Amendment to Agreement of Lease
(the "Restated Lease Amendment and Third Amendment") is made as of the 6th day
of November, 1998, by and between John A. Pino, Trustee of Re-Act Realty Trust,
a trust established under a Declaration of Trust dated September 21, 1984, and
recorded in the Middlesex South District Registry of Deeds at Book 15823, Page
351, as amended by First Amendment dated October 20, 1988 and recorded with the
Middlesex South District Registry of Deeds at Book 19427, Page 422 (the
"Landlord") and ACT Manufacturing, Inc., a corporation organized under the laws
of the Commonwealth of Massachusetts and having its principal place of business
at 108 Forest Avenue, Hudson, Massachusetts (the "Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Advanced Cable Technologies, Inc. entered into a
certain Agreement of Lease dated as of April 1, 1985, as amended by a certain
Lease Amendment executed as of October 25, 1988 and a certain Second Amendment
to Lease dated as of August 4, 1993, whereby Landlord leased to Automated
Component Technologies, Inc. certain premises (the "Premises") known as and
bearing the address of One Robert Bonazzoli Drive, Hudson, Massachusetts. True
and complete copies of said Agreement of Lease, Lease Amendment and Second
Amendment are attached hereto as Exhibit A, Exhibit B, and Exhibit C,
--------- --------- ---------
respectively.
WHEREAS, Advanced Cable Technologies, Inc. by Articles of Merger dated
December 15, 1994, changed its name to ACT Manufacturing, Inc.;
WHEREAS, Landlord and Tenant entered into a certain Third Amendment to
Agreement of Lease dated as of February 7, 1995 (the "Third Amendment"), a true
and complete copy of the Third Amendment is attached hereto as Exhibit D (said
---------
Agreement of Lease, said Lease Amendment, said Second Amendment and the Third
Amendment are herein collectively referred to as the "Lease"); and
WHEREAS, Landlord and Tenant desire to restate and amend said Lease
Amendment to correct the street address of the Premises as set forth therein and
the Third Amendment to reflect the understanding and past agreement of the
parties regarding the minimum monthly rental amount and to memorialize such
understanding going forward.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein and in the Lease contained, it is hereby agreed as follows:
1. Landlord and Tenant acknowledge that as of August 1, 1998 Tenant has
been paying minimal monthly rent for the Premises based upon an annual
rate equal to Six Dollars and Fifty Cents ($6.50) per square foot
(based upon a total rentable area of twenty-six thousand (26,000)
square feet).
2. Paragraph number 2 of the Third Amendment is hereby deleted and the
following shall be inserted in lieu thereof: "Effective as of August 1,
1998 (the beginning of the extension term), the Tenant shall pay a
minimum monthly rental for the Premises based upon an annual rate equal
to Six Dollars and Fifty Cents ($6.50) per square foot (based upon a
total rentable area of twenty-six thousand (26,000) square feet), in
twelve (12) equal monthly installments in advance on the first day of
each calendar month during the term of the Lease."
<PAGE>
-2-
3. The definition of "PREMISES" in the Lease Amendment is hereby deleted
and replaced with the following: "One Robert Bonazzoli Drive, Hudson,
Massachusetts 01749". Additionally, reference to "108 Forest Avenue,
Hudson" in paragraph 2 of the Lease Amendment is hereby deleted and
replaced with the following: "One Robert Bonazzoli Drive, Hudson".
4. Except as modified herein the Lease Amendment and the Third Amendment
are hereby restated.
As modified by the terms of this Restated Lease Amendment and Third
Amendment, the Lease is, and shall remain, in full force and effect. Each
capitalized term used in this Restated Lease Amendment and Third Amendment which
is not defined in this Restated Lease Amendment and Third Amendment shall have
the same meaning ascribed to such term in the Lease. This Restated Lease
Amendment and Third Amendment contains the entire agreement of the parties, and
any and all agreements and negotiations are merged into and incorporated into
this Restated Lease Amendment and Third Amendment. This Restated Lease
Amendment and Third Amendment shall be binding upon and inure to the benefit of
Landlord, Tenant, and their respective successors and permitted assigns.
This Restated Lease Amendment and Third Amendment is governed by the laws
of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, this Restated Lease Amendment and Third Amendment is
executed as of the day and year first written above.
RE-ACT REALTY TRUST
By: /s/ John A. Pino
----------------------------------------
John A. Pino, Trustee as
aforesaid and not individually
ACT MANUFACTURING, INC.
By: /s/ John A. Pino
----------------------------------------
John A. Pino, President
<PAGE>
Exhibit 10.12
-------------
FORBEARANCE AGREEMENT
---------------------
THIS FORBEARANCE AGREEMENT (hereinafter, this "Agreement") made this 14th
day of October, 1998 by and among:
BANKBOSTON, N.A. (hereinafter, the "Bank"), a bank organized under the
laws of the United States of America with its principal office located at
100 Federal Street, Boston, Massachusetts;
BANCBOSTON LEASING, INC. (hereinafter, the "Lessor"), a Massachusetts
corporation with its principal office located at 100 Federal Street,
Boston, Massachusetts;
ACT MANUFACTURING, INC. (hereinafter, the "Company"), a Massachusetts
corporation with its principal office located at 108 Forest Avenue, Hudson,
Massachusetts;
JOHN A. PINO, TRUSTEE OF RE-ACT REALTY TRUST (hereinafter, the
"Trust"), under Declaration of Trust dated September 21, 1984 and recorded
with the Middlesex County (Southern District) Registry of Deeds at Book
15823, Page 351, as amended from time to time; and
JOHN A. PINO (hereinafter, "Pino"), an individual with an address c/o
2 Cabot Road, Hudson, Massachusetts.
Background
----------
The "Lease Transactions". Reference is made to certain lease arrangements
------------------------
entered into by and between the Lessor and the Company evidenced by, among other
things, a Master Lease Agreement (hereinafter, the "Master Lease") dated October
27, 1992 entered into by and between the Lessor and Automated Component
Technologies, Inc. and assumed by the Company pursuant to an Assumption
Agreement dated December 15, 1994. The Master Lease covers those leases
(hereinafter collectively, the "Leases") of the equipment (hereinafter, the
"Equipment") listed on Schedule 1, annexed hereto. As security for the Master
Lease and the Leases, the Company granted the Lessor a security interest in and
to all of the Company's business assets (hereinafter, the "Collateral") pursuant
to a certain Subordinate Security Agreement dated January 12, 1995.
The "Trust Transactions". Reference is further made to a certain
------------------------
Reimbursement Agreement (hereinafter, the "Reimbursement Agreement") dated
October 1, 1988 entered into by and between the Bank and the Trust, as amended
from time to time, with respect to a certain Letter of Credit (hereinafter, the
"Letter of Credit") issued by the Bank for the account of the Trust of support
that issue of certain
<PAGE>
industrial revenue bonds (hereinafter, the "Bonds") of the Massachusetts
Industrial Finance Agency designated "Re-Act Realty Trust Project". The
Reimbursement Agreement is secured by a certain Mortgage and Security Agreement
(hereinafter, the "Mortgage") dated October 1, 1988 and recorded with the
Middlesex County (Southern District) Registry of Deeds at Book 19427, Page 427,
as amended from time to time. In addition, Pino executed and delivered to the
Bank a Limited Guaranty (hereinafter, the "Guaranty") dated February 14, 1995
and a certain Pledge Agreement (hereinafter, the "Pledge Agreement") each dated
February 14, 1995 as additional security for the Trust's obligations to the Bank
under the Reimbursement Agreement.
Current Status. The Company defaulted under the Master Lease and the
--------------
Leases and the Letter of Credit was to expire by its terms on October 1, 1998.
The Company and the Trust have requested that (i) the Bank and the Lessor
forbear from exercising their respective rights and remedies upon default, (ii)
the Bank extend the expiry date of the Letter of Credit, and (iii) the Lessor
release its security interest in the Collateral. In exchange therefor, the
Company and the Trust have offered to (i) provide the Lessor with additional
security for the Master Lease and the Leases, (ii) satisfy all amounts due under
the Master Lease and the Leases on or before February 28, 1999, and (iii)
replace the Letter of Credit on or before December 15, 1998. The Bank and the
Lessor have agreed to the Company's and the Trust's requests, but only upon the
terms and conditions set forth herein.
Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed by and between
(i) the Bank and the Lessor, and (ii) the Company, the Trust, and Pino
(hereinafter collectively, the "Obligors"), as follows:
Ratification of Documents; Further Assurances
---------------------------------------------
1. The Obligors:
(a) Hereby ratify, confirm, and reaffirm all and singular the terms and
conditions of the documents, instruments, and agreements evidencing
the Lease Transactions and the Trust Transactions. The Obligors
further acknowledge and agree that, except as specifically modified in
this Agreement, all terms and conditions of the those documents,
instruments, and agreements shall remain in full force and effect; and
(b) Shall, from and after the execution of this Agreement, execute and
deliver to the Bank and/or the Lessor whatever additional documents,
instruments, and agreements that the Bank and/or the Lessor, as the
case may be, may require in order to vest or perfect those documents
and any
2
<PAGE>
collateral granted therein more securely in the Bank and the Lessor,
and otherwise to give effect to the terms and conditions of this
Agreement.
Substitute Security for the Master Lease and the Leases
-------------------------------------------------------
2. Simultaneously with the execution of this Agreement, the Company is
satisfying all amounts owed to the Bank, among others, under a certain Amended
and Restated Loan and Security Agreement (the "Loan Agreement") dated December
18, 1994. Upon receipt by the Bank of all amounts required to be paid in
connection therewith, the Company shall, no later than October 15, 1998,
present to the Lessor a standby letter of credit (hereinafter, the "Standby
L/C") for the benefit of the Lessor in the amount of $750,000.00.
(a) The Standby L/C shall be issued by The Chase Manhattan Bank and shall
be in form and substance satisfactory to the Lessor in all respects,
in the Lessor's sole and exclusive discretion, and drawable by the
Lessor immediately upon the occurrence of an Event of Default, as
defined in Paragraph 7, below, through the presentation of an
executed Draw Certificate in the form of Exhibit "A", annexed hereto.
(b) In exchange for the Standby L/C, the Lessor shall release any
security interests held by the Lessor in and to any of the
Collateral.
Amendment of the Master Lease and the Leases
--------------------------------------------
3. From and after the execution of this Agreement and receipt by the
Lessor of the Standby L/C, the Master Lease and the Leases are and shall be
amended, as follows:
(a) The Company shall continue to make all otherwise regularly scheduled
payments due under the Master Lease and the Leases as and when due
each month.
(b) The Financial Performance Covenants incorporated into the Master
Lease and the Leases by reference to the Loan Agreement are hereby
deleted in their entirety.
(c) The term of the Master Lease and the Leases is amended and shall
expire on February 28, 1999. Accordingly, on or before that date, the
Company shall pay to the Lessor the amounts set forth on Schedule 2
annexed hereto with respect to each Lease (hereinafter, the "Buyout
Amounts").
3
<PAGE>
(d) The payment to the Lessor of the Buyout Amounts shall constitute full
satisfaction of the Company's obligations to the Lessor under the Master
Lease and the Leases, including the Company's exercise of its option to
purchase the Equipment for its fair market value at the end of the term
of each Lease.
(e) Notwithstanding the release by the Lessor of its security interest in
the Collateral, the Lessor shall, pending payment of the Buyout Amounts,
retain all of its right, title, and interest in and to the Equipment.
Upon payment to the Lessor of the Buyout Amounts, the Lessor shall
convey all of its right, title, and interest in and to the Equipment to
the Company, or to that person designated by the Company.
Replacement of the Letter of Credit
-----------------------------------
4. The Bank has extended the expiry date of the Letter of Credit to
December 31, 1998. On or before December 15, 1998, the Trust shall replace the
Letter of Credit with a replacement letter of credit to support the Bonds, or
shall otherwise retire or refinance the Bonds, and the original Letter of Credit
shall be returned to the Bank. Upon consummation of the foregoing:
(a) The Trust's obligations to the Bank under the Reimbursement Agreement
shall be satisfied in full.
(b) The Bank shall promptly:
(i) Release and discharge the Mortgage and any other lien or
encumbrance held by the Bank as security for the Reimbursement
Agreement, and execute and deliver to the Trust all documents reasonably
required to effect such release and discharge;
(ii) Return the Guaranty to Pino and release to Pino all collateral
pledged to the Bank pursuant to the Pledge Agreement.
Forbearance by Bank and Lessor
------------------------------
5. In consideration of the Obligors' performance in accordance with this
Agreement:
(a) The Bank and the Lessor shall each forbear from enforcing their
respective rights and remedies as a result of the Obligors' defaults,
until the occurrence of an Event of Default, as defined in Paragraph 7,
below.
4
<PAGE>
(b) The Lessor hereby WAIVES any default or event of default under the
Master Lease or the Leases existing as of the date of this Agreement.
Forbearance Fee
---------------
6. In consideration of the agreement of the Bank and the Lessor to
forbear as set forth in this Agreement, upon the execution of this Agreement,
the Obligors shall pay to the Bank a forbearance fee in the amount of $25,000.00
(the "Forbearance Fee"). The Forbearance Fee shall be fully earned by the Bank
and the Lessor as of the execution of this Agreement. The Forbearance Fee shall
be retained by the Bank and the Lessor under all circumstances and shall not be
applied in reduction of any amounts otherwise owed to either the Bank or the
Lessor.
Events of Default
-----------------
7. The occurrence of any one or more of the following events shall
constitute an event of default (hereinafter, an "Event of Default") under this
Agreement:
(a) The failure of the Obligors to promptly, punctually, or faithfully
perform any term or condition of this Agreement as and when due,
including without limitation the replacement of the Letter of Credit
on or before December 15, 1998, it being expressly acknowledged and
agreed that TIME IS OF THE ESSENCE;
(b) The failure of the Obligors to pay any amount required to be paid to
the Bank or the Lessor under this Agreement as and when due,
including without limitation payment of the Buyout Amounts on or
before February 28, 1999, it being expressly acknowledged and agreed
that TIME IS OF THE ESSENCE; or
(c) Except with respect to payment of the Buyout Amounts on or before
February 28, 1999, the failure of the Company to pay any amount
required to be paid to the Lessor under the Master Lease or the
Leases, which failure shall continue for Fifteen (15) days after
delivery by the Lessor to the Company of written notice thereof.
Rights Upon Default
-------------------
8. Upon the occurrence of any Event of Default:
(a) The Bank's and the Lessor's agreement to forbear as set forth in this
Agreement shall automatically terminate and the Bank and the Lessor
may immediately commence enforcing their respective rights and
remedies.
5
<PAGE>
(b) All liabilities, obligations, and indebtedness of every kind, nature,
and description due to the Bank and/or the Lessor by any of the
Obligors shall be immediately due and payable in full, without
demand, notice, or protest, all of which are hereby expressly WAIVED;
(c) The Lessor may draw under the Standby L/C up to the full amount
thereof.
Costs of Collection
-------------------
9. In addition, upon the occurrence of any Event of Default, the
Obligors shall reimburse the Bank and the Lessor on demand for any and all
costs, expenses, and costs of collection (including attorneys' fees) hereafter
reasonably incurred by the Bank and/or the Lessor in connection with the
protection, preservation, and enforcement by them of their respective its rights
and remedies. The $25,000.00 reserve paid to the Bank in connection with the
satisfaction of the amounts due under the Loan Agreement shall also be held by
the Bank and the Lessor as additional security for the payment of the foregoing
costs, expenses, and costs of collection.
Notices
-------
10. Any communication between the Bank and/or the Lessor and the Obligors
shall be forwarded via certified mail, return receipt requested, or via
recognized overnight courier, addressed as follows:
If to the Bank or the Lessor:
BankBoston, N.A.
100 Federal Street
Mail Stop: MA-BOS 01-06-01
Boston, Massachusetts 02110
Attention: Mr. Peter Haley
Vice President
With a copy via telecopier to: Donald E. Rothman, Esquire
Riemer & Braunstein
Three Center Plaza
Boston, Massachusetts 02108
Telecopier No. (617) 723-6831
If to the Obligors:
ACT Manufacturing, Inc.
2 Cabot Road
6
<PAGE>
Hudson, Massachusetts 01749
Attention: Mr. Douglas Greenlaw
Chief Financial Officer
With a copy via telecopier to: Mark D. Smith, Esquire
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Telecopier No. (817) 248-7100
Waivers
-------
11. Waiver of Claims. The Obligors hereby acknowledge and agree that they
have no offsets, defenses, claims, or counterclaims against the Bank or the
Lessor, or their respective officers, directors, employees, attorneys,
representatives, predecessors, successors, or assigns with respect to the Lease
Transactions or the Trust Transactions, or otherwise, and that if the Obligors
now have, or ever did have, any offsets, defenses, claims, or counterclaims
against the Bank or the Lessor, or their respective officers, directors,
employees, attorneys, representatives, predecessors, successors, or assigns,
whether known or unknown, at law or in equity, from the beginning of the
world through this date and through the time of execution of this Agreement, all
of them are hereby expressly WAIVED, and the Obligors each hereby RELEASE the
Bank and the Lessor, and their respective officers, directors, employees,
attorneys, representatives, predecessors, successors, and assigns from any
liability therefor.
12. Non-Interference. From and after the occurrence of any Event of Default,
the Obligors agree not to interfere with the exercise by the Bank and/or the
Lessor of any of their respective rights and remedies. The Obligors further
agree that they shall not seek to distrain or otherwise hinder, delay, or impair
the Bank's or the Lessor's efforts to realize upon any collateral, or otherwise
to enforce their rights and remedies. The provisions of this Paragraph 12 shall
be specifically enforceable by the Bank and/or the Lessor.
13. Automatic Stay. The Obligors agree that upon the filing of any Petition
for Relief by or against any one or more of the Obligors under the United States
Bankruptcy Code, the Bank and/or the Lessor shall be entitled to immediate and
complete relief from the automatic stay, and the Bank and/or the Lessor
shall be permitted to proceed to protect and enforce their respective rights and
remedies under state law. The Obligors hereby expressly assent to any motion
filed by the Bank and/or the Lessor seeking relief from the automatic stay. The
Obligors further hereby expressly WAIVE the protections afforded under Section
362 of the United States Bankruptcy Code with respect to the Bank and the
Lessor.
7
<PAGE>
14. Jury Trial. The Obligors hereby make the following waiver knowingly,
voluntarily, and intentionally, and understand that the Bank and the Lessor, in
entering into this Agreement or making any financial accommodations to the
Obligors, whether now or in the future, are relying on such a waiver: THE
OBLIGORS HEREBY IRREVOCABLY WAIVE ANY PRESENT OR FUTURE RIGHT TO A JURY IN ANY
TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE BANK OR THE LESSOR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE BANK OR THE
LESSOR OR IN WHICH THE BANK OR THE LESSOR IS JOINED AS A PARTY LITIGANT), WHICH
CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT OF, ANY RELATIONSHIP BETWEEN
THE OBLIGORS, OR ANY OTHER PERSON, AND THE BANK OR THE LESSOR.
Entire Agreement
----------------
15. This Agreement shall be binding upon, and shall inure to the benefit
of the Obligors, the Bank, and the Lessor, and their respective employees,
representatives, successors, and assigns. This Agreement and all documents,
instruments, and agreements executed in connection herewith incorporate all of
the discussions and negotiations between the Obligors and the Bank and the
Lessor, either expressed or implied, concerning the matters included herein and
in such other documents, instruments and agreements, any statute, custom, or
usage to the contrary notwithstanding. No such discussions or negotiations shall
limit, modify, or otherwise affect the provisions hereof. No modification,
amendment, or waiver of any provision of this Agreement, or any provision of any
other document, instrument, or agreement between the Obligors and the Bank or
the Lessor shall be effective unless executed in writing by the party to be
charged with such modification, amendment, or waiver, and if such party be the
Bank or the Lessor, then by a duly authorized officer thereof.
Construction of Agreement
-------------------------
16. In connection with the interpretation of this Agreement and all other
documents, instruments, and agreements incidental hereto:
(a) All rights and obligations hereunder and thereunder, including matters
of construction, validity, and performance, shall be governed by and
construed in accordance with the law of The Commonwealth of
Massachusetts and are intended to take effect as sealed instruments.
(b) The captions of this Agreement are for convenience purposes only, and
shall not be used in construing the intent of the Bank, the Lessor,
and the Obligors under this Agreement.
8
<PAGE>
(c) In the event of any inconsistency between the provisions of this
Agreement and any other document, instrument, or agreement entered
into by and between the Bank and/or the Lessor and the Obligors, the
provisions of this Agreement shall govern and control.
(d) The Bank, the Lessor, and the Obligors have prepared this Agreement
and all documents, instruments, and agreements incidental hereto with
the aid and assistance of their respective counsel. Accordingly, all
of them shall be deemed to have been drafted by the Bank, the Lessor,
and the Obligors and shall not be construed against any of the Bank,
the Lessor, or the Obligors.
Illegality or Unenforceability
------------------------------
17. Any determination that any provision or application of this Agreement
is invalid, illegal, or unenforceable in any respect, or in any instance, shall
not affect the validity, legality, or enforceability of any such provision in
any other instance, or the validity, legality, or enforceability of any other
provision of this Agreement.
Informed Execution
------------------
18. The Obligors warrant and represent to the Bank and the Lessor that
the Obligors:
(a) Have read and understand all of the terms and conditions of this
Agreement;
(b) Intend to be bound by the terms and conditions of this Agreement;
(c) Are executing this Agreement freely and voluntarily, without duress,
after consultation with independent counsel of their own selection;
and
(d) Acknowledge and agree that the forbearance provided to the Obligors
by the Bank and the Lessor pursuant to this Agreement constitutes a
fair and reasonable time frame within which the Obligors may pay and
perform each and all of their obligations to the Bank and the Lessor.
(REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)
9
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed this 14th day of
October, 1998.
BANKBOSTON, N.A. ACT MANUFACTURING, INC.
By: /s/ Peter Haley By: /s/ Douglass C. Greenlaw
--------------------------- ----------------------------
Title: VICE PRESIDENT Title:
BANCBOSTON LEASING, INC. RE-ACT REALTY TRUST
By: /s/ Peter Haley By: /s/ John A. Pino
--------------------------- ----------------------------
Title: VICE PRESIDENT John A. Pino, Trustee
AUTHORIZED OFFICER
/s/ John A. Pino
-------------------------------
John A. Pino, Individually
10
<PAGE>
Exhibit 10.13
-------------
EXTENSION AND MASTER
LEASE AMENDMENT AGREEMENT
(CITIZENS LEASING CORPORATION)
------------------------------
THIS AGREEMENT is made as of October 14, 1998 between ACT MANUFACTURING, INC., a
Massachusetts business located at 2 Cabot Road, Hudson, Massachusetts
("Lessee"), and CITIZENS LEASING CORPORATION, a Rhode Island corporation
("Lessor").
RECITALS
--------
A. The Lessee and BancBoston Leasing Inc. ("BancBoston") entered into a
certain Master Lease Agreement ("Lease Agreement") dated as of October 27, 1992
pursuant to which BancBoston agreed to lease to Lessee, and Lessee agreed to
lease from BancBoston, personal property mutually agreed upon by the parties and
identified in one or more equipment schedules.
B. In connection with the Lease Agreement, the Lessee executed and
delivered to BancBoston, among other things, certain equipment schedules
("Equipment Schedules") and related Certificates of Acceptance (such
Certificates of Acceptance, the Equipment Schedules and the Lease Agreement,
collectively, "Lease").
C. Subsequent to the execution and delivery of the Equipment Schedules,
BancBoston sold and assigned to the Lessor the Lease and the equipment
("Equipment") subject thereto, as evidenced by, among other things, certain
notices of assignments form BancBoston to the Lessee.
D. The Lessee is in default of its obligations under the Lease.
Specifically, the Lessee is in default under the Loan and Security Agreement
between the Lessee and First National Bank of Boston, State Street Bank and
Trust Company and Citizens Bank of
<PAGE>
Massachusetts (the "Banks") (the "Credit Facility"). The foregoing default under
the Credit Facility constitutes an "Event of Default" (hereinafter a "Default")
under the Lease.
E. Contemporaneously herewith, Lessee is entering into a new Credit
Agreement with Chase Manhattan Bank as agent ("Chase") for itself and certain
other participating lenders (the "New Banks") (the "New Credit Facility")
whereby the New Banks agreed to replace the existing Credit Facility between the
Lessee and the Banks.
F. The Lessee has requested that the Lessor waive the present Default so
that it may enter into the New Credit Facility and seek to pay its Indebtedness
to the Lessor. The Lessor has agreed to so waive on the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Lessor and Lessee hereby agree as follows:
1. Terms. Unless otherwise defined herein, terms used herein shall have
-----
the meanings ascribed to them in the Lease.
2. Buyout Amount. As of the date hereof, per the terms and conditions of
-------------
the Lease, the buyout amount is approximately $5,737,777.46 (the "Buyout
Amount"). Such Buyout Payment, together with all other obligations of the Lessee
to the Lessor thereunder and hereunder, are (a) valid and enforceable
obligations of the Lessee, and (b) not subject to setoff, counterclaim or any
defense.
3. Validity and Enforceability of Lease, Etc. The Lease, as modified
------------------------------------------
hereby, is valid, binding and enforceable by the Lessor against the Lessee in
accordance with its terms.
2
<PAGE>
The Lease is a true lease and not one intended as security, and the Equipment is
the sole and exclusive property of the Lessor.
4. Waiver of Default. The Lessee acknowledges the existence of the Default
-----------------
described above. The Lessor hereby waives the existing Default. The Lessee
acknowledges that the execution of this Agreement shall not result in the waiver
of any other of the Lessor's rights or remedies under the Lease or any rights or
remedies under this Agreement, except as specifically provided herein. In
particular, no other Default is hereby waived.
5. Default. Section 16.1 of the Lease is hereby amended by deleting Section
-------
16.1(i) in its entirety and inserting in lieu thereof the following:
(i) Lessee is in payment default under a material credit or loan agreement
("Payment Default"); demand has been made by any lender under a material
credit or loan agreement ("Demand Default"); or payment has been accelerated
under a material credit or loan agreement ("Acceleration Default").
6. Lease Term. Section 3 of the Lease is hereby amended by deleting Section
----------
3.1 in its entirety and inserting in lieu thereof the following:
3.1 The term of the Lease for the Equipment (the "Term") shall begin on the
Commencement Date set forth in the applicable Certificate of Acceptance and
shall continue until March 1, 1999.
7. Term Default. Section 16.1 of the Lease is hereby amended by adding the
------------
following:
(k) Lessee fails to pay all of the Lessee's Indebtedness under the Lease at
the end of the Term.
8. Indebtedness. Section 2 of the Lease is hereby amended by adding the
------------
following:
2.7 The "Indebtedness" shall mean the sum of (x) the Buyout Amount and (y)
all other obligations of the Lessee to the Lessor under the Lease and the
Extension Agreement, including interest charges and reasonable attorney's fees
and costs and expenses of collection (including appraisal costs and expenses).
3
<PAGE>
9. Notice and Cure. Section 17 of the Lease is hereby amended by adding
---------------
the following:
17.4 Lessee will provide written notice to the Lessor of any Payment
Default, Demand Default and/or Acceleration Default contemporaneous with
Lessee's receipt of notice of such Payment Default, Demand Default and/or
Acceleration Default from any lender. After receipt of notice of such
Demand Default and/or Acceleration Default, Lessee shall have fifteen (15)
days to cure such Demand Default and/or Acceleration Default before the
Lessor may exercise its remedies under the Lease. Upon the expiration of
thirty days (30) from the date of Payment Default, Lessee shall have an
additional fifteen (15) days to cure such Payment Default before the Lessor
may exercise its remedies under the Lease.
10. Termination of Subordinate Security Interest. Lessor hereby terminates
--------------------------------------------
and releases its subordinated security interest in certain collateral securing
the Lease and agrees to execute an appropriate UCC-3 financing statement to
reflect such release.
11. Future Assurances. In connection with the payment of the Lessee's
-----------------
Indebtedness under the Lease, the Lessee shall execute all documents reasonably
requested by the Lessor.
12. Authority. The Lessee represents and warrants to the Lessor that (a)
---------
the Lessee has full power and authority and has taken all required corporate and
other action necessary to permit it to execute and deliver, and perform all of
its obligations contained in, this Agreement, and to perform all of its
obligations under the Lease, as modified hereby, and (b) the taking of such
actions will not violate any provision of law applicable to its charter
documents nor will it result in the breach of or constitute a default under any
agreement or instrument to which it is bound.
13. Waiver of Defenses and Release of Lessor. The Lessee releases, remises
----------------------------------------
and forever discharges the Lessor and each of its past, present and future
officers, directors, stockholders, agents, employees, affiliates, attorneys,
successors and assignees of and from any
4
<PAGE>
and all claims, obligations, demands, causes of action, counterclaims and
defenses of any kind of nature whatsoever (including any claims, counterclaims
or defenses based on so-called lender liability), which the Lessee now has
against the Lessor and/or any of its past, present and future officers,
directors, stockholders, agents, employees, affiliates, attorneys, successors
and assigns, or ever had from the beginning of the world to the date hereof.
14. Defaults and Right of Remedies of Lessor. The failure of the Lessee
----------------------------------------
to perform any of its obligations hereunder shall constitute an Event of Default
under the Lease. Upon the occurrence and continuation of an Event of Default
hereunder or under the Lease subsequent to the date hereof, any obligation of
the Lessor to forbear from exercising its rights and remedies shall terminate
automatically, and the Lessor thereafter in its discretion may exercise any or
all of its rights and remedies under this Agreement, the Lease and/or applicable
law, it being understood that no such right or remedy is intended to be
exclusive of any other right or remedy, but each and every right and remedy
shall be cumulative and shall be in addition to every right and remedy given in
this Agreement, the Lease now or hereafter existing at law or in equity or by
statute, and may be exercised from time to time as often as deemed expedient by
the Lessor.
15. Waiver Fee. The Lessee shall pay the Lessor a waiver fee of $75,000.00
----------
in consideration of the Lessor's agreement to waive the Default under the Lease
which is fully earned upon execution of this Agreement, $25,000.00 of which is
due and payable upon execution of this Agreement, and the balance due and
payable upon failure of Lessee to pay Lessee's entire Indebtedness under the
Lease at the conclusion of the Term.
16. Expenses. The Lessee shall reimburse the Lessor on demand for all
--------
reasonable costs, expenses and charges incurred by the Lessor in connection with
the (a) preparation,
5
<PAGE>
administration and enforcement of this Agreement, any and all agreements and
instruments executed in connection herewith and administration and enforcement
of the Lease and this Agreement; (b) valuation of the Equipment; and (c)
exercise by the Lessor of its rights and remedies under any of the foregoing
and/or applicable law.
17. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed one original, but all of which
together shall constitute one and the same instrument.
18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of The Commonwealth of Massachusetts.
19. Successors, etc., This Agreement shall be binding upon and shall inure
---------------
to the benefits of any successors to or assigns of the parties hereto, and this
Agreement and all documents and instruments related hereto may not be amended,
waived or modified in any manner without the written consent of the parties
hereto.
20. Waiver of Jury Trial. THE LESSEE IRREVOCABLY WAIVES ANY AND ALL RIGHT
--------------------
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING INVOLVING THE LESSEE AND RELATING TO
THIS AGREEMENT AND/OR THE LEASE.
21. Conditions to Effectiveness. This Agreement only shall become
---------------------------
effective upon the satisfaction of the following conditions:
(a) certificates from the secretaries of the Lessee, covering incumbency
and corporate action taken to authorize this Agreement, which
certificates shall be in form and substance satisfactory to the
Lessor; and
(b) the delivery to the Lessor of a certificate or certificates of
insurance evidencing that the Lessor is in compliance with Section
11.1 and Section 11.2 of the Lease.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a
sealed instrument as of the first date above written.
ACT MANUFACTURING, INC.
By: /s/ Douglass C. Greenlaw
-----------------------------
Name: Douglass C. Greenlaw
Title: Chief Financial Officer
CITIZENS LEASING CORPORATION
By: /s/ David J. Angell
-----------------------------
Name: David J. Angell
Title: VP
7
<PAGE>
EXHIBIT 11
ACT MANUFACTURING, INC.
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
BASIC NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) as reported.................................... $ 796 $ (620)
Weighted average number of common shares outstanding:
Common Stock.................................................. 9,063 9,050
------ ------
Basic net income (loss) per common share...................... $ 0.09 $ (.07)
====== ======
DILUTED NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) as reported.................................... $ 796 $ (620)
Weighted average number of common shares outstanding:
Common Stock.................................................. 9,063 9,050
Effect of stock options....................................... 93 -
------ ------
Total...................................................... 9,156 9,050
------ ------
Diluted net income (loss) per common share.................... $ 0.09 $ (.07)
====== ======
<CAPTION>
NINE MONTHS ENDED
--------------------------
1998 1997
------------ ------------
BASIC NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) as reported..................................... $ (244) $6,373
Weighted average number of common shares outstanding:
Common Stock................................................... 9,063 8,853
------ ------
Basic net income (loss) per common share....................... $(0.03) $ .72
====== ======
DILUTED NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) as reported..................................... $ (244) $6,373
Weighted average number of common shares outstanding:
Common Stock................................................... 9,063 8,853
Effect of stock options........................................ -- 322
------ ------
Total....................................................... 9,063 9,175
------ ------
Diluted net income (loss) per common share..................... $(0.03) $ .69
====== ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,735
<SECURITIES> 0
<RECEIVABLES> 70,734
<ALLOWANCES> 2,463
<INVENTORY> 48,076
<CURRENT-ASSETS> 126,662
<PP&E> 20,731
<DEPRECIATION> 8,011
<TOTAL-ASSETS> 145,887
<CURRENT-LIABILITIES> 65,713
<BONDS> 31,258
0
0
<COMMON> 91
<OTHER-SE> 48,825
<TOTAL-LIABILITY-AND-EQUITY> 145,887
<SALES> 214,003
<TOTAL-REVENUES> 214,003
<CGS> 202,224
<TOTAL-COSTS> 212,666
<OTHER-EXPENSES> (81)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,825
<INCOME-PRETAX> (407)
<INCOME-TAX> 163
<INCOME-CONTINUING> (244)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (244)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
