<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 29, 1998
STELLEX INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
333-41939 13-3971931
(Commission File Number) (IRS Employer Identification No.)
1430 Broadway, 13th Floor
New York, New York 10018
(Address of Principal Executive Offices) (Zip Code)
(212) 391-1392
(Registrant's Telephone Number, Including Area Code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On May 29, 1998, Stellex Industries, Inc. (the "Company") acquired
Monitor Aerospace Corporation ("Monitor"), a leading aerospace subcontractor
engaged in the manufacture and assembly of precision-machined structural
aircraft components and assemblies for tolerance-critical applications, located
in Amityville, New York. The Company's acquisition of Monitor (the "Monitor
Acquisition") was effected pursuant to the Agreement and Plan of Merger dated
as of April 28, 1998, by and among Stellex Aerospace Holdings, Inc., a
subsidiary of the Company ("Holdings"), Soze Corp., a wholly-owned subsidiary
of Holdings, and Monitor.
The aggregate net purchase price for the Monitor Acquisition,
determined through negotiations between the Company and Monitor, was $95.0
million, including the assumption of approximately $26.5 million of debt and
excluding fees and expenses of approximately $5.9 million. The Monitor
Acquisition was financed through (i) drawings of $95.7 million under the
Amended and Restated Credit Agreement dated as of May 29, 1998 (as amended,
supplemented or modified from time to time, the "Credit Agreement"), among the
Company, the financial institutions from time to time party thereto, Societe
Generale, as Administrative Agent, and First Union Commercial Corporation, as
Collateral Agent, and (ii) Monitor's issuance of a promissory note to certain of
the sellers in the principal amount of $5,180,000. Borrowings under the Credit
Agreement were comprised of term loans in an aggregate principal amount of $90.0
million and revolving loans of $17.3 million, of which $11.6 million was drawn
to refinance the existing Company revolver and near term working capital
requirements.
In connection with the Monitor Acquisition, the Company amended and
restated the Credit Agreement to, among other things, increase the maximum
borrowing availability of the revolving loan facility thereunder by $10 million
to $35 million and modify certain covenants. The Credit Agreement is comprised
of a $115.0 million term loan facility, of which $25 million remains undrawn,
and a $35.0 million revolving loan facility. The term loan facility includes a
$30 million tranche having a scheduled final maturity of December 31, 2003, and
a $60.0 million tranche having a scheduled final maturity of December 31, 2005.
The revolving loan facility has a scheduled maturity of December 31, 2003.
2
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
At the time of the filing of this Report, it is
impracticable to provide the financial statements required by Item 7 of Form
8-K. The required financial statements will be filed by the Registrant, under
cover of Form 8-K/A, as soon as practicable, but not later than August 14,
1998.
(b) Pro Forma Financial Information.
Unaudited Pro Forma Consolidated Statements of
Operations for the Year Ended December 31, 1997 and
for the Three Months Ended March 31, 1998
Unaudited Pro Forma Consolidated Balance Sheet as
of March 31, 1998
(c) Exhibits.
2.1 Agreement and Plan of Merger dated as of April 28,
1998, by and among Stellex Aerospace Holdings,
Inc., Soze Corp. and Monitor Aerospace Corporation.
10.1 Amended and Restated Credit Agreement dated as of
May 29, 1998 (as amended, supplemented or modified
from time to time, the "Credit Agreement"), among
the Company, the financial institutions from time
to time party thereto, Societe Generale and First
Union Commercial Corporation.
99.1 Press Release, dated June 3, 1998, announcing
acquisition of Monitor Aerospace Corporation.
3
<PAGE>
CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The following consolidated pro forma financial information (the "Pro Forma
Financial Information") have been derived by the application of pro forma
adjustments to the Consolidated Historical Financial Statements of Monitor
referenced as part of this item and the Company's historical and pro forma
financial information previously filed on Forms 10-K and 10-Q dated December 31,
1997 and March 31, 1998, respectively, and Form S-4 dated January 29, 1998.
Monitor Aerospace Corporation ("Monitor") has a fiscal year end as of May 31
which differs from that of the Company's. For purposes of the Pro Forma
Financial Information, the year ended December 31, 1997 results incorporate the
nine month audited results ended February 28, 1998 added to the three month
unaudited results ended May 31, 1997 for Monitor. In addition, the three months
ended March 31, 1998 pro forma results incorporate the three month results ended
February 28, 1998 for Monitor. The pro forma statements of operations give
effect to the Monitor Acquisition as if it were consummated on January 1, 1997.
The pro forma balance sheet gives effect to the Monitor Acquisition as if it had
occurred on March 31, 1998 (however, the audited balance sheet as of February
28, 1998 for Monitor was utilized in this circumstance). The pro forma
adjustments are described in the accompanying notes. The Pro Forma Financial
Information should not be considered indicative of actual results that would
have been achieved had the Monitor Acquisition been consummated on the dates or
for the periods indicated and do not purport to indicate results of operations
as of any future date or for any future period. The Pro Forma Financial
Information should be read in conjunction with the Historical Financial
Statements and the notes thereto referred to in this item and in the Company's
previously filed Forms 10-K, 10-Q and S-4 as referenced earlier.
The pro forma adjustments were applied to the respective Historical Financial
Statements to reflect the new capitalization of the Company and to account for
the Monitor Acquisition as a purchase. Under purchase accounting, the
respective purchase cost will be allocated to the acquired assets and
liabilities based on their fair values as of the closing date, based on
valuations and other studies which are not yet complete. The Company, however,
does not expect that the effects of the final allocation will differ
materially from those set forth herein.
4
<PAGE>
STELLEX INDUSTRIES, INC.
CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma
Stellex
Industries Monitor Monitor
For Year For Nine Months For Three
Ended Ended Months Ended Pro Forma
December 31, February 28, May 31, Pro Forma Stellex
1997 1998 1997 Adjustments Industries
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 120,532 $ 62,157 $ 18,278 - $ 200,967
Cost of sales 87,576 50,386 14,483 - 152,445
--------- --------- --------- --------- ---------
Gross profit 32,956 11,771 3,795 - 48,522
Selling, general & admin 16,568 5,859 2,054 $ (4,110) (a) 20,371
Amort of intangibles 2,862 - - 2,571 (b) 5,433
--------- --------- --------- --------- ---------
Operating income 13,526 5,912 1,741 1,539 22,718
Interest expense 10,896 2,133 816 5,890 (c) 19,735
Other expense (income) 35 - (142) 142 (d) 35
--------- --------- --------- --------- ---------
Income (loss) before tax 2,595 3,779 1,067 (4,493) 2,948
Provision (benefit) for
taxes 1,038 1,484 287 (1,164) (e) 1,645
--------- --------- --------- --------- ---------
Net income (loss) $ 1,557 $ 2,295 $ 780 $ (3,329) $ 1,303
========= ========= ========= ========= =========
Depreciation and amortization $ 14,698
EBITDA (f) $ 37,381
Adjusted EBITDA (f) $ 38,360
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Monitor For
Three Months
Stellex Ended Pro Forma
Industries February 28, Pro Forma Stellex
Historical 1998 Ajustments Industries
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 27,899 $ 22,289 - $ 50,188
Cost of sales 21,951 18,732 - 40,683
-------- -------- -------- --------
Gross profit 5,948 3,557 - 9,505
Selling, general & admin 5,068 2,509 $ (1,693) (a) 5,884
Amort of intangibles 642 - 643 (b) 1,285
-------- -------- -------- --------
Operating income 238 1,048 1,050 2,336
Interest expense 2,770 717 1,493 (c) 4,980
Minority interest - - - -
Other 31 - - 31
-------- -------- -------- --------
Income (loss) before tax (2,563) 331 (443) (2,675)
Provision (benefit) for taxes (772) 133 639 (e) -
-------- -------- -------- --------
Net income (loss) $ (1,791) $ 198 $ (1,082) $ (2,675)
======== ======== ======== ========
Depreciation and amortization $ 3,648
EBITDA (f) $ 7,725
Adjusted EBITDA (f) $ 8,704
</TABLE>
5
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) The pro forma adjustment to selling, general and administrative expenses
includes the following (in thousands):
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1997 March 31, 1998
----------------- ------------------
<S> <C> <C>
Elimination of stock compensation charge under a $ (629) $ (520)
restricted stock award plan
Elimination of post-retirement benefit obligations (290) (260)
Elimination of owners expenses (3,788) (949)
Elimination of Acquisition-related expense (153) (153)
Additional charges related to a new management
services agreement 750 189
------------- -------------
$ (4,110) $ (1,693)
============= =============
</TABLE>
(b) The pro forma adjustment to amortization of intangibles represents the
amortization of goodwill (30 year life) and other identifiable intangible
assets (up to 10 year life).
(c) The pro forma adjustment to interest expense and amortization of deferred
financing costs reflects the following (in thousands):
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, 1997 March 31, 1998
----------------- ------------------
<S> <C> <C>
Elimination of existing Monitor interest expense $ (2,949) $ (717)
Interest expense on an estimated average incremental borrowing
under the Revolving Credit Facility of $5 million 400 100
Interest expense on the A - tranche of the Term Loan Facility 2,280 570
Interest expense on the B - tranche of the Term Loan Facility 5,075 1,269
Interest expense on the Seller Note 414 104
Deferred financing cost amortization 670 167
------------- -------------
$ 5,890 $ 1,493
============= =============
</TABLE>
(d) The pro forma adjustment reflects the elimination of a non-cash
adjustment to other income relating to a defined benefit plan which was
terminated as a direct result of the Acquisition.
(e) The pro forma adjustment reflects the effect of the Acquisition on the
provision for income taxes. The tax benefit for the pro forma three month
period ended March 31, 1998 is limited due to certain permanent tax
differences relating to the basis in property, plant and equipment and
intangibles.
(f) EBITDA represents income (loss) before income taxes plus interest
expense, depreciation and amortization less interest income. EBITDA for
the pro forma three months ended March 31, 1998 excludes certain non-cash
compensation expense totaling $715,000 associated with a put arrangement
with the management owners of KII Holdings, and amortization expense
totaling $1,057,000 included in cost of sales relating to an acquisition
accounting adjustment for Stellex Microwave to fair value inventory.
Adjusted EBITDA for the pro forma year ended December 31, 1997 and three
months ended March 31, 1998 excludes certain non-cash charges included in
cost of sales for Monitor for the write-off of excess inventory totaling
$979,000. The definition of EBITDA as used herein differs in certain
respects from the definition of such term in the Registrant's Indenture.
See "Description of Notes--Certain Definitions" in Form S-4 filed on
January 29, 1998. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered an alternative to operating
income or cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not
be construed as an indication of a company's operating performance or as
a measure of liquidity. Since all companies and analysts do not
necessarily calculate EBITDA in the same fashion, EBITDA as presented in
this Prospectus may not be comparable to similarly titled measures
reported by other companies. Funds depicted by EBITDA are generally not
presently available for management's discretionary use due primarily to
legal and functional requirements to conserve funds for capital
replacement or expansion, debt service and other commitments and
uncertainties.
6
<PAGE>
STELLEX INDUSTRIES, INC.
CONSOLIDATED PRO FORMA BALANCE SHEET
MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Monitor as of Pro Forma
Stellex February 28, Pro Forma Stellex
Industries 1998 Adjustments Industries
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash $ 3,193 $ 271 $ - $ 3,464
Accounts receivable, net 17,767 14,065 - 31,832
Inventory 26,996 30,313 1,800 (a) 59,109
Prepaid expenses 788 1,794 - 2,582
Deferred taxes 3,155 - - 3,155
--------- --------- --------- ---------
51,899 46,443 1,800 100,142
Property, plant and equipment 31,499 14,441 15,000 (a) 60,940
Goodwill and other identified intangibles 54,493 - 43,123 (a) 97,616
Deferred financing costs 5,221 - 4,425 (a) 9,646
Other assets 1,597 1,353 - 2,950
--------- --------- --------- ---------
Total assets $ 144,709 $ 62,237 $ 64,348 $ 271,294
========= ========= ========= =========
Liabilities and Stockholders' Equity:
Accounts payable $ 5,467 $ 7,705 $ - $ 13,172
Accrued liabilities 14,099 6,130 (1,196) (a) 19,033
Current portion of long term debt 137 3,536 (3,536) (a) 137
--------- --------- --------- ---------
19,703 17,371 (4,732) 32,342
Revolving Credit Agreement 7,500 - 5,720 (b) 13,220
Term Loan Facility - A tranche - - 30,000 (b) 30,000
Term Loan Facility - B tranche - - 60,000 (b) 60,000
Existing term loan facility - 27,813 (27,813) (a) -
Senior Subordinated Notes 100,000 - - 100,000
Other long term obligations 6,405 248 5,180 (b) 11,833
Deferred taxes 2,500 3,547 10,251 (a) 16,298
Minority interest in KII Holdings 1,794 - - 1,794
--------- --------- --------- ---------
Total liabilities 137,902 48,979 78,606 265,487
Preferred stock 11,450 - - 11,450
Common stock 50 149 (149) 50
Additional paid-in-capital - 3,092 (3,092) -
Accumulated deficit (4,693) 10,017 (11,017) (a) (5,693)
--------- --------- --------- ---------
6,807 13,258 (14,258) 5,807
Total liabilities and stockholders' equity $ 144,709 $ 62,237 $ 64,348 $ 271,294
========= ========= ========= =========
</TABLE>
7
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) The acquisition of Monitor will be accounted for as a purchase applying
the provisions of Accounting Principles Board Opinion No. 16 ("APB 16").
The respective purchase cost will be allocated to acquired assets and
liabilities based on their relative fair values as of the closing dates,
based on valuations and other studies which are not yet complete.
However, the Company's management believes that the effects of the final
allocation will not differ materially from those set forth herein. The
purchase cost and preliminary allocation of the excess of cost over the
net book value of assets acquired is as follows (in thousands):
<TABLE>
<S> <C>
Purchase Cost:
Merger consideration for stock of Monitor $ 95,000
Fees and expenses 5,900
------------
Total purchase cost 100,900
Pro forma book value of stock acquired:
Book value of Monitor per historical financial statements 13,258
Debt not assumed (current portion - $3,536,
long term - $27,813) 31,349
------------
Total pro forma book value of stock acquired 44,607
Excess of purchase cost over net book value of shares acquired 56,293
Allocated to:
Property, plant and equipment (15,000)
Inventory (recognition of manufacturer's profit) (1,800)
Identifiable intangibles (5,000)
Elimination of current taxes payable (1,196)
Deferred financing costs (4,425)
Investment banking fees to an affiliate (1,000)
Establishment of additional deferred taxes 10,251
------------
Remaining of excess of purchase cost over net assets acquired $ 38,123
============
</TABLE>
(b) Reflects the Acquisition capitalization ( the existing revolving credit
facility was refinanced as part of the Acquisition financing and is shown
net of borrowings under the new revolving credit facility).
8
<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 hereunto duly authorized.
STELLEX INDUSTRIES, INC.
Date: June 15, 1998 By: /s/ William L. Remley
------------------------------
William L. Remley
President and
Chief Executive Officer
9
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger dated as of April 28, 1998, by
and among Stellex Aerospace Holdings, Inc., Soze Corp. and
Monitor Aerospace Corporation.
10.1 Amended and Restated Credit Agreement dated as of May 29,
1998 (as amended, supplemented or modified from time to
time, the "Credit Agreement"), among the Company, the
financial institutions from time to time party thereto,
Societe Generale and First Union Commercial Corporation.
99.1 Press Release, dated June 3, 1998, announcing acquisition of
Monitor Aerospace Corporation.
<PAGE>
AGREEMENT AND PLAN OF MERGER
among
STELLEX AEROSPACE HOLDINGS, INC.
a Delaware corporation,
SOZE CORP.,
a New York corporation,
and
MONITOR AEROSPACE CORPORATION
a New York corporation
April 28, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
MERGER; CLOSING; EFFECTIVE TIME; DEFINITIONS..............................1
1.1 The Merger..................................................1
1.2 Closing: Effective Time....................................1
1.3 Articles of Incorporation: Bylaws..........................2
1.4 Directors and Officers......................................2
1.5 Definitions.................................................2
ARTICLE 2
MERGER CONSIDERATION;
CONVERSION OF SHARES IN THE MERGER.......................................11
2.1 Terms of Merger............................................11
2.2 Payment for Company Common Stock...........................12
2.3 Determination and Payment of Merger Consideration..........13
2.4 Escrow Agreement and Pension Escrow Fund...................13
2.5 Closing Procedures.........................................14
2.6 Closing of Company Transfer Books..........................14
2.7 Transfer Taxes.............................................14
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY................................................14
3.1 Organization; Powers.......................................14
3.2 Authorization of Transaction; Noncontravention.............15
3.3 Capitalization; Shares.....................................16
3.4 Financial Statements.......................................17
3.5 Litigation.................................................18
3.6 Tax Returns................................................18
3.7 No Defaults................................................20
3.8 Properties.................................................20
3.9 Governmental Approvals.....................................20
3.10 Intellectual Property......................................21
3.11 Compliance With Laws; Environmental Matters................23
3.12 ERISA......................................................24
3.13 Insurance..................................................25
3.14 Labor Matters..............................................26
3.15 Force Majeure..............................................26
3.16 Books and Records..........................................26
i
<PAGE>
TABLE OF CONTENTS
PAGE
----
3.17 Accounts Receivable; Inventory.............................26
3.18 Brokers' Compensation......................................27
3.19 Contracts..................................................27
3.20 Bank Accounts..............................................30
3.21 Suppliers..................................................30
3.22 Customers..................................................30
3.23 No Material Misstatements..................................30
3.24 Government Contracts.......................................31
3.25 Product Liability; Warranties..............................32
3.26 Absence of Undisclosed Liabilities.........................33
3.27 Absence of Undisclosed Changes.............................33
3.28 Affiliate Transactions.....................................33
3.29 Dividends..................................................33
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER..................................34
4.1 Organization, Standing and Power...........................34
4.2 Authority of Buyer; No Violation...........................34
4.3 Litigation.................................................35
4.4 Brokers or Finders.........................................35
4.5 Financing..................................................35
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS......................................35
5.1 Access to Information......................................35
5.2 Conduct of Business by the Company and its Subsidiaries....36
5.3 Regulatory Matters.........................................38
5.4 Audit/Updated Financial Information........................39
5.5 Further Assurances.........................................39
5.6 Releases...................................................39
5.7 Transaction Proposals......................................40
5.8 Notice of Certain Events...................................40
ARTICLE 6
CONDITIONS...............................................................41
6.1 Conditions Precedent to Obligations of Buyer and MergerSub.41
6.2 Conditions Precedent to Obligations of the Company.........44
ii
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 7
TERMINATION..............................................................45
7.1 Termination................................................45
7.2 Effect of Termination or Failure to Consummate Merger......46
7.3 Termination Payment........................................46
7.4 Expenses...................................................46
ARTICLE 8
BUYER'S NOTE OFFSETS; SURVIVAL OF REPRESENTATIONS
AND WARRANTIES..........................................................47
8.1 Survival of Representations and Warranties.................47
8.2 Buyer's Note Payment Offsets; Exclusive Remedy.............47
8.3 Procedure for Payment Offsets for Third-Party Claims.......48
8.4 Buyer's Note Payment Offsets for Non-Third Party Claims....49
ARTICLE 9
GENERAL..................................................................50
9.1 Notices....................................................50
9.2 Extension; Waiver..........................................51
9.3 Choice of Law; Consent to Jurisdiction.....................51
9.4 Amendment; Entire Agreement................................51
9.5 Counterparts; Headings.....................................52
9.6 Expenses...................................................52
9.7 Publicity..................................................52
9.8 Severability...............................................53
9.9 No Third Party Beneficiaries; Assignment...................53
9.10 Confidentiality............................................53
Exhibits
A Amended and Restated Certificate of Incorporation of the Company
B Buyer's Note
C Escrow Agreement
D Letter of Transmittal
E-1 NonCompetition Agreement-Monitto
E-2 Monitor Asia Agreements
-Purchase and Sale Agreement
-Sales Representative Agreement
F Opinion of Company's Counsel
iii
<PAGE>
TABLE OF CONTENTS
PAGE
----
G-1 Term Sheet-Andrews
G-2 Goldberg Consulting Agreement
H Opinion of Buyer's Counsel
I Release
Schedules
A Closing Liability Schedule
1.4 Officers of Surviving Corporation and Subsidiary
2.3 Shareholders; Amount Payable to each Shareholder
3.1 Directors and Officers of the Company and Subsidiary
3.2 Consents
3.3 Shareholders; Outstanding Debt
3.4 Projections
3.5 Litigation
3.6 Taxes
3.8 Real Property Owned or Leased
3.9 Government Approvals
3.10 Intellectual Property
3.11 Compliance with Laws; Environment
3.12 ERISA; Benefit Plans
3.13 Insurance
3.14 Employment Agreements
3.17 Inventory Locations
3.19A Major Contracts
3.19B Purchase and Sale Transactions
3.19C Exceptions
3.20 Bank Accounts
3.21 Suppliers
3.22 Customers
3.24 Government Contracts
3.25 Product Liability; Warranties
3.27 Material Adverse Changes
3.28 Affiliate Transactions
4.2 Consents of Buyer
5.2 Activities from 2/28/98 to Closing
6.2(h) Bonuses
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
April 28, 1998 by and among STELLEX AEROSPACE HOLDINGS, INC., a Delaware
corporation ("Buyer"), SOZE CORP., a New York corporation that is a wholly-owned
subsidiary of Buyer ("MergerSub"), and MONITOR AEROSPACE CORPORATION, a New York
corporation (the "Company").
Buyer and the Company desire to have MergerSub merge with and into the
Company (the "Merger"), as the result of which the Company will be the surviving
corporate entity, with the Merger to be upon the terms and subject to the
conditions set forth herein. The Shareholders and each of the Boards of
Directors of Buyer, MergerSub, and the Company have duly approved this
Agreement. Capitalized terms used herein shall have the meanings given to them
or referred to in Section 1.5 hereof.
In consideration of the premises and the mutual covenants, representations,
warranties, and agreements contained herein, Buyer, MergerSub and the Company
agree as follows:
ARTICLE 1
MERGER; CLOSING; EFFECTIVE TIME; DEFINITIONS
1.1 The Merger. At the Effective Time and in accordance with the terms and
conditions of this Agreement, the Company and MergerSub shall consummate the
Merger in which (i) MergerSub shall be merged with and into the Company and the
separate corporate existence of MergerSub shall thereupon cease, (ii) the
Company shall be the surviving corporation in the Merger and shall become a
wholly-owned subsidiary of Buyer, and (iii) the Company shall continue its
corporate existence under the laws of the State of New York with all its rights,
privileges, powers, franchises, assets, liabilities and obligations unaffected
by the Merger. The Merger shall have the effects set forth in Section 906 of the
Business Corporation Law of the State of New York ("BCL"). The Company after the
Merger is sometimes referred to herein as the "Surviving Corporation."
1.2 Closing: Effective Time. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.1 hereof, the Closing of the transactions contemplated by
the terms of this Agreement shall take place as soon as reasonably practicable
(and in any event within five (5) Business Days) after the date on which all of
the conditions set forth in Article 6 of this Agreement have been satisfied or
waived in writing, at the offices of Windels, Marx, Davies & Ives, 156 West 56th
Street, New York, New York (such date, the "Closing Date"). At the Closing, the
Company and MergerSub shall execute a certificate of merger ("Certificate of
Merger") and cause the Certificate of Merger to be delivered for filing with the
Secretary of State of the State of New York in accordance with the BCL. The
Merger shall become effective in accordance with the BCL upon the filing of the
<PAGE>
Certificate of Merger with the Secretary of State of New York, which Certificate
of Merger shall be filed on the Closing Date, or at such time thereafter as
Buyer and the Company may agree upon in writing in such Certificate of Merger
(the "Effective Time").
1.3 Articles of Incorporation: Bylaws. At the Effective Time (a) the
Certificate of Incorporation of the Company as in effect immediately prior to
the Effective Time shall be amended and restated as set forth in Exhibit A
hereto and as so amended and restated shall become the Amended and Restated
Certificate of Incorporation of the Surviving Corporation, and (b) the Bylaws of
MergerSub as in effect immediately prior to the Effective Time shall become the
Bylaws of the Surviving Corporation.
1.4 Directors and Officers. The directors of MergerSub immediately prior to
the Effective Time and the individuals identified on Schedule 1.4 hereto to be
officers of the Surviving Corporation, from and after the Effective Time shall
be the directors and officers, respectively, of the Surviving Corporation until
their successors have been duly elected or appointed in accordance with the
Bylaws of the Surviving Corporation (and Buyer, as the then sole shareholder of
the Surviving Corporation, and the Surviving Corporation shall take such action
as may be appropriate to elect or appoint such persons as directors and officers
of the Surviving Corporation and the Subsidiaries).
1.5 Definitions. In addition to capitalized terms otherwise defined herein,
as used in this Agreement the following capitalized terms shall have the
meanings provided in this Section 1.5:
"Affiliate" shall mean, with respect to any Person, at the time in
question, any shareholder, officer or director of such Person, any Affiliate of
any shareholder, officer or director of such Person, any other Person that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with such Person. For purposes of the
preceding definition, "control" (including the terms "controlling", "controlled
by" and "under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through ownership of voting securities, by contract or
otherwise.
"Andrews Employment Agreement" means the Employment Agreement between the
Company and R. Bruce Andrews effective December 1, 1995, as amended August 9,
1997 and March 25, 1998.
"Applicable Law" shall mean a statute, law, treaty, rule, code, ordinance,
regulation, permit license, certificate, Governmental Approval, order, judgment,
decree, injunction, writ, or other binding determination or like action of any
Governmental Authority, including all Environmental, Health or Safety
Requirements of Law, as in effect from time to time.
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"Asbestos Containing Material" shall mean any material containing more than
one percent (1%) asbestos by weight.
"BCL" means the New York State Business Corporation Law.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which the Company
or any ERISA Affiliate is, or within the immediately preceding six (6) years
was, an "employer" as defined in Section 3(5) of ERISA.
"Best Efforts" means the reasonable best efforts that a prudent person
desirous of achieving a result would use in similar circumstances to insure that
such result is achieved as reasonably expeditiously as possible.
"BT Alex Brown" shall have the meaning set forth in Section 3.18.
"Buyer" shall have the meaning set forth in the introductory paragraph
hereof.
"Buyer's Note" shall mean the Non-Negotiable Promissory Note, substantially
in the form of Exhibit B hereto, issued by the Surviving Corporation to the
Majority Noteholder as a representative of the Noteholders. The Buyer shall be
entitled to offset payments due or to become due under the Buyer's Note in
accordance with the provisions of Article VIII and those set forth in the
Buyer's Note.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. ss.ss. 9601 et seq., any amendments thereto, any
successor statutes, and any regulations or guidance promulgated thereunder.
"Certificate" means a stock certificate evidencing ownership of shares of
Common Stock immediately prior to the Effective Time.
"Claim" shall mean any claim or demand, by any Person, of whatsoever kind
or nature for any alleged Liabilities and Costs, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
permit, ordinance or regulation, common law or otherwise.
"Claim Notice" shall have the meaning set forth in Section 8.3(a).
"Closing" means the performance by the parties and satisfaction of all of
the conditions set forth in Article 6, which shall take place as provided in
Section 1.2.
"Closing Certificate" means the closing certificate referred to in Section
6.1(l).
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"Closing Date" shall have the meaning set forth in Section 1.2.
"Closing Liability Schedule" shall have the meaning set forth in Section
2.3(a).
"Common Stock" means the common stock, without par value, of the Company.
"Company" shall have the meaning set forth in the introductory paragraph
herein.
"Company Financial Statements" shall have the meaning set forth in Section
3.4.
"Company Value" means $95,000,000.
"Contaminant" shall mean any waste, pollutant, hazardous or toxic
substance, hazardous or toxic waste, petroleum or petroleum derived substance or
waste, any radioactive material, including but not limited to, any source,
special nuclear or byproduct material as defined at 42 U.S.C. Section 2011 et
seq., as amended or hereafter amended, asbestos in friable condition,
polychlorinated biphenyls, or any constituent of any such substance or waste,
and includes but is not limited to these terms as defined in federal, state,
local or foreign laws or regulations (including, without limitation, under any
Environmental, Health or Safety Requirements of Law.)
"Contracts" shall mean all contracts, agreements, guaranties, indentures,
bonds, options, leases, security agreements, easements, collective bargaining
agreements, licenses, contractual commitments or binding agreements of any
nature whatsoever, express or implied, written or unwritten, and all amendments
thereto, entered into or binding upon the Company or any of its Subsidiaries or
to which the property or assets of the Company or any of its Subsidiaries may be
subject.
"Current Assets" shall mean the Company's Current Assets determined in
accordance with GAAP.
"Current Liabilities" shall be the Company's Current Liabilities determined
in accordance with GAAP, but such amount shall exclude the current portion of
long-term debt.
"Defective Product Action" has the meaning set forth in Section 3.25(a).
"EAB" shall mean European American Bank.
"Environmental, Health or Safety Requirements of Law" shall mean any
Federal, state, local or foreign law, ordinance, rule, regulation, permit,
license, order, decree or other binding determination of any Governmental
Authority relating to, imposing liability or standards concerning, or otherwise
addressing the environment, human health and/or safety, including but not
limited to the Clean Air Act, the Clean Water Act, RCRA, CERCLA, any so-called
"Superfund" or "Superlien" law, the Toxic Substances Control Act and OSHA.
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"Environmental Lien" shall mean a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental, Health or Safety
Requirements of Law, or (ii) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of a
Contaminant into the environment.
"Environmental Reports" shall have the meaning set forth in Section 3.11.
"Equipment Purchase Leases" means the equipment purchase lease agreements
in effect on the Closing Date with lessors, including, without limitation,
Paramist Funding Corp., Jacom Computer Services Inc., GE Capital Fleet Services,
IBM Credit Corporation, Yale Industrial Trucks, ORIX Credit Alliance, Inc.,
Colonial Pacific Leasing, and Yale Financial Services.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the IRC) as the Company, (ii) partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of Section 414(c) of
the IRC) with the Company, or (iii) member of the same affiliated service group
(within the meaning of Section 414(m) of the IRC) as the Company, any
corporation described in clause (i) above or any partnership or trade or
business described in clause (ii) above.
"Escrow Agent" means the Escrow Agent set forth in the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement described in Section 2.4 to
be entered into between the Buyer, the Company, the Majority Noteholder and the
Escrow Agent, substantially in the form of Exhibit C hereto.
"Excluded Share" means any share of Common Stock that immediately prior to
the Closing Date is held by MergerSub, a Subsidiary or by the Company in its
treasury.
"Existing Liens" means Permitted Liens and Liens under the Loan Agreements.
"Expiration Date" shall have the meaning set forth in Section 8.1.
"Fleet Bank Mortgage Loan Documents" means the Amended, Consolidated and
Restated Mortgage Note in the principal amount of $3,675,000, as amended, and
all instruments and agreements executed by the Company with, or in favor of,
Fleet Bank, N.A., including the mortgage modification and extension agreement
executed by the Company in favor of Fleet Bank, N.A.
"Force Majeure" shall mean an act of God, fire, flood, storm, strike or
labor difficulties, riot, insurrection, act of war (whether declared or
otherwise), act of Governmental Authority or
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other extraordinary event, in each case beyond the control of and without the
fault or negligence of the party claiming Force Majeure.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"GE Capital Loan Documents" means the equipment financing agreements in the
original aggregate principal amount of $4,828,479.31, as amended, and all
instruments and agreements executed by the Company in connection therewith.
"Governmental Approval" shall mean any material authorization, certificate,
consent, approval, waiver, exception, variance, franchise, permission, permit,
exception, filing, publication, declaration, notice, license, right or other
form of required permission from, of or with any Governmental Authority, and
shall include, without limitation, each siting, environmental and operating
permit and license that is required for the ownership, use and operation of any
facility owned or leased by the Company or either of its Subsidiaries, or the
conduct by the Company or either of its Subsidiaries of their businesses.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Government Contract" means any prime government Contract, subcontract,
teaming agreement or arrangement, joint venture, basic ordering agreement,
letter contract, purchase order, delivery order, change order, or other
contractual commitment of any kind, or a bid which if accepted would result in
any of the foregoing, in each instance between the Company or any of its
Subsidiaries and (i) any Governmental Authority, (ii) any prime contractor of
any Governmental Authority, or (iii) any subcontractor with respect to any
contract described in clauses (i) or (ii) above.
"HSR Act" has the meaning set forth in Section 6.1(k).
"Intellectual Property" shall mean any patent, copyright, trademark, trade
name, service mark, logo, Internet domain name or industrial design, any
registrations thereof and pending applications therefor (to the extent
applicable), any other intellectual property right (including, without
limitation, any invention, know-how, trade secret, formula, algorithm, process,
confidential or proprietary report or information, customer list or membership
list, any computer program, software, source code, object code, database or data
right, and any system, user, programmer, maintenance, installation or other form
of documentation or other material related thereto), any license or other
contract relating to any of the foregoing, and any goodwill associated with any
business owning, holding or using any of the foregoing.
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"IRC" shall mean the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder, and any successor
statutes or rules and regulations.
"IRS" means the Internal Revenue Service or any successor agency.
"Knowledge" or "to the best knowledge of" means to the actual knowledge of
(A) in the case of the Company, Douglas Monitto, Bruce Andrews, Lawrence
Goldberg, Neil Seiden, Douglas Whitlock, David Sylvain, Gary Kahrau, Paul
Kowack, Terry Walley and Chris Nagowski, and (B) in the case of the Buyer or
MergerSub, any officer or director of Buyer and MergerSub; but, in either case,
such terms shall not include imputed knowledge.
"Letter of Transmittal" shall have the meaning set forth in Section 2.2(b).
"Liabilities and Costs" shall mean all indebtedness, claims, liabilities,
obligations, responsibilities, losses, damages, personal injury, death, punitive
damages, economic damages, treble damages, intentional, willful or wanton
injury, damage or threat to the environment, natural resources or public health
or welfare, costs and expenses (including, without limitation, reasonable
attorney, expert, engineering and consulting fees and costs and any fees and
costs associated with any investigation, feasibility, or Remedial Action
studies), fines, penalties and monetary sanctions, and interest, whether
accrued, absolute or contingent, and whether or not of a kind required by GAAP
to be set forth on a financial statement or in notes thereto.
"Lien" shall mean any mortgage, pledge, deed of trust, assignment, lien,
charge, encumbrance, security interest of any kind, lease, conditional sales
contract, reversionary interest, right of first refusal, easement or other
adverse claim or right, or any agreement to grant or furnish any of the
foregoing.
"Loan Agreements" means collectively, the Fleet Bank Mortgage Loan
Agreements, the GE Capital Loan Agreements, the NYJDA Loan Agreements, the Stock
Redemption Notes, the Revolving Credit Agreements, and the Equipment Purchase
Leases.
"Losses" means all claims, demands, liabilities, obligations, losses,
fines, costs, proceedings, suits, actions, causes of action, judgments, awards,
deficiencies, assessments, damages (whether or not resulting from third party
claims, governmental actions or otherwise), including, without limitation,
out-of-pocket expenses and reasonable attorneys' and accountants' fees and
expenses.
"MAIC" means Monitor Aerospace International Corp., a New York Corporation,
which is a wholly owned subsidiary of the Company.
"Major Customers" has the meaning set forth in Section 3.22.
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"Majority Noteholder" means one or more Noteholders owning a majority of
the percentage interest in the Buyer's Note as set forth on Schedule 2.3.
"Material Adverse Effect" means any condition, event, change, or occurrence
which is or would reasonably be expected to be materially adverse to either (i)
the business, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries on a consolidated
basis, (ii) the operation or use of any material facility of the Company or its
Subsidiaries, or (iii) the ability of the parties hereto to consummate the
transactions contemplated hereby.
"Material Contract" shall have the meaning given to such term in Section
3.19.
"Merger Consideration" shall mean the amount determined in accordance with
Section 2.3 hereof and payable by the Buyer to the Shareholders on the Closing
Date in accordance with Schedule 2.3 hereof.
"MergerSub" shall have the meaning set forth in the introductory paragraph
herein.
"MMC" means Monitor Marine Products, Inc., a New York Corporation which is
a wholly owned subsidiary of the Company.
"Monitor Asia Agreements" means the agreements set forth as Exhibit E-2
hereto including the (i) Purchase and Sale Agreement whereby certain assets,
agreements, licenses and liabilities of the Company will be transferred to a
company owned by Mr. Monitto simultaneously with the Closing, and (ii) Sales
Representative Agreement whereby a company owned by Mr. Monitto will act as a
representative of the Company for certain products and services.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by the Company or an ERISA Affiliate.
"Noteholders" means Douglas Monitto, Lawrence G. Goldberg and R. Bruce
Andrews, as their interests shall appear (as set forth on Schedule 2.3).
"NPL" is defined in Section 3.11(c)(ii).
"NYJDA Loan Agreement" means the $5,600,000 Third Mortgage Loan made by New
York Job Development Authority to the Company dated December 30, 1992.
"OSHA" shall mean the Occupational Safety and Health Act, 29 U.S.C. ss.ss.
651 et seq., any amendments thereto, and any successor statutes.
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"Payment Event" shall have the meaning set forth in Section 7.3.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Escrow Fund" means the portion of the Merger Consideration placed
in escrow pursuant to the provisions of Section 2.4.
"Pension Plan" means the Monitor Aerospace Corporation Retirement Plan.
"Permitted Liens" shall mean:
(i) Liens for Taxes on Property not yet due and payable or which are
being diligently contested in good faith and by appropriate proceedings
diligently conducted, and for which the Company or such Subsidiary has set
aside full and adequate reserves on its books as required by GAAP;
(ii) Liens imposed by law, such as carrier's, warehousemen's and
mechanic's liens and other similar liens, which arise in the ordinary
course of business with respect to obligations not yet due or being
diligently contested in good faith by appropriate proceedings and for which
the Company or its Subsidiaries shall have set aside full and adequate
reserves on its books as required by GAAP;
(iii) Liens arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other
social security benefits other than any Lien imposed by ERISA;
(iv) Liens incurred or deposits made in the ordinary course of
business to secure surety bonds provided that such Liens shall extend only
to cash collateral for such surety bonds; and
(v) Liens set forth on Schedule 3.8.
"Person" means any individual, corporation, association, limited liability
company, partnership, joint venture, trust, unincorporated organization,
Governmental Authority or other entity.
"Plan" shall have the meaning given in ERISA ss.3(3) (other than a
Multiemployer Plan) in respect of which the Company or any ERISA Affiliate is,
or within the immediately preceding six (6) years was, an "employer" as defined
in Section 3(5) of ERISA.
"Property" shall mean any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or other asset
owned, leased or operated by the Company or a Subsidiary.
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"Purchase and Sale Transaction" is defined in Section 3.19(B).
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.
ss.ss. 6901 et seq., any amendments thereto or any successor statutes.
"Release" shall have the same meaning as set forth in 42 U.S.C. ss.
9601(22).
"Response Action" shall have the same meaning as set forth in 42 U.S.C. ss.
9601(25).
"Restricted Stock Bonus Plan" means the Company's Restricted Stock Bonus
Plan.
"Reportable Event" shall mean any reportable event as defined in Section
4043 of ERISA.
"Revolving Credit Agreements" means the Revolving Credit Agreement between
EAB, as Agent, and the Company dated as of March 31, 1997, as amended, and all
instruments and agreements executed by the Company or MAIC with, or in favor of,
EAB and the parties participating therein.
"Shareholder Side Agreement" means the Shareholder Side Agreement dated the
date hereof executed by each of the Shareholders in favor of the Buyer and
MergerSub.
"Shareholders" means the holders of record of capital stock of the Company
either as of the date hereof or prior to or as of the Closing Date, as
applicable.
"Shareholders Equity" shall mean the shareholders equity of the Company as
determined in accordance with GAAP.
"Stock Redemption Notes" mean two subordinated unsecured notes aggregating
$1,795,000 issued by the Company to Mr. Guy Lepore in connection with the
repurchase and retirement of 210 shares of Common Stock.
"Subsidiary" or "Subsidiaries" shall mean MAIC and/or MMC, as appropriate.
"Surviving Corporation" shall have the meaning given to such term in
Section 1.1.
"Taxes" shall mean any and all Federal, state, local or foreign taxes,
charges, fees, levies, other assessments in the nature of taxes, interest or
penalties, including (without limitation) those measured by or referred to as
income, gross receipts, excise, real or personal property, sales, withholding,
social security, occupation, use, service, service use, license, net worth,
payroll, franchise, ad valorem, profits, employment, severance, stamp, premium,
value added, windfall profits, customs duties or similar fees, transfer and
recordings taxes, fees and charges.
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"Tax Return" shall mean any return, declaration, claim for refund,
information return, report or statement in relation to Taxes, including any
schedule or attachment thereto or amendment thereof.
"Termination Event" shall mean (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Company or any ERISA Affiliate from a
Benefit Plan during a plan year in which the Company or such ERISA Affiliate was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the
imposition of an obligation on the Company or any ERISA Affiliate under Section
4041 of ERISA to provide affected parties written notice of intent to terminate
a Benefit Plan in a distress termination described in Section 4041(c) of ERISA;
(iv) the institution by the PBGC of proceedings to terminate a Benefit Plan; (v)
any event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Benefit Plan; or (vi) the partial or complete withdrawal of the Company or any
ERISA Affiliate from a Multiemployer Plan.
"Threshold Amount" has the meaning set forth in Section 8.2(b).
"Transaction Proposal" has the meaning set forth in Section 5.7.
"Working Capital" shall mean the difference between the Company's Current
Assets and Current Liabilities.
ARTICLE 2
MERGER CONSIDERATION;
CONVERSION OF SHARES IN THE MERGER
2.1 Terms of Merger. Upon the Merger becoming effective:
(a) At the Closing Date and subject to the terms hereof, without any action
on the part of the holder, all outstanding shares of Common Stock (other than
any Excluded Share) that are issued and outstanding immediately prior to the
Effective Time shall become and be converted into the right to receive the
Merger Consideration. Certificates representing outstanding shares of Common
Stock shall, after the Effective Time, represent only the right to receive from
Buyer the portion of the Merger Consideration applicable to such shares, subject
to the terms hereof. Until presented and surrendered to Buyer in accordance with
the terms hereof, each Certificate which represented issued and outstanding
Common Stock shall be deemed for all purposes to evidence ownership of the
applicable portion of the Merger Consideration for such shares. Except for
interest payable on the funds represented by the Buyer's Note, no interest shall
accrue or be payable with respect to the Merger Consideration.
(b) Each Excluded Share shall be canceled and retired, and no securities
shall be issuable and no cash paid with respect thereto.
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(c) Each share of common stock of MergerSub issued and outstanding at the
Effective Time shall, without any action on the part of the holder thereof,
become and be converted into one share of the common stock of the Surviving
Corporation. Outstanding certificates representing shares of common stock of
MergerSub shall be deemed to represent an identical number of shares of common
stock of the Surviving Corporation.
2.2 Payment for Company Common Stock.
(a) At the Closing, the Buyer and MergerSub shall deliver:
(i) to each holder of Common Stock of the Company, the portion of the
Merger Consideration specified on Schedule 2.3 hereof against the delivery
by each holder of a Certificate or Certificates representing such holder's
shares of Common Stock and an executed Letter of Transmittal;
(ii) to the Majority Noteholder, the Buyer's Note, substantially in the
form of Exhibit B; and
(iii) to the Escrow Agent, the Pension Escrow Fund.
(b) Promptly upon the signing of this Agreement, Buyer shall cause to be
mailed to each Shareholder a letter of transmittal and instructions for use in
effecting the surrender of the Certificates ("Letter of Transmittal") in the
form of Exhibit D hereto. If payment is to be made with respect to shares of
Common Stock to a Person other than the registered holder of the Certificate
surrendered, it shall be a condition of such payment that (i) the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer,
(ii) the Person requesting such payment shall pay any transfer or other Taxes
required by reason of the payment to a Person other than the registered holder
of the Certificate surrendered or establish to the reasonable satisfaction of
Buyer that such Tax has been paid or is not applicable and (iii) the Shareholder
and/or such Person shall otherwise comply with the provisions of the Letter of
Transmittal. If any Certificates are issued to a minor, such Certificates and
the Letter of Transmittal shall be executed by the trustee, custodian or other
person authorized to act on behalf of such minor and shall otherwise be in
conformity with the Uniform Gifts to Minors Act and other relevant legal
requirements.
(c) In the event any Certificate representing Common Stock shall have been
lost, stolen, or destroyed, Buyer shall deliver in exchange for such lost,
stolen, or destroyed Certificate, upon the making of an affidavit of that fact
by the holder thereof, such payment as may be required pursuant hereto;
provided, however, that the Surviving Corporation or Buyer may, in its
discretion and as a condition precedent to any such payment, require the owner
of such lost, stolen, or destroyed Certificate to deliver a bond in such sum as
it may reasonably direct as indemnity against any claim that may be made against
the Surviving Corporation,
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Buyer, or any other party with respect to the Certificate alleged to have been
lost, stolen, or destroyed.
2.3 Determination and Payment of Merger Consideration.
(a) The Merger Consideration shall be determined by deducting from
$95,000,000 ("Company Value"), the liabilities and expenses of the Company in
the categories listed on the attached Schedule A ("Closing Liability Schedule")
calculated as of the Closing Date. The Closing Liability Schedule will be
prepared and certified by R. Bruce Andrews and the controller of the Company,
detailing all expenses and liabilities listed in the categories set forth
therein as of the Closing Date.
(b) The Merger Consideration shall be payable as follows:
(i) $5,180,000 will be payable in the form of the Buyer's Note;
(ii) The Pension Escrow Fund shall be delivered to the Escrow Agent to
be disbursed in accordance with the Escrow Agreement; and
(iii) The remainder of the Merger Consideration will be payable in
cash to the Shareholders, provided that the Buyer may rely on
Schedule 2.3 hereto with respect to the identity and number of
shares held by each Shareholder, and the amount and portion of
the Merger Consideration to be paid to each Shareholder, which
Schedule 2.3 shall be finalized and presented to Buyer no later
than three business days prior to the Closing Date.
2.4 Escrow Agreement and Pension Escrow Fund.
(a) A portion of the Merger Consideration ("Pension Escrow Fund") will be
placed in escrow for the purpose of paying all costs and liabilities incurred by
the Company in connection with termination of the Pension Plan, including legal,
accounting, actuarial and other expenses which would be incurred in connection
with the termination of the Pension Plan. The amount of the Pension Escrow Fund
shall be $4,000,000. Concurrently with the execution of this Agreement, the
Company shall have delivered to Buyer an actuarial report of Sedgwick Noble
Lowndes providing an estimate of termination liabilities as of May 31, 1998 for
the Pension Plan and the value of Pension Plan assets as of a recent date.
Between the date of this Agreement and the Closing Date (or the earlier
termination of this Agreement pursuant to Section 8.1), the Pension Plan assets
shall be invested in securities and other instruments reasonably acceptable to
the Buyer.
(b) The Pension Escrow Fund will be disbursed by the Escrow Agent in
accordance with the Escrow Agreement substantially in the form of Exhibit C
hereto. Subject to Section 2.4(c)
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below, after the Closing, the Buyer shall cause the Company to take all actions
reasonably necessary to effectuate the termination of the Pension Plan. In the
course of effectuating the termination of the Pension Plan, the Company shall
comply with all Applicable Law, including ERISA.
(c) After the Closing, at the election of the Buyer, if the cost to
terminate the Pension Plan exceeds or is expected to exceed the Pension Escrow
Fund, including any interest accrued thereon, the Buyer shall have the right to
withdraw the termination of the Plan and make a claim under the Escrow Agreement
for the full amount of the Pension Escrow Fund.
2.5 Closing Procedures. At the Closing, the Company will deliver to Buyer
the Closing Liability Schedule and the Closing Certificate.
2.6 Closing of Company Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
capital stock of the Company shall thereafter be made. If, after the Effective
Time, Certificates formerly representing shares of Common Stock are presented to
Buyer or the Surviving Corporation, as the case may be, they shall be canceled
and exchanged for the portion of the Merger Consideration into which such shares
are convertible under Section 2.1.
2.7 Transfer Taxes. The Surviving Corporation shall bear and pay any
applicable sales, transfer, stamp, documentary, and other similar Taxes (which
shall be reflected on the Closing Liability Schedule), other than any Taxes
based on income, and governmental fees that are due or payable as a result of
the transactions contemplated by this Agreement.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of Buyer and MergerSub as
follows:
3.1 Organization; Powers.
(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
New York 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 failure to so qualify and/or be in good standing would
not have a Material Adverse Effect.
(b) Each of the Company and its Subsidiaries has the requisite corporate
power and authority and all necessary Government Approvals to own, lease and
operate its Properties and to carry on its business as it is presently being
conducted. The Company has heretofore made available to Buyer and MergerSub a
complete and correct copy of the Certificate
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of Incorporation and the By-Laws, each as amended to date, of the Company and
each of its Subsidiaries. Such Certificates of Incorporation and By-Laws are in
full force and effect. Neither the Company nor any of its Subsidiaries is in
violation of any provision of its Certificate of Incorporation or By-Laws.
(c) Schedule 3.1 lists each director and officer (including the
title/position held) of the Company and each Subsidiary.
3.2 Authorization of Transaction; Noncontravention.
(a) The Company has all requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby to be consummated by it. The
execution and delivery by the Company of this Agreement, the performance by the
Company of its obligations hereunder and the consummation by it of the
transactions contemplated hereby to be consummated by it have been duly and
validly authorized by all necessary corporate action on the part of the Company.
This Agreement has been duly executed and delivered by the Company and this
Agreement constitutes the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to the
effects of bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
(b) Other than as set forth on Schedule 3.2, neither the execution and the
delivery by the Company of this Agreement, the performance by it of its
obligations hereunder, nor the consummation by it of the transactions
contemplated hereby to be consummated by it in accordance with the terms hereof
will (i) violate or conflict with any provision of the Certificate of
Incorporation or By-laws of the Company or any of its Subsidiaries, (ii) violate
or conflict with any law, rule, regulation or any court or administrative order,
judgment, decree, injunction or other binding action or requirement of any
Governmental Authority to or by which the Company or any of its Subsidiaries (or
any of their material Property) is a party or is bound, (iii) require the
approval of or a filing or registration with any Governmental Authority (other
than the filing of the Certificate of Merger and any filings under the HSR Act),
(iv) whether after notice or lapse of time or both, violate, breach or conflict
with any provision of, result in the loss of a material benefit under, give the
other parties thereto any rights or benefits not otherwise applicable under, or
permit the termination or acceleration of any Material Contract or Purchase and
Sale Transaction, (v) require any authorization, consent or approval of,
exemption or other action by, or notice to, any party to any Material Contract
or Purchase and Sale Transaction, or (vi) result in the creation or imposition
of any Lien upon any Property of the Company or any of its Subsidiaries.
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3.3 Capitalization; Shares.
(a) The authorized capital stock of the Company consists of 5,700 shares of
capital stock, of which (i) 2,200 shares are Common Stock, without par value,
(ii) 2,000 shares are Class A Preferred Stock, par value $100 per share, and
(iii) 1,500 shares are Class B Preferred Stock, par value $100 per share.
1,038.0014 shares of Common Stock are outstanding and are validly issued, fully
paid, and nonassessable. As a result of the transactions contemplated by this
Agreement, an additional 63.1977 shares of Common Stock will be issued under the
Andrews Employment Agreement on or prior to the Closing Date, which shares, upon
issuance, will be validly issued, fully paid and nonassessable. No shares of
Preferred Stock are issued or outstanding.
(b) Except as set forth in Section 3.3(a) above, there are no shares of
capital stock or other equity or voting securities of the Company issued,
reserved for issuance or outstanding. There are no outstanding bonds,
debentures, notes or other indebtedness or other securities of the Company
having the right to vote (or convertible into, or exchangeable or exercisable
for, securities having the right to vote) on any matters on which stockholders
of the Company may vote. Except as set forth in Section 3.3(a) above, there are
no outstanding options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
Subsidiaries is a party or by which any of them is bound obligating the Company
or any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other securities of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding contractual obligations, commitments, understandings or
arrangements of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire or make payment in respect of any shares of capital stock of
the Company or any of its Subsidiaries or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such Subsidiary or any other entity. Except as set forth in Schedule 3.3, there
are no proxies with respect to the shares of capital stock of the Company or any
of its Subsidiaries and there are no agreements or understandings between or
among any Persons which affect or relate to the voting or giving of written
consents with respect to any security of the Company or any of its Subsidiaries.
Except as set forth in Schedule 3.3, there are no agreements or arrangements to
which the Company or any of its Subsidiaries is a party pursuant to which the
Company is or could be required to register shares of Common Stock or other
securities under the Securities Act of 1933, as amended. The Company has not
adopted a shareholders' rights plan. All outstanding shares of capital stock of
the Company are duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive or similar rights.
(c) Schedule 3.3 contains a true, accurate, and complete list of the names
of the Shareholders of record and the number and class of shares held of record
by each Shareholder as of the date hereof, and as at the Effective Time after
giving effect to the shares of Common
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Stock to be issued pursuant to the issuance of stock under the Andrews
Employment Agreement. All issued and outstanding shares of capital stock of the
Company is owned of record by the Shareholders as set forth in Schedule 3.3.
Immediately prior to the Effective Time, the shares of Common Stock set forth on
Schedule 3.3 shall be owned by the Shareholders free and clear of any Liens,
encumbrances, security agreements, claims, equities, charges, restrictions,
voting agreements, proxies, options, rights of first refusal, calls, contractual
rights or other interests.
(d) The Company has no Subsidiaries other than MAIC and MMC, and does not
own or hold or have the right to acquire any equity interest in any Person,
directly or indirectly. All of the outstanding shares of capital stock of each
of the Subsidiaries have been validly issued and are fully paid and
non-assessable and not subject to preemptive or similar rights. The Company owns
all of the capital stock of MAIC and MMC, free and clear of all Liens, and there
are no outstanding options, warrants, or other rights in or with respect to the
unissued or treasury shares of capital stock of MAIC or MMC, or any other
securities convertible into capital stock of MAIC or MMC.
(e) Schedule 3.3 sets forth the outstanding indebtedness for borrowed money
of the Company and its Subsidiaries. Except as set forth on Schedule 3.3,
neither the Company nor any of the Subsidiaries is in conflict with or in
default or violation of (with or without the giving of notice or lapse of time
or both) of any of the material terms of such indebtedness nor has any event or
condition occurred which would give the holders of such indebtedness the right
to accelerate the maturity of or require repayment of such indebtedness prior to
its stated maturity, other than this Agreement.
3.4 Financial Statements. Copies of the audited consolidated balance sheets
of the Company and its Subsidiaries as of May 31, 1996 and 1997, and the related
consolidated statements of income and cash flow of the Company and its
Subsidiaries for the fiscal years ended May 31, 1995, 1996 and 1997 and the
notes thereto, accompanied by opinions of Holtz Rubenstein & Co., LLP,
independent public accountants of the Company, and the unaudited consolidated
balance sheets of the Company and its Subsidiaries as of February 28, 1997 and
1998, and consolidated statements of income and cash flow of the Company and its
Subsidiaries for the nine months ended February 28, 1997 and 1998 (collectively,
the "Company Financial Statements"), duly certified by the controller and
President of the Company, have been furnished to the Buyer. The Company
Financial Statements (a) have been prepared in accordance with GAAP applied on a
consistent basis during the periods covered thereby, (b) fairly present the
consolidated financial condition of the Company as of such dates and the
consolidated results of the operations of the Company for the periods ended on
such dates , (c) contain and reflect all necessary adjustments and accruals for
a fair presentation to the Company's consolidated financial condition and the
consolidated results of its operations for the periods covered by the Company
Financial Statements, (d) contain and reflect adequate provisions for all
reasonably anticipated liabilities for all Taxes, with respect to the periods
then ended and all prior periods, (e) with respect to Contracts, Purchase and
Sale Transactions and commitments for the sale of goods or the provision of
services by the Company and its Subsidiaries, contain and reflect
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adequate reserves for all anticipated losses, returns and allowances and costs
in excess of anticipated receipts, and (f) do not reflect items resulting
directly from the transactions contemplated by this Agreement other than
accounts payable which have been paid in the ordinary course of business. Since
the date of the unaudited financial statements there has been no change that
would represent a Material Adverse Effect other than changes resulting directly
from the transactions contemplated by this Agreement, including, without
limitation (i) the liabilities set forth on the Closing Liability Schedule, (ii)
the termination of the Pension Plan, and (iii) the compensation expense which
the Company will recognize upon (A) issuance of shares of Common Stock to Mr.
Andrews in accordance with the Andrews Employment Agreement, and (B)
cancellation of restrictions on Common Stock issued under the Restricted Stock
Bonus Plan. The projections attached hereto as Schedule 3.4 ("Projections") were
prepared in good faith by the Company based on reasonable assumptions, and to
the best knowledge of the Company, no event or condition relating to the
Company's ongoing business and operations, has occurred that would make the
Projections inaccurate or misleading in any material respect.
3.5 Litigation. There are no actions, suits, proceedings, orders, decrees
or judgments at law or in equity or by or before any Governmental Authority or
other agency now pending or, to the best knowledge of the Company, threatened
against or affecting the Company or its Subsidiaries or any Property or rights
of the Company or its Subsidiaries which, if adversely determined, could
reasonably be expected to, individually or in the aggregate, materially impair
the right of the Company or its Subsidiaries to carry on business substantially
as now being conducted or as presently contemplated or would result in a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries nor any
Property or asset of the Company or any of its Subsidiaries is subject to any
order, writ, judgment, injunction, decree, determination or award which has had,
or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Affect.
Schedule 3.5 sets forth an accurate and complete description of every
pending or, to the best knowledge of the Company, threatened legal action,
claim, suit, investigation, arbitration and legal, administrative or other
proceeding of any nature, domestic or foreign, criminal or civil, at law or in
equity, by or against or otherwise affecting the Company or any of its
Subsidiaries or their respective operations, Properties, financial condition or
prospects.
3.6 Tax Returns.
(a) The Company and its Subsidiaries have timely filed or caused to be
timely filed with the appropriate taxing jurisdictions, all Federal, state,
local and foreign Tax Returns required to be filed, have timely paid or caused
to be timely paid all Taxes as shown on such returns or on any assessment
received by them to the extent that such Taxes have become due, except (i) such
Taxes the amount, applicability or validity of which are being contested in good
faith by appropriate proceedings diligently conducted and with respect to which
the Company or its Subsidiaries shall have set aside on its books full and
adequate reserves with respect to such Taxes as are required by GAAP, or (ii)
for the Company's nonpayment of its estimated federal
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income tax due February 15, 1998, in the amount of $1,000,000, as a result of
the anticipated reduction or elimination of the Company's federal income tax
liability for the tax period prior to the Closing as a result of the
transactions contemplated by this Agreement. The Company and its Subsidiaries
have established on the Company Financial Statements reserves which are adequate
for the payment of any Taxes not yet paid or due and payable, which reserves do
not reflect items resulting from the transactions contemplated by this Agreement
(including, without limitation, the compensation expense which the Company would
recognize upon (A) the issuance of shares of Common Stock at Closing to Mr.
Andrews in accordance with the Andrews Employment Agreement (although reserves
may have been adjusted for stock issued prior to Closing), and (B) cancellation
of restrictions on Common Stock issued under the Restricted Stock Bonus Plan).
(b) Except as disclosed in Schedule 3.6, no audits or other administrative
or court proceedings are pending or proposed with respect to the Company or any
of its Subsidiaries that relate to any Federal, state, local or foreign Taxes.
(c) No claim has been made by any taxing authority for material unpaid
Taxes against the Company or any of its Subsidiaries that has given rise to a
Lien against any assets of Property of the Company or any of its Subsidiaries.
(d) Except as set forth in Schedule 3.6, neither the Company nor any of its
Subsidiaries is a party to or bound by (nor will any of them become a party to
or bound by) any tax indemnity, tax sharing, or tax allocation agreement.
(e) Except as set forth in Schedule 3.6, neither the Company nor any of its
Subsidiaries has ever been a member of an affiliated group of corporations
within the meaning of Section 1504 of the IRC, other than the affiliated group
of which the Company is the common parent.
(f) Neither the Company nor any of its Subsidiaries has filed a consent
pursuant to the collapsible corporation provisions of Section 341(f) of the IRC
(or any corresponding provision of state or local law) or agreed to have Section
341(f)(2) of the IRC (or any corresponding provisions of state or local law)
apply to any disposition of any asset owned by the Company or any of its
Subsidiaries, as the case may be.
(g) Except as set forth in Schedule 3.6, neither the Company nor any of its
Subsidiaries has agreed to make nor is any required to make any adjustment under
Section 481(a) of the IRC by reason of a change in accounting method or
otherwise.
(h) Except as set forth in Schedule 3.6, no taxable period of the Company
or any Subsidiary of the Company that ended after May 31, 1992 has been subject
to an audit by a relevant taxing authority.
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(i) There is no contract, agreement, plan, or arrangement covering any
employee or former employee of the Company or any of its Subsidiaries that,
individually or collectively, would give rise to a payment that would not be
deductible by reason of Section 280G of the Code.
3.7 No Defaults. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any law, rule, regulation, order,
judgement, decree, injunction or requirement of any Governmental Authority
(including, without limitation, laws, rules and regulations relating to
government contracting) applicable to the Company or any of its Subsidiaries or
by which any Property or asset of the Company or any of its Subsidiaries is
bound or affected, except for any such conflicts, defaults or violations that
would not have, individually or in the aggregate, a Material Adverse Effect. All
exports and reexports made by or on behalf of the Company or any of its
Subsidiaries of commodities, software, or technology of United States origin
since January 1, 1993 have been in compliance in all material respects with all
United States laws and regulations governing exports.
3.8 Properties. As of the date hereof, each of the Company and its
Subsidiaries has good and marketable title to all of their Properties (other
than leased property), free and clear of all Liens of any nature whatsoever,
except Existing Liens. As of the Effective Time, each of the Company and its
Subsidiaries shall have good and marketable title to all of their Properties
(other than Leased Property), free and clear of all Liens of any nature
whatsoever, except Permitted Liens. Except as set forth on Schedule 3.8, each of
the Company and its Subsidiaries has the right to use all material leased
Property with valid and enforceable lease agreements expiring not earlier than
December 31, 1998. Schedule 3.8 contains a list of all real property owned or
leased by the Company or its Subsidiaries, including a summary of the principal
terms of each lease. Title to such real property owned by the Company and its
Subsidiaries is insurable by a nationally recognized title insurance company
subject only to Permitted Liens. Each material item of tangible personal
Property used by the Company or any of its Subsidiaries in connection with the
operation of their businesses is in operating condition and repair, is fit for
its intended purpose, and is usable in the ordinary course of business. During
the past twelve months, there has not been any significant interruption in the
operations of the Company or any of its Subsidiaries due to inadequate
maintenance of any item of tangible personal property.
3.9 Governmental Approvals. The Company and each Subsidiary has obtained
all Governmental Approvals which Governmental Approvals are necessary for it to
own, lease or operate its Properties and assets and to carry on its business as
presently conducted. All such Governmental Approvals are listed on Schedule 3.9.
All Governmental Approvals set forth in Schedule 3.9 have been duly obtained and
are in full force and effect unless otherwise indicated on Schedule 3.9. There
is no proceeding pending or, to the best knowledge of the Company, threatened
which seeks, or which may be expected, to rescind, terminate, modify, condition,
suspend or otherwise alter any Governmental Approval. Neither this Agreement nor
the transactions contemplated hereby will cause or result in the rescission,
termination, modification, suspension or alteration of any Governmental
Approval, nor will they require the consent or
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approval of any Person with respect to any Governmental Approval (other than
filings required by the HSR Act).
3.10 Intellectual Property.
(a) Schedule 3.10 sets forth a true, correct and complete list of all
patents, copyrights, trademarks, trade names, service marks, logos and Internet
domain names, any registrations thereof and pending applications therefor which
are either owned by the Company or the Subsidiaries or licensed by or to the
Company or the Subsidiaries and indicates, with respect to each item of
Intellectual Property listed thereon, the owner thereof and, if applicable, the
name of the licensor and licensee thereof and the date(s) of any licenses or
other agreements or Contracts with respect thereto (which licenses, agreements
and other Contracts are valid and binding obligations of the parties thereto,
enforceable in accordance with their respective terms). The Company and each
Subsidiary owns or has the lawful right to use all Intellectual Property
necessary for the conduct of its business as now conducted, provided, that, with
respect to any patents or trademarks that are immaterial to the business of the
Company, such representation is being made only to the best knowledge of the
Company. The consummation of the transactions contemplated herein will not
adversely affect the nature or usefulness to the Company and its Subsidiaries of
any material item of Intellectual Property.
(b) Except as set forth in Schedule 3.10:
(i) The Company and each Subsidiary have full legal and beneficial
ownership (free and clear of any and all Liens) of, or a valid right to use
(free of any material restriction), all Intellectual Property necessary for
the conduct of its business, and neither the Company nor any Subsidiary has
received any notice or claim (whether written, oral or otherwise)
challenging the Company's or such Subsidiaries' ownership or rights in such
Intellectual Property or suggesting that any other Person (except, under
certain circumstances, the licensor thereof) has any claim of legal or
beneficial ownership with respect thereto or otherwise raising a dispute or
disagreement with respect to such Intellectual Property;
(ii) All Intellectual Property of the Company and the Subsidiaries is
legally valid and enforceable without any material qualification,
limitation or restriction on its use, and the Company and the Subsidiaries
have not, directly or indirectly through any of its Affiliates, received
any notice or claim (whether written, oral or otherwise) challenging the
validity or enforceability of any such Intellectual Property, including,
without limitation, the validity or enforceability of any license or other
Contract with respect to such Intellectual Property;
(iii) Neither the use of any of the Intellectual Property owned by the
Company or the Subsidiaries nor, to the best knowledge of the Company, any
other Intellectual Property used or licensed by the Company or the
Subsidiaries conflicts with, infringes
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upon, violates or interferes with or constitutes an appropriation of any
right, title or interest held by any other Person, and there have been no
claims made with respect thereto; and
(iv) To the best knowledge of the Company, no other Person is
infringing on any part of the Intellectual Property listed on Schedule
3.10.
(v) Neither the Company nor any Subsidiary has done anything to
diminish or otherwise adversely affect the value or usefulness of any
material item of Intellectual Property, and neither the Company nor any
Subsidiary has or has caused anyone to copy or reproduce copyrighted
material that would materially diminish the value thereof or limit the
ability of the Company or a Subsidiary of the Company to enforce its rights
thereto.
(vi) No individual employee or third party contractor of, or
consultant to, the Company or its Subsidiaries who has worked on any
Intellectual Property necessary to the conduct of the Company's business
has any individual rights to such Intellectual Property which have not been
assigned to the Company or a Subsidiary. Neither the Company nor any of its
Subsidiaries has disclosed any confidential information in the possession
of the Company or any of its Subsidiaries under an obligation of
confidentiality to any third party, except pursuant to a valid and binding
agreement that prevents disclosure or misuse of such information, except
where such disclosure would not result in a Material Adverse Effect.
(c) The Company and the Subsidiaries have not conducted the Company's
business, and have not used or enforced (or failed to use or enforce) any
Intellectual Property, in a manner that would result in the abandonment,
cancellation or unenforceability of any item of the Intellectual Property listed
on Schedule 3.10, and the Company and the Subsidiaries have not taken or failed
to take any action that would result in the forfeiture or relinquishment of any
Intellectual Property used in the conduct of the Company's business as now
conducted.
(d) Protection and Maintenance of Intellectual Property. Except as set
forth in Schedule 3.10, (i) the Company has taken all reasonable steps to (A)
protect the Company's and Subsidiaries' rights to the Intellectual Property
listed on Schedule 3.10 and the secrecy, confidentiality and value of their
trade secrets, and (B) prevent the unauthorized use thereof by, or the
unauthorized disclosure thereof to, any other Person, in each case in accordance
with standard industry practice, and (ii) each of the Company and the
Subsidiaries shall use its Best Efforts to maintain, or cause to be maintained,
the Intellectual Property listed on Schedule 3.10 in full force and effect
through the Closing and, without limitation, has renewed or has made, and will
make within an applicable renewal period ending on or prior to the Closing,
application to renew all of such Intellectual Property subject to expiration on
or prior to the Closing. Except as set forth on Schedule 3.10, neither the
Company nor any Subsidiary, nor any of their respective Affiliates, has granted
to any other Person any rights or permissions to use any of the Intellectual
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Property listed on Schedule 3.10. With respect to any part of the Intellectual
Property which was created by the Company, the Subsidiaries or any of their
agents or representatives (e.g., any copyrights, know-how, trade secrets, trade
rights or confidential or proprietary reports or information of the Company),
(A) to the best knowledge of the Company, no third party has any rights (whether
non-exclusive or otherwise) in such Intellectual Property, and, except pursuant
to reasonably prudent safeguards, no third party has received any confidential
information relating to such Intellectual Property, (B) the Company and the
Subsidiaries are not under any contractual or other obligation to disclose to
any third party any such Intellectual Property except pursuant to prudent and
reasonable safeguards, and (C) there are no known significant defects therein
and such Intellectual Property substantially conforms to all documentation and
materials produced by the Company and the Subsidiaries which described such
Intellectual Property.
3.11 Compliance With Laws; Environmental Matters. Each of the
representations and warranties set forth in this Section 3.11 is qualified in
its entirety by all disclosures contained in Schedule 3.11, including without
limitation, any environmental reports referred to therein, copies of which are
in the possession of the Buyer, and in any supporting documentation relating
thereto which has been so delivered to Buyer (the "Environmental Reports").
Except as disclosed on Schedule 3.11 and in the Environmental Reports:
(a) the operations of the Company and its Subsidiaries on a consolidated
basis comply in all material respects with all Applicable Laws, including all
applicable Environmental, Health or Safety Requirements of Law;
(b) neither the Company nor its Subsidiaries, or their Properties,
businesses or operations are subject to any investigation, judicial or
administrative proceeding, order, judgment, decree, settlement or other
agreement respecting (i) any Environmental, Health or Safety Requirements of
Law, (ii) any Response Action or (iii) any Claims or Liabilities and Costs
arising from the Release or threatened Release of a Contaminant;
(c) (i) for the past five years, neither the Company nor any
Subsidiary has filed any notice:
(A) under CERCLA, 42 U.S.C. ss. 9603(a), the Clean Water
Act, 33 U.S.C. ss. 1321(b)(5), or any other Environmental,
Health or Safety Requirements of Law reporting a Release or
threatened Release of a Contaminant;
(B) under CERCLA, 42 U.S.C. ss. 9603(c), or any state
equivalent indicating past or present treatment, storage or
disposal of a hazardous waste, as that term is defined under
40 C.F.R. Part 261 or any state equivalent; or
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(C) reporting a material violation of any applicable
Environmental, Health or Safety Requirement of Law;
(ii) neither the Company's nor any Subsidiaries' present Property
is listed or, to the best knowledge of the Company, proposed for
listing on the National Priorities List pursuant to CERCLA ("NPL") or
on the Comprehensive Environmental Response Compensation Liability
Information System List or any similar state list of sites requiring
Response Action;
(d) there is not now, nor has there ever been on or in the Property of the
Company or either of its Subsidiaries during the past five years:
(i) any treatment, recycling, storage or disposal of any Contaminants
at levels requiring investigation or clean up under applicable
Environmental, Health or Safety Requirements of Law;
(ii) any underground or aboveground storage tank or surface
impoundment or underground injection well other than a well used as a
source of recirculating cooling water; or
(iii) any polychlorinated biphenyls (PCBs) used in hydraulic oils,
electrical transformers or other equipment;
(e) no Environmental Lien has attached to any property of the Company or
its Subsidiaries;
(f) all Asbestos Containing Material which is on or part of the Property
does not violate any applicable Environmental, Health or Safety Requirement of
Law; and
(g) none of the products that the Company or its Subsidiaries manufactures,
distributes or sells contains Asbestos Containing Material.
3.12 ERISA.
(a) Neither the Company nor any ERISA Affiliate maintains or contributes to
any Plan other than a Plan listed on Schedule 3.12 hereto, and no ERISA
Affiliate maintains or contributes to any Benefit Plan or Multiemployer Plan
other than a Plan listed on Schedule 3.12 hereto.
(b) Each Plan which is intended to be qualified under Section 401(a) of the
IRC has been determined by the IRS to be so qualified, and each trust related to
any such Plan has been determined to be exempt from federal income tax under
Section 501(a) of the IRC. Except as disclosed on Schedule 3.12, neither the
Company nor any ERISA Affiliate maintains
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or contributes to any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides benefits to employees after termination of
employment other than as required by Section 601 of ERISA.
(c) Neither the Company nor any ERISA Affiliate has materially breached any
of the responsibilities, obligations or duties imposed on it by ERISA or
regulations promulgated thereunder with respect to any Plan. No Plan has
incurred any accumulated funding deficiency (as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the IRC), whether waived or not waived. Neither the
Company nor any ERISA Affiliate nor any fiduciary of any Plan which is not a
Multiemployer Plan (i) has engaged in a nonexempt "prohibited transaction"
described in Section 406 of ERISA or Section 4975 of the IRC or (ii) has taken
or failed to take any action which would constitute or result in a Termination
Event. Neither the Company nor any ERISA Affiliate has incurred any liability to
the PBGC which remains outstanding other than the payment of premiums, and there
are no premium payments which have become due which are unpaid. Schedule B to
the most recent annual report filed with the IRS with respect to each Plan is
complete and accurate. Since the date of each such Schedule B, there has been no
adverse change in the funding status or financial condition of the Plan relating
to such Schedule B. Since its last valuation date, there have been no amendments
to such Plan that increase the present value of accrued benefits.
(d) Neither the Company nor any ERISA Affiliate has (i) failed to make a
required contribution or payment to a Multiemployer Plan or (ii) made a complete
or partial withdrawal under Sections 4203 or 4205 of ERISA from a Multiemployer
Plan, nor has the Company or any ERISA Affiliate suffered a 70% decline in its
Contribution base units within the meaning of ERISA Section 4205(h)(1)(j) in any
Plan Year beginning after 1979. Neither the Company nor any ERISA Affiliate has
failed to make a required installment or any other required payment under
Section 412 of the IRC on or before the due date for such installment or other
payment. Neither the Company nor any ERISA Affiliate is required to provide
security to a Plan under Section 401(a)(29) of the IRC due to a Plan amendment
that results in an increase in current liability for the plan year.
3.13 Insurance. Schedule 3.13 contains a true and complete list of all
insurance policies and binders to which the Company or any of its Subsidiaries
is a party or by which any of their material Properties or assets are covered,
specifying the insurer, the policy number or covering note number with respect
to binders and describing each pending claim thereunder of more than $100,000.
All of such insurance is in full force and effect. Except as set forth in
Schedule 3.13, none of such insurance policies or binders has been issued by
Affiliates of the Company or any of its Subsidiaries or cover any Persons other
than the Company and its Subsidiaries and their respective directors, officers,
employees, representatives or agents (in their capacities as such). The
insurance coverage maintained by the Company and its Subsidiaries is in such
amounts, types, and forms as are, in the opinion of management of the Company,
appropriate for the Company's and its Subsidiaries' business, operations,
properties, and assets. There are no outstanding unpaid claims under any
insurance policy or binder set forth in
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Schedule 3.13, and neither the Company nor any of its Subsidiaries has received
a notice of cancellation or non-renewal of any such policy or binder. No such
policy or binder is terminable, modifiable, suspendable or cancelable by the
insurer by virtue of the consummation of the transactions contemplated by this
Agreement.
3.14 Labor Matters. Neither the Company nor its Subsidiaries is a party to
or is subject to any collective bargaining agreement, and there are no strikes
or other labor disputes against the Company or any Subsidiary pending or, to the
Company's Knowledge, threatened. The Company and each of its Subsidiaries have
complied in all material respects with all labor agreements and all Applicable
Laws relating to the employment of labor, including those related to wages,
hours, collective bargaining, occupational safety, and the payment of social
security and other payroll related Taxes, and neither the Company nor any of its
Subsidiaries has received any notice alleging a failure to comply in any
material respect with any such laws, rules, regulations decrees, orders,
judgments, injunctions and requirements. No material controversies, disputes or
proceedings are pending or, to the best knowledge of the Company, threatened
against the Company or any of its Subsidiaries with respect to their employees.
As of the date hereof, to the best knowledge of the Company, there are no
activities or proceedings of any labor union to organize non-unionized
employees. All payments due from the Company or its Subsidiaries or for which
any claim may be made against the Company or its Subsidiaries on account of
wages and employee health and welfare insurance and other benefits have been
paid or accrued as a liability on the books of the Company or its Subsidiaries,
except as disclosed on Schedule 3.14. Except as disclosed on Schedule 3.14,
there are no employment agreements covering the employees or directors of the
Company or its Subsidiaries.
3.15 Force Majeure. No event of Force Majeure has occurred and is
continuing.
3.16 Books and Records. The books and records of the Company and its
Subsidiaries accurately reflect in all material respects the business and
affairs of the Company and such Subsidiaries and are maintained in a manner
sufficient to permit the preparation of financial statements prepared in
accordance with GAAP.
3.17 Accounts Receivable; Inventory.
(a) All accounts receivable that are reflected on the Company Financial
Statements represent valid obligations arising from sales actually made or
services actually performed, subject to reserves on the Company Financial
Statements established in accordance with GAAP. Subject to such reserves, and
subject to any additional reserves required as of the Closing as a result of
events occurring subsequent to this Agreement, substantially all of the accounts
receivable either have been or will be collected in full, without any material
set off, in the ordinary course of the Company's and its Subsidiaries' business.
(b) Except as set forth on Schedule 3.17, all inventory of the Company and
its Subsidiaries reflected on the Company Financial Statements is owned by the
Company or one of
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its Subsidiaries, is located on property owned or leased by the Company or one
of its Subsidiaries (each location of which is listed on Schedule 3.17) or is in
transit to one of such locations, and consists of a quality and quantity usable
and salable in the ordinary course of business. Obsolete items and items of
below-standard quality have been written off or written down to net realizable
value in the Company Financial Statements. All inventories not written off have
been priced at the lower of cost or market on a first in, first out basis. Other
than the Existing Liens, neither the Company nor any of its Subsidiaries has
given or agreed to give any Person an acknowledgment or confirmation of a Lien
or any other preferential right of such Person to any of the inventory or other
assets of the Company or any of its Subsidiaries, including, without limitation,
any bailee letter, warehousemen's letter or similar instrument.
3.18 Brokers' Compensation. Except for the Company's agreement with BT
Alex. Brown & Co. ("BT Alex Brown"), neither the Company nor any of its
Subsidiaries is a party to any agreement or has any obligation to any broker,
finder, or investment banker relating to the transactions contemplated hereby.
3.19 Contracts.
(A) Schedule 3.19A lists all of the following agreements, other than
Purchase and Sale Transactions, to which the Company or any Subsidiary is a
party (each such agreement being listed under a subheading to such schedule
corresponding to the lettered paragraphs below):
(a) any Contract permitting a person to borrow money or for the deferred
purchase price of property, any letter of credit, any pledge, any security
agreement, any lease, any guarantee, and any subordination agreement or other
similar or related type of Contract (including, without limitation, the Loan
Agreements) as to which the Company or any Subsidiary is a debtor, pledgor,
lessee, or obligor;
(b) any Contract dealing with advertising, distributorship, licensing,
consulting, dealership, representative, or agency relationships for an amount in
excess of $50,000 per annum and which can not be terminated by the Company in
accordance with its terms upon not more than thirty days' notice without penalty
or cost;
(c) any Contract pursuant to which any Person is or will become pursuant to
the terms thereof entitled to any benefit or right (including, without
limitation, a right to notice, termination or acceleration) upon a change in
control of the Company or the sale of capital stock of the Company or any of its
Subsidiaries or any of their Properties or assets, which Contract has a value or
potential liability to the Company in excess of $100,000 or is otherwise
material to the business of the Company;
(d) any Contract (A) for the sale of its assets outside of the ordinary
course of business, or (B) for the grant of any preferential right to purchase
any of its assets, Properties, or rights;
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(e) any Contract having a value or potential liability to the Company in
excess of $100,000 which obligates the Company or any Subsidiary for a period in
excess of one year, to purchase, sell, or provide services, materials, supplies,
merchandise, facilities, or equipment and which is not terminable without
penalty by the Company or such Subsidiary on not more than 30 days' notice
without penalty or cost;
(f) any Contract for any one capital expenditure (or series of related
capital expenditures), the amount of which is in excess of $100,000;
(g) any Contract for the employment of any officer, consultant or employee,
including, without limitation, any employee manual or policy (whether oral or
written) or any Contract, program or policy (whether oral or written) providing
for severance or similar benefits, bonuses, profit-sharing payments,
post-retirement benefits or other compensation of any nature;
(h) any Contract still in effect with any present or former officer,
director, consultant or employee with respect to, or which grants any bonuses or
other rights on account of a change in control of the Company or any Subsidiary
or any sale of the capital stock of the Company or any of its Subsidiaries or
any of their Properties or assets;
(i) any lease, rental or occupancy agreement, license, installment or
conditional sale agreement, or other Contract affecting the ownership of,
leasing of, title to, use of, or any leasehold or other interest in, any
Property (except personal property leases and installment or conditional sale
agreements having a value per item or aggregate payments of less than $50,000
and with terms of less than one year);
(j) any joint venture, partnership, or other Contract (however named)
involving a sharing of profits, losses and costs of liabilities by the Company
or either Subsidiary with any other Person;
(k) any Contract containing covenants that purport to restrict the business
activity of the Company or either Subsidiary or limit their freedom to engage in
any line of business or compete with any Person or any Contract that restricts
any Subsidiary from paying dividends or making distributions to the Company or
transferring any Property or assets to the Company or any other Subsidiary or
which restricts the Company or its Subsidiaries from granting Liens on its
Properties or assets;
(l) any power of attorney granted by the Company or either Subsidiary that
is currently effective; and
(m) any other Contract not otherwise set forth on the Schedules hereto
which involves an amount or has a value in excess of $100,000 or which was not
entered into in the ordinary course of business consistent with past practices.
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The documents identified in Schedule 3.19(A) are collectively referred to herein
as the "Material Contracts," and individually as a "Material Contract." Each
Material Contract is in full force and effect and is a valid and binding
obligation of the Company and its Subsidiaries which are a party thereto and, to
the best knowledge of the Company, the other parties thereto, and is enforceable
in accordance with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or law). No event or
condition has occurred which (whether with or without notice or lapse of time or
both) would constitute a material default in any of the material terms of any
Material Contract by the Company or any of its Subsidiaries or, to the best
knowledge of the Company, by any third party thereto. Neither the Company nor
any of its Subsidiaries has Knowledge of any anticipated material breach of any
Material Contract.
(B) Schedule 3.19B lists all purchase orders, sales confirmations, purchase
contracts and supply contracts, including, without limitation, all Government
Contracts, entered into by the Company or any Subsidiary in the ordinary course
of business ("Purchase and Sale Transactions"). The Company has no Knowledge of
any breach or default under any Purchase and Sale Transaction which could
reasonably be expected to have a Material Adverse Effect, or, in any instance
where the Company has Knowledge of any fact that may constitute a default under
any of the provisions of a Purchase and Sale Transaction, neither the Company
nor the other party or parties to such Purchase or Sale Transaction has
indicated an intention to terminate such Purchase and Sale Transaction or to
hold the other party liable thereto for damages for breach. Neither the Company
nor any Subsidiary has received a notice of default from any party to a Purchase
and Sale Transaction.
(C) True and correct copies of all documents listed on Schedule 3.19A and B
have been, upon request, made available to Buyer at the Company prior to the
date hereof. Except as set forth in Schedule 3.19C, the Company has no Knowledge
of any intention by any party to any Material Contract or Purchase and Sale
Transaction to: (a) terminate such Material Contract or Purchase and Sale
Transaction or materially amend the terms thereof, (b) refuse to renew such
Material Contract or Purchase and Sale Transaction upon expiration thereof if
renewable, or (c) renew such Material Contract or Purchase and Sale Transaction
upon expiration thereof on terms and conditions which are materially more
onerous to the Company and the Subsidiaries which are a party thereto than those
currently set forth therein. Except as set forth on Schedule 3.19C, there are
not now, nor have there been in the twelve month period prior to the date
hereof, any disagreements or disputes of a serious nature which relate to the
validity or interpretation of or performance under any Material Contract or
Purchase and Sale Transaction. Neither the Company nor any of its Subsidiaries
is under any material liability or obligation with respect to the return of
inventory or products sold by the Company or any of its Subsidiaries which are
in the possession of distributors, wholesalers, retailers or customers.
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3.20 Bank Accounts. Schedule 3.20 contains a true and complete list, as of
the date hereof, of all bank accounts, investment accounts and safe deposit
boxes existing in the name of the Company or any of its Subsidiaries, showing
the name of each bank or financial institution in which the Company or either
Subsidiary has such an account or safe deposit box, the names of all persons
authorized to draw thereon or to have access thereto and the account number of
each such account or safe deposit box.
3.21 Suppliers. The Company and its Subsidiaries have good business
relationships with suppliers which are material to the Company's business.
Except as set forth in Schedule 3.21, no supplier of materials or services to
the Company or either Subsidiary in an aggregate amount in excess of $250,000
per year has during the last 12 months decreased materially or, to the best
knowledge of the Company, threatened to decrease or limit materially, except
upon the Company's or any Subsidiary's request, its provision of such materials
or services. To the best knowledge of the Company, there has not occurred any
termination, cancellation, or limitation of, or any material modification or
change in, the business relationships of the Company or either of its
Subsidiaries with any supplier of materials or services which would reasonably
be expected to have a Material Adverse Effect. The consummation of the
transactions contemplated hereby will not, to the best knowledge of the Company,
adversely affect the relationships between the Company or any of its
Subsidiaries and any such supplier.
3.22 Customers. Schedule 3.22 sets forth a list of the largest customers of
the Company and its Subsidiaries on a consolidated basis in terms of sales
generated in the Company's fiscal years ended May 31, 1996 and 1997 and sales
expected during the fiscal year ending May 31, 1998 (the "Major Customers"). The
Company and its Subsidiaries have maintained good business relationships with
the Major Customers since May 31, 1996. Except as set forth in Schedule 3.22, no
Major Customer has decreased materially or, to the best knowledge of the
Company, threatened to decrease materially its purchases of the services or
products of the Company or any of its Subsidiaries. Except as set forth on
Schedule 3.22, since May 31, 1996, neither the Company nor any of its
Subsidiaries has Knowledge of any termination, cancellation, or limitation of,
or any material modification or change in, the business relationships of the
Company or any of its Subsidiaries with any of the Major Customers. The
consummation of the transactions contemplated hereby will not, to the best
knowledge of the Company, adversely affect the relationships between the Company
and its Subsidiaries and any Major Customer.
3.23 No Material Misstatements. No representation contained herein contains
any material misstatement of fact or omits to state any material fact necessary
to make the statements therein not materially misleading.
3.24 Government Contracts.
(a) With respect to each Government Contract to which Company or any
Subsidiary is a party, except as set forth on Schedule 3.24: (i) the Company or
the Subsidiary has fully
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complied with all applicable requirements of statute, rule, regulation or order,
whether incorporated expressly, by reference or by operation of law; (ii) all
representations and certifications were current, accurate and complete when
made; (iii) to the best knowledge of the Company, no allegation has been made,
either orally or in writing, that the Company or any of its Subsidiaries is in
breach or violation of any statutory, contractual or regulatory requirement;
(iv) no termination for convenience, termination for default, cure notice or
show cause notice has been issued, (v) for the past twelve months, no material
cost incurred by the Company or any of its Subsidiaries pertaining to such
Government Contract has been formally questioned or challenged, is the subject
of any investigation (other than routine review by the Government not resulting
in formal action) or has been disallowed by any Governmental Authority, and (vi)
for the past twelve months, no money due to the Company or any of its
Subsidiaries pertaining to such Government Contract has been withheld or set off
nor has any claim been made to withhold or set off money and the Company and its
Subsidiaries are entitled to all progress payments received with respect
thereto.
(b) Neither the Company, any Subsidiary, nor any directors, officers,
consultants or employees of the Company or any Subsidiary is (or for the last
three years has been) (i) under administrative, civil or criminal investigation,
indictment or information, audit or internal investigation with respect to any
alleged irregularity, misstatement or omission regarding a Government Contract;
or (ii) suspended or debarred from doing business with the U.S. Government or
any state or local government or from participating in Government Contracts, or
declared nonresponsible or ineligible for government contracting. Neither the
Company nor any Subsidiary has conducted or initiated any internal investigation
or made a voluntary disclosure to any U.S. Government, state or local government
entity with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract. The Company knows of no
circumstances that would warrant the institution of suspension or debarment
proceedings or the finding of nonresponsibility or ineligibility on the part of
the Company or any Subsidiary or any of their respective officers, directors,
consultants or employees in the future.
(c) Other than as set forth in Schedule 3.24, there exist (i) no financing
arrangements with respect to performance of any current Government Contract;
(ii) no outstanding claims against the Company or any of its Subsidiaries,
either by the U.S. Government or by any prime contractor, subcontractor, vendor
or other third party, arising under or relating to any Government Contract; and
(iii) no disputes between the Company or any of its Subsidiaries and the U.S.
Government or any prime contractor, subcontractor or vendor arising under or
relating to any Government Contract. Except as set forth in Schedule 3.24,
neither the Company nor any Subsidiary has any interest in any pending or
potential claim against the U.S. Government or any prime contractor,
subcontractor or vendor arising under or relating to any Government Contract.
Except as set forth on Schedule 3.24, neither the Company nor any Subsidiary has
been notified that any Government Contract is under audit by the U.S. Government
or any other Person that is a party to such Government Contract (other than
routine reviews by the U.S. Government not resulting in formal action).
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(d) No payment has been made by the Company or its Subsidiaries (or, to the
extent that the same might result in any liability on the part of the Company or
its Subsidiaries, to the best knowledge of the Company, by any Person on behalf
of the Company or its Subsidiaries) in connection with any Government Contract
in violation of applicable procurement laws or regulations or in violation of,
or requiring disclosure pursuant to, the Foreign Corrupt Practices Act. The
Company's and each of the Subsidiaries' cost accounting and procurement systems
and the associated entries reflected in their respective financial statements
with respect to Government Contracts are in compliance in all material respects
with Applicable Law.
(e) All material test and inspection results provided by the Company or any
of its Subsidiaries to the U.S. Government pursuant to any Government Contract
or to any other Person pursuant to a Government Contract or as a part of the
delivery to the U.S. Government or to any other Person pursuant to a Government
Contract of any article designed, engineered or manufactured by the Company or
its Subsidiaries were complete and correct in all material respects as of the
date so provided. The Company and its Subsidiaries have provided all material
test and inspection results to the U.S. Government or to any other Person
pursuant to a Government Contract as required by Applicable Law and the terms of
the Government Contracts.
3.25 Product Liability; Warranties
(a) Except as disclosed in Schedule 3.25, (i) there is no claim now pending
or, to the best knowledge of the Company, threatened by or before any
Governmental Authority alleging any defect in any product manufactured, shipped,
sold or delivered by the Company or any Subsidiary or alleging, with respect
thereto, any failure of the Company or any of its Subsidiaries to warn or any
breach by the Company or any of its Subsidiaries of any express warranties or
representations; (ii) there has not within the last three years been any product
recall, post-sale warning, rebate offer, or similar action (collectively
"Defective Product Action") conducted with respect to any product manufactured,
shipped, sold or delivered by the Company or any of its Subsidiaries, or any
investigation by any Governmental Authority concerning any Defective Product
Action; and (iii) during the last three years, there have been no material
defects in, failures to warn, or breaches by the Company or any of its
Subsidiaries of express warranties or representations with respect to, any
product manufactured, shipped, sold or delivered by the Company or any of its
Subsidiaries.
(b) Except as described in Schedule 3.25, there are not pending nor, to the
best knowledge of the Company, threatened, any material claims under or pursuant
to any warranty, whether express or implied, on products or services sold prior
to the date of this Agreement by the Company or any Subsidiary.
3.26 Absence of Undisclosed Liabilities. As of February 28, 1998, none of
the Company nor any of its Subsidiaries has any Liabilities and Costs which were
required to be but were not reflected in the consolidated balance sheet of the
Company and its Subsidiaries included in the most recent Company Financial
Statements.
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3.27 Absence of Undisclosed Changes. Since February 28, 1998, other than as
set forth on Schedule 3.27, and other than the transactions contemplated by this
Agreement, there has not been (a) any material adverse change in the business,
condition (financial or otherwise), results of operations or prospects of the
Company and its Subsidiaries, taken as a whole, (b) any damage, destruction or
loss (whether or not covered by insurance) with respect to any Property or asset
of the Company or any of its Subsidiaries having, individually or in the
aggregate, a Material Adverse Affect, or (c) any entry by the Company or any of
its Subsidiaries into any commitment or transaction material to the Company and
its Subsidiaries taken as a whole other than in the ordinary course of business.
In addition, since February 28, 1998, other than as set forth on Schedule 3.27,
and other than the transactions contemplated by this Agreement, (i) none of the
Company nor any of its Subsidiaries has incurred any Liabilities and Costs
except Liabilities and Costs incurred in the ordinary course of business
consistent with past practices, (ii) the Company and its Subsidiaries have
conducted their businesses only in the ordinary course of business consistent
with past practices and have not taken any of the actions proscribed by Section
5.2, (iii) there has not been (a) any change by the Company or any of its
Subsidiaries in their accounting methods, principles and practices, (b) any
reevaluation by the Company or any of its Subsidiaries of any assets (including,
without limitation, any write down of inventory or writeoff of accounts
receivable) other than as required by GAAP, (c) any declaration, setting aside
or payment of any dividend or distribution in respect of any capital stock of
the Company or any redemption, purchase or other acquisition of any of its
securities, or (d) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the rate of
compensation payable or to become payable to any officer or key employee of the
Company or any Subsidiary.
3.28 Affiliate Transactions. Except as set forth on Schedule 3.28, there
are no agreements (oral or written) between the Company or any of its
Subsidiaries, on the one hand, and any Affiliate thereof (other than Affiliates
that are the Company or one of its Subsidiaries), on the other hand.
3.29 Dividends. Since February 28, 1998, neither the Company nor any of its
Subsidiaries has (i) amended its Certificate of Incorporation to alter its
capital stock, (ii) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock (in cash or otherwise), or (iii)
purchased or redeemed any shares of its capital stock.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company that each of the following
statements is true and correct on the date hereof:
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4.1 Organization, Standing and Power. Buyer is duly organized and existing
as a corporation under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease, and operate its properties and
assets and to carry on its business as presently conducted and to consummate the
transactions contemplated hereby. MergerSub is duly organized and existing as a
corporation under the laws of the State of New York and has all requisite
corporate power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. MergerSub does not own, lease, or operate any
properties or assets and has not carried on any business activities since its
inception other than in connection with the transactions contemplated by this
Agreement. MergerSub is a wholly-owned subsidiary of Buyer.
4.2 Authority of Buyer; No Violation.
(a) Buyer and MergerSub each have all requisite corporate power and
authority to enter into this Agreement and to consummate the Merger and the
transactions contemplated hereby. The execution and delivery by Buyer and
MergerSub of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Buyer and MergerSub, and this Agreement has been
duly executed and delivered by Buyer and MergerSub and is a valid and binding
obligation of Buyer and MergerSub, enforceable in accordance with its terms,
except in so far as the enforceability thereof may be limited by (i) applicable
bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally, or (ii) general principles of equity
regardless of whether asserted in a proceeding in equity or at law.
(b) Neither the execution and delivery by Buyer or MergerSub of this
Agreement, the consummation of the transactions contemplated herein, nor
compliance by Buyer and MergerSub with any of the provisions hereof, will: (i)
conflict with or result in a breach of any provision of their respective
Articles or Certificate of Incorporation or Bylaws; (ii) as of the Closing Date,
constitute a breach of or result in a default, or give rise to any rights of
termination, cancellation, or acceleration under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, franchise, license, permit,
agreement, or other instrument or obligation to which Buyer or MergerSub is a
party, or by which Buyer or MergerSub or any of their respective properties or
assets is bound which would cause a material adverse effect on the business,
operations, condition or affairs of Buyer or MergerSub or the ability of Buyer
or MergerSub to consummate the transactions contemplated hereby; or (iii)
violate any order, writ, injunction, decree, statute, rule, or regulation
applicable to Buyer or MergerSub or any of their respective properties or
assets. No consent of, approval of, notice to, or filing with any Governmental
Authority having jurisdiction over any aspect of the business or assets of Buyer
or MergerSub, and no consent of, approval of, or notice to or filing with any
other Person, is required in connection with the execution and delivery by Buyer
and MergerSub of this Agreement or the consummation by Buyer and MergerSub of
the transactions contemplated hereby, except the filing (i) of the Certificate
of Merger contemplated by Section 1.2, (ii) pursuant to the HSR Act, to the
extent applicable, and (iii) as set forth on Schedule 4.2.
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4.3 Litigation. There is no private or governmental suit, claim, action, or
proceeding pending or, to Buyer's Knowledge, threatened, against Buyer, its
subsidiaries or Affiliates or against any of their directors or officers that
would impair the ability of Buyer or MergerSub to perform its obligations
hereunder.
4.4 Brokers or Finders. Other than Mentmore Holdings Corporation (whose
fees will be paid by Surviving Corporation), Buyer has not incurred any
obligation or liability, contingent or otherwise, for brokerage or finder's
fees, agents' commissions, or any similar payment in connection with this
Agreement.
4.5 Financing. Buyer will use its Best Efforts to conclude the financing
arrangements reflected in the Commitment Letter of Societe Generale dated April
16, 1998 or other suitable financing arrangements.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Access to Information. Between the date of this Agreement and the
Closing Date, the Company and its Subsidiaries will afford to the officers,
employees, financial advisors, financing sources, consultants, accountants,
attorneys, and authorized representatives of Buyer reasonable access during
normal business hours to the premises, personnel, advisors, consultants,
attorneys, accountants, representatives, properties, contracts, commitments, and
books and records of the Company and its Subsidiaries. The Company shall furnish
Buyer as promptly as practicable with such documents or copies thereof, and
other information concerning the business and affairs of the Company and its
Subsidiaries, including without limitation, any financial and operating data or
other periodic financial information, as Buyer shall, from time to time,
reasonably request. All information and documents provided to Buyer and its
agents shall be kept confidential by Buyer pursuant to the provisions of Section
9.10. The Company further agrees to use its Best Efforts to cause its and its
Subsidiaries' accountants, personnel, advisors, consultants, attorneys, and such
other persons as the parties shall mutually agree upon to fully cooperate with
Buyer and its representatives in connection with the right of access granted
herein.
5.2 Conduct of Business by the Company and its Subsidiaries. Between the
date of this Agreement and the Closing Date, the Company and its Subsidiaries
will cause their businesses to be operated only in the ordinary course and
consistent with past practices. Each of the Company and its Subsidiaries will
use its Best Efforts to (i) preserve intact the present business organization,
(ii) maintain in effect all material licenses, permits, and approvals of
Governmental Authorities which are necessary for the conduct of its business,
(iii) keep available the services of the present management and workforce, and
(iv) maintain good business relationships with suppliers, customers and
distributors and others having business dealings with
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it. Except as otherwise contemplated by or permitted by this Agreement, or as
otherwise consented to or approved by Buyer in writing, the Company and its
Subsidiaries shall not:
(a) amend their Certificates of Incorporation or Bylaws or issue, sell,
grant, pledge, purchase, redeem, or otherwise encumber, or agree or commit to
issue, sell, grant, pledge, purchase, redeem, or otherwise encumber any shares
of their or the Company's capital stock; or grant, issue, create, sell, pledge,
purchase, redeem or otherwise encumber or agree to grant, issue, sell, pledge,
purchase, redeem, or otherwise encumber any options, warrants or rights to
purchase shares of their or the Company's capital stock or securities of any
kind convertible into or exchangeable for shares of their or the Company's
capital stock; or declare, set aside, make or pay any dividend or other
distribution in respect of their or the Company's capital stock other than
issuances of stock which may be made pursuant to the Andrews Employment
Agreement;
(b) except as set forth in Schedule 5.2, increase the compensation or rate
of compensation payable or to become payable to any of its present or former
employees, directors, consultants or officers, nor make any increase in
compensation or rate of compensation or benefits payable or to become payable to
employees, directors, consultants or officers who are parties to separation,
severance, or employment agreements with the Company, nor enter into any
separation, severance, or "change in control" agreements with any of its present
or former employees, officers, consultants or directors, nor enter into any
written or oral employment agreement which by its terms cannot be terminated on
thirty (30) days' notice or less without penalty;
(c) except as contemplated by or permitted by this Agreement and except as
set forth in Schedule 5.2, set aside, or pay to any present or former officer,
director, consultant or employee any bonus, profit-sharing, severance,
retirement, insurance, death, fringe benefit, or other extraordinary
compensation, nor adopt, amend, fund or commit itself to fund any employee
benefit plan or account related to any Plan with or for the benefit of any of
its present or former employees, consultants, directors or officers;
(d) acquire any business entity or all or substantially all of the assets
of a business entity;
(e) except as set forth on Schedule 5.2, make any capital expenditures, the
aggregate amount of which are in excess of $100,000, other than (i) emergency
repairs, and (ii) those scheduled in the Company's and its Subsidiaries capital
expenditure budget for 1998, a copy of which has been provided to Buyer;
(f) create or incur any liabilities in excess of $100,000, other than
liabilities incurred in the ordinary course of business or as contemplated or
permitted by or in connection with this Agreement and the consummation of the
Merger;
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(g) voluntarily create or incur any Lien, or fail to take action to
discharge any involuntary Lien, against or in respect of any Property, except
for Permitted Liens;
(h) terminate any Material Contract or Purchase and Sale Transaction, or
enter into, renew, extend, amend, or modify any Material Contract or Purchase
and Sale Transaction in any manner that is materially burdensome to the Company
and/or would negatively impact its business plan, except as set forth on
Schedule 5.2;
(i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practices or in accordance with their
terms, of liabilities reflected or reserved against in, or discussed in, the
most recent Company Financial Statements or incurred since the date of such
financial statements in the ordinary course of business consistent with past
practices or liabilities set forth on the Closing Liability Schedule to the
extent deducted from the Company Value in calculating the Merger Consideration;
(j) institute, settle, or agree to settle any claim, action, or proceeding
involving an expenditure in excess of $100,000 before any court or other
Governmental Authority;
(k) (i) default in any material respect under any Material Contract, or
(ii) default in any material respect under any Purchase and Sale Transaction
which, individually or together with other agreements or understandings with
respect to which a default exists, could reasonably be expected to have a
Material Adverse Effect;
(l) fail to maintain such liability, casualty, property, loss, and other
insurance coverage upon its properties and with respect to the conduct of its
business, on such terms, in such amounts, and with such insurance carriers and
to such extent and covering such risks as are maintained on the date hereof;
(m) acquire or dispose of any material assets or rights;
(n) make any loan or advance to any Person, other than to the Company or to
any Subsidiary and other than routine advances to employees of the Company and
its Subsidiaries, or enter into any other transaction with any Affiliate (other
than any such transaction between the Company or one or more of its
Subsidiaries) or employees other than as set forth in Schedule 5.2;
(o) prior to the Closing Date, prepay any obligation of the Company or any
of its Subsidiaries for money borrowed, capital leases, purchase money
indebtedness, or Taxes due and owing, including, without limitation, obligations
under the Loan Agreements;
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(p) fail to collect accounts receivable and pay accounts payable in the
ordinary course of business consistent with past practices;
(q) fail to maintain working capital components at such levels as are
consistent with past practice and appropriate in connection with the financing
of the Company's operations;
(r) fail to maintain and comply with all Government Approvals;
(s) make payments, directly or indirectly, to or for the benefit of Douglas
Monitto or his family members or their respective Affiliates in an amount in
excess of $250,000 per month between the date of this Agreement and the Closing
Date, whether such payments are for compensation, the reimbursement of expenses
or otherwise (provided that, in no event shall the aggregate payments exceed
$3.2 million in the Company's fiscal year ended May 31, 1998 or a pro rated
lesser amount should the Closing Date occur prior to May 31, 1998); or
(t) authorize any of, or commit or agree to take any of the foregoing
actions.
In addition to the foregoing, the Company and its Subsidiaries shall not take
any action that would, or that could reasonably be expected to, result in (i)
any of the representations and warranties of the Company set forth in this
Agreement becoming untrue in any material respect or (ii) any of the conditions
of the other parties to the consummation of the transactions contemplated by
this Agreement and set forth in Section 6 not being satisfied.
5.3 Regulatory Matters. The Company, Buyer and MergerSub will make, and the
Company will cause its Subsidiaries to make, all necessary governmental and
regulatory filings, as soon as practicable, in order to facilitate prompt
consummation of the transactions contemplated by this Agreement. In addition,
the Company and its Subsidiaries, Buyer and MergerSub will each use its Best
Efforts, and will cooperate fully with each other (i) to comply as promptly as
practicable with all governmental requirements applicable to the transactions
contemplated by this Agreement and (ii) to obtain as promptly as practicable all
necessary Governmental Approvals and consents of all third parties necessary for
the consummation of the transactions contemplated by this Agreement. Each of the
Company and its Subsidiaries, Buyer and MergerSub shall use its Best Efforts to
provide such information and communications to Governmental Authorities as such
Governmental Authorities may request.
5.4 Audit/Updated Financial Information. The Company shall permit the Buyer
and the Buyer's representatives to audit the Company's consolidated books and
records as of February 28, 1998 and for the nine-month period then ended, at the
cost and expense of Buyer. The Company shall, and shall cause its accountants,
agents and employees to, cooperate fully in connection with such audit and make
available to the Buyer such books and records as are reasonably necessary to
conduct such audit. Buyer will use its Best Efforts to complete such audit on or
prior to May 27, 1998. As soon as internally available and in any event within
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days after the end of each calendar month, the Company shall deliver to Buyer
complete copies of any internal unaudited monthly statements of earnings and
balance sheets for the previous calendar month. The Company covenants that,
except for normal interim and year-end audit adjustments, such financial
statements shall be prepared in accordance with GAAP (except for changes
required by GAAP) consistently applied, and shall fairly present in all material
respects the consolidated financial condition and results of operations of the
Company as of the dates indicated and for the periods then ended.
5.5 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its Best Efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper, or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its Best Efforts to defend any lawsuits or other legal
proceedings, whether judicial or administrative, whether brought derivatively or
on behalf of third parties (including any Governmental Authority), challenging
this Agreement or the consummation of the Merger. In addition, the Company shall
provide such information and assistance as Buyer shall reasonably request or
require in connection with the financing for the transactions contemplated by
this Agreement, including by making available officers and advisors of the
Company and its Subsidiaries from time to time to attend and make presentations
regarding the business and prospects of the Company and its Subsidiaries at
meetings of prospective lenders or purchasers of the Company's debt or equity
securities, provided, however, that all meals, transportation and lodging costs
and expenses incidental thereto shall be for the account of Buyer. Without
limiting the generality of the foregoing, the Company shall use its Best Efforts
to cause its accountants, attorneys, advisors, employees and other
representatives to cooperate with Buyer and MergerSub in order to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, the financing of such transactions. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement and the Shareholders shall take all such necessary
action.
5.6 Releases. The Buyer shall deliver a release at the Closing (i)
releasing the Shareholders of any liability of, or to, the Company or the Buyer
arising prior to the Closing other than liabilities which may arise under such
Shareholder's Letter of Transmittal and Shareholder Side Agreement, and (ii)
releasing the directors and officers of the Company and each of its Subsidiaries
of any liability of, or to, the Company or the Buyer arising under this
Agreement, or any other liability (other than any such liabilities for gross
negligence or willful misconduct and for acts for which indemnity would not be
available under the Company's Certificate of Incorporation or By-laws) arising
prior to the Closing. After the Closing, the Buyer shall continue to hold
harmless and indemnify the former officers and directors of the Company from any
claim asserted by any third party with respect to acts or omissions arising out
of such individual's services as officers or directors of the Company or any
Subsidiary occurring prior to the Effective Time, to the fullest extent
currently permitted by the Certificate of Incorporation and By-laws of the
Company. Notwithstanding the foregoing, Buyer shall not be obligated to release
any current or former director or officer of the Company or any Subsidiary from
any liability, or indemnify any current or former officer or director of the
Company or any Subsidiary from any claims or Losses of or to any Shareholder or
any Person acting on behalf of
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or as a successor in interest to any Shareholder, or relating to any action
brought by any Shareholder.
5.7 Transaction Proposals. From the date hereof until the Closing Date (or
the earlier termination of this Agreement), the Shareholders and the Company
shall not, and the Company shall not permit any of its Subsidiaries to, and
neither the Shareholders nor the Company shall authorize or permit any of their
respective officers, directors, consultants or employees, or any of their
respective investment bankers, attorneys, advisors, auditors, representatives or
agents to, directly or indirectly, (i) solicit, initiate or encourage the
submission of inquiries, proposals or offers from any Person or group relating
to any acquisition or purchase of assets of, or any equity interest in, the
Company or any of its Subsidiaries or any tender or exchange offer, merger,
consolidation, business combination, recapitalization, restructuring, spin-off,
liquidation, dissolution or similar transaction involving, directly or
indirectly, the Company or any of its Subsidiaries (each a "Transaction
Proposal"), (ii) participate in any discussions or negotiations regarding any
Transaction Proposal or furnish information about the Company to any Person
except to (x) lenders and other parties to agreements with the Company and its
Subsidiaries (for the specific purpose set forth in such agreements, which in no
event shall include a Transaction Proposal) and (y) Buyer or MergerSub or their
representatives, (iii) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person to make or enter into a Transaction Proposal, or (iv) accept, approve or
authorize, or enter into any agreement concerning any Transaction Proposal or
dispose of any equity interest in the Company or any of its Subsidiaries. The
Company and the Shareholders shall cause their agents, officers, directors,
representatives and Affiliates to abide by the terms of this Section 5.7. In the
event that the Company or any Shareholder receives or becomes aware of any
Transaction Proposal, it shall promptly notify Buyer in writing of such
communication and keep Buyer informed of any subsequent developments in
connection therewith.
5.8 Notice of Certain Events. Each party shall notify the other parties if:
(a) any notice or other communication is received from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement is received;
(c) any actions, suits, claims, investigations or proceedings are commenced
or, to the best knowledge of such party, threatened against, relating to or
involving or otherwise affecting any party hereto which could interfere with the
consummation of the transactions contemplated by this Agreement or could result
in a Material Adverse Effect; and
(d) the occurrence or non-occurrence of any event would cause either (i)
any representation or warranty of any party contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time, (ii) any condition set forth in this Agreement to be
unsatisfied at any time from the date hereof to the Effective Time,
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or (iii) any material failure by any party to comply with or satisfy any
covenant, condition or agreement to be complied with hereunder; provided, that
the delivery of any notice pursuant to this Section 5.8 shall not limit or
otherwise affect the remedies available hereunder to Buyer or MergerSub.
ARTICLE 6
CONDITIONS
6.1 Conditions Precedent to Obligations of Buyer and MergerSub. The
obligations of Buyer and MergerSub to consummate the transactions provided for
by this Agreement are subject to the satisfaction at or prior to the Closing
Date of each of the following conditions, any one or more of which may be waived
(but only in writing) by Buyer:
(a) Representations and Warranties of the Company. (i) All of the Company's
representations and warranties contained in this Agreement, shall be true and
correct, in the case of any representation or warranty that is qualified as to
materiality or "Material Adverse Effect," in all respects, and in the case of
any representation or warranty that is not so qualified, in all material
respects, as of the date hereof and as of the Closing Date as though made on and
as of the Closing Date, except to the extent such representations and warranties
speak as of an earlier date; (ii) the Company and its Subsidiaries shall each
have performed and complied with all agreements and covenants required by this
Agreement to be performed by them on or prior to the Closing Date; and (iii)
with respect to (i) and (ii), at the Closing there shall be delivered to Buyer a
certificate signed by the President of the Company to the foregoing effect.
(b) Orders; Illegality. There shall not be in effect any statute, rule,
regulation, preliminary or permanent injunction or other order or decree of a
Governmental Authority which enjoins, prohibits, makes illegal or materially
restricts or otherwise prevents the consummation of the Merger or the
transactions contemplated hereby, and there shall not be pending any proceeding
in which any Person seeks such a remedy.
(c) Third Party Consents and Waivers. There shall have been obtained all
consents, approvals and waivers from parties to all Material Contracts and
Purchase and Sale Transactions that are required in connection with the Merger,
including those listed on Schedule 3.2.
(d) Governmental and Regulatory Consents. All filings required to be made
prior to the Closing Date with, and all consents, approvals, novations (if
required), permits and authorizations required to be made or obtained prior to
the Closing Date from any Governmental Authority in connection with the
execution and delivery of this Agreement and the consummation of the
transactions hereby by the Company, Buyer and MergerSub shall have been made or
obtained.
(e) Opinion of Counsel. Buyer shall have received the opinion of counsel to
the Company and its Subsidiaries dated as of the Closing Date, in the form of
Exhibit F attached hereto.
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(f) Resignations. Buyer shall have received, in form reasonably
satisfactory to Buyer, the resignations, effective as of the Closing Date, of
all directors of the Company and the Subsidiaries and the resignations of all
officers thereof other than the officers identified on Schedule 1.4.
(g) Repayment of Existing Obligations. All amounts reflected on the Closing
Liability Schedule as deductions from the Company Value pursuant to Section 2.3,
including, without limitation, amounts outstanding under the Loan Agreements,
shall have been paid in full with funds provided by the Buyer simultaneously
with, and conditioned upon, the Closing. Buyer shall have received from each
bank, creditor or other Person a written commitment and/or certification, in
form and substance satisfactory to Buyer, to the effect that upon receipt of
payment in full of the amount listed on the Closing Liability Schedule, all
claims against the Company and its Subsidiaries, all guaranties with respect to
such claims, and all Liens and security interests in its favor encumbering any
of the Company's or its Subsidiaries' Properties or assets will be released and
extinguished. In this regard the Buyer shall also have received UCC termination
statements, reconveyances of deeds of trust, releases of mortgages and all other
documents sufficient or necessary to terminate all agreements and release all
claims thereunder, and release all such Liens and security interests, with
authority to file and/or record the same in the appropriate governmental offices
upon payment of the relevant amounts.
(h) Termination of Guaranty. At or prior to the Closing, the Company's
guaranty of a loan from KeyBank, N.A. to Douglas Monitto shall be
unconditionally released at no cost to the Company.
(i) Stock Certificates. Buyer shall have received Certificates representing
all issued and outstanding shares of capital stock of the Company and Letters of
Transmittal executed from each Shareholder.
(j) Financing Conditions. All conditions, other than conditions which are
not satisfied by or through the fault of the Buyer or MergerSub, to borrowing
set forth in the Commitment Letter of Societe Generale dated April 16, 1998
shall be satisfied as of the Closing Date.
(k) Hart-Scott-Rodino. The waiting period applicable to the transactions
contemplated by this Agreement under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), including any extensions thereof, shall have expired or been
terminated.
(l) Closing Certificate. At or prior to the Closing Date, Buyer shall have
received the Closing Certificate ("Closing Certificate") which shall contain the
certification from the President and controller of the Company that (i) the
Closing Liability Schedule is accurate and complete, and (ii) the Company's
Working Capital is at least $29,375,000, and the Company's Shareholders Equity
is at least $13,800,000 as of the Closing Date (without giving effect to the
costs, expenses and effects of the transactions contemplated by this Agreement,
including, without limitation, the issuance of stock to Mr. Andrews under the
Andrews Employment Agreement or the cancellation of restrictions on stock issued
under the Restricted
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Stock Bonus Plan). The Closing Certificate shall contain such supporting
documentation as is reasonably necessary to demonstrate the accuracy of the
information contained therein, and the Buyer shall be reasonably satisfied that
the Closing Certificate and the information contained therein does not contain a
manifest error.
(m) Environmental Audits. The Buyer shall have received "Phase I"
environmental assessment reports of the environmental condition of the real
property owned or leased by the Company and its Subsidiaries which confirm the
correctness of the warranties, representations and covenants of the Company in
Section 3.11 hereof and which disclose no condition which could have a Material
Adverse Affect or could subject the Company to liability or remediation costs in
excess of $100,000.
(n) Non-competition/Monitor Asia. Douglas Monitto shall have entered into
(i) the Non-competition Agreement with Mr. Monitto substantially in the form of
Exhibit E-1, and (ii) the Monitor Asia Agreements substantially in the forms set
forth in Exhibit E-2, hereto.
(o) Employment of Management. The Company shall have entered into an (i)
amended employment agreement substantially on the terms described in Exhibit G-1
hereto with R. Bruce Andrews, and (ii) amended consulting agreement
substantially in the form set forth in Exhibit G-2 with Lawrence Goldberg.
(p) Escrow Agreement. The Company, the Majority Noteholder and the Escrow
Agent shall have executed the Escrow Agreement.
(q) Audit. Buyer shall have received the audited financial statements
described in Section 5.4 accompanied by an unqualified audit opinion, and the
audit shall present no reportable conditions and no indication of misfeasance,
malfeasance, misrepresentation, fraud or material irregularities, no material
weaknesses in accounting systems and controls and no material deviation from the
financial statements dated as of February 28, 1998 and for the nine-month period
then ended, which were certified and delivered by the Company to the Buyer prior
to the date hereof.
(r) CATIC Machines. The Company shall have entered into definitive
agreements with Catic International Leasing Co., Ltd. regarding the purchase,
sale, exchange or lease of four gantry profilers, in form and substance
satisfactory to the Buyer.
6.2 Conditions Precedent to Obligations of the Company. The obligations of
the Company to consummate the transactions provided for by this Agreement are
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any one or more of which may be waived by the Company (but
only in writing):
(a) Representations and Warranties of Buyer and MergerSub. All of Buyer's
and MergerSub's representations and warranties contained in this Agreement shall
be true and correct in all material respects as of the date hereof and as of the
Closing Date as though made on and as of the Closing Date, except to the extent
such representations and warranties speak as of an earlier date, (ii) Buyer and
MergerSub shall have performed and complied with all agreements
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and covenants required by this Agreement to be performed by them on or prior to
the Closing Date; and (iii) with respect to (i) and (ii), at the Closing there
shall be delivered to the Company a certificate signed by an executive officer
or authorized representative of Buyer and MergerSub to the foregoing effect.
(b) Orders; Illegality. There shall not be in effect any statute, rule,
regulation, preliminary or permanent injunction or other order or decree of a
Governmental Authority which enjoins, prohibits, makes illegal or materially
restricts or otherwise prevents the consummation of the Merger or the
transactions contemplated hereby, and there shall not be pending any proceeding
in which any Person seeks such a remedy.
(c) Buyer's Note. The Noteholders shall have received the Buyer's Note
substantially in the form of Exhibit B hereto, duly executed by the Surviving
Corporation.
(d) Opinion of Counsel. The Company shall have received the opinion of
counsel to Buyer in the form attached as Exhibit H hereto.
(e) Loan Agreements/Expenses. At the Closing, MergerSub shall have
available sufficient funds to make the payments listed on the Closing Liability
Schedule if required to be paid at that time, and the guaranties of Douglas
Monitto under the Loan Agreements shall be unconditionally released at the
Closing without recourse against Mr. Monitto.
(f) Release. The Buyer shall deliver the release referred to in Section 5.6
in the form attached as Exhibit I hereto.
(g) Merger Consideration. At the Closing, Buyer and MergerSub shall have
available cash sufficient to pay the Merger Consideration, the Pension Escrow
Fund, and the liabilities listed on the Closing Liability Schedule if required
to be paid at that time. At the Closing, Buyer and MergerSub shall pay to each
Shareholder who has delivered to Buyer such Shareholder's Certificates and
Letter of Transmittal, the Shareholder's portion of the Merger Consideration and
shall deliver to the Escrow Agent, the Pension Escrow Fund.
(h) Employment Obligations. At the Closing, bonuses due through May 31,
1998 in the amounts and to the senior executives of the Company listed on
Schedule 6.2(h), shall be paid to each such executive in immediately available
funds by wire transfer to an account designated by such executive. To the extent
that the bonuses exceed $1,000,000, the excess shall be included on the Closing
Liability Schedule and deducted from the Company Value in calculating the Merger
Consideration. The amount of the bonuses due on account of operations of the
Company shall be calculated without giving effect to the transactions
contemplated by this Agreement.
(i) Non-competition/Monitor Asia. The Company shall have entered into (i)
the noncompetition agreement with Mr. Monitto substantially in the form of
Exhibit E-1, and (ii) the Monitor Asia Agreements substantially in the forms set
forth in Exhibit E-2, hereto.
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(j) Employment of Management. The Company shall have entered into an (i)
amended employment agreement substantially on the terms described in Exhibit G-1
hereto with Bruce Andrews, and (ii) amended consulting agreement substantially
in the form set forth in Exhibit G-2 with Lawrence Goldberg.
(k) Hart-Scott-Rodino. The waiting period applicable to the transactions
contemplated by this Agreement under the HSR Act, including any extensions
thereof, shall have expired or been terminated.
(l) Escrow Agreement. The Buyer and the Escrow Agent shall have executed
the Escrow Agreement.
ARTICLE 7
TERMINATION
7.1 Termination. By notice given at or prior to the Closing, this Agreement
may be terminated and the transactions contemplated hereby may be abandoned:
(a) by either Buyer or the Company if a material breach of any provision of
this Agreement has been committed by the other party and such breach has not
been waived, provided that written notice of such breach has been given to the
breaching party and the breaching party has failed to cure such breach within 30
days of receipt of such notice;
(b) by Buyer or the Company, as the case may be, if any of the conditions
for the benefit of the terminating party in Article 6 have not been satisfied as
of the Closing Date or become impossible (other than through the failure of that
party to comply with its obligations under this Agreement) and that party has
not waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and the Company; or
(d) by either Buyer or the Company if the Merger shall not have been
consummated (other than through the failure of the party seeking termination to
comply fully with its obligations under this Agreement) on or before May 30,
1998, or such later date as the parties may agree upon.
No termination of this Agreement under this Section 7.1 for any reason or in any
manner shall release, or be construed as releasing either party from its
obligations under Article VII or Section 9.10 hereof.
7.2 Effect of Termination or Failure to Consummate Merger. In the event of
the termination of this Agreement as provided in Section 7.1, (i) written notice
thereof shall forthwith be given to the other party or parties specifying the
provision hereof pursuant to which such termination is made, (ii) all documents
and materials forwarded by the Company to the Buyer shall be promptly returned
to the Company as required by Section 9.10, and (iii) this Agreement shall
become void and of no further force or effect, except that this Article VII and
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Section 9.10 shall remain in full force and effect. Upon termination of this
Agreement under Section 7.1, there shall be no liability on the part of any
party hereto except in the event of a termination that constitutes a Payment
Event. In the event that the transactions contemplated by this Agreement do not
occur for any reason, the sole and exclusive remedy of the Buyer or MergerSub
with respect to such failure to close shall be as set forth in Section 7.3(a),
and the parties will have no other remedies against, and will have no liability
to, each other and each other parties' respective Affiliates, agents, officers,
directors, shareholders, partners or representatives except as set forth in
Section 9.10 and this Article VII.
7.3 Termination Payment.
(a) Within five business days after the occurrence of a Payment Event, the
Company shall pay to an account designated by Buyer, in immediately available
funds, a cancellation fee equal to $2,500,000.
(b) A "Payment Event" shall mean the termination of this Agreement or the
failure to consummate the Merger as a result of any of the following:
(i) the Buyer terminates this Agreement pursuant to Section 7.1(a), (b) or
(d) because of the voluntary, willful and intentional failure of the Company to
comply with any of the material provisions set forth in this Agreement, provided
that such failure is exclusively within the control of the Company or the
Company fails to meet the condition to Closing set forth in Section 6.1(i)
(unless such condition is waived by Buyer); or
(ii) all conditions to Closing set forth in Section 6.2 have been
satisfied, and the Company fails or refuses to close because the Company has
committed a voluntary, willful and intentional action, with respect to a matter
wholly within the control of the Company, which is intended to and does render
the Company unable to provide the closing certifications required by Section
6.1(a) or 6.1(l).
7.4 Expenses. Except as otherwise provided in Section 7.3, in the event the
transactions contemplated by this Agreement shall not be consummated, the
parties hereto shall bear their respective expenses incurred in connection with
the preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including the fees and expenses of agents,
representatives, counsel, actuaries and accountants.
ARTICLE 8
BUYER'S NOTE OFFSETS; SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; MAJORITY NOTEHOLDER
8.1 Survival of Representations and Warranties. The representations,
warranties and covenants contained in this Agreement shall survive the Closing
Date and continue in effect for two years thereafter ("Expiration Date").
8.2 Buyer's Note Payment Offsets; Exclusive Remedy.
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(a) The Buyer shall be entitled to offset payments of principal and
interest due under the Buyer's Note, in accordance with the procedures set forth
herein and in the Buyer's Note, if the Buyer or the Company or any of the
Subsidiaries has Losses as a result of, based upon or arising from:
(i) any inaccuracy in or breach of any of the representations and
warranties made by the Company in or pursuant to this Agreement;
(ii) any breach or nonperformance of any of the covenants or
agreements made by the Company in or pursuant to this Agreement;
(iii) any inaccuracy in the Closing Liability Schedule or the Closing
Certificate;
(iv) the invalidity, unenforceability of, or claims of material breach
or default arising under, any Material Contract or Purchase and Sale
Transaction;
(v) the amount by which the cost to terminate the Pension Plan
pursuant to Section 2.4 of the Merger Agreement exceeds the amount
recovered by Buyer under the Pension Escrow Fund (whether or not the
Pension Plan is terminated or Buyer elects not to terminate the Pension
Plan pursuant to Section 2.4(c));
(vi) any third party claim or demand against the Company or any of its
Subsidiaries regarding the conduct of the Company's or any Subsidiary's
business prior to Closing to the extent not actually covered by the
proceeds of insurance, ;
(vii) any claim the Buyer may have under any Letter of Transmittal or
the Shareholder Side Agreement;
(viii) any action, suit, proceeding or claim brought by, or on behalf
of, any Shareholder under or in respect of this Agreement, the Buyer's Note
or the Escrow Agreement, other than by Majority Noteholder in accordance
with such documents; and
(ix) any claims by a Governmental Authority for failure by the Company
to file reports with state and local officials pursuant to the Emergency
Planning and Community Right-to-Know Act, and any claims or costs of the
Company arising from any investigation or remediation required by the
appropriate Governmental Authority under any Environmental, Health or
Safety Requirement of Law, provided that the Company must make a good faith
effort to resolve each such claim or cost in the most cost-efficient manner
in accordance with prudent business practices.
(b) Notwithstanding anything in Section 8.2(a) to the contrary, no payment
offsets under the Buyer's Note may be made (i) with respect to any liabilities
listed on the Closing Liability Schedule to the extent such liabilities have
reduced the Company Value in the
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calculation of the Merger Consideration, or (ii) unless the aggregate of all
Losses of the Buyer and/or the Company exceeds $100,000 (the "Threshold
Amount"), in which case the full amount of all Losses may be offset against the
Buyer's Note.
(c) If the Buyer shall be entitled to offset payments due or to become due
under the Buyer's Note at any time prior to the Expiration Date, the Buyer shall
make a claim for offset of payments under the Buyer's Note in accordance with
the procedures set forth in this Article VIII and in the Buyer's Note and
neither the Noteholders, any payee under the Buyer's Note, any Shareholder, nor
any of their respective Affiliates shall be personally liable to make payment of
thereof. No payment offsets under the Buyer's Note may be made at any time after
the Expiration Date, other than for claims for Losses made prior to, but not
settled prior to, the Expiration Date.
(d) After the Closing, the exclusive remedy of Buyer and MergerSub for any
claims made under this Agreement shall be to offset payments due under the
Buyer's Note as described herein, and the Buyer and MergerSub waive any and all
right to make further claims under this Agreement; provided, however, the Buyer
shall maintain any rights or remedies it may have under the respective Letters
of Transmittal, the Shareholder Side Agreement and the Escrow Agreement.
8.3 Procedure for Payment Offsets for Third-Party Claims
(a) If the Buyer determines that it is or may be entitled to payment
offsets under the Buyer's Note with respect to claims for Losses resulting from
the assertion of liability by third parties, it shall give notice ("Claim
Notice") to the Noteholders within 45 days of it becoming aware of any such
claim and the facts upon which any such claim for Losses will be based, and the
Claim Notice shall set forth such material information with respect thereto as
is then reasonably available to the Buyer. The rights of the Buyer in respect of
claims for Losses shall not be adversely affected by its failure to give notice
pursuant to the foregoing unless, and, if so, only to the extent that the
Noteholders incur an out-of-pocket expense or are materially prejudiced thereby.
After receipt of the Claim Notice, the Majority Noteholder shall be entitled, at
any time that he so elects, to participate in the defense thereof, at his own
expense. The Buyer shall not, without the written consent of the Majority
Noteholder (which shall not be unreasonably withheld or delayed), settle or
compromise any Loss or consent to entry of any judgment in respect thereof if
and to the extent that an offset under the Buyer's Note is claimed.
(b) The Majority Noteholder shall have the right to defend, compromise or
settle such claim for Losses if the Buyer or the Company, within 30 days of
receipt by the Majority Noteholder of the Claim Notice, fails to assume the
defense of such claim, at the cost and expense of Buyer and the Company.
(c) The parties shall cooperate in the defense of all third party claims.
In connection with the defense of any claim, each party shall make available to
the party controlling such defense any books, records or other documents within
its control and access to employees that are reasonably requested in the course
of such defense.
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8.4 Buyer's Note Payment Offsets for Non-Third Party Claims. In the event
that the Buyer or the Company asserts the existence of a claim for Losses
(excluding claims resulting from the assertion of liability by third parties),
it shall give written notice to the Noteholders specifying the nature and amount
of the claim asserted. If the Majority Noteholder, within 30 days or such
greater time as may be necessary for the Majority Noteholder to investigate such
claim not to exceed 90 days, after receiving the notice from the Buyer or the
Company, shall not give written notice to the Buyer or the Company announcing
his intent to contest such assertion, such assertion shall be deemed accepted
and the amount of such claim shall be deemed a valid claim for Losses, the
amount of which will reduce the principal and interest due and to become due
under the Buyer's Note. During the time period set forth in the preceding
sentence, the Buyer or the Company shall cooperate fully with the Majority
Noteholder in respect of such claim for Losses. In the event that the Majority
Noteholder contests the assertion of a claim by giving such written notice to
the Buyer or the Company within said period, the parties shall, acting in good
faith, attempt to reach agreement with respect to such claim within ten days
after such notice. During the continuance of a pending claim for Losses,
payments in the amount of the contested Losses, due or to become due, shall be
withheld until a final resolution of such claim.
8.5 Majority Noteholder. The Majority Noteholder shall exercise all rights
and privileges of the Noteholders under the Buyer's Note and the Escrow
Agreement, and with respect to claims by Buyer under the Buyer's Note and Escrow
Agreement, and related matters, and in furtherance thereof (but without
limitation of the authority granted hereunder): (i) to investigate, employ
counsel to defend, resolve and settle any claim made by Buyer against the
Buyer's Note and Escrow Agreement, (ii) to give and receive notices pursuant
hereto and thereto, and (iii) to make and exercise all decisions, consents,
choices, elections, selections (including selection of counsel and other
consultants and advisors), settlements, requests, and exercise of discretion
that the Noteholders have the right to make or exercise with respect to matters
addressed herein or therein which shall be made or exercised only by the
Majority Noteholder on behalf of the Noteholders. Buyer and the Company shall
have the right to rely solely on the decisions made and actions taken by the
Majority Noteholder, and may rely on Schedule 2.3 exclusively in determining
whether or not it is dealing with the Majority Noteholder. If the Majority
Noteholder shall at any time transfer all or any part of his interest in the
Buyer's Note in accordance with the provisions of the Buyer's Note, whether or
not by operation of law, the Buyer shall be provided with such documentation
that it deems necessary to evidence such transfer, including, without
limitation, an opinion of counsel. In no event shall the Buyer or the Company be
responsible for the costs, expenses or liabilities of the Majority Noteholder.
ARTICLE 9
GENERAL
9.1 Notices. All notices and other communications hereunder shall be in
writing and may be delivered personally, sent by fax, sent by overnight courier,
or mailed by registered or certified mail, postage prepaid, return receipt
requested. Any such notice sent by fax shall be deemed given when transmitted
upon receipt of a confirmation thereof, any notice sent by overnight courier
shall be deemed given one business day after being delivered to the overnight
courier for next business day delivery, and any such notice sent by registered
or certified mail
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shall be deemed given on the date such receipt is acknowledged or refused.
Notices should be sent as follows:
If to Buyer, addressed to:
Mentmore Holdings Corporation
1430 Broadway, 13th Floor
New York, New York 10018-3308
Attention: Michael D. Schenker, Esq.
Fax No.: (212) 382-1559
with a copy to:
Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: Robert W. Ericson, Esq.
Fax No.: (212) 294-4700
If to the Company, addressed to:
Monitor Aerospace Corporation
1000 New Horizons Boulevard
Amityville, New York 11701
Attention: Douglas Monitto, Chairman
Fax No. (516) 957-1114
with a copy to:
Windels, Marx, Davies & Ives
156 West 56th Street
New York, New York 10019
Attention: Daniel V. Duff, Jr., Esq
James P. Conroy, Esq.
Fax No. (212) 262-1215
If to the Noteholders to:
Douglas Monitto, R. Bruce Andrews, Lawrence Goldberg
c/o Daniel V. Duff, Jr., Esq.
Windels, Marx, Davies & Ives
156 West 56th Street
New York, New York 10019
Fax No. (212) 262-1215
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or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
9.2 Extension; Waiver. At any time prior to the Closing, the parties hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such party by a senior
officer of the waiving party, provided that after the Merger has been approved
by the Shareholders, the Board of Directors of the Company shall not have any
authority to change the form or amount of consideration to be paid in the Merger
without the approval of such changes by the Shareholders in accordance with
applicable legal requirements.
9.3 Choice of Law; Consent to Jurisdiction. This Agreement shall be
governed by, construed, interpreted, and the rights of the parties enforced in
accordance with the internal laws of the State of New York. Each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any state
or Federal court located in the State of New York in the event any dispute
arises under this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction or venue by motion or other request for leave from such court, and
(c) agrees that it will not bring any action relating to this Agreement or any
of the transactions contemplated by this Agreement in any court other than a
state or Federal court sitting in the State of New York.
9.4 Amendment; Entire Agreement. This Agreement may not be amended except
by an instrument in writing signed by each of the parties hereto. This
Agreement, together with the exhibits and attachments hereto, and the schedules
hereto, constitutes the entire Agreement between the parties pertaining to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations, and discussions, whether oral or written, of the
parties.
9.5 Counterparts; Headings. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The headings of the
several Articles and Sections herein are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
9.6 Expenses. Except as set forth in Sections 7.3 and 7.4, the expenses of
Buyer, the Company and each Shareholder shall be allocated as follows:
(a) Buyer shall bear all fees and expenses of its counsel and all other
costs and expenses incurred by it in the preparation of this Agreement and its
investigation of the Company including, without limitation, environmental
consultation, and shall, at the time of and conditioned upon the Closing of the
transactions contemplated by this Agreement and the
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effectiveness of the Merger, provide funds to the Company to pay the fees and
expenses described in subparagraph (b) below;
(b) The Company shall pay all expenses of counsel to the Company and all
other costs and expenses incurred by the Company in connection with or arising
as a result of the transactions contemplated hereby, but only to the extent such
costs and expenses are set forth on the Closing Liability Schedule and have
reduced the Company Value in the calculation of the Merger Consideration as set
forth in Section 2.3(a); and
(c) Except to the extent such amounts have been set forth on the Closing
Liability Schedule and have reduced the Company Value in the calculation of the
Merger Consideration as set forth in Section 2.3(a), the Shareholders shall bear
all fees and expenses of counsel to the Company and the Shareholders, their
accountants, any brokers, finders, investment bankers, and any other Persons
specifically engaged to provide consulting, professional or other services to
the Company or the Shareholders in connection with the transactions contemplated
by this Agreement; all costs and expenses incurred by the Company and the
Shareholders or any such persons or firms in the preparation of this Agreement;
and the calling, noticing, and holding of a meeting of Shareholders to consider
and act upon the Merger or of attempting to obtain their written consents
thereto.
9.7 Publicity. No public announcement, press release, or communication
regarding the Merger shall be made without the prior written consent (which
consent shall not be unreasonably withheld) of the parties as to the content and
timing thereof except as required by Applicable Law (including, without
limitation, applicable securities laws). Any such general announcements or
communications by the Company or Buyer with third parties or representatives of
the press or news media shall be made only with the prior approval of the other
party hereto, which shall not be unreasonably withheld, except as otherwise
required by law or legal process. Subject to the preceding sentence, the Company
and the Buyer shall cooperate with each other in the development and
distribution of all news releases and other public announcements with respect to
the Merger.
9.8 Severability. If any term, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable, or against its regulatory policy, the remainder of
the terms, provisions, covenants, and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated so long as the economic or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by Applicable Law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
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9.9 No Third Party Beneficiaries; Assignment. This Agreement is not
intended to confer upon any employee of the Company or its Subsidiaries, or any
other Person, other than the parties hereto and their respective successors and
permitted assigns, any legal or equitable rights or remedies, except that, with
respect to directors and officers of the Company and any Subsidiary, the
provisions of Sections 5.6 are intended for the benefit of, and enforceable by,
such Persons. Neither this Agreement nor any of the rights, interests, or
obligations of the parties may be assigned by any party hereto, whether by
operation of law or otherwise, without the prior written consent of the other
parties hereto and any such assignment that is not consented to shall be null
and void; provided, however, Buyer and MergerSub may assign their rights and
obligations under this Agreement to any of their respective Affiliates without
the consent of any other party hereto but such assignment shall not affect the
Buyer's and MergerSub's obligations hereunder which shall continue in full force
and effect. Subject to the foregoing, this Agreement shall be binding on and
inure to the benefit of and be enforceable by the parties and their respective
successors and permitted assigns.
9.10 Confidentiality. From the date hereof until the Closing Date:
(a) The Buyer acknowledges the confidential and proprietary nature of the
Confidential Information (as defined below), agrees not to disclose and to hold
and keep the same confidential as provided herein. As used herein, the term
"Confidential Information" means and includes any and all:
(i) trade secrets concerning the business and affairs of the Company
or the Subsidiaries, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current, and planned research and
development, current and planned manufacturing or distribution methods and
processes, customer lists, current and anticipated customer requirements,
price lists, market studies, business plans, computer software and programs
(including object code and source code), computer software and database
technologies, systems, structures and architectures (and related processes,
formulae, composition, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information) and any
other information, however documented, that is a trade secret within the
meaning of applicable law; and
(ii) information concerning the business and affairs of the Company or
the Subsidiaries (which includes historical financial statements, financial
projections and budgets, historical and projected sales, capital spending
budgets and plans, the names and backgrounds of key personnel, personnel
training techniques and materials), however documented, that has been or
may hereafter be provided or shown to the Buyer or Buyer's representatives
(including financing sources of Buyer) by the Company or by the directors,
officers, employees, agents, consultants, advisors, legal counsel,
accountants, financial advisors or other representatives of the Company or
the Subsidiaries or is otherwise obtained from review of Company's or the
Subsidiaries' documents or property or discussions with Company's
representatives, irrespective of the form of the communication, and also
includes all notes, analyses, compilations, studies, summaries, and other
material prepared by the Buyer or the Buyer's representatives containing or
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based, in whole or in part, on any information included in the foregoing.
Any trade secrets of the Company and its Subsidiaries will also be entitled
to all of the protections and benefits under Applicable Law.
(b) The Buyer agrees that the Confidential Information (a) will be kept
confidential by the Buyer and the Buyer's representatives and (b) without
limiting the foregoing, will not be disclosed by the Buyer or the Buyer's
representatives to any person except for the purpose of evaluating the
transactions contemplated by this Agreement, including the financing for such
transactions. It is understood that the Buyer may disclose Confidential
Information to only those of the Buyer's representatives (including, without
limitation, financing sources) who (i) require such material for the purpose of
evaluating the transaction contemplated by this Agreement, and (ii) are informed
by the Buyer of the confidential nature of the Confidential Information and the
obligations of this Agreement. Buyer shall be responsible to the Company for the
breach of this Section 9.10(b) by its representatives to whom it has furnished
Confidential Information.
(c) All of the foregoing obligations and restrictions do not apply to that
part of the Confidential Information that (a) was or becomes generally available
to the public other than as a result of a disclosure by the Buyer or the Buyer's
representatives in violation of this Section 9.10, (b) was available, or becomes
available, to the Buyer on a non-confidential basis prior to its disclosure to
the Buyer by the Company or a Company's representative, but only if the Buyer
has no Knowledge that the source of such information is bound by a
confidentiality agreement with the Company or is otherwise prohibited from
transmitting the information to the Buyer or the Buyer's representatives by a
contractual, legal, fiduciary, or other obligation, or (c) in the reasonable
opinion of Buyer, is required to be disclosed by Applicable Law.
(d) If the Buyer or any of the Buyer's representatives are requested or
become legally compelled (by oral questions, interrogatories, requests for
information or documents, subpoena, civil or criminal investigative demand, or
similar process) or are required by a regulatory body to make any disclosure
that is prohibited or otherwise constrained by this Agreement, the Buyer or such
representative, as the case may be, will provide the Company with prompt notice
of such request so that it may seek an appropriate order or other appropriate
remedy. Subject to the foregoing, the Buyer or such representative may furnish
that portion (and only that portion) of the Confidential Information that, in
the opinion of its counsel, the Buyer is legally compelled or is otherwise
legally required to disclose; provided, however, that the Buyer and the Buyer's
representatives must use reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded any Confidential Information so
disclosed.
(e) If this Agreement terminates for any reason or if the Merger is not
consummated, then (a) the Buyer (i) will promptly deliver to the Company all
documents or other materials furnished by the Company or any Company
representative to the Buyer or the Buyer's representatives constituting
Confidential Information, together with all copies and summaries thereof in the
possession or under the control of the Buyer or the Buyer's representatives, and
(ii) will destroy materials generated by the Buyer or the Buyer's
representatives that include or refer to any part of the Confidential
Information, without retaining a copy of any such material or (b) alternatively,
if the Company requests or gives its prior written
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consent to the Buyer's request (which consent shall not be unreasonably
withheld), the Buyer will destroy all documents or other matters constituting
Confidential Information in the possession or under the control of the Buyer or
the Buyer's representatives. Any such destruction pursuant to the foregoing must
be confirmed by the Buyer in writing to the Company.
(f) Until the Closing Date, the Company and its Subsidiaries shall, and,
from and after the date hereof, the Shareholders (in whatever capacity) shall
treat as confidential all Confidential Information and all non-public
information concerning the Buyer or MergerSub and will not disclose any such
information to any Person except to the extent that (i) any disclosure of such
information may be required by Applicable Law, (ii) disclosure of Confidential
Information may be made by the Company prior to the Closing in the normal course
of business consistent with past practice provided that such disclosure would
not impair, in any material way, the business or operations of the Company or
any of the Subsidiaries, and (iii) with respect to non-public information
concerning Buyer, such information is available, or becomes available, to the
Company or its Subsidiaries on a non-confidential basis, but only if the source
of such information is not bound by a confidentiality agreement with the Buyer
or MergerSub or is not otherwise prohibited from transmitting the information by
a contractual, legal, fiduciary, or other obligation.
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IN WITNESS WHEREOF, Buyer, MergerSub, and the Company have each caused this
Agreement to be executed by their respective officers as of the date first above
written.
STELLEX AEROSPACE HOLDINGS, INC.
By: /s/ William L. Remley
----------------------------------
Name: William L. Remley
Title: President and Treasurer
SOZE CORP.
By: /s/ William L. Remley
----------------------------------
Name: William L. Remley
Title: President and Treasurer
MONITOR AEROSPACE CORPORATION
By: /s/ R. Bruce Andrews
---------------------------------
Name: R. Bruce Andrews
Title: President
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EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
MONITOR AEROSPACE CORPORATION
a New York Corporation
Under Section 807 of the Business Corporation Law
THE UNDERSIGNED, President and Secretary of Monitor Aerospace
Corporation (the "Corporation") do hereby certify as follows:
1. The name of the Corporation is Monitor Aerospace Corporation. The
Corporation was formed under the name of Monitor Machinery Corp.
2. The Certificate of Incorporation of Monitor Machinery Corp. was
filed with the State of New York on May 26, 1948. The Corporation is the
surviving constituent corporation of a consolidation of Monitor Machinery
Corp., Monitor Properties Corp. and Boxart Machine Company, Inc., pursuant to a
certificate of consolidation filed with the Department of State of the State of
New York on May 31, 1963 pursuant to Section 86 of the Stock Corporation Law of
New York.
3. The Certificate of Incorporation is hereby amended to effect the
following amendments authorized by the Business Corporation Law:
a. Article SECOND of the Certificate of Incorporation is
hereby amended in its entirety to read as follows:
SECOND: The Corporation is formed for the following purposes:
To engage in any lawful act or activity for which
corporations may be organized under the Business Corporation Law,
provided that the Corporation is not formed to engage in any act or
activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or
approval first being obtained.
b. Article THIRD of the Certificate of Incorporation is
hereby amended in its entirety to read as follows:
THIRD: The total number of shares of stock which the
Corporation has authority to issue is 1,000 shares. All of such shares
are Common Stock without par value.
<PAGE>
c. Article SIXTH of the Certificate of Incorporation is
hereby amended in its entirety to read as follows:
SIXTH: The Corporation shall indemnify any person to the
fullest extent permitted by the New York Business Corporation Law, as
amended from time to time, for all amounts (including, without
limitation, judgements, fines, settlement payments, expenses and
attorney's fees) incurred or paid in connection with any action, suit,
investigation or proceeding arising out of or relating to the
performance of services by such person for, or acting as a director,
officer, or employee of, the Corporation or any other person or
enterprise at the Corporation's request, and shall to the fullest
extent permitted by the New York Business Corporation Law, as amended
from time to time, advance all expenses incurred or paid by such
person in connection with, and until disposition of any action, suit,
investigation or proceeding arising out of or relating to the
performance of services by such person for, or acting as a director,
officer or employee of, the Corporation or any other person or
enterprise at the Corporation's request.
d. Article SEVENTH of the Certificate of Incorporation is
hereby amended in its entirety to read as follows:
SEVENTH: No director of the Corporation shall be personally
liable to the Corporation or its shareholders for damages for any
breach of duty in such capacity, provided that nothing contained in
this Article SEVENTH shall eliminate or limit the liability of any
director if a judgment or other final adjudication adverse to him or
her establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or that
he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled or that his or
her acts violated Section 719, or its successor, of the New York
Business Corporation Law.
e. A new Article EIGHTH is hereby added as follows:
EIGHTH: In furtherance and not in limitation or the powers
conferred by statute, the board of directors of the Corporation is
expressly authorized to adopt, amend or repeal the by-laws of the
Corporation.
f. A new Article NINTH is hereby added as follows:
NINTH: Elections of directors need not be by written ballot
unless the by-laws of the Corporation so provide.
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g. A new Article TENTH is hereby added as follows:
TENTH: No holder of any of the shares of any class of the
Corporation shall be entitled as of right to subscribe for, purchase,
or otherwise acquire any shares of any class of the Corporation which
the Corporation proposes to issue or any rights or options which the
Corporation proposes to grant for the purchase of shares of any class
of the Corporation or for the purchase of any shares, bonds,
securities, or obligations of the Corporation which are convertible
into or exchangeable for, or which carry any rights, to subscribe for,
purchase, or otherwise acquire shares of any class of the Corporation;
and any and all of such shares, bonds, securities, or obligations of
the Corporation, whether now or hereafter authorized or created, may
be issued, or may be reissued or transferred if the same have been
reacquired and have treasury status, and any and all such rights and
options may be granted by the Board of Directors to such persons,
firms, corporations, and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its
discretion may determine, without first offering the same, or any
thereof, to any said holder. Without limiting the generality of the
foregoing stated denial of any and all preemptive rights, no holder of
shares of any class of the Corporation shall have any preemptive
rights in respect of the matters, proceedings, or transactions
specified in subparagraphs (1) to (6), inclusive, of paragraph (e) of
Section 622 of the Business Corporation Law.
h. A new Article ELEVENTH is hereby added as follows:
ELEVENTH: Corporation Service Company, 80 State Street, 6th
Floor, Albany, New York, 12207-2543, is designated as agent of the
Corporation upon whom process against the Corporation may be served.
4. The Certificate of Incorporation of the Corporation as amended
heretofore is hereby restated as further amended to read in its entirety as
follows:
CERTIFICATE OF INCORPORATION
OF
MONITOR AEROSPACE CORPORATION
a New York Corporation
FIRST: The name of the corporation is Monitor Aerospace
Corporation.
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SECOND: The Corporation is formed for the following purposes:
To engage in any lawful act or activity for which
corporations may be organized under the Business Corporation Law,
provided the Corporation is not formed to engage in any act or
activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or
approval first being obtained.
THIRD: The total number of shares of stock which the
Corporation has authority to issue is 1,000 shares. All of such
shares of Common Stock are without par value.
FOURTH: The office of the Corporation in the State of New York
is to be located in the Town of Babylon, Village of Amityville,
County of Suffolk.
FIFTH: The duration of the Corporation shall be perpetual.
SIXTH: The Corporation shall indemnify any person to the
fullest extent permitted by the New York Business Corporation Law, as
amended from time to time, for all amounts (including, without
limitation, judgements, fines, settlement payments, expenses and
attorney's fees) incurred or paid in connection with any action, suit,
investigation or proceeding arising out of or relating to the
performance of services by such person for, or acting as a director,
officer or employee of, the Corporation of any other person or
enterprise at the Corporation's request, and shall to the fullest
extent permitted by the New York Business Corporation Law, as amended
from time to time, advance all expenses incurred or paid by such
person in connection with, and until disposition of any action, suit,
investigation or proceeding arising out of or relating to the
performance of services by such person for, or acting as a director,
officer or employee of, the Corporation or any other person or
enterprise at the Corporation's request.
SEVENTH: No director of the Corporation shall be personally
liable to the Corporation or its shareholders for damages for any
breach of duty in such capacity, provided that nothing contained in
this Article SEVENTH shall eliminate or limit the liability of any
director if a judgment or other final adjudication adverse to him or
her establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law or that
he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled or that his or
her acts violated Section 719, or its successor, of the New York
Business Corporation Law.
EIGHTH: In furtherance and not in limitation of the powers
conferred by statute, the board of directors of the Corporation is
expressly authorized to adopt, amend or repeal the by-laws of the
Corporation.
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NINTH: Elections of directors need not be by written ballot
unless the by-laws of the Corporation so provide.
TENTH: No holder of any of the shares of any class of the
Corporation shall be entitled as of right to subscribe for, purchase,
or otherwise acquire any shares of any class of the Corporation which
the Corporation proposes to issue or any rights or options which the
Corporation proposes to grant for the purchase of shares of any class
of the Corporation or for the purchase of any shares, bonds,
securities, or obligations of the Corporation which are convertible
into or exchangeable for, or which carry any rights, to subscribe for,
purchase, or otherwise acquire shares of any class of the Corporation;
and any and all of such shares, bonds, securities, or obligations of
the Corporation, whether now or hereafter authorized or created, may
be issued, or may be reissued or transferred if the same have been
reacquired and have treasury status, and any and all such rights and
options may be granted by the Board of Directors to such persons,
firms, corporations, and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its
discretion may determine, without first offering the same, or any
thereof, to any said holder. Without limiting the generality of the
foregoing stated denial of any and all preemptive rights, no holder of
shares of any class of the Corporation shall have any preemptive
rights in respect of the matters, proceedings, or transactions
specified in subparagraphs (1) to (6), inclusive, of paragraph (e) of
Section 622 of the Business Corporation Law.
ELEVENTH: Corporation Service Company, 80 State Street, 6th
Floor, Albany, New York, 12207-2543, is designated as agent of the
Corporation upon whom process against the Corporation may be served.
5. The amendment and restatement of the Certificate of Incorporation
is being done in connection with the merger of Soze Corp., a New York
corporation, with and into the Corporation in accordance with Section 902 of
the New York Business Corporation Law.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury, this day of ,
1998.
-----------------------------------
President
-----------------------------------
Secretary
[MAY BE REVISED PRIOR TO CLOSING]
5
<PAGE>
EXHIBIT B
FORM OF
NON-NEGOTIABLE OFFSET
PROMISSORY NOTE
$5,180,000 ________, 1998
FOR VALUE RECEIVED, the undersigned, MONITOR AEROSPACE CORPORATION, a New
York Corporation ("Payor" or the "Company"), promises to pay to Douglas Monitto,
in his capacity as Majority Noteholder and representative for the Noteholders
named in the Merger Agreement referred to below (in such capacity the "Payee"),
at 1000 New Horizons Boulevard, Amityville, New York, or at such other place as
the Payee and the Payor shall agree upon, the principal sum of FIVE MILLION, ONE
HUNDRED EIGHTY THOUSAND DOLLARS ($5,180,000) (subject to offset as set forth
below), with interest from the date hereof on the outstanding principal amount
at the rate of 8% per annum. Interest hereon shall be payable quarterly on March
31, June 30, September 30 and December 31 of each year while this Note remains
outstanding. The entire principal hereof, plus accrued and unpaid interest
hereunder, shall be payable on the second anniversary of the date hereof (the
"Expiration Date"). Interest hereon shall be retroactively adjusted between the
parties when the principal amount hereof is adjusted so that any interest paid
hereunder is paid only upon the adjusted principal amount. Interest adjustments
will only be made by offset against future payments of principal and interest
hereunder.
All capitalized terms used herein but not otherwise defined shall have the
meanings ascribed to them in the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of April 28, 1998, among the Payor, Stellex Aerospace
Holdings, Inc. (the "Buyer") and Soze Corp.
The principal amount of this Note and any interest due and payable
hereunder but not otherwise paid by the Payor, shall be reduced in the event
that Payor or any of its subsidiaries or Buyer has Losses as a result of, based
upon or arising from:
(i) any inaccuracy in or breach of any of the representations and
warranties made by the Company in or pursuant to the Merger Agreement;
(ii) any breach or nonperformance of any of the covenants or
agreements made by the Company in or pursuant to the Merger Agreement;
(iii) any inaccuracy in the Closing Liability Schedule or the Closing
Certificate;
1
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(iv) the invalidity, unenforceability of, or claims of material breach
or default arising under, any Material Contract or Purchase and Sale
Transaction;
(v) the amount by which the cost to terminate the Pension Plan
pursuant to Section 2.4 of the Merger Agreement exceeds the amount
recovered by the Buyer under the Pension Escrow Fund (whether or not the
Pension Plan is terminated or the Buyer elects not to terminate the Pension
Plan pursuant to Section 2.4(c) of the Merger Agreement);
(vi) any third party claim or demand against the Payor or any of its
Subsidiaries regarding the conduct of the Company's or any of its
Subsidiaries' business prior to the Closing to the extent not actually
covered by the proceeds of insurance;
(vii) any claim the Buyer or the Payor may have under any Letter of
Transmittal or the Shareholder Side Agreement; or
(viii) any action, suit, proceeding or claim brought by, or on behalf
of, any Shareholder under or in respect of this Note, the Merger Agreement
or the Escrow Agreement, other than by the Payee in accordance with such
documents; and
(ix) any claims by a Governmental Authority for failure by the Company
to file reports with state and local officials pursuant to the Emergency
Planning and Community Right-to-Know Act, and any claims or costs of the
Company arising from any investigation or remediation required by any
Governmental Authority under any Environmental, Health or Safety
Requirement of Law, provided that the Company must make a good faith effort
to resolve each such claim or cost in a cost-efficient manner in accordance
with prudent business practices.
Notwithstanding anything in the preceding paragraph to the contrary, no
payment offsets under this Note may be made (i) with respect to any liabilities
listed on the Closing Liability Schedule to the extent such liabilities reduced
the Company Value in the calculation of the Merger Consideration, or (ii) unless
the aggregate of all Losses of the Buyer and/or the Payor exceeds $100,000, in
which case the full amount of all Losses may be offset against this Note.
If either the Buyer or Payor shall be entitled to offset payments due or
become due under this Note at any time prior to the Expiration Date, it shall
make a claim for offsets of payments under this Note in accordance with the
procedures set forth herein and in Article VIII of the Merger Agreement, and
neither the Payee, any Noteholder, any Shareholder, nor any of their respective
Affiliates shall be personally liable to make payment thereof; provided,
however, that each Shareholder shall remain personally liable to the Buyer and
the Payor for any breach of such Shareholder's representations
2
<PAGE>
or covenants set forth in its Letter of Transmittal or in the Shareholder Side
Agreement. No payment offsets under this Note may be made at any time after the
Expiration Date, other than for claims for Losses made prior to, but not settled
prior to, the Expiration Date.
If either the Buyer or Payor determines that it is or may be entitled to
payment offsets under this Note with respect to claims for Losses resulting from
the assertion of liability by third parties, it shall give notice ("Claim
Notice") to the Payee within 45 days of its becoming aware of any such claim and
the facts upon which any such claim for Losses will be based, and the Claim
Notice shall set forth such information with respect thereto as is then
reasonably available to the Buyer or the Payor. The rights of each of the Buyer
and Payor in respect of claims for Losses shall not be adversely affected by its
failure to give notice pursuant to the foregoing unless, and, if so, only to the
extent, that the Payee incurs an out-of-pocket expense or is otherwise
materially prejudiced thereby. After receipt of the Claim Notice, the Payee
shall be entitled, at any time that he so elects, to participate in the defense
thereof, at his own expense. The Buyer shall not, without the written consent of
the Payee (which consent shall not be unreasonably withheld or delayed), settle
or compromise any Loss or consent to entry of any judgment in respect thereof if
and to the extent that an offset by be claimed hereunder. The Payee shall have
the right to defend, compromise or settle any such claim for Losses if neither
the Buyer nor the Payor, within 30 days of receipt by the Payee of the Claim
Notice, assumes the defense of such claim, at the cost and expense of Buyer and
the Payor.
Each of the Payee and the Payor shall cooperate in the defense of all third
party claims. In connection with the defense of any claim, each of the Payee and
the Payor shall make available to the party controlling such defense any books,
records or other documents within its control and access to employees that are
reasonably requested in the course of such defense.
In the event that either the Buyer or the Payor asserts the existence of a
claim of Losses (excluding claims resulting from the assertion of liability by
third parties), it shall give written notice to the Payee specifying the nature
and amount of the claim asserted. If the Payee, within 30 days or such greater
time as may be necessary for the Payee to investigate such claim not to exceed
90 days after receiving the notice from the Buyer or the Payor, shall not give
written notice to the Buyer or the Payor announcing his intent to contest such
assertion, such assertion shall be deemed accepted and the amount of such claim
shall be deemed a valid claim for Losses, the amount of which will reduce the
principal and interest due and to become due under this Note. During the time
period set forth in the preceding sentence, the Buyer or the Payor shall
cooperate with the Payee in respect of such claim for Losses. In the event that
the Payee contests the assertion of a claim by giving such written notice to the
Buyer or the Payor within said period, the Payee and the Payor shall, acting in
good faith, attempt to reach agreement with respect to such claim within 10 days
after such notice. During the continuance of a pending claim for Losses,
payments due or becoming due under the Note shall be withheld until a final
resolution of such claim.
3
<PAGE>
The undersigned may, at any time and from time to time, without penalty,
make prepayments which will be applied to the payment of principal under this
Note. In any case where the date of maturity of the principal of or interest on
this Note or the date fixed for payment or prepayment of this Note shall be, at
any place of payment, a Sunday, a legal holiday or a day on which banking
institutions are authorized or obligated by law or regulation to close, then
payment of principal or interest need not be made on such date at such place but
may be made on the next succeeding day that is not at such place of payment a
Sunday, a legal holiday or a day on which banking institutions are authorized or
obligated by law or regulation to close, with the same for and effect as if made
on the date of maturity or the date fixed for payment or prepayment.
Presentment, demand and protest, and notices of protest, dishonor, and
non-payment of this Note and all notices of every kind are hereby waived.
No single or partial exercise of any power hereunder shall preclude the
other or further exercise thereof or the exercise of any other power. No delay
or omission on the part of the Payee or the Payor in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note.
This Note may not be negotiated, assigned or transferred to any other
Person whatsoever without the consent of the undersigned.
THE OBLIGATIONS OF THE PAYOR UNDER THIS NOTE ARE TO THE PAYEE ONLY. NO
SHAREHOLDER, OR PERSON ACTING THROUGH OR ON BEHALF OF A SHAREHOLDER, OR ANY
OTHER PERSON (INCLUDING, WITHOUT LIMITATION, ANY NOTEHOLDER) SHALL HAVE THE
RIGHT TO ENFORCE ANY OF THE TERMS OR PROVISIONS OF THIS NOTE OR TO SEEK ANY
REMEDIES FOR AN ALLEGED BREACH HEREUNDER OR UNDER THE MERGER AGREEMENT. THE
PAYOR SHALL HAVE NO OBLIGATION TO DEAL WITH ANY INDIVIDUAL SHAREHOLDER OR
NOTEHOLDER REGARDING ANY ISSUE ARISING UNDER THIS NOTE OR THE MERGER AGREEMENT.
The Note shall be governed by and construed in accordance with the internal
laws of the State of New York.
MONITOR AEROSPACE CORPORATION,
a New York corporation
By:__________________________________
William L. Remley
Chief Executive Officer
4
<PAGE>
EXHIBIT C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement"), dated as of _________, 1998 by
and among Stellex Aerospace Holdings, Inc. (the "Buyer"), Monitor Aerospace
Corporation (the "Company"), Douglas Monitto (in his capacity as Majority
Noteholder as provided in Section 8.5 of the Merger Agreement referred to below
"Majority Noteholder"), and _________ (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Buyer, the Buyer's wholly-owned subsidiary, Soze Corp.
("MergerSub"), and the Company have entered into an Agreement and Plan of Merger
dated as of April 28, 1998 (the "Merger Agreement") pursuant to which MergerSub
shall merge with and into the Company, the Company, as the surviving
corporation, will become the wholly-owned subsidiary of the Buyer, and the
shareholders of the Company will receive consideration for their shares of
common stock of the Company;
WHEREAS, the Merger Agreement provides that the Buyer shall deposit FOUR
MILLION DOLLARS ($4,000,000) into the Pension Escrow Fund (as defined in the
Merger Agreement) to be held in an escrow account with the Escrow Agent in
accordance with the terms of this Agreement;
WHEREAS, all terms used herein and not defined herein shall have the
meaning set forth in the Merger Agreement;
WHEREAS, pursuant to the terms of the Merger Agreement, the Majority
Noteholder will act on behalf of the Noteholders with respect to all rights,
privileges and obligations of the Noteholders under this Agreement;
WHEREAS, the Buyer and the Majority Noteholder desire the Escrow Agent to
hold and dispose of the funds in the Escrow Account, and the Escrow Agent is
willing to do so, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Appointment of Escrow Agent. The Escrow Agent is hereby constituted and
appointed as escrow agent, and hereby accepts its appointment and agrees to act
as escrow agent pursuant to this Agreement.
2. Pension Escrow Fund. Pursuant to Section 2.4 of the Merger Agreement,
the Buyer has caused the delivery to the Escrow Agent of the sum of Four Million
Dollars ($4,000,000), in cash for deposit in an account identified as the
"Monitor Escrow Account" (the "Pension Escrow Account"). The Escrow Agent
acknowledges receipt of the sum referred to in the preceding sentence. The
Pension Escrow Fund will be held by the Escrow Agent until disbursed pursuant to
Section 4 or released pursuant to Section 5. Pursuant to Subsections 2.4(b) of
the Merger Agreement, the Buyer shall cause the Company to take all actions
reasonably necessary to effectuate the termination of the Pension Plan;
provided, however, that, in accordance with
<PAGE>
Section 2.4(c) of the Merger Agreement, in the event the cost to terminate the
Pension Plan exceeds or is expected to exceed the Pension Escrow Fund, the Buyer
shall have the right to elect to withdraw the termination of the Pension Plan
and make a claim under Section 4(d) hereof for the full amount of the Pension
Escrow Fund.
3. Investment of Pension Escrow Fund. The Escrow Agent shall invest and
reinvest the Pension Escrow Fund in direct obligations of the United States of
America, obligations for which the full faith and credit of the United States of
America is pledged to provide for the payment of principal and interest,
commercial paper rated of the highest quality by Moody's Investors Service, Inc.
or Standard & Poor's Ratings Service, or, upon receipt of written investment
instructions from the Buyer and the Majority Noteholder, the Escrow Agent shall
invest the Pension Escrow Fund in other investments in accordance with such
instructions. The Pension Escrow Fund shall be invested at all times during the
term of this Agreement except when such investments are liquidated and cash is
held by the Escrow Agent pending immediate payment of any amount from the
Pension Escrow Fund as provided in this Agreement. The Escrow Agent shall not be
responsible or liable for any loss suffered in connection with any investment of
the Pension Escrow Fund made by it in accordance with this Section 3 or realized
as a result of the liquidation of any such investment, absent willful
misconduct, bad faith or gross neglect.
4. Disbursement From Escrow Account. The Escrow Agent shall continue to
hold the Pension Escrow Fund in its possession until authorized hereunder to
distribute the Pension Escrow Fund as follows:
(a) No transfer shall be made from the Pension Escrow Fund for the
purpose of paying benefits therefrom or otherwise, until the later of (i)
the date that a favorable determination letter upon plan termination is
received from the Internal Revenue Service and any actions required to be
taken as a condition of the favorable termination letter have been
satisfied, (ii) the date the Pension Benefit Guaranty Corporation has
indicated by notice to the Plan Administrator that distributions from
Pension Plan may proceed and (iii) the date all participants, beneficiaries
or alternate payees who can be located have either completed their election
forms or have been deemed to have made an election (the "Distribution
Date"). At the Distribution Date, or as soon as practicable thereafter, and
at the request of the Buyer, the Escrow Agent shall transfer into the
Pension Plan funds sufficient to satisfy all liabilities owed to
participants, beneficiaries or alternate payees under the Pension Plan. The
Buyer shall notify Majority Noteholder of the Distribution Date, and shall
provide Majority Noteholder with documentation evidencing the amount
required to satisfy all liabilities under the Pension Plan.
(b) The Buyer, may pursuant to a Claim Notice substantially in the
form attached to this Agreement as Exhibit A, request a withdrawal from the
Pension Escrow Fund for any and all costs associated with the termination
of the Company's Pension Plan, other than those liabilities described in
subsection (a) hereof, including, but not limited to, all legal,
accounting, actuarial and other expenses associated with such termination.
The Buyer must provide, along with the Claim Notice, detailed schedules of
any and all expense documentation to support the Claim Notice. The Claim
Notice with supporting documentation shall be delivered to the Escrow Agent
and the Majority Noteholder pursuant to Section 10. The Escrow Agent must
release the funds requested in the Claim Notice to the Buyer unless on or
by the third (3rd) business day after the Escrow Agent's receipt of such
Claim Notice, the Escrow Agent shall have received from the Majority
Noteholder, a Dispute Notice substantially in the form attached to this
Agreement as Exhibit B.
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<PAGE>
(c) Upon the later of (i) the date the last single sum distribution to
a participant, beneficiary or alternate payee is made or (ii) the date an
annuity contract is purchased for participants, beneficiaries or any
alternate payees who have not elected a single sum distribution upon plan
termination, the Majority Noteholder may, by delivering a Claim Notice to
the Escrow Agent, the Company and the Buyer, request a withdrawal from the
Pension Escrow Fund in an amount equal to the excess of the Escrow Pension
Fund over the actual cost to terminate the Pension Plan. The Majority
Noteholder must provide, along with the Claim Notice, detailed schedules of
any and all documentation to support the Claim Notice. The Escrow Agent
must release the funds requested in the Claim Notice to the Majority
Noteholder unless on or by the third (3rd) business day after the Escrow
Agent's receipt of such Claim Notice, the Escrow Agent shall have received
from the Buyer, a Dispute Notice.
(d) The Buyer may, by delivering a Claim Notice to the Escrow Agent
and the Majority Noteholder, request a withdrawal of the entire amount of
the Pension Escrow Fund if the cost of terminating the Pension Plan exceeds
or is expected to exceed the amount in the Escrow Pension Fund. The Buyer
must provide, along with the Claim Notice, detailed schedules of any and
all documentation to support the Claim Notice. The Escrow Agent must
release the funds requested in the Claim Notice to Buyer unless on or by
the third (3rd) business day after the Escrow Agent's receipt of such Claim
Notice, the Escrow Agent shall have received from the Majority Noteholder,
a Dispute Notice.
(e) If one party delivers a Claim Notice as described in this Section
4, and either (i) the other party, by written notice, accepts the claims
set forth in the Claim Notice, or (ii) the other party fails to deliver a
Dispute Notice within the time specified, then the amount of the claim in
the Claim Notice shall be delivered by the Escrow Agent as specified in the
Claim Notice.
(f) If a Dispute Notice is delivered, the Majority Noteholder and
Buyer shall attempt to resolve in good faith any disputes with respect to
the claims. Escrow Agent shall not distribute the amount of any claim in
dispute until its receipt of one of the following: (i) written instructions
from the Majority Noteholder and Buyer with instructions with regard to
payment or nonpayment of the claim, or (ii) the dispute has finally been
settled by order of a court of competent jurisdiction from which time for
appeal of such order has passed. If a court determines that any party
unreasonably disputed a valid claim, the court may award attorney fees to
the prevailing party.
5. Other Releases of Pension Escrow Fund.
(a) On the date that the Escrow Agent shall receive notice from the Buyer
that the Pension Plan has been terminated and all costs and liabilities
associated therewith paid, the Escrow Agent shall deliver to the Majority
Noteholder the balance of the Pension Escrow Fund (the "Release Date").
(b) Interest earned on the Pension Escrow Fund shall be used to pay the
fees of the Escrow Agent. In addition, interest on the Pension Escrow Fund shall
be part of the Pension Escrow Fund and may be used for payment of any claims
hereunder. Interest accrued and not paid to the Escrow Agent or any other party
hereto, pursuant to the provisions hereof shall be deemed to accrue to the
Company, and the Escrow Agent may release to the Company a portion of the
interest accrued to pay any tax liabilities associated therewith.
-3-
<PAGE>
(c) If the Release Date shall fall on a day that is not a business day, any
required payment hereunder shall be made on the next business day.
6. Termination. This Agreement shall terminate upon delivery of the entire
amount of the Escrow Account (including interest thereon) in accordance
herewith.
7. Delivery of Pension Escrow Fund. The Majority Noteholder and the Buyer
will be entitled to delivery of the Pension Escrow Fund, or any portion thereof,
solely in accordance with the terms hereof. Except as may otherwise be lawfully
determined, no creditor of the Majority Noteholder, the Noteholders, the
Shareholders, the Company or the Buyer will have any rights in or to the Pension
Escrow Fund so long as it remains subject to the terms of this Agreement.
Interests in the Pension Escrow Account may not be transferred by any party
hereto.
8. Duties of the Escrow Agent; Fees. The Escrow Agent shall be reimbursed
for its fees described on Schedule A from interest earned on the Pension Escrow
Fund. Any reasonable attorneys' fees incurred by the Escrow Agent in connection
with a dispute between the Buyer and the Majority Noteholder shall be borne
equally by the parties. Acceptance by the Escrow Agent of its duties under this
Agreement is subject to the following terms and conditions, which the parties to
this Agreement hereby agree will govern and control the rights, duties and
immunities of the Escrow Agent:
(a) the duties and obligations of the Escrow Agent shall be determined
solely by the provisions of this Agreement and the Escrow Agent shall be
responsible only for the performance of such duties and obligations as are
specifically set forth in this Agreement;
(b) the Escrow Agent shall be fully protected in acting on and relying upon
any written advice, certificate, notice, direction, instruction, request,
or other paper or document which the Escrow Agent in good faith believes to
be genuine and to have been signed or presented by the proper party or
parties, and the Escrow Agent may assume that any person purporting to give
such advice, certificate, notice, direction, instruction, request or other
paper or document has been duly authorized to do so. The Escrow Agent
assumes no responsibility for the accuracy of the recitals thereof;
(c) the Escrow Agent shall not be liable for any mistake in fact or law or
otherwise, absent willful misconduct, bad faith or negligence;
(d) the Escrow Agent may seek the advice of legal counsel in the event of
any dispute or question as to the construction of any of the provisions of
this Agreement or its duties hereunder, and it shall incur no liability and
will be fully protected by the Buyer and the Majority Noteholder in respect
of any action taken, omitted or suffered by it in good faith in accordance
with the opinion of such counsel; and
(e) the Buyer and the Majority Noteholder agree to indemnify the Escrow
Agent from the performance or its duties and against any and all claims,
losses and liabilities arising out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), absent
willful misconduct, bad faith or negligence of the Escrow Agent.
9. Resignation of Escrow Agent. The Escrow Agent and any successor escrow
agent, as the case may be, may resign its duties and be discharged from all
further duties and obligations hereunder at any time upon giving 60 days' prior
written notice to the Buyer and the Majority Noteholder. The Buyer and the
Majority Noteholder shall thereupon jointly designate a successor
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<PAGE>
escrow agent hereunder within said 30-day period, to whom the Escrow Agent shall
deliver the Pension Escrow Fund. In the absence of such a joint designation of a
successor escrow agent, the Escrow Agent shall, without further liability or
responsibility, retain the Pension Escrow Fund as custodian thereof until
otherwise directed by the Buyer and the Majority Noteholder jointly.
10. Notices. Any notice or other communication required or permitted
hereunder shall be effective only if it is in writing and delivered personally
or sent by telecopy or mailed by registered or certified mail, return receipt
requested (air mail if to a point overseas from the point of mailing), postage
prepaid addressed as follows:
If to the Buyer:
Monitor Acquisition Corp.
c/o Mentmore Holdings Corporation
1430 Broadway, 13th Floor
New York, New York 10018-3308
Attention: Michael D. Schenker, Esq.
Telecopier No.: (212) 382-1559
with a copy to:
Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: Robert W. Ericson, Esq.
Telecopier No.: (212) 294-4700
If to the Majority Noteholder:
Douglas Monitto
c/o Daniel V. Duff, Jr.
156 West 56th Street
New York, New York 10019
Telecopier No.: (212) 262-1215
With copies to:
Windels, Marx, Davies & Ives
156 West 56th Street
New York, New York 10019
Attention: David V. Duff, Jr., Esq.
James P. Conroy, Esq.
Telecopier No.: (212) 262-1215
If to Escrow Agent:
___________________________________
___________________________________
___________________________________
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<PAGE>
or to such other address as any such party may designate by notice given to the
other parties and shall be deemed to have been given as of the date received.
All notices given by telecopy shall be promptly confirmed by the mailing (by
first class mail) of a letter in receipt thereof.
13. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
The parties to this Agreement agree that any legal suit, action or proceeding
arising out of or relating in any way to this Agreement, shall be instituted
exclusively in a court in New York, and each party waives any objection
whatsoever which it may now have or hereafter have to the laying of the venue of
any such suit, action or proceeding exclusively in a court in New York, and
irrevocably submit to the exclusive jurisdiction of a court in New York, in any
such suit, action or proceeding. In the event any legal suit, action or
proceeding of any kind is commenced in or brought in any court other than in a
court in New York, the parties agree to, and shall cause their respective
subsidiaries and affiliates to, transfer and/or remove any such legal suit,
action or proceeding to a court in New York, or to dismiss such legal suit,
action or proceeding immediately.
14. Assignment. No assignment, amendment or modification of the terms of
this Agreement shall be binding or effective unless expressed in writing and
signed by each party.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same instrument.
16. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
17. Captions. The titles of captions of sections contained in this
Agreement are inserted only as a matter of convenience and for reference and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
STELLEX AEROSPACE
HOLDINGS, INC.
By:________________________
Name:
Title:
MAJORITY NOTEHOLDER:
----------------------------
Name: Douglas Monitto
MONITOR AEROSPACE
CORPORATION
----------------------------
Name:
Title:
ESCROW AGENT:
By: __________________________
Name:
Title:
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<PAGE>
SCHEDULE A
Escrow Fees $
-------------
<PAGE>
EXHIBIT A
CLAIM NOTICE
[Escrow Agent Address]
---------------------
---------------------
---------------------
[Majority Noteholder/Buyer Address]
---------------------
---------------------
---------------------
Ladies and Gentlemen:
Reference is made to (i) the Agreement and Plan of Merger dated as of
___________, 1998 among Stellex Aerospace Holdings, Inc. ("Buyer "), Soze Corp.
and Monitor Aerospace Corporation (the "Company"), and (ii) the Escrow Agreement
dated as of _____________, 1998 ("Escrow Agreement") among the Buyer, the
Majority Noteholder named therein and the Escrow Agent.
This letter shall serve as the [Buyer's/Majority Noteholder's] notice to
the [Buyer/Majority Noteholder] that such party has a claim under the Escrow
Agreement with respect to costs associated with termination of the Company's
Pension Plan in the amount of $_______________________ (the "Claim Amount").
[Annex I hereto sets forth the supporting documentation of the Claim Amount.]
The undersigned hereby instructs the Escrow Agent to disburse from the
Escrow Account the Claim Amount by wire transfer to the account specified below.
[Insert Wire Instructions]
By: ____________________
Name:
Title:
<PAGE>
EXHIBIT B
DISPUTE NOTICE
[Escrow Agent Address]
---------------------
---------------------
---------------------
[Buyer or Majority Noteholder's Address]
---------------------
---------------------
---------------------
Ladies and Gentlemen:
Reference is made to (i) the Agreement and Plan of Merger dated as of
___________, 1998 among Stellex Aerospace Holdings, Inc.. ("Buyer "), Soze Corp.
and Monitor Aerospace Corporation (the "Company"), and (ii) the Escrow Agreement
dated as of _____________, 1998 ("Escrow Agreement") among the Buyer, the
Majority Noteholder and the Escrow Agent.
This letter shall serve as the Dispute Notice of the [Buyer/Majority
Noteholder] as described in the Escrow Agreement. The undersigned hereby
instructs the Escrow Agent not to disburse from the Pension Escrow Fund
$__________________ to [Buyer/Majority Noteholder], but $____________ may be
distributed in accordance with the Claim Notice.
------------------------
<PAGE>
EXHIBIT D
LETTER OF TRANSMITTAL
To accompany certificates for shares of Common Stock of
MONITOR AEROSPACE CORPORATION
surrendered for the applicable Merger Consideration
in connection with the merger of
Soze Corp., a wholly-owned subsidiary of
Stellex Aerospace Holdings, Inc., with and into Monitor Aerospace Corporation
This letter should be delivered with accompanying stock certificates as soon as
possible to:
Monitor Aerospace Corporation
1000 New Horizons Boulevard
Amityville, New York 11701
PLEASE READ THE ATTACHED INSTRUCTIONS CAREFULLY.
Gentlemen:
Pursuant to the Agreement and Plan of Merger dated as of April 28, 1998
(the "Merger Agreement") among Stellex Aerospace Holdings, Inc. ("Buyer"), Soze
Corp. ("MergerSub"), and Monitor Aerospace Corporation (the "Company"), the
undersigned shareholder (the "Shareholder") herewith surrenders for cancellation
the following certificate(s), which represent all of the shares of Common Stock
of the Company ("Company Common Stock") owned (beneficially or of record) by the
Shareholder (the "Shares"):
<TABLE>
<CAPTION>
====================================================================================================================
Common Stock
====================================================================================================================
Name and Address of Shareholder Cert. No. Number of Shares
====================================================================================================================
Unrestricted Restricted
Shares* Shares**
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
====================================================================================================================
Total (must equal total shares of record)
====================================================================================================================
(If the above space is inadequate, please attach a schedule.)
</TABLE>
* Unrestricted Shares means Company Common Stock owned by persons other than
Douglas Monitto, Lawrence G. Goldberg and R. Bruce Andrews.
** Restricted Shares means Company Common Stock owned by Douglas Monitto,
Lawrence G. Goldberg and R. Bruce Andrews (collectively, the
"Noteholders").
1
<PAGE>
Terms used herein, but not otherwise defined herein, shall have the
meanings subscribed thereto in the Merger Agreement.
Payment for Shares: You are hereby authorized and instructed to deliver, as
set forth below, the Shareholder's portion of the Merger Consideration set forth
on Schedule 2.3 of the Merger Agreement (which such Shareholder acknowledges is
accurate and complete and in accordance with any and all agreements with such
Shareholder and other Shareholders), less any withholding therefrom required by
Applicable Law, for all shares of Company Common Stock owned by the Shareholder
and formerly represented by the stock certificate(s) so surrendered and to take
all necessary actions to effect such delivery; provided that any shareholder
holding Restricted Shares acknowledges that a portion of the Merger
Consideration:
(i) will be paid in the form of a Buyer's Note in the aggregate amount
of $5,180,000 payable by the Company to the Majority Noteholder, and
that if the Buyer has claims under the Merger Agreement, the
Shareholder Side Agreement or under any Letter of Transmittal, the
Buyer may offset payments due under the Buyer's Note; and
(ii) will be placed in escrow pursuant to the Escrow Agreement between
Buyer, the Majority Noteholder and the Escrow Agent named therein (the
"Escrow Agreement") for the purpose of paying all costs and
liabilities associated with termination of the Pension Plan,
including, legal, accounting, actuarial, and other expenses which
would be incurred in connection with the termination of the Pension
Plan.
The portion of the Merger Consideration that is payable in cash to the
Shareholder pursuant to the Merger Agreement is hereinafter referred to as the
"Closing Date Merger Consideration." Each Shareholder intends to receive amounts
payable to him or her by wire transfer pursuant to the "Wire Transfer
Instructions" set forth on the last page hereof. If such instructions are not
provided, the Closing Date Merger Consideration shall be paid by Buyer by
issuing a cashier's check in the name of the Shareholder and mailing the same to
the address of the Shareholder indicated herein. The Shareholder understands
that if payment is to be made to a person other than the registered holder of
the certificate(s) surrendered herewith, it is a condition of such payment that
the certificate(s) be properly endorsed or otherwise in proper form for transfer
and that the Shareholder must pay any transfer or other Taxes required by reason
of the payment to such other person or establish to the reasonable satisfaction
of Buyer that such Taxes have been paid or are not applicable.
Ownership of Shares; Authorizations: The Shareholder represents and
warrants that the Shareholder: (i) is the record owner of the Shares, (ii) is
the beneficial owner of the Shares or has full authority and capacity to
transfer the Shares on behalf of the beneficial owners, and (iii) has good and
marketable title to the Shares, free and clear of any liens, encumbrances,
security agreements, claims, equities, charges, restrictions, voting agreements,
proxies, options, rights of first refusal, calls, contractual rights or other
interests or adverse claims. The Shareholder has all necessary power and
authority to execute and deliver this Letter of Transmittal, and to consummate
the transactions described herein, and the Letter of Transmittal is the legal,
valid and binding obligation of the Shareholder. If the Shareholder is a
Majority Noteholder, the Shareholder has all necessary power and authority to
execute and deliver the Escrow Agreement, and to consummate the transactions
described therein, and the Escrow Agreement is the legal, valid and binding
obligation of the Shareholder.
2
<PAGE>
If the Shareholder is a legal entity, the execution and delivery of each of
this Letter of Transmittal and, if applicable, the Escrow Agreement: (a) has
been duly and validly authorized by such Shareholder's governing body; (b) does
not violate (A) any applicable law or court order or (B) the organizational
documents of such Shareholder; and (c) does not conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any agreement to which the Shareholder is a party or to which such
Shareholder's property is bound or result in the creation or imposition of any
lien of any nature upon any property of such Shareholder. If the Shareholder is
a trustee or otherwise acting in a fiduciary or representative capacity, the
Shareholder hereby represents and warrants that it is duly authorized to execute
and deliver this Letter of Transmittal.
Release: Effective as of the Closing, the Shareholder hereby irrevocably
waives and releases all known and unknown claims it may have, in such
Shareholder's capacity as a shareholder of the Company, against the Company,
Buyer, or MergerSub, or any present, future and former directors, officers,
agents, affiliates and employees of the Company, Buyer or MergerSub from any and
all actions, claims, causes of action or liabilities of any nature, in law or
equity, known or unknown, and whether or not heretofore asserted, which such
Shareholder ever had, now has or hereafter can, shall or may have against any of
the foregoing entities or persons for, upon or by reason of any matter, cause or
thing relating to the Shareholder's status as a shareholder of the Company,
provided that this release shall not be deemed to limit or release any party
from the provisions of the Merger Agreement, Buyer's Note or the Escrow
Agreement. The release set forth in the foregoing sentence shall be binding upon
all beneficiaries, heirs, executors, administrators, trustees in bankruptcy,
legatees, distributees, successors, assigns and legal representatives of the
Shareholder, and shall not be affected by, and shall survive the death,
incapacity, dissolution, bankruptcy, liquidation or reorganization of the
Shareholder. The Shareholder acknowledges that the release provided for in this
paragraph is a condition to Closing and is being given in partial consideration
for the Buyer's undertakings in the Merger Agreement.
THE SHAREHOLDER, UNLESS IT IS THE MAJORITY NOTEHOLDER ACTING IN ITS
CAPACITY AS SUCH, ACKNOWLEDGES AND AGREES THAT IT HAS NO RIGHT, TITLE OR OTHER
INTEREST IN THE BUYER'S NOTE OR THE PENSION ESCROW FUND. THE SHAREHOLDER, UNLESS
IT IS THE MAJORITY NOTEHOLDER ACTING IN ITS CAPACITY AS SUCH, WAIVES ANY AND ALL
RIGHTS TO BRING ANY CLAIMS OR CAUSES OF ACTION UNDER THE MERGER AGREEMENT, THE
BUYER'S NOTE OR THE ESCROW AGREEMENT.
IF THE SHAREHOLDER IS A NOTEHOLDER, SUCH NOTEHOLDER ACKNOWLEDGES AND AGREES
THAT THE MAJORITY NOTEHOLDER SHALL EXERCISE ALL RIGHTS AND PRIVILEGES OF THE
NOTEHOLDERS UNDER THE BUYER'S NOTE, THE ESCROW AGREEMENT AND THE MERGER
AGREEMENT, AND RELATED MATTERS, ALL IN ACCORDANCE WITH SECTION 8.5 OF THE MERGER
AGREEMENT.
EACH SHAREHOLDER ACKNOWLEDGES THAT THE BUYER AND THE COMPANY SHALL HAVE NO
OBLIGATION TO DEAL WITH ANY INDIVIDUAL SHAREHOLDER (OTHER THAN THE MAJORITY
NOTEHOLDER IN ITS CAPACITY AS SUCH) REGARDING ANY ISSUE ARISING UNDER THE
BUYER'S NOTE, THE ESCROW AGREEMENT OR THE MERGER AGREEMENT. GOVERNING LAW;
CONSENT TO JURISDICTION: THE SHAREHOLDER AGREES THAT THIS AGREEMENT SHALL BE
GOVERNED BY, CONSTRUED,
3
<PAGE>
INTERPRETED, AND THE RIGHTS OF THE PARTIES ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK. THE SHAREHOLDER (A) CONSENTS TO SUBMIT
HIMSELF OR HERSELF TO THE PERSONAL JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED IN THE STATE OF NEW YORK IN THE EVENT ANY DISPUTE ARISES UNDER THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, (B) AGREES THAT HE OR
SHE WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION OR VENUE BY
MOTION OR OTHER REQUEST FOR LEAVE FROM SUCH COURT, AND (C) AGREES THAT HE OR SHE
WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY COURT OTHER THAN A STATE OR FEDERAL COURT SITTING IN
THE STATE OF NEW YORK.
Other Documents: The Shareholder hereby agrees to execute or provide any
additional documents, or take such additional action, as Buyer may deem
reasonably necessary to evidence or effect surrender of the Shares covered by
this Letter of Transmittal or to establish the right of the persons indicated in
this Letter of Transmittal to receive any payment indicated in this Letter of
Transmittal.
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder who surrenders certificates
formerly evidencing shares of Company Common Stock for payment of the applicable
Merger Consideration is generally required by law to provide Buyer with his or
her correct taxpayer identification number on the Form W-9 accompanying this
Letter of Transmittal. If Buyer is not provided with the Shareholder's correct
taxpayer identification number, the Shareholder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such Shareholder may be subject to backup withholding. Backup withholding also
may be imposed if the Internal Revenue Service notifies Buyer that the taxpayer
identification number provided by the Shareholder is incorrect.
If backup withholding applies, Buyer is required to withhold 31% of any
payments made to the Shareholder. Backup withholding is not an additional tax.
Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
Purpose of Form W-9
To prevent backup withholding on payments that are made to a Shareholder,
the Shareholder must notify Buyer of the Shareholder's correct taxpayer
identification number by completing the Form W-9 certifying under penalties of
perjury that the taxpayer identification number provided on Form W-9 is correct
(or that the Shareholder has applied for or intends, in the near future, to
apply for a taxpayer identification number, and the Shareholder is not waiting
for such number).
What Number to Give
The taxpayer identification number that the Shareholder is required to give
is his or her social security number if the Shareholder is an individual, or the
employer identification number if the Shareholder is not an individual. If
someone is acting in a representative capacity for a Shareholder, the social
security number of the person being represented must also be provided. If
payment is to
4
<PAGE>
be made to other than the registered holder, the payee indicated under "Special
Payment Instructions" or "Wire Transfer Instructions" must provide such payee's
taxpayer identification number and complete the Form W-9 accompanying this
Letter of Transmittal.
Form W-8/Foreign Persons
All persons who are not citizens of the United States or who are not
otherwise United States persons, as that term is defined in the Internal Revenue
Code of 1986, as amended, which term includes, among other things, a corporation
organized under the laws of any state, should complete Form W-8 in lieu of Form
W-9.
Employee Owners of Stock
Payments made to (i) employees and other persons who surrender shares of
stock issued under the Restricted Stock Bonus Plan or the Andrews Employment
Agreement or (ii) employees who otherwise own stock acquired as a consequence of
their employment with the Company, which stock is still subject to ownership
restrictions that cause the employee or other persons to then not be treated as
the unrestricted owner of the stock for tax purposes, are generally subject to
withholding of applicable Federal, state and local income and employment related
taxes. Any income taxes withheld shall be deemed to have been paid by such
shareholder, who may then claim a credit against such shareholder's personal tax
liability in an amount equal to such withheld taxes. Any affected shareholders
should consult with their tax advisors and the Company as to the impact of such
taxes.
INSTRUCTIONS FOR SURRENDERING CERTIFICATE(S)
(in connection with the merger of Soze Corp.,
a wholly-owned subsidiary of Stellex Aerospace Holdings, Inc.
with and into Monitor Aerospace Corporation)
In accordance with the terms of the Merger Agreement, upon surrender of
certificates representing the Shares, the Shareholder thereof is entitled to
receive his or her portion of the applicable Merger Consideration described in
the Merger Agreement for all shares of Company Common Stock surrendered by the
Shareholder, less amounts placed in escrow pursuant to the Escrow Agreement or
paid under the Buyer's Note. To receive such Merger Consideration, the
Shareholder must send this Letter of Transmittal, properly filled in, dated, and
signed, together with the certificate(s) evidencing the Shares, to the Company
at the address set forth above. It is expected that a representative of the
Buyer will be present at the closing of the transactions contemplated in the
Merger Agreement to receive Letters of Transmittal and certificates for shares
of Company Common Stock.
1. Signatures. This Letter of Transmittal must either: (a) be signed by the
registered holder(s) of the certificate(s) transmitted with this Letter to
Transmittal; or (b) signed by a transferee to whom such certificates have been
duly transferred by the registered holder (such transfer to be evidenced as
described in paragraph 2 below). THE SHAREHOLDER MUST HAVE HIS OR HER SIGNATURE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY HAVING AN OFFICE IN THE UNITED
STATES OR BY A MEMBER ORGANIZATION OF THE NEW YORK STOCK EXCHANGE OR THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., and such persons must complete
the Internal Revenue Service Form W-9, as described below. If any surrendered
certificates are held of record in joint tenancy,
5
<PAGE>
both joint tenants must sign. If the surrendered certificates are held of record
in joint tenancy and one joint tenant is deceased, the surviving joint tenant
must send a death certificate of the deceased joint tenant along with this
Letter of Transmittal. If this Letter of Transmittal is executed by an attorney,
executor, administrator, trustee, or guardian, or by anyone acting in a
fiduciary or representative capacity, or by an officer of a corporation, the
person executing such letter of Transmittal must give his or her full title in
such capacity and evidence of authority satisfactory to Buyer. All signatures
must correspond with the name as written on the tendered Certificates or as
otherwise provided in this paragraph.
2. Payment to Other than the Registered Holder If any payment for shares of
Company Common Stock is to be made in a name other than the name of the
registered holder of the surrendered certificate, the certificate so surrendered
must be duly endorsed by the registered holder to the person to whom payment is
to be made, or the surrendered certificate must be accompanied by a duly
executed stock power, in each case with the signature guaranteed (as described
above in paragraph 1), evidencing proper assignment of the shares of Company
Common Stock represented by said certificate. Also, any person requesting
payment to anyone other than the registered holder of the shares of Company
Common Stock being surrendered must pay any transfer or other Taxes required by
reason of the payment to a person other than the registered holder or establish
to the satisfaction of Buyer that such Tax has been paid or is not payable.
3. Special Instructions/Wire Transfers. Please complete the applicable
special instruction boxes if either: (a) cashier's checks for the Closing Date
Merger Consideration are to be issued in a name other than the name of the
Shareholder; or (b) payments of the Closing Date Merger Consideration are to be
made by wire transfer (whether such payments are to be made for the account of
the Shareholder or that of a person other than the Shareholder).
4. Certificates in Different Names. If certificates are registered in
different names, it will be necessary to complete, sign, and submit as many
separate Letters of Transmittal as there are different registrations of
certificates surrendered.
5. Lost Certificates. If certificates have been lost, stolen, or destroyed,
that fact should be indicated on the face of this Letter of Transmittal, and the
Shareholder should contact R. Bruce Andrews at the Company for further
instructions.
6. Delivery of Certificates. All certificates should be delivered at one
time for surrender. A Letter of Transmittal and the stock certificate(s) must be
received by the Company and Buyer, in satisfactory form, in order to make an
effective surrender. Delivery of the certificate(s) and other documents will be
effected, and the risk of loss and title to the certificate(s) will pass, only
upon proper delivery of the certificate(s) to the Company. The method of
delivery of the Letter of Transmittal and the stock certificate(s) is at the
option and risk of the Shareholder, but if mail is used, registered mail with
proper insurance is suggested as a precaution against loss.
7. Comply with all Conditions. Failure to accurately complete this Letter
of Transmittal, to obtain guarantees of signatures, or to comply with the other
conditions and requirements of this Letter of Transmittal may affect the closing
of the Merger Agreement. Buyer may, entirely at its election, waive any of the
conditions or requirements specified herein. All determinations as to
whether the conditions and requirements of this Letter of Transmittal have been
complied with shall be made by Buyer and shall be final and binding.
6
<PAGE>
8. Forms W-9. Please complete the Internal Revenue Service Form W-9 (or, in
the case of a non-United States person, a Form W-8) accompanying this Letter of
Transmittal. Failure to do so may result in withholding of a portion of the
payment to be made hereunder.
9. Additional Information. If you need an additional Letter of Transmittal
or require additional information or explanations, please call R. Bruce Andrews
at the Company at (516) 957- 2442.
10. Cancellation of Shares. Subject to and in accordance with the terms of
the Merger Agreement, all shares of Company Common Stock outstanding prior to
the Merger and held by the Shareholder will be canceled at the Effective Time.
11. Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of the Shareholder contained in this
Agreement shall survive the Closing Date indefinitely.
12. Representations Regarding Merger Agreement. The Shareholder
acknowledges that he, she or it has been provided with a fully executed copy of
the Merger Agreement (including schedules and exhibits) and approves the terms
and provisions thereof. The Shareholder confirms that it has approved, by
unanimous written consent, the form, terms and provisions of the Merger
Agreement pursuant to the Unanimous Written Consent of Shareholders of the
Company dated April 28, 1998.
7
<PAGE>
- --------------------------------------------------------------------------------
WIRE TRANSFER INSTRUCTIONS
To be completed if payments are to be made by wire transfer. Please make
payments by wire transfer to the following accounts and in the following amounts
in accordance with the following instructions:
- --------- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Guarantee of Signature(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(ALL SHAREHOLDERS' SIGNATURES APPEARING HEREON MUST BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY HAVING AN OFFICE IN THE UNITED STATES OR BY A
MEMBER ORGANIZATION OF THE NEW YORK STOCK EXCHANGE OR THE NATIONAL ASSOCIATION
OF SECURITIES DEALERS, INC.)
The undersigned hereby guarantees the signature(s) that appear on this
Letter of Transmittal and the stock certificate(s) formerly representing the
shares of Company Common Stock surrendered pursuant to this Letter of
Transmittal.
Authorized Signature: __________________________________________________________
Name of Firm: __________________________________________________________________
Dated: _________________________________________________________________________
*THE SHAREHOLDER MUST ALSO COMPLETE THE FORM W-9 ACCOMPANYING THIS LETTER
OF TRANSMITTAL. FAILURE TO COMPLETE SUCH FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS DUE.
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
All Shareholders
SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)
(Must be signed by registered holder(s) as name(s) appear on stock
certificate(s) or by person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If any certificate being
surrendered is held of record in joint tenancy, both joint tenants must sign. If
signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or other acting in a fiduciary or representative
capacity, please set forth full title.
Shareholders should complete:
Dated: _________________________________________________________________________
Name(s): _______________________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(Including Zip Code)
- --------------------------------------------------------------------------------
Area Code and Telephone Number (______) ________________________________________
CHECKS WILL BE MAILED TO THE ADDRESS
ABOVE UNLESS OTHERWISE INDICATED.
================================================================================
8
<PAGE>
EXHIBIT E-1
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is made as of the ___ day
of May, 1998 between Monitor Aerospace Corporation (the "Company"), a New York
corporation, whose address is at 1000 New Horizons Boulevard, Amityville, New
York 11701 and Douglas Monitto ("Monitto").
WHEREAS, concurrently with the execution of this Agreement, Stellex
Aerospace Holdings, Inc. ("Buyer"), Soze Corp. ("MergerSub") and the Company
will enter into an Agreement and Plan of Merger, dated as of April __, 1998 (the
"Merger Agreement"), pursuant to which MergerSub will be merged into and with
the Company (the "Merger");
WHEREAS, concurrently with the execution of this Agreement, the Company and
Monitor Asia Corporation ("Monitor Asia"), an Affiliate of Monitto, will enter
into a Sales Representative Agreement, dated as of May __, 1998 (the "Monitor
Asia Sales Representative Agreement"), pursuant to which Monitor Asia will serve
as a non-exclusive representative of the Company for the promotion and sale of
certain products and services of the Company in certain territories as more
specifically provided for therein;
WHEREAS, concurrently with the execution of this Agreement, the Company,
Monitor Asia and Monitor Aerospace International Corporation ("MAIC"), a
subsidiary of the Company, will enter into an Asset Purchase Agreement, dated as
of May __, 1998 (the "Asset Purchase Agreement"), pursuant to which the Company
will sell and Monitor Asia will acquire certain assets and properties of MAIC as
set forth more specifically on Exhibit A thereto;
WHEREAS, pursuant to Section 6.1(n) of the Merger Agreement, a condition
precedent to the obligations of Buyer and MergerSub to consummate the Merger is
that Monitto shall have entered into a non-competition agreement with the
Company; and
WHEREAS, Monitto desires to induce Buyer and MergerSub to enter into the
Merger Agreement, the Asset Purchase Agreement and the Monitor Asia Sales
Representative Agreement and to consummate the Merger, from which transactions
Monitto will gain substantial economic benefits.
NOW THEREFORE, in consideration of the execution of the Merger Agreement,
the Asset Purchase Agreement and the Monitor Asia Sales Representative Agreement
and the consummation of the Merger, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
legally sound hereby, Monitto and the Company hereby agree as follows:
<PAGE>
1. Acknowledgments. The Company and Monitto acknowledge that:
a. The Company's business is highly competitive;
b. The essence of that portion of the Company's business in which Monitto
was involved consisted of trade secrets, business and product
information, financial information, and other confidential and
proprietary customer relationships (collectively, the "Trade
Secrets"), all of which are necessary to the conduct of the Company's
business and are protected and kept secret by the Company; and
c. Monitto acknowledges that the Company's rights in its Trade Secrets
and customers would be misappropriated should Monitto, personally, or
any company or business entity with which he is or becomes affiliated
at any time, disclose the Trade Secrets to others or engage in
solicitation of the Company's customers in a manner inconsistent with
this agreement, and that the Company would suffer substantial damage
as a result of such disclosure or solicitation.
2. Trade Secrets and Customer Lists.
Based upon what is set forth above:
a. Monitto agrees that neither he, personally, nor any company or
business entity with which he is or becomes affiliated, shall, for a
period of two (2) years after the date of execution of this Agreement,
solicit any customers of the Company for the account of any competing
business with which he is or shall in any way become employed or
affiliated.
b. Monitto agrees that neither he, personally, nor any company or
business entity with which he is or becomes affiliated, shall, for a
period of two (2) years after the execution of this Agreement, induce
or attempt to induce any employee or independent contractor of the
Company to terminate his employment or contractual agreement, whether
written or oral, with the Company.
c. Monitto agrees that following the date of execution of this Agreement
neither he, personally, nor any company or business entity with which
he is or becomes affiliated shall obtain, directly or indirectly, from
him and thereafter use, disseminate, or disclose, in whole or in part,
any of the Company's Trade Secrets to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever. As
used in this Agreement, the term "Trade Secrets" shall not include any
proprietary information and intellectual property set forth on Exhibit
A hereto, which the Company acknowledges to be proprietary information
and intellectual property belonging to Monitto as of the date of
execution of this Agreement. Except as set forth on Exhibit A hereto,
the presumption will be that all other proprietary
2
<PAGE>
information and intellectual property of the Company represents
Company Trade Secrets.
3. Non-competition. Neither Monitto personally, nor any company or business
entity with which he is or becomes affiliated at any time, shall, for a
period of two (2) years after the date of execution of this Agreement,
directly or indirectly, own, manage, operate, or control, or be employed by
or participate in or be connected in any manner with the ownership,
management, operation, or control of any business or type of business
competitive with the Company's business. For the purposes of this
Agreement, the Company's business consists of the manufacture and assembly
of precision machined structural aircraft components and assemblies, the
sale and licensing of technology to aerospace manufacturers and the
providing of applied management consulting to aerospace manufacturers. In
addition, during such period, neither Monitto, personally, nor any company
or business entity with which he is or becomes affiliated at any time,
shall, directly or indirectly, hire, attempt to hire, solicit, or otherwise
attempt to employ in any capacity, whether as employee, independent
contractor, consultant, or otherwise, and whether temporary or permanent,
part-time or full time, any employee or agent of the Company or any
Affiliate of the Company.
4. Legal and Equitable Relief.
a. Monitto agrees that, upon the breach of any of the provisions of this
Agreement, the Company, in addition to all other remedies, shall be
entitled, as a matter of right, to injunctive relief in any court of
competent jurisdiction, and may, in addition, pursue any other
available remedy, at law or in equity, including the recovery of
damages.
b. If the scope, period of time, or area of restriction herein specified
is or would be adjudged unreasonable in any court proceeding, then the
period of time, scope, or area of restriction shall be reduced or
limited in the court's discretion so as to make said time period,
scope or area of restriction reasonable, such that it or they may be
enforced in such areas and during such periods of time and in such
manner as is adjudged to be reasonable by the court by the elimination
of any unreasonable aspects thereof.
c. Monitto stipulates that in any proceeding in which Monitto,
personally, or any company or business entity with which he is or
becomes affiliated at any time, is shown to be soliciting or receiving
business from the Company's customers in a manner contrary to the
provisions of this Agreement, such information shall be considered
prima facie evidence that the names and addresses of such customers
became known to Monitto as a result of the confidential relationship
between Company and Monitto. The burden shall be on Monitto to prove
otherwise.
5. Limitation on Restrictions. Notwithstanding the restrictions contained
herein, none of the following actions shall constitute a violation of the
terms of this Agreement: (a) the
3
<PAGE>
assumption by Monitor Asia of the Sales Representative Agreement, dated as
of November 15, 1996, between the Company and Cincinnati-Milacron Marketing
Company, (b) Monitor Asia's acting as a non-exclusive representative of the
Company and others for the promotion and sale of certain products and
services of the Company and others in certain territories pursuant to or as
permitted by the Monitor Asia Sales Representative Agreement nor (C) the
assumption by Monitor Asia of (I) the Expatriate Employment Agreement,
dated June 30, 1997, between the Company and Kan Hong Seng, (ii) the letter
agreement, dated September 30, 1997, between the Company and John Lowry and
(iii) the ___________ agreement, dated _____________, between the Company
and Chuck Lu Da.
6. Successors and Assigns. The Company may assign its rights under this
Agreement and this Agreement shall inure to the benefit of the successors
and assigns of Company and, subject to the restrictions on transfer herein
set forth, be binding upon Monitto and his heirs, executors,
administrators, guardians, and successors whether individuals, companies,
Affiliates or other business entities. Monitto may not assign his rights or
obligations under this Agreement.
7. Waiver. The failure of the Company to insist upon strict adherence to any
term of this Agreement shall not be considered a waiver or deprive the
Company of the right to subsequently insist upon strict adherence to that
term or to insist at any time upon strict adherence to any other term of
this Agreement.
8. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity of or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Choice of law; Consent to Jurisdiction. Each of the parties hereto agrees
that this Agreement shall be governed by, construed, interpreted, and the
rights of the parties enforced in accordance with the internal laws of the
State of New York. Each of the parties hereto (a) consents to submit
himself or herself to the personal jurisdiction of any State or Federal
court located in the State of New York in the event any dispute arises
under this Agreement, (b) agrees that he or she will not attempt to deny or
defeat such personal jurisdiction or venue by motion or other request for
leave from such court, and(C)agrees that he or she will not bring any
action relating to this Agreement in any court other than a state or
Federal court Sitting in the State of New York.
10. Headings. The headings in this Agreement are solely for convenience of
references and shall not affect its interpretation.
11. Entire Agreement. This Agreement constitutes the entire agreement between
the Company and Monitto and supersedes and cancels all prior oral or
written agreements between them, if any, with respect to the subject matter
hereof.
4
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12. Amendments. This Agreement may not be amended, altered or changed, except
by a writing signed by the Company and Monitto.
13. Defined Terms. All capitalized terms used herein but not otherwise defined
shall have the meanings ascribed to them in the Merger Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate by a proper and duly authorized representative thereof, and Monitto
has signed this Agreement in duplicate, as of the day and year first above
written.
--------------------------------------
DOUGLAS MONITTO
Sworn before me this _________ day of
_________________, 1998.
- -----------------------------------
Notary Public
MONITOR AEROSPACE CORPORATION
By:___________________________________
Name:
Title:
Sworn before me this ___________ day of
________________, 1998.
- -----------------------------------
Notary Public
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<PAGE>
Exhibit E-2
ASSET PURCHASE AND SALE AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of the _____ day of
________, 1998, by Monitor Aerospace Corporation, a corporation duly organized
and existing under the laws of the State of New York and Monitor Aerospace
International Corporation, a corporation duly organized and existing under the
laws of the State of New York (collectively, the "Company") and Monitor Asia
Corporation ("Monitor Asia")(the "Purchaser"), a corporation duly organized and
existing under the laws of the State of Delaware.
WHEREAS, the Company desires to sell, and the Purchaser desires to
purchase, the assets and properties of the Company described on Exhibit A, and
to employ the persons listed on Exhibit A, in order to conduct a business
selling products, engineering and services to the aircraft and aerospace
industry throughout Asia; and
WHEREAS, it is the express intent of the parties that all assets
transferred hereunder are to be transferred for $1 plus assumption of certain
liabilities; and
WHEREAS, it is the express intent of the parties that all of the risks and
liabilities of the assets and businesses of the Company which are transferred
hereunder for events occurring after the date hereof shall be borne solely by
Purchaser; and
WHEREAS, it is the express intent of the parties that all of the risks and
liabilities of the assets and businesses of the Company which are not
transferred hereunder shall remain solely with the Company; and
WHEREAS, the Purchaser and its employees are knowledgeable about the
business and the assets which it is acquiring hereunder and the Purchaser is
willing to acquire such assets and business "as is" without any warranties or
representations by the Company as to their operating condition or otherwise;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I.
SALE AND PURCHASE
Section 1.1. Sale of Assets by the Company. Subject to and upon the
terms, provisions and conditions contained in this Agreement as of the date
hereof, the Company hereby sells, assigns, and delivers to the Purchaser, and
the Purchaser
<PAGE>
purchases, accepts and receives from the Company, all of the Company's right,
title and interest in and to all of the assets other than deposits related
thereto listed on Exhibit A (the "Assets"). Such deposits, which are referred to
in Items 1A, 1B and 1G and 2A of Exhibit A, shall be paid over to the Company on
the date of this Agreement.
Section 1.2. Excluded Assets. Notwithstanding any provision of this
Agreement to the contrary, there shall be excluded from the sale and purchase
contemplated by this Agreement all assets of the Company not specifically listed
in Exhibit A (the "Retained Assets").
Section 1.3. Liabilities Assumed by Purchaser. Purchaser hereby assumes and
agrees to pay all of the obligations and liabilities of the Company related to
the Assets, whether such obligations and liabilities arise out of events
occurring before or after the date hereof, including without limitation, all
risks of loss in connection with contracts scheduled on Exhibit A. All risks of
loss in connection with the Retained Assets shall remain with the Company.
Purchaser has delivered to the Company agreements (such agreements, together
with releases referred to in Section 4.2, the "Releases") of the third parties
to the contracts listed on Exhibit A, in form and substance satisfactory to the
Company, releasing the Company from all liability under such contracts.
Section 1.4. Purchase Price. In consideration of the sale, assignment and
delivery of the Assets to the Purchaser by the Company in accordance with the
provisions of this Agreement, the Purchaser shall pay to the Company the
purchase price (the "Purchase Price") in an amount equal to $1.00 by check in
good, available funds, receipt of which is acknowledged by the Company and the
assumption by the Purchaser of the obligations and liabilities of the Company
with respect to the Assets.
Section 1.5. Use of Name. Purchaser agrees to use the word "Monitor" only
in the countries of Indonesia, Malaysia, Thailand, Singapore, South Korea,
People's Republic of China and the Republic of China and only for so long as the
Sales Representative Agreement dated the date hereof between the Company and
Monitor Asia remains in effect. Purchaser agrees, within two months after
receipt of notice to do so, to cease using the word "Monitor" in its name if
requested to do so by the Company because such continued use would be
determintal or adverse to the business operations of the Company.
2
<PAGE>
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents, warrants and covenants to the Purchaser
that:
Section 2.1. Due Authorization, Execution and Delivery. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. Such execution and
delivery by the Company has been duly authorized and this Agreement has been
duly executed and delivered and is enforceable in accordance with its terms,
subject only to bankruptcy, insolvency or other laws now or hereafter in effect
relating to creditors' rights.
Section 2.2. No Other Representations or Warranties. Other than as
expressly provided herein, the Company makes no other warranties or
representations regarding the Assets.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 3.1 Organization, Due Authorization, Execution and Delivery. The
Purchaser is a duly organized, validly existing corporation and in good standing
under the laws of the State of Delaware with all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Such execution and delivery by the Purchaser
has been duly authorized and this Agreement has been duly executed and is
enforceable in accordance with its terms, subject only to bankruptcy, insolvency
or other laws now or hereafter in effect relating to creditors' rights.
Section 3.2 Purchaser's Knowledge and Experience. Purchaser expressly
represents that it is highly knowledgeable and sophisticated in the businesses
to which the contracts being acquired as assets hereunder pertain and
acknowledges that the Company is transferring all assets, including the
contracts, "as is" and without any warranties or representations, except as
expressly stated herein, and Purchaser expressly waives all right to any
warranties or representations from the Company in connection with the purchase
and transfer of the Assets, except as expressly set forth herein.
Section 3.3 Valid and Binding Agreement. This Agreement and any further
instruments executed and delivered by the Purchaser hereunder, constitute and
will constitute the legal, valid and binding obligations of the Purchaser,
enforceable
3
<PAGE>
against the Purchaser in accordance with their respective terms. To the
knowledge of the Purchaser, the Releases constitute the legal, valid and binding
obligations of the parties providing such releases, enforceable against such
parties in accordance with the respective terms.
Section 3.4 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement by the Purchaser, nor compliance with the terms and
provisions of this Agreement on the part of the Purchaser, will (a) violate any
statute or regulation of any governmental authority, domestic or foreign,
affecting the Purchaser; (b) require the issuance of any authorization, license,
consent or approval of any federal, state or foreign governmental agency; or (c)
conflict with or result in a breach of any of the terms, conditions or
provisions of any judgment, order, injunction, decree, note, indenture, loan
agreement or other agreement or instrument to which the Purchaser is a party, or
by which the Purchaser is bound, or constitute a default thereunder.
ARTICLE IV.
COVENANTS OF PURCHASER
Section 4.1. Performance of Obligations. The Purchaser will perform in a
timely manner all of the Company's obligations required under or in connection
with the Assets.
Section 4.2. Employees. Exhibit A lists those employees of the Company
whose employment with the Company will be terminated on the date of this
Agreement. It shall be a condition to the effectiveness of this Agreement that
the Purchaser shall deliver to the Company (a) a consent executed by each
employee of the Company listed on Exhibit A hereto to his termination of
employment by the Company and (b) a release executed by each employee listed on
Exhibit A hereto of all claims each such employee may have against the Company
under any employment agreement, consulting agreement, statute or otherwise, in
each case in form and substance satisfactory to the Company. The Purchaser shall
be responsible for any liability of the Company arising after the date hereof to
the former employees of the Company listed on Exhibit A.
ARTICLE V.
INDEMNIFICATION
Section 5.1 Indemnification. The Purchaser shall indemnify and hold the
Company and its affiliates harmless from and against any and all losses, costs,
obligations, liabilities,
4
<PAGE>
settlement payments, awards, judgements, liens, penalties, damages, expenses and
charges (including, without limitation, reasonable fees and disbursements of
counsel and other professionals) incurred by the Company or its affiliates in
connection with or arising from:
a. Any indebtedness and obligation of or claim, contingent or otherwise,
relating to the Assets, whether incurred or arising prior to or after
the date hereof;
b. Any breach by Purchaser of any of its covenants or agreements
contained in this Agreement;
c. Any failure by Purchaser to perform any of its obligations under this
Agreement;
d. Any claim asserted by any party to a contract listed on Exhibit A; and
e. All actions, suits, proceedings, demands, assessments, judgments,
costs and expenses (including reasonable legal fees) incident to the
foregoing.
ARTICLE VI.
MISCELLANEOUS
Section 6.1 Confidentiality. Each party acknowledges the confidential
nature of the information covered by and relating to this Agreement and to the
Assets. Each party and each party's representatives will hold in strict
confidence all confidential data and information obtained with respect to this
Agreement, the Assets or the other party hereto, except to the extent disclosure
is required by applicable law.
Section 6.2 Construction. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
regard to conflicts of law principles.
Section 6.3. Entire Agreement. This Agreement, together with schedules and
exhibits attached hereto, contains the entire agreement between the parties with
respect to the subject matter hereof and supercedes all prior agreements or
understanding, oral or written, as to such subject matter.
Section 6.4. Further Assurances. Each of the parties agrees hereafter to
execute and deliver to the other any and all
5
<PAGE>
further agreements, instruments, artifacts and other documents as may reasonably
be requested by the other party hereto in order more fully to consummate the
transactions contemplated hereby and to effect an orderly transition of the
Assets being acquired by the Purchaser hereunder.
Section 6.5. Notices. All notices or other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally or by telecopier, on the date received if
sent by courtier, or otherwise addressed as follows:
(i) if to Purchaser, to:
Monitor Asia Corporation
Beijing Silver Tower
Room 915
Beijing
Peoples Republic of China
with a copy to:
Daniel V. Duff, Jr., Esq.
Windels, Marx, Davies & Ives
156 West 56th Street
New York, New York 10019
(2) if to the Company, to:
Monitor Aerospace Corporation
1000 New Horizons Boulevard
Amityville, New York 11701
Attention: President
Fax No.: (516)957-1114
with a copy to:
Mentmore Holdings Corporation
1430 Broadway, 13th Floor
New York, NY 10018-3308
Attention: Michael D. Schenker, Esq.
Fax No.: (212)391-1392
Section 6.6 Bulk Transfer Laws. Purchaser hereby waives compliance with the
provisions of applicable bulk transfer laws, if any, in connection with the sale
of the Assets to Purchaser.
Section 6.7 Survival. All representations and warranties (and indemnities
with respect thereto) contained in
6
<PAGE>
this Agreement shall survive the execution and delivery of this Agreement. All
covenants and agreements (and indemnities with respect thereto) under this
Agreement shall survive the execution and delivery of this Agreement.
Section 6.8 Waivers and Amendments; Non-Contractual Remedies; Preservation
of Remedies. This Agreement may be amended, superceded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by authorized representatives of the parties hereto. No such written
instrument shall be effective unless it expressly recites that it is intended to
amend, supercede, cancel, renew or extend this Agreement or to waive compliance
with one or more of the terms hereof, as the case may be. Except as expressly
provided herein, no delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, or any
single or partial exercise of any such right, power or privilege, preclude any
further exercise of any other such right, power or privilege
Section 6.9 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns.
Section 6.10 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts which together shall constitute one and the same
instrument.
Section 6.11 Severability. Should any provision of this Agreement be
determined to be invalid or at variance with any present or future requirements
of applicable laws then such provision alone shall become inoperative to the
extent necessary, and this Agreement may remain in full force and should be
construed so as to give effect to the intent and purpose of the parties to the
maximum extent possible.
7
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
and year first above written.
MONITOR AEROSPACE CORPORATION
By:
-----------------------------
Name:
--------------------------
Title:
-------------------------
MONITOR AEROSPACE INTERNATIONAL
CORPORATION
By:
-----------------------------
Name:
--------------------------
Title:
-------------------------
MONITOR ASIA CORPORATION
By:
-----------------------------
Name: Douglas Monitto
--------------------------
Title: President
-------------------------
8
<PAGE>
EXHIBIT A
I. ASSETS (INCLUDING CONTRACTS AND LEASES) OF MONITOR AEROSPACE CORPORATION
AND MONITOR AEROSPACE INTERNATIONAL CORPORATION BEING SOLD HEREUNDER:
A. Lease of Premises at Room #915, Beijing Silver Tower, Beijing, Peoples
Republic of China,(other than prepaid rent in the amount of $18,000,
which will be paid by the Purchaser to the Company on the date of this
Agreement).
B. Telephone number,(less deposit of $4,000, which will be paid by the
Purchaser to the Company on the date of this Agreement ).
C. Office equipment and computer hardware and software located on leased
premises (having a total book value of less than $100,000).
D. Car.
E. Promotional materials on leased premises.
F. Cincinnati Milacron Sales Representative Agreement dated ____, between
_____________ and _____________ (including pro rata portion of advance
paid to Monitor for period subsequent to the date of this Agreement).
G. Beijing Cash Account to cover expenses incurred prior to Closing
(balance of account to be paid by the Purchaser to the Company on the
date of this Agreement).
II. PERSONS TO BE EMPLOYED BY PURCHASER:
A. John Lowry (Purchaser to reimburse the Company for $4,000 rent
prepayment on employee's apartment on the date of this Agreement).
B. Charles Song (Kan Hong Seng).
C. Chuck Lu Da.
9
<PAGE>
EXHIBIT E-2
SALES REPRESENTATIVE AGREEMENT
This is an Agreement effective as of the _____ day of May, 1998 between
Monitor Aerospace Corporation, a corporation organized under the laws of New
York, U.S.A. ("Monitor"), whose address is 1000 New Horizons Boulevard,
Amityville, New York 11701 and Monitor Asia Corporation ("Monitor Asia"), a
corporation organized under the laws of Delaware (the "Representative"), whose
address is Room 915, Beijing Silver Tower, #2 North Dong San Huan Road, Chao
Yang District, Beijing, 100027, Peoples Republic of China.
1. Appointment. Monitor appoints Representative and Representative accepts
such appointment as a non-exclusive representative of Monitor for the Products
or Services listed in the attached Exhibit A ("Products and Services") in the
Territory defined in Article 2 below.
2. Territory. The term "TERRITORY" shall mean the following geographical
area:
A. Entire world except North America with respect to sale of end mills;
and
B. The countries of Indonesia, Malaysia, Thailand, Singapore, South
Korea, Peoples Republic of China and the Republic of China, with
respect to other Monitor Products and Services.
3. Term. The term of this Agreement shall be for one (1) year, commencing
on the ___ day of May, 1998. This Agreement shall automatically be extended for
successive one-year periods unless either party gives notice of termination to
the other party more than ninety (90) days prior to the beginning of an
extension period.
4. Representative's Obligations.
(a) Sales Promotion. Representative shall promote the sale of Products and
Services in the Territory. These efforts include advertising and canvassing
campaigns, and efforts to assist in obtaining necessary import licenses. In
general, Representative will be responsible for exhibition expenses.
(b) Orders and Inquiries. Representative shall transmit or cause to be
transmitted to Monitor without delay any order for or inquiry concerning
Products and Services from any prospective customer in the Territory.
(c) Assistance and Advice. Upon request, Representative shall provide
assistance and advice to customers in the Territory concerning the maintenance,
handling, application and use of Products and Services for a fee to be agreed
upon.
(d) Reports and Visits. Representative shall submit to Monitor upon request
detailed and complete written reports on its sales promotion activities. The
reports shall also include other relevant market information including, but not
limited to, customer demand, customer reaction and activities of competitors.
Representative shall as Monitor deems reasonably necessary, receive visits
throughout the Territory by employees or representatives of Monitor for the
purpose of consulting and cooperating with Representative in the promotion, sale
and service of Products and Services.
(e) Industrial Property Rights. Representative shall recognize and respect
the rights of Monitor and its affiliated companies in their trademarks, trade
names, copyright,
<PAGE>
patents and other intellectual property, and Representative shall not use any
other trademarks in conjunction with the Products and Services without the prior
written consent of Monitor. Representative shall communicate to Monitor all
inventions or improvements made by Representative relating to the Products and
Services, and Representative shall grant to Monitor and its affiliated companies
a non-exclusive royalty-free license to all rights associated therewith,
including the right to sublicense such inventions or improvements to Monitor's
customers. Representative shall assist Monitor and its affiliated companies,
when requested, in obtaining and maintaining patent, trademark and other
intellectual property protection in Monitor's and its affiliated companies'
names which are used in conjunction with the Products and Services.
Representative shall supply to Monitor samples of any labels or advertising
material prepared by Representative and bearing the name "Monitor" and any other
trademarks or trade names of Monitor and its affiliated companies.
(f) Confidential Information. Except with the prior written consent of
Monitor, Representative shall not use or disclose to any person, business,
public body or other entity any confidential information concerning the business
or Products and Services of Monitor or its affiliates which it has acquired or
hereafter acquires in the course of or as an incident to its activities under
this Agreement or otherwise, and shall take precautions to prevent any such use
or disclosure by any of its employees, agents and representatives. This
obligation shall continue indefinitely, both prior to and after the termination
or expiration of this Agreement.
(g) Government Regulations. Representative shall not do any act or thing,
or cooperate in the doing of any act or thing, which will cause in any manner a
violation of United States export control laws or regulations, the export or
import control laws or regulations of any other applicable country as then in
force or amended or any other applicable law.
(h) Sub-Representatives. Representative shall not appoint any sub-
representative or agents for the sale of Products and Services without the prior
written consent of Monitor.
(i) Representations. Representative shall not make any representations as
to Products and Services other than that contained in the written Product and
Services information and data provided by Monitor. Representative shall be
totally responsible for any of its representations as to Products and Services
which are not authorized by Monitor and shall hold Monitor harmless for any
claims and expenses, including reasonable attorney's fees, resulting from such
unauthorized representations.
(j) Translation. Representative shall translate into local language all
commercial communications to the customer or prospective customer from Monitor,
such as proposals, conditions, etc. Representative shall translate into English
for Monitor all commercial communications to Monitor from the customer or the
Representative.
(k) Expenses. Representative shall bear and pay when due all expenses
incurred by it or its employees in the performance of obligations imposed by
this Agreement.
(l) Re-exportation. In the event Representative has knowledge that
prospective customers for Products and Services intend to re-export same to
another country, such sales shall be promoted by Representative only with the
full prior knowledge and written consent of Monitor and only in accordance with
applicable law.
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<PAGE>
(m) Exclusive Representation. Representative will not represent, sell,
offer to sell, or act on behalf of any competitor Products and Services sold by
Monitor (whether under an official agreement, or in an unofficial capacity, by
request of customer) except that Representative may sell end mills manufactured
by others; provided that in connection with such sales, Representative does not
infringe any trademark, trade name or other intellectual property rights,
including the use of the name "Monitor", owned by Monitor or its affiliated
companies. In the event Representative offers a specific Product or Service
opportunity to Monitor, which Monitor does not wish to pursue, Representative
shall be free, subject to the other terms of this Agreement, to represent
another party with respect to such Product or Service, provided the overall
terms made available for such other party are no less favorable than the overall
terms made available by Monitor.
(n) Forecast. Representative shall develop a forecast for anticipated new
business on an annual basis. This forecast will be reviewed and concurred with
by management.
5. Monitor's Obligations. Monitor agrees as follows:
(a) Sales Opportunities. To identify for Representative prospective
customers known to it in the Territory.
(b) Promotional Assistance. To supply Representative with literature,
samples and such other information or materials as it believes will assist
Representative in promoting the sale and acceptance of Products and Services in
the Territory.
(c) Orders and Invoices. To transmit or cause to be transmitted to
Representative copies of proposed and executed contracts with customers for
Products and Services in the Territory and copies of invoices covering
deliveries pursuant to such contracts.
(d) Expenses. To bear and pay when due all expenses incurred by it or its
employees in the performance of its obligations under this Agreement.
6. Acceptance of Orders.
(a) Any quotation submitted by Monitor shall be valid only for the customer
to whom it is directed and the prices, terms and conditions of the quotation
shall not be altered, varied or changed except by Monitor in writing.
(b) Monitor may in its sole discretion either accept or reject any request
for quotation or any order for Products and Services from any prospective
customer in the Territory. Monitor shall have no obligation to supply Products
and Services until and unless an order has been accepted by Monitor in writing.
Monitor shall not incur any liability to Representative by reason of Monitor's
refusal to quote or accept any order.
(c) Monitor shall not be obligated to make any shipment of Products and
Services if such shipment would, at the time thereof, constitute a violation of
any provision of its country's law, regulations, or policy relating to trade
with the Territory, including, but not by way of limitation, the United States
Export Control Act of 1949 as amended or any regulation issued pursuant thereto.
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<PAGE>
7. Commissions.
(a) As compensation for services rendered pursuant to this Agreement for
sales of Products and Services directly due to Representative's efforts, Monitor
shall pay Representative a sales commission as agreed to by Monitor and
Representative for each contract on a specific basis.
(b) All commissions payable under this Article 7 shall be payable following
the month in which total payment from the customer is received by Monitor and
shall be paid or credited to Representative in the currency used by the customer
for such payment. All payments by Monitor to Representative shall be made by
check or bank transfer payable to Representative. No check or bank transfer
shall be sent to other than Representative's principal place of business unless
Representative makes a specific written request to the contrary, in which case a
record of such payment will be sent by Monitor to Representative's principal
place of business.
(c) In the event this agreement expires or is terminated by either party
unless otherwise expressly agreed to the contrary in the sales commission
agreement entered into with respect to a particular transaction, commissions
shall be paid to the extent payable prior to the effective date of such
expiration or termination.
8. Ethical Conduct. Representative is not entitled to any commission, fee
or discount if facts are known to Monitor which support a belief that
Representative is prepared to make or has made any unlawful or improper payment
in connection with the transaction on which a commission or fee is to be paid or
discount allowed, or that Representative is in violation of any law applicable
to Representative in its role as Representative hereunder.
9. Limitation of Liability. Each party agrees that under no circumstances
shall the other party or its affiliates be liable for any consequential,
indirect or incidental loss or damage, including lost profits, howsoever caused
or arising.
10. Products and Services List and Alterations. Monitor may from time to
time amend the list of Products and Services specified in the exhibit attached
by addition or deletion and may alter the specifications or design of any
Products and Services or parts. Representative shall not change or alter
Products and Services in any manner without Monitor's prior written consent.
11. Service Obligation. If the parties agree that Representative is to
perform service on the Products, they shall sign an addendum and attach it to
this Agreement along with an exhibit setting forth the fee for same.
12. Termination - Obligations Upon Termination.
(a) If either party hereto shall become insolvent or is in default of any
obligation under this Agreement (which default is not corrected within thirty
(30) days from written notice of such default) the other party may, at its
option, immediately terminate this Agreement. In the event that Douglas Monitto
ceases to hold a controlling ownership interest in Representative during the
term of this Agreement, Monitor shall have the right upon five (5) days written
notice to Representative to terminate this Agreement. Representative will notify
Monitor in writing upon the occurrence of any event resulting in Douglas Monitto
ceasing to hold a controlling ownership interest in Representative.
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<PAGE>
(b) Either party may also terminate this Agreement for any reason (with or
without cause) by giving the other party at least ninety (90) days prior written
notice.
(c) In no event shall any termination of this Agreement affect any rights
or obligations accrued or existing at the time of such termination or arising
out of such termination.
(d) Upon a termination of this Agreement for any reason, Representative
shall return to Monitor any unused promotional information or material supplied
by Monitor to Representative.
13. Force Majeure. Neither party shall be liable for any loss or damage of
any nature incurred as a result of any failures or delays in performance caused
by any strikes, lockouts, labor disputes, fires, acts of God or the public
enemy, riots, incendiaries, interference by civil or military authorities,
compliance with the laws, order or policies of any governmental authority,
delays in transit or delivery on the part of transportation companies or
communication facilities or sources of raw materials.
14. Relationship of Parties/Authority of Representative.
(a) The authority of Representative shall be to promote the sale and
acceptance of Products and Services in the Territory and to notify Monitor
whenever a customer desires a quotation for Products and Services
(b) Representative is and shall remain an independent contractor and in no
circumstances shall be deemed an employee of Monitor. Representative is not
authorized to and shall not accept any order on behalf of Monitor. It is
expressly agreed that this Agreement does not constitute a partnership
agreement.
(c) Representative is not authorized to and shall not undertake or assume
any obligation of any kind, express or implied, on behalf of Monitor.
15. Assignability. This Agreement shall not be assigned by either party
without the prior written consent of the other party, except that it may be
assigned without such consent to an affiliate or successor of Monitor or to a
person, firm, or corporation acquiring all or substantially all of the business
and assets of Monitor.
16. Authentic Text. The authentic text of this Agreement is in the English
language and shall be controlling in the event a question of interpretation or
construction should arise. The English language will also provide the text of
all day to day commercial communication between Monitor and Representative and,
when necessary, Representative will translate local language into English.
17. Notices. Any notice required or authorized to be given hereunder,
except for routine and typical shipment documentation, shall be served by
courier or certified letter return receipt requested or by telefax addressed to
Monitor or Representative (as the case may be) at the applicable address set
forth in the first paragraph of this Agreement. Any notice so given by telefax
shall be deemed to have been served on the day of sending the message,
otherwise, notice shall be deemed to have been given when received. Proof that
such notice was sent to the correct telefax numbers, shall be conclusive
evidence of service. Notices required by this Agreement shall be addressed to
any other address as may be specified by either party by written notice to the
other.
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18. Licenses - Joint Ventures. This Agreement does not include or prohibit
any sales by Monitor in the Territory or any cooperation agreement, including
but not limited to license agreements and joint ventures, between Monitor and
other parties in the Territory, and purchase and/or shipments in connection with
such sales or agreements. Unless otherwise agreed, Representative shall not be
entitled to any compensation or commission hereunder in connection with such
sales or agreements.
19. Entire Agreement - Modifications - Waivers. This Agreement, including
the attached exhibits, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes and terminates all prior
agreements between the parties relating to the same subject matter. Any change,
addition to, or waiver of the terms and conditions of this Agreement shall be
binding upon the parties only if approved in writing by authorized
representatives of the parties. The failure of either party to require the
performance of any term or condition of this Agreement or the waiver by either
party of any breach of this Agreement shall not prevent a later enforcement of
such term or condition or be deemed a waiver of any later breach. If any
provision or paragraph of this Agreement shall be deemed legally invalid, the
other provisions and paragraphs shall remain in force and effect.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement.
MONITOR AEROSPACE CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
MONITOR ASIA CORPORATION
By:
-----------------------------
Name: Douglas Monitto
Title: President
<PAGE>
EXHIBIT "A"
Schedule of Products and Services, Commissions and Support Assistance
I Monitor Products and Services
The following Products and Services currently offered by Monitor:
- Monitor Designed Cutting Tools
- Technologies, MRP Software and Know How
- Turn key projects
- Sub-contract manufacturing
Note: This agreement does not cover any other Products and Services of Monitor.
II Schedule of Sales Commissions
Commission will be subject to negotiation for each transaction.
Payment Terms. Payment of commissions are as stated in Sales Representative
Agreement, Article 7, Item (b). However, in the event the end user agrees to
make progress payments for the contracted amount, Monitor will make progress
payments on the commission to be paid. The amount of the commission paid upon
receipt of a progress payment will be based upon the percentage of the entire
order the progress payment represents.
Out of Territory Sales. Monitor recognizes that as Representative pursues
its Asian opportunities, it may identify a potential sale of Monitor Products
and Services outside of the Territory that Monitor is currently unaware of. In
such event, Monitor is willing to discuss a finder's fee in specific instances.
III Support Assistance
Monitor will pay Representative a monthly amount of $24,200 per month for
six months from the date of this Agreement to cover some of the expenses
incurred by Representative to support Monitor Products and Services in Asia.
Monitor will terminate the employment of Charles Seng (Kan Hong Seng) and
pay him severance in the amount of $12,000 per month for six months, pursuant to
the terms of his employment contract.
-8-
<PAGE>
EXHIBIT F
OPINION OF COMPANY'S COUNSEL
May __, 1998
Stellex Aerospace Holdings, Inc.
c/o Mentmore Holdings Corporation
1430 Broadway, 13th Floor
New York, New York 10018-3308
Ladies and Gentlemen:
We have acted as counsel to Monitor Aerospace Corporation, a New York
corporation (the "Company"), and its subsidiaries, Monitor Aerospace
International Corp. and Monitor Marine Products, Inc., both New York
corporations (together, the "Subsidiaries"), in connection with the Agreement
and Plan of Merger dated as of April 28, 1998 among Stellex Aerospace Holdings,
Inc., a Delaware Corporation (the "Buyer"), Soze Corp., a New York corporation,
and the Company (the "Merger Agreement"). In such capacity, we have been asked
to render the following opinion to you pursuant to Section 6.1(d) of the Merger
Agreement. Capitalized terms used herein and not defined herein shall have the
meaning ascribed to such terms in the Merger Agreement.
We have examined the Merger Agreement, the Escrow Agreement, the
Certificate of Incorporation and By-Laws of the Company and the Subsidiaries and
the Certificate of Merger. We have also examined and are familiar with the
Minutes of Meetings of the Board of Directors of the Company and other corporate
proceedings of the Company relating to the authorization of and the execution
and delivery by the Company of the Merger Agreement and the Escrow Agreement.
In addition to the foregoing, we have examined and relied upon such other
matters of law, documents, certificates of public officials and representations
of officers of the Company or the Subsidiaries as we have deemed relevant to the
rendering of our opinion including the representations and warranties of the
Company set forth in the Merger Agreement. In all of these examinations, we have
assumed: the accuracy of all factual information furnished to us; the
genuineness of all signatures on original and certified documents; the
conformity to original and certified documents of all copies submitted to us as
conformed or photostatic copies; the due authorization, execution and delivery
of the Merger Agreement by Buyer and MergerSub; and that the Merger Agreement is
the legal, valid and binding obligation of Buyer and MergerSub.
The opinions expressed herein are limited to the laws of the State of New
York and the federal laws of the United States of America.
Based upon and subject to the foregoing, we are of the opinion that:
<PAGE>
Stellex Aerospace Holdings, Inc.
May __, 1998
Page 2
1. Each of the Company and its Subsidiaries (a) has been duly organized,
and is validly existing and in good standing under the laws of the State of New
York, (b) has all requisite corporate power and authority to own, operate and
lease its respective properties and to carry on its respective businesses as it
is now being conducted and (c) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except we do not give any opinion as to the need for or
qualification of Monitor Aerospace International Corporation in the Peoples
Republic of China, or where the failure to be so qualified and in good standing
would not have a Material Adverse Effect and would not adversely affect the
ability of the Company to perform its obligations under the Merger Agreement and
the Escrow Agreement.
2. The Company has full legal and corporate power and authority to execute
and deliver the Merger Agreement and the Escrow Agreement, to perform its
obligations thereunder and to consummate the transactions contemplated thereby
to be consummated by it. The execution and delivery by the Company of the Merger
Agreement and the Escrow Agreement, the performance by the Company of its
obligations under each of the Merger Agreement and the Escrow Agreement and the
consummation by it of the transactions contemplated by the Merger Agreement have
been duly and validly authorized by all necessary corporate action on the part
of the Company. Each of the Merger Agreement and the Escrow Agreement has been
duly and validly executed and delivered by the Company and constitutes a legal,
valid and binding agreement of the Company enforceable in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
3. The authorized capital stock of the Company consists of 5,700 shares of
capital stock, of which (i) 2,200 shares are Common Stock, without par value,
(ii) 2,000 shares are Class A Preferred Stock, par value $100 per share, and
(iii) 1,500 shares are Class B Preferred Stock, par value $100 per share.
1,038.0014 shares of Common Stock are outstanding and are validly issued, fully
paid and nonassessable and are held of record by the Shareholders as set forth
on Schedule 3.3 of the Merger Agreement. As a result of the transactions
contemplated by the Merger Agreement, an additional 63.1977 shares of Common
Stock will be issued under the Andrews Employment Agreement on or prior to the
Closing Date, which shares, upon issuance, will be validly issued, fully paid
and nonassessable. All outstanding shares of capital stock of the Company are,
and all shares which may be issued pursuant to the Andrews Employment Agreement
will be, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive or similar rights. No shares of Preferred Stock are issued
or outstanding.
<PAGE>
Stellex Aerospace Holdings, Inc.
May __, 1998
Page 3
4. All of the outstanding shares of capital stock of each of the
Subsidiaries have been validly issued and are fully paid and nonassessable and
not subject to preemptive or similar rights. The Company owns all the capital
stock of each of the Subsidiaries free and clear of all Liens, and there are no
outstanding options, warrants or other rights in or with respect to the unissued
or treasury shares of capital stock of the Subsidiaries.
5. Except as set forth in paragraph 3 above, there are no shares of capital
stock or other equity or voting securities of the Company issued, reserved for
issuance or outstanding. To the best of our knowledge, there are no outstanding
bonds, debentures, notes or other indebtedness or other securities of the
Company having the right to vote (or convertible into, or exchangeable or
exercisable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote. Except as set forth in paragraph 3, to the
best of our knowledge, there are no outstanding, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its Subsidiaries is a party or by which any if them
is bound obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other securities of the Company or any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. To the best of our knowledge, there are
no outstanding contractual obligations, commitments, understandings or
arrangements of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire or make payment in respect of any shares of capital stock of
the Company or any of its Subsidiaries or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such Subsidiary or any other entity.
6. Except as disclosed in Schedule 3.2 of the Merger Agreement, neither the
execution and the delivery by the Company of the Merger Agreement or the Escrow
Agreement, the performance by it of its obligations under the Merger Agreement
or the Escrow Agreement, nor the consummation by it of the transactions
contemplated by the Merger Agreement to be consummated by it in accordance with
the terms of the Merger Agreement will (i) violate or conflict with any
provision of the Certificate of Incorporation or By-laws of the Company or any
of its Subsidiaries, (ii) violate or conflict with any law, rule, regulation or
any court or administrative order, judgment, decree, injunction or other binding
action or requirement of any Governmental Authority to or by which the Company
or any of its Subsidiaries (or any of their material Property) is a party or is
bound, (iii) require the approval of, or a filing or registration with, any
Governmental Authority (other than the filing of the Certificate of Merger and
any filing under the HSR Act), (iv) whether after notice or lapse of time or
both, violate, breach or conflict with any provision of, result in the loss of a
material benefit under,
<PAGE>
Stellex Aerospace Holdings, Inc.
May __, 1998
Page 4
give the other parties thereto any rights or benefits not otherwise applicable
under or permit the termination or acceleration of those Material Contracts or
the Purchase and Sale Transactions listed on Annex 1 hereto, (v) require any
authorization, consent or approval of, exemption or other action by, or notice
to, any party to those Material Contracts or Purchase and Sale Transactions
listed on Annex 1 hereto, or (vi) result in the creation or imposition of any
Lien upon any Property of the Company or any of its Subsidiaries.
7. To the best of our knowledge, no legal or governmental proceedings are
pending or threatened to which the Company or any of its Subsidiaries is a
party, or to which any of their respective Properties or assets are subject,
which (a) are required to be disclosed in Schedule 3.5 of the Merger Agreement
and are not, (b) if decided against the Company or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect or (c) could impair or
otherwise threaten the consummation of the transactions contemplated by the
Merger Agreement.
8. Upon the filing of the Certificate of Merger with the Secretary of State
of the State of New York, the Merger will be effective under the BCL in
accordance with the terms of the Merger Agreement and the Certificate of Merger.
This opinion is being furnished to you solely in connection with the
consummation by the Company of the transactions contemplated by the Merger
Agreement. Without our specific prior written consent, this opinion may not be
utilized, quoted or relied upon by anyone other than you or your counsel for any
other purpose.
Very truly yours,
<PAGE>
EXHIBIT G-1
R. Bruce Andrews
----------------
Employment Term Sheet
1. Title, role: no change
2. Base salary: $450,000
3. Duration of contract: December 31, 2002
4. Deferred compensation: no change - $60,000/yr (Subject to Mentmore
review of documents)
5. Benefits/prerequisites:
a. Golf club: no change
b. Car: no change
c. Medical, life insurance, LTD, 401(k): no change
d. Confidentiality, intellectual property, non-compete - may
need minor changes, subject to legal review
6. Vacation: no change
7. Termination: six months salary as severance for termination without
cause, may need changes, subject to legal review
8. Board seat at Monitor level
9. Bonus for calendar year 1998 and thereafter,
% Mgmt Plan
EBITDA Bonus Amount
------------ ------------
110% $150,000
125% 500,000 maximum
Prorated in between percentages, prorate for 1998
<PAGE>
R. Bruce Andrews
Page 2
Mgmt Plan EBITDA
----------------
Calendar Year
-------------
1998-7 mo. -$11,314,000
1999 -Number to be agreed upon
2000 and thereafter -Annual management plan approved by
10. Discretionary bonus for all years
11. $750,000 investment: $500,000 in cash (assuming a minimum of $5.5
million in proceeds paid to R. Bruce Andrews) and $250,000 personal
full recourse note due at the time $5 million hold back note is
settled and cash distributed. A portion of the cash distributed will
pay off this note -- 8% interest rate -- interest paid annually.
Payments of interest on $5 million hold back note received by Bruce
Andrews to be paid towards interest on the $250,000 note. This note is
due in full in any case in two years or termination of employment. The
investment is in the same equity securities as purchased by the
shareholders of the acquiring corporation - $750,000 buys 2.83%.
12. If Bruce Andrews voluntarily terminates employment (including death or
disability) or is terminated without cause through December 31, 1999,
he can put shares to Company at the lesser of (i) cost plus interest
computed at 8% or (ii) equity percentage fully diluted x ((trailing 12
month EBITDA x 5) less funded debt)). Andrews must give not less than
six months notice of voluntary termination.
13. Company has call right on stock on Triggering Event at price
determined under 12 above through December 31, 1999, and thereafter by
appraisal (FMV of Company multiplied by percent equity interest, fully
diluted).
14. Triggering events: death, disability, any termination
15. Pull-along/Tag-along: management must sell common equity if majority
equity holder sells to non-affiliate; management may require its
common equity to be sold with a sale of all of a majority equity
holders stock to non-affiliate
<PAGE>
R. Bruce Andrews
Page 3
16. Participation of 2.2% (55.5% x 4%) of the common equity based on the
achievement of annual SAR EBITDA Targets (as defined)
Vesting Schedule Based on Plan
Plan Year 110% 115%
--------- ---- ----
December 31, 1998 -0- -0-
December 31, 1999 20% 40%
December 31, 2000 10% 20%
December 31, 2001 10% 20%
December 31, 2002 10% 20%
Vesting on January 1, 2000 is based on meeting plan goals on an annual
basis (i.e. 110% of Plan 1998, 115% of Plan 1999, 30% vesting at January 1,
2000).
17. SAR EBITDA Targets
7 months $11,314,000
1999 May 31, plans
2000 extrapolated -
2001 numbers to be
2002 agreed on
18. "EBITDA" definition: sum of (a) GAAP net income, (b) depreciation and
amortization, (c) interest expense, (d) federal, state, local and
foreign taxes, and (e) Mentmore fees in excess of $1 million annually
less extraordinary items or non-recurring gains. EBITDA shall be after
full accrual for all incentive and bonus program amounts. The Board
may in its sole discretion consider other appropriate adjustments.
19. Company SAR call rights: right to call and redeem SARs on Triggering
Event.
20. Company SAR call price: independent appraisal process -- FMV of
Company multiplied by fully diluted percentage SAR common stock
equivalent.
21. Triggering events: death, disability, any termination
22. Accelerated vesting: IPO, sale of Company or substantially all of its
assets, change of control.
23. SAR owner put rights: right to put SAR to Company based on same
computation as call price above upon death or disability.
<PAGE>
EXHIBIT G-2
CONSULTING AGREEMENT
--------------------
THIS AGREEMENT is made on June 1, 1998 among MONITOR AEROSPACE
CORPORATION, a corporation with offices at 1000 New Horizons Boulevard,
Amityville, New York (the "Corporation") and LAWRENCE G. GOLDBERG, residing at
29 Argyle Place, Smithtown, New York ("Goldberg") and LGG ASSOCIATES, LTD., a
New York Corporation with offices at 29 Argyle Place, Smithtown, New York
("LGG"). In consideration of the mutual promises and agreements contained
herein, the parties agree as follows:
1. Consulting. The Corporation agrees to retain the consulting
services of LGG and LGG agrees to provide such services to the Corporation on
the terms and conditions of this Agreement.
2. Term of Agreement, Nature of Consulting Services and
Responsibilities. LGG will provide the services of Goldberg to the Corporation
and Goldberg shall serve the Corporation as a consultant for the period
commencing June 1, 1998 and ending on May 31, 2000. During that period,
Goldberg shall be available to provide such financial and other consulting
services (including assistance and advice in the negotiation of the
Corporation's annual financing package with its primary lender) as may be
reasonably requested by the corporation to assist its executive officers and
management personnel in the fiscal management and the operations of the
Corporation. Goldberg shall perform such services at such times and in such
manner as he may determine, in order to satisfactorily fulfill his obligations
under this agreement. Such services shall be performed during normal business
hours and such additional times as are necessary for travel and to respond to
the competitive needs of the business. In no event shall Goldberg be required
to devote more than an
<PAGE>
average of ten days per month to the performance of such services. Of these ten
days per month, Goldberg agrees to devote up to an average of 5 days per month
to providing services to the Corporation's affiliates consistent with the
services described herein.
3. Compensation. During the term of this Agreement,
(a) The Corporation shall pay LGG monthly consulting payments of
Fifteen Thousand ($15,000) Dollars, such payments to be made on or about the
15th day of each month commencing June 1, 1998 and ending May 15, 2000, when
the final payment shall be made. Goldberg shall also be reimbursed for all
reasonable, documented out-of-pocket expenses incurred in his consulting work
for the Corporation.
(b) Beginning with Fiscal Year 1999, within ninety (90) days of the
close of each full fiscal year while this Agreement is in effect, the
Corporation shall pay LGG a lump sum payment of $50,000. For Fiscal Year 1998,
the Corporation shall pay LGG a lump sum payment of $29,162, representing a
pro-rata portion of the $50,000 lump sum payment provided for in the preceding
sentence (i.e., 7/12 of $50,000). In the event this Agreement is terminated
pursuant to Section 5 hereof, the Corporation shall pay LGG, within fifteen
(15) days of the effective date of termination, a pro rata portion of the lump
sum payments provided for in this Section based on the number of days this
Agreement was in effect during the fiscal year in which this Agreement was
terminated.
(c) As additional compensation, the Corporation will pay to Goldberg
one-half of the premiums (up to a maximum of $15,000 per year) necessary to
keep in force, during the term of this Agreement, life insurance policy number
31581184 on the life of Goldberg, issued by The Manufacturers Life Insurance
Company (Manulife), ownership of which has previously been assigned to
Goldberg. The Corporation's obligations hereunder will be limited to payment of
the
2
<PAGE>
pro rata portion of the policy premiums which is attributable to the period
from June 1, 1998 to May 31, 2000. The Corporation, Goldberg and LGG understand
that an amount will be taxable to Goldberg or to LGG as a result of these
premium payments. Goldberg and LGG acknowledge their respective obligations to
pay any Federal, State or local income taxes assessed against either of them as
a result of the inclusion of this amount in gross income for income tax
purposes. The Corporation shall have no obligation with respect to the payment
of such income taxes or with respect to the payment of interest on policy
loans.
(d) Goldberg is presently included in the Corporation's group health
insurance plan (including the MERPS feature), group life and disability
insurance plans. To the extent that the Corporation continues its participation
under such plans, Goldberg shall continue to be covered thereby, (but not in
any cafeteria plan within the meaning of the Internal Revenue Code Section 125)
and the Corporation will make all premium payments and other contributions
which are required under such plans in order to continue Goldberg's coverage.
4. Office Space. The Corporation shall make the two room office suite
adjacent to its reception area available to Goldberg for his exclusive use
during the term of this Agreement, rent-free. Goldberg shall also be entitled
to use such suite for other personal, business and professional activities, so
long as such activities do not violate the provisions of this paragraph 7 of
this Agreement.
5. Termination of Agreement. This Agreement shall terminate on May 31,
2000, unless sooner terminated by Goldberg's death, by LGG or the Corporation
upon at least ninety (90) days' written notice of its intention to terminate,
or if Goldberg shall become physically or mentally disabled while this
Agreement is in effect so that he is unable to perform fully the duties
described
3
<PAGE>
herein for a period of six consecutive months; provided, however that in no
event shall the termination of this Agreement by the Corporation be effective
prior to June 1, 1999. All monthly consulting payments not yet payable to LGG
shall immediately cease following either Goldberg's resignation as a consultant
or the termination of this Agreement by LGG or the Corporation; provided,
however, that in the event this Agreement is terminated prior to June 1, 1999
as a result of the death or disability of Goldberg, LGG shall continue to be
entitled to consulting payments of Fifteen Thousand ($15,000) Dollars per month
for the twelve month period following Goldberg's death or the commencement of
his disability.
6. Confidentiality. Both LGG and Goldberg shall maintain in strictest
confidence and shall neither use for its or his own benefit nor disclose to
third parties except as necessary and for the exclusive benefit of the business
of the Corporation any confidential propriety information of the Corporation of
either a business or technical nature. The obligation of this Section shall
survive the termination of this Agreement regardless of the reason for such
termination. It shall not, however, be deemed to prevent either LGG or Goldberg
from using its or his general experience and skills and information in the
public domain during or after termination of the consulting services required
under this Agreement.
7. Non-Competition. For as long as LGG is receiving consulting
payments pursuant to this Agreement, neither it nor Goldberg shall directly or
indirectly engage in, become employed by, invest in, or consult with any
business which competes or plans to compete with the Corporation in any aspect
of its business. Notwithstanding the foregoing, either LGG or Goldberg may
perform consulting services for any such business with the prior written
consent of the Corporation, which consent shall not be unreasonably withheld.
In addition, neither LGG nor Goldberg shall, during
4
<PAGE>
such period, hire any person employed by the Corporation, solicit or advise any
person employed by the Corporation to seek or accept employment with any other
employer, or advise any other person about offering employment to any employee
of the Corporation.
8. Binding Effect and Assignment. This Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and LGG, Goldberg and their respective successors, assigns, heirs and personal
representatives. The rights and obligations of LGG and Goldberg hereunder shall
not be subject to voluntary or involuntary alienation, assignment or transfer.
In the event of any consolidation or merger of the Corporation into or with
another firm or corporation or the sale or other transfer of all or
substantially all of the assets of the Corporation to any person, firm or
corporation, or to more than one or a combination of such entities, the
acquiring person, firm or corporation shall assume, jointly and severally if
there is more than one acquiring entity, this Agreement and perform the
obligations of the Corporation, and the obligations of LGG and Goldberg
hereunder shall continue in favor of such acquiring person, firm or
corporation.
9. Independent Contractor - Taxes. Nothing herein shall be construed
as creating any partnership, joint venture, agency or employer-employee
relationship between the parties hereto. LGG, Goldberg and the Corporation
shall each be, and remain at all times, independent contractors. The
Corporation shall not be responsible for income tax withholding, social
security taxes, unemployment insurance and LGG and Goldberg shall be
responsible for determining the amounts of and making all such payments.
10. Entire Agreement. This Agreement contains the entire understanding
between and among the parties with respect to the subject matter hereof and
supersedes any prior understanding
5
<PAGE>
and agreements. Any prior understandings or agreements between the parties with
respect to the subject matter hereof are hereby terminated as of the date
hereof.
11. Severability. Any provision of this Agreement which may be
determined to be unenforceable under the laws of the State of New York, or any
other applicable laws, shall be construed as severable from the other
provisions of this Agreement without in any way affecting the enforceability of
the remaining provisions.
12. Amendments. This Agreement may not be amended except by a writing
executed by the parties hereto.
13. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on
the date above written.
ATTEST: MONITOR AEROSPACE CORPORATION
- --------------------------------- -------------------------------------
LGG ASSOCIATES LTD.
By:
-----------------------------------
--------------------------------------
LAWRENCE G. GOLDBERG
6
<PAGE>
EXHIBIT H
OPINION OF BUYER'S COUNSEL
[Subject to Revision Prior to Closing]
, 1998
Monitor Aerospace Corporation
1000 New Horizons Boulevard
Amityville, New York 11701
Ladies and Gentlemen:
We have acted as counsel to Stellex Aerospace Holdings, Inc. ("Buyer") and
Soze Corp.("MergerSub")in connection with the Agreement and Plan of Merger dated
as of April 28, 1998 between Buyer, MergerSub and Monitor Aerospace Corporation
(the "Merger Agreement"). In such capacity, we have been asked to render the
following opinion to you pursuant to Section 6.2(d) of the Merger Agreement.
Capitalized terms used herein and not defined herein shall have the meaning
ascribed to such term in the Merger Agreement.
We have examined signed counterparts of the Merger Agreement and the
Certificate of Incorporation and By-Laws of the Buyer and MergerSub. We have
also examined and are familiar with the Minutes of Meetings of the Board of
Directors of Buyer and MergerSub or other corporate proceedings of Buyer and
MergerSub relating to the authorization of and the execution and delivery by
Buyer and MergerSub of the Merger Agreement.
In addition to the foregoing, we have examined and relied upon such other
matters of law, documents, certificates of public officials and representations
of officers of the Buyer or MergerSub as we have deemed relevant to the
rendering of our opinion including the representations and warranties of Buyer
and MergerSub set forth in the Merger Agreement. In all of these examinations,
we have assumed: the accuracy of all factual information furnished to us; the
genuineness of all signatures on original and certified documents; the
conformity
<PAGE>
Monitor Aerospace Corporation
, 1998
Page
to original and certified documents of all copies submitted to us as conformed
or photostatic copies; the due authorization, execution and delivery of the
Merger Agreement by the Company; and that the Merger Agreement is the legal,
valid and binding obligation of the Company.
The opinions expressed herein are limited to the laws of the State of New
York, the General Corporation Law of the State of Delaware and the federal laws
of the United States of America.
Based upon and subject to the foregoing, we are of the opinion that:
1. Buyer and MergerSub are each corporations duly organized, validly
existing and in good standing under the laws of the their respective states of
incorporation and each has all requisite corporate power and authority to own,
operate and lease its respective properties and to carry on its respective
businesses as it is now being conducted.
2. Buyer and MergerSub each has full legal power and authority to execute
and deliver the Merger Agreement and to consummate the transactions contemplated
thereby. The execution and delivery of the Merger Agreement and the consummation
of the transactions contemplated thereby have been duly and validly authorized
by all necessary corporate action on the part of Buyer and MergerSub. The Merger
Agreement has been duly and validly executed and delivered by Buyer and
MergerSub and constitutes a legal, valid and binding agreement of Buyer and
MergerSub enforceable in accordance with its terms. The enforceability of
Buyer's and MergerSub's obligations under the Merger Agreement may be limited by
an implied covenant of good faith and fair dealing; by general equitable
principles (whether considered in a proceeding in equity or at law); by
bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization,
moratorium or other similar laws now or hereafter in effect, relating to or
affecting creditors' rights or remedies generally; and by general principles of
interpretation and rules of construction of contracts.
3. The execution of the Merger Agreement does not require any Governmental
Approval except (i) the filing of the Certificate of Merger contemplated by
Section 1.2 of the Merger Agreement, and (ii) the filing made pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
<PAGE>
Monitor Aerospace Corporation
, 1998
Page
4. Neither the execution and delivery of the Merger Agreement nor the
consummation of the transactions contemplated thereby will: (i) violate the
Certificate of Incorporation or By-Laws of Buyer or MergerSub; (ii) to the best
of our knowledge, except as set forth in Section 4.2 to the Merger Agreement,
require any consent, approval or notice under or conflict with or result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration) under any indenture, agreement for borrowed money, bond, note or
other similar instrument of Buyer or MergerSub listed on Exhibit I; or (iii) to
the best of our knowledge, violate or conflict with any law, rule or regulation
of the State of New York or any court or administrative order, judgment, decree
or injunction or other binding action or requirement of any New York
Governmental Authority to or which the Company or any of its Subsidiaries is
bound; provided that we express no opinion in the foregoing clauses (ii) and
(iii) with respect to matters that could not reasonably be expected to result in
a Material Adverse Effect.
5. Upon the filing of the Certificate of Merger with the Secretary of State
of the State of New York, the Merger will be effective under the BCL in
accordance with the terms of the Merger Agreement and the Certificate of Merger.
This opinion is being furnished to you solely in connection with the
consummation by Buyer and MergerSub of the transactions contemplated by the
Merger Agreement. Without our specific prior written consent, this opinion may
not be utilized, quoted or relied upon by anyone other than you or your counsel
for any other purpose.
Very truly yours,
<PAGE>
EXHIBIT I
RELEASE
Stellex Aerospace Holdings, Inc. ("Buyer"), Soze Corp. ("MergerSub"), and
Monitor Aerospace Corporation (the "Company"), pursuant to the Agreement and
Plan of Merger, dated April ____, 1998, among the Company, MergerSub and Buyer
(the "Merger Agreement"), hereby (i) release and forever discharge, each of the
Shareholders (as defined in the Merger Agreement), and the heirs,
administrators, successors and assigns thereof, of any liability of, or to, the
Company or the Buyer arising prior to the date hereof other than liabilities
which may arise under a shareholder's Letter of Transmittal dated the date
hereof or the Side Shareholder Agreement executed by the Shareholder dated April
__, 1998, and (ii) release each person who currently serves as a director or
officer of the Company and each of its Subsidiaries of any liability of, or to,
the Company or the Buyer arising under the Merger Agreement, or any other
liability (other than any such liabilities for gross negligence or willful
misconduct and for acts for which indemnity would not be available under the
Company's Certificate of Incorporation or By-Laws) arising prior to the Closing.
After the Closing, the Buyer hereby agrees to hold harmless and indemnify the
former officers and directors of the Company from any claim asserted by any
third party with respect to acts or omissions arising out of such individual's
services as officers or directors of the Company or any Subsidiary occurring
prior to the date hereof, to the fullest extent currently permitted by the
Certificate of Incorporation and By-laws of the Company. Notwithstanding the
foregoing, Buyer shall not be obligated to release any current or former
director or officer of the Company or any Subsidiary from any liability, or
indemnify any current or former officer or director of the Company or any
Subsidiary from any claims or Losses of or to any Shareholder or any Person
acting on behalf of or as a successor in interest to any Shareholder, or
relating to any action brought by any Shareholder.
Dated: ___________________
Stellex Aerospace Holdings, Inc.
By: ____________________________
Name:
Title:
Soze Corp.
By: ____________________________
Name:
Title:
Monitor Aerospace Corporation
By: ____________________________
Name:
Title:
<PAGE>
DISCLOSURE SCHEDULES
TO
AGREEMENT AND PLAN OF MERGER
AMONG
Stellex Aerospace Holdings, Inc., as Buyer
Soze Corp. as MergerSub
and
MONITOR AEROSPACE CORPORATION, as the Company
Dated as of April 28, 1998
THE DISCLOSURE SCHEDULES ATTACHED HERETO ARE SUBJECT TO THE
FOLLOWING TERMS AND CONDITIONS:
1. THE INTRODUCTORY LANGUAGE AND HEADINGS TO EACH OF THE PARTS TO THESE
DISCLOSURE SCHEDULES ARE INSERTED FOR CONVENIENCE ONLY AND SHALL NOT CREATE A
DIFFERENT STANDARD FOR DISCLOSURE THAN THE LANGUAGE SET FORTH IN THE AGREEMENT
AND PLAN OF MERGER.
2. THE INCLUSION OF ANY ITEM ON A SCHEDULE, WHICH SCHEDULE REQUIRES A LISTING OF
A "MATERIAL" ITEM OR AN ACTION "NOT IN THE ORDINARY COURSE OF BUSINESS" IS NOT
DEEMED TO BE AN ADMISSION OR REPRESENTATION THAT THE INCLUDED ITEM IS "MATERIAL"
OR IS "NOT IN THE ORDINARY COURSE OF BUSINESS."
3. ALL CAPITALIZED TERMS USED HEREIN AND NOT OTHERWISE DEFINED SHALL HAVE THE
MEANING GIVEN TO SUCH TERMS IN THE AGREEMENT AND PLAN OF MERGER.
<PAGE>
SCHEDULE A
Monitor Aerospace Corporation
Closing Liability Schedule
Estimate/Final Numbers Inserted at Closing
<TABLE>
<CAPTION>
Penalties/Cost Related to
Payment at Closing
(including LIBOR
Amount breakage costs)
----------------------- -----------------------
<S> <C> <C> <C>
A.1 All outstanding short- and long-term
debt, mortgages, capital leases
and obligations secured by a Lien on
any assets of the Company or the
Subsidiaries (unless listed in A2)
Fleet Bank Mortgage Loan
GE Capital Loan 3,227,000 30,000
NYJDA Loan 2,243,617 67,309
Stock Redemption Notes (G. Lepore) 4,891,667 -
Revolving Credit Agreement 1,247,963 -
13,000,000 -
----------------------- ----------------------
Sub-total $ 24,610,247 $ 97,309
======================= ======================
A.2 Equipment Purchase Leases (penalties
paid only if paid off at Closing)
Colonial Pacific Lease 8,290 *
Tektronics Lease 2,446
Paramist Funding Corporation (2/12/97) 171,758 n/a
Paramist Funding Corporation (3/3/97) 136,220 n/a
Paramist Funding Corporation (7/15/97) 241,372 n/a
Jacom Computer Services (Schedule 1) 14,441 *
Jacom Computer Services (Schedule 2) 33,546 *
Jacom Computer Services (Schedule 3) 40,104 *
Jacom Computer Services (Schedule 4) 24,930 *
Jacom Computer Services (Schedule 5) 246,867 16,608
Jacom Computer Services (Schedule 6) 673,306 21,175
Jacom Computer Services (Schedule 7) 118,901 4,664
IBM Credit Corporation 97,126 *
GE Capital Fleet Services 29,444 *
General Electric Capital Corp.
(Contour Lease) 853,279 34,131
Yale Financial Services 15,405 -
Orix Credit Alliance Inc. - -
Estimated Penalties on smaller leases (*) - 7,000
----------------------- ----------------------
Sub-total $ 2,707,435 $ 83,578
======================= ======================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Total A1 and A2 27,317,682 180,887
Credit for Equipment Purchased (199,500)
----------------------- ----------------------
Total A1 and A2 $ 27,118,182 180,887
----------------------- ----------------------
</TABLE>
<PAGE>
SCHEDULE A
Monitor Aerospace Corporation
Closing Liability Schedule
Estimate/Final Numbers Inserted at Closing
<TABLE>
<CAPTION>
Penalties/Cost Related to
Payment at Closing
(including LIBOR
Amount breakage costs)
<S> <C> <C> <C>
---------------------- ---------------- ------
B. Other Stock redemption obligations
(accrued, paid, payable) 0 0
---------------------- ---------------- ------
C. Any payments to current or former
shareholder, directors, officers or
employees pursuant to the following
(unless included as part of long
term debt):
Non-Qualified pension plans $ 3,000,000
Deferred Compensation 0
Post-termination benefits 0
Death Benefits 0
Medical Reimbursement Benefits 10,000 *2
to former employees
Salary continuation Benefits 0
Termination or change of control 0
D. Bonuses in excess of $1.0 million 145,000 *2
E. Medicare Tax or Premiums for Removal of 400,000 *2
Stock Restrictions under Restricted Stock
Bonus Plan and in connection with stock
issuance under Andrews Employment
Agreement
---------------------- ---------------- ------
F. All expenses incurred by the Company or
the Shareholders in conjunction with the
sale of the Company, including those
incurred in connection with the Merger
Agreement and the Merger, whenever paid
BT Alex Brown fee
Attorney's fee
Accountant's fee
Consultant's fee
Consent and Waiver fees (if any) Transfer,
stamp, document taxes Pre-Closing Actuarial
fees Shareholder meeting
--------------------- ---------------- ------
Sub-total $ 2,500,000
(estimated)
G. Expenses for 6 months for Monitor Asia $ 217,200
transaction
Total B through G $ 2,500,000 $ 1,072,200
====================== ================ ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Penalties/Cost Related to
Payment at Closing
(including LIBOR
Amount breakage costs)
----------------- ------------------
<S> <C> <C> <C>
H. Freight and licensing costs $ 200,000
associated with final CATIC
arrangement (if applicable)*1
Total H $ 200,000 $ -
TOTAL REDUCTIONS (A through H) $ 29,818,18 $ 1,253,087
================= =================
Company Value $ 95,000,000
Total Reductions *2 (31,071,269)
$ 63,928,731
Pension Escrow Fund (4,000,000)
Merger Consideration *2 $ 59,928,731
</TABLE>
*1 - If by closing, a resolution with CATIC is reached which does not
require the exporting of a gantry machine system to China, no deduction
will be made.
*2 - Estimate. Final numbers to be disclosed at closing.
<PAGE>
Schedule 1.4 Officers of Surviving Corporation and Subsidiary
TO BE PROVIDED BY BUYER AT OR PRIOR TO CLOSING
2
<PAGE>
Schedule 2.3 Shareholders
<TABLE>
<CAPTION>
Amount Payable1/
Name Shares Issued and to each
Outstanding Shareholder
on Closing Date
Shares Percent
------ -------
<S> <C> <C> <C>
Douglas Monitto 592.2165 53.7793%
Douglas Monitto, as 49.3534 4.4818%
Trustee for the benefit of
Pamela Petri
Pamela Petri 156.2093 14.1855%
Ruth C. Monitto and 107.3000 9.7439%
Frances Monitto, as
Trustees under the Will
of Vito R. Monitto
Lawrence G. Goldberg 70.0000 6.3567%
Michael Petri, as Custodian 4.0000 .3632%
for Joseph Petri
Michael Petri, as Custodian 4.0000 .3632%
for Douglas Petri
Michael Petri, as Custodian 4.0000 .3632%
for Kathryn Petri
Michael Petri, as Custodian 4.0000 .3632%
for Andrea Petri
R. Bruce Andrews 110.1199 10.0000% $
---------- ----------
Total 1,101.1991 100.000% $
========== ==========
</TABLE>
- --------
(1) To Be Completed at Closing in accordance with the Agreement dated
April 28, 1998.
3
<PAGE>
Schedule 2.3 Continued
$5,180,000 Note
Percentage Ownership
Note Holders of $5,180,000 Note
Douglas Monitto 76.6786 (Majority Noteholder)
R. Bruce Andrews 14.2580
Lawrence G. Goldberg 9.0634
4
<PAGE>
Schedule 3.1 Directors and Officers of the Company and Subsidiaries
- ------------ ------------------------------------------------------
Monitor Aerospace Corporation
Douglas Monitto Chairman & Treasurer & Director
R. Bruce Andrews President & Director
Terence Walley Vice President Marketing & Sales
Gary Kahrau Vice President of Technology & Assistant Secretary
Edwin R. Markowitz Secretary & Director
Carol Aguilar Assistant Secretary
Lawrence G. Goldberg Director
Guy Lepore Director
Monitor Aerospace International Corp.
Douglas Monitto Chairman & President & Director
R. Bruce Andrews Executive Vice President & Director
Joseph Andress Vice President
Shaun Huang Vice President
Charles Seng Vice President
Edwin R. Markowitz Treasurer & Secretary & Director
Carol Aguilar Assistant Secretary
Monitor Marine Products Inc.
Douglas Monitto Director & President
Edwin R. Markowitz Director
R. Bruce Andrews Director & Secretary
5
<PAGE>
Schedule 3.2 Consents upon Change of Control
- ------------ -------------------------------
The Loan Agreements listed on Schedule 3.19(a), which are incorporated
herein by reference, may require consent or notification prior to a
change of control of the Company, and the change of control may result
in a breach of such Loan Agreements.
The Buyer must comply with novation requirements under federal
acquisition regulations after the Closing in connection with the
Government Contracts (where the Company is the primary contractor)
listed on Schedule 3.19B.
Many of the Company's purchase orders with ShinMaywa (America) Ltd.
require consent prior to an assignment by operation of law. These
purchase orders are listed below:
P.O. # 1100-0082 dated 02/18/97
P.O. dated 03/05/96
P.O. # 1100-0075 dated 02/18/97
P.O. # 1100-0076 dated 02/18/97
P.O. # 1100-0074 dated 02/18/97
P.O. # 7205-0003 dated 12/15/95
P.O. # 7205-0004 dated 12/15/95
P.O. # 1100-0086 dated 02/18/97
P.O. # 1100-0087 dated 02/18/97
P.O. # 1100-0088 dated 02/18/97
P.O. # 1100-0094 dated 03/05/97
P.O. # 1100-0095 dated 02/18/97
P.O. # 1100-0069 dated 02/18/97
P.O. # 1100-0070 dated 02/18/97
P.O. # 1100-0071 dated 02/18/97
P.O. # 1100-0077 dated 02/18/97
P.O. # 1100-0078 dated 02/18/97
P.O. # 1100-0079 dated 02/18/97
P.O. # 1100-0081 dated 02/18/97
P.O. # 1100-0083 dated 02/18/97
P.O. # 1100-0073 dated 02/18/97
Sales Representative Agreement dated January 15, 1998 between the
Company and Cincinnati Milacron Marketing Company (prohibits
assignments other than assignments by Milacron to a successor of
Milacron).
The General Terms Agreements, dated as of March 29, 1996 and March 20,
1998, between the Company and The Boeing Company states that upon a
sale of the Company, certain intellectual property rights of the
Company shall be transferred to Boeing.
The Software License Agreement with CGTech listed on Schedule 3.10,
Item 4, does not permit transfers by operation of law. Written consent
is needed to transfer the license.
6
<PAGE>
Written consent is needed to transfer by operation of law the
Purchase/License Agreement with Electronic Data Systems Corporation
listed on Schedule 3.10, Item 6.
Computer Service Lease Agreements, dated as of March 29, 1996 ,
between the Company and Jacom Computer Services Inc., Lease Number
9609, and related schedules as follows: Schedule 1 dated April 15,
1996, Schedule 2 dated April 25, 1996, Schedule 3 dated June 14, 1996,
Schedule 4 dated October 17, 1996, Schedule 5 dated November 14, 1997,
Schedule 6 dated December 3, 1997 and Schedule 7 dated December 1,
1997 require that notice be given to Jacom prior to any assignment of
lease to a corporation acquiring all or substantially all of the
property of the Company.
The Employment Agreement dated December 8, 1997 between the Company
and Neil Seiden, listed on Schedule 3.14, Item (i), provides that Mr.
Seiden shall have the right to receive severance equal to one years
salary plus prorated portion of incentive compensation in the event of
a change of control, a reduction in his position and his voluntary
termination of employment with the Company. Prior to Closing, this
Agreement will be amended to provide that the rights set forth in the
preceding sentence shall, in respect of the change of control
resulting from the Merger, only survive for six months following the
Closing.
7
<PAGE>
<TABLE>
<CAPTION>
Schedule 3.3 Shareholders
Shares Issued and Shares Issued and Outstanding
Name Outstanding prior to Closing at the Effective Time
- ---- ---------------------------- ---------------------
<S> <C> <C>
Douglas Monitto 592.2165 592.2165
Douglas Monitto, as 49.3534 49.3534
Trustee for the benefit
of Pamela Petri
Pamela Petri 156.2093 156.2093
Ruth C. Monitto and 107.3000 107.3000
Frances Monitto as
Trustees under the Will
Of Vito R. Monitto
Lawrence G. Goldberg 70.0000 70.0000
Michael Petri, as Custodian 4.0000 4.0000
For Joseph Petri
Michael Petri, as Custodian 4.0000 4.0000
For Douglas Petri
Michael Petri, as Custodian 4.0000 4.0000
For Kathryn Petri
Michael Petri, as Custodian 4.0000 4.0000
For Andrea Petri
R. Bruce Andrews 46.9222 110.1199
--------- ---------
Total 1038.0014 1101.1991
========= =========
</TABLE>
Agreements with Shareholders
The Shareholders have entered into an agreement with respect to the allocation
of the Merger Consideration among themselves.
Agreements with respect to Common Stock
Douglas Monitto, Lawrence Goldberg and R. Bruce Andrews have entered into a
written agreement dated October 29, 1997 to sell their shares of Common Stock
collectively.
Agreements for Outstanding Debt: The contracts listed under Paragraph (a) of
Schedule 3.19A are incorporated herein by reference.
8
<PAGE>
Schedule 3.4 Projections
Certified copy provided under separate cover.
9
<PAGE>
Schedule 3.5 Litigation
None.
For informational purposes only: Management is aware of a U.S. Government
investigation concerning the possible unauthorized diversion by the People's
Republic of China of machine tools sold to a Chinese leasing company by a U.S.
aircraft OEM (a customer of the Company) in 1994 and of the Company's purported
connection to these matters. The Company has been cooperating with the
investigation, has done nothing unlawful and has been advised by the U.S.
Government that it is neither a subject nor a target of the investigation.
10
<PAGE>
Schedule 3.6 Taxes
o The Company has been informed in writing that there is "No Change"
regarding tax payments for a New York State tax audit for the years ending
May 31, 1992 through May 31, 1994.
o The Company made the following accounting change for the fiscal year ended
May 31, 1993 and thereafter: Inventory valuation method was changed from
last-in-first- out to first-in-first-out.
11
<PAGE>
Schedule 3.8 Real Property Owned and Leased
Real Estate Owned
1000 New Horizons Boulevard, Amityville, New York (legal description attached as
Exhibit A).
Real Estate Leases
1. Warehouse and parking area at 80 E. Gates Avenue, Lindenhurst, New
York pursuant to: Standard Form of Store Lease dated as of September
6, 1994 between Lawrence Goldrich Agency Realty and the Company with
the following principal terms:
-25,000 square feet
-$137,467.92 annual rent (5% annual increases)
-Term ends 11/30/99
-May terminate at end of lease year with six months notice
2. Garage at 42 Kean Street, West Babylon, New York pursuant to: Lease
dated November, 1993 between Chemlabs Pharmaceutical Co., Inc. and the
Company with the following principal terms:
-$26,250 annual rent, plus annual 5% or cost of
living increases, whichever is higher
-Term ends 11/14/99
3. Beijing Office Lease pursuant to: Lease between Richarm International
Limited and the Company with the following principal terms:
-Monthly rent $6,000
-To be transferred to Monitor Asia pursuant to the Asset Purchase
and Sale Agreement, which will be entered into by the Company and
Monitor Asia in connection with the Merger.
4. Residential property at 69 Lakebridge Drive, Kings Park, New York
leased from Diana Montanez through April, 1998 with the following
principal terms:
-Monthly rent $2,000
5. Residential property at 29 Lakebridge Drive, Kings Park, New York
leased from Ray Carrano through August, 1998 with the following
principal terms:
-Monthly rent $2,000
Storage Lease
6. Storage Space Lease at Premise 006, Building 001, 2431 Chico Avenue,
S. El Monte, California, month to month verbal arrangement.
-Monthly rent $1,305
Permitted Liens
Easements and other minor encumbrances of record which do not materially affect
the value, use or marketability of any real property.
12
<PAGE>
LEGAL DESCRIPTION
Exhibit A to Schedule 3.8
ALL THAT CERTAIN PLOT, PIECE, OR PARCEL OF LAND, SITUATE, LYING, AND BEING AT
NORTH AMITYVILLE, TOWN OF BABYLON, COUNTY OF SUFFOLK AND STATE OF NEW YORK MORE
PARTICULARLY BOUNDED AND DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE WESTERLY SIDE OF NEW HORIZONS BOULEVARD DISTANT
1781.22 FEET SOUTHWESTERLY FROM THE SOUTHWESTERLY END OF A CONNECTING LINE WHICH
CONNECTS THE NORTHWESTERLY SIDE OF NEW HORIZONS BOULEVARD WITH THE SOUTHERLY
SIDE OF WELLWOOD AVENUE, AS WIDENED;
RUNNING THENCE SOUTHERLY ALONG THE WESTERLY SIDE OF NEW HORIZONS BOULEVARD THE
FOLLOWING TWO COURSES AND DISTANCES:
1) ALONG THE ARC OF A CURVE BEARING TO THE LEFT HAVING A RADIUS OF 331.00 FEET A
DISTANCE OF 261.84 FEET;
2) SOUTH 11 DEGREES, 34 MINUTES, 49 SECONDS EAST 528.94 FEET;
RUNNING THENCE SOUTH 84 DEGREES, 57 MINUTES, 18 SECONDS WEST 833.88 FEET TO THE
EASTERLY LINE OF LAND NOW OR FORMERLY OF S. C. M. CORP.
RUNNING THENCE NORTH 21 DEGREES, 27 MINUTES, 52 SECONDS WEST 46.11 FEET TO THE
SOUTH EAST CORNER OF LAND NOW OR FORMERLY OF TOWN OF BABYLON;
RUNNING THENCE NORTHERLY ALONG SAID LAND THE FOLLOWING 2 COURSES AND DISTANCES:
1) NORTH 11 DEGREES, 34 MINUTES, 49 SECONDS WEST 722.85 FEET;
2) NORTH 00 DEGREES, 28 MINUTES, 12 SECONDS WEST 645.61 FEET TO THE SOUTHERLY
LINE OF LAND NOW OR FORMERLY A. AND J. SAVACA;
RUNNING THENCE NORTH 84 DEGREES, 18 MINUTES, 18 SECONDS EAST ALONG SAID LAND AND
LAND NOW OR FORMERLY OF T. FISCH AND LAND NOW OR FORMERLY OF JOSEPH BOKUS 278.74
FEET;
RUNNING THENCE SOUTH 07 DEGREES, 08 MINUTES, 28 SECONDS WEST 150.00 FEET;
RUNNING THENCE NORTH 84 DEGREES, 18 MINUTES, 18 SECONDS EAST 481.37 FEET;
RUNNING THENCE SOUTH 11 DEGREES, 34 MINUTES, 49 SECONDS EAST 408.95 FEET;
RUNNING THENCE SOUTH 56 DEGREES, 15 MINUTES, 24 SECONDS EAST 145.46 FEET TO THE
WESTERLY SIDE OF NEW HORIZONS BOULEVARD, THE POINT OR PLACE OF BEGINNING.
FOR INFORMATION ONLY: DISTRICT 0100 SECTION 126.01 BLOCK 01.00 LOT 003.000.
( END )
<PAGE>
Schedule 3.9 Government Approvals
Permits
Issuer: Suffolk County Department of Health Services
Type: Hazardous Materials Storage Permit
ID No.: 1-0087
Issuer: Suffolk County Department of Public Works
Type: Sewer Discharge Permit
ID No.: 626-715-0010
Issuer: New York Department of Environmental Conservation
Type: Particulate Emission Certificate
ID No.: 4720004749
Issuer: New York Department of Environmental Conservation
Type: Discharge of non-contact cooling water
ID No.:
Issuer:
Type: Occupancy Certificate
ID No.: 89121
Issuer:
Type: Fire Prevention Form 1
ID No.: 2937/12
13
<PAGE>
Schedule 3.10 Intellectual Property
License Agreements (the Company or a Subsidiary is Licensee)
1. End User Product License Agreement with Progress Software Corporation (this
is an undated, unsigned license agreement applicable to anyone who opens
the software package)
2. Software License Agreement with Cimlinc Advanced Manufacturing technology
(this is an undated, unsigned license agreement applicable to anyone who
opens the software package)
3. Applications Support and Software Maintenance Contract dated February 1,
1997 with Numerical Control Computer Sciences (customer is not specified)
4. Software License Agreement with CGTech (this is an undated, unsigned
license agreement applicable to anyone who opens the software package)
5. Binary Code License and Software License Agreement with Sun Microsystems
Computer Company (this is an undated, unsigned license agreement applicable
to anyone who opens the software package)
6. Purchase/License Agreement with Electronic Data Systems Corporation signed
by the Company on December 19, 1996
7. End-User License Agreement for Microsoft Software (this is an undated,
unsigned license agreement applicable to anyone who opens the software
package)
8. WinDD End User License Agreement with Tektronix (this is an undated,
unsigned license agreement applicable to anyone who opens the software
package)
Transfer of Intellectual Property
The General Terms Agreements, dated as of March 29, 1996 and March 20,
1998, between the Company and The Boeing Company grants Boeing a license
to, and states that upon a transfer of the Company to any third party, all
intellectual property of the Company related to the development,
production, maintenance or repair of products covered by the Agreements, is
transferred to Boeing.
The Rohr Long Term Agreements listed on Schedule 3.19B (LTA 47708-9301,
47708-9202 and 47708-9201) contain provisions that state that Rohr has a
worldwide, royalty free, nonexclusive and irrevocable license to the
Company's proprietary information if (a) the Agreement or any purchase
order is terminated for default, or (b) the Company's refusal to provide
Rohr or Rohr's customers any product under any agreement during or after
the life of the agreement.
The Textron Aerostructures purchase orders listed in the attachment to
Schedule 3.19B contain language granting Textron a non-exclusive,
noncancellable, royalty-free license under certain intellectual property
controlled by the Company which relate to or are required by Textron to
make complete use of the material being purchased.
14
<PAGE>
Schedule 3.11 Environmental Compliance; Permits
Environmental Reports
Phase I Environmental Audit dated November 1991 prepared by EEA, Inc.
Phase I Environmental Audit dated October 1990 prepared by EEA, Inc.
Until April 27, 1998, Monitor had not filed reports with State and Local
officials pursuant to Sections 311 and 312 of the Emergency Planning and
Community Right-to-Know Act with respect to the storage at its manufacturing
facility of number 2 fuel oil and cutting oil. Monitor is currently filing Tier
Two reports with State and Local officials with respect to its storage of fuel
oil and cutting oil.
Monitor has three concrete lined drainage structures which have served as dry
well receptacles for surface water runoff from various sources including its
manufacturing operations. Sediments accumulated in these structures have been
tested and found to contain low levels of metal, solvent and petroleum
hydrocarbon contaminants. Monitor arranged for removal of the sediments by
Safety Kleen on April 24 and 25, 1998 and their disposal in accordance with
applicable regulations and is closing the structures in cooperation with the
Suffolk County Department of Health Services.
Above Ground Liquid Storage Tanks
See Attachment 3.11
15
<PAGE>
Schedule 3.12 ERISA; Benefit Plans
3.10A Monitor Aerospace Corporation Savings and Profit Sharing Plan
3.12B Monitor Aerospace Corporation Employees' Pension Plan and Trust. This
plan was "frozen" in 1997 and will be terminated in accordance with
the Merger Agreement.
3.12C Salary Continuation Agreements - Four senior executives may
participate in plan providing for deferral of between $20,000 and
$60,000 of such executive's compensation and the purchase by the
Company of variable universal life insurance with such amount of
deferred compensation. Approved at September 1997 meeting, and
currently being set up. Annual cost is $100,000.
3.12D Executive Incentive Compensation Program - The senior executives
listed below can earn annual bonuses of up to 30% of base salary.
Two-thirds of the bonus is paid if the Company meets or exceeds profit
goals of its business plan and one-third is paid if executive meets
agreed upon individual goals.
Douglas Whitlock
Neil Seiden
Gary Kahrau
Terence Walley
Dave Sylvain
Paul Kowack
Hazel Beuttenmuller
Tom Kiely (partial for 30% of last fiscal year) Jeffery Moore
(partial for 3/4 of last fiscal year)
3.12E Senior Officer Death Benefit - If Chairman, President or Executive
Vice President (currently vacant) should die while in office, widow or
surviving children (if under age 25) to receive two years salary
payable over a period of four to ten years. Adopted by the Board in
1975 and amended December 22, 1994.
3.12F Medical/Vacation and other Benefits
--Vytra POS (Point of Service) - Majority of employees enrolled. (See
Attachment 3.12F(i)).
--Vytra "Brooklyn" POS (Point of Service) - Plan covers employees
living in areas not served by Vytra network. (See Attachment
3.12F(ii)).
--Vytra "Executive" POS (Point of Service) - Plan covers six
executives. Monitor reimburses for medical expenses not covered by
VYTRA and pays copayments and deductibles. (See Attachment
3.12F(iii)).
--Medical/Dental Facility - Employees and dependents must use the
services of the on-site facility. (See Attachment 3.12F(iv)).
16
<PAGE>
--Sick/Vacation Policy - Employees are paid for unused and accrued
vacation time at termination if employed at least one year. Neither
unused or accrued sick time is paid at termination of employment. (See
Attachment 3.12F(v)).
--Short/Long Term Disability (See Attachment 3.12F(vi)).
--Life Insurance (See Attachment 3.12F(vii)).
--Other Benefits (See Attachment 3.12F(viii)).
3.12G Monitor Aerospace Corporation Restricted Stock Bonus Plan Adopted
December 15, 1983, as modified and amended by Board resolution dated
January 6, 1997 and amended March 25, 1998.
3.12H [intentionally deleted]
3.12I Six former long term employees are receiving unfunded supplemental
payments totaling $17,000 per year from the Company. The payments
terminate at various times through the year 2004. The Company shall
terminate these obligations by the Closing, and the cost of
terminating these obligations will be included on the Closing
Liability Schedule. The Company has no obligation to make such
payments to other employees currently retired or retiring in the
future.
3.12J N. Goldberg has a contractual right to receive a payment of $23,400
per year for life and, upon such former employee's death, the
employee's spouse is entitled to receive $11,700 until her death,
pursuant to the Compensation and Settlement Agreement dated September
1990 between the Company and Norman B. Goldberg, as amended October 1,
1994 and October 1, 1997. The Company shall terminate this obligation
by the Closing, and the cost of terminating this obligation will be
included on the Closing Liability Schedule.
3.12K On December 26, 1973, the Company, by Board resolution, adopted a
medical reimbursement plan for officers, spouses and children
effective January 1, 1974 covering all expenses for medical care as
defined in Section 213(e) of the Internal Revenue Code. The medical
reimbursement plan was amended by Board resolution dated December 22,
1994 to include three former employees of the Company who were
consultants for the Company. The plan was further amended by Board
resolution dated October 3, 1996 to include directors of the Company,
their spouses and dependent children and corporate executives
designated by the Chairman or President and their spouses and
dependent children. The plan terminates for participants when the
participant or the participant's spouse turns 65 or the termination of
employment or any substantive consulting arrangement with the Company.
Costs relating to the medical reimbursement plan for former employees
will be included on the Closing Liability Schedule.
The benefits described in 3.12C, 3.12E, 3.12F, 3.12I, 3.12J and 3.12K may be
considered employee welfare benefit plans within the meaning of Section 3(1) of
ERISA.
17
<PAGE>
Schedule 3.13 Insurance
See "Summary of Insurance" from A.L. Carr Agency, Inc. attached
hereto. The policies listed have been renewed and are in full force
and effect.
There may be ongoing workman's compensation claims which are unsettled
and not yet paid.
18
<PAGE>
Schedule 3.14 Employment Contracts
The following employees have employment contracts:
(a) Employment Agreement between the Company and R. Bruce Andrews
effective December 1, 1995, as amended August 9, 1997 and March 25,
1998.
Salary Continuation Agreement, dated November 17, 1997, between the
Company and R. Bruce Andrews
(b) Letter Agreement between the Company and Anthony Barone executed on
May 15, 1997
(c) Letter Agreement between the Company and Hazel Beuttenmuller executed
on March 24, 1995
(d) Letter Agreement between the Company and Bernard Cody executed on
January 15, 1997
(e) Letter Agreement between the Company and Gary Kahrau executed on
December 5, 1997
Salary Continuation Agreement, dated November 17, 1997, between the
Company and Gary Kahrau.
(f) Letter Agreement between the Company and Tom Kiely executed on
December 9, 1997
(g) Letter Agreement between the Company and Paul Kowack executed on April
21, 1997
Letter Agreement between the Company and Paul Kowack executed on
December 8, 1997 stating that the Company will provide a housing
allowance of $10,000 per year for three years beginning December 1,
1997
Salary Continuation Agreement, dated November 17, 1997, between the
Company and Paul Kowack.
(h) Letter Agreement between the Company and Kevin Lynch executed on
August 6, 1997
(i) Letter Agreement between the Company and Neil Seiden executed on
December 8, 1997
(j) Expatriate Employment Agreement executed on June 30, 1997 between the
Company and Kan Hong Seng (Charles Seng). This Agreement to be assumed
by Monitor Asia.
(k) Letter Agreement between the Company and Dave Sylvain executed on
August 22, 1996
19
<PAGE>
Salary Continuation Agreement, dated November 17, 1997, between the
Company and Dave Sylvain.
(l) Letter Agreement between the Company and Terence Walley executed on
February 22, 1996
(m) Letter Agreement between the Company and Douglas Whitlock executed on
December 5, 1997
In addition, (i) Lawrence Goldberg, a director of the Company, has a
consulting contract with the Company described in Schedule 3.19A(b), which is
incorporated herein by reference and which will be terminated at Closing, and
(ii) Edwin Markowitz, director, has a verbal consulting arrangement with the
Company described in Schedule 3.19A(b), which is incorporated herein by
reference.
In addition, almost all new employees receive letters offering employment
and setting forth certain terms of employment, which do not constitute
employment agreements.
20
<PAGE>
Schedule 3.17 Inventory Locations
On-Site Inventory Locations
Monitor Aerospace Corporation
1000 New Horizons Boulevard
Amityville, New York 11701
Monitor Aerospace Corporation
c/o Lawrence Goldrich Agency Realty
80 East Gates Avenue
Lindenhurst, New York 11757
Monitor Aerospace Corporation
c/o Chemlabs Pharmaceutical Co., Inc.
42 Kean Street
West Babylon, New York 11704
Monitor Aerospace Corporation*
Room 915, Beijing Silver Tower
#2 North Dong San Huan Road
Chao Yang District
Beijing 100027, PRC
Monitor Aerospace Corporation
c/o Coast Machinery Movers Inc.
Premise 006, Building 001
2431 Chico Avenue
South El Monte, California 91733-1685
See Attachment 3.17A for list of off-site inventory locations.
See Attachment 3.17B for description of consigned goods held by the
Company. All inventory of the Company and its Subsidiaries reflected on
the Company Financial Statements is owned by the Company or one of its
Subsidiaries and does not consist of consigned goods.
* On the Closing Date, there will be no inventory at this location.
21
<PAGE>
Schedule 3.19A Contracts
(a) 1. Revolving Credit Agreement dated as of March 31, 1997 among Monitor
Aerospace Corporation, as Borrower, and European American Bank
("EAB"), as Agent, and EAB and Fleet Bank, N.A., as Banks, and any
notes or security agreements executed in connection therewith.
2. $3,675,000 Mortgage Modification among Fleet Bank, N.A., as Mortgagee,
and Monitor Aerospace Corporation, as Mortgagor, dated March 31, 1997,
and any notes or security agreements executed in connection therewith.
3. Promissory Note dated May 9, 1997 from Monitor Aerospace Corporation
to General Electric Capital Corporation. ($1.1 million loan financing
of two Cincinnati Milacron Gantry Machines), and any security
agreements executed in connection therewith. This Note and the Note
described in Item 4 below are partially secured by a $250,000 Letter
of Credit.
4. Promissory Note dated December 22, 1995 from Monitor Aerospace
Corporation to General Electric Capital Corporation ($3,728,479.31
million equipment refinancing), and any security agreements executed
in connection therewith.
5. $5,600,000 Third Mortgage Loan made by New York Job Development
Authority (JDA), as lender, to Monitor Aerospace Corporation, as
Borrower, dated December 30, 1992, and any notes or security
agreements executed in connection therewith.
6. Equipment Purchase Lease between Monitor Aerospace Corporation and
Colonial Pacific Leasing dated January 6, 1995 and any security
agreements executed in connection therewith.
7. Equipment Purchase Lease between Monitor Aerospace Corporation and
ORIX Credit Alliance, Inc. dated March 19, 1993 and any security
agreements executed in connection therewith.
8. Equipment Purchase Lease between Monitor Aerospace Corporation and
Yale Financial Services dated March 19, 1996 and any security
agreements executed in connection therewith.
9. "Master" Equipment Purchase Lease No. 9609 dated March 29, 1996
between Jacom Computer Services, Inc. and Monitor Aerospace
Corporation (Equipment Schedules #1 to #7) and any security agreements
executed in connection therewith.
10. Equipment Purchase Lease between Monitor Aerospace Corporation and
Paramist Funding Corp. dated February 12, 1997 and any security
agreements executed in connection therewith.
11. Equipment Purchase Lease between Monitor Aerospace Corporation and
Paramist Funding Corp. dated March 3, 1997 and any security agreements
executed in connection therewith.
22
<PAGE>
12. Equipment Purchase Lease between Monitor Aerospace Corporation and
Paramist Funding Corp. dated July 15, 1997 and any security agreements
executed in connection therewith.
13. Equipment Purchase Lease between Monitor Aerospace Corporation and IBM
Credit Corporation dated May 6, 1997 and any security agreements
executed in connection therewith.
14. Equipment Purchase Lease between Monitor Aerospace Corporation and
Yale Financial Services dated May 15, 1997 and any security agreements
executed in connection therewith.
15. Equipment Purchase Lease between Monitor Aerospace Corporation and GE
Capital Fleet Services dated May 13, 1996 and any security agreements
executed in connection therewith.
16. Guaranty by Monitor Aerospace Corporation to Key Bank for $535,000
loan to Douglas Monitto for motor yacht "Monitor".
(b) Consulting Contracts:
(i) Consulting Agreement dated November 1, 1994 between the Company
and Lawrence G. Goldberg, as modified by Board resolution dated
September 28, 1995 and January 6, 1997.
(ii) Letter Agreement dated April 14 between the Company and Shaun
Huang.
(iii) Letter Agreement dated September 30, 1997 between the Company
and John Lowry
(iv) Letter Agreement dated December 8, 1997 between the Company and
Dr. Lisa Markowitz
(v) Consultancy Agreement between the Company and Nor-Tec Asia, Inc.
dated April 23, 1993
(vi) Compensation and Settlement Agreement between the Company and N.
Goldberg dated September 1990 (no date on contract)
Amendment No. 1 to Compensation and Settlement Agreement dated
October 1, 1994
Amendment No. 2 to Compensation and Settlement Agreement dated
October 1, 1997
Consulting arrangements* without contracts between the Company
and:
(a) Edwin Markowitz
(b) Hans Wisiak
(c) Carlo Tolve
23
<PAGE>
(d) Joseph Cangialosi
(e) Joseph Andress
*The consulting arrangements are with former management employees
pursuant to verbal agreements. The number of consultants varies
from time to time. Total payments for the services of such
consultants are not expected to exceed $100,000 per individual
consultant in 1998, but the aggregate payments are expected to
exceed $100,000. The chart attached hereto as Attachment 3.19(i)
sets forth all material terms of the consulting arrangements
between the Company and each of the referenced individuals. Each
of the consulting arrangements is at will and terminable without
notice or penalty.
See software license agreements listed on Schedule 3.10 which are
incorporated herein by reference.
Sales Representative Agreement dated January 15, 1998 between the
Company and Cincinnati Milacron Marketing Company will be transferred
to Monitor Asia at closing.
Sales Representative Agreement between the Company and Ryan Sales Inc.
dated November 27, 1996.
Representative Agreements between the Company and Western Engineering
Company dated March 21, 1996.
(c) The following benefits arise upon a change in control:
R. Bruce Andrews- Common Stock issuable pursuant to Andrews
Employment Agreement is issued giving Mr.
Andrews the share ownership reflected on
Schedule 3.3
BT Alex Brown- Investment Banking Fee pursuant to Letter
Agreement dated October 27, 1997 between BT
Alex. Brown Incorporated and the Company, as
modified by Letter Agreement dated October 27,
1997 from the Company to BT Alex. Brown
Incorporated
Douglas Monitto- Restrictions on Common Stock granted pursuant to
Restricted Stock Bonus Plan, described on
Schedule 3.12G are released
Lawrence G. Goldberg- Restrictions on Common Stock granted pursuant to
Restricted Stock Bonus Plan described on
Schedule 3.12G are released
See Schedule 3.2 which lists agreements requiring consent or which grant
third parties certain rights upon a change of control, which Schedule
3.2 is incorporated herein by reference.
24
<PAGE>
(d) Nonrecourse Promissory Note dated May 1, 1996 in the amount of $250,000
payable by Paul J. Patin, Gerald St. George and Jeffrey A. Weinstock,
and Guaranty dated May 1, 1996 from DynaLantic Corp.
Purchase and Sale Agreement forming part of Monitor Asia Agreements and
attached to the Merger Agreement as Exhibit E-2.
Bill of Sale dated March 30, 1998 from the Company to Green Tree Vendor
Services for the transfer of Trane Coil Enclosure of Lease: 17159096,
pursuant to Lease Agreement executed in 1994 between TriCon Capital, a
unit of Greyhound Financial Corporation and the Company.
(e) New York Power Authority Application, dated May 4, 1992 with respect to
direct purchase of electric power by the Company.
(e) and (f) Contract between the Company and Cincinnati Milacron for lease
with option to buy "Sidewinder" machine (undated).
Computer Service Lease Agreement No. 9609, dated March 29, 1996 between
the Company and Jacom.
(g) & (h) See Schedule 3.14 for list of employment agreements which are
incorporated herein by reference. See Schedule 3.12 for list of employee
benefits, contracts and arrangements which are incorporated herein by
reference. See Schedule 3.19(c) for list of consulting agreements, which
are incorporated herein by reference.
(i) See Schedule 3.8 for list of real estate leases which is incorporated
herein by reference.
See Schedule 3.19A(a), Items 6 to 13, which are incorporated herein by
reference.
(j) Agreement between the Company and Cincinnati Milacron dated January 15,
1998 regarding marketing and related costs in Asia will be transferred
at Closing to Monitor Asia Corporation.
(k) The Loan Agreements listed on Schedule 3.19A(a) between the Company and
its lenders may limit the Company's business activities to the aerospace
business and may restrict Liens.
(l) A Power of Attorney granted by the Company to Alan E. Weiner, CPA in
connection with New York State Tax audit.
A Power of Attorney granted pursuant to Revolving Credit Agreement with
EAB.
25
<PAGE>
Schedule 3.19B
1. General Terms Agreement between The Boeing Company and the
Company dated March 20, 1998 (Number BCA-65336-0326).
2. Special Business Provisions between Boeing Commercial Airplane
Group, a division of The Boeing Company and the Company dated
March 20, 1998 (Number POP-65336-0360), and Amendment No. 1
dated March 20, 1998.
3. General Terms Agreement between The Boeing Company, acting by
and through its division The Boeing Commercial Airplane Group,
and the Company, No. BCA-65336-0056 dated as of March 29, 1996.
4. Special Business Provisions between The Boeing Company and the
Company dated March 29, 1996 (Number POP-65336-0059), and
Amendment No. 1 for interim pricing between January 1, 1997 and
June 30, 1998.
5. Long Term Agreement # LTA 47708-9301 dated May 15, 1993 between
the Company and Rohr, Inc. for MD-11 Tail Pylon Components, and
Amendment No. 1 dated May 30, 1995.
6. Long Term Agreement # LTA 47708-9202 dated July 15, 1992 between
the Company and Rohr, Inc. for RB211-535 (E-4) and V2500 Thrust
Reverser Tracks, and Amendment No. 1 dated May 30, 1995.
7. Long Term Agreement # LTA 47708-9201 dated March 15, 1992
between the Company and Rohr, Inc. for Boeing Model 757 Aircraft
Engine Struts, and Amendment No. 1 dated May 30, 1995, and
Amendment No. 1 dated February 1995.
8. Negotiation Agreement dated December 22, 1995 between Northrop
Corporation, acting through its Military Aircraft Division and
the Company.
9. Purchase Agreement 0020229347 between the Company and Cincinnati
Milacron Marketing Co. dated December 23, 1996 for turnkey
manufacturing requirements, and Addendum dated February 17,
1997.
10. Memorandum of Understanding dated July 9, 1997 between the
Company and Mecachrome.
11. Contract Nos. 96-FE-0530, 96-FE-0531, 96-FE-0532, and
96-FE-0540, each dated October 2, 1996 between Monitor Aerospace
International Corporation and Jui Li Enterprise Co., Ltd.
12. Contract Number ATE/USA/95Z0016 dated August 15, 1995 between
the Company, China National Aero-Technology Import & Export
Corporation, and Xian Aircraft Industrial Company.
26
<PAGE>
13. Contract Number ATE/USA/95Z0018 dated August 15, 1995 between
the Company, China National Aero-Technology Import & Export
Corporation, and Chengdu Aircraft Industrial Corp.
14. Contract Number ATE/USA/95Z0014 dated August 15, 1995 between
the Company, China National Aero-Technology Import & Export
Corporation, and Shanghai Aviation Industrial (Group)
Corporation, and Amendment No. 1 dated September 20, 1996.
A certified list of all other Purchase and Sale Transactions has been
provided under separate cover to Buyer.
Schedule 3.19C
Contract Compliance
The Company does not always meet the "on-time" requirements of Purchase
and Sale Transactions with customers, but this is common in the
industry, and the Company's on-time performance is considered above
average in the industry.
Contract Claim
The Company has certain claims for payment of additional costs with the
prime contractor for the U.S. Government's development of the F22
airplane. The Government had originally planned on making many F22
airplanes, but has had only one prototype built. The Company is
presently in the process of recouping these additional costs through
unit price adjustment to follow on production orders.
Stop Work Notice
The Company received by letter dated March 23, 1998 from Northrop
Grumman, a Stop Work Notice for F/A-18C/D FY'98 Purchase Orders (F18)
with indications that work may resume in September, 1998. The Company
was told verbally that the Stop Work Notice was issued to allow Boeing
St. Louis time to close a foreign military sale. Northrop Grumman, by
letter dated March 24, directed the Company to stop work on specific
portions of Purchase Orders, a copy of which is attached hereto as
Attachment 3.19.
27
<PAGE>
Schedule 3.19(1)
Monitor Aerospace
Summary - Consultants Without Formal Agreements
As of March 16, 1998
<TABLE>
<CAPTION>
Daily Monthly Other
Name Function Comp. Comp. Compensation Notes
<S> <C> <C> <C> <C> <C>
Joseph Andress International $ 400 Living Allowance, Travel,
Auto, Bonus
Joseph Cangialosi Manufacturing $ 7,350 Vacation, Holidays, Auto Comp. based on
(3) days/week
Carlo Tolve Quality $ 400 Not currently
active
Johann Wislak Manufacturing $ 254 Currently @
(5) days/week
Edwin Markowitz Pension/Profit Sharing $ 4,600 MERP Major Medical for Comp. based on (3)
Special Payroll spouse to age 65 (3/12/00), days/week
Corp. Secretary Minimum deposit life
insurance ($100k), Auto
Nor-Tec Inc. International - Asia $ 5,000 Expenses
</TABLE>
<PAGE>
Attachment 3.19
[NORTHROP GRUMMAN letterhead]
23 March 1998
To: Our Supplier Team
Subject: F/A-18 C/D Program
Accompanying this letter you will find a letter and Stop Work Order covering
Northrop Grumman Corporation F/A-18C/D FY '98 Purchase Orders. This has been
made necessary for delays in FY '98 aircraft procurement for which we are
competing. We anticipate that we will be in a position to resume work in
September, 1998.
We and Boeing, our customer, remain convinced that the future for the F/A-18C/D
is very promising. We, along with our Boeing customer, identify a future market
of several hundred aircraft. We intend to continue to aggressively pursue this
market. In order to keep the air vehicle price competitive, we solicit your
energetic support in helping us to avoid price increases arising from this
temporary interruption in program continuity. We are also asking for your help
in preserving the lead-time that we have achieved through the work performed to
date.
The F/A-18 program is a vital element of the defense of the United States and
its allies. The Northrop Grumman Corporation is proud of its long association
with the program and with you as a valued supplier.
I look forward to continuing our work together on the F/A-18C/D program.
Sincerely,
/s/ Brian L. Hunt
B.L. Hunt
Program Manager
F/A-18A/B/C/D
<PAGE>
Schedule 3.20 Bank Accounts
Schedule Attached
Safe Deposit Box
Location: Bank of New York, Wellwood Avenue, Amityville, New York
Box #: 417
Signatories: Edwin Markowitz, R. Bruce Andrews, Douglas Monitto
28
<PAGE>
Schedule 3.21 Suppliers
No exceptions.
29
<PAGE>
Schedule 3.22 10 Largest Customers
See Attachment 3.22
30
<PAGE>
Sales of Manufactured Product to Monitor Aerospace
Corporation's Largest Customers FY '96 Through FY '98 3rd Quarter
($ Rounded to Hundreds of Thousands)
<TABLE>
<CAPTION>
FY '96 FY '97 FY '98 YTD Through Feb. 1998
------ ------ ----------------------------
Customer Sales(M) Customer Sales(M) Customer Sales(M)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Boeing Seattle 12.5 Boeing Seattle 23.2 Boeing Seattle 21.7
Rohr (BF Goodrich) 7.9 Rohr (BF Goodrich) 8.9 Rohr (BF Goodrich) 12.8
Boeing Wichita 5.8 Boeing Wichita 7.3 Boeing Wichita 6.3
Boeing Canada (1) 3.1 Boeing St. Louis 5.2 Boeing St. Louis 4.1
Northrop Grumman 2.7 Northrop Grumman 2.7 Northrop Grumman 3.6
(Military) (Military) (Military)
Boeing St. Louis 2.7 Shinmaywa (3) 2.0 IAE (4) 2.2
Mitsui (2) 2.3 Hawker De Havilland 1.8 Hawker De Havilland (7) 1.5
Hawker De Havilland 1.9 Boeing Canada (1) 1.5 Pratt & Whitney 1.2
Northrop Grumman 1.3 IAE (4) 1.0 Saab (3) 0.7
(Melbourne)
Shinmaywa (3) 1.2 Wyman Gordon (5) 0.7 Shinmaywa (3) 0.7
Saab 1.0 Lockheed Martin (6) 0.7 Northrop Grumman 0.5
(Commercial)
</TABLE>
NOTES:
(1) One-time turnkey project to support MD11 at Boeing Canada
(2) Mitsui was Shinmaywa's trading agent in Japan and now Shinmaywa buys
directly
(3) Major sales is for a crash MD11 retrofit program which slows down in FY
98
(4) IAE was novated work previously done for Rohr, work may again novate but
back to Rohr
(5) Wyman Gordon fluctuates with the F-22 program
(6) Lockheed Martin fluctuates with the space shuttle program
(7) Hawker sales will decrease in future as Monitor opted not to continue
contract at 30% decrease to current 747 work
(8) Saab work will decrease in future as Saab exits commercial business
Attachment 3.22
<PAGE>
Schedule 3.24 Government Contracts
See Schedule 3.19C under heading "Contract Claim" which is incorporated herein
by reference.
31
<PAGE>
Schedule 3.25 Product Liability/Warranty Claims Contracts
NONE
32
<PAGE>
Schedule 3.27 Undisclosed Changes
Reference is made to Schedule 5.2 which is incorporated herein by
reference.
33
<PAGE>
Schedule 3.28 Affiliate Transactions
Reference is made to the Monitor Asia Agreements attached as Exhibit E-2
to the Agreement and Plan of Merger, which are incorporated herein by
reference.
See Employment Agreements listed on Schedule 3.14 which are incorporated
herein by reference.
See Consulting Agreement with Lawrence Goldberg listed on Schedule
3.19(b), and Consulting Arrangement with Edwin Markowitz listed on
Schedule 3.19(b) which are incorporated herein by reference.
The Company has made a loan to Douglas Monitto in the principal amount
of $51,212.32, which will be repaid at Closing.
Guaranty by Monitor Aerospace Corporation to Key Bank for $535,000 loan
to Douglas Monitto for motor yacht "Monitor". This Guaranty will be
released at Closing.
Certain shareholders are employees of the Company or a Subsidiary, and
receive benefits as such. Such benefits are described on Schedule 3.12
and are incorporated herein by reference.
Other arrangements with members of the Monitto family as previously
disclosed to Buyer will be terminated at or prior to Closing.
Stock Redemption Agreement dated February 1, 1996 between the Company
and Guy Lepore, and Promissory Notes in the amounts of $1,461,997.53 and
$332,562.08 executed in connection therewith. Such Amounts are included
on the Closing Liability Schedule.
34
<PAGE>
Schedule 4.2 Requirements Relating to Buyer
Filings under Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended. Government Contracts may require novations or consents.
35
<PAGE>
Schedule 5.2 Activities Prior to Closing
(c) Compensation/Payments to Employees
The Company will continue to accrue on its monthly Financial Statements
one-twelfth of the expected bonuses to be paid to employees at year end.
The Company will terminate the arrangements listed on Schedule 3.12I and
3.12J, and all costs associated with such termination will be on the
Closing Liability Schedule, and will reduce the Company Value in
calculating the Merger Consideration.
At Closing, bonuses in the amounts listed on Schedule 6.2(h) will be
paid to the persons listed thereon and any amounts in excess of
$1,000,000 will be reflected on the Closing Liability Schedule.
The Company will continue making payments under, or accruing amounts on
its financial statements, to the extent required under the Plans listed
on Schedule 3.12 and the employment agreements listed on Schedule 3.14
(e), (f) and (m) Capital Expenditure
The Company has purchased a used machine tool for $199,500 which is
currently being used in the normal course of business.
(h) Stop Work Notice
The Company received by letter dated March 23, 1998 from Northrop
Grumman, a Stop Work Notice for F/A-18C/D FY'98 Purchase Orders (F18)
with indications that work may resume in September, 1998. The Company
was told verbally that the Stop Work Notice was issued to allow Boeing
St. Louis time to close a foreign military sale. Northrop Grumman, by
letter dated March 24, directed the Company to stop work on specific
portions of Purchase Orders, a copy of which is attached hereto as
Attachment 3.19.
(c), (h) and (n) Restricted Stock Bonus Plan/Andrews Employment
Agreement
Amendment No. 1 to the Restricted Stock Bonus Plan was approved by the
Board at a meeting held March 25, 1998 and will be proposed at the
special meeting of shareholders to be held in connection with the
Merger.
Amendment No. 2 to the Andrews Employment Agreement was approved by the
Board at a meeting held March 25, 1998 and will be proposed at the
special meeting of shareholders to be held in connection with the
Merger.
36
<PAGE>
(i) Payment of Obligations
The Company will terminate the arrangements listed on Schedule 3.12I and
3.12J and all costs associated with such termination will be on the
Closing Liability Schedule and will reduce the Company Value in
calculating the Merger Consideration.
At Closing, bonuses in the amounts listed on Schedule 6.2(h) will be
paid to the persons listed thereon and any amounts in excess of one
million dollars will be reflected on the Closing Liability Schedule.
Certain items listed on the Closing Liability Schedule will result in
the Company incurring liabilities not currently reflected on the
Financial Statements of the Company, but such liabilities will be a
deduction from the Company Value in the calculation of the Merger
Consideration.
Termination of the restrictions on shares issued to Mr. Monitto and Mr.
Goldberg pursuant to the Restricted Stock Bonus Plan and the Andrews
Employment Agreement will result in the Company recognizing compensation
expense, the effect of which has not been reflected on the Company's
Financial Statements.
(m) Sale/Transfer of Assets.
The Company will enter into the Monitor Asia Agreements at Closing in
the form attached as Exhibit E-2 to the Merger Agreement, which are
incorporated herein by reference .
Bill of Sale dated March 30, 1998 from the Company to Green Tree Vendor
Services for the transfer of Trane Coil Enclosure of Lease: 17159096,
pursuant to Lease Agreement executed in 1994 between TriCon Capital, a
unit of Greyhound Financial Corporation and the Company.
37
<PAGE>
Schedule 6.2(h)
Company Bonuses Due Through
May 31, 1998 to be
Paid at the Closing
R. Bruce Andrews $ 550,000
Lawrence Goldberg $ 150,000
Senior Management $ 337,000
Special Recognition Awards $ 185,000
(Small awards to approximately
22 individuals contributors
consistent with prior years)
Total to be paid $1,222,000
<PAGE>
EXECUTION COPY
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 29, 1998 (as
amended, supplemented or modified from time to time, the "Agreement") is entered
into among STELLEX INDUSTRIES, INC., a Delaware corporation (the "Borrower"),
the financial institutions from time to time parties hereto, whether by
execution of this Agreement or an Assignment and Acceptance (the "Lenders"),
SOCIETE GENERALE ("SG"), in its capacity as administrative agent for the Lenders
(in such capacity, the "Administrative Agent"), and FIRST UNION COMMERCIAL
CORPORATION ("First Union"), in its capacity as collateral agent for the Lenders
(in such capacity, the "Collateral Agent").
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. The following terms used in this Agreement
shall have the following meanings, applicable both to the singular and the
plural forms of the terms defined:
"Accommodation Obligation" means any Contractual Obligation, contingent or
otherwise, of any Person with respect to any Indebtedness, obligation or
liability of another, if the primary purpose or intent thereof by the Person
incurring the Accommodation Obligation is to provide assurance to the obligee of
such Indebtedness, obligation or liability of another Person that such
Indebtedness, obligation or liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders thereof
will be protected (in whole or in part) against loss in respect thereof
including, without limitation, direct and indirect guarantees, endorsements
(except for collection or deposit in the ordinary course of busi ness), notes
co-made or discounted, recourse agreements, take-or-pay agreements, keep-well
agreements, agreements to purchase or repurchase such Indebtedness, obligation
or liability or any security therefor or to provide funds for the payment or dis
charge thereof, agreements to maintain solvency, assets, level of income, or
other financial condition, and agreements to make payment other than for value
received.
"Acquisitions" means, collectively, the Kleinert Acquisition, the
Watkins-Johnson Acquisition and the Monitor Acquisition.
"Acquisition Agreements" means, collectively, the Kleinert Acquisition
Agreement, the Watkins-Johnson Acquisition Agreement and the Monitor Acquisition
Agreement.
-1-
<PAGE>
"Acquisition Documents" means, collectively, the Kleinert Acquisition
Documents, the Watkins-Johnson Acquisition Documents and the Monitor Acquisition
Documents.
"Acquisition Term Loan Commitment" means, with respect to any Lender, the
obligation of such Lender to make Acquisition Term Loans pursuant to the terms
and conditions of this Agreement, and which shall not exceed the principal
amount set forth opposite such Lender's name under the heading "Acquisition Term
Loan Commitment" on Schedule I attached hereto or the signature page of the
Assignment and Acceptance by which it became (or becomes) a Lender, as modified
from time to time pursuant to the terms of this Agreement or to give effect to
any applicable Assignment and Acceptance, and "Acquisition Term Loan
Commitments" means the aggregate principal amount of the Acquisition Term Loan
Commitments of all the Lenders, the maximum amount of which shall not at any
time exceed $25,000,000.
"Acquisition Term Loan Lender" means a Lender who has a Acquisition Term
Loan Commitment.
"Acquisition Term Loan Notes" has the meaning assigned thereto in Section
2.05(d).
"Acquisition Term Loans" has the meaning ascribed to such term in Section
2.02(a)(iii).
"Acquisition Term Loan Termination Date" means the day which is the
earliest of (A) December 31, 1999, (B) the termination of the Commitments
pursuant to Section 11.02(a) and (C) the date of termination in whole of the
Commitments pursuant to Section 3.01(a)(ii).
"Administrative Agent" has the meaning ascribed to such term in the
preamble hereto.
"Administrative Agent's Account" means SG's account, account number 9042229
(re: Stellex), maintained at the office of Societe Generale, New York, New York,
ABA #026004226, or such other account as the Administrative Agent may from time
to time specify in writing to the Borrower and the Lenders.
"Aerospace" means Stellex Aerospace, a California corporation (formerly
known as Kleinert Industries Inc.).
"Affiliate" means, as applied to any specified Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with, such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any specified Person, means the
possession, directly or indirectly, of the power to vote ten percent (10%) or
more of the Securities having
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voting power for the election of directors of such specified Person or otherwise
to direct or cause the direction of the management and policies of such
specified Person, whether through the ownership of voting Securities or by
contract or otherwise.
"Agents" means, collectively, the Administrative Agent and the Collateral
Agent.
"Agreement" has the meaning ascribed to such term in the preamble hereto.
"Applicable Acquisition Term Loan Base Rate Margin" means initially a rate
equal to 1.50% per annum during the period from the Effective Date until the
last day of the fourth fiscal quarter of 1998. Beginning with the fourth fiscal
quarter of 1998, such rate will fluctuate quarterly on the first day of the
fiscal quarter immediately following the fiscal quarter in which the financial
statements are delivered to the Administrative Agent in accordance with Section
7.01(a) based upon the Leverage Ratio (as it may be adjusted on a Pro Forma
Basis for any Permitted Acquisition) for the twelve-month period ending as of
the last day of the fiscal quarter immediately preceding the fiscal quarter in
which such financial statements are delivered, as set forth below:
If the Leverage Applicable Acquisition Term
Ratio is: Loan Base Rate Margin
--------------- ---------------------------
Equal to or greater
than 5.5 1.75%
Less than 5.5 but equal to
or greater than 5.0 1.50%
Less than 5.0 but equal to
or greater than 4.5 1.25%
Less than 4.5 1.00%
"Applicable Acquisition Term Loan Eurodollar Rate Margin" means initially a
rate equal to 2.50% per annum during the period from the Effective Date until
the last day of the fourth fiscal quarter of 1998. Beginning with the fourth
fiscal quarter of 1998, such rate will fluctuate quarterly on the first day of
the fiscal quarter immediately following the fiscal quarter in which the
financial statements are delivered to the Administrative Agent in accordance
with Section 7.01(a) based upon the Leverage Ratio (as it may be adjusted on a
Pro Forma Basis for any Permitted Acquisition) for the twelve-month period
ending as of the last day of the fiscal quarter immediately preceding the fiscal
quarter in which such financial statements are delivered, as set forth below:
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If the Leverage Applicable Acquisition Term
Ratio is: Loan Eurodollar Rate Margin
--------------- ---------------------------
Equal to or greater
than 5.5 2.75%
Less than 5.5 but equal to
or greater than 5.0 2.50%
Less than 5.0 but equal to
or greater than 4.5 2.25%
Less than 4.5 2.00%
"Applicable Revolving Loan Base Rate Margin" means initially a rate equal
to 1.25% per annum during the period from the Effective Date until the last day
of the fourth fiscal quarter of 1998. Beginning with the fourth fiscal quarter
of 1998, such rate will fluctuate quarterly on the first day of the fiscal
quarter immediately following the fiscal quarter in which the financial
statements are delivered to the Administrative Agent in accordance with Section
7.01(a) based upon the Leverage Ratio (as it may be adjusted on a Pro Forma
Basis for any Permitted Acquisition) for the twelve-month period ending as of
the last day of the fiscal quarter immediately preceding the fiscal quarter in
which such financial statements are delivered, as set forth below:
If the Leverage Applicable Revolving Loan
Ratio is: Base Rate Margin
--------------- --------------------------
Equal to or greater
than 5.5 1.50%
Less than 5.5 but equal to
or greater than 5.0 1.25%
Less than 5.0 but equal to
or greater than 4.5 1.00%
Less than 4.5 0.75%
"Applicable Revolving Loan Eurodollar Rate Margin" means initially a rate
equal to 2.25% per annum during the period from the Effective Date until the
last day of the fourth fiscal quarter of 1998. Beginning with the fourth fiscal
quarter of 1998, such rate will fluctuate quarterly on the first day of the
fiscal quarter immediately following the fiscal quarter in which the financial
statements are delivered to the Administrative Agent in accordance with Section
7.01(a) based upon the Leverage Ratio (as it may be adjusted on a Pro Forma
Basis for any Permitted Acquisition) for the twelve-month period ending as of
the last day of the fiscal quarter immediately preceding the fiscal quarter in
which such financial statements are delivered, as set forth below:
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If the Leverage Applicable Revolving Loan
Ratio is: Eurodollar Rate Margin
--------------- ------------------------
Equal to or greater
than 5.5 2.50%
Less than 5.5 but equal to
or greater than 5.0 2.25%
Less than 5.0 but equal to
or greater than 4.5 2.00%
Less than 4.5 1.75%
"Applicable Term A Loan Base Rate Margin" means initially a rate equal to
1.25% per annum during the period from the Effective Date until the last day of
the fourth fiscal quarter of 1998. Beginning with the fourth fiscal quarter of
1998, such rate will fluctuate quarterly on the first day of the fiscal quarter
immediately following the fiscal quarter in which the financial statements are
delivered to the Administrative Agent in accordance with Section 7.01(a) based
upon the Leverage Ratio (as it may be adjusted on a Pro Forma Basis for any
Permitted Acquisition) for the twelve-month period ending as of the last day of
the fiscal quarter immediately preceding the fiscal quarter in which such
financial statements are delivered, as set forth below:
If the Leverage Applicable Term A Loan
Ratio is: Base Rate Margin
--------------- -----------------------
Equal to or greater
than 5.5 1.50%
Less than 5.5 but equal to
or greater than 5.0 1.25%
Less than 5.0 but equal to
or greater than 4.5 1.00%
Less than 4.5 0.75%
"Applicable Term A Loan Eurodollar Rate Margin" means initially a rate
equal to 2.25% per annum during the period from the Effective Date until the
last day of the fourth fiscal quarter of 1998. Beginning with the fourth fiscal
quarter of 1998, such rate will fluctuate quarterly on the first day of the
fiscal quarter immediately following the fiscal quarter in which the financial
statements are delivered to the Administrative
Agent in accordance with Section 7.01(a) based upon the Leverage Ratio (as it
may be adjusted on a Pro Forma Basis for any Permitted Acquisition) for the
twelve-month period ending as of the last day of the fiscal quarter immediately
preceding the fiscal quarter in which such financial statements are delivered,
as set forth below:
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<PAGE>
If the Leverage Applicable Term A Loan
Ratio is: Eurodollar Rate Margin
--------------- ----------------------
Equal to or greater
than 5.5 2.50%
Less than 5.5 but equal to
or greater than 5.0 2.25%
Less than 5.0 but equal to
or greater than 4.5 2.00%
Less than 4.5 1.75%
"Applicable Term B Loan Base Rate Margin" means initially a rate equal to
1.75% per annum during the period from the Effective Date until the last day of
the fourth fiscal quarter of 1998. Beginning with the fourth fiscal quarter of
1998, such rate will fluctuate quarterly on the first day of the fiscal quarter
immediately following the fiscal quarter in which the financial statements are
delivered to the Administrative Agent in accordance with Section 7.01(a) based
upon the Leverage Ratio (as it may be adjusted on a Pro Forma Basis for any
Permitted Acquisition) for the twelve-month period ending as of the last day of
the fiscal quarter immediately preceding the fiscal quarter in which such
financial statements are delivered, as set forth below:
If the Leverage Applicable Term B Loan
Ratio is: Base Rate Margin
--------------- ----------------------
Equal to or greater
than 5.5 2.00%
Less than 5.5 but equal to
or greater than 5.0 1.75%
Less than 5.0 but equal to
or greater than 4.5 1.50%
Less than 4.5 1.50%
"Applicable Term B Loan Eurodollar Rate Margin" means initially a rate
equal to 2.75% per annum during the period from the Effective Date until the
last day of the fourth fiscal quarter of 1998. Beginning with the fourth fiscal
quarter of 1998, such rate will fluctuate quarterly on the first day of the
fiscal quarter immediately following the fiscal quarter in which the financial
statements are delivered to the Administrative Agent in accordance with Section
7.01(a) based upon the Leverage Ratio (as it may be adjusted on a Pro Forma
Basis for any Permitted Acquisition) for the twelve-month period ending as of
the last day of the fiscal quarter immediately preceding the fiscal quarter in
which such financial statements are delivered, as set forth below:
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<PAGE>
If the Leverage Applicable Term B Loan
Ratio is: Eurodollar Rate Margin
--------------- ----------------------
Equal to or greater
than 5.5 3.00%
Less than 5.5 but equal to
or greater than 5.0 2.75%
Less than 5.0 but equal to
or greater than 4.5 2.50%
Less than 4.5 2.50%
"Applicable Lending Office" means, with respect to a particular Lender, its
Eurodollar Lending Office in respect of provisions relating to Eurodollar Rate
Loans and its Domestic Lending Office in respect of provisions relating to Base
Rate Loans.
"Asset Sale" means any sale, conveyance, transfer, lease or other
disposition of property of any Loan Party.
"Assignment and Acceptance" means an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto and made a part hereof
(with blanks appropriately completed) delivered to the Administrative Agent in
connection with an assignment of a Lender's interest under this Agreement in
accordance with the provisions of Section 13.01.
"Availability" means, at any particular time, the amount by which the
Maximum Revolving Credit Amount at such time exceeds the Revolving Credit
Obligations at such time.
"Base Rate" means, on any date, a fluctuating interest rate per annum
(rounded upward, if necessary, to the next highest 1/16 of 1%) equal to the
higher of:
(a) the rate of interest then most recently established by SG in New
York, New York as its base rate for Dollars loaned in the United States, in
effect on such date; and
(b) the Federal Funds Rate in effect on such date plus 1/2 of 1%.
The Base Rate is not necessarily intended to be the lowest rate of interest
determined by SG in connection with extensions of credit.
"Base Rate Loans" means all Loans which bear interest at a rate determined
by reference to the Base Rate as provided in Section 4.01(a).
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<PAGE>
"Benefit Plan" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multiemployer Plan) which is subject to Title IV of ERISA or
Section 412 of the Code in respect of which any Loan Party or any ERISA
Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"Board of Directors" means the board of directors or equivalent governing
body of a Person (or the general partner of such Person, as the case may be,) or
any committee thereof duly authorized to act on behalf of such board of
directors or equivalent governing body.
"Borrower" has the meaning ascribed to such term in the preamble hereto.
"Borrowing" means a borrowing consisting of Loans of the same Type made on
the same day by the Lenders.
"Borrowing Base" means, as of any date of determina tion, an amount equal
to the sum of (a) eighty-five percent (85%) of Eligible Receivables less such
reserves as the Administrative Agent reasonably deems appropriate plus (B) fifty
percent (50%) of Eligible Inventory less such reserves as the Administrative
Agent reasonably deems appropriate.
"Borrowing Base Certificate" means a certificate, substantially in the form
of Exhibit B attached hereto and made a part hereof.
"Business" means the businesses of the Borrower and its Subsidiaries on the
date hereof and any business located in the United States or Canada related,
ancillary or complementary thereto, or which is an extension thereof.
"Business Day" means a day, in the applicable local time, which is not a
Saturday or Sunday or a legal holiday and on which banks are not required or
permitted by law or other govern mental action to close (i) in New York, New
York or Los Angeles, California, (ii) in the case of Eurodollar Rate Loans, in
London, England and (iii) in the case of Letter of Credit transactions for the
Issuing Bank, in the place where its office for issuance and administration of
the pertinent Letter of Credit is located.
"Capital Expenditures" means, for any period, the aggregate of all
expenditures (whether paid in cash or other assets or accrued as a liability
(but without duplication)) during such period that, in conformity with GAAP, are
required to be included in or reflected by a Loan Party's fixed asset account as
reflected in its balance sheets; provided, however, that Capital Expenditures
shall include, whether or not such a designation would be in conformity with
GAAP, (A) that portion of Capital Leases which is capitalized on the balance
sheet of such
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<PAGE>
Loan Party and (B) expenditures for Equipment which is purchased simultaneously
with the trade-in of existing Equipment owned by such Loan Party to the extent
that the gross purchase price of the purchased Equipment exceeds the book value
of the Equipment being traded in at such time; provided, further, that Capital
Expenditures shall exclude, whether or not such a designation would be in
conformity with GAAP, (i) any expenditures made with the proceeds, damages or
awards under any policy of insurance with respect to any casualty or other
damage or defect or the proceeds of any taking by reason of any public
improvement or condemnation proceeding or transfer, (ii) any Permitted
Acquisition relating to an acquisition of assets and (iii) any expenditures made
with the proceeds of any Asset Sale in accordance with clause (i) of the
definition of "Excluded Proceeds."
"Capital Lease" means, as applied to any Person, any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Capital Stock" means, with respect to any Person, any capital stock of
such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.
"Cash Capital Expenditures" means, for any period, that portion of Capital
Expenditures which is paid in cash.
"Cash Collateral Account" means the account opened and maintained at First
Union National Bank which account shall be governed by the terms of the Cash
Collateral Pledge Agreement and shall be under the sole dominion and control of
the Collateral Agent.
"Cash Collateral Pledge Agreement" means the Cash Collateral Pledge and
Assignment Agreement, substantially in the form of Exhibit K attached hereto and
made a part hereof, made by the Loan Parties in favor of the Collateral Agent
for the benefit of the Agents and the Lenders, as such Pledge Agreement may be
amended, supplemented or otherwise modified from time to time.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year after the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one (1) year after the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings
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<PAGE>
obtainable from either Standard & Poor's Corporation or Moody's Investors
Services, Inc. (or, if at any time neither Standard & Poor's Corporation nor
Moody's Investors Services, Inc. shall be rating such obligations, then from
such other nationally recognized rating services reasonably acceptable to the
Administrative Agent) and not listed in Credit Watch published by Standard &
Poor's Corporation; (iii) commercial paper, other than commercial paper issued
by any Loan Party or any of its Affiliates, maturing no more than ninety (90)
days after the date of creation thereof and, at the time of acquisition, having
a rating of at least A-1 or P-1 from either Standard & Poor's Corporation or
Moody's Investor's Service, Inc. (or, if at any time neither Standard & Poor's
Corporation nor Moody's Investors Service, Inc. shall be rating such
obligations, then the highest rating from such other nationally recognized
rating services reasonably acceptable to the Administrative Agent); (iv)
domestic and Eurodollar certificates of deposit or time deposits or bankers'
acceptances maturing within ninety (90) days after the date of acquisition
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or Canada
having combined capital and surplus of not less than $250,000,000; (v)
repurchase obligations of the type referred to in clauses (i) through (iv)
above; and (vi) money market and mutual funds substantially all of whose assets
are comprised of securities of the types described in clauses (i) through (v)
above and cash.
"Cash Interest Expense" means, for any Financial Covenant Period, total
interest expense, whether paid or accrued (including the interest component of
Capital Leases, but excluding amortization of deferred financing costs and
interest paid on the Put/Call Promissory Notes) of the Borrower and its
Subsidiaries on a consolidated basis, as determined in conformity with GAAP.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. ss.ss. 9601 et seq., any amendments thereto,
any successor statutes, and any regulations promulgated thereunder.
"Change of Control" means the occurrence of one or more of the following
events:
(a) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act), directly or indirectly, of more than 35% of the
total voting power of the Voting Securities of the Borrower;
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<PAGE>
(b) the Permitted Holders "beneficially own" (as defined in Rules
13d-3 and 13d-5 under the Securities Exchange Act), directly or indirectly,
in the aggregate less than 51% of the total voting power of the Voting
Securities of the Borrower or do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the Board of Directors of the Borrower; or
(c) the first day on which a majority of the members of the Board of
Directors of the Borrower are not Continuing Directors.
"Chief Financial Officer" means the chief financial officer or vice
president of finance of the Borrower.
"Claim" means any claim or demand, by any Person, of whatsoever kind or
nature for any alleged Liabilities and Costs, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.
"Class" means, with respect to any Lender, its classification as a
Revolving Loan Lender, Term A Loan Lender, Term B Loan Lender or Acquisition
Term Loan Lender.
"Closing Date" means October 31, 1997.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and any regulations or guidelines promulgated
thereunder.
"Collateral" means all property and interests in prop erty now owned or
hereafter acquired by any Loan Party in or upon which a Lien is granted under
any of the Loan Documents.
"Collateral Agent" has the meaning ascribed to such term in the preamble
hereto.
"Collateral Documents" means, collectively, the Security Agreements, the
Pledge Agreements, the Intellectual Property Security Agreement and the Cash
Collateral Pledge Agreement.
"Commercial Letter of Credit" means any documentary letter of credit issued
by an Issuing Bank pursuant to Section 2.04 for the account of the Borrower,
which is drawable upon presentation of documents evidencing the sale or shipment
of goods purchased by the Borrower or any of its Subsidiaries in the ordinary
course of their business.
"Commission" means the Securities and Exchange Commis sion and any Person
succeeding to the functions thereof.
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<PAGE>
"Commitment" means, with respect to any Lender, such Lender's Revolving
Loan Commitment, Term A Loan Commitment, Term B Loan Commitment and Acquisition
Term Loan Commitment, and as modified from time to time pursuant to the terms of
this Agreement or to give effect to any applicable Assignment and Acceptance,
and "Commitments" means the aggregate principal amount of the Commitments of all
the Lenders, the maximum amount of which shall not exceed $150,000,000.
"Commitment Fee Rate" means initially a rate equal to one-half of one
percent (1/2 of 1%) per annum during the period from the Effective Date until
the last day of the fourth fiscal quarter of 1998. Beginning with the fourth
fiscal quarter of 1998, such rate will fluctuate quarterly on the first day of
the fiscal quarter immediately following the fiscal quarter in which the
financial statements are delivered to the Administrative Agent in accordance
with Section 7.01(a) based upon the Leverage Ratio (as it may be adjusted on a
Pro Forma Basis for any Permitted Acquisition) for the twelve-month period
ending as of the last day of the fiscal quarter immediately preceding the fiscal
quarter in which such financial statements are delivered, as set forth below:
If the Leverage Commitment
Ratio is: Fee Rate
--------------- ----------
Equal to or greater
than 5.0 0.500%
Less than 5.0 0.375%
"Commitment Termination Date" means the day which is the earliest of (A)
December 31, 2003, (B) the termination of the Commitments pursuant to Section
11.02(a) and (C) the date of termination in whole of the Revolving Credit
Commitments pursuant to Section 3.01(a)(ii).
"Compliance Certificate" has the meaning ascribed to such term in Section
7.01(c).
"Contaminant" means any waste, pollutant (as that term is defined in 42
U.S.C. ss.9601(33) or in 33 U.S.C. ss.1362(13)), hazardous substance (as that
term is defined in 42 U.S.C. ss.9601(14)), hazardous chemical (as that term is
defined by 29 CFR ss.1910.1200(c)), toxic substance, hazardous waste (as that
term is defined in 42 U.S.C. ss.6903(5)), radioactive material, petroleum,
including crude oil or any petroleum-derived substance, waste, or breakdown or
decomposition product thereof, as defined under federal, state or local laws or
regulations, or any constituent of any such substance or waste, including, but
not limited to polychlorinated biphenyls ("PCBs"), and asbestos.
"Contractual Obligation" means, as applied to any Person, any provision of
any Securities issued by that Person or
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any indenture, mortgage, deed of trust, security agreement, pledge agreement,
guaranty, contract, undertaking, agreement or instrument to which that Person is
a party or by which it or any of its properties is bound, or to which it or any
of its properties is subject.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Borrower who (i) was a member of such Board of
Directors on the Closing Date or (ii) was nominated by Richard L. Kramer or
William L. Remley to serve on such Board of Directors.
"Contribution Agreement" means the Amended & Restated Contribution
Agreement dated as of the Effective Date among the Loan Parties, as such
agreement may be further amended, supplemented or otherwise modified from time
to time.
"Current Assets" means, as at any date of determina tion, the total assets
of the Borrower and its Subsidiaries on a consolidated basis which may properly
be classified as current assets in conformity with GAAP.
"Current Liabilities" means, as at any date of determination, the current
liabilities of the Borrower and its Subsidiaries on a consolidated basis which
may properly be classified as current liabilities in conformity with GAAP.
"Customary Permitted Liens" means
(i) Liens (other than Environmental Liens and Liens in favor of the
PBGC) with respect to the payment of taxes, assessments or governmental
charges or claims, in all cases which are not yet due or are being
contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other Liens imposed by
law created in the ordinary course of business in all cases for amounts
which are not yet due or are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP;
(iii) Liens (other than any Lien in favor of the PBGC) incurred or
deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other types of social
security benefits or to secure the performance of bids, tenders, sales,
leases, contracts (other than for the repayment of borrowed money), surety,
appeal and performance bonds, in all cases for
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<PAGE>
amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with GAAP;
and
(iv) zoning restrictions, easements, licenses, reservations,
covenants, rights-of-way, utility easements, building restrictions and
other similar charges or encum brances on the use of Real Property which do
not materially interfere with the ordinary conduct of the business of the
Loan Parties and which do not materially adversely affect the value of the
Real Property.
"Debt" means, as applied to any Person at any time and without duplication,
all indebtedness, obligations or other liabilities of such Person (i) for
borrowed money or evidenced by debt securities, debentures, acceptances, notes
or other similar instruments (other than the Put/Call Promissory Notes), (ii)
under profit payment agreements or in respect of obligations to redeem,
repurchase or exchange any Securities of such Person or to pay dividends in
respect of any stock (other than the Put/Call Preferred Stock and management
investor agreements of the type referred to in the definition of "Management
Equity Interests" provided that such indebtedness, obligations or other
liabilities thereunder are only permitted to be paid if permitted under this
Agreement), (iii) with respect to letters of credit issued for such Person's
account (to the extent not accounted for in clause (i) above), (iv) to pay the
deferred purchase price of property or services, except accounts payable and
accrued expenses arising in the ordinary course of business, or (v) in respect
of Capital Leases.
"Default" means an event which, with the giving of notice or the lapse of
time, or both, would constitute an Event of Default.
"Default Rate" has the meaning ascribed to such term in Section 4.01(d).
"DOL" means the United States Department of Labor and any Person succeeding
to the functions thereof.
"Dollars" and "$" mean the lawful money of the United States.
"Domestic Lending Office" means, with respect to any Lender, such Lender's
office, located in the United States, specified as the "Domestic Lending Office"
under its name on Schedule I attached hereto or on the Assignment and Acceptance
by which it became a Lender or such other United States office of such Lender as
it may from time to time specify by written notice to the Borrower and the
Administrative Agent.
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"EBITDA" means, for any Financial Covenant Period, (i) the Net Income,
determined on a consolidated basis for the Borrower and its Subsidiaries, for
such Financial Covenant Period plus the following amounts (without duplication)
for such Financial Covenant Period to the extent deducted in calculating such
Net Income: (A) depreciation and amortization expense, (B) interest expense, (C)
federal, state, local and foreign income taxes, (D) extraordinary or unusual
losses, (E) non-cash portion of nonrecurring losses and charges, (F) non-cash
management compensation expense, (G) amounts paid with respect to the "Retention
Plan Payments" as defined in the Watkins-Johnson Acquisition Agreement and (H)
any increase in cost of sales resulting from the write-up of inventory in
accordance with Accounting Principles Board Opinion No. 16 (or successor
provision); minus (ii) the amount of extraordinary gains, each item in clauses
(i) and (ii) calculated pursuant to GAAP for such period.
"Effective Date" means the date on which all of the conditions precedent in
Sections 5.01 and 5.02 have been satisfied.
"Eligible Assignee" means (i) a Lender or (ii) a commercial bank, lending
institution, finance company, insurance company, other financial institution or
fund reasonably acceptable to the Administrative Agent and the Borrower (which
acceptance shall not be unreasonably withheld), provided, however, if a Default
or Event of Default has occurred and is continuing, the acceptance by the
Borrower shall not be required.
"Eligible Inventory" means Inventory that is reflected on the consolidated
balance sheet of the Borrower as inventory, and unbilled receivables that are
reflected on the consolidated balance sheet of the Borrower as unbilled
receivables (but only to the extent such unbilled receivables do not exceed
$2,000,000), and each valued in accordance with GAAP, with respect to which,
when scheduled on a Borrowing Base Certificate and at all times thereafter, the
Collateral Agent has a valid and perfected first priority security interest and
there is no violation of the negative or affirmative covenants or other
provisions of this Agreement or any other Loan Document specifically applicable
to Inventory. No Inventory of the Borrower shall be Eligible Inventory if such
Inventory is located, stored, used or held at the premises of a third party
unless either (i) (A) the Administrative Agent shall have received a bailee's or
similar letter from such third party in form and substance satisfactory to the
Administrative Agent and (B) an appropriate UCC-1 financing statement shall have
been executed with respect to such location or (ii) the Administrative Agent
shall have otherwise consented in writing, provided however that Inventory in
the possession of outside processors and offloaded Inventory in the possession
of third parties, together
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having an aggregate value of no more than $4,000,000 at any one time, may be
Eligible Inventory.
"Eligible Receivables" means those Receivables, that are reflected on the
consolidated balance sheet of the Borrower and valued in accordance with GAAP,
with respect to which, when scheduled on a Borrowing Base Certificate and at all
times thereafter, the Collateral Agent has a valid and perfected first priority
security interest (but not including compliance with the Assignment of Claims
Act of 1940 , as amended, with respect to Receivables where the account debtor
is the United States of America or any department, agency or instrumentality
thereof) and there is no violation of the negative or affirmative covenants or
other provisions of this Agreement or any other Loan Document specifically
applicable to Receivables. No Receivable of the Borrower shall be an Eligible
Receivable if:
(i) the Receivable is a non-dated Receivable which remains due or
unpaid more than one hundred twenty (120) days after the date of original
invoice issued by the Borrower or any of its Subsidiaries with respect to
the sale giving rise thereto; or the Receivable is a dated Receivable which
remains due or unpaid more than one hundred twenty (120) days after the
date of the original invoice issued by the Borrower or any of it
Subsidiaries with respect to the sale giving rise thereto; or
(ii) the Receivable does not arise out of a sale made in the ordinary
course of business of the Borrower or any Subsidiary of the Borrower, or is
to a Person which is an Affiliate or Subsidiary of the Borrower or
controlled by an Affiliate or Subsidiary of the Borrower; or
(iii) that portion of the Receivable that is in dispute or is subject
to any asserted claim of setoff; or
(iv) any warranty contained in this Agreement or any Loan Document
with respect to Eligible Receivables or such Receivable has been breached;
or
(v) the account debtor has filed a petition for bankruptcy or any
other petition for relief under the Bankruptcy Code, made an assignment for
the benefit of creditors, or if any petition or other application for
relief under the Bankruptcy Code has been filed against the account debtor,
or if the account debtor has failed, suspended its business operations,
become insolvent, or suffered a receiver or a trustee to be appointed for
all or a material portion of its assets or affairs; or
(vi) the sale is to an account debtor located outside the continental
United States, unless such sale is on letter of credit or acceptance terms
acceptable to the
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Administrative Agent (which letter of credit or acceptance has been
assigned to the Collateral Agent in a manner satisfactory to the
Administrative Agent), provided, however, that Receivables having an
aggregate value of not more than $2,000,000 at any one time where the sales
are to account debtors located in countries which are members of the OECD
may be Eligible Receivables; or
(vii) the sale to such customer is on guaranteed sale, sale and
return, sale on approval, consignment or any other repurchase or return
basis (other than a repurchase or return pursuant to a warranty); or
(viii) the goods giving rise to such Receivable have not been shipped
or delivered to the account debtor or the services giving rise to such
Receivable have not been performed by the Borrower or any Subsidiary of the
Borrower; or
(ix) any document or agreement executed or delivered in connection
with any Receivable, or any procedure used in connection with any such
document or agreement, fails in any respect to comply with any requirements
of applicable law, and such failure would, in the reasonable determination
of the Administrative Agent, (a) have a material adverse effect upon the
collectability of such Receivable or (b) subject payments with respect to
such Receivable to any claim for recovery thereof after receipt by the
Administrative Agent or the Lenders.
In addition to the foregoing, no Receivables owing by a particular account
debtor shall be Eligible Receivables if twenty five percent (25%) or more of the
Receivables owing from such account debtor are ineligible for any reason.
"Environmental, Health or Safety Requirement of Law" means Requirements of
Law relating to or addressing the indoor or outdoor environment, health or
safety, including but not limited to any law, regulation, or order relating to
the use, handling, or disposal of any Contaminant, any law, regulation, or order
relating to Remedial Action, and any law, regulation, or order relating to
workplace or worker safety and health.
"Environmental Lien" means a Lien in favor of any Governmental Authority
for (i) any liability under federal or state environmental laws or regulations,
or (ii) damages arising from, or costs incurred by such Governmental Authority
in response to, a Release or threatened Release of a Contaminant into the
environment.
"Equipment" means all of each Loan Party's present and future owned (i)
equipment and fixtures, including, without limitation, machinery, manufacturing,
distribution, selling,
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computer system, data processing and office equipment, assembly systems, tools,
molds, dies, fixtures, appliances, furniture, furnishings, vehicles, vessels,
aircraft, aircraft engines, and trade fixtures, (ii) other tangible personal
property, and (iii) any and all accessions, parts and appurtenances attached to
any of the foregoing or used in connection therewith, and any substitutions
therefor and replacements, products and proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" means any (i) corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as any Loan Party, (ii) partnership, trade or business (whether or not
incorporated) which is under common control (within the meaning of Section
414(c) of the Code) with a Loan Party and (iii) entity which is a member of an
"affiliated service group" (as defined in Section 414(m) of the Code) with any
other Loan Party.
"Eurodollar Affiliate" means, with respect to each Lender, the Affiliate of
such Lender (if any) set forth below such Lender's name under the heading
"Eurodollar Affiliate" on Schedule I attached hereto or on the Assignment and
Acceptance by which it became a Lender or such Affiliate of a Lender as it may
from time to time specify by written notice to the Borrower and the
Administrative Agent.
"Eurodollar Interest Payment Date" means (i) with respect to any Eurodollar
Rate Loan, the last day of each Eurodollar Interest Period applicable to such
Loan and (ii) with respect to any Eurodollar Rate Loan having a Eurodollar
Interest Period in excess of three (3) calendar months, the last day of each
calendar quarter during such Eurodollar Interest Period.
"Eurodollar Interest Period" has the meaning set forth in Section 4.02(b).
"Eurodollar Lending Office" means, with respect to any Lender, the office
or offices of such Lender (if any) set forth below such Lender's name under the
heading "Eurodollar Lending Office" on Schedule I attached hereto or on the
Assignment and Acceptance by which it became a Lender or such office or offices
of such Lender as it may from time to time specify by written notice to the
Borrower and the Administrative Agent.
"Eurodollar Rate" means, with respect to any Eurodollar Interest Period
applicable to a Borrowing of Eurodollar Rate Loans, an interest rate per annum
obtained by dividing (i) the rate of interest per annum specified by notice to
the Administrative Agent by SG as the rate per annum at which
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deposits in Dollars are offered by SG in London, England to major banks in the
London interbank market at approximately 11:00 a.m. (London time) on the
Interest Rate Determination Date for such Eurodollar Interest Period for a
period equal to such Eurodollar Interest Period and in an amount substantially
equal to the amount of the Eurodollar Rate Loan to be made by SG to be
outstanding during such Eurodollar Interest Period, by (ii) a percentage equal
to 100% minus the Eurodollar Reserve Percentage. The Eurodollar Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Eurodollar Rate Loans" means those Loans outstanding which bear interest
at a rate determined by reference to the Eurodollar Rate as provided in Section
4.01(a).
"Eurodollar Reserve Percentage" means, for any day, that percentage which
is in effect on such day, as prescribed by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York, New York with respect to
"Eurocurrency Liabilities" (or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on Eurodollar
Rate Loans is determined or any category of extensions of credit or other assets
which includes loans by a non-United States office of any bank to United States
residents).
"Event of Default" means any of the occurrences set forth in Section 11.01
after the expiration of any applicable grace period and the giving of any
applicable notice, in each case as expressly provided in Section 11.01.
"Excess Cash Flow" means, for any Fiscal Year, EBITDA for such Fiscal Year,
minus cash interest paid during such Fiscal Year, minus Capital Expenditures
made during such Fiscal Year, minus principal payments made on Funded Debt
(excluding Revolving Loans) during such Fiscal Year, minus taxes paid in cash
during such Fiscal Year, plus the decrease or minus the increase in Working
Capital during such Fiscal Year.
"Excluded Proceeds" means (i) Net Cash Proceeds that are used by a Loan
Party within one year from the receipt of such Net Cash Proceeds by such Loan
Party on account of an Asset Sale to replace the asset with respect to such
Asset Sale, acquire any other assets or property constituting Collateral which
serve a similar purpose or have the same or similar function for the business as
the replaced assets or to consummate a Permitted Acquisition, provided that such
Net Cash Proceeds are deposited into the Cash Collateral Account upon receipt of
such Net Cash Proceeds by such Loan Party until the earlier of (A) such time as
such Loan Party replaces or acquires such asset or consummates
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the Permitted Acquisition or (B) the first annual anniversary of the date such
Net Cash Proceeds were deposited into the Cash Collateral Account, (ii) Net Cash
Proceeds on account of one or more Asset Sales so long as such Net Cash Proceeds
do not exceed $500,000 in the aggregate in any twelve month period, (iii)
proceeds from the sales of Inventory in the ordinary course of business, (iv)
proceeds from the disposition of Equipment if such Equipment is obsolete or no
longer useful in the ordinary course of such Loan Party's business and (v)
proceeds received by a Wholly Owned Subsidiary of a Loan Party as a result of an
assignment, transfer, conveyance or other disposition permitted pursuant to
Section 9.02(v).
"Excluded Securities" means, with respect to any Loan Party, (i) common or
preferred stock issued by such Loan Party to a seller in connection with a
Permitted Acquisition or management personnel in connection with management
compensation arrangements or a Permitted Acquisition, (ii) Series B Preferred
Stock issued by KII Holding Corp. having an aggregate liquidation preference not
to exceed $200,000 and (iii) any Securities issued by any Subsidiary of the
Borrower to the Borrower or another Subsidiary of the Borrower, provided that
such Securities referred to in this clause (iii) are pledged to the Collateral
Agent, on terms and conditions, and pursuant to documentation, reasonably
satisfactory to the Administrative Agent, in a manner whereby the Collateral
Agent has a valid, perfected and first priority Lien therein and (iv) Management
Equity Interests.
"Farm Bureau" means Farm Bureau Life Insurance Company.
"Farm Bureau Consent" means a consent of Farm Bureau to the Collateral
Agent's Liens in the Collateral granted by Paragon Precision Products and by
Aerospace pursuant to the Loan Documents (including, without limitation, a
pledge by Aerospace of the Paragon Precision Products stock pursuant to the
Pledge Agreement executed and delivered by Aerospace), which consent shall be in
form and substance satisfactory to the Administrative Agent and shall have been
executed and delivered by Farm Bureau to the Administrative Agent.
"Farm Bureau Deed of Trust" means the Deed of Trust with Assignment of
Rents and Fixture Filing dated as of September 6, 1991 made by Paragon Precision
Products in favor of Farm Bureau, as such Deed of Trust may be amended,
supplemented and modified from time to time.
"Farm Bureau Guaranty" means the Guaranty dated as of September 6, 1991 by
and between Farm Bureau and Aerospace.
"Federal Funds Rate" means, for any period, a fluctu ating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System
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arranged by federal funds brokers, as published for such day (or, if such day is
not a Business Day in New York, New York, for the next preceding Business Day)
in New York, New York by the Federal Reserve Bank of New York, or if such rate
is not so published for any day which is a Business Day in New York, New York,
the average of the quotations for such day on such transactions received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by the Administrative Agent.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System or any Governmental Authority succeed ing to its functions.
"Fee Letters" means, collectively, the Fee Letters between the Borrower and
each of the Agents.
"Financial Covenant Period" means the immediately preceding four fiscal
quarter period, provided that for the fourth quarter of 1997 and the first and
second quarters of 1998, the amount of EBITDA, Cash Interest Expense and Capital
Expenditures used in covenant calculations shall be the stipulated amounts set
forth on Schedule 1.01(C) (as adjusted on a pro forma basis for any Permitted
Acquisition consummatd after the date hereof) instead of the results calculated
in accordance with GAAP.
"Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries
ending on December 31 of each calendar year.
"Fixed Charge Coverage Ratio" means, for any Financial Covenant Period, the
ratio of (i) EBITDA less Cash Capital Expenditures made during such period to
(ii) Cash Interest Expense plus the regularly scheduled installments of Funded
Debt payable during such period.
"Forfeiture Proceeding" means any action, proceeding or investigation
affecting any of the Loan Parties before any court, governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
the receipt of notice by any such party that any of them is a subject of any
governmental inquiry or investigation, which may result in an indictment of any
of them or the seizure or forfeiture of any of their property.
"Funded Debt" means Debt which matures more than one year from the date of
its creation or matures within one year from such date but is renewable or
extendible, at the option of the debtor, to a date more than one year from such
date or arises under a revolving credit or similar agreement which obligates the
lender or lenders to extend credit during a period of more than one year from
such date including, without limitation, all
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amounts of Funded Debt required to be paid or prepaid within one year from the
date of determination.
"Funding Date" means the date of the funding of a Loan.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants Standards Board or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession as in effect on the Effective Date.
"General Intangibles" means all of each Loan Party's present and future
choses in action, causes of action and all other intangible personal property of
every kind and nature (other than Receivables), including without limitation
general intangibles, contracts, corporate or other business records, designs,
patents, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, tradestyles, trade secrets, operating
certificates, operating certificate applications, goodwill, registrations,
copyrights, licenses, franchises, permits, operating authorities, agent and
owner/operator contracts, certificates of public convenience, refunds or
reversions from any employee benefit plan or pension plan, covenants not to
compete, blueprints and other drawings, customer lists, tax refunds, tax refund
claims, rights and claims against carriers and shippers, and rights to
indemnification.
"Governing Documents" means, with respect to any corporation, (i) the
articles/certificate of incorporation (or the equivalent organizational
documents) of such corporation, (ii) the by-laws (or the equivalent governing
documents) of the corporation and (iii) any document setting forth the
designation, amount and/or relative rights, limitations and preferences of any
class or series of such corporation's capital stock; and, with respect to any
general partnership, (i) the partnership agreement (or the equivalent
organizational documents) of such partnership and (ii) any document setting
forth the designation, amount and/or relative rights, limitations and
preferences of any of the partnership interests; and, with respect to any
limited partnership, (i) the partnership agreement (or the equivalent
organizational documents) of such partnership, (ii) a certificate of limited
partnership (or the equivalent organizational documents) and (iii) any document
setting forth the designation, amount and/or relative rights, limitations and
preferences of any of the partnership interests.
"Government" means the United States government or any department,
instrumentality or agency thereof, or any state government or any department,
instrumentality or agency thereof.
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"Governmental Authority" means any nation or government, any federal,
state, local, foreign or other political subdivision thereof and any entity
exercising executive, legisla tive, judicial, regulatory or administrative
functions of or pertaining to government.
"Government Contracts" means (i) written contracts between any Loan Party
and the Government; and (ii) written subcontracts between any Loan Party and a
prime contractor who is providing goods or services to the Government pursuant
to a written contract with the Government or its prime contractor, if applicable
(the "Prime Contract"), provided that the subcontract relates only to goods or
services being provided to the Government pursuant to the prime contract.
"Guarantors" means, collectively, each Subsidiary of the Borrower
(including Monitor and its Subsidiaries).
"Guaranty" means the Amended and Restated Guaranty, substantially in the
form of Exhibit J attached hereto and made a part hereof, referred to in the
List of Closing Documents set forth on Exhibit E attached hereto and made a part
hereof.
"Holder" means any Person entitled to enforce any of the Obligations,
whether or not such Person holds any evidence of Indebtedness, including,
without limitation, each Agent, each Lender and each Issuing Bank.
"Indebtedness" means, as applied to any Person at any time, (a) all
indebtedness, obligations or other liabilities of such Person (i) for borrowed
money or evidenced by debt securi ties, debentures, acceptances, notes or other
similar instru ments, and any accrued interest, fees and charges relating
thereto, (ii) under profit payment agreements or in respect of obligations to
redeem, repurchase or exchange any Securities of such Person or to pay dividends
in respect of any stock, (iii) with respect to letters of credit issued for such
Person's account, (iv) to pay the deferred purchase price of property or
services, except accounts payable and accrued expenses arising in the ordinary
course of business, (v) in respect of Capital Leases or (vi) which are
Accommodation Obligations; (b) all indebted ness, obligations or other
liabilities of such Person or others secured by a Lien (other than a Customary
Permitted Lien) on any property of such Person, whether or not such
indebtedness, obligations or liabilities are assumed by such Person, all as of
such time; (c) all indebtedness, obligations or other liabilities of such Person
in respect of Interest Rate Contracts and foreign exchange contracts, net of
liabilities owed to such Person by the counterparties thereon; (d) all preferred
stock subject (upon the occurrence of any contingency or otherwise) to mandatory
redemp tion; and (e) all contingent Contractual Obligations with respect to any
of the foregoing.
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"Indemnified Matters" has the meaning ascribed to such term in Section
13.05.
"Indemnitees" has the meaning ascribed to such term in Section 13.05.
"Information Package" means, with respect to each Permitted Acquisition, an
information package consisting of (i) a description of the Business being
acquired, (ii) historical financial statements (which may be unaudited) for the
respective Business for at least the two full fiscal years most recently ended
and the latest twelve-month period ended with the last day of the fiscal quarter
last ended, (iii) projections for the five years after the respective Permitted
Acquisition, (iv) an officer's certificate for the twelve-month period ended on
the date of the most recent delivery of quarterly financial statements pursuant
to Section 7.01(a) hereof indicating the compliance on a Pro Forma Basis with
the financial covenants contained in Schedule 5.03(B) hereof and (v) any other
information which the Borrower in good faith determines should be furnished so
that the Information Package for the respective Business being acquired is, to
the best of the Borrower's knowledge after reasonable investigation, true and
correct in all material respects and is not incomplete by omitting to state any
fact necessary to make the information (taken as a whole) contained therein not
misleading in any material respect; provided, however, that with respect to the
projections described in clause (iii) above, the Borrower shall only be required
to represent that such projections were prepared in good faith.
"Intellectual Property Security Agreement" means the Amended and Restated
Patent Security Agreement, substantially in the form of Exhibit N attached
hereto and made a part hereof, referred to in the List of Closing Documents set
forth on Exhibit E attached hereto and made a part hereof.
"Interest Coverage Ratio" means, with respect to any Financial Covenant
Period, the ratio of (i) EBITDA to (ii) Cash Interest Expense.
"Interest Rate Contracts" means interest rate exchange, swap, collar, cap,
hedging or similar agreements.
"Interest Rate Determination Date" has the meaning ascribed to such term in
Section 4.02(c).
"Inventory" means all of each Loan Party's present and future (i)
inventory, (ii) goods, merchandise and other personal property furnished or to
be furnished under any contract of service or intended for sale or lease, and
all goods consigned by such Loan Party to another Person and all other items
which have previously constituted Equipment but are then currently being held
for sale or lease in the ordinary course of such Loan
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Party's business, (iii) raw materials, work-in-process and finished goods, (iv)
materials and supplies of any kind, nature or description used or consumed in
such Loan Party's business or in connection with the manufacture, production,
packing, shipping, advertising, finishing or sale of any of the property
described in clauses (i) through (iii) above, (v) goods in which such Loan Party
has a joint or other interest or right of any kind (including, without
limitation, goods in which such Loan Party has an interest or right as
consignee), and (vi) goods which are returned to or repossessed by such Loan
Party; in each case whether in the possession of such Loan Party, a bailee, a
consignee, or any other Person for sale, storage, transit, processing, use or
otherwise, and any and all documents for or relating to any of the foregoing.
"Investment" means, with respect to any Person, (i) any purchase or other
acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person, (ii) any purchase by that Person of all
or substantially all of the assets of a business conducted by another Person,
and (iii) any direct or indirect loan, advance (other than prepaid expenses,
accounts receivable, advances to employees and similar items made or incurred in
the ordinary course of business as presently conducted) or capital contribution
by that Person to any other Person, including all Indebtedness to such Person
arising from a sale of property by such Person other than in the ordinary course
of its business. The amount of any Investment shall be the original cost of such
Investment, plus the cost of all additions thereto less the amount of any return
of capital or principal to the extent such return is in cash with respect to
such Investment without any adjustments for increases or decreases in value or
write-ups, write-downs or write-offs with respect to such Investment.
"IRS" means the Internal Revenue Service and any Person succeeding to the
functions thereof.
"Issue" means, with respect to any Letter of Credit, either issue, or
extend the expiry of, or renew, or increase the amount of, such Letter of
Credit, and the term "Issued" or "Issuance" shall have a corresponding meaning.
"Issuing Bank" means SG and any successor or assignee thereof.
"Kleinert Acquisition" means the transactions contemplated by the Kleinert
Acquisition Documents.
"Kleinert Acquisition Agreement" means the Stock Purchase Agreement, dated
as of May 23, 1997 by and among KII Acquisition as buyer, Kleinert Industrie
Holding AG, a Swiss corporation as seller, and Kleinert Industries Inc.
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"Kleinert Acquisition Documents" means, collectively, the Kleinert
Acquisition Agreement, the Kleinert Seller Note, and all documents, instruments
and agreements delivered in connection therewith.
"Kleinert Seller Note" means the promissory note made by KII Acquisition
Corp. in favor of Kleinert Industrie Holding AG in the principal amount of
$1,750,000, delivered pursuant to the Kleinert Acquisition Agreement.
"Lender" has the meaning ascribed to such term in the preamble hereto.
"Letter of Credit" means any Commercial Letter of Credit or Standby Letter
of Credit.
"Letter of Credit Fee" is defined in Section 4.03
"Letter of Credit Obligations" means, at any particular time, the sum of
(i) all outstanding Reimbursement Obligations, plus (ii) the aggregate undrawn
face amount of all outstanding Letters of Credit, plus (iii) the aggregate face
amount of all Letters of Credit requested by the Borrower but not yet issued
(unless the request for an unissued Letter of Credit has been denied pursuant to
Section 2.04(c)(i)).
"Letter of Credit Reimbursement Agreement" means, with respect to a Letter
of Credit, such form of application therefor and form of reimbursement agreement
therefor (whether in a single or several documents, taken together) as the
Issuing Bank from which the Letter of Credit is requested may employ in the
ordinary course of business for its own account, with such modifications thereto
as may be agreed upon by the Issuing Bank and the Borrower and as are not
materially adverse (in the reasonable judgment of the Issuing Bank) to the
interests of the Lenders; provided, however, in the event of any conflict
between the terms hereof and of any Letter of Credit Reimbursement Agreement,
the terms hereof shall control
"Leverage Ratio" means, for any Financial Covenant Period, the ratio of (i)
the outstanding Funded Debt for the Borrower and its Subsidiaries at the end of
such period, to (ii) EBITDA for such period.
"Liabilities and Costs" means all liabilities, obligations,
responsibilities, losses, damages, punitive damages, economic damages,
consequential damages, treble damages, costs and expenses (including, without
limitation, attorney, expert and consulting fees and costs of investigation,
feasibility or Remedial Action studies), fines, penalties and monetary
sanctions, interest, absolute or contingent, past, present or future (in each
case, net of insurance proceeds and excluding
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amounts for which a Person is fully indemnified or for which a reimbursement
escrow has been established).
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever in
respect of any property of a Person, whether granted voluntarily or imposed by
law, and includes the interest of a lessor under a Capital Lease or under any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement or similar notice (other
than a financing statement filed by a "true" lessor pursuant to ss. 9-408 of the
Uniform Commercial Code or with respect to goods consigned to a Loan Party or
inventory of a third person in the possession of a Loan Party), naming the owner
of such property as debtor, under the Uniform Commercial Code or other
comparable law of any jurisdiction.
"Loan Documents" means this Agreement, the Notes, the Fee Letters, the
Guaranties, the Contribution Agreement, the Collateral Documents, the Letter of
Credit Reimbursement Agreements, any Interest Rate Contracts to which any Lender
or any Affiliate of a Lender is a party, any foreign exchange con tracts to
which any Lender or any Affiliate of a Lender is a party, and all other
instruments, agreements and written Contractual Obligations between any Loan
Party and any Agent, any Issuing Bank or any Lender delivered to either such
Agent, such Issuing Bank or such Lender pursuant to or in connection with the
transactions contemplated hereby.
"Loan Parties" means the Borrower and the Guarantors. For avoidance of
doubt, a person shall be deemed to become a Loan Party only at the time it
becomes a Guarantor and a Subsidiary of the Borrower.
"Loans" means the Revolving Loans, the Term Loans and the Swing Loans.
"Management Agreement" means the Amended and Restated Management Advisory
Services Agreement dated May 29, 1998 among Mentmore Holdings Corporation and
the Loan Parties, as such agreement may be amended, supplemented or modified
from time to time.
"Management Equity Holder" means (i) a holder of a Put/Call Promissory
Note, (ii) the legal or beneficial owner of Put/Call Preferred Stock or (iii) a
holder of any Management Equity Interests.
"Management Equity Interests" means shares of Capital Stock of the Borrower
or of a Subsidiary of the Borrower,
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options, warrants or stock appreciation or similar rights, in each case held, at
the time of the issuance thereof, by any then current or former officer,
employee or other member of management (or thereafter by their estates or
beneficiaries under their estates) of the Borrower or of such Subsidiary
pursuant to any management equity subscription agreement, employment agreement,
employee benefit plan, stockholder agreement, stock option agreement or similar
management investor agreement and which may be required to be repurchased by the
Borrower or such Subsidiary, or which may be repurchased at the option of the
Borrower or such Subsidiary, in each case pursuant to the terms of any such
agreement under which such equity interests were issued, including, without
limitation, the Management Participation Agreement and the Monitor Management
Participation Agreement.
"Management Participation Agreement" means that certain Agreement dated as
of July 1, 1997 by and among KII Holding Corp., Greystoke Capital Management
Limited LDC, Bradley C. Call, Julius E. Hodge, Lawrence B. Smith, Roland H.
Marti, John Barriatua, Arun Kumar and Louis A. Brown, as such agreement may be
amended, supplemented and modified from time to time.
"Margin Stock" means "margin stock" as such term is defined in Regulation
U.
"Material Adverse Effect" means a material adverse effect upon (i) the
condition (financial or otherwise), operations, assets, business, properties or
performance of the Borrower and its Subsidiaries, taken as a whole, (ii) the
ability of the Loan Parties to perform their respective obligations under the
Loan Documents, or (iii) the ability of the Lenders, any Issuing Bank or any
Agent to enforce the Loan Documents.
"Material Contract" means any Government Contract in excess of $1,500,000.
"Maximum Revolving Credit Amount" means, at any particular time, the lesser
of (i) the Revolving Loan Commitments at such time and (ii) the Borrowing Base
at such time.
"Monitor" means Monitor Aerospace Corp., a New York corporation.
"Monitor Acquisition" means the transactions contemplated by the Monitor
Acquisition Documents.
"Monitor Acquisition Agreement" means that certain Agreement and Plan of
Merger dated as of April 28, 1998 by and among Monitor, Stellex Aerospace
Holdings, Inc. and Soze Corp.
"Monitor Acquisition Documents" means, collectively, the Monitor
Acquisition Agreement and all documents, instruments and agreements delivered in
connection therewith.
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"Monitor Management Participation Agreement" means that certain agreement,
in form and substance satisfactory to the Agents, to be entered into with
certain members of management of Monitor, as such agreement may be amended,
supplemented or modified from time to time.
"Monitor Seller Note" means that certain Non-Negotiable Offset Promissory
Note dated May 29, 1998 made by Monitor in favor of Douglas Monitto in the
original principal amount of $5,180,000, delivered pursuant to the Monitor
Acquisition Agreement.
"Multiemployer Plan" means an employee benefit plan as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by either any Loan Party or any ERISA Affiliate.
"Net Cash Proceeds" means with respect to any Asset Sale or issuance of
Securities, an amount equal to the cash proceeds of such Asset Sale or issuance,
net of (i) reasonable attorneys' fees, accountants' fees, brokerage, consultant
and other customary fees, underwriting commissions and other reasonable fees and
expenses actually incurred in connection therewith, (ii) taxes paid or
reasonably estimated to be payable as a result thereof, (iii) the amount of
Indebtedness secured by a Lien on the asset being sold that has been repaid with
the proceeds of such Asset Sale and (iv) appropriate amounts that must be set
aside as reserves in accordance with GAAP.
"Net Income" means, for any period, the net earnings (or loss) after taxes
of the Borrower and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with GAAP.
"Net Worth" means the total assets of the Borrower and its Subsidiaries on
a consolidated basis less total liabilities of the Borrower and its Subsidiaries
on a consolidated basis (excluding liabilities with respect to the Put/Call
Promissory Notes, the Put/Call Preferred Stock and deferred compensation arising
in connection with management put/call rights), each determined in accordance
with GAAP, but without giving effect to the sale of inventory written-up in
accordance with Accounting Principles Board Opinion No. 16 (or successor
provision).
"Notes" means, collectively, the Revolving Loan Notes, the Term Notes and
the Swing Loan Notes.
"Notice of Borrowing" means a notice substantially in the form of Exhibit C
attached hereto and made a part hereof.
"Notice of Continuation/Conversion" means a notice substantially in the
form of Exhibit D attached hereto and made a part hereof.
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"Obligations" means all Loans, advances, debts, liabilities, obligations,
covenants and duties owing by any Loan Party to any Agent, any Lender, any
Issuing Bank, any Affiliate of any Agent, any Lender or any Issuing Bank, or any
Person entitled to indemnification pursuant to Section 13.05 of this Agreement,
of any kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether or not for the payment of money, whether
arising by reason of an extension of credit, opening or amendment of a Letter of
Credit or payment of a draft drawn thereunder, arising under this Agreement, the
Notes or any other Loan Document, whether or not for the payment of money,
whether arising by reason of an extension of credit, loan, guaranty,
indemnification, Interest Rate Contract, foreign exchange contract or in any
other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
all interest, charges, expenses, fees, attorneys' fees and disbursements and any
other sum charge able to any Loan Party under this Agreement, the Notes or any
other Loan Document.
"Officer's Certificate" means, with respect to any Person, a certificate
executed on behalf of such Person by (i) the chairman or vice-chairman of such
Person's board of directors or (ii) such Person's president, any of its
vice-presidents, its chief financial officer, vice president of finance or its
treasurer.
"OECD" means the Organization for Economic Cooperation and Development.
"Other Taxes" has the meaning ascribed to such term in Section 3.03(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"Permits" means any permit, approval, authorization license, variance, or
permission required from a Governmental Authority under an applicable
Requirement of Law.
"Permitted Acquisition" means an acquisition by the Borrower or any of its
corporate Subsidiaries of (a) assets constituting a business or operation that
is within the definition of Business and constitutes a line of business of a
Person (other than a Subsidiary of the Borrower) or (b) at least 75% of the
capital stock of a Person engaged in the Business; provided that (i) such
acquisition is made in accordance with the provisions of this Agreement, (ii)
the conditions set forth in Section 5.03 have been satisfied, (iii) the total
consideration for such acquisition does not exceed $50,000,000 and (iv) no more
than $25,000,000 of the total consideration can be financed with
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the proceeds of the Loans and consideration in excess of $25,000,000 will be
financed by the issuance of equity or subordinated indebtedness with terms and
conditions acceptable to the Administrative Agent.
"Permitted Disposition" means an Asset Sale where (i) the consideration
therefor does not exceed $35,000,000; (ii) the Borrower or any Subsidiary
receives consideration at the time of such Asset Sale at least equal to the fair
market value of the stock and/or assets subject to such Asset Sale, as
determined by (A) the Board of Directors of the Borrower with respect to an
Asset Sale the value of which does not exceed $15,000,000 or (B) a fairness
opinion by an investment banking firm or valuation firm reasonably satisfactory
to the Administrative Agent with respect to an Asset Sale the value of which
equals or exceeds $15,000,000; (iii) at least 75% of the consideration thereof
received by the Borrower or such Subsidiary is in the form of cash or Cash
Equivalents and 100% of the Net Cash Proceeds from such Asset Sale is applied in
accordance with Section 3.01(b)(i); and (iv) the consideration thereof that is
not in the form of cash is pledged to the Collateral Agent, on terms and
conditions, and pursuant to documentation, reasonably satisfactory to the
Administrative Agent, in a manner whereby the Collateral Agent has a valid,
perfected and first priority Lien therein.
"Permitted Existing Indebtedness" means the Indebtedness identified as such
on Schedule 1.01(A).
"Permitted Existing Liens" means the Liens on assets of any Loan Party
identified as such on Schedule 1.01(B).
"Permitted Holders" means (i) Richard L. Kramer and William L. Remley, (ii)
any spouse or immediate family member of any person named in clause (i) hereof
and any child or spouse of any spouse or immediate family member of any such
person, (iii) a trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding,
directly or indirectly, a controlling interest of which consist of any person
named in clause (i) hereof and/or such other Persons referred to in the
immediately preceding clause (ii) hereof, or (iv) the trustees of any trust
referred to in clause (iii) hereof.
"Person" means any natural person, corporation, limited partnership,
general partnership, joint stock company, joint venture, association, company,
trust, bank, trust company, land trust, business trust, limited liability
company or other organization, whether or not a legal entity, and any
Governmental Authority.
"Plan" means an employee benefit plan defined in Section 3(3) of ERISA
(other than a Multiemployer Plan) in respect of which any Loan Party or any
ERISA Affiliate is, or
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within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreements" means, collectively, the Amended and Restated Pledge
Agreements, substantially in the form of Exhibit M attached hereto and made a
part hereof, referred to in the List of Closing Documents set forth on Exhibit E
attached hereto and made a part hereof.
"Process Agent" has the meaning ascribed to such term in Section 13.20(a).
"Pro Forma Basis" means, with respect to any Permitted Acquisition, the
calculation of the financial covenants set forth in Article X and Schedule
5.03(b) and the calculation of the Leverage Ratio in the determination of
pricing and fees hereunder for the Borrower and its Subsidiaries on a
consolidated basis for the immediately preceding twelve month period, and
otherwise determined in accordance with this Agreement, as if such Permitted
Acquisition had been effected on the first day of such twelve month period,
provided that all such calculations shall take into account the pro forma effect
of all Permitted Acquisitions that occur during such twelve month period and all
Permitted Acquisitions that occur after such twelve month period but on or prior
to the date of determination (including any Indebtedness assumed or acquired in
connection therewith and any Indebtedness incurred to finance such Permitted
Acquisition) as if they had occurred on the first day of such twelve month
period.
"Property" means any and all Real Property or personal property, whether
tangible or intangible, plant, building, facility, structure, underground
storage tank or unit, Equipment, Inventory, General Intangible, Receivable,
securities, account, deposit, claim, right or other asset owned, by any Loan
Party, as applicable, (including any surface water thereon and subsurface matrix
(including but not limited to soil, bedrock and groundwater) thereunder).
"Pro Rata Share" means, with respect to any Lender, the percentage obtained
by dividing (i)with respect to a Revolving Loan Lender, such Lender's Revolving
Loan Commitment (or, if after the Commitment Termination Date, the outstanding
balances of such Lender's Revolving Loans) by the aggregate amount of all
Revolving Loan Lenders' Revolving Loan Commitments (or, if after the Commitment
Termination Date, the outstanding balances of all Revolving Loans; (ii) with
respect to an Acquisition Term Loan Lender, such Lender's unused Acquisition
Term Loan Commitment and the outstanding balances of such Lender's Acquisition
Term Loans by the aggregate amount of all Acquisition Term Loan Lenders'
Acquisition Term Loan Commitments (or, if after the Acquisition Term Loan
Termination Date, the outstanding balances of all Acquisition Loans; (iii) with
respect to a Term A Loan Lender,
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the outstanding amount of such Term A Loan Lender's Term A Loans by the
aggregate outstanding amount of all Term A Loans; (iv) with respect to a Term B
Loan Lender, the outstanding amount of such Term B Loan Lender's Term B Loans by
the aggregate outstanding amount of all Term B Loans; and (v) with respect to
each Lender, such Lender's Revolving Loan Commitment (or, if after the
Commitment Termination Date, the outstanding balance of such Lender's Revolving
Loans), such Lender's unused Acquisition Term Loan Commitment and the
outstanding balance of such Lender's Acquisition Term Loans, such Lender's
outstanding balance of Term A Loans and such Lender's outstanding balance of
Term B Loans by the sum of all the Lenders' Revolving Loan Commitments (or, if
after the Commitment Termination Date, the outstanding balance of all Revolving
Loans)plus all Lenders' Acquisition Term Loan Commitments and the outstanding
balance of all Acquisition Term Loans plus the outstanding balance of all Term A
Loans plus the outstanding balance of all Term B Loans.
"Put/Call Preferred Stock" means preferred stock which may be issued by the
Borrower or a Subsidiary of the Borrower to the holders of any Management Equity
Interests of the Borrower or such Subsidiary in exchange for such Management
Equity Interests held by such holders; provided that such preferred stock
provides that any payment made pursuant to or in connection with the provisions
of such preferred stock or of the instrument governing such preferred stock,
including pursuant to any redemption, repurchase or default provision, and
payments of dividends on such preferred stock, in each case in cash, may be made
only to the extent Restricted Junior Payments would then be permitted to be made
in accordance with Section 9.06(iii) (as such Section may be amended or modified
from time to time or any similar provision in any agreement relating to the
extension, substitution, renewal or refinancing of the Obligations) after giving
effect to all other Restricted Junior Payments made to any other Management
Equity Holders prior to or concurrently therewith.
"Put/Call Promissory Notes" means promissory notes which may be issued by
the Borrower or a Subsidiary of the Borrower to the holders of any Management
Equity Interests of the Borrower or such Subsidiary in exchange for such
Management Equity Interest held by such holders; provided that (a) such
promissory notes are expressly subordinated to the Notes, (b) such notes are not
secured by any Lien on any property or assets of the Borrower or any of its
Subsidiaries, (c) such promissory notes provide that any payment that is to be
made pursuant to or in connection with the provisions of such promissory notes,
including, without limitation, payments of principal or interest on such notes,
in each case in cash, may be made only to the extent that Restricted Junior
Payments would then be permitted to be made in accordance with Section 9.06(iii)
(as such Section may be amended or modified from time to time or any similar
provision in any agreement relating to the extension, substitution, renewal or
refinancing of the Obligations) after giving effect to all
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other Restricted Junior Payments made to any other Management Equity Holder
prior to or concurrently therewith and (d) such promissory notes are on terms
(other than pricing and maturity) and conditions no less favorable to the Loan
Party and the Lenders than the subordination terms in the Management
Participation Agreement.
"Real Property" means all of each Loan Party's present and future right,
title and interest (including, without limitation, any leasehold estate) in (i)
any plots, pieces or parcels of land, (ii) any improvements, buildings,
structures and fixtures now or hereafter located or erected thereon or attached
thereto of every nature whatsoever (the rights and interests described in
clauses (i) and (ii) above being the "Premises"), (iii) all easements, rights of
way, gores of land or any lands occupied by streets, ways, alleys, passages,
sewer rights, water courses, water rights and powers, and public places
adjoining such land, and any other interests in property constituting
appurtenances to the Premises, or which hereafter shall in any way belong,
relate or be appurtenant thereto, (iv) all hereditaments, gas, oil, minerals
(with the right to extract, sever and remove such gas, oil and minerals, and
easements, of every nature whatsoever, located in or on the Premises and (v) all
other rights and privileges thereunto belonging or apper taining and all
extensions, additions, improvements, betterments, renewals, substitutions and
replacements to or of any of the rights and interests described in clauses (iii)
and (iv) above.
"Receivables" means all of each Loan Party's present and future (i)
accounts, (ii) contract rights, chattel paper, instruments, documents, deposit
accounts, and other rights to payment of any kind, whether or not arising out of
or in connection with the sale or lease of goods or the rendering of services,
and whether or not earned by performance, (iii) any of the foregoing which are
not evidenced by instruments or chattel paper, (iv) intercompany receivables,
and any security documents executed in connection therewith, (v) proceeds of any
letters of credit or insurance policies on which such Loan Party is named as
beneficiary, (vi) claims against third parties for advances and other financial
accommodations and any other obligations whatsoever owing to such Loan Party,
(vii) rights in and to all security agreements, leases, guarantees, instruments,
securities, documents of title and other contracts securing, evidencing,
supporting or otherwise relating to any of the foregoing, together with all
rights in any goods, merchandise or Inventory which any of the foregoing may
represent, and (viii) rights in returned and repossessed goods, merchandise and
Inventory which any of the same may represent, including, without limitation,
any right of stoppage in transit.
"Register" has the meaning ascribed to such term in Section 13.01(c).
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"Regulation U" means Regulation U of the Federal Reserve Board as in effect
from time to time.
"Regulation X" means Regulation X of the Federal Reserve Board as in effect
from time to time.
"Reimbursement Date" is defined in Section 2.04(d)(i)(A).
"Reimbursement Obligations" means, as to the Borrower, the aggregate
reimbursement or repayment obligations of the Borrower with respect to amounts
drawn under Letters of Credit.
"Release" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including the movement of Contaminants through or in the
air, soil, surface water or groundwater.
"Remedial Action" means any action required to (i) clean up, remove, treat
or in any other way address Contaminants in the indoor or outdoor environment;
(ii) prevent the Release or threat of Release or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; or (iii) perform
pre-remedial studies and investigations and post-remedial monitoring and care.
"Replacement Event" means, with respect to any Lender, the appointment of,
or the taking of possession by, a receiver, custodian, conservator, trustee or
liquidator of such Lender, or the declaration by the appropriate regulatory
authority that such Lender is insolvent.
"Replacement Lender" means a financial institution which is an Eligible
Assignee or is otherwise reasonably acceptable to the Administrative Agent and
the Borrower (which acceptance shall not be unreasonably withheld) and which is
not a Loan Party or an Affiliate of a Loan Party.
"Reportable Event" has the meaning ascribed to such term in Section 4043 of
ERISA or regulations promulgated thereunder, other than an event which is not
subject to the thirty (30) day notice requirement of such regulations.
"Requirements of Law" means, as to any Person, any law, rule or regulation,
or determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject including, without
limitation, the Securities Act, the Securities Exchange Act, Regulations U and
X, ERISA, the Fair Labor Standards Act and any certificate of occupancy, zoning
ordinance, building, environmental
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or land use requirement or any permit, approval, authorization license,
variance, or permission required from a Governmental Authority or any
environmental, labor, employment, occupational safety or health law, rule or
regulation.
"Requisite Lenders" means any Lender or Lenders whose Pro Rata Shares, in
the aggregate, are greater than fifty-one percent (51%); provided, however,
that, in the event that the Commitments have been terminated pursuant to the
terms of this Agreement, "Requisite Lenders" means any Lender or Lenders whose
aggregate ratable shares (stated as a percentage) of the aggregate outstanding
amount of the Obligations are greater than fifty-one percent (51%).
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of capital stock of,
partnership interest of or other equity interest of, a Loan Party now or
hereafter outstanding, except a dividend payable solely in shares of that class
of stock or in any junior class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of capital
stock of, partnership interest of or other equity interest of, a Loan Party now
or hereafter outstanding, (iii) any payment or prepayment of principal of,
premium, if any, or interest, fees or other charges on or with respect to, and
any redemption, purchase, retirement, defeasance, sinking fund or similar
payment and any claim for rescission with respect to, any permitted subordinated
indebted ness and (iv) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of capital stock of, partnership
interest of or other equity interest of, a Loan Party now or hereafter
outstanding.
"Revolving Credit Obligations" means, at any particular time, the sum of
(i) the outstanding principal amount of the Swing Loans at such time, plus (ii)
the outstanding principal amount of the Revolving Loans at such time, plus (iii)
Letter of Credit Obligations outstanding at such time.
"Revolving Loan" has the meaning ascribed to such term in Section 2.01(a).
"Revolving Loan Commitment" means, with respect to any Lender, the
obligation of such Lender to make Revolving Loans pursuant to the terms and
conditions of this Agreement, and which shall not exceed the principal amount
set forth opposite such Lender's name under the heading "Revolving Loan
Commitment" on Schedule I attached hereto or the signature page of the
Assignment and Acceptance by which it became (or becomes) a Lender, as modified
from time to time pursuant to the terms of this Agreement or to give effect to
any applicable Assignment and
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Acceptance, and "Revolving Loan Commitments" means the aggregate principal
amount of the Revolving Loan Commitments of all the Lenders, the maximum amount
of which shall not at any time exceed a principal amount of $35,000,000.
"Revolving Loan Lender" means a Lender who has a Revolving Loan Commitment.
"Revolving Loan Notes" has the meaning assigned thereto in Section 2.05(a).
"Securities" means any stock, shares, voting trust certificates, bonds,
debentures, notes or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or any certificates of interest, shares,
or partici pations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Security Agreements" means, collectively, the Amended and Restated
Security Agreements, substantially in the form of Exhibit L attached hereto and
made a part hereof, referred to in the List of Closing Documents set forth on
Exhibit E attached hereto and made a part hereof.
"SG" has the meaning ascribed to such term in the preamble hereto.
"Solvent", when used with respect to any Person, means that at the time of
determination:
(i) the fair value of its assets is in excess of the total amount of
its liabilities (including, without limitation, contingent liabilities);
and
(ii) the present fair saleable value of its assets is greater than its
probable liability on its existing debts as such debts become absolute and
matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as
they mature; and
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(iv) it has not conducted nor proposes to conduct a business for which
its assets would constitute unreasonably small capital.
"Standby Letter of Credit" means any letter of credit issued by an Issuing
Bank pursuant to Section 2.04 for the account of the Borrower, which is not a
Commercial Letter of Credit.
"Subordinated Note Documents" means, collectively, the Subordinated Note
Indenture and all documents, instruments and agreements delivered in connection
therewith.
"Subordinated Note Indenture" means the Indenture dated as of October 31,
1997 between the Borrower, the subsidiary guarantors party thereto and Marine
Midland Bank, as Trustee, pursuant to which the Subordinated Notes were issued.
"Subordinated Notes" means the 9 1/2% Senior Subordinated Notes due 2007
issued pursuant to the Subordinated Note Indenture.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned or controlled by such Person, one or more of
the other subsidiaries of such Person or any combination thereof.
"Swing Loan" is defined in Section 2.03(a).
"Swing Loan Lender" means SG, in its individual capacity or, in the event
SG is not the Administrative Agent, the Administrative Agent (or any Affiliate
of the Administrative Agent designated by the Administrative Agent), in its
individual capacity.
"Swing Loan Note" means one or more notes evidencing the Borrower's
Obligation to repay the Swing Loans.
"Syndication Agent" means First Union Capital Markets.
"Taxes" has the meaning ascribed to such term in Section 3.03(a).
"Term A Loan Commitment" means, with respect to any Lender, the obligation
of such Lender to make Term A Loans pursuant to the terms and conditions of this
Agreement, and which shall not exceed the principal amount set forth opposite
such Lender's name under the heading "Term A Loan Commitment" on Schedule I
attached hereto or the signature page of the Assignment and Acceptance by which
it became (or becomes) a
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Lender, as modified from time to time pursuant to the terms of this Agreement or
to give effect to any applicable Assignment and Acceptance, and "Term A Loan
Commitments" means the aggregate principal amount of the Term A Loan Commitments
of all the Lenders, the maximum amount of which shall not at any time exceed
$30,000,000.
"Term A Loan Lender" means a Lender who has a Term A Loan Commitment.
"Term A Loan Notes" has the meaning assigned thereto in Section 2.05(b).
"Term A Loans" has the meaning ascribed to such term in Section 2.02(a)(i).
"Term B Loan Commitment" means, with respect to any Lender, the obligation
of such Lender to make Term B Loans pursuant to the terms and conditions of this
Agreement, and which shall not exceed the principal amount set forth opposite
such Lender's name under the heading "Term B Loan Commitment" on Schedule I
attached hereto or the signature page of the Assignment and Acceptance by which
it became (or becomes) a Lender, as modified from time to time pursuant to the
terms of this Agreement or to give effect to any applicable Assignment and
Acceptance, and "Term B Loan Commitments" means the aggregate principal amount
of the Term B Loan Commitments of all the Lenders, the maximum amount of which
shall not at any time exceed $60,000,000.
"Term B Loan Lender" means a Lender who has a Term B Loan Commitment.
"Term B Loan Notes" has the meaning assigned thereto in Section 2.05(c).
"Term B Loans" has the meaning ascribed to such term in Section
2.02(a)(ii).
"Term Loans" means, collectively, the Term A Loans, the Term B Loans and
the Acquisition Term Loans.
"Term Notes" means, collectively, the Term A Loan Notes, the Term B Loan
Notes and the Acquisition Term Loan Notes.
"Termination Event" means (i) any Reportable Event with respect to any
Benefit Plan, (ii) the withdrawal of a Loan Party or an ERISA Affiliate from a
Benefit Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, (iii) the occurrence of an obligation
arising under Section 4041 of ERISA of a Loan Party or an ERISA Affiliate to
provide affected parties with a written notice of an intent to terminate a
Benefit Plan in a distress termination
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described in Section 4041(c) of ERISA, (iv) the institution by the PBGC of
proceedings to terminate any Benefit Plan, (v) any event or condition which
constitutes grounds under Section 4042 of ERISA for the appointment of a Trustee
to administer a Benefit Plan, or (vi) the partial or complete withdrawal of any
Loan Party or any ERISA Affiliate from a Multiemployer Plan.
"Transaction Documents" means, collectively, the Loan Documents and the
Acquisition Documents.
"Type" means, with respect to any Loan, its nature as a Eurodollar Rate
Loan or a Base Rate Loan.
"Uniform Commercial Code" means the Uniform Commercial Code as enacted in
the State of New York, as it may be amended from time to time.
"Unused Commitment Fee" has the meaning ascribed to such term in Section
4.03(a).
"Voting Securities" means with respect to any Person, Securities with
respect to any class or classes of capital stock of such Person entitling the
holders thereof ordinarily to vote in the election of the members of the board
of directors of such Person.
"Watkins-Johnson Acquisition" means the transactions contemplated by the
Watkins-Johnson Acquisition Documents.
"Watkins-Johnson Acquisition Agreement" means the Stock Purchase Agreement
dated as of August 29, 1997 by and among TSMD Acquisition, Watkins-Johnson
Company and Microwave (formerly known as W-J TSMD, Inc.).
"Watkins-Johnson Acquisition Documents" means, collectively, the
Watkins-Johnson Acquisition Agreement and all documents, instruments and
agreements delivered in connection therewith.
"Wholly Owned Subsidiary" means a Subsidiary of the Borrower all the
Capital Stock of which (other than directors' qualifying shares and Management
Equity Interests representing not in excess of 20% of the outstanding Capital
Stock of such Subsidiary) is owned by the Borrower or another Wholly Owned
Subsidiary.
"Working Capital" means, as at any date of determina tion, the excess, if
any, of Current Assets over Current Liabilities.
1.02. Computation of Time Periods. In this Agreement, in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including"
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and the words "to" and "until" each mean "to but excluding". Periods of days
referred to in this Agreement shall be counted in calendar days unless Business
Days are expressly prescribed. Any period determined hereunder by reference to a
month or months or year or years shall end on the day in the relevant calendar
month in the relevant year, if applicable, immediately preceding the date
numerically corresponding to the first day of such period, provided that if such
period commences on the last day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month during which
such period is to end), such period shall, unless otherwise expressly required
by the other provisions of this Agreement, end on the last day of the calendar
month.
1.03. Accounting Terms. For purposes of this Agree ment, all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
conformity with GAAP.
1.04. Other Terms. Terms not otherwise defined herein which are defined in,
or used in, Article 9 of the Uniform Commercial Code shall have the respective
meanings assigned to such terms in Article 9 of the Uniform Commercial Code.
1.05 Knowledge. As used in this Agreement the phrases "to the knowledge
of," "known by" or phrases of similar import, when applied to any Loan Party,
shall mean that an individual holding any of the offices identified on Schedule
1.05 attached hereto is actually aware of, or should be aware of in the ordinary
course of business, the fact or other matter.
ARTICLE II
AMOUNTS AND TERMS OF LOANS
2.01. Revolving Loan Facility.
(a) Availability. Subject to the terms and conditions set forth in this
Agreement, each Revolving Loan Lender hereby severally agrees to make revolving
loans (each individually, a "Revolving Loan" and, collectively, the "Revolving
Loans") to the Borrower from time to time during the period from the Effective
Date to the Business Day immediately preceding the Commitment Termination Date,
in an amount not to exceed such Revolving Loan Lender's Pro Rata Share of the
Availability at such time; provided, however, that the initial Borrowing of
Revolving Loans shall not exceed $20,000,000. Each Base Rate Loan shall be for a
minimum amount of Five Hundred Thousand Dollars ($500,000) and in integral
multiples of One Hundred Thousand Dollars ($100,000) in excess of that amount.
Each Eurodollar Rate Loan shall be for a minimum amount of Two Million Dollars
($2,000,000) and in integral multiples of One Hundred Thousand Dollars
($100,000) in excess of that amount. All Revolving Loans comprising the same
Borrowing under this Agreement shall be made by the Revolving
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Loan Lenders simultaneously and proportionately to their then respective Pro
Rata Shares, it being understood that no Revolving Loan Lender shall be
responsible for any failure by any other Revolving Loan Lender to perform its
obligation to make a Revolving Loan hereunder nor shall the Commitment of any
Revolving Loan Lender be increased or decreased as a result of any such failure.
Subject to the provisions of this Agreement, the Borrower may repay any
outstanding Revolving Loan made to it on any day which is a Business Day and any
amounts so repaid may be reborrowed in accordance with the provisions of this
Section 2.01(a).
(b) Notice of Borrowing. When the Borrower desires to borrow under this
Section 2.01, the Borrower shall deliver to the Administrative Agent a Notice of
Borrowing, signed by it, no later than 12:00 noon (New York time) (i) on the
proposed Funding Date, in the case of a Borrowing of Base Rate Loans, and (ii)
at least three (3) Business Days in advance of the proposed Funding Date, in the
case of a Borrowing of Eurodollar Rate Loans; provided that no Borrowing of
Eurodollar Rate Loans shall be made on the Effective Date. Such Notice of
Borrowing shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount of the proposed Borrowing, (iii) whether the proposed
Borrowing will be of Base Rate Loans or Eurodollar Rate Loans, and (iv) in the
case of Eurodollar Rate Loans, the requested Eurodollar Interest Period. In lieu
of delivering such a Notice of Borrowing, the Borrower may give the
Administrative Agent telephonic notice of any proposed Borrowing by the time
required under this Section 2.01(b) if it confirms such notice by delivery of
the Notice of Borrowing to the Administrative Agent promptly, but in no event
later than 5:00 p.m. (New York time) on the same day. Any Notice of Borrowing
(or telephonic notice in lieu thereof) given pursuant to this Section 2.01(b)
shall be irrevocable.
(c) Making of Revolving Loans. (i) Each Revolving Loan Lender shall deposit
an amount equal to its Pro Rata Share of the amount requested by the Borrower to
be made as Revolving Loans in the Administrative Agent's Account at its office
in New York, New York, in immediately available funds, not later than 2:00 p.m.
(New York time) on any Funding Date applicable thereto. Subject to the
fulfillment of the conditions precedent set forth in Sections 5.01 and 5.02, the
Administrative Agent shall make the proceeds of such amounts received by it
available to the Borrower at the Administrative Agent's office in New York, New
York on such Funding Date (or on the date received if later than such Funding
Date). The failure of any Revolving Loan Lender to deposit the amount described
above with the Administrative Agent on the applicable Funding Date shall not
relieve any other Revolving Loan Lender of its obligations hereunder to make its
Revolving Loan on such Funding Date.
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(ii) Unless the Administrative Agent shall have been notified by any
Revolving Loan Lender no later than 1:00 p.m. (New York time) on the applicable
Funding Date in respect of any Borrowing of Revolving Loans that such Revolving
Loan Lender does not intend to fund its Revolving Loan requested to be made on
such Funding Date, the Administrative Agent may assume that such Revolving Loan
Lender has funded its Revolving Loan and is depositing the proceeds thereof with
the Administrative Agent on the Funding Date, and the Administrative Agent in
its sole discretion may, but shall not be obligated to, disburse a corresponding
amount to the Borrower on the Funding Date. If the Revolving Loan proceeds
corresponding to that amount are advanced to the Borrower by the Administrative
Agent but are not in fact deposited with the Administrative Agent by such
Revolving Loan Lender on or prior to the applicable Funding Date, such Revolving
Loan Lender agrees to pay, and in addition the Borrower agrees to repay, to the
Administrative Agent forthwith on demand such corresponding amount, together
with interest thereon, for each day from the date such amount is disbursed to or
for the benefit of the Borrower until the date such amount is paid or repaid to
the Administrative Agent, (A) in the case of the Borrower, at the interest rate
applicable to such Borrowing and (B) in the case of such Revolving Loan Lender,
at the Federal Funds Rate for the first Business Day, and thereafter at the
interest rate applicable to such Borrowing. If such Revolving Loan Lender shall
pay to the Administrative Agent the corresponding amount, the amount so paid
shall constitute such Revolving Loan Lender's Revolving Loan, and if both such
Revolving Loan Lender and the Borrower shall pay and repay such corresponding
amount, the Administrative Agent shall promptly pay to the Borrower such
corresponding amount. This Section 2.01(c)(ii) does not relieve any Revolving
Loan Lender of its obligation to make its Revolving Loan on any Funding Date;
nor does this Section relieve the Borrower of its obligation to pay or repay any
Revolving Loan Lender funding its Revolving Loan pursuant to this Section
interest on such Revolving Loan from such Funding Date until the date on which
such Revolving Loan is repaid in full.
(d) Repayment of Revolving Loans. The Revolving Loan Commitments shall
terminate, and all outstanding Revolving Loans shall be paid in full, on the
Commitment Termination Date.
2.02. Term Loan Facility.
(a) (i) Amount of Term A Loans. Subject to the terms and conditions set
forth in this Agreement, each Term A Loan Lender hereby severally agrees to make
term loans (each individually, a "Term A Loan" and, collectively, the "Term A
Loans") to the Borrower on the Effective Date in an amount not to exceed such
Lender's Term A Loan Commitment. Each Term A Loan shall be a Base Rate Loan on
the Funding Date. All Term A Loans shall be made by the Term A Loan Lenders
simultaneously and proportionately to their then respective Pro Rata Shares, it
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being understood that no Term A Loan Lender shall be responsible for any failure
by any other Term A Loan Lender to perform its obligation to make a Term A Loan
hereunder nor shall the Term A Loan Commitment of any Term A Loan Lender be
increased or decreased as a result of any such failure.
(ii) Amount of Term B Loans. Subject to the terms and conditions set forth
in this Agreement, each Term B Loan Lender hereby severally agrees to make term
loans (each individually, a "Term B Loan" and, collectively, the "Term B Loans")
to the Borrower on the Effective Date in an amount not to exceed such Lender's
Term B Loan Commitment. Each Term B Loan shall be a Base Rate Loan on the
Funding Date. All Term B Loans shall be made by the Term B Loan Lenders
simultaneously and proportionately to their then respective Pro Rata Shares, it
being understood that no Term B Loan Lender shall be responsible for any failure
by any other Term B Loan Lender to perform its obligation to make a Term B Loan
hereunder nor shall the Term B Loan Commitment of any Term B Loan Lender be
increased or decreased as a result of any such failure.
(iii) Amount of Acquisition Term Loans. Subject to the terms and conditions
set forth in this Agreement, each Acquisition Term Loan Lender hereby severally
agrees to make term loans (each individually, a "Acquisition Term Loan" and,
collec tively, the "Acquisition Term Loans") to the Borrower from time to time
during the period from the Effective Date to the Business Day immediately
preceding the Acquisition Term Loan Termination Date in an amount not to exceed
such Lender's Acquisition Term Loan Commitment. Each Acquisition Term Loan shall
be a Base Rate Loan on the Funding Date and be for a minimum amount of Two
Million Five Hundred Thousand Dollars ($2,500,000) and in integral multiples of
One Hundred Thousand Dollars ($100,000) in excess of that amount. All
Acquisition Term Loans shall be made by the Acquisition Term Loan Lenders
simultaneously and proportionately to their then respective Pro Rata Shares, it
being understood that no Acquisition Term Loan Lender shall be responsible for
any failure by any other Acquisition Term Loan Lender to perform its obligation
to make a Acquisition Term Loan hereunder nor shall the Acquisition Term Loan
Commitment of any Acquisition Term Loan Lender be increased or decreased as a
result of any such failure. Any Acquisition Term Loan that has been repaid or
prepaid may not be reborrowed under this Section 2.02(a)(iii).
(b) Notice of Borrowing. When the Borrower desires to borrow under this
Section 2.02, the Borrower shall deliver to the Administrative Agent a Notice of
Borrowing, signed by it, no later than 12:00 noon (New York time) at least one
Business Day in advance of the proposed Funding Date. Such Notice of Borrowing
shall specify (i) the proposed Funding Date (which shall be a Business Day) and
(ii) the amount of the proposed Borrowing with respect to the Term Loans. All
Term Loans shall
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be Base Rate Loans on the Funding Date but after the Funding Date may be
converted to Eurodollar Rate Loans pursuant to Section 4.01(c). Any Notice of
Borrowing given pursuant to this Section 2.02(b) shall be irrevocable.
(c) Making of Term Loans. (i) Each Lender shall deposit an amount equal to
its Pro Rata Share of the amount requested by the Borrowers specified in such
Notice of Borrowing to be made as Term Loans in the Administrative Agent's
Account at its office in New York, New York, in immediately available funds, not
later than 12:00 noon (New York time) on the Funding Date. Subject to the
fulfillment of the conditions precedent set forth in Sections 5.01, 5.02 and
5.03, the Administrative Agent shall make the proceeds of such amounts received
by it available to the Borrower at the Administrative Agent's office in New
York, New York on such Funding Date.
(ii) Unless the Administrative Agent shall have been notified by any Lender
no later than 1:00 p.m. (New York time) on the applicable Funding Date in
respect of any Borrowing of Term Loans that such Lender does not intend to fund
its Term Loan requested to be made on such Funding Date, the Administrative
Agent may assume that such Lender has funded its Term Loan and is depositing the
proceeds thereof with the Administrative Agent on the Funding Date, and the
Administrative Agent in its sole discretion may, but shall not be obligated to,
disburse a corresponding amount to the Borrower on the Funding Date. If the Term
Loan proceeds corresponding to that amount are advanced to the Borrower by the
Administrative Agent but are not in fact deposited with the Administrative Agent
by such Lender on or prior to the applicable Funding Date, such Lender agrees to
pay, and in addition the Borrower agrees to repay, to the Administrative Agent
forthwith on demand such corresponding amount, together with interest thereon,
for each day from the date such amount is disbursed to or for the benefit of the
Borrower until the date such amount is paid or repaid to the Administrative
Agent, (A) in the case of the Borrower, at the interest rate applicable to such
Borrowing and (B) in the case of such Lender, at the Federal Funds Rate for the
first Business Day, and thereafter at the interest rate applicable to such
Borrowing. If such Lender shall pay to the Administrative Agent the
corresponding amount, the amount so paid shall constitute such Lender's Term
Loan, and if both such Lender and the Borrower shall pay such corresponding
amount, the Administrative Agent shall promptly pay to the Borrower such
corresponding amount. This Section 2.02(c)(ii) does not relieve any Lender of
its obligation to make its Term Loan on any Funding Date; nor does this Section
relieve the Borrower of its obligation to pay or repay any Lender funding its
Term Loan pursuant to this Section interest on such Term Loan from such Funding
Date until the date on which such Term Loan is repaid in full.
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(d)(i) Repayment of Term A Loans. The principal amount of the Term A Loans
shall be payable in twenty-two (22) consecutive quarterly installments on the
last day of September, December, March and June in each year, commencing on
September 30, 1998 in the principal amounts set forth below; provided, however,
that the amount of the last such installment shall be in the amount necessary to
repay in full the outstanding principal amount of the Term A Loans:
Installment Payment Date Amount
------------------------ ------
September 30, 1998 $ 750,000
December 31, 1998 750,000
March 31, 1999 750,000
June 30, 1999 750,000
September 30, 1999 750,000
December 31, 1999 750,000
March 31, 2000 750,000
June 30, 2000 750,000
September 30, 2000 1,125,000
December 31, 2000 1,125,000
March 31, 2001 1,125,000
June 30, 2001 1,125,000
September 30, 2001 1,500,000
December 31, 2001 1,500,000
March 31, 2002 1,500,000
June 30, 2002 1,500,000
September 30, 2002 2,250,000
December 31, 2002 2,250,000
March 31, 2003 2,250,000
June 30, 2003 2,250,000
September 30, 2003 2,250,000
December 31, 2003 2,250,000
(ii) Repayment of Term B Loans. The principal amount of the Term B Loans
shall be payable in thirty (30) consecutive quarterly installments on the last
day of September, December, March and June in each year, commencing on September
30, 1998 in the principal amounts set forth below; provided, however, that the
amount of the last such installment shall be in the amount necessary to repay in
full the outstanding principal amount of the Term B Loans:
Installment Payment Date Amount
------------------------ ------
September 30, 1998 $ 150,000
December 31, 1998 150,000
March 31, 1999 150,000
June 30, 1999 150,000
September 30, 1999 150,000
December 31, 1999 150,000
March 31, 2000 150,000
June 30, 2000 150,000
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September 30, 2000 150,000
December 31, 2000 150,000
March 31, 2001 150,000
June 30, 2001 150,000
September 30, 2001 150,000
December 31, 2001 150,000
March 31, 2002 150,000
June 30, 2002 150,000
September 30, 2002 150,000
December 31, 2002 150,000
March 31, 2003 150,000
June 30, 2003 150,000
September 30, 2003 150,000
December 31, 2003 150,000
March 31, 2004 7,000,000
June 30, 2004 7,000,000
September 30, 2004 7,000,000
December 31, 2004 7,000,000
March 31, 2005 7,000,000
June 30, 2005 7,000,000
September 30, 2005 7,000,000
December 31, 2005 7,700,000
(iii) Repayment of Acquisition Term Loans. The principal amount of the
Acquisition Term Loans outstanding on the Acquisition Term Loan Termination Date
(the "Outstanding Acquisition Term Loan Amount") shall be payable in fifteen
(15) substantially equal consecutive quarterly installments in the principal
amount equal to 4.17% of the Outstanding Acquisition Term Loan Amount on the
last day of March, June, September and December in each year, commencing on
March 31, 2000 through and including September 30, 2003 and one (1) installment
in the principal amount equal to 37.45% of the Outstanding Term Loan Amount on
December 31, 2003; provided, however, that the amount of the last such
installment shall be in the amount necessary to repay in full the outstanding
principal amount of the Acquisition Term Loans.
2.03. Swing Loans. (a) Swing Loans. Subject to the terms and conditions set
forth herein, the Swing Loan Lender may, in its sole discretion, make loans (the
"Swing Loans")to the Borrower, from time to time after the Effective Date and
prior to the Commitment Termination Date, up to an aggregate principal amount at
any one time outstanding which shall not exceed an amount equal to $2,000,000.
The Swing Loan Lender shall have no duty to make or to continue to make Swing
Loans. All Swing Loans shall be payable on demand with accrued interest thereon
and shall be secured as part of the Obligations by the Collateral and shall
otherwise be subject to all the terms and conditions applicable to Revolving
Loans, except that (x) Swing Loans shall not have a minimum amount requirement
and (y) all interest on the Swing Loans made by the Swing Loan Lender shall be
payable to the Swing Loan Lender solely for its own account.
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(b) Notice of Borrowing. When the Borrower desires to borrow under this
Section 2.03, it shall deliver to the Administrative Agent an irrevocable Notice
of Borrowing, signed by it, no later than 12:00 p.m. (New York time) on the day
of the proposed Borrowing of a Swing Loan. Such Notice of Borrowing shall
specify (i) the date of the proposed Borrowing (which shall be a Business Day),
(ii) the amount of the proposed Borrowing and (iii) instructions for the
disbursement of the proceeds of the proposed Borrowing. In lieu of delivering
such a Notice of Borrowing, the Borrower shall give the Administrative Agent
irrevocable telephonic notice of any proposed Borrowing by 12:00 p.m. (New York
time) on the day of the proposed Borrowing, and shall confirm such notice by
delivery of the Notice of Borrowing by telecopy to the Administrative Agent
promptly, but in no event later than 3:00 p.m. (New York time) on the same day.
All Swing Loans shall be Base Rate Loans.
(c) Making of Swing Loans. The Swing Loan Lender shall deposit the amount
it intends to fund, if any, in respect of the Swing Loans requested by the
Borrower with the Administrative Agent at its office in New York, New York not
later than 3:00 p.m. (New York time) in immediately available funds on the date
of the proposed Borrowing applicable thereto. The Swing Loan Lender shall not
make any Swing Loan during the period commencing on the first Business Day after
it receives written notice from any Lender that one or more of the conditions
precedent contained in Section 5.02 shall not on such date be satisfied, and
ending when such conditions are satisfied, and the Swing Loan Lender shall not
otherwise be required to determine that, or take notice whether, the conditions
precedent set forth in Section 5.02 hereof have been satisfied in connection
with the making of any Swing Loan. Subject to the preceding sentence, the
Administrative Agent shall make such proceeds available to the Borrower at the
Administrative Agent's office in New York, New York on the date of the proposed
Borrowing and shall disburse such proceeds to the Borrower in accordance with
the Borrower's disbursement instructions set forth in the applicable Notice of
Borrowing.
(d) Repayment of Swing Loans. The Borrower shall repay the outstanding
Swing Loans owing to the Swing Loan Lender (i) upon demand by the Swing Loan
Lender and (ii) on the Commitment Termination Date. In the event that the
Borrower fails to repay any Swing Loans, together with interest thereon, as set
forth in the first sentence of this paragraph, then, upon the request of the
Swing Loan Lender, each Revolving Loan Lender shall make Revolving Loans to the
Borrower (irrespective of the satisfaction of the conditions in Section 5.02 or
the requirement to deliver a Notice of Borrowing in Section 2.01(b), which
conditions and requirement such Revolving Loan Lenders irrevocably waive) in an
amount equal to such Revolving Loan Lender's Pro Rata Share of the aggregate
amount of the Swing Loans then outstanding (net of that portion of such Swing
Loan,
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if any, owing to such Revolving Loan Lender in its capacity as a Swing Loan
Lender) after giving effect to any prepayments and repayments made by the
Borrower, and the Borrower hereby authorizes the Administrative Agent to apply
the proceeds of such Revolving Loans to the repayment of such Swing Loans. To
the extent the Administrative Agent receives any amounts in prepay ment or
repayment of outstanding Revolving Loans prior to such request, the
Administrative Agent shall apply such amounts when received to the repayment of
the Swing Loans then outstanding. The failure of any Revolving Loan Lender to
make available to the Administrative Agent its Pro Rata Share of such Revolving
Loans shall not relieve any other Revolving Loan Lender of its obligation
hereunder to make available to the Administrative Agent such other Revolving
Loan Lender's Pro Rata Share of such Revolving Loans on the date of such
request.
2.04. Letters of Credit. Subject to the terms and conditions set forth
herein, the Issuing Bank hereby agrees to Issue for the account of the Borrower
one or more Letters of Credit during the period from the Effective Date to the
date which is the thirtieth day prior to the Commitment Termination Date,
subject to the following provisions:
(a) Types and Amounts. The Issuing Bank shall not have any obligation to
Issue, and shall not Issue any Letter of Credit at any time:
(i) if the aggregate Letter of Credit Obligations with respect to the
Issuing Bank, after giving effect to the Issuance of the Letter of Credit
requested hereunder, shall exceed $10,000,000 or any limit imposed by law
or regulation upon the Issuing Bank;
(ii) if the Issuing Bank receives written notice (A) from the
Administrative Agent at or before 12:00 p.m. (New York time) on the date of
the proposed Issuance of such Letter of Credit that immediately after
giving effect to the Issuance of such Letter of Credit, (1) the Letter of
Credit Obligations at such time would exceed $10,000,000 or (2) the
Revolving Credit Obligations at such time would exceed the Maximum
Revolving Credit Amount at such time, or (B) from any of the Lenders at or
before 12:00 p.m. (New York time) on the date of the proposed Issuance of
such Letter of Credit that one or more of the condi tions precedent
contained in Article V, as applicable, would not on such date be satisfied
(or waived pursuant to Section 13.09), unless such conditions are
thereafter satisfied or waived and written notice of such satisfaction or
waiver is given to the Issuing Bank by the Administrative Agent (and the
Issuing Bank shall not otherwise be required to determine that, or take
notice whether, the conditions precedent set forth
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in Article V, as applicable, have been satisfied or waived); or
(iii) which has an expiration date later than the earlier of (A) the
date which occurs 180 days following the date of Issuance with respect to a
Commercial Letter of Credit or the date which occurs 360 days following the
date of Issuance with respect to a Standby Letter of Credit or (B) the
Business Day immediately preceding the Commitment Termination Date; or
(iv) which is in a currency other than Dollars.
(b) Conditions. In addition to being subject to the satisfaction of the
conditions precedent contained in Article V, as applicable, the obligation of
the Issuing Bank to Issue any Letter of Credit is subject to the satisfaction in
full of the following conditions:
(i) if the Issuing Bank so requests, the Borrower shall have executed
and delivered to such Issuing Bank and the Administrative Agent a Letter of
Credit Reimbursement Agreement and such other documents and materials as
may be required pursuant to the terms thereof;
(ii) the terms of the proposed Letter of Credit shall be satisfactory
to the Issuing Bank in its reasonable credit judgment; and
(iii) no order, judgment or decree of any court, arbitrator or
Governmental Authority shall purport by its terms to enjoin or restrain the
Issuing Bank from Issuing the Letter of Credit and no law, rule or
regulation applicable to the Issuing Bank and no request or directive
(whether or not having the force of law and whether or not the failure to
comply therewith would be unlawful) from a Governmental Authority with
jurisdiction over the Issuing Bank shall prohibit or request that the
Issuing Bank refrain from the Issuance of letters of credit generally or
the Issuance of such Letter of Credit.
(c) Issuance of Letters of Credit. (i) The Borrower shall give the Issuing
Bank and the Administrative Agent written notice that it is requesting that the
Issuing Bank Issue a Letter of Credit not later than 12:00 p.m. (New York time)
on the third Business Day preceding the requested date for Issuance thereof, or
such shorter notice as may be acceptable to such Issuing Bank and the
Administrative Agent. Such notice shall be irrevocable unless and until such
request is denied by the applicable Issuing Bank and shall specify (A) that the
requested Letter of Credit is either a Commercial Letter of Credit or a Standby
Letter of
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Credit, (B) the stated amount of the Letter of Credit requested, (C) the
effective date (which shall be a Business Day) of Issuance of such Letter of
Credit, (D) the date on which such Letter of Credit is to expire, (E) the Person
for whose benefit such Letter of Credit is to be Issued, (F) other relevant
terms of such Letter of Credit and (G) the amount of the then out standing
Letter of Credit Obligations. Such Issuing Bank shall notify the Administrative
Agent immediately upon receipt of a written notice from the Borrower requesting
that a Letter of Credit be Issued and, upon the Administrative Agent's request
therefor, send a copy of such notice to the Administrative Agent.
(ii) The Issuing Bank shall give the Administrative Agent written notice,
or telephonic notice confirmed promptly thereafter in writing, of the Issuance
of a Letter of Credit (which notice the Administrative Agent shall promptly
transmit by telegram, telex, telecopy, telephone or similar transmission to each
Lender).
(d) Reimbursement Obligations; Duties of Issuing Banks. (i) Notwithstanding
any provisions to the contrary in any Letter of Credit Reimbursement Agreement:
(A) the Borrower shall reimburse the Issuing Bank for amounts drawn
under such Letter of Credit pursuant to subsection (e)(ii) below, no later
than the date (the "Reimbursement Date") which is one (1) Business Day
after the Borrower receives written notice from the Issuing Bank that a
draft has been presented under such Letter of Credit by the beneficiary
thereof; and
(B) all Reimbursement Obligations with respect to any Letter of Credit
shall bear interest at the rate applicable to Base Rate Loans in accordance
with Section 4.01(a) from the date of the relevant drawing under such
Letter of Credit until the Reimbursement Date and thereafter at the rate
applicable in accordance with Section 4.01(d).
(ii) The Issuing Bank shall give the Administrative Agent written notice,
or telephonic notice confirmed promptly thereafter in writing, of all drawings
under a Letter of Credit and the payment (or the failure to pay when due) by the
Borrower on account of a Reimbursement Obligation (which notice the
Administrative Agent shall promptly transmit by telegram, telex, telecopy or
similar transmission to each Lender).
(iii) No action taken or omitted, in good faith and without gross
negligence, by the Issuing Bank under or in connection with any Letter of Credit
shall put the Issuing Bank under any resulting liability to any Revolving Loan
Lender, the Borrower or, so long as it is not Issued in violation of Section
2.04(a), relieve any Revolving Loan Lender of its obligations
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hereunder to the Issuing Bank. Solely as between the Issuing Bank and the
Revolving Loan Lenders, in determining whether to pay under any Letter of
Credit, the Issuing Bank shall have no obligation to the Revolving Loan Lenders
other than to confirm that any documents required to be delivered under a
respective Letter of Credit appear to have been delivered and that they appear
on their face to comply with the requirements of such Letter of Credit.
(e) Participations. (i) Immediately upon Issuance by the Issuing Bank of
any Letter of Credit in accordance with the procedures set forth in this Section
2.04, each Revolving Loan Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuing Bank, without recourse
or warranty, an undivided interest and participation in such Letter of Credit to
the extent of such Revolving Loan Lender's Pro Rata Share, including, without
limitation, all obligations of the Borrower with respect thereto (other than
amounts owing to the Issuing Bank under Section 2.04(g)) and any security
therefor and guaranty pertaining thereto.
(ii) If the Issuing Bank makes any payment under any Letter of Credit and
the Borrower does not repay such amount to the Issuing Bank on the Reimbursement
Date, the Issuing Bank shall promptly notify the Administrative Agent, which
shall promptly notify each Revolving Loan Lender, and each Revolving Loan Lender
shall promptly and unconditionally pay to the Administrative Agent for the
account of the Issuing Bank, in immediately available funds, the amount of such
Revolving Loan Lender's Pro Rata Share of such payment (net of that portion of
such payment, if any, made by such Revolving Loan Lender in its capacity as the
Issuing Bank), and the Administrative Agent shall promptly pay to the Issuing
Bank such amounts received by it, and any other amounts received by the
Administrative Agent for the Issuing Bank's account, pursuant to this Section
2.04(e). All such payments shall constitute Revolving Loans made to the Borrower
pursuant to Section 2.01 (irrespective of the satis faction of the conditions in
Section 5.02 or the requirement in Section 2.01(b) to deliver a Notice of
Borrowing, which conditions and requirement, for the purpose of refunding any
Reimbursement Obligation owing to the Issuing Bank, the Revolving Loan Lenders
irrevocably waive). If a Revolving Loan Lender does not make its Pro Rata Share
of the amount of such payment available to the Administrative Agent, such
Revolving Loan Lender agrees to pay to the Administrative Agent for the account
of the Issuing Bank, forthwith on demand, such amount together with interest
thereon, for the first Business Day after the date such payment was first due at
the Federal Funds Rate, and thereafter at the interest rate then applicable to a
Base Rate Loan in accordance with Section 4.01(a). The failure of any such
Revolving Loan Lender to make available to the Administrative Agent for the
account of an Issuing Bank its Pro Rata Share of any such payment shall neither
relieve any other Revolving Loan
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Lender of its obligation hereunder to make available to the Administrative Agent
for the account of the Issuing Bank such other Revolving Loan Lender's Pro Rata
Share of any payment on the date such payment is to be made nor increase the
obligation of any other Revolving Loan Lender to make such payment to the
Administrative Agent. This Section does not relieve the Borrower of its
obligation to pay or repay any Revolving Loan Lender funding its Pro Rata Share
of such payment pursuant to this Section interest on the amount of such payment
from such date such payment is to be made until the date on which payment is
repaid in full.
(iii) Whenever the Issuing Bank receives a payment on account of a
Reimbursement Obligation, including any interest thereon, as to which any
Revolving Loan Lender has made a Revolving Loan pursuant to clause (ii) of this
Section, the Issuing Bank shall promptly pay to the Administrative Agent such
payment in accordance with Section 3.02. Each such payment shall be made by the
Issuing Bank or the Administrative Agent, as the case may be, on the Business
Day on which such Person receives the funds paid to such Person pursuant to the
preceding sentence, if received prior to 11:00 a.m. (New York time) on such
Business Day, and otherwise on the next succeeding Business Day.
(iv) Upon the request of any Lender, the Issuing Bank shall furnish such
Lender copies of any Letter of Credit or Letter of Credit Reimbursement
Agreement to which the Issuing Bank is party and such other documentation as
reasonably may be requested by such Lender.
(v) The obligations of a Revolving Loan Lender to make payments to the
Administrative Agent for the account of the Issuing Bank with respect to a
Letter of Credit shall be irrevocable, shall not be subject to any qualification
or exception whatsoever except willful misconduct or gross negligence of the
Issuing Bank, and shall be honored in accordance with this Article II
(irrespective of the satisfaction of the conditions described in Article V, as
applicable, which conditions, for the purposes of refunding any Reimbursement
Obligation owed to the Issuing Bank, such Revolving Loan Lenders irrevocably
waive) under all circumstances, including, without limitation, any of the
following circumstances:
(A) any lack of validity or enforceability hereof or of any of the
other Loan Documents;
(B) the existence of any claim, setoff, defense or other right which
the Borrower may have at any time against a beneficiary named in a Letter
of Credit or any transferee of a beneficiary named in a Letter of Credit
(or any Person for whom any such transferee may be acting), the
Administrative Agent, the Issuing Bank, any Lender, or any other Person,
whether in connection
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herewith, with any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transactions
between the account party and beneficiary named in any Letter of Credit);
(C) any draft, certificate or any other document presented under the
Letter of Credit having been deter mined to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(D) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents;
(E) any failure by the Issuing Bank to make any reports required
pursuant to Section 2.04(h) or the inaccuracy of any such report; or
(F) the occurrence of any Event of Default or Default.
(f) Payment of Reimbursement Obligations. (i) The Borrower unconditionally
agrees to pay to the Issuing Bank, in Dollars, the amount of all Reimbursement
Obligations, interest and other amounts payable to the Issuing Bank under or in
connection with the Letters of Credit when such amounts are due and payable,
irrespective of any claim, setoff, defense or other right which the Borrower may
have at any time against the Issuing Bank or any other Person.
(ii) In the event any payment by the Borrower received by the Issuing Bank
with respect to a Letter of Credit and distributed by the Administrative Agent
to the Lenders on account of their participation is thereafter set aside,
avoided or recovered from the Issuing Bank in connection with any receiver ship,
liquidation or bankruptcy proceeding, each such Lender which received such
distribution shall, upon demand by the Issu ing Bank, contribute such Lender's
Pro Rata Share of the amount set aside, avoided or recovered together with
interest at the rate required to be paid by the Issuing Bank upon the amount
required to be repaid by it.
(g) Issuing Bank Charges. The Borrower shall pay to the Issuing Bank,
solely for its own account, the standard charges assessed by the Issuing Bank in
connection with the issuance, administration, amendment and payment or
cancellation of Letters of Credit and such compensation in respect of such
Letters of Credit for the Borrower's account as may be agreed upon by the
Borrower and the Issuing Bank from time to time.
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(h) Issuing Bank Reporting Requirements. The Issuing Bank shall, no later
than the tenth (10th) Business Day following the last day of each calendar
month, provide to the Administrative Agent and the Borrower separate schedules
for Commercial Letters of Credit and Standby Letters of Credit issued by it, in
form and substance reasonably satisfactory to the Administrative Agent, setting
forth the aggregate Letter of Credit Obligations outstanding to it at the end of
each month and any information requested by the Administrative Agent or the
Borrower relating to the date of issue, account party, amount, expiration date
and reference number of each Letter of Credit issued by it.
(i) Indemnification; Exoneration. (A) In addition to all other amounts
payable to an Issuing Bank, the Borrower hereby agrees to defend, indemnify, and
save the Administrative Agent, the Issuing Bank and each Lender harmless from
and against any and all claims, demands, liabilities, penalties, damages, losses
(other than loss of profits), costs, charges and expenses (including reasonable
attorneys' fees but excluding taxes) which the Administrative Agent, the Issuing
Bank or such Lender may incur or be subject to as a consequence, direct or
indirect, of (i) the Issuance of any Letter of Credit other than as a result of
the gross negligence or willful misconduct of the Issuing Bank, as determined by
a court of competent jurisdiction, or (ii) the failure of the Issuing Bank
issuing a Letter of Credit to honor a drawing under such Letter of Credit as a
result of any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or Governmental Authority.
(B) As between the Borrower on the one hand and the Administrative Agent,
the Lenders and the Issuing Bank on the other hand, the Borrower assumes all
risks of the acts and omissions of, or misuse of Letters of Credit by, the
respective beneficiaries of the Letters of Credit. In furtherance and not in
limitation of the foregoing, subject to the provisions of the Letter of Credit
Reimbursement Agreements, the Administrative Agent, the Issuing Bank and the
Lenders shall not be responsible for (except to the extent resulting from their
gross negligence or willful misconduct, as determined by a court of competent
jurisdiction): (i) the form, validity, legality, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and Issuance of the Letters of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) the validity, legality or sufficiency of
any instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
(iii) failure of the beneficiary of a Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of Credit; (iv) errors,
omissions, interruptions or delays in transmission
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or delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (v) errors in interpretation of technical
terms; (vi) any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit or of the
proceeds thereof; (vii) the misapplication by the beneficiary of a Letter of
Credit of the proceeds of any drawing under such Letter of Credit; (viii) any
litigation, proceeding or charges with respect to such Letter of Credit; and
(ix) any consequences arising from causes beyond the control of the
Administrative Agent, the Issuing Bank or the Lenders.
2.05. Promise to Pay; Evidence of Debt. (a) The Borrower agrees to pay when
due the principal amount of each Revolving Loan which is made to the Borrower,
and further agrees to pay all unpaid interest accrued thereon, in accordance
with the terms of this Agreement and the promissory notes evidencing the
Revolving Loans owing to the Revolving Loan Lenders. The Borrower shall execute
and deliver to each Revolving Loan Lender a promissory note to evidence the
Revolving Loans owing to such Revolving Loan Lender and agrees to execute and
deliver to such Revolving Loan Lender and any assignee of such Revolving Loan
Lender such promissory notes as are necessary after giving effect to any
assignment thereof pursuant to Section 13.01, each substantially in the form of
Exhibit F-1 attached hereto and made a part hereof (all such promissory notes
and all amendments thereto, replacements thereof and substitutions therefor
being collectively referred to as the "Revolving Loan Notes"; and "Revolving
Loan Note" means any one of the Revolving Loan Notes).
(b) The Borrower agrees to pay when due the principal amount of each Term A
Loan which is made to the Borrower, and further agrees to pay all unpaid
interest accrued thereon, in accordance with the terms of this Agreement and the
promissory notes evidencing the Term A Loans owing to the Term A Loan Lenders.
The Borrower shall execute and deliver to each Term A Loan Lender a promissory
note to evidence the Term A Loans owing to such Term A Loan Lender and agrees to
execute and deliver to such Term A Loan Lender and any assignee of such Term A
Loan Lender such promissory notes as are necessary after giving effect to any
assignment thereof pursuant to Section 13.01, each substantially in the form of
Exhibit F-2 attached hereto and made a part hereof (all such promissory notes
and all amendments thereto, replacements thereof and substitutions therefor
being collectively referred to as the "Term A Loan Notes"; and "Term A Loan
Note" means any one of the Term A Loan Notes).
(c) The Borrower agrees to pay when due the principal amount of each Term B
Loan which is made to the Borrower, and further agree to pay all unpaid interest
accrued thereon, in accordance with the terms of this Agreement and the
promissory notes evidencing the Term B Loans owing to the Term B Loan Lenders.
The Borrower shall execute and deliver to each Term B
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Loan Lender a promissory note to evidence the Term B Loans owing to such Term B
Loan Lender and agrees to execute and deliver to such Term B Loan Lender and any
assignee of such Term B Loan Lender such promissory notes as are necessary after
giving effect to any assignment thereof pursuant to Section 13.01, each
substantially in the form of Exhibit F-3 attached hereto and made a part hereof
(all such promissory notes and all amendments thereto, replacements thereof and
substitutions therefor being collectively referred to as the "Term B Loan
Notes"; and "Term B Loan Note" means any one of the Term B Loan Notes).
(d) The Borrower agrees to pay when due the principal amount of each
Acquisition Term Loan which is made to the Borrower, and further agrees to pay
all unpaid interest accrued thereon, in accordance with the terms of this
Agreement and the promissory notes evidencing the Acquisition Term Loans owing
to the Acquisition Term Loan Lenders. The Borrower shall execute and deliver to
each Acquisition Term Loan Lender a promissory note to evidence the Acquisition
Term Loans owing to such Acquisition Term Loan Lender and agrees to execute and
deliver to such Acquisition Term Loan Lender and any assignee of such
Acquisition Term Loan Lender such promissory notes as are necessary after giving
effect to any assignment thereof pursuant to Section 13.01, each substantially
in the form of Exhibit F-4 attached hereto and made a part hereof (all such
promissory notes and all amendments thereto, replacements thereof and
substitutions therefor being collectively referred to as the "Acquisition Term
Loan Notes"; and "Acquisition Term Loan Note" means any one of the Acquisition
Term Loan Notes).
(E) The Borrower agrees to pay when due the principal amount of each Swing
Loan which is made to the Borrower, and further agree to pay all unpaid interest
accrued thereon, in accordance with the terms of this Agreement and the
promissory notes evidencing the Swing Loans owing to the Swing Loan Lender. The
Borrower shall execute and deliver to the Swing Loan Lender a promissory note to
evidence the Swing Loans owing to the Swing Loan Lender and agrees to execute
and deliver to the Swing Loan Lender and any assignee of the Swing Loan Lender
such promissory notes as are necessary after giving effect to any assignment
thereof pursuant to Section 13.01, each substantially in the form of Exhibit F-5
attached hereto and made a part hereof (all such promissory notes and all
amendments thereto, replacements thereof and substitutions therefor being
collectively referred to as the "Swing Loan Notes"; and "Swing Loan Note" means
any one of the Swing Loan Notes).
2.06. Use of Proceeds of Loans. (a) The proceeds of the Term A Loans and
the Term B Loans will be used (i) to finance the acquisition of Monitor pursuant
to the Monitor Acquisition Documents, (ii) to refinance certain indebtedness of
Monitor and (iii) to pay for the related transaction fees, costs and expenses.
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(b) The proceeds of the Acquisition Term Loans shall be used to fund
Permitted Acquisitions.
(c) The proceeds of the Revolving Loans shall be used to provide working
capital in the ordinary course of business of the Borrower and its Subsidiaries
and other general corporate purposes not prohibited hereunder (including to pay
a portion of the purchase price and/or the related transaction fees, costs and
expenses incurred in connection with the Monitor Acquisition).
2.07. Authorized Officers, Employees and Agents. On the Closing Date and
from time to time thereafter, the Borrower shall deliver to the Administrative
Agent an Officer's Certificate setting forth the names of the officers of the
Borrower, employees and agents of the Borrower authorized to request Loans and
Letters of Credit on behalf of the Borrower and containing a specimen signature
of each such officer, employee or agent. The officers, employees and agents so
authorized shall also be authorized to act for the Borrower in respect of all
other matters relating to the Loan Documents. The Agents shall be entitled to
rely conclusively on such officer's, employee's or agent's authority to request
such Loan or Letter of Credit until the Agents receive written notice to the
contrary. In addition, the Agents shall be entitled to rely conclusively on any
written notice sent to it by telecopy. The Agents shall have no duty to verify
the authenticity of the signature appearing on, or any telecopy or facsimile of,
any written Notice of Borrowing or any other document, and, with respect to an
oral request for such a Loan or Letter of Credit, the Agents shall have no duty
to verify the identity of any person representing himself or herself as one of
the officers, employees or agents authorized to make such request or otherwise
to act on behalf of the Borrower. None of the Agents, the Issuing Banks or the
Lenders shall incur any liability to the Borrower or any other Person in acting
upon any telecopy or facsimile or telephonic notice referred to above which any
Agent believes to have been given by a duly authorized officer or other person
authorized to borrow on behalf of the Borrower.
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. Prepayments; Reductions in Revolving Loan Commitments.
(a) Voluntary Prepayments/Reductions.
(i) The Borrower may, at any time and from time to time, prepay the Loans
in whole or in part; provided, however, that any partial prepayment of Revolving
Loans shall be in minimum amounts of $500,000 and in multiples of $100,000 in
excess thereof and that any partial prepayment of Term Loans
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shall be in minimum amounts of $1,000,000 and in multiples of $100,000 in excess
thereof; provided, further, that Eurodollar Rate Loans may only be prepaid (A)
in whole or in part on the expiration date of the then applicable Eurodollar
Interest Period, upon at least three (3) Business Days' prior written notice to
the Administrative Agent (which the Administrative Agent shall promptly transmit
to each Lender, it being agreed that the failure of the Administrative Agent to
give such notice shall not affect the Borrower's right to prepay any Loan) or
(B) otherwise upon payment of the amounts described in Section 4.02(f). Any
notice of prepayment given to the Administrative Agent under this Section
3.01(a)(i) shall specify the Loans to be prepaid, the date (which shall be a
Business Day) of prepayment, and the aggregate principal amount of the
prepayment. Any prepayment of Term Loans shall be applied in the proportions
specified by the Borrower to the Term A Loans, the Term B Loans and the
Acquisition Term Loans but the amounts, if any, applied to each of the Term A
Loans, Term B Loans, and Acquisition Term Loans shall be applied pro rata to the
remaining principal installments of such Term Loans. When notice of prepayment
is delivered as provided herein, the principal amount of the Loans specified in
the notice shall become due and payable on the prepayment date specified in such
notice.
(ii) The Borrower, upon at least five (5) Business Days' prior notice to
the Administrative Agent (which the Administrative Agent shall promptly transmit
to each Lender), shall have the right, at any time and from time to time, to
terminate in whole or permanently reduce ratably in part the unused portions of
the Commitments. Any partial reduction of the Commitments shall be in an
aggregate minimum amount of One Million Dollars ($1,000,000) and integral
multiples of One Hundred Thousand Dollars ($100,000) in excess of that amount,
and shall reduce the Commitment of each Lender proportionately in accordance
with such Lender's Pro Rata Share. Any notice of termination or reduction given
to the Administrative Agent under this Section 3.01(a)(ii) shall specify whether
the termination or reduction is applicable to the Revolving Loan Commitment or
the Acquisition Term Loan Commitment, the date (which shall be a Business Day)
of such termination or reduction and, with respect to a partial reduction, the
aggregate principal amount thereof.
(iii) The prepayments and payments in respect of reductions and
terminations described in clauses (i) and (ii) of this Section 3.01(a) may be
made without premium or penalty (except as provided in Section 4.02(f)).
(b) Mandatory Prepayments/Reductions.
(i) Immediately upon any Loan Party's receipt of any Net Cash Proceeds on
account of an Asset Sale (other than Excluded Proceeds), such Loan Party shall
make or cause to be made a mandatory prepayment of the Term Loans in an amount
equal
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to 100% of such Net Cash Proceeds. Each such prepayment of Term Loans shall be
applied pro rata to the Term A Loans, the Term B Loans and the Acquisition Term
Loans and the amounts applied to Term A Loans, Term B Loans and the Acquisition
Term Loans shall be applied pro rata to the remaining principal installments of
such Term Loans.
(ii) Immediately upon any Loan Party's receipt of any Net Cash Proceeds
from the issuance of any Securities (other than Excluded Securities) by such
Loan Party (other than such Net Cash Proceeds that are used by such Loan Party
to consummate a Permitted Acquisition within one year from the date such Net
Cash Proceeds are received, provided that such Net Cash Proceeds are deposited
into the Cash Collateral Account upon receipt of such Net Cash Proceeds by such
Loan Party until the earlier of (A) the date such Loan Party consummates a
Permitted Acquisition in accordance with the provisions hereof or (B) the date
which is the first annual anniversary of the date of deposit thereof), such Loan
Party shall make or cause to be made a mandatory prepayment of the Term Loans in
an amount equal to 100% of such Net Cash Proceeds. Each such prepayment of Term
Loans shall be applied pro rata to the Term A Loans, the Term B Loans and the
Acquisition Term Loans and the amounts applied to Term A Loans, Term B Loans and
Acquisition Term Loans shall be applied pro rata to the remaining principal
installments of such Term Loans.
(iii) On the 90th day following the last day of each Fiscal Year, the
Borrower shall make or cause to be made a mandatory prepayment of the Term Loans
in an amount equal to the lesser of 50% of the Excess Cash Flow for such Fiscal
Year or the aggregate principal amount of the Term Loans outstanding as of the
date of payment; provided, however, that no mandatory prepayment shall be
required hereunder if the Leverage Ratio of the Borrower and its Subsidiaries on
a consolidated basis for such Fiscal Year is less than 3.25 to 1.00. Each such
prepayment of Term Loans shall be applied pro rata to the Term A Loans, the Term
B Loans and the Acquisition Term Loans and the amounts applied to Term A Loans,
Term B Loans and Acquisition Term Loans shall be applied pro rata to the
remaining principal installments of such Term Loans.
(iv) Immediately upon the Revolving Credit Obligations exceeding the
Maximum Revolving Credit Amount, the Borrower shall make or cause to be made a
mandatory prepayment of the Revolving Credit Obligations in an amount equal to
such excess, such amount to be applied in accordance with the provisions of
Section 3.02(b).
(v) Nothing in this Section 3.01(b) shall be con strued to constitute the
Lenders' consent to any transaction which is not expressly permitted by Article
IX.
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3.02. Payments. (a) Manner and Time of Payment. All payments of principal,
interest, fees, Reimbursement Obligations and other Obligations which are
payable to the Administrative Agent, any Lender or any Issuing Bank shall be
made without condition or deduction for any counterclaim, defense, recoupment or
set-off, in Dollars and in immediately available funds, delivered to the
Administrative Agent (or, in the case of Reimbursement Obligations, to the
Issuing Bank) not later than 1:00 p.m. (New York time) on the date due, by
deposit of such funds to the Administrative Agent's Account (or such account of
the Issuing Bank, as it may designate). The Administrative Agent shall
thereafter cause to be distributed to the Lenders their respective Pro Rata
Shares of such payments in accordance with the provisions of Section 3.02(b) if
received prior to 1:00 p.m. (New York time), and on the next succeeding Business
Day, if received thereafter, by the Administrative Agent.
(b) Apportionment of Payments. (i) Subject to the provisions of Section
3.02(b)(ii), all payments of principal in respect of outstanding Revolving Loans
shall be applied by the Administrative Agent to the ratable payment of the
Revolving Loans owing to the Lenders, and all payments of principal in respect
of outstanding Term Loans shall be applied by the Administrative Agent to the
ratable payment of the Term Loans owing to the Lenders. Payments relating to
interest shall be applied to the payment of interest owing to the Lenders in
respect of the Loans on a ratable basis.
(ii) After the occurrence of an Event of Default and while the same is
continuing, the Administrative Agent shall apply all payments and prepayments of
any Obligations and all proceeds of Collateral in the following order:
(A) first, to pay principal of and interest on any Loans which the
Administrative Agent may have advanced on behalf of any Lender pursuant to
Section 2.01(c)(ii) or Section 2.02(c)(ii) for which the Administrative
Agent has not been reimbursed by such Lender or the Borrower;
(B) second, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Administrative Agent or the
Lenders;
(C) third, to pay interest on the Loans;
(D) fourth, to pay the principal amount of the Loans then outstanding
in accordance with each Lender's Pro Rata Share; and
(E) fifth, to pay all other Obligations in such order as the
Administrative Agent may determine in its sole discretion.
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The order of priority set forth in this Section 3.02(b)(ii) and the related
provisions of this Agreement are set forth solely to determine the rights and
priorities of the Administrative Agent and the Lenders as among themselves. If
sufficient funds are not available to fund all Obligations described in any of
the foregoing clauses (A) through (E), the available funds shall be allocated to
the Obligations described in such clause ratably.
(c) Payments on Non-Business Days. Whenever any pay ment to be made by the
Borrower hereunder or under the Notes is stated to be due on a day which is not
a Business Day, the payment shall instead be due on the next succeeding Business
Day, and any such extension of time shall be included in the computation of the
payment of interest and fees hereunder.
3.03. Taxes. (a) Payments Free and Clear of Taxes. Any and all payments by
the Borrower hereunder, under the Notes or under any other Loan Document shall
be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender, the
Issuing Bank and the Administrative Agent, taxes imposed on its income, capital,
profits or gains and franchise taxes imposed on it, in each case by (i) the
United States except withholding taxes contemplated pursuant to Section
3.03(e)(ii)(C), (ii) the Governmental Authority of the juris diction in which
such Lender's office or, to the extent that the imposition of taxes, levies,
imposts, deductions, charges or withholdings results therefrom, any branch
office of such Lender is located from which such Lender makes or maintains any
extension of credit under this Agreement and (iii) the Governmental Authorities
in those jurisdictions in which such Person is organized or doing business, in
each case including all political subdivisions thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). Subject to Section 3.03(e), if the Borrower
shall be required by law to withhold or deduct any Taxes from or in respect of
any sum payable hereunder, under the Notes or under any other Loan Document to
any Lender, any Issuing Bank or the Administrative Agent, (x) such sum payable
shall be increased as may be necessary so that after making all required
withholdings or deductions (including withholdings or deductions applicable to
additional sums payable under this Section 3.03) such Lender, such Issuing Bank
or the Administrative Agent (as the case may be) receives an amount equal to the
sum it would have received had no such withholdings or deductions been made, (y)
the Borrower shall make such withholdings or deductions, and (z) the Borrower
shall pay the full amount withheld or deducted to the relevant taxation
authority or other authority in accordance with applicable law.
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(b) Other Taxes. In addition, the Borrower agrees to pay any present or
future stamp, value-added or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from and which relate directly to
(i) any payment made under any Loan Document or (ii) the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the Notes or any
other Loan Document (hereinafter referred to as "Other Taxes").
(c) Indemnification. The Borrower will indemnify each Lender, each Issuing
Bank and each Agent against, and reimburse each on demand for, the full amount
of all Taxes and Other Taxes (including, without limitation, any Taxes or Other
Taxes imposed by any Governmental Authority on amounts payable under this
Section 3.03 and any additional income or franchise taxes resulting therefrom)
incurred or paid by such Lender, such Issuing Bank or such Agent (as the case
may be) or any Affiliate of such Lender and any liability (including penalties,
interest, and out-of-pocket expenses paid to third parties) arising there from
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or lawfully payable. A certificate as to any amount payable to any Person under
this Section 3.03 submitted by such Person to the Borrower shall, absent
manifest error, be final, conclusive and binding upon all parties hereto. In
determining such additional amount, such Person shall take into account and
reduce the amount otherwise payable by the Borrower pursuant to this Section
3.03 by an amount equal to the tax credits and other tax benefits actually
utilized (as determined by such Person in its reasonable judgment). This
indemnification shall be made within thirty (30) days from the date such Person
makes written demand therefor and within thirty (30) days after the receipt of
any refund of the Taxes or Other Taxes following final determination that the
Taxes or Other Taxes which gave rise to the indemnification were not required to
be paid, such Person shall repay the amount of such paid indemnity to the
Borrower.
(d) Receipts. Within thirty (30) days after the date of any payment of
Taxes or Other Taxes by the Borrower, the Borrower will furnish to the
Administrative Agent, at its address referred to in Section 13.10, the original
or a certified copy of a receipt or other documentation reasonably satisfactory
to the Administrative Agent evidencing payment thereof. The Borrower will
furnish to the Administrative Agent upon the Administrative Agent's request from
time to time an Officer's Certificate stating that all Taxes and Other Taxes of
which it is aware that are due have been paid and that no additional Taxes or
Other Taxes of which it is aware are due.
(e) Foreign Bank Certifications. (i) Each Lender that is not created or
organized under the laws of the United States or a political subdivision thereof
shall deliver to the Borrower
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and the Administrative Agent on or before the Effective Date or the date on
which such Lender becomes a Lender pursuant to Section 13.01 hereof a true and
accurate certificate executed in duplicate by a duly authorized officer of such
Lender to the effect that such Lender is eligible to receive payments hereunder
and under the Notes without deduction or withholding of United States federal
income tax (A) under the provisions of an applicable tax treaty concluded by the
United States (in which case the certificate shall be accompanied by two duly
completed copies of IRS Form 1001 (or any successor or substitute form or
forms)) or (B) under Sections 1442(c)(1) and 1442(a) of the Internal Revenue
Code (in which case the certificate shall be accompanied by two duly completed
copies of IRS Form 4224 (or any successor or substitute form or forms)) and IRS
Form W-8 or W-9 and any other form which the Borrower or the Administrative
Agent shall reasonably request in connection therewith or (C) in the case of a
Lender that is not a "bank" for purposes of Section 881(c) of the Code and that
is claiming exemption from U.S. federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a Form W-
8, or any subsequent versions thereof or successors thereto (and, if such Lender
delivers a Form W-8, a certificate representing that such Lender is not a "bank"
for purposes of Section 881(c) of the Code, is not a 10% shareholder (within the
meaning of Section 871(h)93)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code). In the event a Lender fails to deliver the
requisite forms in accordance with the preceding sentence, such Lender shall not
be entitled to the indemnification provided by Section 3.03(c) or additional
amounts in respect of Taxes pursuant to Section 3.03(a).
(ii) Each such Lender further agrees to deliver to the Borrower and the
Administrative Agent from time to time, a true and accurate certificate executed
in duplicate by a duly author ized officer of such Lender before or promptly
upon the occurrence of any event requiring a change in the most recent
certificate previously delivered by it to the Borrower and the Administrative
Agent pursuant to this Section 3.03(e). Each certificate required to be
delivered pursuant to this Section 3.03(e)(ii) shall certify as to one of the
following:
(A) that such Lender can continue to receive payments hereunder and
under the Notes without deduction or withholding of United States federal
income tax;
(B) that such Lender cannot continue to receive payments hereunder and
under the Notes without deduction or withholding of United States federal
income tax as specified therein but does not require additional payments
pursuant to Section 3.03(a) because
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it is entitled to recover the full amount of any such deduction or
withholding from a source other than the Borrower;
(C) that such Lender is no longer capable of receiving payments
hereunder and under the Notes without deduction or withholding of United
States federal income tax as specified therein by reason of a change in law
(including the Code or applicable tax treaty) after the later of the
Effective Date or the date on which a Lender became a Lender pursuant to
Section 13.01 and that it is not capable of recovering the full amount of
the same from a source other than the Borrower; or
(D) that such Lender is no longer capable of receiving payments
hereunder without deduction or withholding of United States federal income
tax as specified therein other than by reason of a change in law (including
the Code or applicable tax treaty) after the later of the Effective Date or
the date on which a Lender became a Lender pursuant to Section 13.01.
Each Lender agrees to deliver to the Borrower and the Administrative Agent duly
completed copies of the above-mentioned IRS forms on or before the earlier of
(x) the date that any such form expires or becomes obsolete or otherwise is
required to be resubmitted as a condition to obtaining an exemption from
withholding from United States federal income tax and (y) fifteen (15) days
after the occurrence of any event requiring a change in the most recent form
previously delivered by such Lender to the Borrower and the Administrative
Agent, unless any change in treaty, law, regulation, or official interpretation
thereof which would render such form inapplicable or which would prevent the
Lender from duly completing and delivering such form has occurred prior to the
date on which any such delivery would otherwise be required and the Lender
promptly advises the Borrower and the Administrative Agent that it is not
capable of receiving payments hereunder or under the Notes without any deduction
or withholding of United States federal income tax. In the event a Lender fails
to deliver the requisite forms in accordance with this Section 3.03(e), such
Lender shall not be entitled to the indemnification provided by Section 3.03(c).
3.04. Increased Capital. If any Lender or Issuing Bank reasonably
determines that (i) the adoption or implementa tion of or any change in or in
the interpretation or administration of any law or regulation or any guideline
or request from any central bank or other Governmental Authority or
quasi-governmental authority exercising jurisdiction, power or control over such
Lender, such Issuing Bank or banks or financial institutions generally (whether
or not having the force of law)
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effective after the date hereof, compliance with which affects or would affect
the amount of capital required or expected to be maintained by such Lender or
such Issuing Bank or any corporation controlling such Lender or such Issuing
Bank and (ii) the amount of such capital is increased by or based upon (A) the
making or maintenance by any Lender of its Loans, any Lender's participation in
or obligation to participate in the Loans, Letters of Credit or other advances
made hereunder or under the Notes or the existence of any Lender's obligation to
make Loans or (B) the issuance or maintenance by the Issuing Bank of, or the
existence of the Issuing Bank's obligation to issue, Letters of Credit, then, in
any such case, upon demand by such Lender or such Issuing Bank (with a copy of
such demand to the Administrative Agent), the Borrower agrees to immediately pay
to the Administrative Agent for the account of such Lender or such Issuing Bank,
from time to time as specified by such Lender or such Issuing Bank, additional
amounts sufficient to compensate such Lender or such Issuing Bank or such
corporation therefor. Such demand shall be accompanied by a statement as to the
amount of such compensation and include a brief summary of the basis for such
demand. Such statement shall be conclusive and binding for all purposes, absent
manifest error.
3.05. Replacement of Lenders. (a) Upon the occurrence of any event giving
rise to the operation of Section 3.03(e)(ii)(C) or (D), Section 3.04, or Section
4.01(f) with respect to any Lender which results in such Lender charging to the
Borrower increased costs in excess of those being charged generally by the
Lenders, (b) if a Lender becomes in default of its obligations under this
Agreement, (c) in the case of a refusal by a Lender to consent to a proposed
change, waiver, discharge or termination with respect to this Agreement which
requires the consent of all Lenders and has been approved by the Requisite
Lenders and/or (d) if a Lender delivers a notice under Section 4.02(e), the
Borrower shall have the right, if no Event of Default then exists, to replace
such Lender (the "Replaced Lender") with one or more other Eligible Assignees,
none of whom shall be in default of its obligations under this Agreement at the
time of such replacement (collectively, the "Replacement Lender") reasonably
acceptable to the Administrative Agent, provided that (i) at the time of any
replacement pursuant to this Section 3.05, the Replacement Lender shall enter
into one or more Assignment and Acceptances pursuant to Section 13.01 (and with
all fees payable pursuant to Section 13.01(d) to be paid by the Replacement
Lender) pursuant to which the Replacement Lender shall acquire all of the
Commitments and outstanding Loans of the Replaced Lender and, in connection
therewith, shall pay to the Replaced Lender in respect thereof an amount equal
to the sum of (A) an amount equal to the principal of, and all accrued interest
on, all outstanding Loans of the Replaced Lender, (B) an amount equal to all
accrued, but theretofore unpaid, fees owing to the Replaced Lender under this
Agreement and (C) an amount equal to
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all other outstanding Obligations owing to the Replaced Lender, and (ii) all
obligations of the Borrower owing to the Replaced Lender (other than those
specifically described in clause (i) above in respect of which the assignment
purchase price has been, or is concurrently being, paid) shall be paid in full
to such Replaced Lender concurrently with such replacement. Upon the execution
of the respective Assignment and Acceptance, the payment of amounts referred to
in clauses (i) and (ii) above and, if so requested by the Replacement Lender,
delivery to the Replacement Lender of the appropriate instruments otherwise
required by this Agreement executed by the Borrower, the Replacement Lender
shall become a Lender hereunder and the Replaced Lender shall cease to
constitute a Lender hereunder, except with respect to indemnification provisions
applicable to the Replaced Lender under this Agreement, which shall survive as
to such Replaced Lender.
ARTICLE IV
INTEREST AND FEES
4.01. Interest on the Loans and other Obligations.
(a) Rate of Interest. (i) All Revolving Loans and the outstanding amount of
all other Obligations (other than Swing Loans and Term Loans) shall bear
interest on the unpaid amount thereof from the date such Loans are made and such
other Obligations are due and payable until paid in full, except as otherwise
provided in Section 4.01(d), as follows:
(A) If a Base Rate Loan or other Obligation, at a rate per annum equal
to the sum of (I) the Base Rate as in effect from time to time as interest
accrues, plus (II) the Applicable Revolving Loan Base Rate Margin in effect
at such time; and
(B) If a Eurodollar Rate Loan, at a rate per annum equal to the sum of
(I) the Eurodollar Rate determined for the applicable Eurodollar Interest
Period, plus (II) the Applicable Revolving Eurodollar Rate Margin in effect
from time to time during such Eurodollar Interest Period.
(ii) All Term A Loans shall bear interest on the unpaid amount thereof from
the date such Loans are made until paid in full, except as otherwise provided in
Section 4.01(d), as follows:
(A) If a Base Rate Loan, at a rate per annum equal to the sum of (I)
the Base Rate as in effect from time to time as interest accrues, plus (II)
the
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Applicable Term A Loan Base Rate Margin in effect at such time; and
(B) If a Eurodollar Rate Loan, at a rate per annum equal to the sum of
(I) the Eurodollar Rate determined for the applicable Eurodollar Interest
Period, plus (II) the Applicable Term A Loan Eurodollar Rate Margin in
effect from time to time during such Eurodollar Interest Period.
(iii) All Term B Loans shall bear interest on the unpaid amount thereof
from the date such Loans are made until paid in full, except as otherwise
provided in Section 4.01(d), as follows:
(A) If a Base Rate Loan, at a rate per annum equal to the sum of (I)
the Base Rate as in effect from time to time as interest accrues, plus (II)
the Applicable Term B Loan Base Rate Margin in effect at such time; and
(B) If a Eurodollar Rate Loan, at a rate per annum equal to the sum of
(I) the Eurodollar Rate determined for the applicable Eurodollar Interest
Period, plus (II) the Applicable Term B Loan Eurodollar Rate Margin in
effect from time to time during such Eurodollar Interest Period.
(iv) All Acquisition Term Loans shall bear interest on the unpaid amount
thereof from the date such Loans are made until paid in full, except as
otherwise provided in Section 4.01(d), as follows:
(A) If a Base Rate Loan, at a rate per annum equal to the sum of (I)
the Base Rate as in effect from time to time as interest accrues, plus (II)
the Applicable Acquisition Term Loan Base Rate Margin in effect at such
time; and
(B) If a Eurodollar Rate Loan, at a rate per annum equal to the sum of
(I) the Eurodollar Rate determined for the applicable Eurodollar Interest
Period, plus (II) the Applicable Acquisition Term Loan Eurodollar Rate
Margin in effect from time to time during such Eurodollar Interest Period.
(v) All Swing Loans shall bear interest on the unpaid amount thereof from
the date such Loans are made until paid in full, except as otherwise provided in
Section 4.01(d), at a rate per annum equal to the sum of (I) the Base Rate as in
effect from time to time as interest accrues, plus (II) the Applicable
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Revolving Loan Base Rate Margin in effect at such time minus 0.0025%.
(vi) The applicable basis for determining the rate of interest on the Loans
shall be selected by the Borrower at the time a Notice of Borrowing or a Notice
of Conversion/Continuation is delivered by the Borrower to the Administrative
Agent; provided, however, the Borrower may not select the Eurodollar Rate as the
applicable basis for determining the rate of interest on such a Loan if (x) such
Loan is to be made on the Effective Date or (y) at the time of such selection a
Default or Event of Default would occur or has occurred and is continuing. If on
any day any Loan is outstanding with respect to which notice has not been timely
delivered to the Administrative Agent in accordance with the terms hereof
specifying the basis for determining the rate of interest on that day, then for
that day interest on that Loan shall be determined by reference to the Base
Rate.
(b) Interest Payments. (i) Interest accrued on each Base Rate Loan shall be
payable in arrears (A) on the first Business Day of each calendar quarter,
commencing on the first such day following the making of such Base Rate Loan and
(B) on the Commitment Termination Date or such other date on which such Loans
become due and payable.
(ii) Interest accrued on each Eurodollar Rate Loan shall be payable in
arrears (A) on each Eurodollar Interest Payment Date applicable to such Loan and
(B) on the Commitment Termination Date or such other date on which such Loans
become due and payable.
(iii)Interest accrued on the balance of all other Obligations shall be
payable in arrears (A) on the first Business Day of each calendar quarter,
commencing on the first such day following the incurrence of such Obligation and
(B) on the Commitment Termination Date.
(c) Conversion or Continuation. (i) The Borrower shall have the option (A)
to convert at any time all or any part of the outstanding Base Rate Loans (other
than Swing Loans) to Eurodollar Rate Loans; (B) to convert all or any part of
out standing Eurodollar Rate Loans having Eurodollar Interest Periods which
expire on the same date to Base Rate Loans on such expira tion date; or (C) to
continue all or any part of outstanding Eurodollar Rate Loans having Eurodollar
Interest Periods which expire on the same date as Eurodollar Rate Loans, and the
succeeding Eurodollar Interest Period of such continued Loans shall commence on
such expiration date; provided, however, no such outstanding Loan may be
continued as, or be converted into, a Eurodollar Rate Loan (i) if the
continuation of, or the conver sion into, would violate any of the provisions of
Section 4.02 or (ii) if an Event of Default would occur or has occurred and is
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continuing. Any conversion into or continuation of Eurodollar Rate Loans under
this Section 4.01(c) shall be in a minimum amount of Two Million Dollars
($2,000,000) and in integral multiples of One Hundred Thousand Dollars
($100,000) in excess of that amount.
(ii) To convert or continue a Loan under Section 4.01(c)(i), the Borrower
shall deliver a Notice of Conversion/ Continuation to each Lender no later than
12:00 noon (New York time) at least two (2) Business Days in advance of the
proposed conversion/continuation date. A Notice of Conversion/Continua tion
shall specify (A) the proposed conversion/continuation date (which shall be a
Business Day), (B) the principal amount of the Loan to be converted/continued,
(C) whether such Loan shall be converted and/or continued and (D) in the case of
a conversion to, or continuation of, a Eurodollar Rate Loan, the requested
Eurodollar Interest Period. In lieu of delivering a Notice of
Conversion/Continuation, the Borrower may give each Lender tele phonic notice of
any proposed conversion/continuation by the time required under this Section
4.01(c)(ii), and such notice shall be confirmed in writing delivered to each
Lender promptly (but in no event later than 5:00 p.m. (New York time) on the
same day). Any Notice of Conversion/Continuation for conversion to, or
continuation of, a Loan (or telephonic notice in lieu thereof) shall be
irrevocable, and the Borrower shall be bound to convert or continue in
accordance therewith.
(d) Default Interest. Notwithstanding the rates of interest specified in
Section 4.01(a) or elsewhere herein, effective immediately upon the occurrence
of any Event of Default and for as long thereafter as such Event of Default
shall be continuing, the principal balance of all Loans and of all other
Obligations, shall bear interest at a rate which is two percent (2.0%) per annum
in excess of the rate of interest applicable to such Obligations from time to
time (the "Default Rate").
(e) Computation of Interest. Interest on (i) Base Rate Loans and all other
Obligations shall be computed on the basis of the actual number of days elapsed
in the period during which interest accrues and a year of 360 days and (ii)
Eurodollar Rate Loans shall be computed on the basis of the actual number of
days elapsed in the period during which interest accrues and a year of 360 days.
In computing interest on any Loan, the date of the making of the Loan shall be
included and the date of payment made in accordance with Section 3.02 shall be
excluded; provided, however, if a Loan is repaid on the same day on which it is
made, one (1) day's interest shall be paid on such Loan.
(f) Changes; Legal Restrictions. If after the date hereof any Lender or any
Issuing Bank reasonably determines that the adoption or implementation of or any
change in or in the interpretation or administration of any law or regulation or
any
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guideline or request from any central bank or other Governmental Authority
or quasi-governmental authority exercising jurisdiction, power or control over
any Lender or over banks or financial institutions generally (whether or not
having the force of law), compliance with which, in each case after the date
hereof:
(i) subjects a Lender or an Issuing Bank (or its Applicable Lending
Office) to charges (other than Taxes) of any kind which is applicable to
the Commitments of the Lenders and/or the Issuing Bank to make Eurodollar
Rate Loans or to issue and/or participate in Letters of Credit or changes
the basis of taxation of payments to that Lender or the Issuing Bank of
principal, fees, interest, or any other amount payable hereunder with
respect to Eurodollar Rate Loans or letters of Credit; or
(ii) imposes, modifies, or holds applicable, any reserve (other than
reserves taken into account in calculating the Eurodollar Rate), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities (including those
pertaining to Letters of Credit) in or for the account of, advances or
loans by, commitments made, or other credit extended by, or any other
acquisition of funds by, a Lender or an Issuing Bank or any Applicable
Lending Office or Eurodollar Affiliate of that Lender or that Issuing Bank;
and the result of any of the foregoing is to increase the cost to that Lender or
that Issuing Bank of making, renewing or maintaining the Loans or its
Commitments or issuing or participating in the Letters of Credit or to reduce
any amount receivable thereunder; then, in any such case, upon written demand by
such Lender or such Issuing Bank (with a copy of such demand to the
Administrative Agent), the Borrower shall immediately pay to the Administrative
Agent for the account of such Lender or such Issuing Bank, from time to time as
specified by such Lender or such Issuing Bank, such amount or amounts as may be
necessary to compensate such Lender or such Issuing Bank or its Eurodollar
Affiliate for any such additional cost incurred or reduced amount received. Such
demand shall be accompanied by a statement as to the amount of such compensation
and include a summary of the basis for such demand. Such statement shall be
conclusive and binding for all purposes, absent manifest error.
(g) Confirmation of Eurodollar Rate. Upon the request of the Borrower from
time to time, the Administrative Agent shall promptly provide to the Borrower
such information with respect to the applicable Eurodollar Rate as may be
reasonably requested.
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4.02. Special Provisions Governing Eurodollar Rate Loans. With respect to
Eurodollar Rate Loans:
(a) Amount of Advance. Each Eurodollar Rate Loan shall be for a minimum
amount of Two Million Dollars ($2,000,000) and in integral multiples of One
Hundred Thousand Dollars ($100,000) in excess of that amount.
(b) Determination of Eurodollar Interest Period. By giving notice as set
forth in Section 2.01(b) or Section 2.02(b) (with respect to a Borrowing of a
Eurodollar Rate Loan) or Section 4.01(c) (with respect to a conversion into or
continuation of a Eurodollar Rate Loan), the Borrower shall have the option,
subject to the other provisions of this Section 4.02, to select an interest
period (a "Eurodollar Interest Period") to apply to the Loans described in such
notice, subject to the following provisions:
(i) The Borrower may only select, as to a partic ular Borrowing of
Eurodollar Rate Loans, a Eurodollar Interest Period of either one, two,
three or six months in duration;
(ii) In the case of immediately successive Eurodollar Interest Periods
applicable to a Borrowing of Eurodollar Rate Loans, each successive
Eurodollar Interest Period shall commence on the day on which the next
preceding Eurodollar Interest Period expires;
(iii) If any Eurodollar Interest Period would otherwise expire on a
day which is not a Business Day, such Eurodollar Interest Period shall be
extended to expire on the next succeeding Business Day if the next
succeeding Business Day occurs in the same calendar month, and if there
shall be no succeeding Business Day in such calendar month, such Eurodollar
Interest Period shall expire on the immediately preceding Business Day;
(iv) The Borrower may not select a Eurodollar Interest Period as to
any Loan if such Eurodollar Interest Period terminates later than the
Commitment Termination Date;
(v) The Borrower may not select a Eurodollar Interest Period with
respect to any portion of princi pal of a Loan which extends beyond a date
on which the Borrower is required to make a scheduled payment of such
portion of principal; and
(vi) There shall be no more than ten (10) Eurodollar Interest Periods
in effect at any one time.
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(c) Determination of Interest Rate. As soon as prac ticable on the second
Business Day prior to the first day of each Eurodollar Interest Period (the
"Interest Rate Determination Date"), the Administrative Agent shall determine
(pursuant to the procedures set forth in the definition of "Eurodollar Rate")
the interest rate which shall apply to Eurodollar Rate Loans, for which an
interest rate is then being determined for the applicable Eurodollar Interest
Period and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to the Borrower and to each Lender. The Administrative
Agent's determination shall be presumed to be correct, absent manifest error,
and shall be binding upon the Borrower.
(d) Interest Rate Unascertainable, Inadequate or Unfair. In the event that
at least one (1) Business Day before the Interest Rate Determination Date:
(i) the Administrative Agent reasonably determines that adequate and
fair means do not exist for ascertaining the applicable interest rates by
reference to which the Eurodollar Rate then being determined is to be
fixed;
(ii) the Requisite Lenders advise the Administrative Agent that Dollar
deposits in the principal amounts of the Eurodollar Rate Loans comprising
such Borrowing are not generally available in the London interbank market
for a period equal to such Eurodollar Interest Period; or
(iii) the Requisite Lenders advise the Administrative Agent that the
Eurodollar Rate as determined by the Administrative Agent, after taking
into account the adjustments for reserves and increased costs provided for
in Section 4.01(f), will not adequately and fairly reflect the cost to such
Lenders of funding Loans of such Type;
then the Administrative Agent shall forthwith give notice thereof to the
Borrower, whereupon (until the Administrative Agent noti fies the Borrower that
the circumstances giving rise to such suspension no longer exist) the right of
the Borrower to elect to have Loans bear interest based upon the Eurodollar Rate
shall be suspended and each outstanding Loan of such Types shall be converted
into a Base Rate Loan on the last day of the then current Eurodollar Interest
Period therefor, and any Notice of Borrowing for which Revolving Loans have not
then been made shall be deemed to be a request for Base Rate Loans,
notwithstanding any prior election by the Borrower to the contrary.
(e) Illegality. (i) If at any time any Lender deter mines (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties) that the making or
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continuation of any Eurodollar Rate Loan has become unlawful or impermissible by
compliance by that Lender with any law, govern mental rule, regulation or order
of any Governmental Authority (whether or not having the force of law and
whether or not fail ure to comply therewith would be unlawful or would result in
costs or penalties), then, and in any such event, such Lender may give notice of
that determination, in writing, to the Borrower and the Administrative Agent,
and the Administrative Agent shall promptly transmit the notice to each other
Lender.
(ii) When notice is given by a Lender under Section 4.02(e)(i), (A) the
Borrower's right to request from such Lender and such Lender's obligation, if
any, to make Eurodollar Rate Loans shall be immediately suspended, and such
Lender shall make a Base Rate Loan as part of any requested Borrowing of
Eurodollar Rate Loans and (B) if the affected Eurodollar Rate Loan or Loans are
then outstanding, the Borrower shall immediately, or if permitted by applicable
law, no later than the date permitted thereby, upon at least one (1) Business
Day's prior written notice to the Administrative Agent and the affected Lender,
convert each such Loan into a Base Rate Loan.
(iii) If at any time after a Lender gives notice under Section 4.02(e)(i)
such Lender determines that it may lawfully make Eurodollar Rate Loans, such
Lender shall promptly give notice of that determination, in writing, to the
Borrower and the Administrative Agent, and the Administrative Agent shall
promptly transmit the notice to each other Lender. The Borrower's right to
request, and such Lender's obligation, if any, to make Eurodollar Rate Loans
shall thereupon be restored.
(f) Compensation. In addition to all amounts required to be paid by the
Borrower pursuant to Section 4.01, the Borrower shall compensate each Lender,
upon demand, for all losses, expenses and liabilities (including, without
limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund or
maintain such Lender's Eurodollar Rate Loans to the Borrower but excluding any
loss of the Applicable Eurodollar Rate Margin on the relevant Loans) which that
Lender may sustain (i) if for any reason a Borrowing, conversion into or
continuation of Eurodollar Rate Loans does not occur on a date specified
therefor in a Notice of Borrowing or a Notice of Conversion/Continuation given
by the Borrower or in a telephonic request by it for borrowing or
conversion/continuation or a successive Eurodollar Interest Period does not
commence after notice therefor is given pursuant to Section 4.01(c), (ii) if for
any reason any Eurodollar Rate Loan is prepaid (including, without limitation,
mandatorily pursuant to Section 3.01(b)) on a date which is not the last day of
the applicable Eurodollar Interest Period, (iii) as a consequence of a required
conversion of a Eurodollar Rate Loan to a Base Rate Loan as a result of any of
the events indicated in
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Section 4.02(d) or (e) or (iv) as a consequence of any failure by the Borrower
to repay Eurodollar Rate Loans when required by the terms hereof. The Lender
making demand for such compensation shall deliver to the Borrower concurrently
with such demand a written statement in reasonable detail as to such losses,
expenses and liabilities, and this statement shall be conclusive as to the
amount of compensation due to that Lender, absent manifest error.
(g) Affiliates Not Obligated. No Eurodollar Affiliate or other Affiliate of
any Lender shall be deemed a party hereto or shall have any liability or
obligation hereunder.
4.03. Fees. (a) Unused Commitment Fee. The Borrower agrees to pay to the
Administrative Agent, for the account of the Lenders in accordance with their
Pro Rata Shares, a fee (the "Unused Commitment Fee"), accruing on (i) the
average amount by which the Revolving Loan Commitments exceeds an amount equal
to Revolving Credit Obligations minus the outstanding principal amount of the
Swing Loans for the period commencing on the Effective Date and ending on the
Commitment Termination Date, and (ii) the average amount by which the
Acquisition Term Loan Commitments exceeds the outstanding Acquisition Term Loans
for the period commencing on the Effective Date and ending on the Acquisition
Term Loan Termination Date, at the Commitment Fee Rate on such aggregate amount
payable quarterly, in arrears, on the first Business Day of each calendar
quarter and on the Commitment Termination Date.
(b) Letter of Credit Fee. In addition to any charges paid pursuant to
Section 2.04(g), the Borrower shall pay to the Agent, for the account of the
Lenders in accordance with their respective Pro Rata Shares:
(i) with respect to each Commercial Letter of Credit issued by the
Issuing Bank, a fee at a per annum rate equal to the Applicable Revolving
Loan Eurodollar Rate Margin on the undrawn face amount of such Letter of
Credit, payable quarterly in arrears on the first Business Day of each
calendar quarter,
(ii) with respect to each Standby Letter of Credit issued by the
Issuing Bank, a fee at a per annum rate equal to the Applicable Revolving
Loan Eurodollar Rate Margin on the undrawn face amount of such Letter of
Credit, payable quarterly in arrears on the first Business Day of each
calendar quarter, and
(iii) with respect to each Letter of Credit issued by the Issuing
Bank, during the occurrence and continuation of an Event of Default, an
additional fee in an amount equal to two percent (2%) per annum on the
undrawn face amount of
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such Letter of Credit, payable quarterly in arrears on the first Business
Day of each calendar quarter.
(c) Computation of Fees. All of the above fees payable on a per annum
basis shall be computed on the basis of the actual number of days elapsed
in a year of 360 days. All such fees shall be payable in addition to, and
not in lieu of, interest, compensation, expense reimbursements,
indemnification and other Obligations.
ARTICLE V
CONDITIONS TO LOANS
5.01. Conditions Precedent to the Effectiveness of the Amended and Restated
Credit Agreement. This Agreement shall become effective upon the satisfaction
of, and the obligation of each Lender on the Effective Date to make the Loans
requested to be made by it shall be subject to the satisfaction of, all of the
following conditions precedent:
(a) Documents. The Administrative Agent (on behalf of itself and the
Lenders) shall have received on or before the Effective Date all of the
following:
(i) this Agreement, the Notes and all other agreements, documents,
instruments, certificates and opinions described in the List of Closing
Documents attached hereto and made a part hereof as Exhibit E, each duly
executed where appropriate and in form and substance satisfactory to the
Lenders and in sufficient copies for each of the Lenders;
(ii) a pro-forma consolidated balance sheet of the Borrower and its
Subsidiaries giving effect to the transactions contemplated in the
Transaction Documents, certified by the Chief Financial Officer (it being
understood that in preparing such balance sheet, the Borrower will use
Monitor's audited balance sheet as of February 28, 1998 and the balance
sheet of Stellex Industries, Inc. and Subsidiaries as of March 30, 1998);
and
(iii) such additional documentation as the Administrative Agent or the
Requisite Lenders may reasonably request.
(b) Perfection of Liens. All Uniform Commercial Code and other filing and
recording fees and taxes shall have been paid or duly provided for. The
Administrative Agent shall be satisfied that all Liens granted to the Collateral
Agent with respect to the Collateral are valid and effective and, upon the
filing of the duly executed Uniform Commercial Code financing statements (or
similar filings required by the applicable
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statutes of any jurisdiction in which the Collateral Agent is being granted a
Lien by any Loan Party), will be perfected and of first priority, except as
otherwise permitted under this Agreement and except for compliance with the
Assignment of Claims Act of 1940, as amended, with respect to Receivables where
the account debtor is the United States of America or any department, agency or
instrumentality thereof. All certificates representing Capital Stock included in
the Collateral shall have been delivered to the Collateral Agent (with duly
executed stock powers, as appropriate) and all instruments included in the
Collateral shall have been delivered to the Collateral Agent (duly endorsed to
the Collateral Agent).
(c) Monitor Acquisition Agreement and Related Matters. The Administrative
Agent and the Lenders shall be satisfied that: (i) the Monitor Acquisition
Documents which are to be entered into as of or prior to the Effective Date
shall have been duly approved and executed and delivered by the parties thereto,
(ii) all conditions precedent to closing under the Monitor Acquisition Agreement
and the other Monitor Acquisition Documents have been met or waived and such
documents are, or simultaneously with the execution hereof, shall be, in full
force and effect.
(d) No Legal Impediments. No law, regulation, order, judgment or decree of
any Governmental Authority shall, and the Administrative Agent shall not have
received any notice that any action, suit, investigation, litigation or
proceeding is pending or threatened in any court or before any arbitrator or
Governmental Authority which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Loans on the Effective Date or (B) the
consummation of the transactions contemplated pursuant to the Transaction
Documents or (ii) would be reasonably expected to impose or result in the
imposition of a Material Adverse Effect.
(e) Consents. Except as set forth on Schedule 6.01(E), each Loan Party
shall have received all consents and authorizations required pursuant to any
material Contractual Obligation with any other Person and shall have obtained
all consents and authorizations of, and effected all notices to and filings
with, any Governmental Authority, in each case, as may be necessary to allow
such Loan Party, lawfully and without risk of rescission, (i) to execute,
deliver and perform this Agreement, the other Loan Documents to which it is, or
is to be, a party and each other agreement or instrument to be executed and
delivered by it pursuant thereto or in connection therewith and (ii) to create
and perfect or continue the validity and perfection of the Liens on the
Collateral to be owned by it in the manner and for the purpose contemplated by
the Loan Documents.
(f) No Change in Condition. No change in the condition (financial or
otherwise), business, performance,
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properties, assets or operations of the Borrower and its Subsidiaries, taken as
a whole, shall have occurred since December 31, 1997 (or since February 28,
1998, with respect to Monitor and its Subsidiaries) which change will have or is
reasonably likely to have a Material Adverse Effect.
(g) No Default. No Default or Event of Default shall have occurred and be
continuing or would result from the making of the Loans.
(h) Representations and Warranties. All of the repre sentations and
warranties contained in Section 6.01 and in the other Loan Documents shall be
true and correct in all material respects on and as of the Effective Date.
(i) Fees and Expenses Paid. There shall have been paid or there will,
substantially concurrently with the closing hereunder, be paid to the
Administrative Agent and to the Lenders, all fees due and payable pursuant to
the Loan Documents on or before the Effective Date, and all expenses (including,
without limitation, reasonable legal fees and expenses) due and payable pursuant
to the Loan Documents on or before the Effective Date.
5.02. Conditions Precedent to All Loans. The obligation of each Lender to
make each Loan requested to be made by it on any Funding Date on or after the
Effective Date, and the agreement of the Issuing Bank to Issue any Letter of
Credit, is subject to the following conditions precedent as of each such date:
(a) Representations and Warranties. As of such date (unless the
representation and warranty expressly speaks as of the Effective Date), both
before and after giving effect to the Loans to be made or the Letter of Credit
to be Issued, all of the representations and warranties contained in Section
6.01 and in the other Loan Documents shall be true in all material respects.
(b) No Defaults. As of such date, no Default or Event of Default shall have
occurred and be continuing or would result from the making of the requested Loan
or the application of the proceeds therefrom or the Issuance of the requested
Letter of Credit.
(c) No Change in Condition. As of such date, no change in the condition
(financial or otherwise), business, performance, properties, assets or
operations of the Borrower and its Subsidiaries, taken as a whole, shall have
occurred since December 31, 1997 (or since February 28, 1998, with respect to
Monitor and its Subsidiaries) which change will have or is reasonably likely to
have a Material Adverse Effect.
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Each request by the Borrower for a Loan, each submission by the Borrower of a
Notice of Borrowing, and each acceptance by the Borrower of the proceeds of each
Loan made hereunder, each submission by the Borrower to the Issuing Bank of a
request for Issuance of a Letter of Credit and the Issuance of such Letter of
Credit, shall constitute a representation and warranty by the Borrower as of the
Funding Date in respect of such Loan and as of the date of issuance of such
Letter of Credit, that all the conditions contained in this Section 5.02 have
been satisfied.
5.03. Conditions Precedent to the Acquisition Term Loans. The obligation of
each Lender to make any Acquisition Term Loan requested to be made by it on any
Funding Date on or after the Effective Date is subject to the following
conditions precedent as of each such date:
(a) Certificate. The Administrative Agent and the Lenders shall have
received a Certificate from the Chief Financial Officer of the Borrower, which
certificate shall be in form and detail reasonably satisfactory to the
Administrative Agent, certifying (i) the specific uses to be made of the
proceeds of the Acquisition Term Loans (broken down by Permitted Acquisition),
(ii) the information provided in the Information Package with respect to each
Permitted Acquisition is true and complete in all material respects, (iii) the
representations and warranties set forth on Schedule 5.03(A) are true in all
material respects, (iv) the Borrower and its Subsidiaries are in compliance with
the covenants set forth on Schedule 5.03(B) and (v) after giving effect to the
incurrence of the Indebtedness with respect to the Acquisition Term Loans being
made on such Funding Date, the Borrower is compliance with Section 4.3 of the
Subordinated Note Indenture.
(b) Liens. The Administrative Agent shall have received documentation, in
form and substance satisfactory to the Administrative Agent, granting the
Collateral Agent a Lien with respect to the assets and/or Capital Stock relating
to the Permitted Acquisition.
(c) Perfection. All Uniform Commercial Code and other filing and recording
fees and taxes shall have been paid or duly provided for. The Administrative
Agent shall be satisfied that all Liens granted to the Collateral Agent with
respect to the Collateral are valid and effective and, upon the filing of the
duly executed Uniform Commercial Code financing statements (or similar filings
required by the applicable statutes of any jurisdiction in which the Collateral
Agent is being granted a Lien by any Loan Party), will be perfected and of first
priority, except as otherwise permitted under this Agreement and except for
compliance with the Assignment of Claims Act of 1940, as amended, with respect
to Receivables where the account debtor is the United States of America or any
department, agency or
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instrumentality thereof. All certificates representing Capital Stock included in
the Collateral shall have been delivered to the Collateral Agent (with duly
executed stock powers, as appropriate) and all instruments included in the
Collateral shall have been delivered to the Collateral Agent (duly endorsed to
the Collateral Agent).
(d) No Legal Impediments. No law, regulation, order, judgment or decree of
any Governmental Authority shall, and the Administrative Agent shall not have
received any notice that any action, suit, investigation, litigation or
proceeding is pending or threatened in any court or before any arbitrator or
Governmental Authority which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Acquisition Term Loans on the Funding
Date or (B) the consummation of the transactions contemplated pursuant to the
documentation relating to the Permitted Acquisition or (ii) would be reasonably
expected to result in a Material Adverse Effect.
(e) Consents. The Borrower shall have received all consents and
authorizations required pursuant to any material Contractual Obligation with any
other Person in connection with such Permitted Acquisition and shall have
obtained all material consents and authorizations of, and effected all material
notices to and filings with, any Governmental Authority required in connection
with such Permitted Acquisition, in each case, as may be necessary to allow the
Borrower or a Subsidiary of the Borrower, lawfully and without risk of
rescission, (i) to execute, deliver and perform, in all material respects, its
obligations under the Collateral Documents and the other agreements to which it
is, or is to be, a party in connection with or relating to the Permitted
Acquisition and each other agreement or instrument to be executed and delivered
by it in connection with or relating to the Permitted Acquisition and (ii) to
create and perfect or continue the validity and perfection of the Liens on the
Collateral to be owned by it in the manner and for the purpose contemplated by
the Loan Documents after giving effect to the Permitted Acquisition.
Each request by the Borrower for a Acquisition Term Loan, each submission by the
Borrower of a Notice of Borrowing, and each acceptance by the Borrower of the
proceeds of each Acquisition Term Loan made hereunder, shall constitute a
representation and warranty by the Borrower as of the Funding Date in respect of
such Acquisition Term Loan that all the conditions contained in this Section
5.03 have been satisfied.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.01. Representations and Warranties of the Loan Parties. In order to
induce the Lenders to enter into this Agreement and to make the Loans and to
Issue the Letters of Credit, each Loan Party hereby represents and warrants as
follows:
(a) Organization; Powers. Each Loan Party (i) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and (ii) has all requisite power and authority to
own, operate and encumber its assets and to conduct its business as presently
contemplated.
(b) Authority. (i) Each Loan Party has the requisite power and authority to
execute, deliver and perform each of the Transaction Documents to which it is a
party.
(ii) No other action or proceeding on the part of any Loan Party is
necessary to execute, deliver and perform each of the Transaction Documents to
which it is a party thereto or to consummate the transactions contemplated
thereby.
(iii) Each of the Loan Documents to which any Loan Party is a party has
been duly executed and delivered by such Loan Party and constitutes the legal,
valid and binding obligation of such Loan Party, enforceable against such Loan
Party in accordance with its terms.
(c) Ownership. Schedule 6.01(C) sets forth the ownership of the Borrower
and its Subsidiaries as of the Effective Date. The Borrower has delivered to the
Administrative Agent true and complete copies of the Governing Documents for
each Loan Party. There exists no other agreement or understanding (written or
oral) affecting in any material respect the relative rights, obligations or
liabilities of such Loan Party other than said Governing Documents so delivered
and such Loan Party is in compliance in all material respects with all of its
Governing Documents.
(d) No Conflict. Except as set forth on Schedule 6.01(D), the execution,
delivery and performance by each Loan Party of each Transaction Document to
which it is a party and the consummation of the transactions contemplated
thereby do not and will not (i) conflict with the Governing Documents of such
Loan Party, (ii) violate any Requirements of Law or any material Contractual
Obligation of such Loan Party or require the termi nation of such material
Contractual Obligation by such Loan Party, (iii) to the best of such Loan
Party's knowledge, constitute a tortious interference with any Contractual
Obligation of any Person, or (iv) result in or require the
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creation or imposition of any Lien whatsoever upon any of the property or assets
of such Loan Party, other than Liens contem plated by the Loan Documents.
(e) Governmental Consents. Except as set forth of Schedule 6.01(E), the
execution, delivery and performance by each Loan Party of each Transaction
Document to which it is a party and the consummation of the transactions
contemplated thereby do not and will not require any registration with, consent
or approval of, or notice to, or other action to, with or by any Governmental
Authority, except (i) filings and acknowledgments thereof necessary to create or
perfect security interests in the Collateral or cause any security interest in
Receivables where the account debtor is the United States of America or any
department, agency or instrumentality thereof to be valid against the United
States of America, (ii) filings under the Exchange Act with respect to the
Monitor Acquisition and this Agreement and (iii) consents and filings that have
been obtained or made.
(f) Governmental Regulation. No Loan Party is limited in its ability to
incur indebtedness or its ability to consummate the transactions contemplated by
the Transaction Documents by reason of regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
or the Investment Company Act of 1940, or any other federal or state statute or
regulation.
(g) Subsidiaries. As of the Effective Date, the Borrower has no
Subsidiaries or interests in any joint venture or partnership of any other
Person other than the Subsidiaries set forth on Schedule 6.01(C).
(h) Financial Position. True and complete copies of the following financial
statements have been delivered to the Administrative Agent and the Lenders: (i)
the audited consolidated balance sheet as at the end of fiscal year ended
December 31, 1997 and the related consolidated statements of operations, cash
flows and shareholders equity and the notes thereto of Stellex Industries, Inc.
and its Subsidiaries for such fiscal year then ended and the unaudited
consolidated balance sheet as at March 30, 1998 and the related consolidated
statements of operations, cash flow and shareholders equity of Stellex
Industries, Inc. and its Subsidiaries for such period then ended; and (ii) the
audited consolidated balance sheet as at February 28, 1998 and the related
consolidated statements of operations and cash flows and the notes thereto of
Monitor for the nine months then ended. The foregoing financial statements were
prepared in conformity with GAAP, except as otherwise noted therein, and fairly
present the financial positions and the results of operations, equity and cash
flows of Stellex Industries, Inc. and its Subsidiaries and Monitor, as
applicable, for each of the periods covered thereby as at the respective
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dates thereof. No Loan Party has any Accommodation Obligation, contingent
liability or liability for any Taxes, long-term leases or commitments, not
reflected in the foregoing financial statements which will have or is reasonably
likely to have a Material Adverse Effect.
(i) Projections. The Borrower has delivered to each Lender pursuant to
Section 5.01(a) certain projected financial statements of the Borrower and its
Subsidiaries which have been prepared in good faith.
(j) Litigation; Adverse Effects. Except as set forth in Schedules 6.01(J-1)
and 6.01(P), no Loan Party has received any notice of any action, suit,
proceeding, investigation or arbitration before or by any Governmental Authority
or private arbitrator pending nor, to the knowledge of such Loan Party,
threatened against such Loan Party or any of its assets (i) challenging the
validity or the enforceability of any of the Transaction Documents or
transactions contemplated thereby or (ii) which will or is reasonably likely to
result in any Material Adverse Effect. Except as set forth in Schedule
6.01(J-2), there is no material loss contingency within the meaning of GAAP
which has not been reflected in the financial statements of Stellex Industries,
Inc. and its Subsidiaries and Monitor with respect to the financial statements
referred to in Section 6.01(h) nor in any financial statements of the Borrower
and its Subsidiaries delivered hereunder. No Loan Party is subject to, or in
default with respect to, any final judgment, writ, injunction, restraining order
or order of any nature, decree, rule or regulation of any court or Governmental
Authority which will have or is reasonably likely to have a Material Adverse
Effect.
(k) No Material Adverse Effect. Since December 31, 1997 with respect to the
Borrower and its Subsidiaries (other than Monitor and its Subsidiaries) and
since February 28, 1998 with respect to Monitor and its Subsidiaries, there has
occurred no event which has had or is reasonably likely to have a Material
Adverse Effect.
(l) Payment of Taxes. Except as set forth on Schedule 6.01(L), all tax
returns and reports to be filed by the Borrower and its Subsidiaries have been
timely filed, and all taxes, assessments, fees and other governmental charges
shown on such returns have been paid when due and payable, except such taxes, if
any, as are reserved against in accordance with GAAP and are being contested in
good faith by appropriate proceedings.
(m) Performance. No Loan Party has received notice, or has actual
knowledge, that (i) it is in default in the perfor mance, observance or
fulfillment of any Contractual Obligations applicable to it or (ii) any
condition exists which, with the giving of notice or the lapse of time or both,
would constitute a
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default with respect to any Contractual Obligation, which in the case of either
clause (i) or (ii), individually or in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect.
(n) Disclosure. The representations and warranties of each Loan Party
contained in the Loan Documents and all certifi cates and other documents
delivered pursuant to the terms thereof and the representations and warranties
of each Loan Party con tained in the Monitor Acquisition Documents and all
information, certificates and other documents delivered pursuant to the terms
thereof, taken as a whole, do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. No Loan Party has intentionally withheld any fact from the Admini
strative Agent or the Lenders in regard to any matter which will have or is
reasonably likely to have a Material Adverse Effect.
(o) Requirements of Law. No Loan Party is in violation of any Requirement
of Law applicable to it or its business which violation (singularly or in the
aggregate) will have or is reasonably likely to have a Material Adverse Effect.
(p) Environmental Matters. To the best of each Loan Party's knowledge,
except as set forth in Schedule 6.01(P) hereto, (i) the operations of such Loan
Party comply in all material respects with all applicable Environmental, Health
or Safety Requirements of Law; (ii) such Loan Party has obtained all material
environmental, health and safety Permits necessary for its operations, and all
such Permits are in effect and such Loan Party is in material compliance with
all terms and conditions of such Permits; (iii) no Loan Party nor its operations
is subject to any order from or agreement with any Governmental Authority or
private party respecting any Environmental, Health or Safety Requirements of Law
or requiring Remedial Action; (iv) no Loan Party nor its operations is subject
to any Liabilities and Costs arising from the Release or threatened Release of a
Contaminant into the environment; (v) no Loan Party has filed any notice under
any Requirement of Law indicating treatment, storage or disposal of a hazardous
waste, as that term is defined under 40 CFR Part 261 or any applicable state
equivalent; (vi) no Loan Party has filed any notice under applicable Requirement
of Law reporting a Release of a Contaminant into the environment; (vii) there is
not on or in the Real Property of any such Loan Party nor has there been under
such Loan Party's ownership or occupancy of such Real Property: (A) any
treatment, storage or disposal of any hazardous waste, as that term is defined
under 40 CFR Part 261 or any applicable state equivalent, by such Loan Party,
except in material compliance with all Environmental, Health or Safety
Requirements of Law, (B) any underground storage tanks or surface impoundments,
(C) any asbestos-
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containing material, or (D) any polychlorinated biphenyls (PCB's) used in
hydraulic oils, electrical transformers or other equipment; (viii) no Loan Party
has received any written notice or Claim to the effect that it is or may be
liable to any Person as a result of the Release or threatened Release of a
Contaminant into the environment; (ix) no Loan Party's present Property or the
Loan Party's past Property is listed or proposed for listing on the National
Priorities List pursuant to CERCLA ("NPL") or on the Comprehensive Environmental
Response Compensation Liability Information System List ("CERCLIS") or any
similar state list of sites requiring Remedial Action; and (x) no Environmental
Lien has attached to any Property of any Loan Party.
(q) ERISA. Neither any Loan Party nor any ERISA Affiliate maintains or
contributes to any Benefit Plan other than a Benefit Plan listed on Schedule
6.01(Q). Except as set forth on Schedule 6.01(Q), each Plan which is maintained
or contributed to by any Loan Party which is intended to be a qualified plan has
been determined by the IRS to be qualified under Section 401(a) of the Code, and
each trust related to any such Plan has been so determined to be exempt from
federal income tax under Section 501(a) of the Code, and such Plan and trust are
being operated in all material respects in compliance with and will be timely
amended as necessary in accordance with the Tax Reform Act of 1986 and the
Omnibus Budget Reconciliation Act of 1987 as inter preted by the regulations
promulgated thereunder. Neither any Loan Party nor any ERISA Affiliate, to the
extent such ERISA Affiliate at any time has joint and several liability with any
Loan Party, maintains or contributes to any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA, which provides benefits to retirees (or
their beneficiaries or dependents) other than as may be required by the
Consolidated Omnibus Reconciliation Act of 1985, as amended and interpreted by
regulations promulgated thereunder. Each Loan Party is in compliance in all
material respects with the responsibilities, obligations or duties imposed on it
by ERISA or regulations promulgated thereunder with respect to all Plans. No
material accumulated funding deficiency (as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the Code) exists in respect to any Benefit Plan.
Except as set forth on Schedule 6.01(Q), neither any Loan Party nor any ERISA
Affiliate nor any fiduciary of any Plan has engaged in a nonexempt "prohibited
transaction" described in Section 406 of ERISA or Section 4975 of the Code that
would result in a Material Adverse Effect. Neither any Loan Party nor any ERISA
Affiliate nor any fiduciary of any Plan has taken any action which would
constitute or result in a Termination Event with respect to any Plan such that
the actions described in the preceding sentence or this sentence, or both, would
result in a Material Adverse Effect. Neither any Loan Party nor any ERISA
Affiliate has incurred any material liability to the PBGC which remains
outstanding other than the liability to pay the PBGC insurance premiums for the
current year. Schedule B
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to the most recent annual report filed with the IRS with respect to each Benefit
Plan and furnished to the Administrative Agent is complete and accurate in all
material respects. Since the date of each such Schedule B, there has been no
material adverse change in the funding status or financial condition of the
Benefit Plan relating to such Schedule B which would result in a Material
Adverse Effect. Neither any Loan Party nor any ERISA Affiliate has failed to
make any required installment under subsection (m) of Section 412 of the Code
and any other payment required under Section 412 of the Code on or before the
due date for such installment or other payment which would in the aggregate have
a Material Adverse Effect. Neither any Loan Party nor any ERISA Affiliate is
required to provide security to a Benefit Plan under Section 401(a)(29) of the
Code due to a Plan amendment that results in an increase in current liability
for the plan year. No Loan Party or ERISA Affiliate is required to, or has
contributed to in the past six years, a Multiemployer Plan.
(r) Labor Matters. As of the Effective Date, no Loan Party is a party to
any collective bargaining agreement. There are no strikes, lockouts or other
disputes relating to any collective bargaining or similar agreement to which
such Loan Party is a party which would have or is reasonably likely to have a
Material Adverse Effect.
(s) Securities Activities. No Loan Party is engaged in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.
(t) Solvency. After giving effect to the receipt and application of the
Loans in accordance with the terms of this Agreement, each Loan Party is
Solvent.
(u) Patents, Trademarks, Permits, etc.; Government Approvals.
(i) Except as set forth on Schedule 6.01(U), each Loan Party owns, is
licensed or otherwise has the lawful right to use all permits and other
governmental approvals, patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of
its business as currently conducted which are material to its condition
(financial or otherwise), operations or performance. There are no claims
pending or, to the best of such Loan Party's knowledge, threatened that
such Loan Party is infringing or otherwise adversely affecting the rights
of any Person with respect to such permits and other governmental
approvals, patents, trademarks, trade names, copyrights, technology,
know-how and processes, except for such claims and infringements as do not,
in the aggregate, give rise to any liability on the part of such Loan Party
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which has or is reasonably likely to have a Material Adverse Effect.
(ii) The consummation of the transactions contemplated by the
Transaction Documents will not impair such Loan Party's ownership of or
rights under (or the license or other right to use, as the case may be) any
permits and governmental approvals, patents, trademarks, trade names,
copyrights, technology, know-how or processes in any manner which has or is
reasonably likely to have a Material Adverse Effect.
(v) Assets and Properties. Each Loan Party has good and marketable title or
leasehold interests, as applicable, to all of its material assets and property
(tangible and intangible), and all such assets and property are free and clear
of all Liens except Liens securing the Obligations and Liens permitted under
Section 9.03. Substantially all of the assets and property owned by, leased to
or used by such Loan Party are in good operating condition and repair, ordinary
wear and tear excepted, are free and clear of any known defects except such
defects as do not substantially interfere with the continued use thereof in the
conduct of normal operations, and are able to serve the function for which they
are currently being used, except in each case where the failure of such asset to
meet such requirements would not have or is not reasonably likely to have a
Material Adverse Effect. Neither this Agreement nor any other Transaction
Document, nor any transaction contemplated under any Transaction Document, will
affect any right, title or interest of such Loan Party in and to any of such
assets in a manner that would have or is reasonably likely to have a Material
Adverse Effect.
(w) Insurance. Schedule 6.01(W) accurately sets forth all insurance
policies and programs in effect as of the Effective Date with respect to the
property and assets and business of each Loan Party, specifying for each such
policy and program, (i) the amount thereof and the amount of the deductible
relating thereto, (ii) the risks insured against thereby, (iii) the name of the
insurer and each insured party thereunder, (iv) the policy or other
identification number thereof and (v) the expiration date thereof.
(x) Material Adverse Agreements. After giving effect to this Agreement, no
Loan Party is a party to or subject to any Contractual Obligation or other
restriction contained in its Governing Documents which has or is reasonably
likely to have a Material Adverse Effect.
(y) Forfeiture Proceeding. No Loan Party is engaged in or proposes to be
engaged in the conduct of any business or activity which could result in a
Forfeiture Proceeding and no
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Forfeiture Proceeding against it is pending or, to the best of each Loan Party's
knowledge, threatened.
(z) Bank Accounts. Except as set forth on Schedule 6.01(Z), no Loan Party
maintains a bank account or deposits funds with any other financial institution
as of the Effective Date.
ARTICLE VII
REPORTING COVENANTS
Each Loan Party covenants and agrees so long as any Commitment is
outstanding and thereafter until payment in full of the Obligations:
7.01. Financial Statements. The Borrower shall main tain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of consolidated financial statements of the
Borrower and its Subsidiaries in conformity with GAAP, and each of the financial
statements described below shall be prepared from such system and records. The
Borrower shall deliver or cause to be delivered to the Administrative Agent:
(a) Quarterly Reports. As soon as practicable, and in any event within
forty-five (45) days after the end of the first three fiscal quarters in each
Fiscal Year, consolidated balance sheet of the Borrower and its Subsidiaries as
at the end of such period and the related statements of income and cash flow of
the Borrower and its Subsidiaries for such fiscal quarter, certified by the
Chief Financial Officer of the Borrower as fairly presenting the financial
position of the Borrower and its Subsidiaries as at the dates indicated and the
results of its operations and cash flow for the fiscal quarter indicated in
accordance with GAAP, subject to normal year end adjustments.
(b) Annual Reports. As soon as practicable, and in any event within ninety
(90) days after the end of each Fiscal Year, (i) the audited consolidated (and
unaudited consolidating) balance sheet of the Borrower and its Subsidiaries as
of the end of such Fiscal Year and the related audited consolidated (and
unaudited consolidating) statements of income and cash flow of the Borrower and
its Subsidiaries for such Fiscal Year, and (ii) a report thereon of an
independent certified public accounting firm reasonably acceptable to the
Administrative Agent, which report shall be unqualified and shall state that
such financial statements fairly present, in all material respects, the finan
cial position of the Borrower and its Subsidiaries as at the dates indicated and
the results of its operations and cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years and that the
examination by such accountants in connection with such financial statements has
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been made in accordance with generally accepted auditing stand ards.
(c) Certificates. (i) Together with each delivery of any financial
statement pursuant to paragraphs (a) and (b) of this Section 7.01, an Officer's
Certificate substantially in the form of Exhibit G attached hereto and made a
part hereof, stating that such officer has reviewed the terms of the Loan
Documents, and has made, or caused to be made under his supervision, a review in
reasonable detail of the transactions and consolidated financial condition of
the Borrower and its Subsidiaries during the accounting period covered by such
financial statements, that such review has not disclosed the existence during or
at the end of such accounting period, and that such officer does not have
knowledge of the existence as at the date of such Officer's Certificate, of any
condition or event which constitutes an Event of Default or Default, or, if any
such condition or event existed or exists, specifying the nature and period of
existence thereof and what action the Borrower has taken, is taking and proposes
to take with respect thereto.
(ii) Together with each delivery of any financial statement pursuant to
paragraphs (a) and (b) of this Section 7.01, a certificate substantially in the
form of Exhibit H attached hereto (the "Compliance Certificate"), signed by the
Borrower's Chief Financial Officer, setting forth calculations (with such
specificity as the Lenders may reasonably request) for the period then ended
which demonstrate compliance, when applicable, with the provisions of Article IX
and Article X.
(d) Budgets; Business Plans; Financial Projections. As soon as practicable
after completion and in any event not later than fifteen (15) days prior to the
beginning of each Fiscal Year (i) a budget for such Fiscal Year; (ii) an annual
business plan for such Fiscal Year, accompanied by a report reconciling all
changes and departures from the business plan delivered to the Administrative
Agent for the preceding Fiscal Year; and (iii) a plan and financial forecast,
prepared in accordance with the Borrower's normal accounting procedures applied
on a consistent basis, for such Fiscal Year and for the four (4) succeeding
Fiscal Years, but in no event for Fiscal Years later than 2003, including,
without limitation, (A) a forecasted balance sheet and changes in financial
position of the Borrower and its Subsidiaries as at the end of such Fiscal Year
and (B) forecasted statements of income and cash flow of the Borrower and its
Subsidiaries for such Fiscal Year and changes in financial position of the
Borrower and its Subsidiaries as of the end of such Fiscal Year.
(e) Replacement Certificate. On June 30 and December 31 of each Fiscal Year
(and more often if so requested by the Administrative Agent), the Borrower shall
provide the
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Administrative Agent with a replacement certificate substantially in the form of
Exhibit I attached hereto (the "Replacement Certificate"), signed by the
Borrower's Chief Financial Officer, setting forth calculations (with such
specificity as the Lenders may reasonably request) for the period then ended
which demonstrate the Net Cash Proceeds that were used to acquire replacement
assets.
7.02. Borrowing Base Certificate. The Borrower shall provide the
Administrative Agent and each Lender with a Borrowing Base Certificate,
certified as being true and correct by the Chief Financial Officer of the
Borrower, on the thirtieth day following the last day of each month, or more
frequently if requested by the Administrative Agent. Each subsequent Borrowing
Base Certificate shall be based upon, with respect to Receivables and Inventory,
information as of the last day of the immediately preceding month. Each such
Borrowing Base Certificate shall set forth Borrowing Base calculations since the
date of the last prior Borrowing Base Certificate and shall include a monthly
summary aging of Receivables and all Eligible Inventory that has become
ineligible, specifying the applicable category of ineligibility and such other
information as the Administrative Agent may request from time to time.
7.03. Other Financial Information. (a) The Borrower shall deliver or cause
to be delivered to the Administrative Agent such other information, reports,
contracts, schedules, lists, documents, agreements and instruments with respect
to (i) the Collateral or (ii) the business, condition (financial or otherwise),
operations, performance or properties of any Loan Party as the Administrative
Agent or any Lender may, from time to time, reasonably request. Each Loan Party
hereby authorizes the Administrative Agent, each Lender and their respective
representatives to communicate directly with the accountants and authorizes the
accountants to disclose to the Administrative Agent, such Lender and such
representatives any and all financial statements and other information of any
kind, including copies of any management letter or the substance of any oral
information, that such accountants may have with respect to the Collateral or
the condition (financial or otherwise), operations, properties and performance
of the Borrower and its Subsidiaries. The Borrower, on or before the Effective
Date, shall deliver a letter addressed to its accountants instructing them to
disclose such information in compliance with this Section 7.03(a).
(b) The Borrower shall deliver or cause to be delivered to the
Administrative Agent copies of all financial statements, reports and notices, if
any, sent or made available generally by the Borrower to the holders of its
publicly-held Securities or to a trustee under any indenture or filed with the
Commission, and of all press releases made available generally by
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the Borrower to the public concerning material developments in the Borrower's
business.
(c) The Borrower shall deliver or cause to be delivered to the
Administrative Agent copies of any management reports delivered to any Loan
Party or to any officer or employee thereof by the accountants in connection
with the financial statements delivered pursuant to Section 7.01.
7.04. Events of Default. Promptly upon any Loan Party obtaining knowledge
(i) of any condition or event which constitutes a Default or an Event of
Default, (ii) that any Person has given any notice to any Loan Party or taken
any other action with respect to a claimed default or event or condition of the
type referred to in Section 11.01(e) or (iii) of any condition or event which
has or is reasonably likely to have a Material Adverse Effect or adversely
affect the Collateral Agent's interest in the Collateral or adversely affect the
value of the Collateral in any material respect, such Loan Party shall deliver
to the Administrative Agent an Officer's Certificate specifying (A) the nature
and period of existence of any such claimed default, Event of Default, Default,
condition or event, (B) the notice given or action taken by such Person in
connection therewith and (C) what action such Loan Party has taken, is taking
and proposes to take with respect thereto.
7.05. Lawsuits. (a) Promptly upon any Loan Party obtaining knowledge of the
institution of, or written threat of, (i) (A) any action, suit, proceeding or
arbitration against or affecting such Loan Party or any asset of such Loan Party
not previously disclosed pursuant to Schedule 6.01(J) or Schedule 6.01(P)
involving an alleged liability or cost in excess of Two Million Five Hundred
Thousand Dollars ($2,500,000) or any actions, suits, proceedings or arbitration
which in the aggregate involve money or property valued in excess of Two Million
Five Hundred Dollars ($2,500,000), except where the same is fully covered by
insurance (other than the applicable deductible), (B) any investigation or
proceeding before or by any Governmental Authority, the effect of which is
reasonably likely to limit, prohibit or restrict materially the manner in which
such Loan Party currently conducts its business or to declare any substance
contained in such products manufactured or distributed by it to be dangerous,
except where the same is fully covered by insurance (other than applicable
deductible), or (C) any Forfeiture Proceeding, such Loan Party shall give
written notice thereof to the Administrative Agent and provide such other
information as may be reasonably available to enable such Lender and the
Administrative Agent and its counsel to evaluate such matters; (ii) as soon as
practicable and in any event within forty-five (45) days after the end of each
fiscal quarter, each Loan Party shall provide the Administrative Agent with a
litigation status report covering the institution of, or written threat of, any
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action, suit, proceeding, governmental investigation or arbitration reported
pursuant to clause (i) above and shall provide such other information at such
time as may be reasonably available to enable the Administrative Agent and its
counsel to evaluate such matters; and (iii) in addition to the requirements set
forth in clauses (i) and (ii) of this Section 7.05, each Loan Party upon request
of the Administrative Agent or the Requisite Lenders shall promptly give written
notice to the Administrative Agent of the status of any action, suit,
proceeding, governmental investi gation or arbitration covered by a report
delivered pursuant to clause (i) or (ii) above and provide such other
information as may be reasonably available to it to enable the Administrative
Agent and its counsel to evaluate such matters.
7.06. Insurance. As soon as practicable and in any event by June 30 in each
fiscal year, each Loan Party shall deliver to the Administrative Agent (i) an
updated Schedule 6.01(W) in form and substance reasonably satisfactory to the
Administrative Agent and the Lenders outlining all insurance policies and
programs currently in effect with respect to the property and assets and
business of such Loan Party, insurance coverage maintained as of the date of
such report by such Loan Party and the loss payment provisions of such coverage
and (ii) evidence that all premiums with respect to such coverage have been paid
when due.
7.07. ERISA Notices. Each Loan Party shall deliver to the Administrative
Agent:
(i) As soon as possible, and in any event within ten (10) Business
Days after either a Loan Party or an ERISA Affiliate knows or has reason to
know that a Termination Event has occurred, a written statement of the
Chief Financial Officer of the Borrower describing such Termination Event
and the action, if any, which such Loan Party or such ERISA Affiliate has
taken, is taking or proposes to take, with respect thereto, and, when
known, any action taken or threatened by the IRS, the DOL or the PBGC with
respect thereto;
(ii) as soon as possible, and in any event within ten (10) Business
Days, after either a Loan Party or an ERISA Affiliate knows or has reason
to know that a non-exempt prohibited transaction (defined in Section 406 of
ERISA and Section 4975 of the Code) that would have a Material Adverse
Effect has occurred, a statement of the Chief Financial Officer of the
Borrower describing such transaction;
(iii) within ten (10) days after the filing thereof with the DOL, the
IRS or the PBGC, copies of each
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annual report, including Schedule B thereto, filed with respect to each
Benefit Plan;
(iv) within ten (10) days after the filing thereof with the IRS, a
copy of each funding waiver request filed with respect to any Benefit Plan
and all communications received by either a Loan Party or an ERISA
Affiliate with respect to such request;
(v) within ten (10) days after the first to occur of an amendment of
any existing Benefit Plan which will result in an increase in the benefits
under such Benefit Plan or a notification of any such increase, or the
establishment of any new Benefit Plan or the commencement of contributions
to any Benefit Plan to which either a Loan Party or an ERISA Affiliate was
not previously contributing, a copy of said amendment, notification or
Benefit Plan;
(vi) promptly upon, and in any event within ten (10) Business Days
after, receipt by either a Loan Party or an ERISA Affiliate of a notice of
the PBGC's intention to terminate a Benefit Plan or to have a trustee
appointed to administer a Benefit Plan, copies of each such notice;
(vii) promptly upon, and in any event within ten (10) Business Days
after, receipt by either a Loan Party or an ERISA Affiliate of an
unfavorable determination letter from the IRS regarding the qualification
of a Plan under Section 401(a) of the Code, a copy of said determination
letter, if such disqualification would have a Material Adverse Effect;
(viii) promptly upon, and in any event within ten (10) Business Days
after receipt by any Loan Party of a notice from a Multiemployer Plan
regarding the imposition of withdrawal liability, a copy of said notice;
and
(ix) promptly upon, and in any event within ten (10) Business Days
after, the Borrower or any of its Subsidiaries fails to make a required
installment under subsection (m) of Section 412 of the Code or any other
payment required under Section 412 of the Code on or before the due date
for such installment or payment, a notification of such failure, if such
failure could result in either the imposition of a Lien under said Section
412 or otherwise have a Material Adverse Effect.
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7.08. Environmental Notices. Each Loan Party shall notify the
Administrative Agent, in writing, promptly, and in any event within thirty (30)
days after such Loan Party's learning thereof, of any: (i) written notice or
written Claim to the effect that such Loan Party is or may be liable to any
Person as a result of the Release or threatened Release of any Contaminant into
the environment; (ii) written notice that such Loan Party is subject to
investigation by any Governmental Authority evaluating whether any Remedial
Action is needed to respond to the Release or threatened Release of any
Contaminant into the environment; (iii) written notice that any Property of such
Loan Party is subject to an Environmental Lien; (iv) written notice of violation
to such Loan Party of any Environmental, Health or Safety Requirement of Law,
which could have a Material Adverse Effect on such Loan Party; (v) commencement
or written threat of any judicial or administrative proceeding alleging a
violation of any Environmental, Health or Safety Requirement of Law; (vi)
written notice from a Governmental Authority of any changes to any existing
Environmental, Health or Safety Requirement of Law that could have a Material
Adverse Effect on the operations of such Loan Party; or (vii) any proposed
acquisition of stock, assets, real estate or leasing of property, or any other
action by such Loan Party that could subject such Loan Party to Liabili ties and
Costs that could have a Material Adverse Effect. For purposes of clauses (i),
(ii) and (iii), written notice shall include other non-written communications
given to an agent or employee of such Loan Party with direct or indirect
supervisory responsibility with respect to the activity, if any, which is the
subject of such communication, if the subject of such communication could have a
Material Adverse Effect.
7.09. Labor Matters. Each Loan Party shall notify the Administrative Agent
in writing, promptly, but in any event within ten (10) days after (a) entering
into any collective bargaining agreement and (b) learning of (i) any material
labor dispute to which such Loan Party may become a party, any strikes, lockouts
or other disputes relating to such Loan Party's plants and other facilities and
(ii) any material liability incurred with respect to the closing of any plant or
other facility of such Loan Party.
7.10. Other Information. Promptly upon receiving a request therefor from
the Administrative Agent or the Requisite Lenders, each Loan Party shall prepare
and deliver to the Administrative Agent such other information with respect to
such Loan Party or the Collateral, including, without limitation, schedules
identifying and describing the Collateral and any dispositions thereof, as from
time to time may be reasonably requested by the Administrative Agent or the
Requisite Lenders.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
Each Loan Party covenants and agrees so long as any Commitment is
outstanding and thereafter until payment in full of the Obligations:
8.01. Existence, etc. Except for those transactions permitted under Section
9.09 of this Agreement, each Loan Party shall at all times maintain its
existence and preserve and keep, or cause to be preserved and kept, in full
force and effect its rights and franchises material to its businesses except
where the loss or termination of such rights and franchises does not have or is
not reasonably likely to have a Material Adverse Effect.
8.02. Powers; Conduct of Business. Each Loan Party shall qualify and remain
qualified to do business in each jurisdiction in which the nature of its
business requires it to be so qualified except for those jurisdictions where
failure to so qualify does not have or is not reasonably likely to have a
Material Adverse Effect.
8.03. Compliance with Laws, etc. Each Loan Party shall, (a) comply with all
Requirements of Law and all restric tive covenants affecting such Person or the
business, property, assets or operations of such Person, and (b) obtain as
needed all Permits necessary for its operations and maintain such Permits in
good standing except in the case where noncompliance with either clause (a) or
(b) above does not have or is not reasonably likely to have a Material Adverse
Effect.
8.04. Payment of Taxes and Claims. Each Loan Party shall pay (a) all taxes,
assessments and other governmental charges imposed upon it or on any of its
properties or assets or in respect of any of its franchises, business, income or
property before any penalty or interest accrues thereon, the failure to make
payment of which will have or is reasonably likely to have a Material Adverse
Effect, and (b) all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable
prior to the same becoming subject to a Lien upon any of such Person's
properties or assets and prior to the time when any penalty or fine shall be
incurred with respect thereto; provided, however, that no such taxes,
assessments and governmental charges referred to in clause (a) above or claims
referred to in clause (b) above need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if
adequate reserves shall have been set aside therefor in accordance with GAAP.
8.05. Insurance. (a) Each Loan Party shall maintain insurance against loss
or damage of the kind customarily insured
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against by corporations similarly situated with reputable insurers and with
deductibles and on terms customary for corporations similarly situated. All such
policies and programs shall be maintained with insurers reasonably satisfactory
to the Administrative Agent. Each certificate and policy relating to property
damage, machinery and/or business interruption coverage shall contain an
endorsement, in form and substance reasonably satisfactory to the Administrative
Agent, showing loss payable to the Collateral Agent, for the ratable benefit of
the Lenders, and, if required by the Administrative Agent, naming the Collateral
Agent as an additional insured under such policy. Each certificate and policy
relating to coverages other than the foregoing shall, if required by the
Administrative Agent, contain an endorsement naming the Collateral Agent as an
additional insured under such policy. Such endorsement or an independent
instrument furnished to the Administrative Agent shall provide that the
insurance companies will give the Collateral Agent at least thirty (30) days'
written notice before any such policy or policies of insurance shall be altered
adversely to the interests of the Collateral Agent and the Lenders or canceled
and that no act, whether willful or negligent, or default of any Loan Party or
any other Person shall affect the right of the Collateral Agent to recover under
such policy or policies of insurance in case of loss or damage. In the event any
Loan Party, at any time or times hereafter shall fail to obtain or maintain any
of the policies of insurance required herein or to pay any premium in
whole or in part relating thereto, then the Administrative Agent, without
waiving or releasing any obligation or resulting Event of Default hereunder, may
at any time or times thereafter (but shall be under no obligation to do so)
obtain and maintain such policies of insurance and pay such premiums and take
any other action with respect thereto which the Administrative Agent deems
advisable; provided, however, in the event that the Administrative Agent decides
to obtain and maintain such policies, the Administrative Agent will give notice
to the Borrower, at least ten days prior to taking any such action, and an
opportunity for the Borrower to cure such failure. All sums so disbursed by the
Administrative Agent shall be part of the Obligations hereunder, payable on
demand.
(b) Each Loan Party will appoint or designate a person, with the approval
of the Administrative Agent, to settle or adjust such claims individually or in
the aggregate not in excess of Fifteen Million Dollars ($15,000,000) during any
fiscal year without the consent of the Administrative Agent. In the event such
claims exceed the foregoing amounts, or claims individually or in the aggregate
have or are likely to have a Material Adverse Effect, such settlements and
adjustments thereof shall be made with the Administrative Agent's consent, which
consent shall not be unreasonably withheld. The Net Cash Proceeds of any such
insurance claim or settlement shall be applied as follows: (i) if no Default or
Event of Default then
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exists and the Administrative Agent receives a certification from the applicable
Loan Party contemporaneously with its receipt of such proceeds that such Loan
Party intends to use such proceeds to replace or repair such asset, such
proceeds shall be applied in accordance with Section 3.01(b)(i) hereof, (ii) if
no Default or Event of Default then exists and no certification is received by
the Administrative Agent, such proceeds shall be applied to the outstanding
balance of the Revolving Loans, and (iii) if a Default or Event of Default then
exists, such proceeds shall be applied to the Obligations in accordance with
Section 3.02(b)(ii).
(c) So long as no Event of Default has occurred and is continuing and all
Obligations are paid when due, the proceeds received under any business
interruption insurance policy shall be remitted to the Loan Party for a period
of up to twelve months. Thereafter, the Administrative Agent shall be entitled
to receive such proceeds to apply against the Obligations.
8.06. Inspection of Property; Books and Records; Discussions. Each Loan
Party shall permit any authorized representative(s) designated by either any
Agent or any Lender to visit and inspect any of the assets of such Loan Party,
to examine, audit, check and make copies of its financial and accounting
records, books, journals, orders, receipts and any correspondence and other data
relating to its businesses or the transactions contemplated by the Loan
Documents (including, without limitation, in connection with environmental
compliance, hazard or liability), and to discuss such Person's affairs, finances
and accounts with its officers and independent certified public accountants, all
upon reasonable notice and at such reasonable times during normal business
hours, as often as may be reasonably requested; provided, however, that upon the
occurrence and during the continuance of an Event of Default each Loan Party
shall permit any authorized representative(s) designated by any Agent or any
Lender to do all of the foregoing without notice, at any time and as often as
the Agents or the Lenders may request. Each such visitation and inspection (i)
by or on behalf of any Lender shall be at such Lender's expense and (ii) by or
on behalf of any Agent shall be at the Borrower's expense; provided, however, so
long as no Event of Default exists, the Borrower shall only pay the reasonable
expenses in connection with one inspection or audit per year. Each Loan Party
shall keep and maintain in all material respects proper books of record and
account in which entries sufficient to prepare financial statements in
conformity with GAAP shall be made of all dealings and transactions in relation
to its businesses and activities, including, without limitation, transactions
and other dealings with respect to the Collateral. If an Event of Default has
occurred and is continuing, each Loan Party, upon the Administrative Agent's
request, shall turn over copies of any such records to the Administrative Agent
or its representatives.
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8.07. Tax Identification Numbers. Each Loan Party shall provide the
Administrative Agent in writing its tax identification number promptly upon the
availability thereof.
8.08. ERISA Compliance. Each Loan Party shall, and shall cause each ERISA
Affiliate to, establish, maintain and operate all Plans to comply in all
material respects with the provisions of ERISA, the Code, all other applicable
laws, and the regulations and interpretations thereunder and the respective
requirements of the governing documents for such Plans.
8.09. Maintenance of Property. Each Loan Party shall maintain in all
material respects all of its owned and leased property in good, safe and
insurable condition and repair and in accordance with any applicable
manufacturers' specifications and recommendations, and not permit, commit or
suffer any waste (except in the ordinary course of business) or abandonment of
any such property and from time to time shall make or cause to be made all
repairs, renewal and replacements thereof, except in the case where
noncompliance thereof, singularly or in the aggregate, does not have or is not
reasonably likely to have a Material Adverse Effect.
8.10. Condemnation. Immediately upon learning of the institution of any
proceeding for the condemnation or other tak ing of any of the owned or leased
Real Property of any Loan Party, such Loan Party shall notify the Administrative
Agent of the pendency of such proceeding, and permit the Administrative Agent to
participate in any such proceeding, and from time to time will deliver to the
Administrative Agent all instruments reasonably requested by the Administrative
Agent to permit such participation.
8.11. Maintenance of Licenses, Permits, etc. Each Loan Party shall maintain
in full force and effect all licenses, permits, governmental approvals,
franchises, authorizations or other rights necessary for the operation of its
business, except where the failure to obtain any of the foregoing would not have
or is not reasonably likely to have a Material Adverse Effect; and notify the
Administrative Agent in writing, promptly after learning thereof, of the
suspension, cancellation, revocation or discontinuance of or of any pending or
threatened action or proceeding seeking to suspend, cancel, revoke or
discontinue any such license, permit, governmental approval, franchise authoriza
tion or right.
8.12. Post Closing Matters. The Loan Parties shall cause each of the
requirements set forth on Schedule 8.12 to be satisfied on or before the date
set forth opposite such requirement.
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8.13. Year 2000 Compliance. The Borrower shall take all actions necessary
to assure that all software necessary for the current operations of its business
and the businesses of its Subsidiaries will (i) record, store, process,
calculate, present and insert time and accurate dates and calculations for
calendar dates falling on or after January 1, 2000, (ii) record, store, process,
calculate and present any information dependent on or relating to such dates in
the same manner and with the same functionality, data integrity and performance
as the software records, stores, processes, calculates and presents calendar
dates on or before December 31, 1999, and (iii) lose no functionality with
respect to the introduction of records, including but not limited to back-up and
archived information and/or data, containing dates falling on or after January
1, 2000.
ARTICLE IX
NEGATIVE COVENANTS
Each Loan Party covenants and agrees so long as any Commitment is
outstanding and thereafter until payment in full of the Obligations:
9.01. Indebtedness. The Loan Parties shall not, directly or indirectly,
create, incur, assume or otherwise become or remain liable with respect to any
Indebtedness, except:
(i) the Obligations;
(ii) trade payables in the ordinary course of business;
(iii) Permitted Existing Indebtedness;
(iv) to the extent permitted by Section 10.05, Capital Leases and
purchase money Indebtedness incurred by the Loan Parties to finance the
acquisition of fixed assets in an aggregate principal amount outstanding at
any one time not to exceed Fifteen Million Dollars ($15,000,000);
(v) Indebtedness owing by one Loan Party to another Loan Party;
(vi) endorsements of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business;
(vii) Interest Rate Contracts with respect to the Loans;
(viii) other unsecured Indebtedness incurred in the ordinary course of
business in an aggregate principal amount
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of up to Two Million Five Hundred Thousand Dollars ($2,500,000) outstanding
at any time;
(ix) extensions, substitutions, renewals, and replacements of the Deed
of Trust in favor of Farm Bureau Life Insurance Company described in item 3
on Schedule 1.01(A), provided that the amount extended, substituted,
renewed or replaced does not exceed the principal amount outstanding at
such time and that such extension, substitution, renewal or replacement is
on terms and conditions no less favorable to Paragon than such Deed of
Trust;
(x) Indebtedness represented by the Subordinated Notes or any
instrument evidencing subordinated indebtedness that extends, renews or
replaces the Subordinated Notes, provided that (A) the terms and conditions
of such subordinated indebtedness (other than pricing), taken as a whole,
are substantially similar to, or more favorable to the Lenders than, the
terms and conditions of the Subordinated Notes and (B) no Default or Event
of Default has occurred and is continuing either before or after giving
effect to the incurrence of such subordinated indebtedness;
(xi) subordinated indebtedness that has terms and conditions (other
than pricing), taken as a whole, that are substantially similar to, or more
favorable to the Lenders than, the terms and conditions of the Subordinated
Notes, provided that (A) after giving effect to the incurrence of such
subordinated indebtedness the Loan Parties are in compliance with the
covenants contained in Article X, (B) no Default or Event of Default has
occurred and is continuing either before or after giving effect to the
incurrence of such subordinated indebtedness, and (C) the proceeds of such
subordinated indebtedness are applied in accordance with Section
3.01(b)(ii);
(xii) Indebtedness of the Borrower or a Subsidiary represented by
Put/Call Promissory Notes or the Put/Call Preferred Stock, in each case,
incurred or issued in exchange for Management Equity Interests, in an
aggregate amount not to exceed the value (calculated in accordance with the
respective agreements pursuant to which such Management Equity Interests
were issued or exchanged) of the Management Equity Interests exchanged so
long as no Default or Event of Default has occurred and is continuing at
the time of such incurrence or issuance or would occur after giving effect
to the incurrence of such Put/Call Promissory Note or the issuance of the
Put/Call Preferred Stock;
(xiii) Indebtedness of a Subsidiary outstanding on or prior to the
date on which such Subsidiary was acquired by
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the Borrower or a Subsidiary of the Borrower (other than Indebtedness
incurred in connection with, or in contemplation of, the transaction or
series of related transactions pursuant to which such Subsidiary became a
Subsidiary or was otherwise acquired by the Borrower or a Subsidiary of the
Borrower) and Indebtedness assumed by the Borrower or a Subsidiary of the
Borrower in connection with a Permitted Acquisition which is outstanding on
or prior to the date of such Permitted Acquisition (other than Indebtedness
incurred in connection with, or in contemplation of, such Permitted
Acquisition); provided that the aggregate permitted amount, accreted value
or liquidation preference, as applicable, of all such Indebtedness does not
exceed Ten Million Dollars ($10,000,000) at any one time outstanding;
(xiv) Indebtedness evidenced by a subordinated note, held by a seller
in connection with a Permitted Acquisition, that has terms and conditions
that are satisfactory to the Administrative Agent, provided that (A) after
giving effect to the incurrence of such subordinated indebtedness the Loan
Parties are in compliance with the covenants contained in Article X, (B) no
Default or Event of Default has occurred and is continuing either before or
after giving effect to the incurrence of such subordinated indebtedness,
and (C) the aggregate amount of such Indebtedness and the aggregate amount
of the outstanding Indebtedness permitted under Section 9.01(xiii) does not
exceed Twenty Million Dollars ($20,000,000) in the aggregate; and
(xv) extensions, substitutions, renewals and replacements of any
Indebtedness described in clause (xiii) and (xiv) above, provided that (A)
the amount extended, substituted, renewed or replaced does not exceed the
principal amount outstanding at such time with respect to such Indebtedness
and (B) that such extension, substitution, renewal or replacement is on
terms (other than pricing) and conditions, taken as a whole, no less
favorable to the Loan Party and the Lenders than the terms and conditions
of the Indebtedness being extended, substituted, renewed or replaced.
9.02. Sales of Assets. The Loan Parties shall not sell, assign, transfer,
lease, convey or otherwise dispose of any assets, whether now owned or hereafter
acquired, or any income or profits therefrom, or enter into any agreement to do
so, except:
(i) sales of Inventory in the ordinary course of business;
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(ii) the disposition of Equipment if such Equipment is obsolete or no
longer useful in the ordinary course of such Loan Party's business;
(iii) sales of assets with an aggregate book value not in excess of
One Million Dollars ($1,000,000) in any Fiscal Year;
(iv) the disposition of Property by casualty or condemnation, provided
that the proceeds of any claim or settlement in connection therewith are
applied in accordance with Section 8.05(b);
(v) assignments, transfers, conveyances and other dispositions from a
Wholly Owned Subsidiary of a Loan Party to another Wholly Owned Subsidiary
of a Loan Party;
(vi) Permitted Dispositions;
(vii) any Loan Party may enter into a license agreement granting
licenses in respect of patents and other rights and assets with its
suppliers on terms and conditions that are commercially reasonable;
(viii) all licenses granted in connection with the Watkins-Johnson
Acquisition; and
(ix) dispositions contemplated by the Monitor Acquisition Documents.
9.03. Liens. The Loan Parties shall not, directly or indirectly, create,
incur, assume or permit to exist any Lien on or with respect to the Collateral,
except:
(i) Liens created by the Loan Documents;
(ii) Permitted Existing Liens;
(iii) Customary Permitted Liens;
(iv) Liens securing Indebtedness permitted by Section 9.01(iv)
covering only assets acquired with such Indebtedness and Liens securing
Indebtedness permitted by Section 9.01(ix) covering only the assets subject
to a Lien under the Deed of Trust;
(v) a Lien with respect to a deposit made by a customer of a Loan
Party in connection with a purchase order placed by such customer so long
as such Lien is limited to the inventory covered by such purchase order and
such inventory is not scheduled on any Borrowing Base Certificate;
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(vi) Liens on property of a Person existing at the time such Person
becomes a Subsidiary of the Borrower, provided that such Liens were in
existence prior to the time such Person becomes a Subsidiary and do not
extend to any other assets;
(vii) Liens on property existing at the time of acquisition thereof by
the Borrower or a Subsidiary of the Borrower, provided that such Liens were
in existence prior to the contemplation of such acquisition and do not
extend to any other assets; and
(viii) other Liens securing obligations incurred in the ordinary
course of business which obligations do not exceed One Million Dollars
($1,000,000) at any one time outstanding.
9.04. Investments. The Loan Parties shall not, directly or indirectly, make
or own any Investment, except:
(i) Investments in Cash Equivalents;
(ii) Investments by any Loan Party in another Loan Party;
(iii) Investments in Interest Rate Contracts permitted pursuant to
Section 9.01(vii);
(iv) Investments received in connection with the bankruptcy or
reorganization of customers of any Loan Party or received in settlement of
delinquent obligations of or disputes with such Loan Party's customers in
the ordinary course of business;
(v) the promissory note issued by DynaLantic to Monitor Aerospace
Corporation on May 1, 1996 in the principal amount of $250,000; and
(vi) other Investments not otherwise permitted under this Section 9.04
having an aggregate market value (measured on the date that such Investment
was made and without giving affect to subsequent changes in value) not to
exceed $5,000,000 outstanding at any time; provided that the Collateral
Agent has a first priority Lien with respect to such Investments and such
Investment does not violate Section 9.09.
9.05. Accommodation Obligations. The Loan Parties shall not, directly or
indirectly, create or become or be liable with respect to any Accommodation
Obligation, except (i) recourse obligations resulting from endorsement of
negotiable instruments for collection in the ordinary course of business, (ii)
the Farm
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Bureau Guaranty, (iii) lease obligations in connection with office space in New
York, New York where the Borrower and Mentmore Holdings Corporation will be
joint tenants, (iv) Accommodation Obligations by one Loan Party on behalf of
another Loan Party but only in connection with Indebtedness permitted pursuant
to Section 9.01(i), (ii), (iii) (iv), (v), (vi), (vii), (viii), (x), (xi),
(xii), (xiv) or (xv), and (v) Accommodation Obligations by one Loan Party that
is the acquiror or the target in connection with a Permitted Acquisition on
behalf of another Loan Party that is the acquiror or the target in connection
with such Permitted Acquisition but only in connection with Indebtedness
permitted pursuant to Section 9.01(xiii) or (xiv).
9.06. Restricted Junior Payments. The Loan Parties shall not declare or
make any Restricted Junior Payments, except:
(i) dividends and other distributions made by any Loan Party (other
than the Borrower) to the Borrower or another Loan Party;
(ii) payments of interest on the Subordinated Notes or the other
subordinated indebtedness permitted pursuant to Section 9.01(x) or Section
9.01(xi), provided that such payments are made in accordance with the
provisions of the Subordinated Note Indenture or such subordinated
indebtedness;
(iii) Restricted Junior Payments made to a Management Equity Holder
pursuant to the Put/Call Promissory Notes, the Put/Call Preferred Stock or
to purchase Management Equity Interests, so long as no Default or Event of
Default has occurred and is continuing or would occur after giving effect
to the making of such Restricted Junior Payment; provided that (a) the
aggregate amount of such Restricted Junior Payments does not exceed
$1,000,000 during any Fiscal Year; provided, further, that, with respect to
any Fiscal Year after December 31, 2000, (A) if the Leverage Ratio for the
Borrower and its Subsidiaries on a consolidated basis as of the last day of
the immediately preceding Fiscal Year is less than 4.0 to 1.0, then the
aggregate amount of such Restricted Junior Payments that may be made during
such Fiscal Year shall not exceed $3,500,000 and (B) if the Leverage Ratio
for the Borrower and its Subsidiaries on a consolidated basis as of the
last day of the immediately preceding Fiscal Year is less than 3.5 to 1.0,
then the aggregate amount of such Restricted Junior Payments that may be
made during such Fiscal Year shall not exceed $5,000,000; and
(iv) Restricted Junior Payments made by the issuance of Put/Call
Promissory Notes or Put/Call Preferred Stock, in each case, in exchange for
Management Equity Interests, in
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an aggregate amount not to exceed the value (calculated in accordance with
the respective agreements pursuant to which such Management Equity
Interests were issued or exchanged) of the Management Equity Interests
exchanged so long as no Default or Event of Default has occurred and is
continuing at the time of such incurrence or issuance or would occur after
giving effect to the issuance of such Put/Call Promissory Note or such
Put/Call Preferred Stock.
9.07. Change in Nature of Business. The Loan Parties shall not make any
material change in the nature or conduct of its business from the businesses
carried on as of the Closing Date other than the Permitted Acquisitions made in
accordance with the provisions of this Agreement.
9.08. Transactions with Affiliates. None of the Loan Parties shall,
directly or indirectly, enter into or permit to exist any transaction with any
Affiliate (other than another Loan Party) of such Loan Party except for (i)
transactions the terms of which are in the ordinary course of business, in
accordance with customary practice, and not less favorable to such Loan Party
than those that might be obtained in an arm's length transaction at the time
from a Person who is not an Affiliate, (ii) reasonable salaries, bonuses and
other compensation or benefits (including deferred compensation, retirement
benefits, loan arrangements, equity participation arrangements and severance
benefits or pursuant to employment agreements, employee benefit plans, stock
option agreements, management equity subscription agreements or similar
management investor agreements) paid to current and former officers, directors
and managers of such Loan Party commensurate with salary, bonus, compensation
and benefit levels of other companies engaged in a similar business in similar
circumstances, (iii) transactions permitted under Sections 9.01(v), 9.01(xii)
9.01(xiii), 9.04(ii), 9.05, 9.06, 9.09 and 9.16, (iv) the Monitor Seller Note
and (v) tax-sharing arrangement among the Loan Parties described in the Tax
Sharing Agreement.
9.09. Restriction on Fundamental Changes. (a) No Loan Party shall enter
into any merger or consolidation, or liquidate, wind-up or dissolve (or suffer
any liquidation or dissolution), or convey, lease, sell, transfer or otherwise
dispose of, in one transaction or series of transactions, all or substantially
all of its business or assets, whether now or here after acquired, except (i)
Permitted Dispositions and (ii) any Wholly Owned Subsidiary of a Loan Party may
merge or consolidate into, or convey, lease, sell, transfer or otherwise dispose
of, in one transaction or a series of related transactions, all or substantially
all of its business or assets to, another Wholly Owned Subsidiary of such Loan
Party so long as the terms and conditions of any such transaction and the
documentation in connection therewith are in form and substance reasonably
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satisfactory to the Administrative Agent and the Collateral Agent and all assets
remain subject to the first priority Lien of the Collateral Agent under the
Collateral Documents.
(b) No Loan Party shall acquire by purchase or otherwise all or
substantially all of the business property or assets of, or stock or other
evidence of beneficial ownership of, any Person; provided, however, that a Loan
Party may make a Permitted Acquisition if: (i) in the event that such Permitted
Acquisition involves the acquisition of stock or other evidence of beneficial
ownership of any Person, the Loan Party acquires at least 75% of the equity
interests (including 75% of the Voting Stock) of such Person; (ii) the equity
interests and/or assets acquired by such Loan Party with respect to any such
Permitted Acquisition are pledged by such Loan Party to the Collateral Agent
pursuant to agreements, substantially in the forms of the Collateral Documents;
(iii) any acquired Person guarantees the Obligations pursuant to an agreement,
substantially in the form of the Guaranty and becomes a Loan Party under the
Contribution Agreement; (iv) no Default or Event of Default has occurred and is
continuing; and (iv) all documentation (including, without limitation, UCC
financing statements, opinions of counsel, and appropriate consents) in
connection with such Permitted Acquisition is in form and substance reasonably
satisfactory to the Administrative Agent and the Collateral Agent.
(c) No Loan Party shall create any new Subsidiary, joint venture or
partnership; provided, however, that a Loan Party may create a new corporate
Subsidiary if (i) a Loan Party holds at least 75% of the equity interests
(including at least 75% of the Voting Stock) of such newly created Subsidiary;
(ii) all of the equity interests that a Loan Party has (whether as legal or
beneficial owner) are pledged to the Collateral Agent, on terms and conditions
satisfactory to the Administrative Agent and all of the assets of such new
Subsidiary are pledged to the Collateral Agent, on terms and conditions
satisfactory to the Administrative Agent; (ii) such new Subsidiary guarantees
the Obligations on terms and conditions satisfactory to the Administrative Agent
and becomes a Loan Party under the Contribution Agreement; (iii) no Default or
Event of Default has occurred and is continuing; and (iv) all documentation
(including, without limitation, security agreements, guarantees, pledge
agreements, UCC financing statements, opinions of counsel, and appropriate
consents) in connection with such new Subsidiary shall be in form and substance
reasonably satisfactory to the Administrative Agent and the Collateral Agent.
(d) Except as permitted under this Agreement, no Loan Party shall change
its corporate, capital or legal structure in any material respect which is
adverse to the interests of the Lenders.
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9.10. Sales and Leasebacks. No Loan Party shall become liable, by
assumption or by Accommodation Obligation, with respect to any lease, whether a
Capital Lease or an operating lease, of any property (whether real or personal
or mixed) (i) which such Loan Party has sold or transferred or will sell or
transfer to any other Person or (ii) which such Loan Party intends to use for
substantially the same purposes as any other asset which it has sold or
transferred or will sell or transfer to any other Person in connection with such
lease, other than the sale and leaseback of real property provided that the sale
of such real property is for fair market value to a Person that is not an
Affiliate and the proceeds are applied in accordance with Section 3.01(b)(i).
9.11. Margin Regulations. No Loan Party shall use all or any portion of the
proceeds of any Loan made under this Agree ment to purchase or carry Margin
Stock.
9.12. ERISA. No Loan Party shall, nor shall it permit any ERISA Affiliate
to, do any of the following to the extent that such act or failure to act would
result in the aggregate, after taking into account any other such acts or
failure to act, in a Material Adverse Effect:
(i) engage, or knowingly permit an ERISA Affiliate to engage, in any
prohibited transaction described in Sections 406 of ERISA or 4975 of the
Code for which a class exemption is not available or a private exemption
has not been previously obtained from the DOL;
(ii) permit to exist any accumulated funding deficiency (as defined in
Sections 302 of ERISA or 412 of the Code), with respect to any Benefit
Plan, which has not been waived;
(iii) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual install ments due with respect to any
waived funding deficiency to any Plan if such failure could result in the
imposition of a Lien or otherwise could have a Material Adverse Effect;
(iv) terminate, or permit any ERISA Affiliate to terminate, any
Benefit Plan which would result in any liability of such Loan Party, or any
ERISA Affiliate under Title IV of ERISA or under such Benefit Plan; or
(v) fail, or permit any ERISA Affiliate to fail, to pay any required
installment under section (m) of Section 412 of the Code or any other
payment required under Section 412 of the Code or Section 302 of ERISA
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on or before the due date for such installment or other payment, if such
failure could result in the imposition of a Lien or otherwise could have a
Material Adverse Effect.
9.13. Amendment of Governing Documents. Except as permitted under this
Agreement, no Loan Party shall amend, supplement or otherwise change its
Governing Documents in any material respect which is adverse to the interests of
the Lenders.
9.14. Environmental Liabilities. Except as disclosed in Schedule 6.01(P),
no Loan Party shall become subject to any Liabilities and Costs which exceed Two
Million Dollars ($2,000,000) in a particular instance or Five Million Dollars
($5,000,000) in the aggregate, arising out of or relating to (a) the Release or
threatened Release at any location of any Contaminant into the environment, or
any Remedial Action in response thereto or (b) any violation of any
Environmental, Health or Safety Requirement of Law.
9.15. No Activities Leading to Forfeiture. No Loan Party shall engage in
the conduct of any business or activity which could result in a Forfeiture
Proceeding.
9.16. Management Fees and Consulting Fees. The Loan Parties shall not pay
any management fee or consulting fee or transfer any assets to any Affiliate,
other than the following payments:
(i) the payment of management fees pursuant to the Management
Agreement (which are subordinated on the terms set forth in the
Subordination Agreement dated as of the date hereof among the Borrower,
Mentmore Holdings Corporation, the Administrative Agent and the Collateral
Agent)in an amount not to exceed (A) One Million Dollars ($1,000,000)
during any Fiscal Year, exclusive of expenses, and (B) after December 31,
1998, additional payments in an amount not to exceed one percent (1%) of
sales for the Borrower and its Subsidiaries on a consolidated basis during
such Fiscal Year less any amount paid pursuant to the preceding clause (A),
exclusive of expenses, provided, in the case of clause (B) above, that the
Interest Coverage Ratio for the Borrower and its Subsidiaries on a
consolidated basis for the immediately preceding Fiscal Year, after giving
pro forma effect to such payment, is equal to or greater than 2.25 to 1.0;
provided, further, that at the time of any such payment and after giving
effect to such payment no Default or Event of Default shall have occurred
and be continuing;
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(ii) the reimbursement of reasonable business expenses incurred in the
ordinary course of business by an Affiliate on behalf of any Loan Party,
provided that the Loan Parties are in compliance with Section 9.08;
(iii) the payment of investment banking fees by the Loan Parties to
Mentmore Holdings Corporation in connection with the transactions
contemplated by the Monitor Acquisition Documents in an amount not to
exceed One Million Dollars ($1,000,000), exclusive of expenses; and
(iv) the payment of investment banking fees by the Loan Parties to
Mentmore Holdings Corporation in connection with any Permitted Acquisition
in an amount not to exceed one percent (1%) of the transaction value,
exclusive of expenses.
9.17. Farm Bureau Life Insurance Company. Aerospace shall not assign or
transfer any moneys, securities or other property to Farm Bureau, or permit any
moneys, securities or other property to be in the constructive or actual
possession of or on deposit with Farm Bureau, provided, however, that Aerospace
may make payments to Farm Bureau that are due and payable under the Farm Bureau
Guaranty.
9.18. Amendment of Subordinated Documents. No Loan Party shall (i) amend,
supplement or otherwise change the provisions of the Subordinated Note Documents
or any documents evidencing the subordinated indebtedness referred to in Section
9.01(xi) in any material respect which would be adverse to the interests of the
Lenders or (ii) designate any Indebtedness as "Designated Senior Indebtedness"
for purposes of the Subordinated Note Indenture.
ARTICLE X
FINANCIAL COVENANTS
Each Loan Party covenants and agrees so long as any Commitment is
outstanding and thereafter until payment in full of the Obligations:
10.01. Minimum Net Worth. The Net Worth of the Borrower and its
Subsidiaries on a consolidated basis at the end of each fiscal quarter of each
Fiscal Year shall not be less than the sum of (i) $2,500,000 plus (ii) an amount
equal to 50% of Net Income since the Effective Date (excluding any losses).
10.02. Minimum Interest Coverage Ratio. The Interest Coverage Ratio (as it
may be adjusted on a Pro Forma Basis for any Permitted Acquisition) of the
Borrower and its Subsidiaries on a consolidated basis at the end of each
Financial Covenant
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Period set forth below shall not be less than the ratio set forth opposite such
date:
Financial Covenant
Period Ending: Ratio
------------------ -----
September 30, 1998 1.75 to 1.00
December 31, 1998 1.75 to 1.00
March 31, 1999 1.75 to 1.00
June 30, 1999 1.75 to 1.00
September 30, 1999 1.75 to 1.00
December 31, 1999 1.75 to 1.00
March 31, 2000 1.75 to 1.00
June 30, 2000 1.75 to 1.00
September 30, 2000 1.75 to 1.00
December 31, 2000 2.00 to 1.00
March 31, 2001 2.00 to 1.00
June 30, 2001 2.00 to 1.00
September 30, 2001 2.00 to 1.00
December 31, 2001 2.25 to 1.00
March 31, 2002 2.25 to 1.00
June 30, 2002 2.25 to 1.00
September 30, 2002 2.25 to 1.00
December 31, 2002 2.50 to 1.00
March 31, 2003 2.50 to 1.00
June 30, 2003 2.50 to 1.00
September 30, 2003 2.50 to 1.00
December 31, 2003 2.50 to 1.00
March 31, 2004 2.50 to 1.00
June 30, 2004 2.50 to 1.00
September 30, 2004 2.50 to 1.00
December 31, 2004 2.50 to 1.00
March 31, 2005 2.50 to 1.00
June 30, 2005 2.50 to 1.00
September 30, 2005 2.50 to 1.00
December 31, 2005 2.50 to 1.00
10.03. Minimum Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio
(as it may be adjusted on a Pro Forma Basis for any Permitted Acquisition) of
the Borrower and its Subsidiaries on a consolidated basis at the end of each
Financial Covenant Period set forth below shall not be less than ratio set forth
opposite such date:
Financial Covenant
Period Ending: Ratio
------------------ -----
September 30, 1998 1.10 to 1.00
December 31, 1998 1.10 to 1.00
March 31, 1999 1.10 to 1.00
June 30, 1999 1.10 to 1.00
September 30, 1999 1.10 to 1.00
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December 31, 1999 1.10 to 1.00
March 31, 2000 1.10 to 1.00
June 30, 2000 1.25 to 1.00
September 30, 2000 1.25 to 1.00
December 31, 2000 1.50 to 1.00
March 31, 2001 1.50 to 1.00
June 30, 2001 1.50 to 1.00
September 30, 2001 1.50 to 1.00
December 31, 2001 1.50 to 1.00
March 31, 2002 1.50 to 1.00
June 30, 2002 1.50 to 1.00
September 30, 2002 1.50 to 1.00
December 31, 2002 1.50 to 1.00
March 31, 2003 1.50 to 1.00
June 30, 2003 1.50 to 1.00
September 30, 2003 1.50 to 1.00
December 31, 2003 1.50 to 1.00
March 31, 2004 1.50 to 1.00
June 30, 2004 1.10 to 1.00
September 30, 2004 1.10 to 1.00
December 31, 2004 1.10 to 1.00
March 31, 2005 1.10 to 1.00
June 30, 2005 1.10 to 1.00
September 30, 2005 1.10 to 1.00
December 31, 2005 1.10 to 1.00
10.04. Maximum Leverage Ratio. The Leverage Ratio (as it may be adjusted on
a Pro Forma Basis for any Permitted Acquisition) of the Borrower and its
Subsidiaries on a consolidated basis, at the end of each Financial Covenant
Period set forth below, shall not be greater than the ratio set forth opposite
such date:
Financial Covenant
Period Ending: Ratio
------------------ -----
September 30, 1998 6.00 to 1.00
December 31, 1998 6.00 to 1.00
March 31, 1999 6.00 to 1.00
June 30, 1999 5.50 to 1.00
September 30, 1999 5.50 to 1.00
December 31, 1999 5.25 to 1.00
March 31, 2000 5.25 to 1.00
June 30, 2000 5.25 to 1.00
September 30, 2000 5.25 to 1.00
December 31, 2000 4.50 to 1.00
March 31, 2001 4.50 to 1.00
June 30, 2001 4.50 to 1.00
September 30, 2001 4.50 to 1.00
December 31, 2001 4.25 to 1.00
March 31, 2002 4.25 to 1.00
June 30, 2002 4.25 to 1.00
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September 30, 2002 4.25 to 1.00
December 31, 2002 4.00 to 1.00
March 31, 2003 4.00 to 1.00
June 30, 2003 4.00 to 1.00
September 30, 2003 4.00 to 1.00
December 31, 2003 4.00 to 1.00
March 31, 2004 4.00 to 1.00
June 30, 2004 4.00 to 1.00
September 30, 2004 4.00 to 1.00
December 31, 2004 4.00 to 1.00
March 31, 2005 4.00 to 1.00
June 30, 2005 4.00 to 1.00
September 30, 2005 4.00 to 1.00
December 31, 2005 4.00 to 1.00
10.05. Capital Expenditures. None of the Loan Parties shall make or
incur any Capital Expenditures (a) during the Fiscal Year 1998 if, after giving
effect to such Capital Expenditures, the aggregate amount of all Capital
Expenditures made by the Loan Parties would exceed Twelve Million Dollars
($12,000,000) for such period, and (b) during any Fiscal Year thereafter if,
after giving effect to such Capital Expenditures, the aggregate amount of all
Capital Expenditures made by the Loan Parties during such Fiscal Year would
exceed Ten Million Dollars ($10,000,000) for such Fiscal Year; provided,
however, the Loan Parties may carry forward from one Fiscal Year to the next
Fiscal Year (but not to any subsequent Fiscal Year) any Capital Expenditures
permitted but not made or incurred in such Fiscal Year.
ARTICLE XI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
11.01. Events of Default. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
(a) Failure to Make Payments When Due. The Borrower shall fail to pay
any principal of the Loans or the Reimbursement Obligations when due, or shall
fail to pay any interest on any Note or any other Obligation within three (3)
Business Days after such interest or Obligation shall become due.
(b) Breach of Representation or Warranty. Any repre sentation or
warranty made or deemed to have been made by any Loan Party under, relating to
or in connection with this Agreement, the Notes, any of the other Loan Documents
or any certificate or statement furnished by any Loan Party pursuant to or in
connection with this Agreement shall be false or misleading in any material
respect when made.
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(c) Breach of Certain Covenants. Any Loan Party shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on such Loan Party under Section 7.04, Section 8.01, Section 8.02, Section 8.03,
Section 8.06, Article IX or Article X of this Agreement or those Sections of the
Loan Documents that are similar to the Sections referred to is in this Section
11.01(c).
(d) Other Defaults. Any Loan Party shall fail duly and punctually to
perform or observe any term, covenant or obligation binding on such Loan Party
(i) under Section 7.01 or Section 7.02 of this Agreement and such failure shall
continue for ten (10) Business Days after the occurrence of such failure or (ii)
under this Agreement (other than as described in Sections 11.01(a), (c) or
(d)(i)) or under any other Loan Document (other than as described in Section
11.01(c), and such failure shall continue for thirty (30) days after any Loan
Party knew of such failure.
(e) Default as to Other Indebtedness. Any Loan Party shall fail to make
any payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) with respect to any Indebtedness (other than
(i) an Obligation or (ii) the Kleinert Seller Note or the Monitor Seller Note
provided that the failure to make any payment under either the Kleinert Seller
Note or the Monitor Seller Note does not give rise to a default or event of
default under or in connection with any other Indebtedness which is in an
aggregate amount of $2,500,000 or more) if the aggregate amount of such other
Indebtedness is Two Million Five Hundred Thousand Dollars ($2,500,000) or more;
or any breach, default or event of default shall occur, or any other condition
shall exist under any instrument, agreement or indenture pertaining to any such
Indebtedness, if the effect thereof (with or without the giving of notice or
lapse of time or both) is to cause an acceleration, mandatory redemption or
other required repurchase of such Indebtedness or permit the holder or holders
of such Indebtedness to accelerate the maturity of any such Indebtedness or
require a redemption or other repurchase of such Indebtedness; or any such
Indebtedness shall be otherwise declared to be due and payable (by acceleration
or otherwise) or required to be prepaid, redeemed or otherwise repurchased by
any Loan Party (other than by a regularly scheduled required prepayment) prior
to the stated maturity thereof; or the holder or holders of any Lien, in any
amount, shall commence foreclosure of such Lien upon property of any Loan Party
having an aggregate value in excess of Two Million Five Hundred Thousand Dollars
($2,500,000).
(f) Involuntary Bankruptcy; Appointment of Receiver, etc. (i) An
involuntary case shall be commenced against any Loan Party and the petition
shall not be dismissed, stayed, bonded or discharged for a period of sixty (60)
days; or a court
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having jurisdiction in the premises shall enter a decree or order for relief in
respect of any Loan Party in an involuntary case, under any applicable
bankruptcy, insolvency or other similar law now or hereinafter in effect; or any
other similar relief shall be granted under any applicable federal, state, local
or foreign law; or the board of directors of any Loan Party (or any committee
thereof) adopts any resolution or otherwise authorizes any action to approve any
of the foregoing.
(ii) A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee, custodian
or other officer having similar powers over any Loan Party or over all or a
substantial part of the assets of any Loan Party shall be entered and such
decree or order shall not be stayed, dismissed or discharged for a period of
sixty (60) days; or an interim receiver, trustee or other custodian of any Loan
Party or of all or a substantial part of the assets of any Loan Party shall be
appointed or a warrant of attachment, execution or similar process against any
substantial part of the assets of any Loan Party shall be issued and any such
event shall not be stayed, dismissed, bonded or discharged for a period of sixty
(60) days; or the board of directors of any Loan Party (or any committee
thereof) adopts any resolution or otherwise authorizes any action to approve any
of the foregoing.
(g) Voluntary Bankruptcy; Appointment of Receiver, etc. Any Loan Party
shall commence a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or shall consent to the entry of
an order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its assets; or any Loan Party shall
make any assignment for the benefit of creditors or shall be unable or fail, or
shall admit in writing its inability, to pay its debts as such debts become due,
or the board of directors of any Loan Party (or any committee thereof) adopts
any resolution or otherwise authorizes any action to approve any of the
foregoing.
(h) Judgments and Attachments. Any money judgment (other than a money
judgment covered by insurance as to which the insurance company has acknowledged
coverage), writ or warrant of attachment, or similar process against any Loan
Party or any assets of any Loan Party involving in any case an amount in excess
of One Million Dollars ($1,000,000) is entered and shall remain undischarged,
unvacated, unbonded or unstayed for a period of thirty (30) days.
(i) Dissolution. Any order, judgment or decree shall be entered against
any Loan Party decreeing its involuntary dis solution or split up and such order
shall remain undischarged and
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unstayed for a period of thirty (30) days; or any Loan Party shall otherwise
dissolve or cease to exist (except as permitted under this Agreement).
(j) Loan Documents; Failure of Security. At any time, for any reason,
(i) any Loan Document ceases to be in full force and effect or any Loan Party
seeks to repudiate its obligations thereunder and the Liens intended to be
created thereby are, or any Loan Party seeks to render such Liens, invalid and
unperfected, or (ii) Liens in favor of the Collateral Agent and/or the Lenders
contemplated by the Loan Documents shall, at any time, for any reason, be
invalidated or otherwise cease to be in full force and effect, or such Liens
shall be subordinated or shall not have the priority contemplated by this
Agreement or the Loan Documents.
(k) ERISA Liabilities. Any Termination Event occurs which will or is
reasonably likely to subject either a Loan Party or an ERISA Affiliate to a
liability which will, or is reasonably likely to have, a Material Adverse
Effect.
(l) Waiver Application. The plan administrator of any Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Code and the substantial business hardship
upon which the application for the waiver is based could subject either any Loan
Party or any ERISA Affiliate to liability which will or is reasonably likely to
have a Material Adverse Effect.
(m) Change of Control. A Change of Control shall have occurred.
(n) Government Contracts. At any time, for any reason, (i) a notice of
debarment, notice of suspension or notice of termination for default shall have
been issued to the Borrower under or in connection with any Government Contract
which could reasonably result in a Material Adverse Effect; (ii) a notice of
debarment, notice of suspension or notice of termination for default shall have
been issued to any other party under a Government Contract as a direct or
indirect result of the Borrower's performance or malfeasance thereunder which
could reasonably result in a Material Adverse Effect; (iii) the Borrower is
barred or suspended from contracting with any Governmental Authority; (iv) a
Government investigation shall have been commenced in connection with any
Government Contract or the Borrower which could reasonably result in criminal
liability, suspension, debarment or any other adverse administrative action
arising by reason of alleged fraud, willful misconduct or other wrongdoing; (v)
a Government investigation shall have been commenced in connection with any
Material Contract or the Borrower which could reasonably result in material
civil liability or any other material adverse administrative action
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arising by reason of alleged neglect or default or other wrongdoing; (vi) the
actual termination of any Material Contract due to alleged fraud, willful
misconduct, neglect, default or other wrongdoing which could reasonably result
in a Material Adverse Effect; or (vii) a cure notice issued under any Material
Contract shall remain uncured beyond (A) the expiration of the time period
available to the Borrower pursuant to such Material Contract and/or such cure
notice, to cure the noticed default or (B) the date on which the other
contracting party is entitled to exercise its rights and remedies under the
Material Contract as a consequence of such default, which could reasonably
result in a Material Adverse Effect.
An Event of Default shall be deemed "continuing" until cured or waived
in writing in accordance with Section 13.09.
11.02. Rights and Remedies.
(a) Acceleration and Termination. Upon the occurrence of any Event of
Default described in Section 11.01(f) or 11.01(g), the Commitments shall
automatically and immediately terminate and the unpaid principal amount of, and
any and all accrued interest on, the Obligations and all accrued fees shall
automatically become immediately due and payable, without presentment, demand,
or protest or other requirements of any kind (including, without limitation,
valuation and appraisement, diligence, presentment, notice of intent to demand
or accelerate and of acceleration), all of which are hereby expressly waived by
the Borrower, and the obligations of the Lenders to make Loans hereunder shall
thereupon terminate; and upon the occurrence and during the continuance of any
other Event of Default, the Administrative Agent shall, at the request, or may
with the consent, of the Requisite Lenders, declare (i) that the Commitments are
terminated, whereupon the Commitments shall immediately terminate, and/or (ii)
the unpaid principal amount of, and any and all accrued interest on, the
Obligations and all accrued fees to be, and the same shall thereupon be,
immediately due and payable, without presentment, demand, or protest or other
requirements of any kind (including, without limitation, valua tion and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration, except as may be specifically provided for herein), all of
which are hereby expressly waived by the Borrower.
(b) Enforcement. Each Loan Party acknowledges that in the event any Loan
Party fails to perform, observe or discharge any of its respective obligations
or liabilities under this Agreement or any other Loan Document, any remedy of
law may prove to be inadequate relief to the Agents and the Lenders; therefore,
the Loan Parties agree that the Agents and the Lenders shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
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ARTICLE XII
THE AGENTS
12.01. Appointment. (a) Each Lender hereby designates and appoints SG as
the Administrative Agent of such Lender under this Agreement, and each Lender
hereby irrevocably authorizes the Administrative Agent to take such action on
its behalf under the provisions of this Agreement, the Notes and the Loan
Documents and to exercise such powers as are set forth herein or therein
together with such other powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement or the other Loan
Documents, the Administrative Agent shall not be required to exercise any
discretion or take any action. Notwithstanding the foregoing, the Administrative
Agent shall be required to act or refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Requisite Lenders (unless the instructions or consent of all of the Lenders is
required hereunder or thereunder) and such instructions shall be binding upon
all Lenders; provided, however, the Administrative Agent shall not be required
to take any action which (i) the Administrative Agent believes will expose it to
personal liability unless the Administrative Agent receives an indemnification
satisfactory to it from the Lenders with respect to such action or (ii) is
contrary to this Agreement, the Notes, the other Loan Documents or applicable
law. The Administrative Agent agrees to act as such on the express conditions
contained in this Article XII.
(b) Each Lender hereby designates and appoints First Union as the
Collateral Agent of such Lender under this Agreement, and each Lender hereby
irrevocably authorizes the Collateral Agent to take such action on its behalf
under the provisions of this Agreement, the Notes and the Loan Documents and to
exercise such powers as are set forth herein or therein together with such other
powers as are reasonably incidental thereto. As to any matters not expressly
provided for by this Agreement or the other Loan Documents, the Collateral Agent
shall not be required to exercise any discretion or take any action.
Notwithstanding the foregoing, the Collateral Agent shall be required to act or
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Requisite Lenders (unless the
instructions or consent of all of the Lenders is required hereunder or
thereunder) and such instructions shall be binding upon all Lenders; provided,
however, the Collateral Agent shall not be required to take any action which (i)
the Collateral Agent believes will expose it to personal liability unless the
Collateral Agent receives an indemnification satisfactory to it from the Lenders
with respect to such action or (ii) is contrary to this Agreement, the Notes,
the other Loan Documents or
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applicable law. The Collateral Agent agrees to act as such on the express
conditions contained in this Article XII.
(c) The provisions of this Article XII are solely for the benefit of the
Agents and the Lenders, and none of the Loan Parties shall have any rights to
rely on or enforce any of the provisions hereof (other than as expressly set
forth in Section 12.07). In performing its functions and duties under this
Agreement, the Agents shall act solely as agents of the Lenders and does not
assume and shall not be deemed to have assumed any obligation or relationship of
agency, trustee or fiduciary with or for any Loan Party. The Agents may perform
any of their respective duties hereunder, or under the Loan Documents, by or
through their respective agents or employees.
12.02. Nature of Duties. The Agents shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of the Agents shall be mechanical and administrative
in nature. The Agents shall not have by reason of this Agreement a fiduciary
relationship in respect of any Holder. Nothing in this Agreement or any of the
Loan Documents, expressed or implied, is intended to or shall be construed to
impose upon the Agents any obligations in respect of this Agreement or any of
the Loan Documents except as expressly set forth herein or therein. Each Lender
shall make its own independent investigation of the financial condition and
affairs of the Borrower and the other Loan Parties in connection with the Loans
hereunder and shall make its own appraisal of the credit worthiness of the
Borrower and the other Loan Parties initially and on a continuing basis, and the
Agents shall not have any duty or responsibility, either initially or on a
continuing basis, to provide any Holder with any credit or other information
with respect thereto (except for reports required to be delivered by the Agents
under the terms of this Agreement). If the Agents seek the consent or approval
of the Lenders to the taking or refraining from taking of any action hereunder,
the Agents shall send notice thereof to each Lender. The Agents shall promptly
notify each Lender at any time that the Lenders so required hereunder have
instructed the Agents to act or refrain from acting pursuant hereto.
12.03. Rights, Exculpation, etc. (a) Liabilities; Responsibilities. None
of the Agents, any Affiliate of any Agent, or any of their respective officers,
directors, employees, agents, attorneys or consultants shall be liable to any
Holder for any action taken or omitted by them hereunder, under the Notes or
under any of the Loan Documents, or in connection therewith, except that no
Person shall be relieved of any liability imposed by law for gross negligence or
willful misconduct. No Agent shall be liable for any apportionment or
distribution of payments made by it in good faith, and if any such apportionment
or distribution is subsequently determined to
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have been made in error the sole recourse of any Holder to whom payment was due,
but not made, shall be to recover from other Holders any payment in excess of
the amount to which they are determined to have been entitled. The Agents shall
not be responsible to any Holder for any recitals, statements, represen tations
or warranties herein or for the execution, effectiveness, genuineness, validity,
legality, enforceability, collectability, or sufficiency of this Agreement, the
Notes or any of the other Loan Documents or the transactions contemplated
thereby, or for the financial condition of the Borrower or any other Loan Party.
None of the Agents are making any representation and warranty in connection
with, and shall not be required to make any inquiry concerning, the Collateral,
the performance or observance of any of the terms, provisions or conditions of
this Agreement, the Notes or any of the Loan Documents, or the financial
condition of the Borrower or any other Loan Party, or the existence or possible
existence of any Default or Event of Default.
(b) Right to Request Instructions. Any Agent may at any time request
instructions from the Lenders (and after all Obligations owing to the Lenders
have been paid in full, from the Holders) with respect to any actions or
approvals which by the terms of any of the Loan Documents such Agent is
permitted or required to take or to grant, and such Agent shall be absolutely
entitled to refrain from taking any action or to withhold any approval and shall
not be under any liability whatsoever to any Person for refraining from any
action or withholding any approval under any of the Loan Documents until it
shall have received such instructions from those Lenders or Holders, as the case
may be, from whom such Agent is required to obtain such instructions for the
pertinent matter in accordance with the Loan Documents. Without limiting the
generality of the foregoing, no Holder shall have any right of action whatsoever
against any Agent as a result of such Agent acting or refraining from acting
under the Loan Documents in accordance with the instructions of all Lenders or,
where required by the express terms of this Agreement, a lesser proportion of
the Lenders, or of all Holders (after the Obligations owing to the Lenders have
been paid in full).
12.04. Reliance. Each Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any telephone
message believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel, independent public
accountants and other experts selected by it.
12.05. Indemnification. To the extent that the Agents are not reimbursed
and indemnified by the Borrower, the Lenders will reimburse and indemnify each
Agent for and against any and all liabilities, obligations, losses, damages,
penalties,
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actions, judgments, suits, reasonable costs, reasonable expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against it in any way relating to or arising out of the Loan
Documents or any action taken or omitted by such Agent under the Loan Documents,
in proportion to each Lender's Pro Rata Share; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from such Agent's gross negligence or willful misconduct. The obligations of the
Lenders under this Section 12.05 shall survive the payment in full of the Loans
and all other Obligations and the termination of this Agreement. In the event
that after payment and distribution of any amount by the Administrative Agent to
Lenders, any Lender or third party, including any Loan Party, any creditor of
any Loan Party or a trustee in bankruptcy, recovers from the Administrative
Agent any amount found to have been wrongfully paid to the Administrative Agent
or disbursed by the Administrative Agent to Lenders, then Lenders, in proportion
to their respective Pro Rata Shares, shall reimburse the Administrative Agent
for all such amounts.
12.06. The Agents Individually. With respect to the Loans made by it, SG
and First Union shall have and may exercise the same rights and powers hereunder
and is subject to the same obligations and liabilities as and to the extent set
forth herein for any other Lender. The terms "Lenders" or "Requisite Lenders" or
any similar terms shall, unless the context clearly otherwise indicates, include
SG and First Union in their respective individual capacities as a Lender or one
of the Requisite Lenders. Each of SG and First Union and their respective
Affiliates may accept deposits from, lend money to, and generally engage in any
kind of banking, trust or other business with any Loan Party or any of its
Affiliates as if it were not acting as an Agent pursuant hereto.
12.07. Successor Agents. (a) Resignation. Any Agent may resign from the
performance of all its functions and duties hereunder at any time by giving at
least thirty (30) days' prior written notice to the Borrower and the Lenders.
Such resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to this Section 12.07.
(b) Appointment by Requisite Lenders. Upon any such notice of
resignation, the Requisite Lenders shall have the right to appoint a successor
Agent selected from among the Lenders, which appointment shall be subject to the
prior written approval of the Borrower (which may not be unreasonably withheld,
and shall not be required upon the occurrence and during the continuance of an
Event of Default or Default).
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(c) Appointment by Retiring Agent. If a successor Agent shall not have
been appointed within the thirty (30) day period provided in paragraph (a) of
this Section 12.07, the retiring Agent shall then appoint a successor Agent who
shall serve as such Agent until such time, if any, as the Requisite Lenders
appoint a successor Agent as provided above. Each Lender shall indemnify and
hold such Agent harmless for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, reasonable costs,
reasonable expenses or disbursements of any kind or nature whatsoever which may
be imposed on, incurred by, or asserted against it in any way relating to or
arising out of the appointment of a successor Agent pursuant to the terms of
this paragraph (c).
(d) Rights of the Successor and Retiring Agents. Upon the acceptance of
any appointment hereunder as Administrative Agent or Collateral Agent, as the
case may be, 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 under this Agreement. After any retiring Agent's resignation
hereunder as an Agent, the provisions of this Article XII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was such
Agent under this Agreement.
12.08. Relations Among Lenders. Each Lender agrees that it will not take
any legal action, nor institute any actions or proceedings, against any Loan
Party or any other Loan Party or with respect to any Collateral, without the
prior written consent of the Requisite Lenders. Without limiting the generality
of the foregoing, no Lender may accelerate or otherwise enforce its portion of
the Obligations, except in accordance with Section 11.02(a).
12.09. Concerning the Collateral and the Loan Documents. (a) Authority.
Subject to the terms and conditions hereof, each Lender authorizes and directs
the Collateral Agent to enter into the Loan Documents relating to the Collateral
for the benefit of the Lenders. Each Lender agrees that any action taken by any
Agent or all Lenders (or, where required by the express terms of this Agreement,
a lesser proportion of the Lenders) in accordance with the provisions of this
Agreement or the other Loan Documents, and the exercise by any Agent or all
Lenders (or, where so required, such lesser proportion) of the powers set forth
herein or therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all of the Lenders. Without
limiting the generality of the foregoing, (i) the Administrative Agent shall
have the sole and exclusive right and authority to act as the disbursing and
collecting agent for the Lenders with respect to all payments and collections
arising in connection with this
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Agreement and the Loan Documents relating to the Collateral and (ii) the
Collateral Agent shall have the sole and exclusive right and authority to
execute and deliver each Loan Document relating to the Collateral and accept
delivery of each such agreement delivered by any Loan Party; act as collateral
agent for the Lenders for purposes of the perfection of all security interests
and Liens created by such agreements and all other purposes stated therein;
manage, supervise and otherwise deal with the Collateral; take such action as is
necessary or desirable to maintain the perfection and priority of the security
interests and Liens created or purported to be created by the Loan Documents;
and except as may be otherwise specifically restricted by the terms of this
Agreement or any other Loan Document, exercise all remedies given to the
Collateral Agent or the Lenders with respect to the Collateral under the Loan
Documents, applicable law or otherwise.
(b) Release of Collateral. (i) Each Lender hereby directs the Collateral
Agent to release or to subordinate any Lien held by the Agent for the benefit of
the Lenders (A) against all of the Collateral, upon payment in full of the
Obligations and termination of this Agreement or (B) against the Collateral
sold, assigned, transferred, conveyed or otherwise disposed of pursuant to
Sections 9.02(ii), (iii), (vi) and (vii) when the Collateral Agent receives a
certificate from the Borrower pursuant to which the Borrower represents and
warrants that the Collateral is being sold, assigned, transferred, conveyed or
otherwise disposed of in compliance with Section 9.02.
(ii) Each Lender hereby directs the Collateral Agent to execute and
deliver or file such termination and partial release statements and do such
other things as are necessary to release Liens to be released pursuant to this
Section 12.09(b) promptly upon the effectiveness of any such release. Upon
request by the Collateral Agent at any time, the Lenders will confirm in writing
the Collateral Agent's authority to release particular types or items as
Collateral pursuant to this Section 12.09.
(iii) Without in any manner limiting the Collateral Agent's authority to
act without any specific or further authorization or consent by the Lenders (as
set forth in Section 12.09(b)), each Lender agrees to confirm in writing, upon
request by the Borrower, the authority to release or subordinate Liens in the
Collateral conferred upon the Collateral Agent under Section 12.09(b). So long
as no Event of Default or Default is then continuing, upon receipt by the
Collateral Agent of any such written confirmation from the Lenders of its
authority to release any particular items or types of Collateral, and upon at
least five (5) Business Days prior written request by the Borrower, the
Collateral Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to
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evidence the release of the Liens granted to the Collateral Agent for the
benefit of Lenders herein or pursuant hereto upon such Collateral; provided,
that (A) the Collateral Agent shall not be required to execute any such document
on terms which, in the Collateral Agent's opinion, would expose the Collateral
Agent to liability or create any obligation or entail any consequence other than
the release of such Liens without recourse or warranty, and (B) such release
shall not in any manner discharge, affect or impair the Obligations or any Liens
upon (or obligations of the Borrower in respect of) all interests retained by
the Loan Parties all of which shall continue to constitute part of the
Collateral.
(iv) The Collateral Agent shall have no obligation whatsoever to the
Lenders or to any other Person to assure that the Collateral exists or is owned
by any Loan Party or is cared for, protected or insured or has been encumbered
or that the Liens granted to the Collateral Agent pursuant to the Loan Documents
have been properly or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Collateral Agent in this Section 12.09 or in any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
in any act, omission or event related thereto, the Collateral Agent may act in
any manner it may deem appropriate, in its sole discretion, given its own
interest in the Collateral as one of the Lenders and that the Collateral Agent
shall have no duty or liability whatsoever to any Lender unless required to act
or refrain from acting upon the instructions of the Lenders and then only in
accordance with Section 12.01.
ARTICLE XIII
MISCELLANEOUS
13.01. Assignments and Participations. (a) Assign ments. No assignment
or participation of any Lender's rights or obligations under this Agreement and
the Notes shall be made except in accordance with this Section 13.01. Each
Lender may assign all or a portion of its rights and obligations under this
Agreement and the Notes in accordance with the provisions of this Section 13.01.
(b) Limitations on Assignments. Each assignment shall be subject to the
following conditions: (i) each assignment shall be of a constant, and not a
varying, ratable percentage of all of an assigning Lender's rights and
obligations in respect of any of its Loans or Commitments being assigned under
this Agreement and its related Note and, in the case of a partial
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assignment, shall be in a minimum principal amount of Five Million Dollars
($5,000,000) except that such limitations shall not apply to an assignment by
any Lender of any portion of its rights and obligations to another Lender or an
assignment by any Lender of all of its rights or obligations to another Person,
(ii) each such assignment shall be to an Eligible Assignee, and (iii) the
parties to each such assignment shall execute and deliver to the Administration
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance, together with a processing and recordation fee of Three Thousand
Five Hundred Dollars ($3,500)(provided that no fee shall be payable in the case
of an assignment to another Lender, an Affiliate of a Lender or an Approved
Fund; and provided further that in the case of contemporaneous assignments by a
Lender to more than one fund managed by the same investment advisor (which funds
are not then Lenders hereunder, Affiliates thereof or Approved Funds), only a
single fee of $3,500 shall be payable for all such contemporaneous assignments);
provided, however, any Lender may assign any or all of its rights and
obligations under this Agreement to any of its Affiliates or to any Approved
Fund without notice to or consent of the Borrower or the Administrative Agent
and without being subject to the foregoing conditions. For purposes of this
Section 13.01, an "Approved Fund" shall mean, with respect to any Lender that is
a fund that invests in bank loans, any other fund that invests in bank loans
which is managed or advised by the same investment advisor as such Lender or by
an affiliate of such investment advisor. Upon such execution, delivery,
acceptance and recording in the Register, from and after the effective date
specified in each Assignment and Acceptance and accepted by the Administrative
Agent (which effective date shall not be any earlier than the date on which the
Administrative Agent so accepts and records the Assignment and Acceptance in the
Register), (x) the assignee thereunder shall, in addition to any rights and
obligations hereunder held by it immediately prior to such effective date, if
any, have the rights and obligations hereunder that have been assigned to it
pursuant to such Assignment and Acceptance and shall, to the fullest extent
permitted by law, have the same rights and benefits hereunder as if it were an
original Lender hereunder and (y) the assigning Lender shall, to the extent that
rights and obligations hereunder have been assigned by it pur suant 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 such assigning Lender's
rights and obliga tions under this Agreement, the assigning Lender shall cease
to be a party hereto).
(c) The Register. The Administrative Agent shall maintain at its address
referred to in Section 13.09 a copy of each Assignment and Acceptance delivered
to and accepted by it
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and a register (the "Register") for the recordation of the names and addresses
of the Lenders and the Commitment of each Lender from time to time and whether
such Lender is an original Lender or the assignee of another Lender pursuant to
an Assignment and Acceptance. The Administrative Agent shall incur no liability
of any kind to any Loan Party, any Lender or any other Person with respect to
its maintenance of the Register or the recordation of information therein. 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. No
assignment shall be effective unless and until the Assignment and Acceptance has
been accepted by the Administrative Agent and registered in the Register.
(d) Fee. Upon its receipt of an Assignment and Accep tance executed by
the assigning Lender and an Eligible Assignee and a processing and recordation
fee of $3500 (payable by the assigning Lender or the assignee, as shall be
agreed between them), the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in compliance with this Agreement and in
substantially the form of Exhibit A hereto, (i) accept such Assignment and
Acceptance, (ii) record the informa tion contained therein in the Register and
(iii) give prompt notice thereof to the Borrower and the other Lenders.
(e) Participations. Each Lender may sell partici pations to one or more
commercial banks, lending institutions, finance companies, insurance companies,
other financial institutions or funds in or to all or a portion of its rights
and obligations under and in respect of any and all facilities under this
Agreement (including, without limitation, all or a portion of any or all of its
Commitments hereunder and the Loans owing to it); provided, however, that (i)
such Lender's obligations under this Agreement (including, without limitation,
its Commitments hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) the Borrower, the Agents 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 and (iv) such participant's rights
to agree or to restrict such Lender's ability to agree to the modification,
waiver or release of any of the terms of the Loan Documents or to the release of
any Collateral covered by the Loan Documents, to consent to any action or
failure to act by any party to any of the Loan Documents or any of their
respective Affiliates, or to exercise or refrain from exercising any powers or
rights which any Lender may have under or in respect of the Loan Documents or
any Collateral, shall be limited to the right to consent to (A) the increase in
the Commitment of the Lender from whom such participant purchased a
participation, (B) the reduction of the principal of, or rate or amount of
interest on, the Loans subject to such participation (other than by the
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payment or prepayment thereof), (C) the postponement of any date fixed for any
payment of principal of, or interest on, the Loan(s) subject to such
participation (except with respect to any modifications of the provisions
relating to prepayments of Loans and other Obligations) and (D) the release of
any guarantor of the Obligations or all or a substantial portion of the
Collateral except as provided in Section 12.09(b).
(f) Information Regarding the Borrower. Any Lender may, in connection
with any assignment or participation or pro posed assignment or participation
pursuant to this Section 13.01, disclose to the assignee or participant or
proposed assignee or participant, any information relating to the Borrower
furnished to such Lender by any Agent or by or on behalf of the Borrower;
provided that, prior to any such disclosure, such assignee or participant, or
proposed assignee or participant, shall agree to preserve in accordance with
Section 13.23 the confidentiality of any confidential information described
therein.
(g) Payment to Participants. Anything in this Agree ment to the contrary
notwithstanding, in the case of any participation, all amounts payable by the
Borrower under the Loan Documents shall be calculated and made in the manner and
to the parties required hereby as if no such participation had been sold.
(h) Lenders' Creation of Security Interests. 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 and
its Notes (including, without limitation, Obligations owing to it and the Notes
held by it) in favor of any Federal Reserve Bank of the Federal Reserve Board
without notice to or consent of the Borrower or the Agents.
13.02. Relations Among Lenders. Each Lender agrees that it will not take
any action, nor institute any actions or proceedings, against the Borrower with
respect to the Obligations or any Collateral, without the prior written consent
of Requisite Lenders.
13.03. Replacement of Lender. In the event that a Replacement Event
occurs and is continuing with respect to any Lender, the Borrower may designate
a Replacement Lender to assume such Lender's Commitment hereunder, to purchase
the Loans and participations of such Lender and such Lender's rights hereunder,
without recourse to or representation or warranty by, or expense to, such Lender
for a purchase price equal to the outstanding principal amount of the Loans
payable to such Lender plus any accrued but unpaid interest on such Loans and
accrued but unpaid fees owing to such Lender, and upon such assumption, purchase
and substitution, and subject to the execution and delivery to the
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Administrative Agent by the Replacement Lender of documentation satisfactory to
the Administrative Agent (pursuant to which such Replacement Lender shall assume
the obligations of such original Lender under this Agreement), the Replacement
Lender shall succeed to the rights and obligations of such Lender hereunder and
such Lender shall no longer be a party hereto or have any rights hereunder
provided that the obligations of the Borrower to such Lender under Section 13.05
hereof with respect to events occurring or obligations arising before such
replacement shall survive such replacement.
13.04. Expenses.
(a) Generally. The Borrower agrees upon demand to pay, or reimburse each
Agent for, all of such Agent's reasonable audit, legal, appraisal, valuation,
filing, document duplication and reproduction and investigation expenses and for
all other out-of-pocket costs and expenses of every type and nature (including,
without limitation, the reasonable fees, expenses and disbursements of legal
counsel, auditors, accountants, appraisers, printers, insurance and
environmental advisers, and other consultants and agents) incurred by such Agent
in connection with (i) the preparation, negotiation, and execution of this
Agreement and the other Loan Documents; (ii) the interpretation of this
Agreement (including, without limitation, the satisfaction or attempted
satisfaction of any of the conditions set forth in Article V), the other Loan
Documents and the making of the Loans hereunder; (iii) the creation, perfection
or protection of the Liens under the Loan Documents; (iv) the ongoing
administration of this Agreement and the Loans, including consultation with
attorneys in connection therewith and with respect to such Agent's rights and
responsibilities under this Agreement and the other Loan Documents and, to the
extent provided under Section 8.06, such Agent's periodic inspections and audits
of the Borrower; (v) the protection, collection or enforcement of any of the
Obligations or the enforcement of any of the Loan Documents; (vi) the
commencement, defense or intervention in any court proceeding relating in any
way to the Obligations, the assets of the Borrower, this Agreement or any of the
other Loan Documents; (vii) the response to, and preparation for, any subpoena
or request for document production with which such Agent is served or deposition
or other proceeding in which such Agent is called to testify, in each case,
relating in any way to the Obligations, the assets of the Borrower, this
Agreement or any of the other Loan Documents; and (viii) any amendments,
consents, waivers, assignments, restatements, or supplements to any of the Loan
Documents and the preparation, negotiation, and execution of the same.
(b) After Default. The Borrower further agrees to pay or reimburse each
Agent and each Lender upon demand for all out-of-pocket costs and expenses,
including, without limitation,
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reasonable attorneys' fees incurred by such Agent or such Lender after the
occurrence of an Event of Default (i) in enforcing any Loan Document or any of
the Obligations or any security therefor or exercising or enforcing any other
right or remedy available by reason of such Event of Default; (ii) in connection
with any refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (iii) in commencing, defending or intervening in any litigation or
in filing a petition, complaint, answer, motion or other pleadings in any legal
proceeding relating to the Obligations, the Property, the Borrower and related
to or arising out of the transactions contemplated hereby or by any of the other
Loan Documents; and (iv) in taking any other action in or with respect to any
suit or proceeding (bankruptcy or otherwise) described in clauses (i) through
(iii) above.
13.05. Indemnity. The Borrower further agrees to defend, protect,
indemnify, and hold harmless each Agent and each of the Lenders and each of
their respective Affiliates, and their respective officers, directors,
employees, attorneys and agents (including, without limitation, those retained
in connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in Article V) (collectively, the "Indemnitees") from and
against any and all liabilities, obligations, losses (other than loss of
profits), damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (excluding any taxes and
including, without limitation, the reasonable fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees in any
manner relating to or arising out of (a) this Agreement, the Notes, the other
Loan Documents, or any act, event or transaction related or attendant thereto,
the making of the Loans, the management of such Loans, the use or intended use
of the proceeds of the Loans, or any of the transactions contemplated by the
Loan Documents, or (b) any Liabilities and Costs under federal, state or local
environmental, health or safety laws, regulations or common law principles
arising from or in connection with the past, present or future operations of the
Borrower or any of its predecessors in interest, or, the past, present or future
environmental condition of any Property of the Borrower, the presence of
asbestos-containing materials at any Property of the Borrower or the Release or
threatened Release of any Contaminant into the environment from any Property of
any (collectively, the "Indemnified Matters"); provided, however, the Borrower
shall have no obligation to an Indemnitee hereunder with respect to Indemnified
Matters caused by or resulting from the willful misconduct or gross negligence
of such Indemnitee, as determined by a court of competent jurisdiction in a
final non-appealable
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judgment or order. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all Indemnified Matters incurred by the Indemnitees.
13.06. Change in Accounting Principles. If any change in the accounting
principles used in the preparation of the most recent financial statements
referred to in Section 7.01 are hereafter required or permitted by the rules,
regulations, pronouncements and opinions of the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) and are adopted by the Borrower and
its Subsidiaries with the agree ment of its independent certified public
accountants and such changes result in a change in the method of calculation of
any of the covenants, standards or terms found in Article IX and Article X, the
parties hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating compliance with such covenants, standards and terms
by the Borrower and its Subsidiaries shall be the same after such changes as if
such changes had not been made; provided, however, no change in GAAP that would
affect the method of calculation of any of the covenants, standards or terms
shall be given effect in such calculations until such provisions are amended, in
a manner satisfactory to the Requisite Lenders and the Borrower, to so reflect
such change in accounting principles.
13.07. Setoff. In addition to any Liens granted under the Loan Documents
and any rights now or hereafter granted under applicable law, upon the
occurrence and during the continuance of any Event of Default, each Lender and
any Affiliate of any Lender is hereby authorized by the Borrower at any time and
from time to time, without notice to any Person (any such notice being hereby
expressly waived) to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured (but not
including tax, payroll and trust accounts)) and any other Indebtedness at any
time held or owing by such Lender or any of its Affiliates to or for the credit
or the account of the Borrower against and on account of the Obligations of the
Borrower to such Lender or any of its Affiliates, including, but not limited to,
all Loans and all claims of any nature or description arising out of or in con
nection with this Agreement or the Notes, irrespective of whether or not (i)
such Lender shall have made any demand hereunder or (ii) the Administrative
Agent, at the request or with the consent of the Requisite Lenders, shall have
declared the principal of and interest on the Loans and other amounts due
hereunder and
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under the Notes to be due and payable as permitted by Article XI and even though
such Obligations may be contingent or unmatured. Each Lender agrees that it
shall not, without the express consent of the Requisite Lenders, and that it
shall, to the extent it is lawfully entitled to do so, upon the request of the
Requisite Lenders, exercise its setoff rights hereunder against any accounts of
the Borrower now or hereafter maintained with such Lender or any of its
Affiliates.
13.08. Ratable Sharing. The Lenders agree among them selves that (i)
with respect to all amounts received by them which are applicable to the payment
of the Obligations (excluding the fees described in Sections 3.03, 3.04 and
4.01(e)) equitable adjustment will be made so that, in effect, all such amounts
will be shared among them ratably in accordance with their Pro Rata Shares,
whether received by voluntary payment, by the exercise of the right of setoff or
banker's lien, by counterclaim or cross- action or by the enforcement of any or
all of the Obligations (excluding the fees and amounts described in Sections
3.03, 3.04 and 4.01(e)) or the Collateral, (ii) if any of them shall by
voluntary payment or by the exercise of any right of counterclaim, setoff,
banker's lien or otherwise, receive payment of a proportion of the aggregate
amount of the Obligations held by it, which is greater than the amount which
such Lender is entitled to receive hereunder, the Lender receiving such excess
payment shall purchase, without recourse or warranty, an undivided interest and
participation (which it shall be deemed to have done simultaneously upon the
receipt of such payment) in such Obligations owed to the others so that all such
recoveries with respect to such Obligations shall be applied ratably in
accordance with their Pro Rata Shares; provided, however, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases shall be rescinded and the purchase prices paid for
such participations shall be returned to such party to the extent necessary to
adjust for such recovery, but without interest except to the extent the
purchasing party is required to pay interest in connection with such recovery.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 13.08 may, to the fullest extent permitted by
law, exercise all its rights of payment (including, subject to Section 13.07,
the right of setoff) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of such
participation.
13.09. Amendments and Waivers. Unless otherwise provided in this
Agreement, no amendment or modification of any provision of this Agreement or
the Notes shall be effective without the written agreement of the Requisite
Lenders and the Borrower, and no termination or waiver of any provision of this
Agreement or the Notes, or consent to any departure by the Borrower therefrom,
shall be effective without the written
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concurrence of the Requisite Lenders, which the Requisite Lenders shall have the
right to grant or withhold in their sole discretion. Notwithstanding the
foregoing, any amendment, modification, termination, waiver or consent with
respect to any of the following provisions of this Agreement and the Notes shall
be effective only by a written agreement, signed by each Lender: (a) waiver of
any of the conditions specified in Sections 5.01, 5.02 and 5.03 (except with
respect to a condition based upon another provision of this Agreement, the
waiver of which requires only the concurrence of the Requisite Lenders), (b)
increase in the aggregate amount of the Commitments or the Commitment of any
Lender, (c) reduction of the principal of, rate or amount of interest on the
Loans or any fees or other amounts payable to such Lender (other than by the
payment or prepayment thereof), provided that if all of the Lenders of a
particular Class consent in writing to a reduction in the rate or amount of
interest on the outstanding Loans of that Class or fees payable in connection
therewith, such consent shall be effective with respect to such Lenders, (d)
postponement of the Commitment Termination Date or any other date fixed for any
payment (including any mandatory prepayment) of principal of, or interest on,
the Loans or any fees or other amounts payable to such Lender (except with
respect to any modifications of the provisions relating to prepayments of Loans
and other Obligations), (e) release of all or a substantial portion of the
Collateral (except as provided in Section 12.09(b)), (f) amendment of the
definition of "Requisite Lenders", or (g) amendment of Section 13.08 or this
Section 13.09. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances. Notwithstanding
anything to the contrary contained in this Section 13.09, no amendment,
modification, waiver or consent shall affect the rights or duties of the Agents
under this Agreement or the other Loan Documents, unless made in writing and
signed by the Agents in addition to the Lenders required above to take such
action.
13.10. Notices. (a) Unless otherwise specifically provided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Agents pursuant to
Articles II, III or XII shall not be effective until received by the Agents. For
the purposes hereof, the addresses of the parties hereto (until notice of a
change thereof is delivered as provided in this Section 13.10) shall be as set
forth below each party's name on Schedule I attached hereto or the signature
page of any
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applicable Assignment and Acceptance, or, as to each party, at such other
address as may be designated by such party in a written notice to all of the
other parties to this Agreement.
(b) The Borrower agrees to indemnify and hold harmless each Indemnitee
from and against any and all claims, damages, liabilities, obligations, losses,
penalties, actions, judgments, suits, costs, disbursements and expenses of any
kind or nature (including, without limitation, reasonable fees and disbursements
of counsel to any such Indemnitee) which may be imposed on, incurred by or
asserted against any such Indemnitee in any manner relating to or arising out of
any action taken or omitted by such Indemnitee in good faith in reliance on any
notice or other written communication in the form of a telecopy or facsimile
purporting to be from Borrower; provided that the Borrower shall have no
obligation under this Section 13.10(b) to an Indemnitee with respect to any
indemnified matter caused by or resulting from the gross negligence or willful
misconduct of that Indemnitee, as determined by a court of competent
jurisdiction in a final non-appealable judgment or order.
13.11. Survival of Warranties and Agreements. All representations and
warranties made herein and all obligations of the Borrower in respect of taxes,
indemnification and expense reimbursement shall survive the execution and
delivery of this Agreement and the other Loan Documents, the making and
repayment of the Loans and the termination of this Agreement and shall not be
limited in any way by the passage of time or occurrence of any event and shall
expressly cover time periods when any of the Agents or any of the Lenders may
have come into possession or control of any assets of the Borrower.
13.12. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any Agent or any Lender in the exercise of any power,
right or privilege under this Agreement, the Notes or any of the other Loan
Documents shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing under this Agreement, the Notes and the other Loan Documents
are cumulative to and not exclusive of any rights or remedies otherwise
available.
13.13. Marshalling; Payments Set Aside. Neither any Agent nor any Lender
shall be under any obligation to marshall any assets in favor of the Borrower or
any other Person or against or in payment of any or all of the Obligations. To
the extent that the Borrower makes a payment or payments to the Agents or the
Lenders, or any of such Persons receives payment from the proceeds of the
Collateral or exercises its rights of
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setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party, then to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, right and
remedies therefor, shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or setoff had not occurred.
13.14. Independence of Covenants. All covenants here under shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default or Default if such action is
taken or condition exists.
13.15. Severability. In case any provision in or obligation under this
Agreement, the Notes or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
13.16. Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement or be given any substan tive effect.
13.17. Governing Law. THIS AGREEMENT SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
13.18. Limitation of Liability. No claim may be made by any Borrower,
any Lender, any Agent or any other Person against any other Agent or any other
Lender or the Affiliates, directors, officers, employees, attorneys or agents of
any of them for any special, consequential or punitive damages in respect of any
claim for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement or the Notes or the
other Loan Documents, or any act, omission or event occurring in connection
therewith; and the Borrower, each Lender and each Agent hereby waive, release
and agree not to sue upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
13.19. Successors and Assigns. This Agreement, the Notes and the other
Loan Documents shall be binding upon the parties thereto and their respective
successors and assigns and
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shall inure to the benefit of the parties thereto and the successors and
permitted assigns of the Lenders. The rights hereunder of the Borrower, or any
interest therein, may not be assigned without the written consent of all
Lenders.
13.20. Certain Consents and Waivers.
(a) Personal Jurisdiction. (i) EACH OF THE AGENTS, THE LENDERS AND THE
BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY,
TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT
SITTING IN NEW YORK, NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF
MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH
OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE
BORROWER IRREVOCABLY DESIGNATES AND APPOINTS MENTMORE HOLDINGS CORPORATION, AS
ITS AGENT (THE "PROCESS AGENT"), WITH AN OFFICE LOCATED AT THE ADDRESS IN NEW
YORK, NEW YORK SET FORTH IN THE LETTER DATED AS OF THE CLOSING DATE BETWEEN THE
ADMINISTRATIVE AGENT AND THE PROCESS AGENT, FOR SERVICE OF ALL PROCESS IN ANY
SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. EACH OF THE AGENTS, THE LENDERS
AND THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE BORROWER WAIVES IN ALL
DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING
THE DISPUTE.
(ii) THE BORROWER AGREES THAT EACH AGENT SHALL HAVE THE RIGHT TO PROCEED
AGAINST IT OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE THE AGENTS AND
THE LENDERS TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
ANY AGENT OR ANY LENDER. THE BORROWER AGREES THAT IT WILL NOT ASSERT ANY
PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY ANY AGENT OR ANY LENDER TO
REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF ANY AGENT OR ANY LENDER. THE
BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN
WHICH ANY AGENT OR ANY LENDER MAY COMMENCE A PROCEEDING DESCRIBED IN THIS
SECTION.
(b) Service of Process. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES
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THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PROCESS AGENT
OR THE BORROWER'S NOTICE ADDRESS SPECIFIED BELOW. THE BORROWER IRREVOCABLY
WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION SET
FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY AGENT OR ANY LENDER TO
BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.
(c) Waiver of Jury Trial. EACH OF THE AGENTS, THE LENDERS AND THE
BORROWER IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT.
13.21. Counterparts; Effectiveness; Inconsistencies. This Agreement and
any amendments, waivers, consents, or supple ments hereto may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective against the Borrower,
each Lender and each Agent on the date hereof when each such party hereto
executes and delivers this Agreement. This Agreement and each of the other Loan
Documents shall be construed to the extent reasonable to be consistent one with
the other, but to the extent that the terms and conditions hereof are actually
inconsistent with the terms and conditions of any other Loan Document, this
Agreement shall govern.
13.22. Entire Agreement. This Agreement, taken together with all of the
other Loan Documents, embodies the entire agreement and understanding among the
parties hereto and supersedes all prior agreements and understandings, written
and oral, relating to the subject matter hereof.
13.23. Confidentiality. The Lenders shall hold all nonpublic information
obtained pursuant to the requirements of this Agreement and identified as such
by the Borrower in accordance with such Lender's customary procedures for
handling confidential information of this nature and in accordance with safe and
sound banking practices and in any event may make disclosure reasonably required
by a bona fide offeree, transferee or participant in connection with the
contemplated transfer or participation or as required or requested by any
Governmental Authority or representative thereof or pursuant to legal process
and shall require any such offeree, transferee or participant to agree (and
require any of its offerees, transferees or participants to agree) to comply
with this Section 13.23. In no event shall any Lender be obligated or required
to return any
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materials furnished by the Borrower; provided, however, each offeree shall be
required to agree that if it does not become a transferee or participant it
shall return all materials furnished to it by the Borrower in connection with
this Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first above written.
STELLEX INDUSTRIES, INC.
By: /s/ William L. Remley
Title: Vice Chairman, President, Chief
Executive Officer and Treasurer
<PAGE>
SOCIETE GENERALE, as Administrative Agent
By: /s/ John M. Stack
Title: Director
<PAGE>
FIRST UNION COMMERCIAL CORPORATION, as
Collateral Agent
By: /s/ Jeff McGrath
Title: Vice President
<PAGE>
FIRST UNION COMMERCIAL CORPORATION, as
Lender
By: /s/ Jeff McGrath
Title: Vice President
<PAGE>
SOCIETE GENERALE, as Lender
By: /s/ John M. Stack
Title: Director
<PAGE>
FLEET NATIONAL BANK, as Lender
By: /s/ James C. Silva
Title: Assistant Vice President
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
By: /s/ Brian Minor
Title: Risk Manager
<PAGE>
SENIOR HIGH INCOME PORTFOLIO,INC.,
as Lender
By: /s/ Gil Marchand
Title: Vice President, Portfolio Manager
<PAGE>
PARIBAS CAPITAL FUNDING LLC, as Lender
By: /s/ Jeffrey J. Youle
Title: Director
<PAGE>
EXHIBIT A
Form of Assignment and Acceptance
ASSIGNMENT AND ACCEPTANCE
ASSIGNMENT AND ACCEPTANCE dated as of ____________ __, 199_, between
_______________________ (the "Assignor") and __________________________ (the
"Assignee").
PRELIMINARY STATEMENTS
A. Reference is made to the Amended and Restated Credit Agreement dated as
of May 29, 1998 among Stellex Industries, Inc., (the "Borrower"), the financial
institutions from time to time parties thereto as lenders (the "Lenders"),
Societe Generale, in its capacity as administrative agent for the Lenders (in
such capacity, the "Administrative Agent"), and First Union Commercial
Corporation, in its capacity as collateral agent for the Lenders (the
"Collateral Agent", and together with the Administrative Agent, the "Agents")
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement and not otherwise defined
herein are used herein with the meanings ascribed thereto in the Credit
Agreement.
B. The Assignor is a Lender under the Credit Agreement and desires to sell
and assign to the Assignee, and the Assignee desires to purchase and assume from
the Assignor, on the terms and conditions set forth below, [[Acquisition] Term
[A] [B] Loans in the principal amount of $_________ (the "Assigned
Interest")](1) [a ___ percent (____%) interest in the Assignor's Revolving Loan
Commitment (the "Assigned Percentage")](2) together with the Assignor's rights
and obligations under the Credit Agreement with respect to the Assigned
[Interest] [Percentage].
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(1) To be used for assignments of Term Loans and Term Loan Commitments of the
applicable type. The Assigned Interest shall be in compliance with the
minimum principle amount permitted for a partial assignment under Section
13.01(b) of the Credit Agreement.
(2) To be used for assignments of Revolving Loan and Revolving Loan
Commitments. The Assigned Percentage shall be in compliance with the
minimum principal amount permitted for a partial assignment under Section
13.01(b) of the Credit Agreement.
<PAGE>
NOW, THEREFORE, the Assignor and the Assignee hereby agree as follows:
1. In consideration of the Assignee's payment to the Assignor of
$_____________, the Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, the Assigned [Interest]
[Percentage], together with the Assignor's rights and obligations under the
Credit Agreement with respect to such Assigned [Interest] [Percentage].
2. The Assignor (i) represents and warrants that it has legal and
beneficial title to the interests being assigned by it hereunder free and clear
of any claim adverse to such title; (ii) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any of the other Loan Documents, or any other
instrument or document furnished pursuant thereto or executed and delivered in
connection therewith; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the
performance or observance by the Borrower of its obligations under the Credit
Agreement, any other Loan Document or any instrument or document furnished
pursuant thereto; and (iv) attaches the Note[s] delivered to it under the Credit
Agreement listed below, and has requested that the Borrower exchange such
Note[s] for the new Note[s] listed immediately thereafter:
I. Attached Note[s] being returned to the Borrower:
[Name of Assignor] [Type and Amount of Note]
II New Note[s] to be executed and delivered by the Borrower:
[Revolving] [[Acquisition] [Revolving][[Acquisition]
Term] [A] [B]
Term] [A] [B] Loan Loan Note Amount
Note Payable
to the Order of:
[Name of Assignor] $_________
[Name of Assignee] $_________
-2-
<PAGE>
3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (ii) confirms that it has received
a copy of the Credit Agreement, together with copies of such other Loan
Documents, information, exhibits, reports, projections and forecasts which the
Assignee has deemed appropriate to make its own credit analysis and decision to
enter into this Assignment and Acceptance; (iii) agrees that it shall have no
recourse against the Assignor with respect to any matters relating to the Credit
Agreement, any other Loan Document or this Assignment and Acceptance (except
with respect to the representations and warranties made by the Assignor in
clause (i) of paragraph 2 above); (iv) agrees that it will, independently and
without reliance upon any of the Agents, the Assignor 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 the Credit Agreement and the other Loan Documents; (v) appoints and
authorizes each of the Agents to take such action as Agents on its behalf and to
exercise such powers under the Credit Agreement and the other Loan Documents as
are delegated to each of such Agents, respectively, by the terms thereof,
together with such powers as are reasonably incidental thereto; (vi) agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Credit Agreement and the other Loan Documents are required to
be performed by it as a Lender; (vii) confirms that it is an Eligible Assignee;
and (viii) specifies as its address for notices the address set forth beneath
its name on the signature page hereof.
4. The effective date for this Assignment and Acceptance shall be
___________ __, 199_ (the "Effective Date").(3) Following the execution of this
Assignment and Acceptance, it will be delivered to the Administrative Agent for
acceptance by the Administrative Agent and for recording in the Register by the
Administrative Agent, together with a processing and recordation fee of $3,500
to be paid to the Administrative Agent by the [Assignor][Assignee]4.
5. As of the Effective Date, provided that the Administrative Agent accepts
this Assignment and Acceptance, (i) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment and Acceptance, have
the rights and obligations of a Lender thereunder and (ii) the Assignor shall
relinquish its rights and be released from its obligations under the Credit
Agreement with respect to the Assigned [Interest] [Percentage].
6. From and after the Effective Date, provided that the Administrative
Agent accepts this Assignment and Acceptance, the Administrative Agent shall
make all payments under the Credit Agreement in respect of the Assigned
[Interest] [Percentage] (including, without limitation, all payments of
principal, interest and fees with respect thereto) to the Assignee. The Assignor
and
- --------
(3) Such date shall be at least two (2) Business Days after the date of
execution of this Assignment and Acceptance by the Assignor and Assignee.
(4) Insert applicable selection.
-3-
<PAGE>
Assignee shall make all appropriate adjustments in payments under the Credit
Agreement for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.
-4-
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned
has caused this Assignment and Acceptance to be executed on its behalf by its
officer thereunto duly authorized, as of _________ __, 199_.
[NAME OF ASSIGNOR]
By______________________________
Name:_________________________
Title:________________________
[NAME OF ASSIGNEE]
By______________________________
Name:_________________________
Title:________________________
Notice Address:
Agreed to and accepted this ___
day of ___________, 199_
SOCIETE GENERALE, as Administrative Agent
By____________________________
The undersigned Borrower hereby confirms its acceptance of the Assignee as an
Eligible Assignee.
STELLEX INDUSTRIES, INC.
By____________________________
Name:
Title:
-5-
<PAGE>
EXHIBIT B
Form of Borrowing Base Certificate
BORROWING BASE CERTIFICATE
To: Societe General, in its capacity as administrative agent (the
"Administrative Agent") and First Union Commercial Corporation, in its
capacity as collateral agent (the "Collateral Agent") for the Lenders (as
defined below) under that certain Amended and Restated Credit Agreement
dated as of May 29, 1998 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement") among Stellex Industries,
Inc.(the "Borrower"), the financial institutions from time to time party
thereto (the "Lenders"), the Administrative Agent and the Collateral Agent.
Pursuant to the provisions of the Credit Agreement, the undersigned hereby
certifies that:
1. I am the duly [elected] [appointed], qualified and acting [Chief
Financial Officer]1 of Stellex Industries, Inc.
2. Unless otherwise defined herein, terms are used herein as defined in the
Credit Agreement.
3. The information set forth below with respect to Inventory and
Receivables of the Borrower as of the close of business on _____________________
is true, accurate and complete.
A. Inventory
Total Inventory: ________________________
(less) non-Eligible Inventory: ________________________
equals Eligible Inventory: ________________________
Value of Eligible Inventory ________________________
consisting of unbilled ________________________
- --------
1 Insert different title if being delivered by other office or member of
management of Stellex Industries, Inc. with significant responsibility for
its financial affairs.
<PAGE>
receivables(2) ___________________________
Value of Eligible Inventory ___________________________
consisting of offloaded ___________________________
Inventory(3) ___________________________
50% of Eligible Inventory:
___________________________("T1")
B. Receivables
Total Receivables: ____________________________
(less) non-Eligible Receivables:
____________________________
____________________________
____________________________
equals Eligible Receivables:
____________________________
Value of Eligible
Receivables arising
from sales to account
debtors located in
OECD countries4
85% of Eligible Receivables:
___________________________("T2")
C. Borrowing Base (preliminary calculation)
Sum of T1 plus T2 (from above):
___________________________
4. I hereby certify that the information contained in this certificate is
true, complete and accurate, and acknowledge that the preliminary calculation of
the Borrowing Base is an accurate calculation and is based on the information
contained in this certificate.
- --------
(2) May not exceed $2,000,000, valued in accordance with GAAP
(3) May not exceed $4,000,000, aggregate value in accordance with GAAP
(4) May not exceed $2,000,000
<PAGE>
STELLEX INDUSTRIES, INC.
By:___________________________
Name:
<PAGE>
EXHIBIT C
Form of Notice of Borrowing
NOTICE OF BORROWING
To: Societe Generale, in its capacity as administrative agent (with its
successors in such capacity, the "Administrative Agent") for the Lenders
(as defined below) under the Amended and Restated Credit Agreement dated as
of May 29, 1998 (as amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement")1 among Stellex Industries, Inc.,
a Delaware corporation (the "Borrower"), the financial institutions from
time to time parties thereto as lenders (the "Lenders"), First Union
Commercial Corporation, in its capacity as collateral agent for the
Lenders, and the Administrative Agent.
Pursuant to Section [2.01(b)][2.02(b)] [2.03(b)] of the Credit Agreement,
this Notice of Borrowing (this "Notice") represents the request of the Borrower
to borrow on [the date hereof] [_______________, 199__ ](the "Funding Date")from
the Lenders the principal amount of [Revolving Loans](2) [Term Loans](3) [Swing
Loans](4) of $______________ as [Base Rate Loans] [Eurodollar Rate Loans](5).
[The Interest Period for such
- --------
(1) Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings in this Notice.
(2) For Borrowings of Revolving Loans, a Notice of Borrowing must be given (i)
no later than 12:00 P.M. (New York time) on the proposed Funding Date, in
the case of a Borrowing consisting of Base Rate Loans, and (ii) no later
than 12:00 P.M. (New York time) at least three (3) Business Days in advance
of the proposed Funding Date, in the case of a Borrowing consisting of
Eurodollar Rate Loans.
(3) The request to borrow Term Loans must be given no later than 12:00 P.M.
(New York time) at least one (1) Business Day in advance of the proposed
Funding Date.
(4) For Borrowings of Swing Loans, a Notice of Borrowing must be given no later
than 12:00 P.M. (New York time) on the day of the proposed Borrowing.
(5) Term Loans may only be made as Base Rate Loans but may be converted to
Eurodollar Rate Loans pursuant to Section 4.01(c) of the Credit Agreement.
<PAGE>
Eurodollar Rate Loans is requested to be a [one, two, three, or six] month
period.] Proceeds of such Loans are to be deposited on the Funding Date into the
[insert name of appropriate account]. [The Availability as of the date hereof is
$_____________.](6)
The undersigned certifies that as of the Funding Date all of the conditions
precedent contained in [Sections 5.01,](7) 5.02 [and 5.03](8) of the Credit
Agreement have been satisfied (or waived pursuant to Section 13.09 of the Credit
Agreement) and that all representations and warranties of the Borrowers set
forth in Section 6.01 of the Credit Agreement and the other Loan Documents are
true and correct in all material respects on the Funding Date (other than
representations and warranties which expressly speak as of another date).
Dated this ___ day of ___________, 199_.
STELLEX INDUSTRIES, INC.
By:_________________________________
Title:___________________________
- --------
(6) To be used for Revolving Loans.
(7) To be used for Loans to be made on the Closing Date.
(8) To be used for Acquisition Term Loans.
-2-
<PAGE>
EXHIBIT D
Form of Notice of Conversion/Continuation
To: Societe Generale, in its capacity as administrative agent (with its
successors in such capacity, the "Administrative Agent") for the Lenders
(as defined below) under the Amended and Restated Credit Agreement dated as
of May 29, 1998 (as amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement") among Stellex Industries, Inc.,
a Delaware corporation (the "Borrower"), the financial institutions from
time to time parties thereto as lenders (the "Lenders"), First Union
Commercial Corporation, in its capacity as collateral agent for the
Lenders, and the Administrative Agent.
Pursuant to Section 4.01(c)(ii) of the Credit Agreement, this Notice of
Conversion/Continuation (this "Notice") represents the election of the Borrower
to:
[1. Convert $_____________(1) in aggregate principal amount of Base Rate
Loans to Eurodollar Rate Loans on __________________, 199_.(2) The initial
Interest Period for such Eurodollar Rate Loans is requested to be a [one, two,
three or six] month period.]
[2. Convert $_____________ in aggregate principal amount of
outstanding Eurodollar Rate Loans to Base Rate Loans on
__________________, 199__.(3)]
- --------
(1) Must be in a principal amount of at least $2,000,000 and in integral
multiples of $100,000 in excess of that amount.
(2) Must be a Business Day at least two (2) Business Days following the
Business Day on which the Notice of Conversion/Continuation is delivered to
the Administrative Agent.
(3) Must be a Business Day at least two (2) Business Days following the
Business Day on which the Notice of Conversion/Continuation is delivered to
the Administrative Agent. Must also be the date of expiration of the
relevant Interest Period[s].
<PAGE>
[3. Continue as Eurodollar Rate Loans $________________(4) in aggregate
principal amount of Revolving Loans consisting of Eurodollar Rate Loans with a
current Interest Period ending ________________, 199__. The succeeding Interest
Period for such Eurodollar Rate Loans is requested to be a [one, two, three or
six] month period.]
[The Borrower hereby certifies that (i) the proposed [continuation]
[conversion] would not violate any provisions of Section 4.02 of the Credit
Agreement, (ii) no Event of Default would occur or has occurred and is
continuing under the Credit Agreement and (iii) all representations and
warranties of the Borrower set forth in Section 6.01 of the Credit Agreement and
the other Loan Documents are and will be true and correct in all material
respects on the date of the proposed [continuation] [conversion] (other than
representations and warranties which expressly speak as of the Closing
Date).](5)
Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings in this Notice.
Dated this ____ day of ______________, 199__.
STELLEX INDUSTRIES, INC.
By:____________________________
Title:_________________________
- --------
(4) Must be a Business Day at least two (2) Business Days following the
Business Day on which the Notice of Conversion/Continuation is delivered to
the Administrative Agent. Must also be in a principal amount of at least
$2,000,000 and in integral multiples of $100,000 in excess of that amount.
(5) To be used for continuations of, and conversions into, Eurodollar Rate
Loans.
-2-
<PAGE>
EXHIBIT F-1
Form of Revolving Loan Note
REVOLVING LOAN NOTE
$__________ May 29, 1998
New York, New York
For value received, the undersigned, STELLEX INDUSTRIES, INC., a Delaware
corporation (the "Borrower"), promises to pay to the order of ______________
(the "Lender"), on the Commitment Termination Date (as defined in the Credit
Agreement referred to below), the lesser of (i) the principal amount of
__________________________ ($__________) or (ii) the unpaid principal amount of
all Revolving Loans made by the Lender to the Borrower under the Credit
Agreement (referred to below).
The Borrower also promises to pay interest on the unpaid principal amount
borrowed hereunder from the date advanced until paid at the rates (which shall
not exceed the maximum rate permitted by applicable law) and at the times
determined in accordance with the provisions of the Amended and Restated Credit
Agreement dated as of May 29, 1998 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") among the
Borrower, the financial institutions from time to time parties thereto as
lenders (the "Lenders"), Societe Generale, in its capacity as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"), and First
Union Commercial Corporation, in its capacity as collateral agent for the
Lenders. Terms defined in the Credit Agreement and not otherwise defined herein
are used herein with the meanings so defined.
This Note is issued pursuant to, and is entitled to the benefits of, the
Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Revolving Loans evidenced
hereby are made and are to be repaid. This Note is secured by certain of the
Loan Documents, and reference is made to such Loan Documents for the terms and
conditions governing the collateral security for the Obligations of the Borrower
hereunder.
All payments of principal and interest in respect of Revolving Loans shall
be made to the Administrative Agent's Account not later than 1:00 p.m. (New York
time) on the date due
<PAGE>
in lawful money of the United States of America in immediately
available funds.
This Note may be prepaid at the option of the Borrower as provided in
Section 3.01(a) of the Credit Agreement and must be prepaid as provided in
Section 3.01(b) of the Credit Agreement.
The Lender shall record in accordance with its usual practice the date and
amount of each Revolving Loan made hereunder and the date and amount of each
payment of principal; provided, however, that the failure to record any such
amount shall not limit or otherwise affect the obligation of the Borrower to
repay to the Lender the outstanding principal amount evidenced by this Note
together with accrued interest thereon in accordance with the terms of the
Credit Agreement.
Upon the occurrence of any one or more of certain Events of Default, the
unpaid balance of the principal amount of this Note may become, and upon the
occurrence and continuation of any one or more of certain other Events of
Default, such unpaid balance may be declared to be due and payable in the
manner, upon the conditions and with the effect provided in the Credit
Agreement.
No reference herein to the Credit Agreement and no provisions of this Note,
the Credit Agreement or the other Loan Documents shall alter or impair the
obligation of the Borrower, which is absolute and unconditional, to pay the
principal of and interest on this Note at the place, at the respective times,
and in the currency herein prescribed.
The Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees and disbursements incurred in the collection and enforcement of
this Note or any appeal of a judgment rendered thereon all in accordance with
the provisions of the Credit Agreement. The Borrower hereby waives diligence,
presentment, protest, demand and notice of every kind except as required
pursuant to the Credit Agreement.
The Credit Agreement and this Note shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of New York.
-2-
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and at the
place first above written.
STELLEX INDUSTRIES, INC.
By:______________________________
Title:___________________________
-3-
<PAGE>
EXHIBIT F-2
Form of Term A Loan Note
TERM A LOAN NOTE
$__________ May 29, 1998
New York, New York
For value received, the undersigned, STELLEX INDUSTRIES, INC., a Delaware
corporation, promises to pay to the order of ______________________________ (the
"Lender") the principal amount of _______________ ($__________) in twenty-two
(22) consecutive quarterly installments on the dates and in the principal
amounts set forth in the Credit Agreement (referred to below); provided,
however, that the amount of the last such installment on December 31, 2003 shall
be in the amount necessary to repay in full the outstanding principal amount of
the Term A Loan represented by this Note.
The Borrower also promises to pay interest on the unpaid principal amount
borrowed hereunder from the date advanced until paid at the rates (which shall
not exceed the maximum rate permitted by applicable law) and at the times
determined in accordance with the provisions of the Amended and Restated Credit
Agreement dated as of May 29, 1998 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") among the
Borrower, the financial institutions from time to time parties thereto as
lenders (the "Lenders"), Societe Generale, in its capacity as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"), and First
Union Commercial Corporation, in its capacity as collateral agent for the
Lenders. Terms defined in the Credit Agreement and not otherwise defined herein
are used herein with the meanings so defined.
This Note is issued pursuant to, and is entitled to the benefits of, the
Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Term A Loan evidenced
hereby is made and is to be repaid. This Note is secured by certain of the Loan
Documents, and reference is made to such Loan Documents for the terms and
conditions governing the collateral security for the Obligations of the Borrower
hereunder.
All payments of principal and interest in respect of this Note shall be
made to the Administrative Agent's Account not later than 1:00 p.m. (New York
time) on the date due in lawful money of the United States of America in
immediately available funds.
<PAGE>
This Note may be prepaid at the option of the Borrower as provided in
Section 3.01(a) of the Credit Agreement and must be prepaid as provided in
Section 3.01(b) of the Credit Agreement.
The Lender shall record in accordance with its usual practice the date and
amount of each Term A Loan made hereunder and the date and amount of each
payment of principal; provided, however, that the failure to record any such
amount shall not limit or otherwise affect the obligation of the Borrower to
repay to the Lender the outstanding principal amount evidenced by this Note
together with accrued interest thereon in accordance with the terms of the
Credit Agreement.
Upon the occurrence of any one or more of certain Events of Default, the
unpaid balance of the principal amount of this Note may become, and upon the
occurrence and continuation of any one or more of certain other Events of
Default, such unpaid balance may be declared to be due and payable in the
manner, upon the conditions and with the effect provided in the Credit
Agreement.
No reference herein to the Credit Agreement and no provisions of this Note,
the Credit Agreement or the other Loan Documents shall alter or impair the
obligation of the Borrower, which is absolute and unconditional, to pay the
principal of and interest on this Note at the place, at the respective times,
and in the currency herein prescribed.
The Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees and disbursements incurred in the collection and enforcement of
this Note or any appeal of a judgment rendered thereon all in accordance with
the provisions of the Credit Agreement. The Borrower hereby waives diligence,
presentment, protest, demand and notice of every kind except as required
pursuant to the Credit Agreement.
The Credit Agreement and this Note shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of New York.
-2-
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and at the
place first above written.
STELLEX INDUSTRIES, INC.
By:______________________________
Title:___________________________
-3-
<PAGE>
EXHIBIT F-3
Form of Term B Loan Note
TERM B LOAN NOTE
$__________ May 29, 1998
New York, New York
For value received, the undersigned, STELLEX INDUSTRIES, INC., a Delaware
corporation, promises to pay to the order of ______________________________ (the
"Lender") the principal amount of _______________ ($__________) in thirty (30)
consecutive quarterly installments on the dates and in the principal amounts set
forth in the Credit Agreement (referred to below); provided, however, that the
amount of the last such installment on December 31, 2005 shall be in the amount
necessary to repay in full the outstanding principal amount of the Term B Loan
represented by this Note.
The Borrower also promises to pay interest on the unpaid principal amount
borrowed hereunder from the date advanced until paid at the rates (which shall
not exceed the maximum rate permitted by applicable law) and at the times
determined in accordance with the provisions of the Amended and Restated Credit
Agreement dated as of May 29, 1998 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") among the
Borrower, the financial institutions from time to time parties thereto as
lenders (the "Lenders"), Societe Generale, in its capacity as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"), and First
Union Commercial Corporation, in its capacity as collateral agent for the
Lenders. Terms defined in the Credit Agreement and not otherwise defined herein
are used herein with the meanings so defined.
This Note is issued pursuant to, and is entitled to the benefits of, the
Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Term B Loan evidenced
hereby is made and is to be repaid. This Note is secured by certain of the Loan
Documents, and reference is made to such Loan Documents for the terms and
conditions governing the collateral security for the Obligations of the Borrower
hereunder.
All payments of principal and interest in respect of this Note shall be
made to the Administrative Agent's Account not later than 1:00 p.m. (New York
time) on the date due in lawful
<PAGE>
money of the United States of America in immediately available
funds.
This Note may be prepaid at the option of the Borrower as provided in
Section 3.01(a) of the Credit Agreement and must be prepaid as provided in
Section 3.01(b) of the Credit Agreement.
The Lender shall record in accordance with its usual practice the date and
amount of each Term B Loan made hereunder and the date and amount of each
payment of principal; provided, however, that the failure to record any such
amount shall not limit or otherwise affect the obligation of the Borrower to
repay to the Lender the outstanding principal amount evidenced by this Note
together with accrued interest thereon in accordance with the terms of the
Credit Agreement.
Upon the occurrence of any one or more of certain Events of Default, the
unpaid balance of the principal amount of this Note may become, and upon the
occurrence and continuation of any one or more of certain other Events of
Default, such unpaid balance may be declared to be due and payable in the
manner, upon the conditions and with the effect provided in the Credit
Agreement.
No reference herein to the Credit Agreement and no provisions of this Note,
the Credit Agreement or the other Loan Documents shall alter or impair the
obligation of the Borrower, which is absolute and unconditional, to pay the
principal of and interest on this Note at the place, at the respective times,
and in the currency herein prescribed.
The Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees and disbursements incurred in the collection and enforcement of
this Note or any appeal of a judgment rendered thereon all in accordance with
the provisions of the Credit Agreement. The Borrower hereby waives diligence,
presentment, protest, demand and notice of every kind except as required
pursuant to the Credit Agreement.
The Credit Agreement and this Note shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of New York.
-2-
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and at the
place first above written.
STELLEX INDUSTRIES, INC.
By:______________________________
Title:___________________________
-3-
<PAGE>
EXHIBIT F-4
Form of Term Acquisition Loan Note
ACQUISITION TERM LOAN NOTE
$__________ May 29, 1998
New York, New York
For value received, the undersigned, STELLEX INDUSTRIES, INC., a Delaware
corporation, promises to pay to the order of ______________________________ (the
"Lender") the lesser of (i) the principal amount of _______________
($__________) or (ii) the unpaid principal amount of all Acquisition Term Loans
made by the Lender to the Borrower under the Credit Agreement (referred to
below) in fifteen (15) consecutive quarterly installments on the dates and in
the principal amounts set forth in the Credit Agreement; provided, however, that
the amount of the last such installment on December 31, 2003 shall be in the
amount necessary to repay in full the outstanding principal amount of the
Acquisition Term Loan represented by this Note.
The Borrower also promises to pay interest on the unpaid principal amount
borrowed hereunder from the date advanced until paid at the rates (which shall
not exceed the maximum rate permitted by applicable law) and at the times
determined in accordance with the provisions of the Amended and Restated Credit
Agreement dated as of May 29, 1998 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") among the
Borrower, the financial institutions from time to time parties thereto as
lenders (the "Lenders"), Societe Generale, in its capacity as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"), and First
Union Commercial Corporation, in its capacity as collateral agent for the
Lenders. Terms defined in the Credit Agreement and not otherwise defined herein
are used herein with the meanings so defined.
This Note is issued pursuant to, and is entitled to the benefits of, the
Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Acquisition Term Loan
evidenced hereby is made and is to be repaid. This Note is secured by certain of
the Loan Documents, and reference is made to such Loan Documents for the terms
and conditions governing the collateral security for the Obligations of the
Borrower hereunder.
All payments of principal and interest in respect of this Note shall be
made to the Administrative Agent's Account not later than 1:00 p.m. (New York
time) on the date due in lawful
<PAGE>
money of the United States of America in immediately available funds.
This Note may be prepaid at the option of the Borrower as provided in
Section 3.01(a) of the Credit Agreement and must be prepaid as provided in
Section 3.01(b) of the Credit Agreement.
The Lender shall record in accordance with its usual practice the date and
amount of each Acquisition Term Loan made hereunder and the date and amount of
each payment of principal; provided, however, that the failure to record any
such amount shall not limit or otherwise affect the obligation of the Borrower
to repay to the Lender the outstanding principal amount evidenced by this Note
together with accrued interest thereon in accordance with the terms of the
Credit Agreement.
Upon the occurrence of any one or more of certain Events of Default, the
unpaid balance of the principal amount of this Note may become, and upon the
occurrence and continuation of any one or more of certain other Events of
Default, such unpaid balance may be declared to be due and payable in the
manner, upon the conditions and with the effect provided in the Credit
Agreement.
No reference herein to the Credit Agreement and no provisions of this Note,
the Credit Agreement or the other Loan Documents shall alter or impair the
obligation of the Borrower, which is absolute and unconditional, to pay the
principal of and interest on this Note at the place, at the respective times,
and in the currency herein prescribed.
The Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees and disbursements incurred in the collection and enforcement of
this Note or any appeal of a judgment rendered thereon all in accordance with
the provisions of the Credit Agreement. The Borrower hereby waives diligence,
presentment, protest, demand and notice of every kind except as required
pursuant to the Credit Agreement.
The Credit Agreement and this Note shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of New York.
-2-
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered by its duly authorized officers, as of the day and year and at the
place first above written.
STELLEX INDUSTRIES, INC.
By:______________________________
Title:___________________________
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<PAGE>
EXHIBIT F-5
FORM OF SWING LOAN NOTE
SWING LOAN NOTE
$____________ May 29, 1998
New York, New York
For value received, the undersigned, STELLEX INDUSTRIES, INC., a Delaware
corporation (the "Borrower"), promises to pay to the order of _____________ (the
"Swing Loan Lender"), the lesser of (i) the principal amount of TWO MILLION
DOLLARS ($2,000,000) or (ii) unpaid principal amount of all Swing Loans made by
the Swing Loan Lender to the Borrower under the Credit Agreement. The principal
indebtedness evidenced hereby shall be payable on the dates and in accordance
with the payment terms set forth in the Credit Agreement.
The Borrower also promises to pay interest on the unpaid principal amount
of the Swing Loan Notes made hereunder from the date advanced until paid at the
rates (which shall not exceed the maximum rate permitted by applicable law) and
at the times determined in accordance with the provisions of that certain
Amended and Restated Credit Agreement dated as of May 29, 1998 (as amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement") among the Borrower, the financial institutions from time to time
parties thereto as lenders (the "Lenders"), Societe Generale, in its capacity as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), and First Union Commercial Corporation, in its capacity as collateral
agent for the Lenders.
This Note is issued pursuant to, and is entitled to the benefits of, the
Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Swing Loans evidenced
hereby are made and are to be repaid. This Note is secured by certain of the
Loan Documents, and reference is made to such Loan Documents for the terms and
conditions governing the collateral security for the Obligations of the Borrower
hereunder. Terms defined in the Credit Agreement and not otherwise defined
herein are used herein with the meanings so defined.
All payments of principal and interest in respect of this Note shall be
made to the Administrative Agent's Account on demand in lawful money of the
United States of America in immediately available funds.
<PAGE>
This Note may be prepaid at the option of the Borrower as provided in
Section 3.01(9) of the Credit Agreement, and must be prepaid as provided in
Section 3.01(b) of the Credit Agreement.
Upon the occurrence of any one or more of certain Events of Default, the
unpaid balance of the principal amount of this Note may become, and upon the
occurrence and continuation of any one or more of certain other Events of
Default, such unpaid balance may be declared to be due and payable in the
manner, upon the conditions and with the effect provided in the Credit
Agreement.
No reference herein to the Credit Agreement and no provision of this Note,
the Credit Agreement or the other Loan Documents shall alter or impair the
obligation of the Borrower, which is absolute and unconditional, to pay the
principal of and interest on this Note at the place, at the respective times,
and in the currency herein prescribed.
The Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees and disbursements incurred in the collection and enforcement of
this Note or any appeal of a judgment rendered thereon all in accordance with
the provisions of the Credit Agreement. The Borrower hereby waives diligence,
presentment, protest, demand and notice of every kind except as required
pursuant to the Credit Agreement.
The Credit Agreement and this Note shall be governed by, and shall be
construed and enforced in accordance with, the law of the State of New York.
2
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and at the
place first above written.
STELLEX INDUSTRIES, INC.
By____________________________
Name:
Title:
3
<PAGE>
EXHIBIT G
Form of Officer's Certificate to Accompany Reports
OFFICER'S CERTIFICATE
To: Societe Generale, in its capacity as agent (with its successors in such
capacity, the "Agent") for the Lenders (as defined below) under the Amended
and Restated Credit Agreement dated as of May 29, 1998 (as amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement") among Stellex Industries, Inc., a Delaware corporation (the
"Borrower"), the financial institutions from time to time party thereto as
lenders (the "Lenders"), First Union Commercial Corporation, in its
capacity as Collateral Agent for the Lenders and the Administrative Agent.
Pursuant to Section 7.01(d) of the Credit Agreement, the __________________
of the Borrower hereby certifies that:
1. Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings in this Certificate.
2. The undersigned has reviewed the terms of the Loan Documents and has
made, or caused to be made under [his][her] supervision, a review in reasonable
detail of the transactions and consolidated financial condition of the Borrower
and its Subsidiaries during the accounting period(s) covered by the financial
statements identified below. Such review [has] [has not] disclosed the existence
during or at the end of such accounting period(s), and as at the date hereof the
undersigned [does] [does not] have knowledge of, any condition or event which
constitutes an Event of Default or Default. [If such condition or event exists
or existed, specify (i) nature and period of such condition or event and (ii)
action being taken and/or proposed to be taken with respect thereto.]
3. The financial statements, reports and copies of certain instruments and
documents attached hereto, namely,
A. ___________________, dated ______________
B. ___________________, dated ______________
C. ___________________, dated ______________
are true and complete copies of the aforesaid which constitute part of the
customary books and reports of the Borrower and its Subsidiaries.
STELLEX INDUSTRIES, INC.
By:_______________________
Name:
Title:
<PAGE>
EXHIBIT H
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate is delivered to you pursuant to Section
7.01(c)(ii)of the Amended and Restated Credit Agreement dated as of May 29, 1998
(as amended from time to time, the "Credit Agreement") among Stellex Industries,
Inc. (the "Borrower" or the "Company"), the financial institutions party thereto
(the "Lenders"), Societe Generale ("Societe Generale"), in its capacity as
administrative agent (in such capacity, the "Administrative Agent"), and First
Union Commercial Corporation, in its capacity as collateral agent (the
"Collateral Agent" and together with the Administrative Agent, the "Agents").
The Company hereby delivers to each Lender, together with the financial
statements being delivered to the Lenders pursuant to Section [7.01(a)]
[7.01(b)] of the Credit Agreement, this Compliance Certificate (this
"Certificate") for the accounting period from _________________, [199_] [200_]
to___________, [199_] [200_].(1) Terms defined in the Credit Agreement and not
otherwise defined herein are used herein as therein defined. For purposes
hereof, section references herein refer to sections of the Credit Agreement, and
bracketed amounts or ratios refer to the maximum or minimum amounts or ratios
required under the relevant sections of the Credit Agreement.
I. NEGATIVE COVENANTS
A. INDEBTEDNESS (Section 9.01)
1. Section 9.01(iv)
Maximum aggregate amount of Indebtedness incurred in connection with
Capital Lease obligations and purchase money Indebtedness as permitted
under Section 10.05, outstanding at any time during the period covered
by this Certificate.
Outstanding Aggregate Amount $_________
Maximum Amount $15,000,000
2. Section 9.01(viii)
Maximum aggregate principal amount of other unsecured indebtedness
incurred in the ordinary course of business, outstanding at any time
during the period covered by this Certificate.
- --------
(1) Insert dates representing the fiscal period covered by this Certificate.
<PAGE>
Outstanding Aggregate Amount $_________
Maximum Amount $2,500,000
3. Sections 9.01(xiii) and (xiv)
(a) Maximum aggregate amount of Indebtedness (i) of the Company or a
Subsidiary of the Company (ii) assumed in connection with a Permitted
Acquisition outstanding at any time during the period covered by this
Certificate.
Outstanding Aggregate Amount $ _________
Maximum Amount $10,000,000
(b) Maximum aggregate amount of Indebtedness evidenced by an approved
subordinated note held by a seller in connection with a Permitted
Acquisition, outstanding at any time during the period covered by this
Certificate.
Outstanding Aggregate Amount $_________
(c) The aggregate amount of Indebtedness under clauses (a) and (b) above.
Outstanding Aggregate Amount $__________
Maximum Amount $20,000,000
B. SALES OF ASSETS (Section 9.02)
1. Section 9.02(iii)
Aggregate book value of assets (other than Inventory, obsolete
Equipment dispositions between Wholly Owned Subsidiaries of Loan
Parties, Permitted Dispositions, and certain permitted grants of
Licenses) sold, assigned, transferred, leased, conveyed or otherwise
disposed of in the ordinary course of business during the Fiscal Year
covered by this Certificate.
Aggregate Amount $__________
Maximum Amount $ 1,000,000
2. Section 9.02(vi) Permitted Dispositions
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<PAGE>
(a) Aggregate value of consideration received by the Company or any
Subsidiary from all Asset Sales during the Fiscal Year covered by
this Certificate.
Aggregate Amount $__________
(b) Percentage of the aggregate value of the consideration received
therefor in the form of cash or Cash Equivalents:
Actual Percentage _________
Minimum Amount 75%
(c) Aggregate amount of Net Cash Proceeds received by the Company or
any Subsidiary from any Asset Sales during the period covered by
this Certificate.
Aggregate Amount $__________
C. LIENS (Section 9.03)
1. Section 9.03 (viii)
Aggregate amount of obligations incurred in the ordinary course of
business secured by liens outstanding at any time during the period
covered by this Certificate.
Aggregate Amount $__________
Maximum Amount $ 1,000,000
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<PAGE>
D. INVESTMENTS (Section 9.04)
1. Section 9.04(vi)
Aggregate market value of Investments not otherwise permitted under
Section 9.04 as of the date the Investment was made, outstanding at
any time during the period covered by this Certificate.
Aggregate Amount $__________
Maximum Amount $ 5,000,000
E. RESTRICTED JUNIOR PAYMENTS (Section 9.06)
1. Sections 9.06(iii)
(a) Aggregate amount of Restricted Junior Payments made pursuant to
the Put/Call Promissory Notes or the Put/Call Preferred Stock or
to purchase Management Equity Interests during the Fiscal Year
covered by this Certificate.
Aggregate Amount $__________
[(b) The Leverage Ratio for the Company and its Subsidiaries on a
consolidated basis for the Fiscal Year immediately preceding the
fiscal year covered by this Certificate.
Leverage Ratio ___ to 1](2)
(c) Specify the maximum amount of Restricted Junior Payments
permitted to be made pursuant to the Put/Call Promissory Notes or
the Put/Call Preferred Stock during the Fiscal Year covered by
this Certificate.
Maximum Amount $__________
- --------
(2) To be included for fiscal years after the Fiscal Year ending on December
31, 2000.
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<PAGE>
F. MANAGEMENT AND CONSULTING FEES (Section 9.16)
1. Section 9.16(i)
(a) Aggregate Amount of management fees paid by any of the Loan
Parties to any Affiliate pursuant to the Management Agreement
during the Fiscal Year covered by this Certificate.
Aggregate Amount $_________
Maximum Amount $_________
2. Section 9.16(iv)
(a) Aggregate Amount of investment banking fees paid by any of the Loan
Parties to Mentmore Holdings Corporation in connection with any
Permitted Acquisition.
Aggregate Amount $__________
(b) The aggregate transaction value of the Permitted Acquisition.
Aggregate Value $__________
(c) Specify the maximum amount of investment banking fees permitted to be
paid by any of the Loan Parties to Mentmore Holdings Corporation in
connection with any Permitted Acquisition.
Maximum Amount $_________
-5-
<PAGE>
II. FINANCIAL COVENANTS
A. MINIMUM NET WORTH (Section 10.01)
Net Worth of the Company and its Subsidiaries, as determined at the end of
the period covered by this Certificate.
Actual Amount $_________
Minimum Amount $[ ](3)
B. MINIMUM INTEREST COVERAGE RATIO (Section 10.02)
Interest Coverage Ratio (as it may be adjusted on a Pro Forma Basis for any
Permitted Acquisition) of the Company and its Subsidiaries, as determined
at the end of the period covered by this Certificate.
Actual Ratio ___ to 1
Minimum Ratio [___ to 1]
C. MINIMUM FIXED CHARGE COVERAGE RATIO (Section 10.03)
Fixed Charge Coverage Ratio (as it may be adjusted on a Pro Forma Basis for
any Permitted Acquisition) of the Company and its Subsidiaries at the end
of the period covered by this Certificate.
Actual Amount _____ to 1
Minimum Ratio [____] to 1
D. MAXIMUM LEVERAGE RATIO (Section 10.04)
Leverage Ratio (as it may be adjusted on a Pro Forma Basis for any
Permitted Acquisition) of the Company and its Subsidiaries at the end of
the period covered by this Certificate.
Actual Ratio ___ to 1
Maximum Ratio [___] to 1
- --------
(3) Equal to $2,500,000 plus an amount equal to 50% of Net Income since the
Effective Date.
-6-
<PAGE>
E. CAPITAL EXPENDITURES (Section 10.05)
(a) The cumulative aggregate amount of Capital Expenditures made or
incurred by the Company and its Subsidiaries on a consolidated basis
during the current Fiscal Year.(4)
Aggregate Amount $_________
(b) Specify the unused portion of Capital Expenditures permitted to be
made or incurred by the Company and its Subsidiaries on a consolidated
basis from the Fiscal Year immediately preceding the current Fiscal
Year.
Aggregate Amount $_________
(c) Specify the maximum amount of Capital Expenditures permitted to be
made or incurred by the Company and its Subsidiaries on a consolidated
basis during the current Fiscal Year.
Maximum Amount $_________
- --------
(4) Capital Expenditures may be made by the Loan Parties (i) during Fiscal Year
1998, in an aggregate amount of up to $12,000,000 and (ii) for each
subsequent Fiscal Year, $10,000,000 plus the Aggregate Amount specified in
clause (b) immediately above.
-7-
<PAGE>
We hereby certify, in our capacity as officers of the Company, that the
information set forth above is accurate as of _____________, [199_] [200_], to
the best of our knowledge after diligent inquiry.
Dated: ___________, [199_] [200_]
STELLEX INDUSTRIES, INC.
By:______________________
Name:
Title: Chief Financial Officer
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<PAGE>
EXHIBIT I
FORM OF REPLACEMENT CERTIFICATE
To: Societe Generale, in its capacity as administrative agent (with its
successors in such capacity, the "Administrative Agent") for the Lenders
(as defined below) under the Amended and Restated Credit Agreement dated as
of May 29, 1998 (as amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement") among Stellex Industries, Inc.,
a Delaware corporation (the "Borrower"), the financial institutions from
time to time party thereto as lenders (the "Lenders"), the Administrative
Agent, and First Union Commercial Corporation, in its capacity as
collateral agent for the Lenders.
Pursuant to Section 7.01(e) of the Credit Agreement,
______________________, the Chief Financial Officer of the Borrower, hereby
certifies, as of _________________ __, 199_, as follows:
1. Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings in this Certificate.
2. During the period from _________, 199_ to _______, 199_, the Borrower
received Net Cash Proceeds in the aggregate amount of $_____ as a result of
sales of assets, issuance of Securities or receipt of insurance proceeds as
follows:
[For each sale of assets, issuance of Securities or receipt of insurance
proceeds, (i) indicate amount of Net Cash Proceeds received and date
received, (ii) describe sale, issuance or nature of loss suffered, (iii)
describe replacement asset acquired or Permitted Acquisition consummated
and cost of such asset or Permitted Acquisition.]
3. For each such sale of assets, issuance of Securities or receipt of
insurance proceeds, Net Cash Proceeds
<PAGE>
received which were not spent as specifically indicated above have been
applied to repay Loans in accordance with the Credit Agreement.
STELLEX INDUSTRIES, INC.
By:_________________________
Name:
Title: Chief Financial Officer
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<PAGE>
EXHIBIT J
FORM OF AMENDED AND RESTATED GUARANTY
This AMENDED AND RESTATED GUARANTY (as amended, supplemented or otherwise
modified from time to time, this "Guaranty") is made as of May 29, 1998 by KII
HOLDING CORP., a Delaware corporation, TSMD ACQUISITION CORP., a Delaware
corporation, KII ACQUISITION CORP., a Delaware corporation, STELLEX MICROWAVE
SYSTEMS, INC., a California corporation, STELLEX AEROSPACE, a California
corporation, PARAGON PRECISION PRODUCTS, a California corporation, BANDY
MACHINING INTERNATIONAL, a California corporation, SCANNING ELECTRON ANALYSIS
LABORATORIES, INC., a California corporation, and GENERAL INSPECTION
LABORATORIES, INC., a California corporation (each individually, an "Existing
Guarantor", and collectively, the "Existing Guarantors"), and by STELLEX
AEROSPACE HOLDINGS, INC., a Delaware corporation, MONITOR AEROSPACE CORPORATION,
a New York corporation, MONITOR AEROSPACE INTERNATIONAL CORP., a New York
corporation and MONITOR MARINE PRODUCTS INC., a New York corporation (each
individually, an "Additional Guarantor", collectively, the "Additional
Guarantors", and together with the Existing Guarantors, the "Guarantors") in
favor of the Agents and the Lenders under that certain Credit Agreement referred
to below.
W I T N E S S E T H
WHEREAS, the Existing Guarantors entered into the Guaranty dated as of
October 31, 1997 (the "Existing Guaranty") in connection with that certain
Credit Agreement dated as of October 31, 1997 (the "Existing Credit Agreement")
among the borrowers named therein, Societe Generale ("SG"), as administrative
agent thereunder, First Union Commercial Corporation ("First Union"), as
collateral agent and syndication agent thereunder, and the financial
institutions party thereto. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
Credit Agreement.
WHEREAS, the Lenders and the Agents have required as a condition, among
others, to entering into that certain Amended and Restated Credit Agreement
dated as of May 29, 1998 (the "Credit Agreement") among the Borrower, SG, as
administrative agent (the "Administrative Agent"), First Union as collateral
agent (the "Collateral Agent", and together with the Administrative Agent, the
"Agents"), and the financial institutions from time to time parties thereto (the
"Lenders"), that each Guarantor guarantee (x) the Obligations of the Borrower
under the Credit Agreement; and (y) the obligations of each such other Guarantor
under this Guaranty (all such Obligations and such obligations hereunder, the
"Guaranteed Obligations");
<PAGE>
NOW THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Guaranty. (i) For value received and in consideration of any loan,
advance or financial accommodation of any kind whatsoever heretofore, now or
hereafter made, given or granted to the Borrower by the Lenders, each Guarantor
unconditionally guarantees the full and prompt payment when due, whether at
maturity or earlier, by reason of acceleration or otherwise, and at all times
thereafter, of all the Guaranteed Obligations (including, without limitation,
interest accruing following the filing of a bankruptcy petition by or against
the Borrower, at the applicable rate specified in the Credit Agreement, whether
or not such interest is allowed as a claim in bankruptcy).
(ii) At any time after the occurrence of an Event of Default, each
Guarantor shall pay to the Administrative Agent, for the ratable benefit of the
Agents and the Lenders, on demand and in immediately available funds, the full
amount of the Guaranteed Obligations. Each Guarantor further agrees to pay and
reimburse the Agents and the Lenders for, on demand and in immediately available
funds, (a) all reasonable fees, costs and expenses (including, without
limitation, all court costs and reasonable attorneys' fees, costs and expenses)
paid or incurred by such Person in: (1) endeavoring to collect all or any part
of the Guaranteed Obligations owing to such Person from, or in prosecuting any
action against, the Borrower relating to the Credit Agreement, the Existing
Credit Agreement, this Guaranty or the transactions contemplated thereby; (2)
taking any action with respect to any security or collateral securing the
Guaranteed Obligations; and (3) preserving, protecting or defending the
enforceability of, or enforcing, this Guaranty or the Agents' or the Lenders'
rights hereunder (all such costs and expenses are hereinafter referred to as the
"Expenses") and (b) interest on the Expenses, from the date of demand under this
Guaranty until paid in full at the per annum rate of interest described in
Section 4.01(d) of the Credit Agreement. Each Guarantor hereby agrees that this
Guaranty is an absolute guaranty of payment and is not a guaranty of collection.
(iii) Notwithstanding anything contained in this Guaranty to the contrary,
the amount guaranteed by each Guarantor hereunder shall be limited to an
aggregate amount which, together with other amounts owing by such Guarantor to
the Agents and the Lenders, is equal to the largest amount that would not be
subject to avoidance under Section 548 of Title 11 of the United States Code (11
U.S.C. ss.ss. 101 et seq.) (the "Bankruptcy Code") or any applicable provisions
of any comparable state law.
-2-
<PAGE>
2. Obligations Unconditional. Each Guarantor hereby agrees that its
obligations under this Guaranty shall be unconditional, irrespective of:
(i) the validity, enforceability, avoidance or subordination of any of
the Guaranteed Obligations or any of the Loan Documents;
(ii) the absence of any attempt by, or on behalf of, any of the Agents
or the Lenders to collect, or to take any other action to enforce, all or
any part of the Guaranteed Obligations whether from or against the Borrower
or any other Person;
(iii) the election of any remedy available under any Loan Document or
any applicable Requirement of Law by, or on behalf of, any of the Agents or
the Lenders with respect to all or any part of the Guaranteed Obligations;
(iv) the waiver, consent, extension, forbearance or granting of any
indulgence by, or on behalf of, any of the Agents or the Lenders with
respect to any provision of any Loan Document;
(v) the failure of any of the Agents or the Lenders to take any steps
to perfect and maintain its security interest in, or to preserve its rights
to, any security or collateral for the Guaranteed Obligations;
(vi) the election by, or on behalf of, any of the Agents or the
Lenders, in any proceeding instituted under Chapter 11 of the Bankruptcy
Code, of the application of Section 1111(b)(2) of the Bankruptcy Code;
(vii) any borrowing or grant of a security interest by the Borrower,
as debtor-in-possession, under Section 364 of the Bankruptcy Code;
(viii) the disallowance, under Section 502 of the Bankruptcy Code, of
all or any portion of the claims against the Borrower held by any of the
Lenders or the Agents, for repayment of all or any part of the Guaranteed
Obligations or any Expenses; or
(ix) any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of the Borrower (other than payment in
full of the Guaranteed Obligations);
provided, however, that nothing contained in this Section 2 shall be deemed to
waive or modify any rights, defenses or claims which such Guarantor, in its
capacity as a Pledgor under a Pledge Agreement or as a Grantor under a Security
Agreement, may have and which it has not expressly waived therein.
-3-
<PAGE>
3. Enforcement; Application of Payments. Upon the occurrence and during the
continuance of an Event of Default, the Agents and/or the Lenders may proceed
directly and at once, without notice, against any Guarantor to obtain
performance of and to collect and recover the full amount, or any portion, of
the Guaranteed Obligations owing to such Person or Persons, without first
proceeding against the Borrower or any other Person, or against any security or
collateral for the Guaranteed Obligations.
4. Waivers. (i) Each Guarantor hereby waives diligence, presentment, demand
of payment, filing of claims with a court in the event of receivership or
bankruptcy of the Borrower, protest or notice with respect to the Guaranteed
Obligations, all setoffs and all presentments, demands for performance, notices
of nonperformance, protests, notices of protest, notices of dishonor and notices
of acceptance of this Guaranty, and all other demands whatsoever (and shall not
require that the same be made on the Borrower as a condition precedent to such
Guarantor's obligations hereunder), and covenants that this Guaranty will not be
discharged, except by payment in full of the Guaranteed Obligations. Each
Guarantor further waives all notices of the existence, creation or incurring of
new or additional Indebtedness, arising either from additional loans extended to
the Borrower or otherwise, and also waives all notices that the principal
amount, or any portion thereof, and/or any interest on any instrument or
document evidencing all or any part of the Guaranteed Obligations is due,
notices of any and all proceedings to collect from the maker, any endorser or
any other guarantor of all or any part of the Guaranteed Obligations, or from
any other Person, and, to the extent permitted by law, notices of exchange,
sale, surrender or other handling of any security or collateral given to the
Collateral Agent or the Lenders to secure payment of all or any part of the
Guaranteed Obligations; provided, however, that nothing contained herein shall
be deemed to waive or modify any rights, defenses or claims which such
Guarantor, as a Pledgor under a Pledge Agreement or as a Grantor under a
Security Agreement, may have and which it has not expressly waived therein.
(ii) The Agents and/or the Lenders are hereby authorized, without notice or
demand and without affecting the liability of the Guarantors hereunder, from
time to time, (a) to renew, extend, accelerate or otherwise change the time for
payment of, or other terms relating to, all or any part of the Guaranteed
Obligations, or to otherwise modify, amend or change the terms of any of the
Loan Documents; (b) to accept partial payments on all or any part of the
Guaranteed Obligations; (c) to take and hold security or collateral for the
payment of all or any part of the Guaranteed Obligations, or any liabilities of
the Borrower, (d) to exchange, enforce, waive and release any such security or
collateral; (e) to apply such security or collateral and direct the order or
manner of sale thereof as in its discretion it may determine; (f) to settle,
release, exchange, enforce, waive, compromise or collect or otherwise liquidate
all or any part of
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<PAGE>
the Guaranteed Obligations, this Guaranty, or any other guaranty, and any
security or collateral for the Guaranteed Obligations or for any such guaranty;
provided, however, that nothing contained herein shall be deemed to waive or
modify any rights, defenses or claims which such Guarantor, in its capacity as a
Pledgor under a Pledge Agreement or as a Grantor under a Security Agreement, may
have and which it has not expressly waived therein. Any of the foregoing may be
done in any manner, without affecting or impairing the obligations of the
Guarantors hereunder.
5. Setoff. Subject to Sections 13.07 and 13.08 of the Credit Agreement, at
any time after all or any part of the Guaranteed Obligations have become due and
payable (by acceleration or otherwise), the Lenders may, without notice to any
Guarantor and regardless of the acceptance of any security or collateral for the
payment hereof, appropriate and apply toward the payment of all or any part of
the Guaranteed Obligations owing to such Persons in accordance with the
provisions of Section 3.02(b)(ii) of the Credit Agreement (i) any Indebtedness
due or to become due from the Lenders to such Guarantor, and (ii) any moneys,
credits or other property belonging to such Guarantor, at any time held by or
coming into the possession of the Lenders or their respective affiliates.
6. Financial Information. Each Guarantor hereby assumes responsibility for
keeping itself informed of the financial condition of the Borrower and any and
all other endorsers and/or other guarantors of all or any part of the Guaranteed
Obligations, and of all other circumstances bearing upon the risk of nonpayment
of the Guaranteed Obligations, or any part thereof, that diligent inquiry would
reveal, and such Guarantor hereby agrees that none of the Agents or the Lenders
shall have any duty to advise any Guarantor of information known to it regarding
such condition or any such circumstances. In the event any of the Agents or the
Lenders, in its sole discretion, undertakes at any time or from time to time to
provide any information to any Guarantor, such Agent or Lender shall be under no
obligation (i) to undertake any investigation not a part of its regular business
routine, (ii) to disclose any information which such Agent or Lender, pursuant
to accepted or reasonable commercial finance or banking practices, wishes to
maintain confidential or (iii) to make any other disclosures or updates relating
to such information or any other information to such Guarantor.
7. No Marshalling; Reinstatement. Each Guarantor consents and agrees that
none of the Agents or the Lenders or any Person acting for or on behalf of any
of them shall be under any obligation to marshal any assets in favor of any
Guarantor or against or in payment of any or all of the Guaranteed Obligations.
Each Guarantor further agrees that, to the extent that the Borrower or any other
guarantor of all or any part of the Guaranteed Obligations makes a payment or
payments to any Agent or Lender, or any Agent or Lender receives any proceeds of
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<PAGE>
Collateral, which payment, payments or proceeds, or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to the Borrower, any other guarantor or any other
Person, or their respective estates, trustees, receivers or any other party,
including, without limitation, such Guarantor under any bankruptcy law, state or
federal law, common law or equitable cause, then, to the extent of such payment
or repayment, the part of the Guaranteed Obligations which has been paid,
reduced or satisfied by such amount shall be reinstated and continued in full
force and effect as of the time immediately preceding such initial payment,
reduction or satisfaction.
8. Subrogation. Until the Guaranteed Obligations shall have been paid in
full, each Guarantor hereby agrees that it (i) shall have no right of
subrogation with respect to such Guaranteed Obligations (under contract, Section
509 of the Bankruptcy Code or otherwise) or any other right of indemnity,
reimbursement or contribution, and (ii) hereby waives any right to enforce any
remedy which any of the Agents or the Lenders now have or may hereafter have
against the Borrower, any endorser or any other guarantor of all or any part of
the Guaranteed Obligations or any other Person, and each Guarantor hereby waives
any benefit of, and any right to participate in, any security or collateral
given to the Agents and the Lenders to secure the payment or performance of all
or any part of the Guaranteed Obligations or any other liability of the Borrower
to the Agents and the Lenders.
9. Subordination. Each Guarantor agrees that any and all claims of such
Guarantor against the other Guarantors and the Borrower or any endorser or other
guarantor of all or any part of the Guaranteed Obligations, or against any of
their respective properties, shall be subordinated to all of the Guaranteed
Obligations. Notwithstanding any right of any Guarantor to ask for, demand, sue
for, take or receive any payment from any other Guarantor or the Borrower, all
rights and Liens of such Guarantor, whether now or hereafter arising and
howsoever existing, in any assets of the Borrower (whether constituting part of
the Collateral or otherwise) shall be and hereby are subordinated to the rights
of the Agents or the Lenders in those assets. Such Guarantor shall have no right
to possession of any such asset or to foreclose upon any such asset, whether by
judicial action or otherwise, unless and until all of the Guaranteed Obligations
shall have been paid in full and all of the Commitments have been terminated. If
all or any part of the assets of the Borrower, or the proceeds thereof, are
subject to any distribution, division or application to the creditors of the
Borrower, whether partial or complete, voluntary or involuntary, and whether by
reason of liquidation, bankruptcy, arrangement, receivership, assignment for the
benefit of creditors or any other action or proceeding, or if the business of
the Borrower is dissolved or if substantially all of the assets of the Borrower
are sold, then, and in any such event, any payment or distribution of any kind
or character, either in cash, securities or other property, which shall be
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<PAGE>
payable or deliverable upon or with respect to any Indebtedness of the Borrower
to the Guarantor ("Borrower Indebtedness") shall be paid or delivered directly
to the Lenders for application on the Guaranteed Obligations, due or to become
due, until such Guaranteed Obligations shall have first been paid in full and
all of the Commitments have been terminated. Each Guarantor irrevocably
authorizes and empowers each of the Agents and the Lenders to demand, sue for,
collect and receive every such payment or distribution and give acquittance
therefor and to make and present for and on behalf of such Guarantor such proofs
of claim and take such other action, in such Agent's or Lender's own name or in
the name of such Guarantor or otherwise, as such Agent or Lender may deem
reasonably necessary or reasonably advisable for the enforcement of this
Guaranty. After the occurrence and during the continuance of an Event of
Default, each Lender may vote, with respect to the Guaranteed Obligations owed
to it, such proofs of claim in any such proceeding, receive and collect any and
all dividends or other payments or disbursements made thereon in whatever form
the same may be paid or issued and apply the same on account of any of the
Guaranteed Obligations. Should any payment, distribution, security or instrument
or proceeds thereof be received by any Guarantor upon or with respect to the
Borrower Indebtedness prior to the payment in full of all of the Guaranteed
Obligations and the termination of all of the Commitments, such Guarantor shall
receive and hold the same in trust, as trustee, for the ratable benefit of the
Agents and the Lenders and shall forthwith deliver the same to the
Administrative Agent in precisely the form received (accompanied by the
endorsement or assignment of such Guarantor where necessary), for application to
the Guaranteed Obligations, due or not due, and, until so delivered, the same
shall be held in trust by such Guarantor as the property of the Agents and the
Lenders. After the occurrence and during the continuance of an Event of Default,
if any Guarantor fails to make any such endorsement or assignment to the Agents
or the Lenders, the Agents or the Lenders or any of their officers or employees
are hereby irrevocably authorized to make the same. Each Guarantor agrees that
until the Guaranteed Obligations have been paid in full and all of the
Commitments have been terminated, such Guarantor will not assign or transfer to
any Person any claim such Guarantor has or may have against the Borrower.
10. Enforcement; Amendments; Waivers. No delay on the part of any of the
Agents or the Lenders in the exercise of any right or remedy arising under this
Guaranty, the Credit Agreement, any of the other Loan Documents or otherwise
with respect to all or any part of the Guaranteed Obligations, the Collateral or
any other guaranty of or security for all or any part of the Guaranteed
Obligations shall operate as a waiver thereof, and no single or partial exercise
by any of the Agents or the Lenders of any such right or remedy shall preclude
any further exercise thereof. No modification or waiver of any of the provisions
of this Guaranty shall be binding upon any of the Agents or the Lenders, except
as expressly set forth in a writing duly signed
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<PAGE>
and delivered by the Agents and the Lenders. Failure by any of the Agents or the
Lenders at any time or times hereafter to require strict performance by the
Borrower or any other guarantor of all or any part of the Guaranteed Obligations
or any other Person of any of the provisions, warranties, terms and conditions
contained in any of the Loan Documents now or at any time or times hereafter
executed by such Persons and delivered to any of the Agents or the Lenders shall
not waive, affect or diminish any right of any of the Agents or the Lenders at
any time or times hereafter to demand strict performance thereof and such right
shall not be deemed to have been waived by any act or knowledge of any of the
Agents or the Lenders, or their agents, officers or employees, unless such
waiver is contained in an instrument in writing, directed and delivered to the
Borrower specifying such waiver, and is signed by the Administrative Agent. No
waiver of any Event of Default by the Lenders shall operate as a waiver of any
other Event of Default or the same Event of Default on a future occasion, and no
action by any of the Agents or the Lenders permitted hereunder shall in any way
affect or impair any Agent's or Lender's rights and remedies or the obligations
of the Guarantors under this Guaranty. Any determination by a court of competent
jurisdiction of the amount of any principal and/or interest owing by the
Borrower to the Agents and the Lenders shall be conclusive and binding on each
Guarantor irrespective of whether such Guarantor was a party to the suit or
action in which such determination was made.
11. Effectiveness; Termination. This Guaranty shall become effective
against any Guarantor upon its execution by such Guarantor and shall continue in
full force and effect and may not be terminated or otherwise revoked until the
Guaranteed Obligations have been paid in full in cash and all of the Commitments
have been terminated. If, notwithstanding the foregoing, any Guarantor shall
have any right under applicable law to terminate or revoke its obligations under
this Guaranty, such Guarantor agrees that such termination or revocation shall
not be effective until a written notice of such revocation or termination,
specifically referring hereto, signed by such Guarantor, is received by the
Agents and the Lenders. Such notice shall not affect the right and power of any
of the Agents or the Lenders to enforce rights arising prior to receipt thereof
by the Agents and the Lenders. If any of the Lenders grants loans or takes other
action after such Guarantor terminates or revokes its obligations under this
Guaranty but before the Agents and the Lenders receive such written notice, the
rights of such Lender with respect thereto shall be the same as if such
termination or revocation had not occurred.
12. Successors and Assigns. This Guaranty shall be binding upon each
Guarantor and upon the successors and permitted assigns of such Guarantor and
shall inure to the benefit of the Agents and the Lenders and their respective
successors and permitted assigns; all references herein to the Borrower and to
the Guarantors shall be deemed to include their respective
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<PAGE>
successors and permitted assigns. The successors and permitted assigns of the
Guarantors and the Borrower shall include, without limitation, their respective
receivers, trustees or debtors-in-possession. All references to the singular
shall be deemed to include the plural where the context so requires.
13. Governing Law. This Guaranty shall be construed and enforced and the
rights and duties of the parties shall be governed in all respects in accordance
with the law of the State of New York.
14. Consent to Jurisdiction and Service of Process. Each of the Guarantors
agrees that the terms of Section 13.20 of the Credit Agreement with respect to
consent to jurisdiction and service of process shall apply equally to this
Security Agreement.
15. Waiver of Jury Trial. EACH OF THE GUARANTORS WAIVES ANY RIGHT TO TRIAL
BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG
ANY OF THE AGENTS, THE LENDERS OR THE GUARANTORS ARISING OUT OF OR RELATED TO
THIS GUARANTY OR ANY OTHER LOAN DOCUMENT. ANY SUCH PERSON MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS GUARANTY WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
16. Waiver of Bond. Each Guarantor waives the posting of any bond otherwise
required of the Agents and the Lenders in connection with any judicial process
or proceeding to realize on the Collateral or any other security for the
Guaranteed Obligations, to enforce any judgment or other court order entered in
favor of the Agents and the Lenders, or to enforce by specific performance,
temporary restraining order, or preliminary or permanent injunction, this
Guaranty or any other agreement or document between any Agent or any Lender and
such Guarantor.
17. Advice of Counsel. Each Guarantor represents and warrants to the
Administrative Agent that it has discussed this Guaranty and, specifically, the
provisions of Sections 13 through 15 hereof, with such Guarantor's lawyers.
18. Notices. All notices and other communications required or desired to be
served, given or delivered hereunder shall be in writing or by a
telecommunications device capable of creating a printed record and shall be
addressed to the party to be notified at the address indicated for each in
Section 13.10 of the Credit Agreement. All such notices and communications shall
be deemed to be validly served, given or delivered (i) ten (10) days following
deposit in the United States mails with proper postage prepaid; (ii) upon
delivery thereof if delivered by hand or by overnight courier service to the
party to be notified; or (iii) upon confirmation of receipt thereof if
transmitted by a telecommunications device.
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<PAGE>
19. Severability. Wherever possible, each provision of this Guaranty shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
20. Collateral. Each Guarantor hereby acknowledges and agrees that its
obligations under this Guaranty are secured pursuant to the terms and provisions
of the applicable Loan Documents to which it is a party.
21. Merger. This Guaranty represents the final agreement of each Guarantor
with respect to the matters contained herein and may not be contradicted by
evidence of prior or contemporaneous agreements, and/or subsequent oral
agreements, between such Guarantor and any Agent or any Lender.
22. Execution in Counterparts. This Guaranty may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
23. No Waiver Under Certain Other Loan Documents. Nothing contained herein
shall be deemed to waive or modify any rights, defenses or claims which such
Guarantor, in its capacity as a Pledgor under a Pledge Agreement or as a Grantor
under a Security Agreement, may have and which it has not expressly waived
therein.
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<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed by each Guarantor
as of the day and year first set forth above.
STELLEX INDUSTRIES, INC.
By____________________________
Name:
Title:
KII HOLDING CORP.
By____________________________
Name:
Title:
TSMD ACQUISITION CORP.
By____________________________
Name:
Title:
KII ACQUISITION CORP.
By____________________________
Name:
Title:
STELLEX MICROWAVE SYSTEMS, INC.
By____________________________
Name:
Title:
STELLEX AEROSPACE
By____________________________
Name:
Title:
<PAGE>
PARAGON PRECISION PRODUCTS
By____________________________
Name:
Title:
BANDY MACHINING INTERNATIONAL
By____________________________
Name:
Title:
SCANNING ELECTRON ANALYSIS
LABORATORIES, INC.
By____________________________
Name:
Title:
GENERAL INSPECTION
LABORATORIES, INC.
By____________________________
Name:
Title:
STELLEX AEROSPACE
HOLDINGS, INC.
By____________________________
Name:
Title:
MONITOR AEROSPACE CORPORATION
By
Name:
Title:
<PAGE>
MONITOR AEROSPACE
INTERNATIONAL CORP.
By____________________________
Name:
Title:
MONITOR MARINE
PRODUCTS, INC.
By____________________________
Name:
Title:
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<PAGE>
EXHIBIT K
FORM OF
CASH COLLATERAL
PLEDGE AND ASSIGNMENT AGREEMENT
THIS CASH COLLATERAL PLEDGE AND ASSIGNMENT AGREEMENT (as amended,
supplemented or otherwise modified from time to time, this "Agreement") dated as
of May 29, 1998, by and among STELLEX INDUSTRIES, INC., a Delaware corporation,
KII HOLDING CORP., a Delaware corporation, TSMD ACQUISITION CORP., a Delaware
corporation, KII ACQUISITION CORP., a Delaware corporation, STELLEX MICROWAVE
SYSTEMS, INC., a California corporation, STELLEX AEROSPACE, a California
corporation, PARAGON PRECISION PRODUCTS, a California corporation, BANDY
MACHINING INTERNATIONAL, a California corporation, SCANNING ELECTRON ANALYSIS
LABORATORIES, INC., a California corporation, and GENERAL INSPECTION
LABORATORIES, INC., a California corporation (each individually, an "Existing
Pledgor", and collectively, the "Existing Pledgors"), STELLEX AEROSPACE
HOLDINGS, INC., a Delaware corporation, MONITOR AEROSPACE CORPORATION, a New
York corporation, MONITOR AEROSPACE INTERNATIONAL CORP., a New York corporation,
and MONITOR MARINE PRODUCTS, INC., a New York corporation (each, individually,
an "Additional Pledgor" and collectively, the "Additional Pledgors", and
together with the Existing Pledgors, the "Pledgors") and FIRST UNION COMMERCIAL
CORPORATION, in its capacity as collateral agent (with its successors in such
capacity, the "Collateral Agent") for the Agents, the Lenders, and the other
Holders, in each case under and as defined in that certain Amended and Restated
Credit Agreement dated as of May 29, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement") among Stellex Industries,
Inc.,(the "Borrower"), Societe Generale ("SG"), as administrative agent (the
"Administrative Agent"), the Collateral Agent (together with the Administrative
Agent, the "Agents"), and the financial institutions from time to time parties
thereto (the "Lenders"). Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the Credit
Agreement.
PRELIMINARY STATEMENTS:
(1) Certain of the Pledgors have a special non-interest-bearing cash
collateral account (the "Account") with First Union National Bank which is
maintained at its office at 1970 Chain Bridge Road, VA1942, McLean, VA 22102,
Account No. 007 5050000000628, in the name of the Collateral Agent and under the
sole control and dominion of the Collateral Agent and subject to the terms of
this Agreement.
(2) The Existing Pledgors and the Collateral Agent have entered into the
Cash Collateral Pledge and Assignment Agreement dated as of October 31, 1997
(the "Existing Agreement")
<PAGE>
with respect to the Account and in connection with that certain Credit Agreement
dated as of October 31, 1997 (the "Existing Credit Agreement") among the
borrowers named therein, the financial institutions from time to time party
thereto, SG, as administrative agent thereunder, and First Union, as syndication
agent and collateral agent thereunder;
(3) It is a condition precedent to the making and the continuation of Loans
and other financial accommodations by the Lenders under the Credit Agreement
that the Pledgors shall have made the pledge and assignment contemplated by this
Agreement.
NOW THEREFORE, in consideration of the premises and in order to induce the
Lenders to make and continue the Loans under the Credit Agreement, each Pledgor
hereby agrees with the Collateral Agent for its benefit and the ratable benefit
of the Lenders, the Agents and the other Holders as follows:
SECTION 1. Pledge and Assignment. Each Pledgor hereby pledges and assigns
to the Collateral Agent for its benefit and the ratable benefit of the Lenders,
Agents and the other Holders, and grants to the Collateral Agent for its benefit
and the ratable benefit of the Lenders, the Agents and the other Holders a
security interest in, the following collateral (the "Collateral"):
(i) the Account, all funds held therein and all certificates and
instruments, if any, from time to time representing or evidencing the
Account;
(ii) all Investments (as hereinafter defined) from time to time, and
all certificates and instruments, if any, from time to time representing or
evidencing the Investments;
(iii) all notes, certificates of deposit, deposit accounts, checks and
other instruments from time to time hereafter delivered to or otherwise
possessed by the Collateral Agent for or on behalf of such Pledgor in
substitution for or in addition to any or all of the then existing
Collateral;
(iv) all interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of the then existing Collateral; and
(v) all proceeds of any and all of the foregoing Collateral.
Each Existing Pledgor reaffirms its pledge of a security interest in the
Pledged Collateral made as of October 31, 1997.
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SECTION 2. Security for Obligations. This Agreement secures the payment of
(i) all the Obligations (ii) all obligations of each Pledgor (other than the
Borrower) under the Amended and Restated Guaranty of even date herewith signed
and delivered by each such Pledgor as guarantor and (iii) all obligations of the
Pledgors now or hereafter existing under this Agreement (all such obligations
being the "Liabilities").
SECTION 3. Delivery of Collateral. All certificates or instruments, if any,
representing or evidencing the Collateral shall be delivered to and held by or
on behalf of the Collateral Agent pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
the Collateral Agent. The Collateral Agent shall have the right, at any time in
its discretion and without notice to the Pledgor, to transfer to or to register
in the name of the Collateral Agent or any of its nominees any or all of the
Collateral. In addition, the Collateral Agent shall have the right at any time
to exchange certificates or instruments representing or evidencing Collateral
for certificates or instruments of smaller or larger denominations.
SECTION 4. Maintaining the Account. So long as any Lender has any
Commitment or any Note shall remain unpaid:
(a) The Pledgors will maintain the Account with First Union National
Bank.
(b) It shall be a term and condition of the Account, notwithstanding
any term or condition to the contrary in any other agreement relating to
the Account and except as otherwise provided by the provisions of Section 6
and Section 14, that no amount (including interest on the Account) shall be
paid or released to or for the account of, or withdrawn by or for the
account of, any Pledgor or any other person or entity from the Account.
The Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other appropriate banking or governmental authority, as may now or hereafter be
in effect.
SECTION 5. Investing of Amounts in the Account. If requested by the
Pledgors, the Collateral Agent will, subject to the provisions of Section 6 and
Section 14, from time to time (a) invest amounts on deposit in the Account in
such Cash Equivalents as the Pledgors may select and the Collateral Agent may
approve and (b) invest interest paid on the Cash Equivalents referred to in
clause (a) above, and reinvest other proceeds of any such Cash Equivalents which
may mature or be sold, in each case in such Cash Equivalents as the Pledgors may
select and the Collateral Agent may approve (the Cash Equivalents referred to in
clauses (a) and (b) above being collectively "Investments"), provided
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<PAGE>
that all such amounts (and all interest on such amounts) invested in Cash
Equivalents shall be available for and shall be deposited into the Account not
later than one year after such amounts were so invested. Interest and proceeds
that are not invested or reinvested in Investments as provided above shall be
deposited and held in the Account.
SECTION 6. Release of Amounts. So long as no Default or Event of Default
shall have occurred and be continuing, funds shall be released to the Pledgors
or their designee among the Loan Parties as follows:
(a) If the Collateral Agent receives a certificate, substantially in
the form of Exhibit A attached hereto, signed by any Pledgor that has
deposited Net Cash Proceeds into the Account on a Business Day within the
immediately preceding 365 day period (the "Deposited Amount"), the
Collateral Agent shall release the amount requested in such certificate to
such Pledgor.
(b) After the Commitments have been terminated and at the request of
the Pledgors, amounts of credit balance of the Account shall be released to
the Pledgors.
Each Pledgor authorizes the Collateral Agent to liquidate Investments if and as
necessary in order for the Collateral Agent to comply with clauses (a) and (b)
above.
SECTION 7. Payment of Amounts to Administrative Agent for Application. On
the first anniversary of the date on which each amount is deposited into the
Account, Investments shall be liquidated, if necessary, so that an amount equal
to such deposited amount, if such deposited amount has not previously been
released in accordance with the provisions of Section 6, shall be remitted by
the Collateral Agent to the Administrative Agent for application by the
Administrative Agent to outstanding Obligations in accordance with the
provisions of the Credit Agreement.
SECTION 8. Representations and Warranties. Each Pledgor represents and
warrants as follows:
(a) Such Pledgor is the legal and beneficial owner of the Collateral free
and clear of any lien, security interest, option or other charge or encumbrance
except for the security interest created by this Agreement.
(b) The pledge and assignment of the Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in the
Collateral, securing the payment of the Liabilities.
(c) No consent of any other person or entity and no authorization,
approval, or other action by, and no notice to or
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<PAGE>
filing with, any governmental authority or regulatory body is required (i) for
the pledge and assignment by such Pledgor of the Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by
such Pledgor, (ii) for the perfection or maintenance of the security interest
created hereby (including the first priority nature of such security interest)
or (iii) for the exercise by the Collateral Agent of its rights and remedies
hereunder.
SECTION 9. Further Assurances. Each Pledgor agrees that at any time and
from time to time, at the expense of the Pledgors, such Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Collateral Agent may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
SECTION 10. Transfers and Other Liens. Each Pledgor agrees that it will not
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, or (ii) create or
permit to exist any lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Collateral, except for the
security interest under this Agreement.
SECTION 11. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
hereby appoints the Collateral Agent such Pledgor's attorney-in-fact, with full
authority in the place and stead of such Pledgor and in the name of such Pledgor
or otherwise, from time to time in the Collateral Agent's discretion to take any
action and to execute any instrument which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation, to receive, indorse and collect all instruments made payable
to such Pledgor or Pledgors representing any interest payment, dividend or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
SECTION 12. Collateral Agent May Perform. If any Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgors under Section
15.
SECTION 13. The Collateral Agent's Duties. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest in the Collateral
and shall not impose any duty upon it to exercise any such powers. Except for
the safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Collateral Agent shall
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<PAGE>
have no duty as to any Collateral, as to ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not the Collateral Agent, any Lender or
the Administrative Agent has or is deemed to have knowledge of such matters, or
as to the taking of any necessary steps to preserve rights against any parties
or any other rights pertaining to any Collateral. The Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Collateral Agent accords its own property.
SECTION 14. Remedies upon Default. If any Event of Default shall have
occurred and be continuing:
(a) The Collateral Agent may, without notice to the Pledgors except as
required by law and at any time or from time to time, charge, set-off and
otherwise apply all or any part of the Collateral in the Account against
the Liabilities or any part thereof.
(b) The Collateral Agent may also exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party
on default under the Uniform Commercial Code in effect in the State of New
York at that time (the "Code") (whether or not the Code applies to the
affected Collateral), and may also, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any of the Collateral Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Collateral Agent may deem commercially reasonable. Each
Pledgor agrees that, to the extent notice of sale shall be required by law,
at least ten days' notice to the Pledgors of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Collateral Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Collateral Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(c) Any cash held by the Collateral Agent as Collateral and all cash
proceeds received by the Collateral Agent in respect of any sale of,
collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Collateral Agent, be held by the
Collateral Agent as collateral for, and/or then or at any time thereafter
be applied (after payment of any amounts payable to the Collateral Agent
pursuant to Section 15) in
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<PAGE>
whole or in part by the Collateral Agent for the ratable benefit of the
Agents, the Lenders and the other Holders against, all or any part of the
Liabilities in such order as the Collateral Agent shall elect. Any surplus
of such cash or cash proceeds held by the Collateral Agent and remaining
after payment in full of all the Liabilities shall be paid over to the
Pledgors.
SECTION 15. Expenses. The Pledgors will upon demand pay to the Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent, the Lenders or the
Administrative Agent hereunder or (iv) the failure by any Pledgor to perform or
observe any of the provisions hereof.
SECTION 16. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, and no consent to any departure by any Pledgor herefrom shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 17. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered to it, if to the Pledgors, at their respective addresses
specified in the Guaranty signed by each of the Pledgors of even date herewith,
and if to the Collateral Agent, at its address specified in the Credit
Agreement, or, as to either party, at such other address as shall be designated
by such party in a written notice to the other party. All such notices and other
communications shall, when mailed, telecopied, telegraphed, telexed or cabled,
be effective when deposited in the mails, telecopied, delivered to the telegraph
company, confirmed by telex answerback or delivered to the cable company,
respectively.
SECTION 18. Continuing Security Interest; Assignments under Credit
Agreement. This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the later of (x)
the payment in full of the Liabilities and all other amounts payable under this
Agreement and (y) the Commitment Termination Date, (ii) be binding upon each
Pledgor, its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Collateral Agent, the Administrative Agent, the Lenders, and
the other Holders, and each of their respective successors, transferees and
assigns. Without limiting the generality of the foregoing clause
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<PAGE>
(iii), any Lender or any Agent may assign or otherwise transfer all or any
portion of its rights and obligations under the Credit Agreement (including,
without limitation, all or any portion of its Commitment, the Loans owing to it
and any Note held by it) to any other person or entity, and such other person or
entity shall thereupon become vested with all the benefits in respect thereof
granted to such Lender or such Agent herein or otherwise. Upon the later of the
payment in full of the Liabilities and all other amounts payable under this
Agreement and the Commitment Termination Date, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Pledgors. Upon any such termination, the Collateral Agent will, at the Pledgors'
expense, return to the Pledgors such of the Collateral as shall not have been
sold or otherwise applied pursuant to the terms hereof and execute and deliver
to the Pledgors such documents as the Pledgors shall reasonably request to
evidence such termination.
SECTION 19. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of New York. Unless otherwise defined herein
or in the Credit Agreement, terms defined in Article 9 of the Code are used
herein as therein defined.
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<PAGE>
IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
STELLEX INDUSTRIES, INC.
By____________________________
Name:
Title:
KII HOLDING CORP.
By____________________________
Name:
Title:
TSMD ACQUISITION CORP.
By____________________________
Name:
Title:
KII ACQUISITION CORP.
By____________________________
Name:
Title:
STELLEX MICROWAVE SYSTEMS, INC.
By____________________________
Name:
Title:
STELLEX AEROSPACE
By____________________________
Name:
Title:
PARAGON PRECISION PRODUCTS
By____________________________
Name:
Title:
S-1
<PAGE>
BANDY MACHINING INTERNATIONAL
By____________________________
Name:
Title:
SCANNING ELECTRON ANALYSIS
LABORATORIES, INC.
By____________________________
Name:
Title:
GENERAL INSPECTION
LABORATORIES, INC.
By____________________________
Name:
Title:
STELLEX AEROSPACE HOLDINGS, INC.
By____________________________
Name:
Title:
MONITOR AEROSPACE CORPORATION
By____________________________
Name:
Title:
MONITOR AEROSPACE INTERNATIONAL
CORP.
By____________________________
Name:
Title:
MONITOR MARINE PRODUCTS, INC.
By____________________________
Name:
Title:
S-2
<PAGE>
Acknowledged and agreed to as of May 29, 1998.
FIRST UNION COMMERCIAL CORPORATION, as Collateral Agent
By:_____________________________
Name:
Title:
S-3
<PAGE>
EXHIBIT A
FORM OF OFFICER'S CERTIFICATE
I, __________________, the duly [appointed] [elected] _____________1 of
[Name of Pledgor] (the "Pledgor"), do hereby certify as follows in connection
with the Cash Collateral Pledge Agreement and the Credit Agreement (each, as
defined below):
1. Reference is made to that certain Cash Collateral Pledge and Assignment
Agreement(as amended, supplemented or otherwise modified from time to time, the
"Cash Collateral Pledge Agreement") dated as of May 29, 1998, by and among the
Pledgors named therein and First Union Commercial Corporation, in its capacity
as collateral agent (with its successors in such capacity, the "Collateral
Agent") for the Agents, the Lenders, and the other Holders, in each case under
and as defined in that certain Amended and Restated Credit Agreement dated as of
May 29, 1998 (as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement") among Stellex Industries, Inc., as the borrower (the
"Borrower"), Societe Generale, as administrative agent (the "Administrative
Agent"), the Collateral Agent (together with the Administrative Agent, the
"Agents"), and the financial institutions from time to time parties thereto (the
"Lenders"). Capitalized terms used in this Certificate and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the Cash
Collateral Pledge Agreement.
2. The Pledgor is requesting that $__________ (the "Requested Amount") be
released to it or its designee among the Loan Parties on __________________ (the
"Release Date") from the Account.
3. The Requested Amount has been deposited by the Pledgor within the 365
day period immediately preceding the Release Date.
4. The Pledgor or its designee among the Loan Parties is using the
Requested Amount [to acquire an asset on the Release Date] or [to fund the
purchase price of a Permitted Acquisition on the Release Date] in accordance
with the provisions of the Credit Agreement.
5. No Default or Event of Default under the Credit Agreement has occurred
and is continuing.
6. All representatives and warranties of the Pledgor contained in the
Credit Agreement are true and correct as of
- --------
(1) Chief Financial Officer, or other officer of the Pledgor with significant
supervisory responsibility for the financial affairs of the Pledgor.
<PAGE>
today, other than those that expressly speak as of a different date.
[5. All of the conditions precedent set forth in Section 5.03 of the Credit
Agreement have been satisfied or waived in writing by the Lenders.]2
WITNESS my hand this __ day of __________, 199_:
--------------------------
Name:
Title:
- --------
(2) To be used if the Requested Amount is being requested in connection with a
Permitted Acquisition.
<PAGE>
EXHIBIT L
FORM OF [AMENDED AND RESTATED] SECURITY AGREEMENT
THIS [AMENDED AND RESTATED] SECURITY AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this "Security Agreement") dated as of May
29, 1998, by and among [NAME OF GRANTOR] (with its successors and permitted
assigns, the "Grantor"), and FIRST UNION COMMERCIAL CORPORATION ("First Union"),
in its capacity as collateral agent (with its successors in such capacity, the
"Collateral Agent") for the Agents, the Lenders, and the other Holders, in each
case under and as defined in that certain Amended and Restated Credit Agreement
dated as of May 29, 1998 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement") among Stellex Industries, Inc. (the
"Borrower"), Societe Generale ("SG"), as administrative agent (the
"Administrative Agent") and the Collateral Agent (together with the
Administrative Agent, the "Agents"), and the financial institutions from time to
time parties thereto (the "Lenders"). Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the Credit Agreement.
WITNESSETH:
[WHEREAS, the parties hereto have entered into the Security Agreement dated
as of October 31, 1997 (the "Existing Security Agreement") in connection with
that certain Credit Agreement dated as of October 31, 1997 (the "Existing Credit
Agreement") among the borrowers named therein, the financial institutions from
time to time party thereto, SG, as administrative agent thereunder, and First
Union, as syndication agent and collateral agent thereunder;]
WHEREAS, in order to secure the prompt and complete payment, observance and
performance of (i) all of the Obligations, (ii) all of the Grantor's obligations
under the Amended and Restated Guaranty of even date herewith entered into in
connection with the Credit Agreement and (iii) all of the Grantor's obligations
and liabilities hereunder and in connection herewith (all the Obligations and
such obligations and liabilities hereunder being hereinafter referred to
collectively as the "Liabilities"), the Agents and the Lenders have required as
a condition, among others, to entering into the Credit Agreement that the
Grantor execute and deliver this Security Agreement;
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE>
1. Defined Terms.
(a) Unless otherwise defined herein, each capitalized term used herein that
is defined in the Credit Agreement shall have the meaning specified for such
term in the Credit Agreement. Unless otherwise defined herein or in the Credit
Agreement, all terms defined in Article 8 and Article 9 of the Uniform
Commercial Code in effect as of the date hereof in the State of New York are
used herein as defined therein as of the date hereof.
(b) The words "hereby," "hereof," "herein" and "hereunder" and words of
like import when used in this Security Agreement shall refer to this Security
Agreement as a whole and not to any particular provision of this Security
Agreement, and section references are to this Security Agreement unless
otherwise specified.
(c) All terms defined in this Security Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.
2. Grant of Security Interest. To secure the prompt and complete payment,
observance and performance of all the Liabilities, the Grantor hereby grants to
the Collateral Agent for the ratable benefit of the Agents, the Lenders, and the
other Holders, a security interest in all of the Grantor's rights, title and
interests in and to the following property, whether now owned or existing or
hereafter arising or acquired and wheresoever located (the "Collateral"):
(a) ACCOUNTS: All present and future accounts, accounts receivable and
other rights of the Grantor to payment for the sale or lease of goods or the
rendition of services (except those evidenced by instruments or chattel paper),
whether now existing or hereafter arising and wherever arising, and whether or
not they have been earned by performance (collectively, "Accounts");
(b) EQUIPMENT: All of the Grantor's present and future (i) equipment and
fixtures, including, without limitation, wherever located, all machinery,
manufacturing, distribution, selling, data processing and office equipment,
furniture, furnishings, assembly systems, tools, tooling, molds, dies,
appliances and vehicles, (ii) other tangible personal property (other than the
Grantor's Inventory) and (iii) any and all accessions, parts and appurtenances
attached to any of the foregoing or used in connection therewith, and any
substitutions therefor and replacements, products and proceeds thereof
(collectively, "Equipment");
(c) GENERAL INTANGIBLES: All of the Grantor's present and future general
intangibles, choses in action, causes of
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<PAGE>
action, and all other intangible personal property of every kind and nature
including, without limitation, corporate, partnership and other business books
and records, inventions, designs, patents, patent applications, trademarks,
service marks, trademark applications, service mark applications, trade names,
trade secrets, goodwill, registrations, copyrights, licenses, franchises,
customer lists, computer programs, software and other computer materials, tax
refunds, tax refund claims, rights and claims against charters, carriers,
shippers, franchisees, lessors, and lessees, and rights to indemnification,
intercompany receivables, and any security documents executed in connection
therewith, deposit accounts (excluding tax, payroll and trust accounts),
proceeds of any letters of credit, indemnity, warranty or guaranty payable to
the Grantor from time to time with respect to the foregoing or proceeds of any
insurance policies on which the Grantor is named as beneficiary, claims against
third parties for advances and other financial accommodations and any other
obligations whatsoever owing to the Grantor, contract rights, customer and
supplier contracts, rights in and to all security agreements, security interests
or other security held by the Grantor to secure payment of the Grantor's
accounts, all right, title and interest under leases, subleases, and concessions
and other agreements relating to real or personal property (including, without
limitation, all rents, issues and profits related thereto), rights in and under
guarantees, instruments, securities, documents of title and other contracts
securing, evidencing, supporting or otherwise relating to any of the foregoing,
together with all rights in any goods, merchandise or Inventory (as defined
below) which any of the foregoing may represent (collectively, "General
Intangibles");
(d) INVENTORY: All of the Grantor's present and future (i) inventory, (ii)
goods, merchandise and other personal property furnished or to be furnished
under any contract of service or intended for sale or lease, and all goods
consigned by the Grantor and all other items which have previously constituted
Equipment but are then currently being held for sale or lease in the ordinary
course of the Grantor's business, (iii) raw materials, work-in-process and
finished goods, (iv) materials, components and supplies of any kind, nature or
description used or consumed in the Grantor's business or in connection with the
manufacture, production, packing, shipping, advertising, finishing or sale of
any of the Property described in clauses (i) through (iii) above, (v) goods in
which the Grantor has a joint or other interest to the extent of the Grantor's
interest therein or right of any kind (including, without limitation, goods in
which the Grantor has an interest or right as consignee), and (vi) goods which
are returned to or repossessed by the Grantor; in each case whether in the
possession of the Grantor, a bailee, a consignee, or any other Person for sale,
storage, transit, processing, use or otherwise, and any and all documents for or
relating to any of the foregoing (collectively, "Inventory");
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<PAGE>
(e) CHATTEL PAPER, INSTRUMENTS AND DOCUMENTS: All chattel paper, all
instruments (as defined in Article 9 of the Uniform Commercial Code) and
securities (as defined in Article 8 of the Uniform Commercial Code), all bills
of lading, warehouse receipts and other documents of title and documents, in
each instance whether now owned or hereafter acquired by the Grantor
(collectively, "Chattel Paper, Instruments and Documents");
(f) INVESTMENT PROPERTY: All investment property (as defined in Article 9
of the Uniform Commercial Code);
(g) OTHER PROPERTY: To the extent not included in the foregoing (and except
to the extent expressly excluded from the foregoing), all property or interests
in property now owned or hereafter acquired by the Grantor, whether in the
possession, custody or control of any Agent, any Lender, or any other Holder, or
any agent or affiliate of any of them in any way or for any purpose (whether for
safekeeping, deposit, custody, pledge, transmission, collection or otherwise),
including, without limitation, all rights and interests of the Grantor, now
existing or hereafter arising and however and wherever arising, in respect of
any and all (w) notes, drafts, letters of credit, stocks, bonds, and debt and
equity securities, whether or not certificated, and warrants, options, puts and
calls and other rights to acquire or otherwise relating to the same; (x) money;
(y) proceeds of loans, including, without limitation, all the Loans made to the
Grantor under the Credit Agreement; and (z) insurance proceeds and books and
records relating to any of the property covered by this Security Agreement
(collectively, "Other Property");
together with respect to each of the items set forth in paragraphs (a) through
(g) above with all accessions and additions thereto, substitutions therefor, and
replacements, proceeds and products thereof.
[The Grantor hereby reaffirms its grant of a security interest in the
Collateral made as of October 31, 1997.]
3. Continuing Liability. The Grantor hereby expressly agrees that,
notwithstanding anything set forth herein to the contrary, the Grantor shall
remain solely responsible under each contract, agreement, interest or obligation
as to which a Lien has been granted to the Collateral Agent hereunder for the
observance and performance of all of the conditions and obligations to be
observed and performed by the Grantor thereunder, all in accordance with and
pursuant to the terms and provisions thereof, and the exercise by the Collateral
Agent, any other Agent or any Lender of any rights under this Security
Agreement, the Credit Agreement or any other Loan Document shall not release the
Grantor from any of the Grantor's duties or obligations hereunder and under each
such contract, agreement, interest or obligation. None of the Collateral Agent,
any other
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<PAGE>
Agent or any Lender shall have any duty, responsibility, obligation or liability
under any such contract, agreement, interest or obligation by reason of or
arising out of this Security Agreement or the assignment thereof by the Grantor
to the Collateral Agent or the granting by the Grantor to the Collateral Agent
of a Lien thereon or the receipt by the Collateral Agent, any other Agent or any
Lender of any payment relating to any such contract, agreement, interest or
obligation pursuant hereto, nor shall the Collateral Agent, any other Agent or
any Lender be required or obligated (nor to the extent prohibited by the terms
of such contract, agreement, interest or obligation or applicable law, rule or
regulation, shall the Collateral Agent, any other Agent or any Lender be
permitted), in any manner, to (a) perform or fulfill any of the obligations of
the Grantor thereunder or pursuant thereto, (b) make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by the
Grantor or the sufficiency of any performance by any party under any such
contract, agreement, interest or obligation, or (c) present or file any claim,
or take any action to collect or enforce any performance or payment of any
amounts which may have been assigned to the Grantor, on which the Grantor has
been granted a Lien to which the Grantor may be entitled at any time or times.
4. Representations, Warranties and Covenants. The Grantor hereby
represents, warrants and covenants that as of the date of the execution of this
Security Agreement, and until the termination of this Security Agreement
pursuant to Section 14 below:
(a) All of the Equipment and Inventory (other than Inventory and
Equipment sold in accordance with the terms of the Credit Agreement,
Equipment being repaired or serviced, Inventory in transit or in the
possession and control of subcontractors of the Grantor or any other Person
for processing and vehicles) are located at the places specified in
Schedule 1 attached hereto and such location is an owned, leased, bailment
or other location as specified in Schedule 1 attached hereto. As of the
date hereof, the correct corporate name, the principal place of business,
the chief executive office, and the federal tax identification number of
the Grantor and the places where the Grantor's books and records concerning
the Collateral are currently kept are set forth in Schedule 2 attached
hereto and made a part hereof, and the Grantor will not change such
principal place of business or chief executive office or remove such
records without (i) providing the Collateral Agent with at least thirty
(30) days' prior written notice of such change, and (ii) making all filings
under the Uniform Commercial Code necessary or appropriate to preserve the
perfection of the security interests described herein to the extent such
security interest may be perfected by such filings. Except as permitted
under the Credit Agreement, the Grantor will
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<PAGE>
not change its name, identity or corporate structure in any manner which
might make any financing statement filed hereunder misleading, unless the
Grantor shall have (A) given the Collateral Agent at least thirty (30)
days' prior written notice thereof (and received any consent that may be
required under the terms of the Credit Agreement), and (B) certified to the
Collateral Agent that all filings reflecting such new name, identity or
structure have been made which are necessary or appropriate to preserve the
perfection of the security interests described herein. The Grantor will
hold and preserve such records and chattel paper and will permit
representatives of the Collateral Agent at any time during normal business
hours to inspect and make abstracts from such records and chattel paper.
(b) The Grantor has exclusive possession and control of the Equipment
and Inventory, except for (i) Inventory in the possession and control of a
bailee or warehouseman of the Grantor as specified in Schedule 1 attached
hereto; (ii) Inventory in the possession and control of subcontractors of
the Grantor or any other Person for processing; (iii) Equipment being
repaired or serviced; and (iv) Equipment and Inventory in transit with
common or other carriers.
(c) The Grantor is the legal and beneficial owner of the Collateral
free and clear of all Liens except as permitted under Section 9.03 of the
Credit Agreement. The Grantor has not, during the five (5) years preceding
the date hereof, been known as or used any other corporate or fictitious
name, except as disclosed on Schedule 3 hereto, nor acquired all or
substantially all the assets, capital stock or operating unit of any
Person, except as disclosed on Schedule 3 hereto and each predecessor in
interest of the Grantor during the five (5) years preceding the Closing
Date is disclosed on Schedule 3 hereto.
(d) This Security Agreement creates in favor of the Collateral Agent a
legal, valid and enforceable security interest in the Collateral, securing
the payment of the Liabilities. When financing statements have been filed
in the appropriate offices in the locations listed on Schedules 1 and 2
hereto, the Collateral Agent will have a fully perfected first priority
Lien on the Collateral to the extent such Lien may be perfected by Uniform
Commercial Code filings, except, in the case of priority, for Liens
permitted by Section 9.03 of the Credit Agreement.
5. Covenants. The Grantor covenants and agrees with the Collateral Agent
that from and after the date of this Secur ity Agreement and until the
termination of this Security Agreement pursuant to Section 14 below:
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<PAGE>
(a) At any time and from time to time, upon the Collateral Agent's
written request and at the expense of the Grantor, the Grantor will
promptly and duly execute and deliver any and all such further instruments
and documents and take such further action as the Collateral Agent
reasonably may deem desirable in order to perfect and protect any Lien
granted or purported to be granted hereby or to enable the Collateral Agent
to exercise and enforce its rights and remedies hereunder with respect to
the Collateral. Without limiting the generality of the foregoing, the
Grantor will: (i) upon the occurrence and during the continuance of an
Event of Default, at the request of the Collateral Agent, mark
conspicuously each item of chattel paper included in the Collateral and
each related contract and, each of its records pertaining to the
Collateral, with a legend, in form and substance satisfactory to the
Collateral Agent, indicating that such document, chattel paper, related
contract or Collateral is subject to the security interest granted hereby;
(ii) if any Collateral shall be evidenced by a promissory note or other
instrument (other than checks or drafts received in the ordinary course of
the Grantor's business), deliver and pledge to the Collateral Agent
hereunder such note or instrument duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to the Collateral Agent; and (iii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices as the Collateral Agent may request, as may be
necessary or desirable, in order to perfect and preserve the security
interest granted or purported to be granted hereby. The Grantor hereby
authorizes the Collateral Agent to file any such financing or continuation
statements without the signature of the Grantor to the extent permitted by
applicable law. The Grantor hereby agrees that a carbon, photographic,
photostatic or other reproduction of this Security Agreement or of a
financing statement is sufficient as a financing statement to the extent
permitted by applicable law.
(b) The Grantor shall keep the Equipment and Inventory (other than
Inventory and Equipment sold in accordance with the terms of the Credit
Agreement, Equipment being repaired or serviced, Inventory in transit or in
the possession and control of subcontractors of the Grantor or any other
person for Processing and vehicles) at the places specified in Schedule 1
hereto and deliver written notice to the Collateral Agent at least 30 days
prior to establishing any other location at which it reasonably expects to
maintain Inventory and/or Equipment (it being understood and agreed that
all action required by Section 5(a)(iii) hereof shall have been taken in
the relevant jurisdiction with respect to all such Equipment and/or
Inventory prior to the
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<PAGE>
establishment of any such location). Upon the establishment of any such
location, and after notice thereof to the Collateral Agent as required in
the preceding sentence, Schedule 1 hereto shall be deemed amended to add
such location thereto without further action by the Collateral Agent or the
Grantor and the Grantor hereby authorizes the Collateral Agent to
substitute a new Schedule 1 hereto to reflect such additional location(s).
(c) The Grantor will keep and maintain at the Grantor's own cost and
expense satisfactory and complete records of the Collateral in a manner
reasonably acceptable to the Collateral Agent, including, without
limitation, a record of all payments received and all credits granted with
respect to such Collateral and a record of the Collateral Agent's security
interest in the Collateral. Upon the occurrence and during the continuance
of an Event of Default, the Grantor shall, for the Collateral Agent's
further security, deliver and turn over to the Collateral Agent or the
Collateral Agent's designated representatives at any time upon three (3)
Business Days' notice from the Collateral Agent or the Collateral Agent's
designated representative, copies of any such books and records (including,
without limitation, subject to limitations in applicable licensing or
similar arrangements, any and all computer tapes, programs and source codes
relating to the Collateral or any part or parts thereof).
(d) In any suit, proceeding or action brought by the Collateral Agent
under any account comprising part of the Collateral, the Grantor will save,
indemnify and keep the Collateral Agent and each Lender harmless from and
against all expense, loss or damages suffered by reason of any defense,
setoff, counterclaim, recoupment or reduction of liability whatsoever of
the obligor thereunder, arising out of a breach by the Grantor of any
obligation or arising out of any other agreement, indebtedness or liability
at any time owing to or in favor of such obligor or its successors from the
Grantor, and all such obligations of the Grantor shall be and shall remain
enforceable against and only against the Grantor and shall not be
enforceable against the Collateral Agent or any Lender; provided, however,
the Grantor shall have no obligation to the Collateral Agent with respect
to the matters indemnified pursuant to this subsection (d) resulting from
the willful misconduct or gross negligence of the Collateral Agent, as
determined in a final non-appealable judgment by a court of competent
jurisdiction.
(e) The Grantor will not create, permit or suffer to exist, and will
defend the Collateral against and take such other action as is necessary to
remove, any Lien on such Collateral, other than Liens permitted under
Section 9.03 of
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<PAGE>
the Credit Agreement, and will defend the right, title and interest of the
Collateral Agent in and to the Grantor's rights to such Collateral,
including, without limitation, the proceeds and products thereof, against
the claims and demands of all Persons whatsoever other than claims secured
by liens permitted under Section 9.03 of the Credit Agreement.
(f) The Grantor will not, without the Collateral Agent's prior written
consent, except in the ordinary course of business and for amounts which
are not material to the Grantor in the aggregate, (i) grant any extension
of the time of payment of any of the Collateral or compromise, compound or
settle the same for less than the full amount thereof; (ii) release, wholly
or partly, any Person liable for the payment thereof; or (iii) allow any
credit or discount whatsoever thereon other than trade discounts granted in
the ordinary course of business.
(g) The Grantor will advise the Collateral Agent promptly, in
reasonable detail, of (i) any material Lien or claim made by or asserted
against any or all of the Collateral (other than Liens existing on the
Closing Date and listed on Schedule 1.01(A) to the Credit Agreement and
Liens permitted under Section 9.03 of the Credit Agreement), and (ii) the
occurrence of any other event which would have a material adverse effect on
the aggregate value of the Collateral or on the Liens with respect to such
Collateral created hereunder.
6. Collections. Except as otherwise provided in this Section 6, the Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to the Grantor under the Accounts. In connection with such collections, the
Grantor may take (and, after the occurrence of an Event of Default, at the
Collateral Agent's direction, must take) such action as the Grantor or, after
the occurrence and during the continuation an Event of Default, the Collateral
Agent may deem necessary or advisable to enforce collection of the Accounts;
provided, however, that the Collateral Agent shall have the right at any time,
upon the occurrence and during the continuance of an Event of Default, (i) to
require the Grantor to prepare notices of assignment for each government
contract to which the Grantor is a party and to file such notices of assignment
with the appropriate contracting officer of the United States Government and
(ii) to otherwise notify the account debtors or obligors under any Accounts of
the assignment of such Accounts to the Collateral Agent and to direct such
account debtors or obligors to make payment of all amounts due or to become due
to the Grantor thereunder directly to the Collateral Agent and, upon such
notification and at the expense of the Grantor, to enforce collection of any
such Accounts, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and
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<PAGE>
to the same extent as the Grantor might have done. After receipt by the Grantor
of notice from the Collateral Agent requiring performance of any of the acts
referred to in the proviso to the preceding sentence, (i) all amounts and
proceeds (including instruments) received by the Grantor in respect of the
Accounts shall be received in trust for the ratable benefit of the Collateral
Agent, the Lenders, and the other Holders hereunder, shall be segregated from
other funds of the Grantor and shall be forthwith paid over to the Collateral
Agent in the same form as so received (with any necessary endorsement) to be
applied to the Obligations in accordance with the Credit Agreement (including,
without limitation, Section 3.02(b)(ii) thereof) and (ii) the Grantor shall not
adjust, settle or compromise the amount or payment of any Account, release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.
7. Remedies, Application of Proceeds, Rights upon Event of Default.
(a) Upon the occurrence and during the continuance of an Event of Default,
the Collateral Agent may exercise in respect of the Collateral, in addition to
all other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies provided for in the Credit Agreement and all the
rights and remedies of a secured party under the Uniform Commercial Code, and
all other applicable law as in effect in any relevant jurisdiction. In addition,
the Collateral Agent may, upon the occurrence and during the continuance of an
Event of Default:
(i) require the Grantor to, and the Grantor hereby agrees that it will
at its expense and upon request of the Collateral Agent, promptly assemble
all, or such part, of the Collateral as directed by the Collateral Agent
and make such Collateral available to the Collateral Agent at a place
designated by the Collateral Agent, which place shall be reasonably
convenient to the Collateral Agent, whether at the premises of the Grantor
or otherwise;
(ii) enter, with or without process of law and without breach of the
peace, any premises where any of the Collateral or the books and records of
the Grantor related thereto are or may be located and, without charge or
liability to the Collateral Agent, seize and remove such Collateral and
such books and records from such premises, or remain upon such premises and
use the same for the purpose of enforcing any and all rights and remedies
of the Collateral Agent under this Security Agreement, the Credit Agreement
or any of the other Loan Documents; and
(iii) without notice, except as specified below, sell, lease, assign,
grant an option or options to purchase or
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<PAGE>
otherwise dispose of all or any part of the Collateral in one or more
parcels, at public or private sale or sales, at any exchange, broker's
board or at any of the Collateral Agent's offices or elsewhere, at such
prices as the Collateral Agent may deem best, for cash, on credit or for
future delivery, and upon such other terms as the Collateral Agent may deem
commercially reasonable; provided, however, that the Grantor shall not be
credited with the net proceeds of any such credit sale, future delivery or
lease of the Collateral until the cash proceeds thereof are actually
received by the Collateral Agent and provided, further that any such sale,
lease assignment, option to purchase or other disposition (each a
"disposition") shall be subject to any prohibition or restriction thereon
contained in any agreement, contract, interest or right comprising a part
of the Collateral subject to such disposition and any applicable law, rule
or regulation. The Grantor agrees that, to the extent notice of sale shall
be required by law, ten (10) or more Business Days' notice, or such longer
period as may be required by law, to the Grantor of the time and place of
any public sale, or the time after which any private sale is to be made,
shall constitute reasonable notification. No notification required by law
need be given to the Grantor if the Grantor has signed, after the
occurrence of an Event of Default, a statement renouncing any right to
notification of sale or other intended disposition. The Collateral Agent
shall not be obligated to make any sale of any of the Collateral regardless
of notice of sale having been given. The Collateral Agent may adjourn any
public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. The Collateral Agent, each
other Agent and each Lender shall have the right upon any such public sale
or sales and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Grantor, which right or equity is
hereby expressly waived and released. In the event of a sale of any
Collateral, or any part thereof, to a Lender, the Collateral Agent or any
other Agent upon the occurrence and during the continuance of an Event of
Default, such Lender or Agent shall not deduct or offset from any part of
the purchase price to be paid therefor any indebtedness owing to it by the
Grantor. Any and all proceeds received by the Collateral Agent with respect
to any sale of, collection from or other realization upon all or any part
of the Collateral, whether consisting of monies, checks, notes, drafts,
bills of exchange, money orders or commercial paper of any kind whatsoever,
shall be held by the Collateral Agent and distributed by the Collateral
Agent in accordance with the Credit Agreement (including, without
limitation, Section 3.02(b)(ii) thereof) and the Grantor shall remain
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<PAGE>
liable for any deficiency following the sale of the Collateral. Subject to
the terms of any applicable license agreement to which the Grantor is a
party, the Collateral Agent is hereby granted an irrevocable license or
other right to use, without charge, the Grantor's labels, copyrights,
patents, rights of use of any name, trade names, general intangibles,
trademarks and advertising matter, or any property of a similar nature, in
completing production of, advertising for sale and selling any Collateral.
(b) To the extent permitted by applicable law, the Grantor waives all
claims, damages and demands against the Collateral Agent, any other Agent or any
Lender arising out of the repossession, retention or sale of the Collateral, or
any part or parts thereof, except as provided in Section 9 hereof.
(c) The Grantor recognizes that in the event the Grantor fails to perform,
observe or discharge any of its obligations or liabilities under this Security
Agreement, no remedy at law will provide adequate relief to the Collateral Agent
and the Collateral Agent shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
(d) The rights and remedies provided under this Security Agreement are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law or equity.
8. The Collateral Agent May Perform. If the Grantor fails to perform any
agreement contained herein, the Collateral Agent, after giving notice in
accordance with the Credit Agreement, may itself perform, or cause performance
of, such agreement, and the expenses of the Collateral Agent incurred in
connection therewith shall constitute an Obligation payable by the Grantor in
accordance with the terms of the Credit Agreement.
9. The Collateral Agent's Duty of Care. The Collateral Agent shall not be
liable for any acts, omissions, errors of judgment or mistakes of fact or law
including, without limitation, acts, omissions, errors or mistakes with respect
to the Collateral, except for those arising out of or in connection with the
Collateral Agent's (i) gross negligence or willful misconduct, or (ii) failure
to use reasonable care with respect to the safe custody of the Collateral in the
Collateral Agent's possession. Without limiting the generality of the foregoing,
the Collateral Agent shall be under no obligation to take any steps necessary to
preserve rights in the Collateral against any other parties but may do so at its
option. All expenses incurred in connection therewith shall be for the sole
account of the Grantor, and shall constitute part of the Liabilities secured
hereby.
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<PAGE>
10. Marshalling, Payments Set Aside; Collateral Agent Appointed
Attorney-in-Fact. The Collateral Agent shall be under no obligation to marshal
any assets in favor of the Grantor or against or in payment of any or all of the
Liabilities. To the extent that the Grantor makes a payment or payments to the
Collateral Agent or the Collateral Agent receives any payment or proceeds of the
Collateral for the ratable benefit of the Collateral Agent, any other Agent, any
Lender, or any other Holder, which payment(s) or proceeds or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Liabilities or any part
thereof intended to be satisfied shall be revived and continue in full force and
effect, as if such payment or proceeds had not been received by the Collateral
Agent.
The Grantor agrees, promptly upon all requests of the Collateral Agent, to
take any action and execute any instrument which the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Security Agreement.
The Grantor hereby irrevocably constitutes and appoints the Collateral Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of the
Grantor, or in its own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes hereof and, without limiting the generality of the foregoing, hereby
gives the Collateral Agent the power and right on behalf of the Grantor, without
notice to or assent by the Grantor, to the extent permitted by applicable law,
to do the following:
(i) to obtain and adjust insurance required to be paid to the
Collateral Agent subject to and in accordance with Section 8.05 of the
Credit Agreement;
(ii) upon the occurrence and during the continuance of an Event of
Default, ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipt for monies due and to become due under or in
respect of any of the Collateral;
(iii) upon the occurrence and during the continuance of an Event of
Default, receive, take, endorse, assign and deliver any and all checks,
notes, drafts, acceptances, documents and other negotiable and
nonnegotiable instruments, documents and chattel paper taken or received by
the Collateral Agent in connection with this Security Agreement;
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<PAGE>
(iv) upon the occurrence and during the continuance of an Event of
Default, to commence, file, prosecute, defend, settle, compromise or adjust
any claim, suit, action or proceeding with respect to the Collateral;
(v) upon the occurrence and during the continuance of an Event of
Default, to sell, transfer, assign or otherwise deal in or with the
Collateral or any part thereof pursuant to the terms and conditions of this
Security Agreement; and
(vi) upon the occurrence and during the continuance of an Event of
Default, to do, at its option and at the expense and for the account of the
Grantor, at any time or from time to time, all acts and things which the
Agent deems necessary to protect or preserve the Collateral and to realize
upon the Collateral.
11. Severability. If any provision of this Security Agreement is held to be
prohibited or unenforceable in any jurisdiction the substantive laws of which
are held to be applicable hereto, such prohibition or unenforceability shall not
affect the validity or enforceability of the remaining provisions hereof and
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
12. Amendments, Waivers and Consents. None of the terms or provisions of
this Security Agreement may be waived, altered, modified or amended, and no
consent to any departure by the Grantor herefrom shall be effective, except by
or pursuant to an instrument in writing which (i) is duly executed by the
Grantor and the Collateral Agent and (ii) complies with the requirements of the
Credit Agreement. Any such waiver shall be valid only to the extent set forth
therein. A waiver by the Collateral Agent of any right or remedy under this
Security Agreement on any one occasion shall not be construed as a waiver of any
right or remedy which the Collateral Agent would otherwise have on any future
occasion. No failure to exercise or delay in exercising any right, power or
privilege under this Security Agreement on the part of the Collateral Agent
shall operate as a waiver thereof; and no single or partial exercise of any
right, power or privilege under this Security Agreement shall preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege.
13. Binding Effect; Successors and Assigns. This Security Agreement shall
be binding upon the Grantor and its successors, and upon any assign(s) of the
Grantor in accordance with Section 13.19 of the Credit Agreement, and shall
inure to the ratable benefit of the Collateral Agent, the other Agents, the
Lenders, and the other Holders, and their respective successors and assigns.
Nothing set forth herein or in any other Loan Document is intended or shall be
construed to give any other Person any right, remedy or claim under, to or in
respect of this
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<PAGE>
Security Agreement, the Credit Agreement or any other Loan Document or any
Collateral. The Grantor's successors shall include, without limitation, a
receiver, trustee or debtor-in-possession of or for the Grantor.
14. Termination of this Security Agreement; Release of Collateral.
(a) The security interest granted by the Grantor under this Security
Agreement shall terminate against all the Collateral upon final payment in full
in cash of the Liabilities and termination of the Revolving Loan Commitments and
of the Term Loan Commitments. Upon such termination and at the written request
of the Grantor, and at the cost and expense of the Grantor, the Collateral Agent
shall execute in a timely manner a satisfaction of this Security Agreement and
such instruments, documents or agreements as are necessary or desirable to
terminate and remove of record any documents constituting public notice of this
Security Agreement and the security interests and assignments granted hereunder
and shall assign and transfer or cause to be assigned and transferred, and shall
deliver or cause to be delivered, to the Grantor all property, including all
monies, instruments and securities of the Grantor then held by the Collateral
Agent.
(b) Notwithstanding anything in this Security Agree ment to the contrary,
the Grantor may, to the extent permitted by Section 9.02 of the Credit Agreement
sell, assign, transfer or otherwise dispose of any Collateral. In addition, the
Collateral shall be subject to release from time to time (with the Collateral
referred to in the immediately preceding sentence, the "Released Collateral") in
accordance with Section 12.09(b) of the Credit Agreement. The Liens under this
Security Agreement shall terminate with respect to the Released Collateral upon
such sale, transfer, assignment, disposition or release, and upon the request of
the Grantor, the Collateral Agent shall execute and deliver such instrument or
document as may be necessary to release the Liens granted hereunder; provided,
however, that (i) the Collateral Agent shall not be required to execute any such
documents on terms which, in the Collateral Agent's opinion, would expose the
Collateral Agent to liability or create any obligation or entail any consequence
other than the release of such Liens without recourse or warranty, and (ii) such
release shall not in any manner discharge, affect or impair the Liabilities or
any Liens on (or obligations of the Grantor in respect of) all interests
retained by the Grantor, including without limitation, the proceeds of any sale,
all of which shall continue to constitute part of the Collateral unless and
until released strictly in accordance with the Loan Documents.
15. The Collateral Agent's Exercise of Rights and Remedies upon the
Occurrence and during the Continuance of an Event of Default. Notwithstanding
anything set forth herein to
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<PAGE>
the contrary, it is hereby expressly agreed that upon the occurrence and during
the continuance of an Event of Default, the Collateral Agent may, and upon the
written direction of the Requisite Lenders shall, exercise any of the rights and
remedies provided in this Security Agreement, the Credit Agreement and any of
the other Loan Documents.
16. Notices. Any notice, demand, request or any other communication
required or desired to be served, given or delivered hereunder shall be in
writing and shall be served, given or delivered as provided in the Guaranty
signed by the Grantor of even date herewith.
17. Section Headings. The section headings herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
18. GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
EXCEPT FOR PERFECTION AND ENFORCEMENT OF SECURITY INTERESTS AND LIENS IN OTHER
JURISDICTIONS WHICH SHALL BE GOVERNED BY THE LAWS OF THOSE JURISDICTIONS.
19. Further Indemnification. The Grantor agrees to pay, and to save the
Collateral Agent and each Lender harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all excise, sales or
other taxes which may be payable or determined to be payable with respect to any
of the Collateral or in connection with any of the transactions contemplated by
this Security Agreement.
20. Counterparts. This Security Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
21. Consent to Jurisdiction and Service of Process. The Grantor agrees that
the terms of the Guaranty signed by the Grantor of even date herewith with
respect to consent to jurisdiction and service of process shall apply equally to
this Security Agreement.
22. Waiver of Bond. The Grantor waives the posting of any bond otherwise
required of the Collateral Agent in connection with any judicial process or
proceeding to realize on the Collateral or any other security for the
Liabilities, to enforce any judgment or other court order entered in favor of
the Collateral Agent, or to enforce by specific performance, temporary
restraining order, or preliminary or permanent injunction, this Security
Agreement or any other agreement or document between the Collateral Agent and
the Grantor.
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<PAGE>
23. Advice of Counsel. The Grantor represents and warrants to the
Collateral Agent and the Lenders that it has discussed this Security Agreement
and, specifically, the provisions of Sections 18, 21, 22 and 25 hereof, with the
Grantor's attorneys.
24. Further Assurances. The Grantor agrees that it will cooperate with the
Collateral Agent and will execute and deliver, or cause to be executed and
delivered, all such other stock powers, proxies, instruments and documents, and
will take all such other actions, including, without limitation, the execution
and filing of financing statements, as the Collateral Agent may reasonably
request from time to time in order to carry out the provisions and purposes of
this Security Agreement.
25. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR AND THE COLLATERAL AGENT
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE, BETWEEN THE COLLATERAL AGENT AND THE GRANTOR ARISING OUT OF
OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS SECURITY AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH. EITHER THE GRANTOR OR THE COLLATERAL AGENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECURITY AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement or caused this Security Agreement to be executed and delivered by
their duly authorized officers as of the date first set forth above.
[NAME OF GRANTOR]
By____________________________
Name:
Title:
FIRST UNION COMMERCIAL CORPORATION,
as Collateral Agent
By____________________________
Name:
Title:
<PAGE>
SCHEDULE 1
TO
SECURITY AGREEMENT
([Name of Grantor])
Dated as of May 29, 1998
Locations of Inventory and Equipment
and Status
Location Status
<PAGE>
SCHEDULE 2
TO
SECURITY AGREEMENT
([Name of Grantor])
Dated as of May 29, 1998
Locations of Books and Records
1. Correct Corporate Name
2. Chief Executive Office
3. Principal Place of Business
4. Federal Tax Identification Number
5. Location(s) of the Grantor's
Books and Records Concerning the Collateral
<PAGE>
SCHEDULE 3
TO
SECURITY AGREEMENT
([Name of Grantor])
Dated as of May 29, 1998
I. Previous Grantor Names
II. Acquisitions of all or substantially all of the assets,
capital stock or operating unit of any Person
III. Predecessor in interest of the Grantor
during the five preceding years
<PAGE>
EXHIBIT M
FORM OF [AMENDED AND RESTATED] PLEDGE AGREEMENT
THIS [AMENDED AND RESTATED] PLEDGE AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this "Pledge Agreement") dated as of May,
29 1998, by and among [NAME OF PLEDGOR] (with its successors and permitted
assigns, the "Pledgor"), and FIRST UNION COMMERCIAL CORPORATION ("First Union"),
in its capacity as collateral agent (with its successors in such capacity, the
"Collateral Agent") for the Agents, the Lenders, and the other Holders, in each
case under and as defined in that certain Amended and Restated Credit Agreement
dated as of May 29, 1998 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement") among the Stellex Industries, Inc., (the
"Borrower"), Societe Generale ("SG"), as administrative agent (the
"Administrative Agent"), the Collateral Agent, together (with the Administrative
Agent the "Agents"), and the financial institutions from time to time parties
thereto (the "Lenders"). Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the Credit
Agreement.
WITNESSETH:
[WHEREAS, the parties hereto have entered into the Pledge Agreement dated
as of October 31, 1997 (the "Existing Pledge Agreement") in connection with that
certain Credit Agreement dated as of October 31, 1997 (the "Existing Credit
Agreement") among the borrowers named therein, the financial institutions from
time to time party thereto, SG, as administrative agent thereunder, and First
Union, as syndication agent and collateral agent thereunder;]
WHEREAS, the Pledgor owns [(i)] the shares of capital stock described in
Exhibit A hereto and issued by the issuers named therein [and (ii) the
certificated indebtedness described in Exhibit C hereto and issued by the
obligors named therein]1; and
WHEREAS, in order to secure the prompt and complete payment, observance and
performance of (i) the Obligations (ii) all of the Pledgors' Obligations under
the Amended and Restated Guaranty of even date herewith entered into in
connection with the Credit Agreement and (iii) all of the Pledgor's obligations
- --------
(1) This and subsequent references to the Pledged Debt will be included in the
Amended and Restated Pledge Agreements executed by Pledgors who hold
indebtedness.
<PAGE>
and liabilities hereunder and in connection herewith (all Obligations and such
obligations and liabilities hereunder being hereinafter referred to collectively
as the "Liabilities"), the Lenders have required, as a condition, among others,
to entering into the Credit Agreement with the Borrower, that the Pledgor
execute and deliver this Pledge Agreement;
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit (including, without limitation,
any loan or advance by renewal, refinancing or extension of the agreements
described hereinabove or otherwise) heretofore, now or hereafter made to or for
the benefit of the Borrower pursuant to the Credit Agreement or any other
agreement, instrument or document executed pursuant to or in connection
therewith, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Pledgor and the Collateral
Agent hereby agree as follows:
1. Defined Terms.
(a) Unless otherwise defined herein, all terms defined in Article 8 and
Article 9 of the Uniform Commercial Code in effect as of the date hereof in the
State of New York are used herein as defined therein.
(b) The words "hereby," "hereof," "herein" and "hereunder" and words of
like import when used in this Pledge Agreement shall refer to this Pledge
Agreement as a whole and not to any particular provision of this Pledge
Agreement. Section references herein are to this Pledge Agreement unless
otherwise specified.
(c) All terms defined in this Pledge Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.
2. Pledge. The Pledgor hereby pledges to the Collateral Agent, for the
ratable benefit of the Agents, the Lenders and the other Holders (each
individually a "Secured Party", and collectively, the "Secured Parties"), and
grants to the Collateral Agent, for the ratable benefit of the Secured Parties,
a security interest in the following (collectively, the "Pledged Collateral"):
(a) The shares of the capital stock described in Exhibit A hereto, and
the certificates representing the shares of such capital stock, all options
and warrants for the purchase of shares of such capital stock held in the
name of the Pledgor (all of said capital stock, options and warrants and
all capital stock held in the name of the Pledgor as a result of the
exercise of such options or
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<PAGE>
warrants being hereinafter collectively referred to as the "Pledged
Stock"), herewith delivered to the Collateral Agent accompanied by stock
powers in the form of Exhibit B hereto and made a part hereof (the "Stock
Powers") duly executed in blank, and all dividends, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of, or in exchange for, any or all of the Pledged
Stock;
(b) All additional shares of stock of any issuer referred to in
Exhibit A hereto from time to time acquired by the Pledgor in any manner,
and all of the shares of the capital stock issued to the Pledgor by any
other wholly owned Subsidiary of the Pledgor which is organized under the
laws of the United States or any state or other political subdivision
thereof after the date hereof, and the certificates representing such
additional shares (any such additional shares shall constitute part of the
Pledged Stock and the Collateral Agent is irrevocably authorized to amend
Exhibit A from time to time to reflect such additional shares), and all
options, warrants, dividends, cash, instruments and other rights and
options from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares;
[(c) The certificated indebtedness of each issuer referred to in
Exhibit C attached hereto (the "Pledged Debt") and the instruments
evidencing such Pledged Debt in excess of $100,000 individually, duly
endorsed and in transferable form, all payments of principal thereof and
interest thereon, due and to become due thereunder, and all books and
records applicable thereto, herewith delivered to the Collateral Agent;]
[(d) All additional instruments evidencing certificated indebtedness
in excess of $100,000 individually which is from time to time owed to the
Pledgor by any Person, duly endorsed and in transferable form, and all
payments of principal thereof and interest thereon, due and to become due
thereunder, and all books and records applicable thereto (such additional
obligations shall constitute part of the Pledged Debt and the Collateral
Agent is irrevocably authorized to amend Exhibit C from time to time to
reflect such additional obligations);]
(e) The property and interests in property described in Section 4
below; and
(f) All proceeds of the foregoing.
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<PAGE>
[The Pledgor hereby reaffirms its grant of a security interest in the
Pledged Collateral made as of October 31, 1997 under the Existing Pledge
Agreement.]
3. Security for Obligations. The Pledged Collateral secures the prompt
payment, performance and observance of the Liabilities.
4. Pledged Collateral Adjustments. If, during the term of this Pledge
Agreement:
(a) Any stock dividend, reclassification, readjustment or other change
is declared or made in the capital structure of any issuer of Pledged
Stock, or any option included within the Pledged Collateral is exercised,
or both, or
(b) Any subscription warrants or any other rights or options shall be
issued to the Pledgor in connection with the Pledged Collateral, [or
(c) Any additional certificated indebtedness in excess of $100,000
individually owing to the Pledgor is incurred by any of the obligors of the
Pledged Debt,]
then all new, substituted and additional shares, warrants, rights, options,
notes or other securities, issued by reason of any of the foregoing, shall be
promptly delivered to and held by the Collateral Agent under the terms of this
Pledge Agreement and shall constitute Pledged Collateral hereunder; provided,
however, that nothing contained in this Section 4 shall be deemed to permit any
stock dividend, issuance of additional stock, warrants, rights or options,
reclassification, readjustment or other change in the capital structure of any
issuer of Pledged Stock which is prohibited in the Credit Agreement.
5. Subsequent Changes Affecting Pledged Collateral. The Pledgor represents
and warrants that it has made its own arrangements for keeping informed of
changes or potential changes affecting the Pledged Collateral (including, but
not limited to, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and the
Pledgor agrees that, subject to Section 22, none of the Secured Parties shall
have any obligation to inform the Pledgor of any such changes or potential
changes or to take any action or omit to take any action with respect thereto.
The Collateral Agent may, upon the occurrence and during the continuation of an
Event of Default, without notice and at its option, transfer or register the
Pledged Collateral or any part thereof into its or its nominee's name with or
without any indication that such Pledged Collateral is subject to the security
interest hereunder, and the Pledgor will cause each issuer of Pledged Stock [and
each obligor with respect to Pledged
-4-
<PAGE>
Debt] to cooperate with the Collateral Agent in effecting any such transfer or
registration. In addition, the Collateral Agent may at any time exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations and the Pledgor
will cause each issuer of Pledged Stock to cooperate with the Collateral Agent
in effecting any such exchange.
6. Representations and Warranties. The Pledgor represents and warrants as
follows:
(a) The Pledgor is the sole legal and beneficial owner of the
percentage of the issued and outstanding shares of capital stock of the
respective issuers thereof listed on Exhibit A hereto, free and clear of
any Lien except for the security interest created by this Pledge Agreement,
and the Pledged Stock constitutes that percentage of the issued and
outstanding shares of capital stock of the respective issuers thereof set
forth in Exhibit A hereto;
[(b) The Pledgor is the sole legal and beneficial owner of the Pledged
Debt, free and clear of any Lien except for the security interest created
by this Pledge Agreement, and the Pledged Debt constitutes a valid and
binding obligation of its respective obligor, enforceable in accordance
with its terms, except as such enforceability may be limited by (x)
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and (y) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law);
(c) The Pledgor has, as applicable, full corporate power and authority
to execute, deliver and perform this Pledge Agreement;
(d) There are no restrictions upon the voting rights associated with,
or upon the transfer of, any of the Pledged Collateral, other than pursuant
to this Pledge Agreement or as otherwise may be expressly permitted by any
of the other Loan Documents;
(e) The Pledgor has the right to vote, pledge and grant a security
interest in or otherwise transfer such Pledged Collateral free of any
Liens;
(f) No authorization, approval, or other action by, and no notice to
or filing with, any Governmental Authority or regulatory body is required
either (i) for the pledge of the Pledged Collateral pursuant to this Pledge
Agreement or for the execution, delivery or performance of this Pledge
Agreement by the Pledgor or (ii) for the exercise by the
-5-
<PAGE>
Collateral Agent of the voting or other rights provided for in this Pledge
Agreement or the remedies in respect of the Pledged Collateral pursuant to
this Pledge Agreement (except as may be required in connection with such
disposition by laws affecting the offering and sale of securities
generally);
(g) The pledge of the Pledged Collateral pursuant to this Pledge
Agreement creates a valid and perfected first priority security interest in
the Pledged Collateral, in favor of the Collateral Agent for the benefit of
the Secured Parties securing the payment and performance of the
Liabilities;
(h) The Stock Powers are duly executed and give the Agent the
authority they purport to confer; and
(i) The grant and perfection of the security interests in the Pledged
Collateral for the ratable benefit of the Secured Parties, in accordance
with the terms herein, are not made in violation of the registration
requirements of the Securities Act of 1933 (the "Securities Act"), any
applicable provisions of other federal securities laws, state securities or
"Blue Sky" law, foreign securities law, or applicable general corporation
law or any other applicable law.
7. Voting Rights. During the term of this Pledge Agreement, and except as
provided in this Section 7 below, the Pledgor shall have the right to vote the
Pledged Stock on all corporate questions in a manner not inconsistent with the
terms of this Pledge Agreement, the Credit Agreement and any other agreement,
instrument or document executed pursuant thereto or in connection therewith.
Upon the occurrence and during the continuance of an Event of Default, the
Collateral Agent may, at the Collateral Agent's option and following written
notice from the Collateral Agent to the Pledgor, exercise all voting powers
pertaining to the Pledged Collateral, including the right to take action by
shareholder consent.
8. Dividends and Other Distributions. (a) So long as no Event of Default
shall have occurred and be continuing:
(i) The Pledgor shall be entitled to receive and retain any and all
dividends, including dividends in connection with a reduction of capital,
capital surplus or paid-in surplus and interest paid in respect of the
Pledged Collateral, provided, however, that, except as otherwise provided
in the Credit Agreement, any and all
(A) dividends and interest paid or payable other than in cash with
respect to, and instruments and other
-6-
<PAGE>
property received, receivable or otherwise distributed with respect to, or
in exchange for, any of the Pledged Collateral;
(B) dividends and other distributions paid or payable in cash with
respect to any of the Pledged Collateral on account of a partial or total
liquidation or dissolution; and
(C) cash paid, payable or otherwise distributed with respect to
principal of, or in redemption of, or in exchange for, any of the Pledged
Collateral;
shall be Pledged Collateral, and shall be forthwith delivered to the
Collateral Agent to hold, for the ratable benefit of the Secured Parties,
as Pledged Collateral and shall, if received by the Pledgor, be received in
trust for the Collateral Agent, for the ratable benefit of the Secured
Parties, and shall be segregated from the other property or funds of the
Pledgor. All such Pledged Collateral so received in the form of monies,
checks, notes, drafts or funds shall be delivered promptly to the
Collateral Agent (with any necessary endorsement) as proceeds of Collateral
in accordance with the applicable provisions of the Credit Agreement, and
all other such Pledged Collateral so received shall be delivered promptly
to the Collateral Agent as Pledged Collateral in the same form as so
received (with any necessary endorsement); and
(ii) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to receive the dividends or interest payments which
the Pledgor is authorized to receive and retain pursuant to clause (i)
above.
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) All rights of the Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 8(a)(i) hereof shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, for the ratable benefit of
the Secured Parties, which shall thereupon have the sole right to receive
and hold as Pledged Collateral such dividends and interest payments; and
(ii) All dividends and interest payments which are received by the
Pledgor contrary to the provisions of clause (i) of this Section 8(b) shall
be received in trust for the
-7-
<PAGE>
Collateral Agent, for the ratable benefit of the Secured Parties, shall be
segregated from other funds of the Pledgor and shall be paid over
immediately to the Collateral Agent as Pledged Collateral in the same form
as so received (with any necessary endorsements);
(iii) The Pledgor shall, upon the request of the Collateral Agent, at
Pledgor's expense, execute and deliver all such instruments and documents,
and do or cause to be done all such other acts and things, as may be
reasonably necessary or, in the opinion of the Collateral Agent, the
Pledgor or either of their counsel, reasonably advisable to register the
applicable Pledged Collateral under the provisions of the Securities Act in
order to sell the same, and to exercise its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the
related prospectus which, in the opinion of the Collateral Agent, the
Pledgor or either of their counsel, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;
(iv) The Pledgor shall, upon the reasonable request of the Collateral
Agent, at Pledgor's expense, use its best efforts to qualify the Pledged
Collateral under state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of the Pledged Collateral, as
requested by the Collateral Agent;
(v) The Pledgor shall, upon the request of the Collateral Agent, at
the Pledgor's expense, make available to the holders of its securities, as
soon as practicable, earnings statements which will satisfy the provisions
of Section 11(a) of the Securities Act; and
(vi) The Pledgor shall, upon the request of the Collateral Agent, at
the Pledgor's expense, do or cause to be done all such other acts and
things as may be reasonably necessary to make such sale of the Pledged
Collateral or any part thereof valid and binding and in compliance with
applicable law.
The Pledgor will reimburse the Collateral Agent for all reasonable expenses
incurred by the Collateral Agent, including, without limitation, reasonable
attorneys' and accountants' fees and expenses, in connection with the foregoing.
Upon or at any time after the occurrence and during the continuance of an Event
of Default, if the Collateral Agent determines that, prior to any public
offering of any securities constituting part of the
-8-
<PAGE>
Pledged Collateral, such securities should be registered under the Securities
Act and/or registered or qualified under any other federal or state law and such
registration and/or qualification is not practicable, then the Pledgor agrees
that it will be deemed commercially reasonable if a private sale, upon at least
ten (10) Business Days' notice to the Pledgor, is arranged so as to avoid a
public offering, even though the sales price established and/or obtained at such
private sale may be substantially less than prices which could have been
obtained for such security on any market or exchange or in any other public
sale.
9. Transfers and Other Liens. The Pledgor agrees that it will not (i) sell
or otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral without the prior written consent of the Collateral Agent, other than
as permitted by the Credit Agreement, or (ii) create or permit to exist any Lien
upon or with respect to any of the Pledged Collateral, except for the security
interest under this Pledge Agreement.
10. Remedies; Application of Proceeds. (a) The Collateral Agent shall have,
in addition to any other rights given under this Pledge Agreement or by law, all
of the rights and remedies with respect to the Pledged Collateral of a secured
party under the Uniform Commercial Code as in effect in the State of New York.
In addition, upon the occurrence and during the continuance of an Event of
Default, the Collateral Agent shall have such powers of sale and other powers as
may be conferred by applicable law. With respect to the Pledged Collateral or
any part thereof which shall then be in or shall thereafter come into the
possession or custody of the Collateral Agent or which the Collateral Agent
shall otherwise have the ability to transfer under applicable law, the
Collateral Agent may, in its sole discretion, without notice except as specified
below, after the occurrence of an Event of Default, sell or cause the same to be
sold at any exchange, broker's board or at public or private sale, in one or
more sales or lots, at such price as the Collateral Agent may reasonably deem
best, for cash or on credit or for future delivery, without assumption of any
credit risk, and the purchaser of any or all of the Pledged Collateral so sold
shall thereafter own the same, absolutely free from any claim, encumbrance or
right of any kind whatsoever. Any Secured Party may, in its own name, or in the
name of a designee or nominee, buy the Pledged Collateral at any public sale
and, if permitted by applicable law, buy the Pledged Collateral at any private
sale. In the event of a sale of any Collateral, or any part thereof, to a
Secured Party upon the occurrence and during the continuance of an Event of
Default, such Secured Party shall not deduct or offset from any part of the
purchase price to be paid therefor any indebtedness owing to it by the Pledgor.
The Pledgor will pay to the Collateral Agent all reasonable expenses
-9-
<PAGE>
(including, without limitation, court costs and reasonable attorneys' and
paralegals' fees and expenses) of, or incidental to, the enforcement of any of
the provisions hereof. The Collateral Agent agrees to distribute any proceeds of
the sale of the Pledged Collateral in accordance with the Credit Agreement
(including, without limitation, Section 3.02 thereof) and the Pledgor shall
remain liable for any deficiency following the sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens to decline speedily in
value or is or becomes of a type sold on a recognized market, the Collateral
Agent will give the Pledgor reasonable notice of the time and place of any
public sale thereof, or of the time after which any private sale or other
intended disposition is to be made. Any sale of the Pledged Collateral conducted
in conformity with reasonable commercial practices of banks, commercial finance
companies, insurance companies or other financial institutions disposing of
property similar to the Pledged Collateral shall be deemed to be commercially
reasonable. Notwithstanding any provision to the contrary contained herein, the
Pledgor agrees that any requirements of reasonable notice shall be met if such
notice is received by the Pledgor as provided in Section 23 below at least ten
(10) Business Days before the time of the sale or disposition; provided,
however, that the Collateral Agent may give any shorter notice that is
commercially reasonable under the circumstances. Any other requirement of
notice, demand or advertisement for sale is waived, to the extent permitted by
law.
(c) In view of the fact that federal and state securities laws may impose
certain restrictions on the method by which a sale of the Pledged Collateral may
be effected after an Event of Default, the Pledgor agrees that upon the
occurrence and during the continuance of an Event of Default, the Collateral
Agent may, from time to time, attempt to sell all or any part of the Pledged
Collateral by means of a private placement restricting the bidders and
prospective purchasers to those who are qualified and will represent and agree
that they are purchasing for investment only and not for distribution. In so
doing, the Collateral Agent may solicit offers to buy the Pledged Collateral, or
any part of it, from a limited number of investors deemed by the Collateral
Agent, in its reasonable judgment, to be financially responsible parties who
might be interested in purchasing the Pledged Collateral. If the Collateral
Agent solicits and receives such offers from not less than four (4) such
investors, then the acceptance by the Collateral Agent of the highest offer
obtained therefrom shall be deemed to be a commercially reasonable method of
disposing of such Pledged Collateral; provided, however, that this Section does
not impose a requirement that the Collateral Agent solicit offers from four or
more investors in order for the sale to be commercially reasonable.
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<PAGE>
11. Collateral Agent Appointed Attorney-in-Fact. The Pledgor hereby
appoints the Collateral Agent its attorney-in- fact, with full authority, in the
name of the Pledgor or otherwise, upon the occurrence and during the continuance
of an Event of Default, from time to time in the Collateral Agent's sole
discretion, to take any action and to execute any instrument which the
Collateral Agent may deem reasonably necessary or reasonably advisable to
accomplish the purposes of this Pledge Agreement, including, without limitation
(subject to Section 8 hereof), to receive, endorse and collect all instruments
made payable to the Pledgor representing any dividend, interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same and to arrange for the transfer of all or any
part of the Pledged Collateral on the books of each of the issuers of such
Pledged Stock to the name of the Collateral Agent or the Collateral Agent's
nominee.
12. Waivers. The Pledgor waives presentment and demand for payment of any
of the Obligations, protest and notice of dishonor or Event of Default with
respect to any of the Obligations and all other notices to which the Pledgor
might otherwise be entitled except as otherwise expressly provided herein or in
the Credit Agreement.
13. Termination of This Pledge Agreement; Release of Pledged Collateral.
The pledge made and the security interest granted by the Pledgor under this
Pledge Agreement shall terminate against all the Collateral upon final payment
in full in cash of the Obligations and termination of the Commitments. Upon such
termination (other than as a result of the sale of the Pledged Collateral) and
at the written request of the Pledgor or its successors or assigns, and at the
cost and expense of the Pledgor or its successors or assigns, the Collateral
Agent shall execute in a timely manner such instruments, documents or agreements
as are reasonably necessary or reasonably desirable to terminate the Collateral
Agent's security interest in the Pledged Collateral and deliver the Pledged
Stock and the Stock Powers, subject to any disposition made by the Collateral
Agent pursuant to the Pledge Agreement.
14. Successors and Assigns. This Pledge Agreement shall be binding upon the
Pledgor and its successors, and upon any assign(s) of the Pledgor, and shall
inure to the benefit of the Secured Parties and their respective successors and
assigns. Nothing set forth herein or in any other Loan Document is intended or
shall be construed to give any other Person any right, remedy or claim under, to
or in respect of this Pledge Agreement, the Credit Agreement or any other Loan
Document or any Pledged Collateral. The Pledgor's successors shall include,
without limitation, a receiver, trustee or debtor-in-possession of or for the
Pledgor.
-11-
<PAGE>
15. APPLICABLE LAW. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS AND DECISIONS OF THE
STATE OF NEW YORK, EXCEPT FOR PERFECTION AND ENFORCEMENT OF SECURITY INTERESTS
AND LIENS IN OTHER JURISDICTIONS WHICH SHALL BE GOVERNED BY THE LAWS OF THOSE
JURISDICTIONS.
16. Consent to Jurisdiction and Service of Process. The Pledgor agrees that
the terms of the Guaranty signed by the Pledgor of even date herewith with
respect to consent to jurisdiction and service of process shall apply equally to
the Pledgor under this Pledge Agreement.
17. WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR AND THE COLLATERAL AGENT
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE, BETWEEN THE COLLATERAL AGENT AND THE PLEDGOR ARISING OUT OF
OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH.
EITHER THE PLEDGOR OR THE COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
18. Waiver of Bond. The Pledgor waives the posting of any bond otherwise
required of the Collateral Agent in connection with any judicial process or
proceeding to realize on the Pledged Collateral or any other security for the
Obligations, to enforce any judgment or other court order entered in favor of
the Collateral Agent, or to enforce by specific performance, temporary
restraining order, or preliminary or permanent injunction, this Pledge Agreement
or any other agreement or document between the Collateral Agent and the Pledgor.
19. Advice of Counsel. The Pledgor represents and warrants to the Secured
Parties that it has discussed this Pledge Agreement and, specifically, the
provisions of Sections 15 through 18 hereof, with the Pledgor's attorneys.
20. Severability. Whenever possible, each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but, if any provision of this Pledge Agreement shall be held to
be prohibited or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Pledge Agreement.
21. Further Assurances. The Pledgor agrees that it will cooperate with the
Collateral Agent and will execute and deliver, or cause to be executed and
delivered, all such other stock powers, proxies, instruments and documents, and
will take
-12-
<PAGE>
all such other actions, including, without limitation, the execution and filing
of financing statements, as the Collateral Agent may reasonably request from
time to time in order to carry out the provisions and purposes of this Pledge
Agreement.
22. The Collateral Agent's Duty of Care. The Collateral Agent shall not be
liable for any acts, omissions, errors of judgment or mistakes of fact or law
including, without limitation, acts, omissions, errors or mistakes with respect
to the Pledged Collateral, except for those arising out of or in connection with
the Collateral Agent's (i) gross negligence or willful misconduct, (ii) material
breach of a material provision of this Pledge Agreement, or (iii) failure to use
reasonable care with respect to the safe custody of the Pledged Collateral in
the Collateral Agent's possession. Without limiting the generality of the
foregoing, the Collateral Agent shall be under no obligation to take any steps
necessary to preserve rights in the Pledged Collateral against any other parties
but may do so at its option. All reasonable expenses incurred in connection
therewith shall be for the sole account of the Pledgor, and shall constitute
part of the Obligations secured hereby.
23. Notices. All notices and other communications required or desired to be
served, given or delivered hereunder shall be in writing and shall be served,
given or delivered as provided in the Guaranty signed by the Pledgor of even
date herewith.
24. Amendments, Waivers and Consents. None of the terms or provisions of
this Pledge Agreement may be waived, altered, modified or amended, and no
consent to any departure by the Pledgor herefrom shall be effective, except by
or pursuant to an instrument in writing which (i) is duly executed by the
Pledgor and the Collateral Agent and (ii) complies with the requirements of
Section 13.09 of the Credit Agreement. Any such waiver shall be valid only to
the extent set forth therein. A waiver by the Collateral Agent of any right or
remedy under this Pledge Agreement on any one occasion shall not be construed as
a waiver of any right or remedy which the Collateral Agent would otherwise have
on any future occasion. No failure to exercise or delay in exercising any right,
power or privilege under this Pledge Agreement on the part of the Collateral
Agent shall operate as a waiver thereof; and no single or partial exercise of
any right, power or privilege under this Pledge Agreement shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
25. Section Titles. The section titles herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
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<PAGE>
26. Execution in Counterparts. This Pledge Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have executed this
Pledge Agreement as of the date set forth above.
[NAME OF PLEDGOR]
By:
---------------------------------
Name:
Title:
FIRST UNION COMMERCIAL CORPORATION,
as Collateral Agent
By:
---------------------------------
Name:
Title:
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<PAGE>
FORM OF
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a copy of the foregoing
Pledge Agreement, agrees promptly to note on its books the security interests
granted under such Pledge Agreement, and waives any rights or requirement at any
time hereafter to receive a copy of such Pledge Agreement in connection with the
registration of any Pledged Collateral in the name of the Collateral Agent or
its nominee or the exercise of voting rights by the Collateral Agent.
[NAME OF ISSUER]
By:
---------------------------------
Name:
Title:
-15-
<PAGE>
EXHIBIT A
to
PLEDGE AGREEMENT
([Name of Pledgor])
dated as of May 29, 1998
Pledged Stock
<TABLE>
<CAPTION>
Percentage of Issued Percentage of Shares of Capital
and Outstanding Capital Stock owned Stock owned by
Capital Stock owned by the Pledgor the Pledgor
Stock Issuer by the Pledgor Subject to Pledge Subject to Pledge
------------ -------------- ----------------- -----------------
<S> <C> <C> <C>
100%
100%
100%
</TABLE>
<PAGE>
EXHIBIT B
to
PLEDGE AGREEMENT
([Name of Pledgor])
dated as of May 29, 1998
Form of Stock Power
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and transfer
to _____________________________________ ____ Shares of Common Stock of
____________________ represented by Certificate[s] No. _____ [and _____] (the
"Stock"), standing in the name of the undersigned on the books of said
corporation and does hereby irrevocably constitute and appoint
________________________ as the undersigned's true and lawful attorney, for and
in name and stead, to sell, assign and transfer all or any of the Stock, and for
that purpose to make and execute all necessary acts of assignment and transfer
thereof; and to substitute one or more persons with like full power, hereby
ratifying and confirming all that said attorney or substitute or substitutes
shall lawfully do by virtue hereof.
Dated: _______________
[NAME OF PLEDGOR]
By: _________________________
Name:
Title:
<PAGE>
[EXHIBIT C
to
PLEDGE AGREEMENT
([Name of Pledgor])
dated as of May 29, 1998
Pledged Debt]
<PAGE>
EXHIBIT N
FORM OF AMENDED AND RESTATED
PATENT SECURITY AGREEMENT
THIS AMENDED AND RESTATED PATENT SECURITY AGREEMENT (as amended,
supplemented or otherwise modified from time to time, this "Agreement"), dated
as of May 29, 1998, by and among [STELLEX MICROWAVE SYSTEMS, INC.] [TSMD
ACQUISITION CORP.] (with its successors and permitted assigns, the "Grantor"),
and FIRST UNION COMMERCIAL CORPORATION ("First Union"), in its capacity as
collateral agent (with its successors in such capacity, the "Collateral Agent")
for the Agents, the Lenders, and the other Holders, in each case under and as
defined in that certain Amended and Restated Credit Agreement dated as of May
29, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") among Stellex Industries, Inc. (the "Borrower"), the
Collateral Agent, Societe Generale ("SG"), as administrative agent (the
"Administrative Agent", together with the Collateral Agent, the "Agents") and
the financial institutions from time to time parties thereto (the "Lenders").
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into the Patent Security Agreement
dated as of October 31, 1997 (the "Existing Patent Security Agreement") in
connection with that certain Credit Agreement dated as of October 31, 1997 (the
"Existing Credit Agreement") among the borrowers named therein, the financial
institutions from time to time party thereto, SG, as administrative agent
thereunder, and First Union, as syndication agent and collateral agent
thereunder;
WHEREAS, the Grantor and the Collateral Agent are parties to that certain
Amended and Restated Security Agreement of even date herewith (as the same may
hereafter be amended, restated, supplemented or otherwise modified from time to
time, the "Security Agreement"), pursuant to which the Grantor has granted a
security interest in certain of its assets to the Collateral Agent for the
ratable benefit of the Agents, the Lenders, and the other Holders; and
WHEREAS, in order to secure the prompt and complete payment, observance and
performance of (i) all of the Obligations; (ii) all of the Grantor's obligations
under the Amended and Restated Guaranty of even date herewith entered into
<PAGE>
in connection with the Credit Agreement; and (iii) all of the Grantor's
obligations and liabilities hereunder and in connection herewith (all the
Obligations and such obligations and liabilities hereunder being hereinafter
referred to collectively as the "Liabilities"), the Agents and the Lenders have
required as a condition, among others, to entering into the Credit Agreement
that the Grantor execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms.
(a) Unless otherwise defined herein, each capitalized term used herein that
is defined in the Credit Agreement shall have the meaning specified for such
term in the Credit Agreement.
(b) The words "hereby," "hereof," "herein" and "hereunder" and words of
like import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section references
are to this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.
2. Incorporation of Credit Agreement. The Credit Agreement and the terms
and provisions thereof are hereby incorporated herein in their entirety by this
reference thereto.
3. Incorporation of Premises. The premises set forth above are incorporated
into this Agreement by this reference thereto and are made a part hereof.
4. Grant of Security Interest in Patents. To secure the complete and timely
payment, performance and satisfaction of all of the Liabilities, the Grantor
hereby grants to the Collateral Agent, for the ratable benefit of the Agents,
the Lenders, and the other Holders of a security interest in, as and by way of a
first mortgage and security interest having priority over all other security
interests, with power of sale to the extent permitted by applicable law, all of
the Grantor's now owned and hereafter acquired:
(a) patents and material patent applications, and the inventions and
improvements described and claimed therein, including, without limitation,
those patents and material patent applications listed on Schedule A
attached hereto and made a part hereof, and (i)the reissues, divisions,
2
<PAGE>
continuations, renewals, extensions and continuations-in-part thereof, (ii)
all income, royalties, damages and payments now and hereafter due and/or
payable under and with respect thereto, including, without limitation,
payments under all licenses entered into in connection therewith and
damages and payments for past or future infringements thereof, (iii) the
right to sue for past, present and future infringements thereof, (iv) all
patented technology and know-how, and (v) all of the Grantor's rights
corresponding thereto throughout the world (all of the foregoing patents
and material applications, together with the items described in clauses
(i)-(v) in this paragraph 4(a) are sometimes hereinafter individually
and/or collectively referred to as the "Patents"); and
(b) rights under or interest in any patent license agreements with any
other party, whether the Grantor is a licensee or licensor under any such
license agreement, including, without limitation, those patent license
agreements listed on Schedule B attached hereto and made a part hereof, in
each case to the extent assignable without violation thereof, and the right
to prepare for sale and sell any and all Inventory now or hereafter owned
by the Grantor and now or hereafter covered by such licenses (all of the
foregoing are hereinafter referred to collectively as the "Licenses").
The Grantor hereby authorizes the Collateral Agent to file this Agreement, or a
duplicate thereof, with the United States Patent and Trademark Office or with
any other authority the Collateral Agent deems appropriate, and the Grantor
agrees to cooperate with the Collateral Agent as the Collateral Agent may
request in order to effectuate such filing or filings.
The Grantor hereby reaffirms its grant of a security interest in the Patents and
Licenses made as of October 31, 1997.
5. Restrictions on Future Agreements. The Grantor agrees that it will not
take any action, and will use its best efforts not to permit any action to be
taken by others, including, without limitation, licensees, or fail to take any
action, which could reasonably be expected to have a material adverse effect on
the validity or enforcement of the rights collaterally assigned to the
Collateral Agent under this Agreement or the rights associated with any material
Patents or Licenses, and in particular, the Grantor will not permit to lapse or
become abandoned, any Patent or License if such lapse or abandonment could
reasonably be expected to have a Material Adverse Effect.
6. New Patents and Licenses. The Grantor represents and warrants that, as
of the Closing Date, to the best of its knowledge, after reasonable inquiry, (a)
the Patents listed on
3
<PAGE>
Schedule A include all of the patents and material patent applications now owned
or held by the Grantor, (b) the Licenses listed on Schedule B include all of the
patent license agreements under which the Grantor is the licensee or licensor
which are material individually or in the aggregate to the operation of the
business of the Grantor and (c) other than the rights of any party to the
Licenses with respect to the Patents, no liens, claims or security interests in
such Patents and Licenses have been granted by the Grantor to any Person other
than the Collateral Agent. If, prior to the termination of this Agreement, the
Grantor shall (i) obtain rights to any new patentable inventions, (ii) become
entitled to the benefit of any patent, patent application, license or any
reissue, division, continuation, renewal, extension or continuation-in-part of
any Patent or any improvement on any Patent or License, or (iii) enter into any
new patent license agreement where the Grantor is the licensee, the provisions
of paragraph 4 above shall automatically apply thereto (but only to the extent
such licenses are assignable without violation thereof, it being understood and
agreed that the Grantor shall use commercially reasonable efforts to insure that
such licenses are assignable for security purposes). The Grantor shall give to
the Collateral Agent written notice of events described in clauses (i), (ii) and
(iii) of the preceding sentence not less frequently than on an annual basis. The
Grantor hereby authorizes the Collateral Agent to modify this Agreement
unilaterally (i) by amending Schedule A to include any future patents and
material patent applications owned or held by the Grantor, and by amending
Schedule B to include any patent license agreements (A) to which the Grantor
becomes a party and (B), which are Patents or Licenses under paragraph 4 above
or under this paragraph 6, and (ii) by filing, in addition to and not in
substitution for this Agreement, either a duplicate original of, or a Notice of
Amendment to, this Agreement containing on Schedule A or B thereto, as the case
may be, such future patents, material patent applications and license
agreements.
7. Royalties. The Grantor hereby agrees that when an Event of Default has
occurred and is continuing the use by the Collateral Agent of the Patents and
Licenses as authorized hereunder in connection with the Collateral Agent's
exercise of its rights and remedies under paragraph 15 or pursuant to Section 7
of the Security Agreement shall be coextensive with the Grantor's rights
thereunder and with respect thereto and without any liability for royalties or
other related charges from the Collateral Agent, the Agents, the Lenders, or the
other Holders to the Grantor.
8. Further Assignments and Security Interests. Except as permitted under
Section 9.02 of the Credit Agreement, the Grantor agrees not to sell or assign
its respective interests in, or grant any license under, the Patents or the
Licenses
4
<PAGE>
without the prior and express written consent of the Collateral Agent.
9. Nature and Continuation of the Collateral Agent's Security Interest;
Termination of the Collateral Agent's Security Interest; Release of Collateral.
(a) This Agreement is made for collateral security purposes only. This
Agreement shall create a continuing security interest in the Patents and
Licenses and shall terminate only when the Liabilities have been paid in full in
cash and the Credit Agreement has been terminated. Upon such termination and at
the written request of the Grantor or its successors or assigns, and at the cost
and expense of the Grantor or its successors or assigns, the Collateral Agent
shall execute in a timely manner such instruments, documents or agreements as
are necessary or desirable to terminate the Collateral Agent's security interest
in the Patents and the Licenses, subject to any disposition thereof which may
have been made by the Collateral Agent pursuant to this Agreement or the
Security Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, the Grantor
may, to the extent permitted by Section 9.02 of the Credit Agreement sell,
assign, transfer or otherwise dispose of any Patents and any Licenses. In
addition, the Patents and Licenses shall be subject to release from time to time
(with the Patents and Licenses referred to in the immediately preceding
sentence, the "Released Collateral") in accordance with Section 12.09(b) of the
Credit Agreement. The Liens under this Agreement shall terminate with respect to
the Released Collateral upon such sale, transfer, assignment, disposition or
release, and upon the request of the Grantor, the Collateral Agent shall execute
and deliver such instrument or document as may be necessary to release the Liens
granted hereunder; provided, however, that (i) the Collateral Agent shall not be
required to execute any such documents on terms which, in the Collateral Agent's
opinion, would expose the Collateral Agent to liability or create any obligation
or entail any consequence other than the release of such Liens without recourse
or warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Liabilities or any Liens on (or obligations of the Grantor in respect
of) all interests retained by the Grantor, including without limitation, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
10. Duties of the Grantor. The Grantor shall have the duty, to the extent
desirable in the normal conduct of the Grantor's business, to: (i) prosecute
diligently any material patent application that is part of the Patents pending
as of the date hereof or hereafter until the termination of this Agreement, and
(ii) make application on unpatented but patentable inventions. The Grantor
further agrees (i) not to abandon any
5
<PAGE>
Patent or License if such abandonment could reasonably be expected to have a
Material Adverse Effect without the prior written consent of the Collateral
Agent, and (ii) to use its reasonable best efforts to obtain and maintain in
full force and effect the Patents and the Licenses that are or shall be
necessary or economically desirable in the operation of the Grantor's business.
Any expenses incurred in connection with the foregoing shall be borne by the
Grantor. None of the Agents or the Lenders shall have any duty with respect to
the Patents and Licenses. Without limiting the generality of the foregoing, none
of the Agents or the Lenders shall be under any obligation to take any steps
necessary to preserve rights in the Patents or Licenses against any other
parties, but the Collateral Agent may do so at its option from and after the
occurrence of an Event of Default, and all expenses incurred in connection
therewith shall be for the sole account of the Grantor and shall be added to the
Liabilities secured hereby.
11. The Collateral Agent's Right to Sue. From and after the occurrence of
an Event of Default, the Collateral Agent shall have the right, but shall not be
obligated, to bring suit in its own name to enforce the Patents and the Licenses
and, if the Collateral Agent shall commence any such suit, the Grantor shall, at
the request of the Collateral Agent, do any and all lawful acts and execute any
and all proper documents required by the Collateral Agent in aid of such
enforcement. The Grantor shall, upon demand, promptly reimburse the Collateral
Agent for all costs and expenses incurred by the Collateral Agent in the
exercise of its rights under this paragraph 11 (including, without limitation,
reasonable fees and expenses of attorneys and paralegals for the Collateral
Agent).
12. Amendments, Waivers and Consents. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended, and no consent to
any departure by the Grantor herefrom shall be effective, except by or pursuant
to an instrument in writing which (i) is duly executed by the Grantor and the
Collateral Agent and (ii) complies with the requirements of the Credit
Agreement. Any such waiver shall be valid only to the extent set forth therein.
A waiver by the Collateral Agent of any right or remedy under this Agreement on
any one occasion shall not be construed as a waiver of any right or remedy which
the Collateral Agent would otherwise have on any future occasion. No failure to
exercise or delay in exercising any right, power or privilege under this
Agreement on the part of the Collateral Agent shall operate as a waiver thereof;
and no single or partial exercise of any right, power or privilege under this
Agreement shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
13. Severability. If any provision of this Agreement is held to be
prohibited or unenforceable in any jurisdiction the substantive laws of which
are held to be applicable hereto, such
6
<PAGE>
prohibition or unenforceability shall not affect the validity or enforceability
of the remaining provisions hereof and shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. Modification. This Agreement cannot be altered, amended or modified in
any way, except as specifically provided in paragraph 6 hereof or by a writing
signed by the parties hereto.
15. Cumulative Remedies; Power of Attorney. The Grantor hereby irrevocably
designates, constitutes and appoints the Collateral Agent (and all Persons
designated by the Collateral Agent in its sole and absolute discretion) as the
Grantor's true and lawful attorney-in-fact, and authorizes the Collateral Agent
and any of the Collateral Agent's designees, in the Grantor's or the Collateral
Agent's name, to take any action and execute any instrument which the Collateral
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, from and after the occurrence of an
Event of Default and the giving by the Collateral Agent of notice to the Grantor
of the Collateral Agent's intention to enforce its rights and claims against the
Grantor, to (i) endorse the Grantor's name on all applications, documents,
papers and instruments necessary or desirable for the Collateral Agent in the
use, prosecution or protection of the Patents or the Licenses, (ii) assign,
pledge, convey or otherwise transfer title in or dispose of the Patents or the
Licenses to anyone on commercially reasonable terms (but subject to the terms
thereof), (iii) grant or issue any exclusive or nonexclusive license under the
Patents or under the Licenses, to anyone on commercially reasonable terms (but
only, in the case of Licenses, to the extent permitted under such Licenses) and
(iv) take any other actions with respect to the Patents or the Licenses as the
Collateral Agent deems in its own best interest or in the best interest of the
Agents or the Lenders. The Grantor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable until all of the Liabilities
shall have been paid in full in cash and the Credit Agreement shall have been
terminated. The Grantor acknowledges and agrees that this Agreement is not
intended to limit or restrict in any way the rights and remedies of the
Collateral Agent, the other Agents or the Lenders under the Loan Documents, but
rather is intended to facilitate the exercise of such rights and remedies.
The Collateral Agent shall have, in addition to all other rights and
remedies given it by the terms of this Agreement, all rights and remedies
allowed by law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any jurisdiction in which the Patents or the
Licenses may be located or deemed located. Upon the occurrence of an Event of
Default and the election by the Collateral Agent
7
<PAGE>
to exercise any of its remedies under Section 9-504 or Section 9-505 of the
Uniform Commercial Code with respect to the Patents and Licenses, the Grantor
agrees to assign, convey and otherwise transfer title in and to the Patents and
the Licenses to the Collateral Agent or any transferee of the Collateral Agent
and to execute and deliver to the Collateral Agent or any such transferee all
such agreements, documents and instruments as may be necessary, in the
Collateral Agent's sole discretion exercised in a commercially reasonable
manner, to effect such assignment, conveyance and transfer. All of the
Collateral Agent's rights and remedies with respect to the Patents and the
Licenses, whether established hereby, by the Security Agreement, by any other
agreements or by law, shall be cumulative and may be exercised separately or
concurrently. Notwithstanding anything set forth herein to the contrary, it is
hereby expressly agreed that upon the occurrence of an Event of Default, the
Collateral Agent may exercise any of the rights and remedies provided in this
Agreement, the Security Agreement and any of the other Loan Documents. The
Grantor agrees that any notification of intended disposition of any of the
Patents and Licenses required by law shall be deemed reasonably and properly
given if given at least ten (10) days before such disposition; provided,
however, that the Collateral Agent may give any shorter notice that is
commercially reasonable under the circumstances.
16. Successors and Assigns. This Agreement shall be binding upon the
Grantor and its successors and assigns, and shall inure to the benefit of each
of the Agents and the Lenders, and each of all of their nominees, successors and
assigns. The Grantor's successors and assigns shall include, without limitation,
a receiver, trustee or debtor-in-possession of or for the Grantor; provided,
however, that the Grantor shall not voluntarily assign or transfer its rights or
obligations hereunder without the Collateral Agent's prior written consent.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND BE CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, EXCEPT FOR
PERFECTION AND ENFORCEMENT OF SECURITY INTERESTS AND LIENS IN OTHER
JURISDICTIONS WHICH SHALL BE GOVERNED BY THE LAWS OF THOSE JURISDICTIONS.
18. Notices. Any notice, demand, request or any other communication
required or desired to be served, given or delivered hereunder shall be in
writing and shall be served, given or delivered as provided in the Guaranty
signed by the Grantor of even date herewith.
19. Section Headings. The section headings herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
20. Counterparts. This Agreement may be executed in separate counterparts,
each of which when so executed shall be
8
<PAGE>
deemed to be an original and all of which shall constitute one and the same
agreement.
21. Consent to Jurisdiction and Service of Process. The Grantor agrees that
the terms of the Guaranty signed by the Grantor of even date herewith with
respect to consent to jurisdiction and service of process shall apply equally to
this Agreement.
22. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR AND THE COLLATERAL AGENT
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE, BETWEEN THE COLLATERAL AGENT AND THE GRANTOR ARISING OUT OF
OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH.
EITHER THE GRANTOR OR THE COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OR
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
[NAME OF GRANTOR]
By: ______________________________
Name:
Title:
Accepted and agreed to as of the
day and year first above written.
FIRST UNION COMMERCIAL CORPORATION
as Collateral Agent
By:_______________________________
Name:
Title:
<PAGE>
SCHEDULE A
TO
PATENT SECURITY AGREEMENT
([NAME OF GRANTOR])
Dated as of May 29, 1998
Patents and Material Patent Applications
Serial/Patent
Project No/ No. Filing/
Status Title Inventor Issued Date
- ------ ----- -------- -----------
Pending Patent Disclosures
Case # Title Status
- ------ ----- ------
-11-
<PAGE>
SCHEDULE B
TO
PATENT SECURITY AGREEMENT
([NAME OF GRANTOR])
Dated as of May 29, 1998
License Agreements
LICENSES FROM THE GRANTOR TO OTHER COMPANIES
Company Subject Term Royalties
- ------- ------- ---- ---------
LICENSES FROM OTHER COMPANIES TO THE GRANTOR
Company Subject/Type Term Royalties
- ------- ------------ ---- ---------
-12-
<PAGE>
STATE OF ________ )
) SS
COUNTY OF ________ )
On the 29 day of May, 1998, before me personally came ________________, to
me known, who being by me duly sworn, did depose and say that he/she resides at
_______________________ __________________________; that he/she is a
____________________ of [NAME OF GRANTOR], the corporation described in and
which accepted and agreed to the foregoing instrument; and that he/she signed
his/her name thereto by authority of the Board of Directors of said corporation.
___________________________
Notary Public
<PAGE>
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
On the 29 day of May, 1998, before me personally came ________________, to
me known, who being by me duly sworn, did depose and say that he/she resides at
______________________ ______________________; that he/she is a
__________________ of First Union Commercial Corporation, the corporation
described in and which accepted and agreed to the foregoing instrument; and that
he/she signed his/her name thereto by authority of the board of directors of
said corporation.
___________________________
Notary Public
<PAGE>
SCHEDULE I
TO
AMENDED AND RESTATED CREDIT AGREEMENT
Party Notice address:
- ----- ---------------
Stellex Industries, Inc. c/o Stellex Industries, Inc.
21550 Oxnard Street, Suite 570
Woodland Hills, CA 91367
Attn: Bradley C. Call, President
Telecopy: (818) 710-7807
with copies to:
Mentmore Holdings Corporation
1430 Broadway Ave., 13th Floor
New York, NY 10018
Attn: William L. Remley, President
Telecopy: (212) 391-1393
and
Winston & Strawn
200 Park Avenue
New York, NY 10166-4193
Attn: Robert W. Ericson, Esq.
Telecopy: (212) 294-4700
Party Notice address:
- ----- ---------------
Societe Generale, Societe Generale
as Administrative Agent 1221 Avenue of the Americas
New York, NY 10020
Attn: John M. Stack, Director
Telecopy: (212) 278-6418
Societe Generale
1221 Avenue of the Americas
New York, NY 10020
Attn: General Counsel
Telecopy: (212) 278-7432
with copies to:
Sidley & Austin
875 Third Avenue
New York, NY 10022
Attn: Barbara A. Vrancik, Esq.
Telecopy: (212) 906-2021
1
<PAGE>
Party Notice address:
- ----- ---------------
First Union Commercial First Union Commercial Corporation
Corporation, as Collateral 1970 Chain Bridge Road
Agent Mail Code VA1942
McLean, VA 22102
Attn: Jeff McGrath
Telecopy: (703) 760-6019
Party Notice address:
- ----- ---------------
Societe Generale, Societe Generale
as Lender 1221 Avenue of the Americas
New York, NY 10020
Attn: John M. Stack, Director
Telecopy: (212) 278-6418
Societe Generale
1221 Avenue of the Americas
New York, NY 10020
Attn: General Counsel
Telecopy: (212) 278-7432
with copies to:
Sidley & Austin
875 Third Avenue
New York, NY 10022
Attn: Barbara A. Vrancik, Esq.
Telecopy: (212) 906-2021
Party Notice address:
- ----- ---------------
First Union Commercial First Union Commercial Corporation
Corporation, as Lender 1970 Chain Bridge Road
Mail Code VA1942
McLean, VA 22102
Attn: Jeff McGrath
Telecopy: (703) 760-6019
Party Notice address:
- ----- ---------------
Senior High Income Senior High Income Portfolio,
Portfolio, Inc. Inc.
c/o Merrill Lynch Assett Management
Prime Rate Portfolio
800 Scudders Mill Road
Area 1B
2
<PAGE>
Plainsboro, NJ 08536
Attn: Ann Marie Smith and
Janet Hansen
Telecopy: (609) 282-2756
Party Notice address:
- ----- ---------------
Paribas Capital Funding Paribas Capital Funding LLC
LLC, as Lender 787 Seventh Avenue
32nd Floor
New York, NY 10019
Attn: Michael Weinberg
Telecopy: (212) 841-2144
Party Notice address:
- ----- ---------------
Fleet National Bank, Fleet National Bank
as Lender 1 Federal Street
Boston, MA 02110
Mail Code MAOFD03C
Attn: Jim Silva
Telecopy: (617) 346-4806
Party Notice address:
- ----- ---------------
General Electric Capital General Electric Capital Corporation
Corporation, as Lender 777 Long Ridge Road
Bldg. B
Stamford, CT 06927
Attn: Brian Minor
Telecopy: (203) 316-7989
3
<PAGE>
SCHEDULE I
TO
AMENDED AND RESTATED CREDIT AGREEMENT
<TABLE>
<CAPTION>
Acquisition
Term Loan Revolving Loan Term A Loan Term B Loan
Lender Commitments Commitments Commitments. Commitments
- ------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
First Union Commercial Corporation $ 7,638,888.89 $10,694,444.44 $ 9,166,666.67 $27,500,000.00
Societe Generale $ 7,638,888.89 $10,694,444.45 $ 9,166,666.67 $16,000,000.00
Senior High Income Portfolio, Inc. -- -- -- $ 5,500,000.00
General Electric Capital Corporation $ 5,555,555.55 $ 7,777,777.78 $ 6,666,666.67 --
Paribas Capital
Funding LLC -- -- -- $ 11,000,000
Fleet National Bank $ 4,166,666.67 $ 5,833,333.33 $ 5,000,000.00
-------------- -------------- -------------- -------------- ---------------
Total Commitments $25,000,000.00 $35,000,000.00 $30,000,000.00 $60,000,000.00 $150,000,000.00
- -----------------
</TABLE>
<PAGE>
SCHEDULE 1.01(A)
PERMITTED EXISTING INDEBTEDNESS
1. Note (the "Farm Bureau Note") Secured by Deed of Trust, dated September 6,
1991, and First Loan Modification Agreement, dated November 1, 1996, by
Paragon Precision Products, Inc. ("Paragon") to Farm Bureau Life Insurance
Company ("Farm Bureau") in the original principal amount of $2,850,000.
2. Guaranty (including the subordination of rights to payment) of Stellex
Aerospace ("Aerospace"), formerly known as Kleinert Industries, Inc., dated
September 6, 1991, Reaffirmation of Guaranty, dated November 1, 1996, and
Second Reaffirmation of Guaranty, dated August 15, 1997, in favor of Farm
Bureau with respect to Paragon's obligation under the Farm Bureau Note.
3. Guaranty of Lease by Aerospace, dated November 21, 1989, in favor of Grand
Nash Company (as lessor) with respect to the performance by Scanning
Electron Analysis Laboratories, Inc. ("SEAL") (as lessee) of its
obligations under the Industrial Real Estate Lease, dated September, 1989,
by and between Grand Nash Company and SEAL, as modified by certain Riders
and by certain amendments, dated June 19, 1990 and June 12, 1995,
respectively, for premises located at 250 North Nash Street, El Segundo,
California 90245.
4. Stellex Aerospace - Success Sharing Plan, dated June 1989, as revised on
January 1, 1998.
5. Cost Per Copy Rental Agreement between SEAL and Astro Office Products,
Inc., dated June 29, 1994, for GP-55 and NP6030.
6. Management Incentive Plan (M.I.P.) Incentive Bonus Program, as revised on
January 1, 1998.
7. The Promissory Note issued by KII Acquisition Corp. ("KII") in favor of
Kleinert Industries Holding AG in the principal amount of $1,750,000.
8. 401(k) Plan adopted by TSMD Acquisition Corp. In connection with the
acquisition of Stellex Microwave Systems, Inc..
9. Capital Lease between Bandy Machining International ("Bandy") and DKM,
dated November 5, 1997 for AS-400 computer and MAPICS application software.
10. Capital Lease between Bandy and Dassault Systems, dated October 1, 1997,
for Catia-CADM Application Software and certain hardware equipment.
<PAGE>
11. Capital Lease between General Inspection Laboratories, Inc. and Sunston
Equipment, Inc., dated April 22, 1998, for Komatsu forklift.
12. Stellex Microwave Quarterly Performance Sharing Plan
13. Stellex Microwave Annual Incentive Plan for Top Management
14. Stellex Microwave Annual Incentive Plan for Senior Management
15. Stellex Microwave Annual Incentive Plan for Middle Management
16. Stellex Microwave Annual Incentive Plan for Key Professionals
17. Employment Agreement between Stellex Microwave Systems ("Microwave") and
Keith Gilbert
18. Promissory Note issued by Monitor in favor of Douglas Monitto, in his
capacity as Majority Noteholder, in the principal amount of $5,180,000.
19. Agreements between Monitor and Catic International Leasing Co., Ltd.
regarding the purchase, sale, exchange or lease of four gantry profilers.
20. Monitor Aerospace Corporation Savings and Profit Sharing Plan.
21. Salary Continuation Agreements - Four senior executives of Monitor
participate in plan providing for deferral of between $20,000 and $60,000
of such executive's compensation and the purchase by the Monitor of
variable universal life insurance with such amount of deferred
compensation. Approved at September 1997 meeting, and currently being set
up. Annual cost is $100,000.
22. Monitor Aerospace Corporation Employees' Pension Plan and Trust. This plan
was "frozen" in 1997 and will be terminated in connection with the Monitor
Acquisition in accordance with the Monitor Acquisition Agreement.
23. Executive Incentive Compensation Program - Under this Program, Eight senior
executives of Monitor can earn annual bonuses of up to 30% of base salary.
Two- thirds of the bonus is paid if the Monitor meets or exceeds profit
goals of its business plan and one-third is paid if executive meets agreed
upon individual goals.
24. Monitor Aerospace Corporation Restricted Stock Bonus Plan - Adopted
December 15, 1983, as modified and amended by Board resolutions dated
January 6, 1997 and March 25, 1998.
25. Employment Agreement dated as of May 29, 1998 between Monitor and Andrews.
<PAGE>
26. Other benefit plans and employment arrangements entered into by Stellex and
its Subsidiaries in the ordinary course of business where compensation is
based on the operating or financial performance of Stellex or any of its
Subsidiaries or that would otherwise constitute "profit sharing
arrangements".
27. Various intercompany loans between the Borrowers as described in the
attached Schedule 1.10(A)(11).
<PAGE>
SCHEDULE 1.10(A)(11)
<TABLE>
<CAPTION>
OBLIGOR OBLIGEE APPROXIMATE
------- ------- AGGREGATE AMOUNT
----------------
<S> <C> <C>
Bandy Machining International Aerospace $ 12,396,500
Paragon Aerospace $ 9,040,500
SEAL Aerospace $ 1,053,500
General Inspection Aerospace $ 892,000
Laboratories, Inc.
Stellex Microwave Systems, Stellex Industries, Inc. $ 96,769,061
Inc.
Stellex Aerospace Stellex Industries, Inc. $ 20,943,000
Monitor Stellex Industries, Inc. $ 95,000,000
</TABLE>
<PAGE>
SCHEDULE 1.01(B)
PERMITTED EXISTING LIENS
1. Uniform Commercial Code Financing Statement No. 9710060886, filed April 4,
1997 in favor of Machinery Sales Co., as Secured Party, against Paragon, as
Debtor, securing one Charmilles Roboform 40 CNC Diesinking EDM machine with
all standard equipment wired 230/3/60 including Hi Inertia C-Axis and 2 Ton
Chiller and any additions, etc., as more particularly described thereon.
(The Chief Financial Officer of Aerospace has advised that all payments
have been made and that a UCC termination statement has been requested of
the Secured Party.)
2. Deed of Trust with Assignment of Rents and Fixture Filing dated September
6, 1991, in the original principal amount of $2,850,000, by Paragon, as
Maker, in favor of Farm Bureau, filed for record on October 16, 1991 with
the Los Angeles County Registrar-Recorder/County Clerk as Instrument No.
91-1635037 (the "Farm Bureau Deed of Trust").
3. Assignment of Leases and Rents dated September 6, 1991, by Paragon in favor
of Farm Bureau, filed for record on October 16, 1991 with the Los Angeles
County Registrar-Recorder/County Clerk as Instrument No. 91-1635038.
4. Uniform Commercial Code Financing Statement No. 91233708, filed October 30,
1991 in favor of Farm Bureau, as Secured Party, against Paragon, as Debtor,
as continued July 19, 1996, securing goods which are located at Paragon's
real property and which are used in the operation or occupancy of the real
property (excepting any personal property, equipment and fixtures which are
used in the trade or business conducted on the real property), general
intangibles relating to the development or use of the real property,
documents of membership, and proceeds and claims.
5. Cost Per Copy Rental Agreement between SEAL and Astro Office Products,
Inc., dated June 29, 1994, for GP-55 and NP6030.
6. The Guaranty of Aerospace, dated September 6, 1991, Reaffirmation of
Guaranty, dated November 1, 1996, and Second Reaffirmation of Guaranty,
dated August 15, 1997, in favor of Farm Bureau contains a provision
granting Farm Bureau a lien upon and right of set-off against all monies,
securities and other property of Aerospace now or hereafter in the actual
or constructive possession of Farm Bureau. To the knowledge of Aerospace,
Farm Bureau does not have possession of any monies, securities or any other
property of Aerospace.
7. Precautionary filings of Uniform Commercial Code financing statements
relating to operating leases and financing statements relating to
Indebtedness and other obligations that have been repaid in full.
<PAGE>
SCHEDULE 1.05
KNOWLEDGE
Chairman of Stellex Industries, Inc. ("Stellex")
Vice President of Stellex
President of Stellex
Chief Financial Officer of Stellex
President of each Guarantor other than Stellex
<PAGE>
SCHEDULE 5.01(A)
ON SIDLEY SYSTEM INSERT
<PAGE>
SCHEDULE 5.03(A)
1. Both before and after giving effect to the consummation of the Permitted
Acquisition, all of the representations and warranties contained in Section 6.01
of the Credit Agreement and in the other Loan Documents shall be true in all
material respects, except that Schedules 6.01(D), 6.01(E), 6.01(L), 6.01(P),
6.01(Q) and 6.01(V) may be modified and amended to give effect to matters in
respect of the Permitted Acquisition, and, as so modified and amended, shall be
reasonably satisfactory to the Agents.
<PAGE>
SCHEDULE 5.03(B)
1. A Borrower has delivered written notice to the Administrative Agent and
the Lenders of its intention to make a Permitted Acquisition and a copy of the
Information Package no less than Fifteen (15) Business Days prior to the
proposed closing date for such Permitted Acquisition that sets forth, among
other things, information regarding liabilities and obligations with respect to
material environmental matters to be incurred by the Borrower or any other Loan
Party (including, without limitation, the acquired Person in the event of an
acquisition of equity interests) as a result of such acquisition, any
indemnities afforded under the terms of such acquisition and the scope and
results of any environmental review undertaken by such Borrower in connection
therewith.
2. The consideration (including, without limitation, the purchase price,
any deferred purchase price and the amount of Indebtedness being assumed) for
such Permitted Acquisition does not exceed the fair market value of the assets
or the equity interests being acquired.
3. The Permitted Acquisition is made at a time when, after giving effect to
such Permitted Acquisition and the related financing thereof, no Default or
Event of Default exists and the Borrower would remain Solvent.
4. Substantially all assets and equity interests acquired by the Borrower
are being pledged to the Collateral Agent, for the ratable benefit of the Agents
and the Lenders, in accordance with Section 9.09.
5. The Interest Coverage Ratio of Stellex and its Subsidiaries on a
consolidated basis calculated on a Pro Forma Basis after giving effect to such
Permitted Acquisition shall be equal to or greater than (a) 1.75 to 1.00 in
connection with any Permitted Acquisition consummated in Fiscal Year 1998, (b)
1.90 to 1.00 in connection with any Permitted Acquisition consummated in Fiscal
Year 1999 and (c). 2.25 to 1.00 in connection with any Permitted Acquisition
consummated thereafter.
6. The Leverage Ratio of Stellex and its Subsidiaries on a consolidated
basis calculated on a Pro Forma Basis after giving effect to such Permitted
Acquisition shall not be greater than (a) 5.75 to 1.00 in connection with any
Permitted Acquisition consummated prior to the Commitment Termination Date and
(b) 4.50 to 1.00 in connection with any Permitted Acquisition consummated
thereafter.
<PAGE>
SCHEDULE 6.01(C)
OWNERSHIP
Borrowers Ownership
- --------- ---------
Stellex Industries, Inc. 9.9% of common stock by Askrigg
Trust (1996) .9% of common stock by
CSP Equity Partners (VII), LLC
89.2% of common stock by Cottingham
Trust (1996)
46.3% of Series A Preferred Stock
by Sunderland Industrial Holdings
Corporation (106 of 229 outstanding
shares) 38.4% of Series A Preferred
Stock by A.J. 1989 Trust (88 of 229
outstanding shares) 9.6% of Series
A Preferred Stock by Equity
Resources Associates (22 of 229
outstanding shares) 3.5% of Series
A Preferred Stock by Chadbourne
Corporation (8 of 229 outstanding
shares) 1.3% of Series A Preferred
Stock by Equity Resources Trust (3
of 229 outstanding shares) .9% of
Series A Preferred Stock by CSP
Equity Partners (VII), LLC (2 of
229 outstanding shares)
KII Holding Corp. 80.1% of common stock by Stellex
Industries, Inc. 19.9% of common
stock by Management Group 100% of
Series A Preferred by Stellex
Industries, Inc.
Kll Acquisition Corp. 100% by Kll Holding Corp.
Stellex Aerospace 100% by Kll Acquisition Corp.
Paragon 100% by Stellex Aerospace
SEAL 100% by Stellex Aerospace
Bandy Machining International 100% by Stellex Aerospace
General Inspection Laboratories, Inc. 100% by Stellex Aerospace
TSMD Acquisition Corp. 100% by Stellex Industries, Inc.
<PAGE>
Stellex Microwave Systems, Inc. 100% by TSMD Acquisition Corp.
Stellex Aerospace Holdings, Inc. 100% by Stellex Industries, Inc.
Monitor Aerospace Corporation 100% by Stellex Aerospace Holdings,
Inc.
Monitor Marine Products, Inc. 100% by Monitor Aerospace
Corporation
Monitor Aerospace International Corp. 100% by Monitor Aerospace
Corporation
<PAGE>
SCHEDULE 6.01(D)
VIOLATIONS OF AND CONFLICTS WITH
GOVERNING DOCUMENTS, REQUIREMENTS
OF LAW OR MATERIAL CONTRACTUAL OBLIGATIONS
Reference is made to Schedule 5.01(A), which is incorporated herein by
reference. In addition the failure of the Loan Parties to obtain consents under
certain contracts or with respect to certain government licenses or permits may
constitute a violation of certain Requirements of Law and/or of certain material
Contractual Obligations to which such matters pertain. The effect on the Loan
Parties is not expected to be material.
<PAGE>
SCHEDULE 6.01(J)(i)
LITIGATION; ADVERSE EFFECTS
None
<PAGE>
SCHEDULE 6.01(J)(ii)
MATERIAL LOSS CONTINGENCIES
NOT REFLECTED IN FINANCIAL STATEMENTS
1. Reference is made to the letter dated September 30, 1997 from Hughes
Missile Systems Company to Watkins-Johnson Company, a copy of which is attached
hereto. The $566,000 item referred to in paragraph 1 thereof may constitute a
"material loss contingency," as such term is used in the second sentence of
Section 6.01(j) of the Agreement (an "MLC").
2. In connection with certain programs, the Loan Parties have incurred
provisional losses which may constitute MLC's. These provisional losses are, as
of the date of this Agreement, not expected to exceed $750,000.
<PAGE>
SCHEDULE 6.01(L)
PAYMENT OF TAXES
1. Paragon failed to file either a "top hat" notice or annual Form 5500 report
with respect to certain income continuation agreements to which Paragon is
a party. In June, 1997, Paragon filed a Top Hat Plan Notice, and tendered
$2,500 with the required documentation in satisfaction of any potential
civil penalty relating to filing obligations, pursuant to the U.S.
Department of Labor's Delinquent Filer Voluntary Compliance Program with
respect thereto. The receipt of such payment has been acknowledged.
2. Aerospace failed to file either a "top hat" notice or annual Form 5500
reports with respect to certain deferred compensation agreements to which
Aerospace is a party. In June, 1997, Aerospace filed a Top Hat Plan Notice,
and tendered $2,500 with the required documentation in satisfaction of any
potential civil penalty relating to filing obligations, pursuant to the
U.S. Department of Labor's Delinquent Filer Voluntary Compliance Program
with respect thereto. The receipt of such payment has been acknowledged.
3. Monitor has been informed in writing that there is "No Change" regarding
tax payments for a New York State tax audit for the years ending May 31,
1992 through May 31, 1994.
4. Monitor made the following accounting change for the fiscal year ended May
31, 1993 and thereafter: Inventory valuation method was changed from
last-in-first-out to first-in-first-out.
<PAGE>
SCHEDULE 6.01(P)
ENVIRONMENTAL MATTERS
1. All matters, including, but not limited to, compliance issues, orders,
agreements, violations or alleged violations, Remedial Actions, Liabilities
and Costs, Releases or threatened Releases, notices, underground storage
tanks, surface impoundments, asbestos-containing materials (confirmed or
suspected) and polychlorinated biphenyls ("PCBs"), disclosed in the
following, all of which have been provided to the Agent (collectively, the
"Environmental Assessments"):
a. Draft Report Phase I Environmental Site Assessment, Seal Laboratories,
250 North Nash Street, El Segundo, California, Dames and Moore, dated
October 21, 1996;
b. Draft Report Phase I Environmental Site Assessment and Phase 11
Limited Subsurface Investigation, General Inspection Laboratories,
8427 Atlantic Avenue, Cudahy, California, Dames and Moore, dated
October 21, 1996;
c. Revised Environmental Compliance Assessment Findings, General
Inspection Laboratories, 8427 Atlantic Avenue, Cudahy, California,
Dames and Moore, dated December 12, 1996;
d. Draft Report Phase I Environmental Site Assessment, Paragon Precision
Products, Inc., 26150 West Technology Drive, Valencia, California,
Dames and Moore, dated October 18, 1996;
e. Draft Report Phase I Environmental Site Assessment and Phase 11
Limited Subsurface Investigation, Bandy Machining International, Inc.,
3400 San Fernando Boulevard and 3086 Avon Street, Burbank, California,
Dames and Moore, dated October 22, 1996;
f. Environmental Assessment of Subsidiaries of Stellex Aerospace, ENSR
Consulting and Engineering, dated May, 1997;
g. Memorandum (Additional Investigative Activities and Findings), ENSR
Consulting and Engineering, dated June 3, 1997;
h. Memorandum (Additional Investigative Activities re: Aerospace,
formerly known as Kleinert Industries, Inc.) ENSR Consulting and
Engineering, dated October 27, 1997;
i. Commercial Sub-Sublease (Buildings 3/4/5) dated October 31, 1997
between W-J TSMD Inc., as Tenant and Watkins-Johnson Company ("WJ"),
as Landlord;
<PAGE>
j. Commercial Sub-Sublease (Building 6) dated October 31, 1997 between
W-J TSMD Inc., as Tenant and WJ, as Landlord;
k. EPA Notifications of Regulated Waste Activity (EPA Form 8700-12) have
been filed as appropriate with the EPA concerning the generation and
disposal of hazardous waste. No waste is to be stored in excess of 90
days;
l. Phase I Environmental Site Assessment and Compliance Audit of WJ, Palo
Alto, California dated October 1997 prepared by ENSR under its
Document Number 8713-095;
m. The following information has been obtained concerning the leased
property:
(i) The California EPA issued an order finding that WJ is a
responsible party for groundwater contamination which flows
through WJ's Palo Alto Plant site on the site itself. A number of
other companies in the area as well as Stanford University, the
land owner, have been included in the order which required the
responsible parties to conduct an investigation into the cause of
the contamination. The order further required the parties to
submit recommendations on the actions to remediate the
contamination. This regional order applies to what has been
designated by the State as the "Hillview/Porter site." The
primary sources of contamination were found to have migrated onto
WJ's property from off-site. Subsequent to a mediation among the
responsible parties to the Hillview/Porter site, a formula for
allocation of costs for investigation and remediation based on a
determination of liability for such costs was developed. The
parties are in compliance with orders relating to this cleanup
effort.
In 1991 WJ established a reserve for expected costs associated
with this effort, and nothing has occurred since that time which
would cause WJ to change that reserve.
(ii) The California EPA also ordered responsible or potentially
responsible parties to the Hillview/Porter site, in addition to
participating in the total site remediation, to investigate and
remediate contamination that is specific to their properties
("site specific"). The State has, in that regard, ordered WJ to
take necessary measures to clean up certain contamination which
the State believes was caused by WJ and not by contaminants
flowing on-site from other sources. WJ has likewise established a
reserve for expected costs associated with this effort, and
nothing has occurred since that time which would cause WJ to
change that reserve.
<PAGE>
n. Preliminary Site Assessment and Limited Site Characterization, Pure
Cote, Inc. and Paragon Precision Products, Pacoima, California, Thorne
Environmental, Inc., June 13, 1989;
o. The documents identified in Paragraph 2 of this Schedule 6.01(P)
relating to the Pacoima Site (as defined below), together with all
matters disclosed in the reports, studies, assessments, findings,
filings, records and other data referenced therein; and
p. Draft Phase I Environmental Site Assessment and Environmental, Health
and Safety Compliance Audit Report of the Monitor Aerospace
Corporation Facility, Amityville, New York, ENSR, May 1998.
2. Prior to the purchase of either Paragon or Paragon's former site at 11035
Sutter Avenue, Pacoima, California (the "Pacoima Site") by Aerospace, a
brick-lined vault (the "Vault") located on the southwestern side of the
Pacoima Site was used for the disposal of waste oils from the Pacoima
Site's operation. During an environmental audit conducted by Aerospace in
1989, soil impacted by hydrocarbons and halogenated organic compounds was
found at the Vault location. Groundwater test results also showed that
gasoline, aromatic volatile compounds, and several halogenated organic
compounds were present in the groundwater.
The contamination was reported to the Los Angeles County Department of
Health Services ("DHS"), and, subsequently, to the California Regional
Water Quality Control Board ("RWQCB"), Los Angeles Region, which assumed
jurisdiction over the remediation of the Pacoima Site. A remediation
program consisting of vapor extraction of the volatile compounds from the
soils was proposed, approved by the RWQCB, and implemented (the
"Remediation Program"). The Remediation Program is described further in the
following documents:
a. Project Summary Report prepared by CET Environmental Services, Inc.
dated January, 1993;
b. The Soil Remediation Closure Report submitted to the RWQCB dated May,
1993 (the "Closure Report"); and
c. A letter from the RWQCB dated August 30, 1993 (the "No Action
Letter").
Several years after Paragon sold the Pacoima Site to D&M Steel ("D&M")
(a copy of the purchase agreement with D&M has been provided to the
Agent) and after the RWQCB issued the No Action Letter, Aerospace
learned that the California Department of Toxic Substances Control
("DTSC"), acting under the authority of the United States
Environmental Protection Agency ("U.S. EPA") contacted D&M for the
purpose of investigating whether a release of hazardous substances had
occurred at the Site which poses a
<PAGE>
threat to public health or the environment (the "DTSC Investigation").
Neither Aerospace nor Paragon have been contacted by either DTSC or
U.S. EPA concerning the DTSC Investigation. Aerospace has been advised
that DTSC inspected the Pacoima Site in 1996 or 1997.
In connection with the prior use of the Vault and the potential
presence of discharges and releases caused by the previous owners of
the Pacoima Site, Aerospace and certain affiliates filed a lawsuit
against the prior owners in Los Angeles County Superior Court (Case
No. PCO07199X) (the "Familian Litigation"). The Familian Litigation
and various claims associated with potential existing and future
hazardous materials claims relating to the Pacoima Site were settled
pursuant to a Settlement and Release Agreement dated on or about July
5, 1994 by and among Aerospace, Paragon, Paragon Tool, Die and
Engineering, Novo-Paragon, Inc., Novo Leasing, Ltd., Isadore Familian,
Gary Familian, Arnold Familian, Marv Smalley, Leonard Shapiro, Robert
Wyser, Wyser Industries, Inc., General Accident Insurance Company of
America, Utica Mutual Insurance Co., Allianz Insurance Co., Sentry
Insurance A Mutual Company, Fireman's Fund Insurance Co., Atlantic
Mutual Insurance Co., and The Travelers (a copy of the Settlement and
Release Agreement has been provided to the Agent).
3. As reflected in the Draft Report Phase I Environmental Site Assessment,
Paragon Precision Products, Inc., 26150 West Technology Drive, Valencia,
California, prepared by Dames and Moore and dated October 18, 1996, the
activated carbon filters used in the Remediation Program (as defined above)
were transported to Yakima, Washington for regeneration and reprocessing.
The filters allegedly were mishandled in the process of regeneration and
reprocessing by Cameron-Yakima, Inc. ("Cameron-Yakima"), the company
responsible for regeneration and reprocessing of the filters, resulting in
a release of hazardous materials on or near Cameron-Yakima's facility at
Yakima. In August 1994, Paragon received a letter from Cameron-Yakima
indicating that the Washington State Department of Ecology had notified
some of Cameron-Yakima's customers that they may be potentially liable for
remediation costs associated with the release. Paragon has received no
further communication with respect to this matter.
4. In 1994 or 1995, Aerospace received a letter addressed to G.W. Bandy, Inc.
("G.W. Bandy"), the predecessor to Bandy Machining International ("Bandy"),
indicating the existence of legal proceedings arising from the failure of a
hazardous materials transporter formerly used by G.W. Bandy to transport
and dispose of machine coolants. Apparently, the transporter had illegally
disposed of the coolants and other materials handled by it, and had
subsequently declared bankruptcy. The transporter was engaged by G.W. Bandy
during periods prior to Aerospace's acquisition of Bandy and was not
utilized by either Aerospace or Bandy at any time subsequent to Aerospace's
acquisition of Bandy in 1990. The letter noticing the legal proceedings was
forwarded by Aerospace to G.W. Bandy, as it is Aerospace's
<PAGE>
view that any liability arising from the proceedings would be the
responsibility of G.W. Bandy, as seller under the purchase agreement
pursuant to which Aerospace acquired Bandy (a copy of which has been
provided to the Agent). No copies of the letter noticing the legal
proceedings were retained by Aerospace and Aerospace has not received any
subsequent correspondence or other notices regarding this matter.
5. By copy of a letter dated February 26, 1992 to the Los Angeles County
Department of Public Works ("LADPVV"), the SDLAC notified Paragon that
Paragon was exempt from industrial waste permitting requirements under
SDLAC's then-current policy and, accordingly, Industrial Wastewater
Discharge Permit No. 12845 for Paragon's Valencia, California facility was
"void." Subsequently, sometime during the first-half of 1993, LADPW
conducted a survey of Paragon to determine if Paragon would be required to
obtain an Industrial Wastewater Discharge Permit from LADPW. During the
LADPW survey, LADPW advised Paragon that its non- destructive penetrant
inspection process could be considered a source of industrial waste and
that Paragon would be required to apply for an Industrial Wastewater
Discharge Permit. The process in question involves application with a brush
of a non-toxic penetrant dye on machined parts and inspection of such parts
under blacklight conditions for any evidence of metal defects. Following
the inspection, the dye is rinsed under tap water in a conventional sink
and flushed into the sanitary sewer. Paragon was advised by the LADPW that
as part of Paragon's application for an Industrial Wastewater Discharge
Permit, Paragon would need to propose installation of a sampling box to
test the pH of the dye discharge on a periodic basis. On March 24, 1993,
SDLAC issued a temporary Industrial Waste Discharge Permit to Paragon.
On June 21, 1993 and again on November 4, 1993, Paragon received from SDLAC
notices of violation dated June 1, 1993 and October 12, 1993, respectively,
stating that Paragon was in violation of SDLAC's Wastewater Ordinance by
failing to submit an application for an Industrial Wastewater Discharge
Permit. Following several months of discussions between Paragon and SDLAC
personnel, on November 29, 1993 Paragon filed an application for an
Industrial Wastewater Discharge Permit with LADPW. By letter dated January
11, 1994 from LADPW, Paragon's application was disapproved on the grounds
that additional information was required to process the application. Among
other things, the letter indicated that Paragon may be required to install
a gravity separation interceptor. Due to temporary dislocations caused by
the Northridge Earthquake on January 17, 1994, Paragon's revisions to the
application were delayed and a notice of violation was issued by LADPW on
May 2, 1994 stating that Paragon had failed to supply the additional
information required by LADPW in its January 11, 1994 letter.
By letter to SDLAC dated June 30, 1994, Paragon requested an extension to
August 19, 1994 to complete its Industrial Wastewater Discharge Permit
application. In a response, by letter dated July 7, 1994, SDLAC extended
the application
<PAGE>
deadline to September 1, 1994. On or about that date, Paragon sent a letter
to LADPW requesting that Paragon be permitted to install a sampling box in
lieu of the gravity separation interceptor requested by LADPW. After an
initial request from LADPW for some additional information, no further
correspondence was received from LADPW during 1994.
On February 10, 1995, Paragon received a letter dated February 8, 1995 from
SDLAC notifying Paragon that its temporary Industrial Wastewater Discharge
Permit 12845 issued March 24, 1993 has been "voided" on the grounds that
Paragon's only industrial discharge is from zyglo dye testing and the daily
discharge volumes are less than 200 gallons. Paragon assumed that this
letter concluded the need for further revisions to its Industrial
Wastewater Discharge Permit application; however, on September 6, 1995,
Paragon received a final delinquency notice from LADPW indicating that it
must immediately file a revised application. This application was filed on
October 19, 1995 and was disapproved with a request for additional
information on November 9, 1995. The additional information requested did
not include a request for installation of a gravity separation interceptor.
Paragon submitted the additional information on December 12, 1995 along
with a permit fee. Since that time, Paragon has received no further
correspondence from either SDLAC or LADPW regarding this matter.
6. A power transformer formerly used in connection with X-ray machines
formerly located at the General Inspection Laboratories ("GIL") facility in
Cudahy, California was found to contain PCBs. The transformer was
transported by a licensed hazardous waste transporter for proper disposal
on October 13, 1997.
7. GIL has filed an Onsite Hazardous Waste Treatment Notification Renewal
Form, dated April 10, 1997, with the Los Angeles County Fire Department and
the California Department of Toxic Substances Control with respect to its
Haviland wastewater treatment equipment and process.
<PAGE>
SCHEDULE 6.01(Q)
ERISA
1. The Monitor Aerospace Corporation Employees' Pension Plan and Trust is a
Benefit Plan. In connection with the Monitor Acquisition, Monitor intends
to terminate this Plan. A portion of the Merger Consideration paid in
connection with the Monitor Acquisition equal to $4,000,000 has been placed
in escrow (the "Escrow Fund") for the purpose of paying all costs and
liabilities incurred by Monitor in connection with the termination of the
Plan. Section 2.4 of the Merger Agreement sets forth certain other terms in
respect of the disbursement of the Escrow Fund and the termination of the
Plan.
<PAGE>
SCHEDULE 6.01(U)
OWNERSHIP OF ALL NECESSARY
GOVERNMENTAL PERMITS
Reference is made to Schedule 5.01(A) with respect to consents, approvals,
contract novations and assignments or new issuances of various governmental
permits that have not been obtained, as of the date of this Agreement, in each
case from certain governmental authorities specified therein. The failure to
have obtained such items, as of the date of this Agreement, qualifies the first
sentence of Section 6.01(u)(i) of this Agreement.
<PAGE>
SCHEDULE 6.01(W)
INSURANCE
1. See attached Insurance Summaries.
<PAGE>
Exhibit 99.1
NEWS RELEASE
CONTACTS:
Kammy Moalemzadeh Bruce Andrews
Vice President President
Mentmore Holdings Corporation Monitor Aerospace Corporation
(212) 391-1392 (516) 957-2300
TO: THE EDITOR
FOR: IMMEDIATE RELEASE
STELLEX INDUSTRIES COMPLETES ACQUISITION OF
MONITOR AEROSPACE CORPORATION
New York, New York, June 3, 1998. Stellex Industries, Inc. announces the
completion of the acquisition of Monitor Aerospace Corporation for total
consideration of $95 million. Monitor, which has sales of $86.3 million, is a
leading aerospace subcontractor engaged in the manufacture and assembly of
precision-machined structural aircraft components and assemblies.
"The combination of Monitor's and Stellex's current aerospace operations
creates one of the world's leading suppliers of aerostructures, providing
finished components directly to original equipment manufacturers and their
major systems subcontractors," said William L. Remley, Vice Chairman and
President of Stellex Industries. With the addition of Monitor, Stellex has
grown to approximately $215 million in revenues since its formation in 1997.
Monitor, based in Amityville, New York, will continue to be operated by its
current management. The acquisition plus refinancing of existing indebtedness
was financed with credit facilities underwritten by Societe Generale
Securities Corporation and First Union Corporation.
Stellex Industries, Inc. is a privately owned company controlled by affiliates
of Mentmore Holdings Corporation. Through its subsidiaries Stellex Microwave
Systems, Inc. and Stellex Aerospace, Stellex Industries is a leading provider
of highly engineered subsystems and components for the aerospace, defense and
space industries.
Mentmore Holdings Corporation is a privately owned investment company which
has successfully completed acquisitions or significant equity investments in
public and private companies with total revenues in 1997 of over $1.3 billion.
These companies include holdings in the aerospace, steel, plastics, foundry,
textile, apparel, packaging, and machinery, and the financial services area.
In addition, Mentmore Holdings Corporation, through an affiliate company with
offices in New York, Washington, D.C. and San Francisco, operates one of the
largest real estate development firms in the United States. Mentmore
Development Company and its subsidiaries and predecessor companies have
developed over 23 million square feet of real estate, representing an
investment at cost of over $4 billion.
11
