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CREDIT AGREEMENT
Dated as of August 25, 1998
by and between
APPLIED CELLULAR TECHNOLOGY, INC.
and
STATE STREET BANK AND TRUST COMPANY
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TABLE OF CONTENTS
ARTICLE I. DEFINITIONS.......................................................1
Section 1.01. Definitions........................................1
Section 1.02. Accounting Terms...................................8
ARTICLE II. AMOUNT AND TERMS OF THE CREDIT...................................8
Section 2.01. The Revolving Credit...............................8
Section 2.02. The Credit.........................................8
(a) General Terms......................................8
(b) The Credit Note....................................9
(c) Interest...........................................9
(d) Requests for Advances..............................9
(e) Payment Upon Maturity Date.........................9
(f) Credit Advances...................................10
Section 2.03. Interest on the Credit............................10
Section 2.04. Special Provisions Governing LIBOR Rate Loans.....10
(a) LIBOR Rate Loan Interest Periods..................10
(b) LIBOR Conversion..................................11
(c) Determination of Interest Rate....................12
(d) Substituted Rate of Borrowing.....................12
(e) Required Termination and Prepayment...............13
(f) Compensation......................................13
(g) Quotation of LIBOR Rate...........................13
(h) LIBOR Rate Taxes..................................14
(i) Booking of LIBOR Rate Loans.......................14
(j) Increased Costs...................................14
(k) Assumptions Concerning Funding of LIBOR
Rate Loans........................................15
(l) LIBOR Rate Loans After Default....................15
Section 2.05. Special Provisions Governing Alternative
Currencies........................................15
(a) General...........................................15
(b) Availability......................................16
(c) Judgment Currency.................................16
Section 2.06. Method of Payment.................................16
Section 2.07. Voluntary Prepayments on the Credit...............17
Section 2.08. Payment and Interest Cutoff.......................17
Section 2.09. Prepayment of Credit..............................17
Section 2.10. Expenses..........................................18
Section 2.11. [Intentionally Omitted]...........................18
Section 2.12. Commitment Fee....................................18
Section 2.13. Use of Credit Proceeds............................18
Section 2.14. Letters of Credit.................................18
(a) Issuance Procedures...............................18
(b) L/Cs - Foreign Subsidiaries.......................19
(c) Reimbursement.....................................19
(d) Commission........................................19
(e) Method of Payment.................................19
(f) Amount............................................19
ARTICLE III. REPRESENTATIONS AND WARRANTIES.................................20
Section 3.01. Corporate Existence and Power;
Organizational Structure..........................20
Section 3.02. Subsidiaries......................................20
Section 3.03. Power and Authority Relative to Borrowing;
Legal and Binding Nature, Compliance
with Other Instruments............................20
Section 3.04. Financial Condition...............................21
Section 3.05 No Material Adverse Change........................21
Section 3.06. Litigation; Employment and Labor..................21
Section 3.07. Title.............................................22
Section 3.08. Tax Returns and Payments..........................22
Section 3.09. Compliance with Law...............................22
Section 3.10. Pension Matters...................................22
Section 3.11. Compliance with Regulation U......................23
Section 3.12. Credit Agreements.................................23
Section 3.13. Leases and Options to Purchase....................23
Section 3.14. Insolvency........................................23
Section 3.15. Real Estate Owned.................................23
Section 3.16. Hazardous Waste...................................23
Section 3.17. Permits...........................................23
Section 3.18. SEC Filings; No Omissions.........................24
Section 3.19 Intellectual Property.............................24
Section 3.20. Operation of Business on Consolidated Basis.......24
ARTICLE IV. CONDITIONS......................................................24
Section 4.01. Conditions to the Credit and the First
Advance...........................................24
(a) Credit Documents..................................25
(b) Actions to Perfect Liens..........................25
(c) Lien Searches.....................................25
(d) Pledged Stock; Stock Powers.......................25
(e) UCC-3 Termination Statements......................25
(f) Secretary's Certificate...........................25
(g) Officer's Certificate.............................26
(h) Legal Existence, Good Standing, Tax Good
Standing and Foreign Qualification Certificates...26
(i) Certificates of Insurance.........................26
(j) Legal Opinions from Counsel for the Borrower
and Guarantors....................................26
(k) No Default........................................26
(l) Material Adverse Change...........................26
(m) Miscellaneous Requirements........................26
Section 4.02. Conditions to Subsequent Advances.................27
ARTICLE V. COVENANTS OF THE BORROWER........................................27
Section 5.01. Payment of Amounts Due, Etc.......................27
Section 5.02. Corporate Existence...............................27
Section 5.03. Maintenance of Properties.........................27
Section 5.04. Payment of Taxes, Compliance with Laws............27
Section 5.05. Insurance.........................................27
Section 5.06. Accounts and Reports..............................28
(a) Annual Reports....................................28
(b) Quarterly Reports.................................28
ii
(c) Compliance Certificates...........................29
(d) Projections.......................................29
(e) Auditor's Management Letter.......................29
(f) Public Information................................29
(g) Accounting Principles.............................30
Section 5.07. Information and Inspection........................30
Section 5.08. Additional Advice.................................30
Section 5.09. Payment of Expenses...............................30
Section 5.10. Limitation on Indebtedness........................31
Section 5.11. Limitation on Liability for Obligations of
Others............................................32
Section 5.12. Limitation on Liens...............................32
Section 5.13. Sale of Assets....................................33
Section 5.14. Loans and Investments in Securities...............33
Section 5.15. Transactions With Affiliated Persons..............34
Section 5.16. Consolidation, Merger or Disposition/Acquisition
of Assets.........................................34
Section 5.17. Changes in Corporate Business.....................35
Section 5.18. New Subsidiaries..................................35
Section 5.19. Minority Stockholders.............................36
Section 5.20. Restricted Payments...............................36
Section 5.21. Restriction on Use of Proceeds....................36
Section 5.22. Bank Accounts.....................................37
Section 5.23. Continued Management and Ownership of Borrower
and Each Subsidiary...............................37
Section 5.24. Material Agreements...............................37
Section 5.25. Maximum Capital Expenditures......................37
Section 5.26. Ratio of Total Liabilities to Tangible
Net Worth.........................................37
Section 5.27. Ratio of Current Assets to Current Liabilities....38
Section 5.28. Ratio of Cash Flow to Debt Service ...............38
Section 5.29. Ratio of Net Profit Before Taxes to Revenue.......38
Section 5.30. Year 2000.........................................39
ARTICLE VI. EVENTS OF DEFAULT...............................................39
ARTICLE VII. MISCELLANEOUS..................................................41
Section 7.01. Term of Agreement.................................41
Section 7.02. Notices...........................................41
Section 7.03. No Waiver.........................................42
Section 7.04. Construction......................................42
Section 7.05. Amendments, Waivers and Consents; No Assignment...42
Section 7.06. Closing...........................................43
Section 7.07. Consent to Jurisdiction...........................43
Section 7.08. Waiver of Jury Trial..............................43
Section 7.09. Indemnity.........................................43
Section 7.10. Setoff............................................43
Section 7.11. Reliance on Representations and Actions
of the Borrower...................................44
Section 7.12. Participation.....................................44
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LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Credit Note
Exhibit B Form of Borrower Security Agreement.
Exhibit C Form of Borrower Stock Pledge Agreement.
Exhibit D Form of Guaranty Agreement.
Exhibit E Form of Subsidiary Security Agreement.
Exhibit F Form of Subsidiary Stock Pledge Agreement.
Exhibit G Form of Notice of Conversion/Continuation
Exhibit H Form of Secretary's Certificate
Exhibit I Form of Officer's Certificate
Exhibit J Form of Compliance Certificate
Schedule 3.02 Schedule of Subsidiaries and Ownership Structure
Schedule 3.04 Schedule of Financial Condition
Schedule 3.05 Schedule of Material Adverse Changes
Schedule 3.06 Schedule of Litigation; Employment and Labor
Schedule 3.07 Schedule of Properties and Assets
Schedule 3.08 Schedule of Payment of Taxes
Schedule 3.09 Schedule of Compliance with Law, etc.
Schedule 3.10 Schedule of Pension Matters
Schedule 3.12 Schedule of Existing Loan Agreements
Schedule 3.13 Schedule of Leases
Schedule 3.15 Schedule of Real Estate
Schedule 3.16 Schedule of Hazardous Waste
Schedule 3.17 Schedule of Licenses and Permits
Schedule 4.01(c) Schedule of Lien Search Results
Schedule 5.06 Form of Consolidating and Comparative
Balance Sheet and Income Statement
Schedule 5.10(d) Schedule of Existing
Purchase Money Indebtedness and Capitalized Lease Obligations
Schedule 5.10(e) Schedule of Other Existing Indebtedness
Schedule 5.11 Schedule of Existing Guaranties
Schedule 5.15 Schedule of Warrants and Options
Schedule 5.20 Schedule of Permitted Payments
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CREDIT AGREEMENT
This CREDIT AGREEMENT (the "Agreement") is made as of August 25, 1998, by
and (a) between APPLIED CELLULAR TECHNOLOGY, INC., a Missouri corporation (the
"Borrower") and (b) STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company (the "Bank").
Preliminary Statements:
WHEREAS, the Borrower wishes to establish a credit facility with the Bank
under which the Borrower may borrow funds from the Bank to refinance existing
indebtedness and for general working capital purposes; and
WHEREAS, the Bank has agreed to establish a credit facility for the
Borrower under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. Definitions. As used herein and in the other Credit
Documents, the following terms shall have the following meanings:
"Adjustment Date" means the first Business Day following receipt by
the Bank of both (i) the financial statements required to be delivered
pursuant to Section 5.06(a) or (b), as the case may be, for the most
recently completed fiscal period specified therein and (ii) the certificate
required to be delivered pursuant to subsection 5.06(c) with respect to
such fiscal period.
"Alternative Currency" shall mean, subject to the provisions set forth
in Section 2.05 below, any currency (a) which is freely transferable and
convertible into Dollars, (b) in which deposits are customarily offered to
banks in the London interbank market, (c) which the Borrower requests the
Bank to include as an alternative currency hereunder, and (d) which is
acceptable to the Bank.
"Applicable LIBOR Rate" shall mean an annual rate of interest for an
Interest Period equal to the LIBOR Rate in effect on the first day of such
Interest Period plus the Applicable Margin.
"Applicable Margin" means, for each LIBOR Rate Loan, 2.00% provided,
however, that after the date hereof, the Applicable Margin for all LIBOR
Rate Loans will be adjusted on each Adjustment Date (based upon the ratio
of Total Liabilities to Tangible Net Worth as of the last day of the fiscal
quarter ended on the date of the financial statements relating to such
Adjustment Date) to the Applicable Margin set below opposite the level for
which the ratio of Total Liabilities to Tangible Net Worth as so determined
satisfies the corresponding criteria set forth under the heading "Ratio of
Total Liabilities to Tangible Net Worth:"
===========================================================================
Ratio of Applicable
Level Total Liabilities Margin
to
Tangible Net Worth
------- ------------------------------------- ----------
I Greater than or equal to 1.75 to 1.00 2.25%
II Less than 1.75 to 1.00 2.00%
==========================================================================
Notwithstanding the foregoing, in the event that the financial
statements required to be delivered pursuant to Section 5.06(a) or
(b), as applicable, and the related certificate required pursuant to
Section 5.06(c), are not delivered when due, then for the period
commencing on the next Adjustment Date to occur subsequent to such
failure through the date immediately following on the date on which
such financial statements and such related certificate is delivered,
the Applicable Margin shall be 2.25%.
"Borrower Security Agreement" means the Borrower Security
Agreement - All Assets to be executed and delivered by the Borrower in
favor of the Bank, substantially in the form attached hereto as
Exhibit B, as the same may be amended, modified, substituted, extended
or restated, from time to time.
"Borrower Stock Pledge Agreement" means the Borrower Stock Pledge
Agreement to be executed and delivered by the Borrower in favor of the
Bank, substantially in the form attached hereto as Exhibit C, as the
same may be amended, modified, substituted, extended or restated, from
time to time.
"Business Day" means (i) with respect to any borrowing, payment
or rate selection of LIBOR Rate Loans and any conversion of another
Type of Credit Advance into a LIBOR Rate Loans, any day other than
Saturday or Sunday on which commercial banks are open for business in
Boston, Massachusetts, on which dealings in Dollars are carried on in
the London interbank market and, where funds are to be paid or made
available in a currency other than Dollars, on which commercial banks
are open for domestic and international business (including dealings
in deposits in such currency) in both London and the place where such
funds are to be paid or made available, and (ii) for all other
purposes, a day other than Saturday or Sunday on which banks are open
for business in Boston, Massachusetts.
"Canadian Debt" shall mean all Indebtedness of the Canadian
Subsidiaries to (a) First Chicago NBD Bank, Canada, (b) The
Toronto-Dominion Bank or (c) any substitute or replacement banks
thereof; provided, however, that the aggregate principal amount of all
such Indebtedness shall not, at any time, exceed $9,000,000.
"Canadian Subsidiary" shall mean any Subsidiary organized under
the laws of Canada.
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"Capital Stock" means, with respect to the Borrower and any
Subsidiary, any and all shares, interests, participations or other
equity equivalents (however designated, whether voting or non-voting)
of capital of the Borrower or such Subsidiary, whichever is
applicable, whether now or hereafter outstanding or issued.
"Capitalized Lease Obligations" means, for any period, all
obligations of the Borrower and its Subsidiaries under any lease of
property (real, personal or mixed) or other periodic payment
arrangement which have been or should be capitalized on the
consolidated balance sheet of the Borrower and its Subsidiaries, in
accordance with GAAP, in each case taken at the amount thereof
accounted for as Indebtedness, net of interest expense related
thereto, determined in accordance with GAAP, the stated maturity of
which shall be the date of the last payment of any amount thereunder
prior to the first date upon which such arrangement may be terminated
by the Borrower or its Subsidiary, whichever is applicable, without
payment of any penalty.
"Credit Documents" shall mean this Agreement, the Note, the
Guaranty Agreement, the Security Documents and all other documents,
instruments, certificates and agreements now or hereafter executed in
connection with any of them.
"Dollar Amount" of any currency at any date shall mean (i) the
amount of such currency if such currency is Dollars, or (ii) the
equivalent amount of Dollars if such currency is any currency other
than Dollars, calculated on the basis of arithmetical mean of the buy
and sell spot rates of exchange of the Bank for such currency on the
London market at 11:00 a.m., London time, two Business Days prior to
the date on which such amount is to be determined.
"Dollars" and "$" shall mean in lawful currency of the United
States of America.
"Foreign Subsidiary" shall mean any Subsidiary organized under
the laws of any jurisdiction outside of the United States of America.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time.
"Guarantor" shall mean any Subsidiary (other than any Foreign
Subsidiary) which is, or is required to become, a guarantor of the
Obligations, as provided in Section 5.18 of this Agreement.
"Guaranty Agreement" means the Guaranty Agreement to be executed
and delivered by each of the Subsidiaries (other than the Foreign
Subsidiaries) in favor of the Bank, substantially in the form attached
hereto as Exhibit D, as the same may be amended, modified,
substituted, extended, restated, supplemented or reaffirmed, from time
to time.
"Interest Rate Determination Date" shall mean each date for
calculating the LIBOR Rate for purposes of determining the interest
3
rate in respect of an Interest Period. The Interest Rate Determination
Date shall be the second Business Day prior to the first day of the
related Interest Period for a LIBOR Rate Loan.
"LIBOR Rate" shall mean, for any given date, the London Interbank
Offered Rate for the applicable Interest Period selected by the
Borrower in accordance with Section 2.05(a) hereof as quoted by
Barclays Bank PLC, London, England or by Lloyds Bank, London, England
(and if such rate shall differ, the Bank shall have the option of
which rate applies for purposes of this Agreement) at 11:00 a.m.,
London time as adjusted by dividing (i) the LIBOR Rate for that
Interest Period by (ii) a percentage equal to 100% minus the stated
maximum percentage rate of all reserves (including, without
limitation, any basic, supplemental, emergency or marginal reserve
requirement) required to be maintained against "Eurocurrency
liabilities" as specified in Regulation D (or against any other
category of liabilities that includes deposits by reference to which
the interest rate on LIBOR Rate Loans is determined or any category of
extensions of credit or other assets that includes loans by a non-U.S.
office of the Bank to U.S. residents).
"LIBOR Rate Loans" shall mean all or a portion of the outstanding
Credit Advances which accrue and bear daily interest during the
Interest Period so selected at a per annum rate equal to the
Applicable LIBOR Rate for such Interest Period pursuant to Section
2.05 hereof.
"Liens" means any and all: mortgages, pledges, security
interests, encumbrances, liens, or charges of any kind, including
agreements to give any of the foregoing; conditional sales or other
title retention agreements or devices, or any leases in the nature
thereof; and filing of, giving or agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction.
"Loans" means, collectively, the LIBOR Rate Loans and the Prime
Rate Loans.
"Note" shall mean the Credit Note, all substitutions and
replacements thereof, and any other note(s) issued by the Borrower to
the Bank pursuant to this Agreement.
"Obligations" shall mean any and all Indebtedness, liabilities,
duties, warranties, covenants and agreements of the Borrower or any of
its Subsidiaries (other than the Foreign Subsidiaries) to the Bank,
whether of payment or of performance; now existing or hereafter
arising; due or not due, absolute or contingent, liquidated or
unliquidated, and arising pursuant to or in connection with this
Agreement and the other Credit Documents (including without
limitation, the Guaranty Agreement).
"Permitted Acquisition" shall mean an acquisition by the Borrower
or a Subsidiary which meets all of the following criteria: (i) is an
acquisition of not less than eighty percent (80%) of the capital stock
or assets of an entity engaged in a substantially similar or
complementary business as that in which the Borrower or such
Subsidiary is engaged as of the date hereof; (ii) the properties and
assets acquired by the Borrower or such Subsidiary in connection with
such acquisition are free from all Liens whatsoever, except Liens
permitted under Section 5.12; (iii) no Indebtedness is assumed by the
4
Borrower in connection with such acquisition, except Indebtedness
permitted under Section 5.10; (iv) immediately prior to, and after
giving effect to such acquisition, no Event of Default shall exist;
and (v) not less than two (2) Business Days prior to such acquisition,
the Bank shall have received computations from the Borrower (based
upon a compliance certificate in the form of Exhibit J hereto) showing
pro forma compliance with the financial covenants set forth in
Sections 5.25 through 5.29, inclusive, of this Agreement, as of the
date of, and after giving effect to, such acquisition.
"Person" or "person" means any individual, corporation, limited
liability company, partnership, limited liability partnership, trust,
trade, business and governmental agency and instrumentality.
"Prime Rate" shall mean the annual rate of interest announced by
the Bank from time to time, at the principal office of the Bank, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as its prime rate.
"Purchase Money Indebtedness" means any Indebtedness incurred by
the Borrower or any of its Subsidiaries, whichever is applicable, in
connection with financing the purchase by the Borrower or such
Subsidiary, whichever is applicable, of property or assets from any
other Person.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System from time to time in effect, and shall
include any successor or other regulation or official interpretation
of said Board of Governors relating to reserve requirements applicable
to member banks of the Federal Reserve System.
"Restricted Payments" means (i) any cash or property dividend,
distribution, or other payment, direct or indirect, to any Person who
now or in the future may hold an equity interest in a Borrower or a
Subsidiary made with respect to or on account of such equity interest,
other than those from a Subsidiary to the Borrower, whether evidenced
by a security or not; and (ii) any payment on account of the purchase,
redemption, retirement or other acquisition of any capital stock of a
Borrower or a Subsidiary, or any other payment or distribution made in
respect thereof, either directly or indirectly (excluding any
Permitted Payments and, for purposes of both clauses (i) and (ii),
stock options and warrants granted to officers, employees or directors
in the ordinary course).
"Security Documents" shall mean the Borrower Security Agreement,
the Borrower Stock Pledge Agreement, the Subsidiary Security
Agreements, the Subsidiary Stock Pledge Agreements and any other
security documents, financing statements and instruments hereafter
delivered to the Bank granting a Lien on any asset or assets of any
Person to secure the Obligations or to secure any guarantee of any
such Obligations.
"Subsidiary" shall mean, with respect to any Person, any
corporation, limited liability company, partnership or other entity of
which more than 50% of the outstanding securities (or other ownership
interest) having ordinary voting power to elect the board of
5
directors, managers or other voting members of the governing body of
such corporation, limited liability company, partnership or other
entity (irrespective of whether at the time securities (or other
ownership interest) of any other class or classes of such corporation,
limited liability company, partnership or other entity shall or might
have voting power upon the occurrence of any contingency) is at the
time directly or indirectly owned or controlled by such Person, by
such Person and one or more other Subsidiaries of such Person, or by
one or more other Subsidiaries of such Person. Unless the context
otherwise specifically requires, the term "Subsidiary" shall be a
reference to a Subsidiary of the Borrower.
"Subsidiary Security Agreement" means the Subsidiary Security
Agreement - All Assets to be executed and delivered by each of the
Subsidiaries (other than the Foreign Subsidiaries) in favor of the
Bank, substantially in the form attached hereto as Exhibit E, as the
same may be amended, modified, substituted, extended or restated, from
time to time.
"Subsidiary Stock Pledge Agreement" means the Subsidiary Stock
Pledge Agreement to be executed and delivered by each of the
Subsidiaries (including any Foreign Subsidiaries) in favor of the
Bank, substantially in the form attached hereto as Exhibit F, as the
same may be amended, modified, substituted, extended or restated, from
time to time.
"Type" means as to any Loan, its nature as a Prime Rate Loan or a
LIBOR Rate Loan.
"UK Debt" shall mean all Indebtedness of the UK Subsidiaries to
National Westminster Bank PLC or any substitute or replacement bank
thereof; provided, however, that the aggregate principal amount of all
such Indebtedness shall not, at any time, exceed $2,500,000.
"UK Subsidiary" shall mean any Subsidiary organized under the
laws of the United Kingdom.
The following terms are defined in the following sections:
Affected Interest Period Section 2.04(d)
Affiliate Section 5.15
Bank Preamble
Base Financial Statements Section 3.04
Borrower Preamble
Capital Expenditures Section 5.25
Cashflow Section 5.28
Closing Date Section 7.06
Code Section 3.10
Commitment Fee Section 2.12
Compliance Certificate Section 5.06(c)
Corporate Parent Section 5.18
CPA Section 5.06(a)
6
Credit Sections 2.01 and 2.02
Credit Advance(s) Section 2.02(a)
Credit Note Section 2.02(b)
Cumulative Amount Section 5.28
Current Assets Section 5.27
Current Liabilities Section 5.27
Debt Service Section 5.28
Default Rate of Interest Section 2.03
ERISA Section 3.10
Event(s) of Default Article VI
Exchange Act Section 5.23
First Chicago NBD Guaranty Section 5.11(c)
Indebtedness Section 5.10
Interest Period Section 2.03
L/C Sections 2.14(a) - (e)
LIBOR Rate Taxes Sections 2.04(h) - (i)
Maximum Credit Section 2.02(b)
Maturity Date Section 2.02(a)
National Westminster Bank Guaranty Section 5.11(d).
Net Profit Before Taxes Section 5.29
Notice of Conversion/Continuation Section 2.04(b)
Participant Section 7.12
Permitted Payments Section 5.20
Prime Rate Loan(s) Section 2.03
Revenue Section 5.29
Special Counsel Section 4.01(j)
specified currency Section 2.05(b)
Securities Law Section 3.19
Tangible Net Worth Section 5.26
Total Liabilities Section 5.26
Section 1.02. Accounting Terms. Unless otherwise specified herein, all
accounting terms used herein shall be construed in accordance with GAAP
consistently applied.
ARTICLE II. AMOUNT AND TERMS OF THE CREDIT
Section 2.01. The Revolving Credit. Subject to the terms and conditions
hereof, and in reliance on the representations and warranties contained herein,
the Bank hereby establishes a revolving credit facility in favor of the Borrower
in the maximum aggregate principal amount of $20,000,000 as set forth below (the
"Credit").
Section 2.02. The Credit.
(a) General Terms. Subject to the terms and conditions hereof and
provided that no Event of Default, or event which with the passage of time,
the giving of notice, or both, would constitute an Event of Default, has
occurred or is continuing, the Borrower may, from time to time from the
7
date hereof up to July 31, 1999 (the "Maturity Date") borrow and reborrow
from the Bank, and the Bank shall advance funds to the Borrower as
requested pursuant to Section 2.02(d) (each a "Credit Advance" and
collectively, the "Credit Advances"); provided, however, that the aggregate
of all Credit Advances outstanding at any time shall not exceed $20,000,000
less the maximum aggregate liability of the Borrower under any outstanding
letters of credit issued pursuant to Section 2.14 of this Agreement
(the"Maximum Credit"). To the extent any Credit Advance exceeds the Maximum
Credit, the Borrower shall immediately, without notice or demand, repay
such overadvance to the Bank.
Each Credit Advance shall be made in either Dollars or in such
Alternative Currency as shall be designated by the Borrower in writing with
respect to such Credit Advance; provided that (a) the Dollar Amount of all
Credit Advances outstanding in Alternative Currencies shall not, at any
time, exceed the aggregate sum of $4,000,000; (b) each Credit Advance to be
made in an Alternative Currency shall be in the minimum amount of 100,000
units of such Alternative Currency and increments of 50,000 units of such
Alternative Currency thereafter; and (c) each Credit Advance to be made in
Dollars shall be in the minimum amount of $100,000 and increments of
$50,000 thereafter. If, with respect to any Credit Advance, the Borrower
does not so designate the currency in which such Credit Advance is to be
made, such Credit Advance shall be made in Dollars.
(b) The Credit Note. All amounts owed by the Borrower with respect to
Credit Advances shall be evidenced by a revolving credit note in the
principal amount of the Maximum Credit, dated the date hereof in the form
attached hereto as Exhibit A (the "Credit Note").
(c) Interest. The Credit Note shall bear interest as provided in
Section 2.03.
(d) Requests for Advances. Each Credit Advance shall be made on the
day on which the Bank receives notice from the Borrower or, if such day is
not a Business Day, on the next succeeding Business Day, provided the Bank
receives notice from the Borrower prior to 1:00 p.m. Boston time on such
Business Day. Each request for a Credit Advance shall be made to the Bank
in writing (including by telecopy) or by telephone by a duly authorized
representative of the Borrower, and the Bank may rely upon any telephone
request which it reasonably believes is made by such a representative. The
Borrower agrees to indemnify and hold the Bank harmless for any action,
including the making of Credit Advances hereunder, or loss or expense,
taken or incurred by the Bank in good faith reliance upon such telephone
request. At the time of the initial request for a Credit Advance made under
this Section 2.02(d), the Borrower shall have provided the Bank with a
Compliance Certificate in the form required by Section 5.06(c) hereof. The
Borrower hereby agrees (i) that the Bank shall be entitled to rely upon the
most recent Compliance Certificate in its possession until it is superseded
by another Compliance Certificate, and (ii) that each request for a Credit
Advance, whether by telephone or in writing or otherwise, shall constitute
a confirmation of the representations and warranties contained in the most
recent Compliance Certificate then in the Bank's possession.
8
(e) Payment Upon Maturity Date. The Credit shall expire on the
Maturity Date and all Credit Advances then outstanding shall be due and
payable without notice on such date together with all accrued and unpaid
interest thereon and any other amounts then due. In the event the Bank
continues Credit Advances after the Maturity Date without a written
extension of the Maturity Date, (i) all such Credit Advances shall be made
within the sole discretion of the Bank; (ii) the entire Credit shall be due
on demand; and (iii) the entire Credit will earn interest at the rate
specified to be earned after the Maturity Date in Section 2.03.
(f) Credit Advances. The Bank may from time to time in its sole
discretion permit Credit Advances to exceed the limitations set forth in
this Agreement, including, without limitation, (i) Credit Advances in
excess of the Maximum Credit, and (ii) advances after the Maturity Date or
the occurrence of an Event of Default. All such Credit Advances will be
deemed part of the Credit advanced hereby. The making of such Credit
Advance on one or more occasions will not operate to limit, waive or
otherwise modify any rights of the Bank hereunder on any future occasion
unless otherwise agreed in writing.
Section 2.03. Interest on the Credit. Unless otherwise elected by the
Borrower in its sole discretion pursuant to the terms of Section 2.04 relating
to LIBOR pricing options, all Credit Advances shall bear interest prior to the
occurrence of an Event of Default or the Maturity Date (computed on the basis of
the actual days elapsed over a 360-day year) at a fluctuating rate per annum
equal to the Prime Rate (the "Prime Rate Loans") in effect from time to time,
with interest thereon being payable monthly in arrears on the last Business Day
of each month. Any change in the Prime Rate shall result in a change on the same
day in the rate of interest to accrue from and after such day on the unpaid
balance of principal of the Prime Rate Loans bearing interest with reference to
the Prime Rate. In the manner and subject to the provisions set forth in Section
2.04, so long as no Event of Default, and no event which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default has
occurred and is then continuing, the Borrower may elect from time to time prior
to the Maturity Date to have all or a portion of the unpaid principal amount of
any Credit Advance bear interest during any particular Interest Period
applicable to LIBOR Rate Loans at the LIBOR Rate and be treated as a LIBOR Rate
Loan, with interest, in all cases, being due and payable on the last day of the
applicable Interest Period relating to such LIBOR Rate Loan, provided, that any
such portion of such loan, shall be in an amount not less than $1,000,000 or
increments of $500,000 thereof. From and after the occurrence of an Event of
Default or upon maturity (whether by demand, acceleration, at the Maturity Date
or otherwise) the unpaid principal balance of the Credit Advances shall bear
interest at a fluctuating rate per annum equal to two percent (2%) above the
rate of interest then payable with respect thereto (the "Default Rate of
Interest").
Section 2.04 Special Provisions Governing LIBOR Rate Loans. Notwithstanding
any other provisions of this Agreement to the contrary, the following provisions
shall govern with respect to LIBOR Rate Loans as to the matters covered:
(a) LIBOR Rate Loan Interest Periods. In connection with each LIBOR
Rate Loan, the Borrower shall elect an interest period (the "Interest
9
Period") to be applicable to such LIBOR Rate Loan, which Interest Period
shall be, at the option of the Borrower, a one, two, three or six month
period; provided that:
(i) the Interest Period for any LIBOR Rate Loan shall commence on
the date of such LIBOR Rate Loan;
(ii) if an Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, further that if any Interest Period
in respect to a LIBOR Rate Loan would otherwise expire on a day that
is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire
on the next preceding Business Day;
(iii) any Interest Period in respect of a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is not numerically corresponding day in the calendar month
at the end of such Interest Period) shall, subject to clause (iv)
below, end on the last Business Day of a calendar month;
(iv) no Interest Period with respect to any LIBOR Rate Loan shall
extend beyond the Maturity Date; and
(v) no Interest Period shall be selected if at the time thereof
an Event of Default is in existence.
(b) LIBOR Conversion. Subject to the provisions hereof (including,
without limitation Section 2.04(a)) and as long as there exists no Event of
Default, the Borrower shall have the option (A) to elect to convert
outstanding Prime Rate Loans in the minimum amount of $1,000,000 or
increments of $500,000 thereof to LIBOR Rate Loans and (B) effective on and
as of the expiration date of the Interest Period of a LIBOR Rate Loan, to
continue such LIBOR Rate Loan; provided, however, that a LIBOR Rate Loan
may only be continued pursuant to clause (B) above if the outstanding
principal amount of such LIBOR Rate Loan equals or exceeds $1,000,000 or
increments of $500,000 thereof. The Borrower shall deliver a notice (the
"Notice of Conversion/Continuation") to the Bank no later than 1:00 P.M.
(Boston time) at least two (2) Business Days in advance of the proposed
conversion/continuation date. A Notice of Conversion/Continuation shall, in
the case of a conversion to, or continuation of, a LIBOR Rate Loan, be
irrevocable and shall be given by the Borrower in the form of Exhibit G,
appropriately completed to specify (i) the proposed conversion/continuation
date (which shall be a Business Day), (ii) the amount of the Credit Advance
to be converted/continued, (iii) whether the Credit Advance to be
converted/continued is a Prime Rate Loan or a LIBOR Rate Loan, and (iv) the
requested Interest Period. In lieu of delivering the above-described Notice
of Conversion/Continuation, the Borrower may give the Bank telephonic
notice by the required time of any proposed conversion/continuation under
this Section 2.04. If the Borrower has failed to deliver timely a Notice of
Conversion/Continuation or to give such a telephonic notice with respect
10
to, a LIBOR Rate Loan, the Borrower shall be deemed to have delivered to
the Bank a Notice of Conversion/Continuation electing to convert such LIBOR
Rate Loan into a Prime Rate Loan. Any notice pursuant to this Section 2.04
(including any telephonic notice) shall be irrevocable on and after the
date of delivery thereof to the Bank, and the Borrower shall be bound to
convert or continue in accordance therewith.
(c) Determination of Interest Rate. As soon as practicable after 10:00
A.M. (Boston time) on an Interest Rate Determination Date, the Bank shall
determine (which determination shall, absent manifest error, be final,
conclusive and binding) the Applicable LIBOR Rate, which rate shall apply
to the LIBOR Rate Loans for which an interest rate is then being determined
for the applicable Interest Period, and the Bank shall promptly give notice
thereof to the Borrower.
(d) Substituted Rate of Borrowing. In the event that on any Interest
Rate Determination Date the Bank shall have reasonably determined (which
determination shall, absent manifest error, be final, conclusive and
binding) that:
(i) by reason of any changes affecting the LIBOR market, or
affecting the position of the Bank in such market, adequate and fair
means do not exist for ascertaining the applicable interest rate by
reference to the LIBOR Rate with respect to the LIBOR Rate Loans as to
which an interest rate determination is then being made; or
(ii) by reason of (A) any change in any applicable law or
governmental rule, regulation or order (or any interpretation thereof
and including the introduction of any new law or governmental rule,
regulation or order) or (B) other circumstances affecting the Bank,
the LIBOR market or the position of the Bank in such market (such as,
for example, but not limited to, official reserve requirements
required by Regulation D to the extent not given effect in the LIBOR
Rate), the LIBOR Rate shall not represent the effective pricing to the
Bank for dollar deposits of comparable amounts for the relevant
period;
then, and in any such event, the Bank shall promptly (and in any event as
soon as possible after being notified of a borrowing, conversion or
continuation) give notice to the Borrower of such determination.
Thereafter, the Borrower shall pay to the Bank with respect to the LIBOR
Rate Loans of the Borrower, upon written demand therefor, such additional
amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as the Bank in its sole discretion shall
reasonably determine) as shall be required to cause the Bank to receive
interest with respect to such LIBOR Rate Loans for the Interest Period
following that Interest Rate Determination Date (the "Affected Interest
Period") at a rate equal to 2.0% per annum in excess of the effective
pricing to the Bank for dollar deposits to make or maintain such LIBOR Rate
Loans. A certificate as to additional amounts owed the Bank, showing in
reasonable detail the basis for the calculation thereof, submitted in good
faith to the Borrower by the Bank, shall, absent manifest error, be final,
conclusive and binding.
11
(e) Required Termination and Prepayment. In the event that on any date
the Bank shall have reasonably determined (which determination shall,
absent manifest error, be final, conclusive and binding) that the making or
continuation of LIBOR Rate Loans has become unlawful by compliance by the
Bank in good faith with any law, governmental rule, regulation or order
(whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), then, and in any such event, the Bank
shall promptly give notice to the Borrower of that determination. The
obligation of the Bank to make or maintain such LIBOR Rate Loans during any
such period shall be determined at the earlier of the termination of the
Interest Period then in effect or when required by law, and the Borrower
shall, no later than the termination of the Interest Period in effect at
the time any such determination pursuant to this Section 2.04(e) is made,
or earlier when required by law, repay such LIBOR Rate Loans, together with
all interest accrued thereon or automatically convert the LIBOR Rate Loans
to a Prime Rate Loan subject to payment of amounts payable under Section
2.09.
(f) Compensation. The Borrower shall compensate the Bank, upon written
request from the Bank (which request shall set forth in reasonable detail
the basis for requesting such amounts), for all losses, expenses and
liabilities (including, without limitation, any interest paid by the Bank
to lenders of funds borrowed by Bank to make or carry the LIBOR Rate Loans
and any loss sustained by the Bank in connection with the reemployment of
such funds) that the Bank may sustain with respect to the Borrower' LIBOR
Rate Loans: (i) if for any reason (other than a default or manifest error
by the Bank) a borrowing of any LIBOR Rate Loan does not occur on a date
specified therefor in a notice of borrowing or a telephone request for
borrowing or conversion/continuation, or a successive Interest Period does
not commence after notice thereof is given; (ii) if, for any reason, any
prepayment of any LIBOR Rate Loan occurs on a date that is not the last day
of the Interest Period applicable to such LIBOR Rate Loan; (iii) if, for
any reason, any prepayment of the LIBOR Rate Loans is not made on the date
specified in a notice of prepayment given by the Borrower with respect to
such LIBOR Rate Loan; or (iv) as a consequence of any other default by the
Borrower to repay such LIBOR Rate Loans when, and on the terms, required by
the terms of this Agreement.
(g) Quotation of LIBOR Rate. Notwithstanding anything contained herein
to the contrary, if on any Interest Rate Determination Date the LIBOR Rate
is unavailable by reason of the failure of the referenced lenders to
provide offered quotations to the Bank in accordance with the definition of
"LIBOR Rate", the Bank shall give the Borrower prompt notice thereof and
any LIBOR Rate Loans requested shall be made as Prime Rate Loans.
(h) LIBOR Rate Taxes. The Borrower agrees that:
(i) Promptly upon notice from the Bank to the Borrower, the
Borrower will pay, prior to the date on which penalties attach
thereto, all present and future income, stamp and other taxes, levies,
or costs and charges whatsoever imposed, assessed, levied or collected
on or in respect of a Credit Advance solely as a result of the
interest rate being determined by reference to the LIBOR Rate and/or
12
the provisions of this Agreement relating to the LIBOR Rate and/or the
recording, registration, notarization or other formalization of any
thereof and/or any payments of principal, interest or other amounts
made on or in respect of a Credit Advance when the interest rate is
determined by reference to the LIBOR Rate (all such taxes, levies,
cost and charges being herein collectively called "LIBOR Rate Taxes");
provided that LIBOR Rate Taxes shall not include taxes imposed on or
measured by the net income of the Bank by the country under the laws
of which the Bank is organized or any political subdivision or taxing
authority thereof or therein, or taxes imposed on or measured by the
net income of any branch or subsidiary of the Bank (whether gross or
net income) by any jurisdiction or subdivision thereof in which that
branch or subsidiary is doing business. The Borrower shall also pay
such additional amounts equal to increases in taxes payable by the
Bank, which increases are attributable to payments made by the
Borrower described in the immediately preceding sentence or this
sentence. Notwithstanding anything contained in this Section 2.04(h)
to the contrary, in the event that the Bank shall recover any amounts
in respect of LIBOR Rate Taxes as to which the Borrower have
previously rendered payment to Bank, then Bank shall reimburse the
Borrower in full for such amounts. Promptly after the date on which
payment of any such LIBOR Rate Tax is due pursuant to applicable law,
the Borrower will at the request of the Bank, furnish to Bank
evidence, in form and substance satisfactory to Bank, that the
Borrower have met its obligation under this Section 2.05(h); and
(ii) The Borrower will indemnify the Bank against, and reimburse
the Bank on demand for, any LIBOR Rate Taxes as determined by the Bank
in its good faith discretion. The Bank shall provide the Borrower with
appropriate receipts for any payments or reimbursements made by the
Borrower pursuant to this clause (ii).
(i) Booking of LIBOR Rate Loans. The Bank may make, carry or transfer
LIBOR Loans at, to, or for the account of, any of its branch offices or the
office of an affiliate of the Bank.
(j) Increased Costs. If, by reason of (i) the introduction of or any
change in (including, without limitation, any change by way of imposition
or increase of reserve requirements), or in the interpretation of, any law
or regulation or (ii) the compliance with any guideline or request from any
central bank or other governmental authority or quasigovernmental authority
exercising control over banks or financial institutions generally (whether
or not having the force of law), any reserve (including, without
limitation, any imposed by the Federal Reserve Board), special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, the Bank or its applicable lending office shall be
imposed or deemed applicable or other condition affecting any of its LIBOR
Rate Loans or its obligation to make such LIBOR Rate Loans shall be imposed
on the Bank or its applicable lending office or the London interbank
market, and as a result thereof there shall be any increase in the cost to
the Bank of agreeing to make or making, funding or maintaining such LIBOR
Rate Loans, or there shall be a reduction in the amount received or
13
receivable by the Bank, then, upon written notice from and demand by the
Bank, the Borrower shall pay to the Bank for the account of the Bank,
within five Business Days after the date specified in such notice and
demand, additional amounts sufficient to indemnify the Bank against such
increased cost. A certificate in reasonable detail as to the amount of such
increased cost, submitted to the Borrower by the Bank, shall, except for
manifest error, be final, conclusive and binding for all purposes.
(k) Assumptions Concerning Funding of LIBOR Rate Loans. The
calculation of all amounts payable to the Bank under this Section 2.04
shall be made as though the Bank had actually funded the LIBOR Rate Loans
through the purchase of a LIBOR deposit bearing interest at the LIBOR Rate
applicable to such LIBOR Rate Loan, in the case of a LIBOR Rate Loan,
through the transfer of such LIBOR deposit from an offshore office of the
Bank to a domestic office of such Bank in the United States of America; it
being understood that the Bank may fund LIBOR Rate Loans in any manner it
sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section 2.04.
(l) LIBOR Rate Loans After Default. After the occurrence of and during
the continuance of an Event of Default, the Borrower may not elect to have
a Credit Advance be continued as, or converted to, a LIBOR Rate Loan after
the expiration of any Interest Period then in effect for such Credit
Advance.
Section 2.05. Special Provisions Governing Alternative Currencies.
Notwithstanding any other provisions of this Agreement to the contrary, the
following provisions shall govern with respect to any Credit Advance to be made
in an Alternative Currency:
(a) General. Subject to the terms and conditions contained in this
Agreement, the Borrower and the Bank shall separately agree as to the
procedures, documentation, lending office and other matters relating to any
Loan to be made in an Alternative Currency, all of which shall be
consistent, and in accordance, with the customary practices and procedures
of the Bank. When making requests for any Loan in an Alternative Currency,
the Borrower shall specify to the Bank (i) the type of Alternative Currency
for such Loan, (ii) the principal amount of such Loan and (iii) the term of
such Loan. Subject to the customary practices and procedures of the Bank.,
the term for any Loan in an Alternative Currency shall be not less than one
(1) week and not more than six (6) months. No Loan in an Alternative
Currency may mature after the Maturity Date.
(b) Availability. If the Bank determines that maintenance of any Loan
denominated an any Alternative Currency would violate any applicable law,
rule, regulation or directive, whether or not having the force of law, and
notifies the Borrower of such determination, then the affected currency
shall cease to be an Alternative Currency and the Bank shall suspend the
availability of the affected currency of Credit Advance and, if the Bank
determines that it is necessary, require that any Credit Advances of the
affected currency be immediately repaid.
(c) Judgment Currency. If for the purpose of obtaining judgment in any
court, it is necessary to convert a sum due from the Borrower hereunder or
14
under the Credit Note in the currency expressed to be payable herein or
under the Credit Note (the "specified currency") into another currency, the
parties hereto agree to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which, in accordance with
normal banking procedures, the Bank could purchase the specified currency
with such other currency at the Bank's main Boston office on the Business
Day preceding that on which final non-appealable judgment is given. The
obligations of the Borrower in respect of any sum due to the Bank hereunder
or under the Credit Note shall, notwithstanding any judgment in a currency
other than the specified currency, be discharged only to the extent that on
the Business Day following receipt by the Bank of any sum adjudged to be so
due in such other currency to the Bank may, in accordance with normal,
reasonable banking procedures, purchase the specified currency with such
other currency. If the amount of the specified currency so purchased is
less than the sum originally due to the Bank, in the specified currency,
the Borrower agrees, to the fullest extent that it may effectively do so,
as a separate obligation and notwithstanding any such judgment, to
indemnify the Bank against such loss, and if the amount of the specified
currency so purchased exceeds the sum originally due to the Bank in the
specified currency, the Bank agrees to remit such excess to the Borrower.
Section 2.06. Method of Payment. All payments (including prepayments) to be
made by the Borrower hereunder and under the Credit Note, whether on account of
principal, interest, fees or otherwise, shall be made without set-off or
counterclaim and shall be made prior to 1:00 P.M., Boston, Massachusetts time,
on the due date thereof, at the office of the Bank located at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or such other place as the Bank may specify
in writing from time to time), (a) in the case of each Loan made in Dollars, in
Dollars, and (b) in the case of each Loan made in an Alternative Currency, in
such Alterative Currency. All such payments (including prepayments) in
immediately available funds. If any payment hereunder becomes due and payable on
a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. All
payments of principal, interest or fees to be made to the Bank may be effected
by the Bank debiting accounts of the Borrower with the Bank and sending an
advice thereof to the Borrower.
Section 2.07. Voluntary Prepayments on the Credit.
(a) Subject to Section 2.08, the Borrower may make prepayments to the
Bank of any outstanding principal amount of any portion of any Credit
Advance which is a Prime Rate Loan in accordance with this Section 2.07 at
any time prior to 1:00 p.m. (Boston time) on any Business Day.
(b) The Borrower may make prepayments to the Bank on any portion of
any Credit Advance which is a LIBOR Rate Loan subject to the terms and
conditions of Sections 2.08 and 2.09.
Section 2.08. Payment and Interest Cutoff. Notice of each prepayment
pursuant to Section 2.07 shall be given to the Bank in the case of prepayment of
15
Prime Rate Loans, not later than 1:00 p.m. (Boston time) on the date of payment,
and shall specify the total principal amount of the Credit to be paid on such
date. Notice of prepayment having been given in compliance with this Section
2.07, the amount specified to be prepaid shall become due and payable on the
date specified for prepayment and from and after said date (unless the Borrower
shall default in the payment thereof) interest thereon shall cease to accrue.
Unpaid interest on the principal amount of any Credit Advances so prepaid
accrued to the date of prepayment shall be due on the date of prepayment.
Section 2.09. Prepayment of Credit. In the event of any prepayment of the
Borrower's obligations to the Bank in respect of LIBOR Rate Loans, either at the
Borrower's initiative or upon the exercise by the Bank of its rights in the case
of an Event of Default, the Borrower agrees to pay to the Bank the Bank's lost
net interest income resulting from the prepayment. Therefore, the Borrower's
payment to the Bank shall consist of all principal amounts outstanding, all
interest owing up to the date of such prepayment or demand by the Bank, together
with the Bank's lost net interest income, if any, computed as described below.
As of the date of prepayment, or as of the date of demand after an Event of
Default, the Bank will determine the interest rate differential between the rate
stated in the Note to the Bank and the yield on a United States Government
Treasury Note with the maturity closest to the Note as the same is reported in
the Wall Street Journal (or if not so reported, as the same is reported in its
successor or another national publication similar thereto) of that day
(reporting the previous day's activity). In the event that the rate differential
so determined is such that the Treasury Note yield is greater than the Note
yield, no lost net interest income shall be paid to the Bank, nor shall any sum
be owed to the Bank by the Borrower solely for any lost net income.
In the event that the rate differential so determined is such that the Note
yield is greater than the Treasury Note yield, the difference shall be
multiplied by the outstanding principal balance of the Note, computed monthly
for the remaining term of the LIBOR Rate Loans; the present value of such
monthly computation shall be calculated and paid to the Bank as its lost net
interest income. For the purpose of computing present value, the interest rate
used for discounting shall be the bond equivalent yield of the six month United
States Treasury ▇▇▇▇ rate as reported in the Wall Street Journal (or if not so
reported, as the same is reported in its successor or another national
publication similar thereto) of that day (reporting the previous day's
activity).
Section 2.10. Expenses. The Borrower shall pay the Bank on demand all
reasonable out-of-pocket fees and expenses incurred by the Bank in connection
with examinations of the books and records of the Borrower, appraisals of the
assets of the Borrower and visits to the Borrower by officers, employees and
agents of the Bank. The Borrower shall cooperate fully with the Bank's officers,
employees and agents in connection with each audit or appraisal performed.
Section 2.11. [Intentionally Omitted].
Section 2.12. Commitment Fee. The Borrower shall pay the Bank a commitment
fee (the "Commitment Fee") quarterly in arrears on the last day of each fiscal
16
quarter commencing September 30, 1998, in an amount equal to the quotient of (i)
the product of (A) the total unused portion of the Credit for each day within
the fiscal quarter then ended, multiplied by (B) a rate equal to one half of one
percent (.50%), divided by (ii) the actual number of days in such quarter.
Section 2.13. Use of Credit Proceeds; No Credit Proceeds to Foreign
Subsidiaries.
(a) Use of Credit Proceeds. The proceeds of the Credit shall be used
by the Borrower to refinance existing Indebtedness of the Borrower and its
Subsidiaries (other than its Foreign Subsidiaries) of approximately
$9,500,000 and for general working capital purposes of the Borrower and its
Subsidiaries (other than its Foreign Subsidiaries).
(b) No Credit Proceeds to Foreign Subsidiaries. Notwithstanding any
provision contained in any of the Credit Documents (including this
Agreement) to the contrary, the Borrower will not, and will cause its
Subsidiaries not to, transfer or otherwise make available any proceeds from
any Credit Advance to any Foreign Subsidiary for any purpose.
Section 2.14 Letters of Credit.
(a) Issuance Procedures. The Borrower may request and the Bank will
issue commercial and standby letters of credit (such letters of credit,
together with any renewals, collectively, the "L/Cs") for the account of
the Borrower. With each request, the Borrower shall deliver to the Bank an
L/C application and L/C agreement, together with the proposed form of such
L/C (which, together with all schedules and exhibits thereto), shall be in
form and substance satisfactory to the Bank and it Special Counsel and such
other certificates, documents and other papers and information as the Bank
may reasonably request. Any foreign beneficiary must be satisfactory to the
Bank. All L/Cs shall be for a period not to exceed (i) one hundred and
eighty (180) days (for commercial L/Cs), or (ii) three hundred and sixty
(360) days (for standby L/Cs), and must expire at least one day prior to
the Maturity Date. Within five Business Days following receipt of the
above-described documents in satisfactory form, the Bank shall, provided
that no (i) Event of Default exists or would exist upon issuance of such
L/C and (ii) no event exists which, with the giving of notice or passage of
time, or both, would constitute an Event of Default, issue such L/C.
(b) L/Cs - Foreign Subsidiaries. Notwithstanding any provision
contained in any of the Credit Documents (including this Agreement) to the
contrary, the Borrower will not request, and the Bank will not issue, any
L/C for the benefit of any Foreign Subsidiary or any creditor or equity
holder thereof.
(c) Reimbursement. The Borrower agrees to pay the Bank on each date
that any amount is drawn under an L/C, a sum equal to the amount so drawn.
The Borrower agrees to pay on demand any and all reasonable expenses
incurred by the Bank in enforcing any rights under this Section 2.14. In
the event any L/C is payable in foreign currency, the Borrower shall
17
reimburse the Bank at the Bank's selling rate of exchange on the date such
reimbursement is made.
(d) Commission. The Borrower agrees to pay the Bank in advance a fee
equal to the face amount of any L/C after the date hereof multiplied by the
Applicable Margin (prorated based upon the number of days from the issue
date to the expiration date), together with any transactional fees, at the
Bank's customary rates.
(e) Method of Payment. The Bank is authorized to obtain reimbursement
for any L/C by making advances under the Credit. The Bank may make such
advance even if it causes the outstanding balance to exceed the limits set
forth in Section 2.01(a) and the making of such advance shall be an Event
of Default under Article VI.
(f) Amount. The aggregate amount of L/Cs outstanding at any time shall
not exceed $2,500,000.
18
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants that:
Section 3.01. Corporate Existence and Power, Organizational Structure. The
Borrower and each Subsidiary is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized, and has full corporate and other power and authority to conduct its
business and own its assets as now conducted and owned and as proposed to be
conducted and owned. The Borrower and each Subsidiary is licensed or qualified
as a foreign corporation in each jurisdiction where the conduct of its business
or the ownership of its assets require such licensing or qualification, except
where the failure to be so licensed or qualified would not have a material
adverse effect upon the business, assets, operations or financial condition of
the Borrower or such Subsidiary, as the case may be. All issued and outstanding
shares of capital stock of the Borrower and any Subsidiary have been duly
authorized, validly issued, fully paid and are non-assessable.
Section 3.02. Subsidiaries. The ownership structure and jurisdiction of
incorporation of each Subsidiary is as set forth in Schedule 3.02 attached
hereto. Except as set forth in Schedule 3.02, the Borrower currently has no
Subsidiaries or any equity investments in any other entity.
Section 3.03. Power and Authority Relative to Borrowing; Legal and Binding
Nature, Compliance with Other Instruments. The Borrower and each Subsidiary has
full power and authority and has taken all required corporate and other action
necessary to permit it to execute and deliver and perform all of its obligations
contained in the Credit Documents to which it is a party, and to borrow
hereunder, and none of such actions will violate any provision of law applicable
to it, or of its charter or by-laws, or result in the breach of or constitute a
default under any agreement or instrument to which it is a party or by which it
is bound. Each of the Credit Documents to which the Borrower and each Subsidiary
is a party has been (or will upon execution be) duly authorized and validly
executed and are (or will upon execution be) the valid and binding obligations
of the Borrower and each Subsidiary enforceable in accordance with their
respective terms. Neither the execution or delivery by each of the Borrower and
its Subsidiaries of any of the Credit Documents to which it is a party nor the
performance of its obligations thereunder, requires the consent, approval or
authorization of any person or governmental authority.
Neither the Borrower nor any Subsidiary is in violation of any term of its
charter or by-laws or of any agreement, instrument, mortgage, indenture,
contract, judgment, decree, order, statute, rule or governmental regulation
applicable to it. The execution, delivery and performance of the Credit
Documents will not result in the creation of any Lien (other than Liens in favor
of the Bank) upon any of the properties or assets of the Borrower or any
Subsidiary.
Section 3.04. Financial Condition. The audited consolidated financial
statements of the Borrower dated as of December 31, 1997 and the unaudited
consolidated financial statements of the Borrower and its Subsidiaries dated as
of March 31, 1998 (the "Base Financial Statements") have been delivered to the
Bank. The Base Financial Statements are complete and correct and present fairly
19
and accurately the financial position of the Borrower and its Subsidiaries, on a
consolidated and consolidating basis, as of the date of the Base Financial
Statements are in conformity with GAAP consistently applied. Except as set forth
on Schedule 3.04 attached hereto, neither the Borrower nor any Subsidiary has
any contingent liability or liability for taxes, or any unusual or burdensome
agreement or commitment which would have a materially adverse effect on its
business assets, operations or financial condition, except as disclosed in the
Base Financial Statements and in this Agreement.
After giving effect to the financing provided for in this Agreement,
neither the Borrower nor any Guarantor will: (a) have liabilities (contingent or
otherwise) which exceed the fair and salable value of its assets; (b) be left
with unreasonably small capital with which to engage in its business; (c) have
incurred, or anticipate or reasonably should anticipate incurring, debts beyond
its ability to pay such debts as they mature.
Section 3.05. No Material Adverse Change. Except as set forth in Schedule
3.05 attached hereto, since the date of the Base Financial Statements there has
been no material adverse change in the business, assets, operation or condition
(financial or otherwise) of the Borrower or any Subsidiary, and neither the
Borrower nor any Subsidiary has paid any dividends or made any distributions on
or purchased or otherwise acquired any shares of the Borrower's capital stock or
the stock of any Subsidiary.
Section 3.06. Litigation; Employment and Labor. Except as set forth in
Schedule 3.06 attached hereto, there are no suits or proceedings pending or, to
the best knowledge of the Borrower, threatened against or affecting the Borrower
or any Subsidiary which would have a material adverse effect on the business,
assets or financial condition of the Borrower or any Subsidiary.
There are no controversies pending or, to the best of the knowledge of the
Borrower after due inquiry, threatened, between the Borrower and any of its
employees or any Subsidiary and its employees, other than employee grievances
arising in the ordinary course of business which are not, in the aggregate,
material to the financial condition, results of operation or business of the
Borrower or any Subsidiary. The Borrower is in compliance with all federal and
state laws respecting employment and employment terms, conditions and practices.
Neither the Borrower nor any Subsidiary has union representation questions,
grievances, discrimination or unfair labor practice complaints pending or
threatened against it before any state or federal board or agency respecting
employment and employment terms, conditions and practices, the failure to comply
with which could have a material adverse effect on its business or operations
or, to the best of their knowledge, after due inquiry, any basis therefor.
Section 3.07. Title. Except as set forth in Schedule 3.07 attached hereto,
the Borrower and each Subsidiary has good and marketable title to, or valid
leasehold interests in, all of the properties and assets and leasehold interests
reflected in the Base Financial Statements, or acquired since such date (except
for materials used, inventory sold, accounts receivable collected and other
items disposed of, all in the ordinary course of business since the date of the
Base Financial Statements), free and clear of all Liens except Liens permitted
by Section 5.12, and easements, restrictions and minor defects in title which do
20
not, either individually or in the aggregate materially detract from the value
or materially limit the use of any real property.
Section 3.08. Tax Returns and Payments. Except as set forth in Schedule
3.08 attached hereto, all of the tax returns and tax reports of the Borrower and
its Subsidiaries required by law to be filed have been duly filed, or extensions
of the time for filing have been duly obtained, and the Borrower and its
Subsidiaries have paid all taxes shown due thereon. Except as set forth in
Schedule 3.08, the federal income tax returns of the Borrower and its
Subsidiaries have never been audited (or, in the case of a Subsidiary, have not
been audited since the date of its acquisition by the Borrower) by the Internal
Revenue Service. There are in effect no waivers of the applicable statutes of
limitations for federal taxes for any period. Except as set forth in Schedule
3.08, no deficiency assessment or proposed adjustment of the federal income
taxes of the Borrower or any Subsidiary is pending, and to the best of
Borrower's knowledge, there is no proposed liability of a substantial nature for
any tax to be imposed upon any of its assets for which there is not an adequate
reserve reflected in the Base Financial Statements.
Section 3.09. Compliance with Law. Except as set forth in Schedule 3.09
attached hereto, the Borrower and each Subsidiary has all necessary franchises,
permits, licenses and other rights to allow it to conduct its business as
presently conducted and as proposed to be conducted, and neither the Borrower
nor any Subsidiary is in default with respect to any order or decree of any
court, or under any law, order or regulation of any governmental authority, or
under the provisions of any contract or agreement to which it is a party or by
which it may be bound, which default would have a material adverse effect on its
business, assets, operations or financial condition.
Section 3.10. Pension Matters. Except as set forth in Schedule 3.10
attached hereto, neither the Borrower nor any Subsidiary has incurred (a) any
material accumulated funding deficiency within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or (b) any
material liability to the Pension Benefit Guaranty Corporation established under
ERISA (or any successor thereto under ERISA) in connection with any employee
benefit plan established or maintained by it; neither the Borrower nor any
Subsidiary has had any tax assessed against it by the Internal Revenue Service
for any alleged violation under Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"). Neither the Borrower nor any Subsidiary has any
material unfunded liability under a pension plan or a contingent liability for
withdrawal from a multi-employer pension plan except as disclosed in the Base
Financial Statements.
Section 3.11. Compliance with Regulation U. None of the proceeds of the
Credit will be used to purchase, carry or refinance any borrowing the proceeds
of which were used to purchase or carry any "margin securities" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System.
Section 3.12. Credit Agreements. Set forth in Schedule 3.12 attached hereto
is a complete and correct list of all existing loan agreements, indentures, note
purchase agreements, guarantees or other instruments relating to extensions of
credit or money borrowed for an amount in excess of $100,000 under which the
Borrower or any Subsidiary is or may become directly or indirectly obligated.
21
Section 3.13. Leases and Options to Purchase. Set forth on Schedule 3.13
attached hereto is a complete and correct list of all existing leases with
respect to, or options to purchase any, real estate or any equipment involving a
commitment, potential commitment, or series of commitments in any twelve month
period, in excess of $100,000 under which the Borrower or any Subsidiary is or
may become directly or indirectly obligated as lessee or purchaser.
Section 3.14. Insolvency. Neither the Borrower nor any Subsidiary has (a)
made a general assignment for the benefit of creditors, (b) filed any voluntary
petition in bankruptcy or suffered the filing of an involuntary petition by its
creditors, (c) suffered the appointment of a receiver to take possession of all
or substantially all of its assets, (c) suffered the attachment or other
judicial seizure of all, or substantially all of its assets, (d) admitted in
writing its inability to pay its debts as they come due, or (e) made an offer of
settlement, extension or composition to its creditors generally.
Section 3.15. Real Estate Owned. Except as set forth in Schedule 3.15
attached hereto, neither the Borrower nor any Subsidiary owns any real property.
Section 3.16. Hazardous Waste. Except as set forth in Schedule 3.16
attached hereto, neither the Borrower nor any Subsidiary has generated, stored
or disposed of any oil, hazardous substance or hazardous material as defined in
the Comprehensive Environmental Response Compensation and Liability Act, as
amended, 42 U.S.C. '9601, et seq., applicable state or federal laws, or
regulations adopted pursuant thereto, in violation of applicable law; and,
except as set forth in Schedule 3.16 attached hereto, to the best of the
Borrower's knowledge, there has been no generation, storage, or disposal of any
such materials by anyone else on the property owned or leased by the Borrower or
any Subsidiary, nor have any such materials been present on such property.
Section 3.17. Permits. All necessary licenses and permits for the use
and occupancy of the real property owned or leased by the Borrower and each
Subsidiary have been issued and are in full force and effect, except as set
forth in Schedule 3.17 attached hereto and except for any such licenses or
permits, the absence of which would not have a material adverse effect upon the
business, assets, operations or financial condition of the Borrower or such
Subsidiary.
Section 3.18. SEC Filings; No Omissions. None of the registration
statements or reports (including, without limitation, reports on Form 10-K, Form
10-Q and Form 8-K) filed by the Borrower with the SEC, as amended, modified or
supplemented from time to time, contains as of the date hereof any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
The making of Credit Advances hereunder, the application of proceeds and
the repayment by the Borrower and the consummation of the transactions
contemplated by this Agreement have not and will not violate any provision of
any federal or state securities loans, rules or regulations, or any order issued
by the SEC (collectively, "Securities Laws"). Neither the Borrower nor any
22
Subsidiary has issued any security in violation of any Securities Laws. The
Borrower agrees to indemnify and hold the Bank harmless from and against any
claim in connection with the violation or alleged violation by the Borrower of
any Securities Laws.
None of the representations or warranties in this Agreement nor any
document, agreement, statement, certificate, exhibit, schedule or other
information furnished or to be furnished by or on behalf of the Borrower to the
Bank pursuant to this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements of facts
contained therein not misleading.
Section 3.19. Intellectual Property. The Borrower possesses all franchises,
patents, copyrights, trademarks, trade names, licenses and permits, and rights
in respect of the foregoing, adequate for the conduct of its business
substantially as now conducted without known conflict with any rights of others.
Section 3.20. Operation of Business on Consolidated Basis. The Borrower and
its Subsidiaries conduct a portion of their business on a consolidated basis,
including, but not limited to, shared management, accounting, marketing and
operations. Any Credit provided to the Borrower under the Credit Documents
benefits the Borrower and all Subsidiaries on a consolidated as well as an
individual basis.
ARTICLE IV. CONDITIONS
Section 4.01. Conditions to the Credit and the First Advance. The
obligation of the Bank to make the initial advance under the Credit is subject
to the fulfillment of the following conditions:
(a) Credit Documents. The Bank shall have received (i) this Agreement,
executed and delivered by a duly authorized officer of the Borrower, with a
counterpart for the Bank, (ii) the Credit Note executed and delivered by a
duly authorized officer of the Borrower, (iii) the Borrower Security
Agreement and the Borrower Stock Pledge Agreement, each executed and
delivered by a duly authorized officer of the Borrower, (iv) the Guaranty
Agreement, executed and delivered by a duly authorized officer of each of
the Subsidiaries (other than the Foreign Subsidiaries) and (v) the
Subsidiary Security Agreements and the Subsidiary Stock Pledge Agreements,
each executed and delivered by a duly authorized officer of each Subsidiary
which is a party thereto.
(b) Actions to Perfect Liens. The Bank shall have received evidence in
form and substance reasonably satisfactory to it that all filings,
recordings, registrations and other actions, including, without limitation,
the filing of duly executed financing statements on form UCC-1, necessary
or, in the opinion of the Bank, desirable to perfect the Liens created by
the Security Documents shall have been completed (or, to the extent that
any such filings, recordings, registrations and other actions shall not
have been completed, arrangements satisfactory to the Bank for the
completion thereof shall have been made).
23
(c) Lien Searches. The Bank shall have received the results of a
recent search by a Person satisfactory to the Bank, of the UCC, judgment
and tax lien filings which may have been filed with respect to personal
property of the Borrower and each of its Subsidiaries in the jurisdictions
set forth in Schedule 4.01(c), and the results of such search shall be
satisfactory to the Bank.
(d) Pledged Stock; Stock Powers. The Bank shall have received the original
certificates representing the shares pledged pursuant to the Borrower Stock
Pledge Agreement and each of the Subsidiary Stock Pledge Agreements,
together with an undated stock power for each such certificate executed in
blank by a duly authorized officer of the Borrower or the applicable
Subsidiary, whichever is applicable.
(e) UCC-3 Termination Statements. The Bank shall have received UCC-3
termination statements and any other instrument necessary to terminate the
Liens granted by the Borrower or any of its Subsidiaries (other than its
Foreign Subsidiaries) to any Person (other than the Bank)(or, to the extent
that any such UCC-3 termination statements or any other instrument shall
not have been obtained and filed, arrangements satisfactory to the Bank for
the obtaining and filing thereof shall have been made).
(f) Secretary's Certificate. The Borrower and each of the Subsidiaries
(including the Foreign Subsidiaries) shall have delivered to the Bank, a
certificate of the Secretary or Assistant Secretary (or Clerk or Assistant
Clerk) of the Borrower and each such Subsidiary (in substantially the form
of Exhibit H attached hereto and dated as of the date of the Closing Date),
certifying (i) in the case of the Borrower and each of its Subsidiaries
(other than its Foreign Subsidiaries), the charter documents, by-laws,
consent votes of directors and incumbency of officers of the Borrower and
each such Subsidiary; and (ii) in the case of each of the Foreign
Subsidiaries, the charter documents and by-law of each such Foreign
Subsidiary.
(g) Officer's Certificate. The Borrower shall have delivered to the
Bank a certificate of a duly authorized officer of the Borrower certifying
that all conditions precedent on the part of the Borrower to the execution
and delivery hereof and the making of the initial Revolving Credit Advance
have been satisfied, in substantially the form of Exhibit I attached hereto
and dated as of the date of the Closing Date.
(h) Legal Existence, Good Standing, Tax Good Standing and Foreign
Qualification Certificates. The Bank shall have received (i) certificates
of legal existence, good standing, tax good standing and foreign
qualification for the Borrower, and (ii) certificates of legal existence,
good standing and foreign qualification from each of the Subsidiaries, all
of recent date issued by the appropriate governmental authorities.
(i) Certificates of Insurance. The Bank shall have received evidence
in form and substance satisfactory to it that all of the requirements of
this Agreement and those sections of the Security Documents requiring the
maintenance of insurance shall have been satisfied.
24
(j) Legal Opinions from Counsel for the Borrower and Guarantors. The
Bank shall have received the written opinion of ▇▇▇▇▇ ▇▇▇▇ LLP, counsel to
the Borrower and the Guarantors, in form satisfactory to Peabody & ▇▇▇▇▇▇
LLP, special counsel to.the Bank (said special counsel and any successor
counsel shall be hereinafter referred to as "Special Counsel") covering
such matters as the Bank or its Special Counsel may request.
(k) No Default. No Event of Default specified in Article VI and no
event which, under Article VI with the giving of notice or the lapse of
time, or both, would constitute an Event of Default, shall have occurred
and be continuing.
(l) Material Adverse Change. There shall not have occurred any
material adverse change in the condition (financial or otherwise),
operation, properties, assets, liabilities, earnings or prospects of the
Borrower or its Subsidiaries since the date the most recent financial
statements were delivered to the Bank.
(m) Miscellaneous Requirements. The Borrower shall have delivered to
the Bank such other documents as the Bank or its Special Counsel shall
reasonably require.
Section 4.02. Conditions to Subsequent Advances. Each request for a
subsequent Credit Advance shall be deemed to be a representation by the Borrower
to the Bank that all representations and warranties contained in Article III
hereof or in any Exhibit, Schedule or Certificate attached hereto or delivered
to the Bank in connection herewith were true and correct when made and continue
to be true and correct as of the date of such advance, and that no Event of
Default specified in Article VI hereof, and no event which, under said Article
VI with the giving of notice or the lapse of time, or both, would constitute an
Event of Default, has occurred and is then continuing.
ARTICLE V. COVENANTS OF THE BORROWER
The Borrower hereby covenants as follows:
Section 5.01. Payment of Amounts Due. The Borrower will make all payments
of principal, interest and other amounts in connection with the Credit Note and
this Agreement in accordance with the terms hereof and thereof, and will
observe, perform and comply with all covenants, terms and conditions contained
herein, in the Credit Note or in any other Credit Document to be observed,
performed or complied with by it, and it will cause each of the Subsidiaries
(other than the Foreign Subsidiaries) to comply with all the covenants, terms
and conditions in any Credit Document to which it is a party, or which by the
terms hereof is applicable to such Subsidiary.
Section 5.02. Corporate Existence. The Borrower will maintain and preserve
in full force and effect its corporate existence and the corporate existence of
each Subsidiary and will maintain and preserve in full force and effect, and
will cause each Subsidiary to maintain and preserve in full force and effect,
all material rights, licenses, patents, trademarks and franchises, and comply
25
with all applicable regulations in all jurisdictions necessary for the conduct
of their respective businesses.
Section 5.03. Maintenance of Properties. The Borrower will maintain,
preserve, protect and keep, and will cause each Subsidiary to maintain,
preserve, protect and keep, all properties used or useful in the conduct of
their respective businesses in good repair, working order and condition,
ordinary wear and tear excepted, and from time to time shall make, and will
cause each Subsidiary to make, such repairs, renewals, replacements, betterments
and improvements thereto as in the judgment of the Borrower's management are
necessary to permit such businesses to be properly and advantageously conducted
at all times.
Section 5.04. Payment of Taxes, Compliance with Laws. The Borrower will pay
and discharge, and will cause each Subsidiary to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon them or upon their
income or profits, or upon any property belonging to them before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies, which, if not paid when due, might become a Lien or charge upon such
property or any part thereof; provided, however, that neither the Borrower nor
any Subsidiary shall be required to pay and discharge any such tax, assessment,
charge, levy or claim so long as the validity thereof shall be contested in good
faith by appropriate proceedings, an adequate reserve for the payment thereof is
established on the books of the Borrower or such Subsidiary in accordance with
GAAP, and the Borrower or each Subsidiary shall pay such tax, assessment,
charge, levy or claim before any taxing authority files any Lien with respect
thereto.
The Borrower will at all times and in all material respects comply with,
and will cause each Subsidiary to comply with, all applicable provisions of
laws, rules, regulations, licenses, permits, approvals and orders and observe
all requirements of federal, state, local and other governmental authorities.
The Borrower will satisfy, or cause to be satisfied, for the Borrower and
each Subsidiary, the minimum annual funding standard, within the meaning of
ERISA, for any employee benefit plan established or maintained by the Borrower
or such Subsidiary which is subject to ERISA and neither the Borrower nor any
Subsidiary will permit any tax or penalty to be incurred by it as a result of
any failure to satisfy any such minimum funding requirement or as a result of
any violation of the provisions of Section 4975 of the Code or any regulation
issued thereunder.
Section 5.05. Insurance. The Borrower will at all times maintain, and will
cause each Subsidiary to maintain, casualty, liability and business interruption
insurance with financially sound and reputable insurers satisfactory to the Bank
in such amounts and to the extent customary for entities of like size in similar
businesses, all in accordance with the provisions of this Agreement, the
Borrower Security Agreement and the Subsidiary Security Agreements. Each such
insurance policy shall contain a provision requiring at least thirty (30) days'
written notice to the Bank prior to the cancellation or modification of each
such policy. Certificates relating to such insurance shall be delivered to the
Bank on the Closing Date and thereafter upon demand by the Bank, it being
understood by the parties hereto that no such certificates for the Foreign
Subsidiaries shall be delivered to the Bank unless and until requested by the
Bank.
26
Section 5.06. Accounts and Reports. The Borrower will furnish or cause to
be furnished to the Bank, the following reports:
(a) Annual Reports. As soon as available and in any event within
ninety (90) days after the end of each fiscal year, (i) consolidated and
comparative audited financial statements of the Borrower, together with all
notes thereto, prepared in reasonable detail and in accordance with GAAP
consistently applied, such consolidated statements to be duly certified by
a certified, independent public accounting firm selected by the Borrower
and acceptable to the Bank ("CPA"), which statements shall be accompanied
by (A) an unqualified opinion thereon by the CPA, and (B) a statement
executed by the Borrower's president or treasurer that to the best of his
or her knowledge, following diligent inquiry, he or she does not know of
any condition or event which constitutes an Event of Default under this
Agreement or which, after notice, or lapse of time or both, would
constitute such an Event of Default, or a statement specifying the nature
and period of existence of any such condition or event, all in form and
substance acceptable to the Bank; and (ii) unaudited consolidating and
comparative balance sheet and income statement prepared on a year-to-date
basis in reasonable detail and in accordance with GAAP consistently
applied, and in form similar to Schedule 5.06 attached hereto.
(b) Quarterly Reports. As soon as available, and in any event within
forty-five (45) days after the end of each quarterly accounting period in
each fiscal year during the term of this Agreement, (i) consolidated and
comparative unaudited financial statements of the Borrower prepared in
reasonable detail and in accordance with GAAP consistently applied,
certified by the president or treasurer of the Borrower, which statements
shall contain balance sheets as of the end of such accounting period,
statements of income and cash flow for such accounting period, all in form
and substance satisfactory to the Bank; and (ii) unaudited consolidating
and comparative balance sheet and income statement prepared on a
year-to-date basis in reasonable detail and in accordance with GAAP
consistently applied, and in form similar to Schedule 5.06 attached hereto.
(c) Compliance Certificates. With the annual and quarterly financial
statements furnished pursuant to subsections (a) and (b) hereof, an
officer's certificate substantially in the form of Exhibit J hereto (the
"Compliance Certificate"), and such other reports as the Bank may
reasonably request.
(d) Projections. At least thirty (30) days prior to each fiscal year
end, financial projections for the Borrower for the next fiscal year
prepared by month in the form previously provided to the Bank.
(e) Auditor's Management Letter. Promptly after receipt by the
Borrower, copies of the management letter provided by the CPA.
(f) Public Information. As soon as they become available, but in any
event, within fifteen (15) days after the issuance thereof, the Borrower
27
shall furnish to the Bank copies of such other financial statements, proxy
material and reports as it shall send or make available to its
stockholders, and promptly upon the filing thereof, copies of all reports
and materials which the Borrower or any Subsidiary files with any
governmental commission (including, without limitation, the SEC),
department or agency or with any domestic or foreign stock exchange or with
the NASDAQ, including without limitation, copies of (i) any registration
statements, prospectuses and any amendments and supplements thereto, and
any regular and periodic reports (including, without limitation, reports on
Form 10-K, Form 10-Q and Form 8-K) filed by Borrower with the SEC or any
domestic or foreign stock exchange or with the NASDAQ, and (ii) any letters
of comment or correspondence with respect to filings or
compliance matters sent to the Borrower by any such governmental commission
(including without limitation, the SEC), department or agency or any such
domestic or foreign stock exchange or the NASDAQ.
(g) Accounting Principles. Reports furnished to the Bank under this
Agreement shall be prepared in accordance with GAAP consistently applied,
except that unaudited statements need not contain notes thereto and shall
be subject to normal year end adjustments. Compliance with the covenants
set forth in this Agreement will be determined in accordance with GAAP
consistently applied. In the event that any subsequent report shall have
been prepared in accordance with accounting principles different than those
used in the Base Financial Statements, the Borrower shall so inform the
Bank of such change in accounting principles and shall provide to the Bank
such subsequent reports and such supplemental reconciling financial
information as may be required to ascertain performance by the Borrower
with the covenants contained in this Agreement.
Section 5.07. Information and Inspection. The Borrower will furnish, and
will cause each Subsidiary to furnish, the Bank from time to time promptly upon
the Bank's request, full information pertinent to any covenant, provision or
condition hereof or to any matter in connection with the business of the
Borrower or such Subsidiary and, at all reasonable times during normal business
hours and as often as the Bank shall reasonably request, permit any authorized
representative designated by the Bank to visit and inspect any of properties of
the Borrower and its Subsidiaries, including their books and records (and to
make extracts therefrom), and to discuss their affairs, finances and accounts
with its officers. The Borrower will, in addition, promptly furnish to the Bank
such financial information as the Bank shall reasonably request. Without
limiting the generality of the foregoing, the Bank shall be entitled to conduct
as many examinations of the books and records of the Borrower or any Subsidiary
as the Bank in its sole discretion deems necessary and the Borrower shall pay on
demand the Bank's out-of-pocket expenses and field audits and appraisal fees.
Section 5.08. Additional Advice. The Borrower will promptly advise the Bank
of any change which constitutes or, after notice or lapse of time or both, would
constitute an Event of Default as defined in Article VI of this Agreement, or a
default in the performance by the Borrower or any Subsidiary under any covenant
or agreement contained in any other agreement to which it is a party or by which
it is bound which has not been cured within the applicable grace period, if any.
The Borrower will also promptly give notice to the Bank of (a) each waiver,
consent or amendment granted or made with respect to borrowed money in excess of
$25,000, and (b) any dispute or default under or change in a material term of
any collection agreement during the prior fiscal year.
Section 5.09. Payment of Expenses. The Borrower will bear all reasonable
out-of-pocket fees and expenses of the Bank in connection with the negotiation,
preparation, execution, amendment, administration or enforcement of this
Agreement, the other Credit Documents and the transactions contemplated hereby
(whether or not the Credit hereunder is consummated) and the making and
collection of the Credit hereunder, including without limitation, the fees and
disbursements of Special Counsel for the Bank, costs of appraisals, recording
fees, and filing fees. Such fees and disbursements of Special Counsel for the
Bank payable by the Borrower in connection with the initial negotiation,
28
preparation and execution of this Agreement and the other Credit Documents shall
not exceed $50,000.
Section 5.10. Limitation on Indebtedness. Except as otherwise provided in
Section 5.11 below, the Borrower will not, and will not permit any Subsidiary to
create, incur, assume, or become, be or remain liable in any manner in respect
of, or allow to exist, any indebtedness (which term shall include: all
indebtedness, obligations and liabilities, which in accordance with GAAP would
be reflected on the balance sheet of the Borrower or such Subsidiary as a
liability; all indebtedness, obligations and liabilities (including any letters
of credit issued by any bank), whether or not assumed by the Borrower or such
Subsidiary, secured by any Lien existing on property owned by the Borrower or
such Subsidiary; all indebtedness in respect of operating leases; and all
amounts representing rental payments which, in accordance with GAAP, would be
classified as a liability on its balance sheet)(collectively, "Indebtedness"),
except for:
(a) the Obligations;
(b) the Canadian Debt;
(c) the UK Debt;
(d) Purchase Money Indebtedness and Capitalized Lease Obligations
(including the approximately $1,400,000 of Purchase Money Indebtedness and
Capitalized Lease Obligations which is in existence as of the date hereof
and which is specifically disclosed in Schedule 5.10(d) attached hereto)
which collectively shall not exceed the aggregate sum of $2,500,000 at any
one time;
(e) Indebtedness of the Borrower and the Subsidiaries which is in
existence as of the date hereof and which is specifically disclosed in
Schedule 5.10(e) attached hereto), and which shall not exceed the aggregate
principal amount of $533,345 at any time on or after the date hereof;
(f) Indebtedness of the Borrower and the Subsidiaries for taxes,
assessments, governmental charges, Liens or claims described in Section
5.04 hereof to the extent that payment thereof is not required by such
Section 5.04;
(g) Indebtedness of the Borrower and the Subsidiaries comprising of
trade debt, wages, employee benefits, advance payments on sales contracts
and other Indebtedness incurred in the ordinary course of business; and
(h) Indebtedness in respect of final judgments for the payment of
money not in excess of $50,000 in the aggregate at any time outstanding
(excluding sums covered by insurance) remaining unsatisfied and in effect
for any period of less than sixty (60) days or in respect of which a stay
of execution shall have, been obtained pending an appeal or proceeding for
review.
Section 5.11. Limitation on Liability for Obligations of Others. Except as
otherwise provided in Section 5.10 above, the Borrower will not, and will not
29
allow any Subsidiary to, assume, guarantee, endorse or otherwise be or become
liable, contingently or otherwise, for the obligations of any other corporation,
firm or entity or other person, except for:
(a) the Guaranty Agreement;
(b) the endorsement of negotiable instruments for deposit or
collection in the normal course of business;
(c) the Guarantee dated ___________, 1998 (the "First Chicago NBD
Guaranty"), from the Borrower in favor of First Chicago NBD Bank, Canada,
as amended as of August __, 1998, pursuant to which, among other things,
the Borrower has guaranteed up to $2,000,000 of all of the obligations and
liabilities of its subsidiary, Ground Effects, Ltd., to First Chicago NBD
Bank, Canada; provided, however, that (i) the Borrower shall not further
amend, restate or otherwise alter the First Chicago NBD Guaranty in any
manner; and (ii) the Borrower will not, directly or indirectly, make any
payment pursuant to or with respect to the First Chicago NBD Guaranty;
(d) the Deed of Guarantee dated January 16, 1998 (the "National
Westminster Bank Guaranty"), from the Borrower in favor of National
Westminster Bank PLC, pursuant to which, among other things, the Borrower
has guaranteed up to ,391,780 (British Pounds) of all of the obligations
and liabilities of its subsidiary, Signal Processors Limited, to National
Westminster Bank PLC, provided, however, that (i) the Borrower shall not
amend, restate or otherwise alter the National Westminster Bank Guaranty in
any manner; and (ii) the Borrower will not, directly or indirectly, make
any payment pursuant to or with respect to the National Westminster Bank
Guaranty; and
(e) those guarantees of the Borrower, which are described in Schedule
5.11 attached hereto, and which relate solely to certain equipment leases
or bonds of the Subsidiaries described therein. . Section 5.12. Limitation
on Liens. The Borrower will not, and will not allow any Subsidiary to, (i)
create, incur, assume or allow to be created, incurred or assumed, or to
exist, any pledge of, or any Lien of any kind on, any of their respective
properties, assets or capital stock, (ii) subject any of such assets to
prior payments of any other Indebtedness whether by subordination
agreement, transfer of assets or otherwise, or (iii) own or acquire or
agree to acquire any property of any character subject to or upon any
mortgage, conditional sale agreement or other title retention agreement,
provided, however, that the foregoing restrictions shall not prohibit the
Borrower or a Subsidiary from:
(a) creating or allowing to exist any Liens which secure Indebtedness
permitted under
Section 5.10;
(b) creating or allowing to exist any Liens in favor of the Bank or
otherwise permitted under the Security Documents;
(c) allowing to exist Liens for taxes, assessments, governmental
charges and levies for claims described in Section 5.04 hereof to the
30
extent that payment thereof is not then required by such Section;
(d) allowing to exist Liens in respect of judgments or awards which
have been in force for less than the applicable appeal period or less than
sixty (60) days, whichever is sooner, so long as execution is not levied
thereunder, or in respect of which the Borrower or such Subsidiary at the
time shall in good faith be prosecuting an appeal, or proceedings for
review are pending and in respect of which a stay of execution shall have
been obtained pending such appeal or review; and
(e) creating or all owing to exist deposits or pledges made in
connection with, or to secure payment of, workmen's compensation,
unemployment insurance or similar programs; Liens, charges or encumbrances
imposed by law, such as carriers', warehousemen's and mechanics' Liens and
other Liens arising in the ordinary course of business which do not,
individually or in the aggregate, materially detract from the value or
limit the use of any property subject thereto; landlords' Liens in respect
of rent not in default or Liens securing the performance of bids, tenders,
contracts (other than for the repayment of borrowed money), statutory
obligations and surety bonds.
Section 5.13. Sale of Assets. The Borrower will not, and will not allow any
of its Subsidiaries to, sell or transfer to any third party any of its assets
(including, without limitation, accounts receivable whether with or without
recourse); provided, however, (a) the Borrower or any of its Subsidiaries may
make such sales or transfers to the Borrower or any of its Subsidiaries (other
than its Foreign Subsidiaries); and (b) the Borrower or any of its Subsidiaries
may make sales or transfers which are (i) permitted by Section 5.16 hereof or
(ii) in the ordinary course of business.
Section 5.14. Loans and Investments in Securities. The Borrower will not,
and will not permit any Subsidiary to, without the prior written consent of the
Bank, purchase or otherwise acquire or retain any stock, assets or obligations
of, or make any loans or advances to, or investments in any corporation,
partnership or other entity or person, other than:
(a) obligations of the United States of America, or any agency
thereof, maturing not more than one (1) year from the date of issue
thereof; or
(b) certificates of deposit or other obligations maturing not more
than one (1) year from the date of issue thereof issued by the Bank; or
(c) Permitted Acquisitions or Permitted Payments; or
(d) loans by the Borrower to the Subsidiaries;
provided, however, notwithstanding any provision contained herein or in any of
the other Credit Documents to the contrary, the Borrower will not, and will
cause its Subsidiaries not to, make any loans or advances to, or additional
investments in, any Foreign Subsidiary for any purpose.
31
Section 5.15. Transactions With Affiliated Persons. The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction with any
Affiliate, except on terms no less favorable to the Borrower or such Subsidiary
than would be available in a bona fide arm's length transaction with a
non-affiliated person or entity; provided that (i) the Borrower shall have
obtained the Bank's prior written consent to any such transaction or series of
related transactions involving an amount of in excess of $25,000 in the
aggregate and (ii) the Borrower may issue stock options and warrants (and stock
upon the exercise thereof) at less than fair market value to its officers,
employees, directors and shareholders. All such existing stock options and
warrants as of the date hereof are as set forth in Schedule 5.15 attached
hereto. "Affiliate" means: any officer, director or shareholder who owns five
percent (5%) or more of any class of securities of the Borrower; any entity
where the Borrower owns directly or indirectly five percent (5%) or more of any
class of securities or interest issued by such entity; or any entity that
controls, is controlled by or under common control with, any Borrower.
Section 5.16. Consolidation, Merger or Disposition/Acquisition of Assets.
The Borrower will not, and will not allow any Subsidiary to, without the prior
written consent of the Bank, consolidate with or merge into or with another
firm, person or corporation, directly or indirectly, issue, sell, assign, pledge
or otherwise encumber or dispose of any shares of its capital stock or sell,
lease or otherwise dispose of (other than in the ordinary course of its
business) all or any material portion of their respective properties or assets
to any firm, person or corporation, or acquire any material portion of the
properties or assets of any other firm, person or corporation, whether in one or
a series of related transactions, except that:
(a) any Subsidiary may merge into or consolidate with the Borrower or
another Subsidiary (provided that the Borrower or a Subsidiary shall be the
surviving corporation); and
(b) the Borrower and its Subsidiaries may sell or otherwise dispose of
any property which has become uneconomic, obsolete or worn out if disposed
of in the ordinary course of business; and
(c) so long as no Event of Default (or event which with notice, the
passage of time or both would become an Event of Default) has occurred and
is continuing, the Borrower and its Subsidiaries may make Permitted
Acquisitions and Permitted Payments.
Section 5.17. Changes in Corporate Business. The Borrower will not, and
will not permit any Subsidiary to, materially alter the nature of its business.
Section 5.18. New Subsidiaries. The Borrower shall, at the expense of the
Borrower and its Subsidiaries, cause each new Subsidiary (other than new Foreign
Subsidiaries) of the Borrower created or acquired after the date hereof, to
execute and deliver to the Bank, within thirty (30) days after the creation or
acquisition of such new Subsidiary, the following agreements and documents, all
in form and substance reasonably satisfactory to the Bank:
(a) a Supplement to Guaranty Agreement in the form attached as Exhibit
A to the Guaranty Agreement, pursuant to which, such new Subsidiary shall
32
become a party to the Guaranty Agreement;
(b) a Subsidiary Security Agreement, pursuant to which, such new
Subsidiary shall grant to the Bank a first priority security interest in
all of its assets;
(c) any and all UCC financing statements which the Bank deems
necessary and appropriate in order to perfect its first priority security
interests in all of the assets of such new Subsidiary; and
(d) such other agreements, documents, financing statements,
instruments, opinions and certificates and completion of such other
matters, as the Bank may reasonably deem necessary or appropriate.
The Borrower, or the Subsidiary, whichever is applicable (hereinafter
referred as the "Corporate Parent"), which owns or otherwise acquires Capital
Stock in any new Subsidiary (including any new Foreign Subsidiary) created or
acquired after the date hereof, will execute and deliver to the Bank, within
thirty (30) days after the creation or acquisition of such new Subsidiary, (i) a
pledge agreement (in form and substance reasonably acceptable to the Bank),
pursuant to which, such Corporate Parent shall grant in favor of the Bank a
first priority security interest with respect to all Capital Stock owned or
otherwise acquired by the Corporate Parent in such new Subsidiary; and (ii) such
financing statements, documents, instruments and certificates, as the Bank may
reasonably request in order to perfect its security interest in such Capital
Stock.
Except as otherwise provided in Sections 5.10 and 5.11 above, the Borrower
will not, and will not permit any Subsidiary to incur any Indebtedness in
connection with the creation or acquisition of any such new Subsidiary.
Section 5.19 Minority Stockholders. To the extent that the Borrower does
not directly or indirectly own all of the outstanding Capital Stock in any
Subsidiary, the Borrower shall use its best efforts to cause all Persons who own
any Capital Stock in such Subsidiary promptly to execute and deliver to the Bank
(a) a pledge agreement (in form and substance reasonably acceptable to the
Bank), providing for a first priority security interest in favor of the Bank
with respect to all Capital Stock owned by such Person in such Subsidiary; and
(b) such financing statements, documents, instruments and certificates, as the
Bank may reasonably request in order to perfect its security interest in such
Capital Stock.
Section 5.20. Restricted Payments. The Borrower will not, and will not
permit any Subsidiary to, directly or indirectly, declare, order, pay or make
any Restricted Payments, provided, however, that so long as no Event of Default
has occurred and is continuing,
(a) the Borrower may redeem for cash up to $700,000 (plus accrued
dividends) of the Borrower's redeemable preferred stock as set forth in
Schedule 5.20 attached hereto;
(b) the Borrower may acquire, in exchange for its Capital Stock, the
remaining equity interests in Subsidiaries which are not wholly-owned by
33
the Borrower, by issuance to the Persons and pay certain "earn outs", in
the amounts, at the times, and, where so indicated, upon the satisfaction
of the earnings targets set forth in Schedule 5.20 attached hereto;
(c) the Borrower may declare and pay cash dividends to its
shareholders in the aggregate amount of up to $150,000 per any fiscal year;
and
(d) any Subsidiary may declare and pay cash dividends, to the extent
permitted under the provisions of the Borrower Stock Pledge Agreement and
the Subsidiary Stock Pledge Agreement.
The transactions permitted in clauses (a), (b), (c) and (d) of this Section 5.20
are hereinafter referred to collectively as the "Permitted Payments."
Section 5.21. Restriction on Use of Proceeds. None of the proceeds of the
Credit shall be used by the Borrower to purchase commodities except for use in
the ordinary course of the Borrower's business, or for the purpose of purchasing
or carrying, or refinancing any borrowing the proceeds of which were used to
purchase or carry, any "margin securities" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System.
Section 5.22. Bank Accounts. The Borrower shall maintain at all times all
of its primary operating and disbursement accounts with the Bank; provided that
the Bank's services meet the reasonable cash management needs of the Borrower.
Section 5.23. Continued Management and Ownership of Borrower and Each
Subsidiary. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall continue to serve actively as chief
executive officer of the Borrower and shall actively participate in the
management of the Borrower. At no time after the date hereof will the Borrower
permit (i) more than 50% of the outstanding shares of Capital Stock of the
Borrower to be beneficially owned (as defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) by any
"person" or any "group" (as defined in Section 13(d)(3) of the Exchange Act); or
(ii) any change in the ownership structure of any Subsidiary as set forth in
Schedule 3.02 (other than as a result of Permitted Acquisitions and Permitted
Payments).
Section 5.24. Material Agreements. The Borrower will observe and perform,
and will cause each Subsidiary to observe and perform, all of its obligations
under each material agreement to which it is a party, except where the failure
so to observe would not have a material adverse affect upon the business,
assets, operations, financial or other condition, or prospects of the Borrower
or such Subsidiary, as the case may be.
Section 5.25. Maximum Capital Expenditures. The Borrower will not permit,
and will cause its Subsidiaries not to permit, Capital Expenditures to exceed
$1,500,000 during any fiscal year (excluding from this calculation, Purchase
Money Indebtedness and Capitalized Lease Obligations permitted pursuant to
Section 5.10(c)) above).
As used herein, "Capital Expenditures" means, for any given period, all
internally financed expenditures of the Borrower and its Subsidiaries for fixed
34
or capital assets made or incurred during such period which are properly
chargeable to capital account in accordance with GAAP consistently applied.
Section 5.26. Ratio of Total Liabilities to Tangible Net Worth. The
Borrower will not permit, and will cause its Subsidiaries not to permit, the
ratio of Total Liabilities to Tangible Net Worth at the end of any fiscal
quarter ending after the date hereof to be greater than 2.0 to 1.0.
As used herein, "Total Liabilities" means, as of any given date, the sum of
all liabilities of the Borrower and its Subsidiaries, as determined on a
consolidated basis, in accordance with GAAP consistently applied; "Tangible Net
Worth" means, as of any given date, the sum of all tangible assets of the
Borrower and its Subsidiaries minus the Total Liabilities, all as determined on
a consolidated basis in accordance with GAAP consistently applied.
Section 5.27. Ratio of Current Assets to Current Liabilities. The Borrower
will not permit, and will cause its Subsidiaries not to permit, the ratio of
Current Assets to Current Liabilities at the end of any fiscal quarter ending
after the date hereof to be less than 1.25 to 1.00.
As used herein, "Current Assets" means, as of any given date, the sum of
all cash and cash equivalents plus inventory, prepaid expenses and accounts
receivables of the Borrower and its Subsidiaries, all as determined on a
consolidated basis in accordance with GAAP consistently applied; "Current
Liabilities" means, as of any given date, all current liabilities (including
current maturities on long-term debt and all amounts outstanding under the
Credit) of the Borrower and its Subsidiaries, as determined on a consolidated
basis in accordance with GAAP consistently applied.
Section 5.28. Ratio of Cash Flow to Debt Service. The Borrower will not
permit, and will cause its Subsidiaries not to permit, the ratio of Cashflow to
Debt Service at the end of any fiscal quarter ending after the date hereof to be
less than 2.5 to 1.0; provided, however, that for the fiscal quarter June 30,
1998, such ratio will not be less than 2.0 to 1.0.
As used herein, "Cashflow" means, for any given period, the Cumulative
Amount of (a) the net income of the Borrower and its Subsidiaries for such
period (excluding all extraordinary income or losses), plus (b) the depreciation
and amortization expenses of the Borrower and its Subsidiaries for such period,
all as determined on a consolidated basis in accordance with GAAP consistently
applied; "Cumulative Amount" means, for any item, the total aggregate amount
thereof for the last four quarters on a rolling basis through the last day of
the fiscal quarter in question; "Debt Service" means, for any given period, the
Cumulative Amount of (a) current maturities of long term debt of the Borrower
and its Subsidiaries (including Capital Lease Obligations), plus (b) all capital
expenditures (both internally and externally financed) of the Borrower and its
Subsidiaries, all as determined on a consolidated basis in accordance with GAAP
consistently applied.
35
Section 5.29. Ratio of Net Profit Before Taxes to Revenue. The Borrower
will not permit, and will cause its Subsidiaries not to permit, the ratio of Net
Profit Before Taxes to Revenue at the end of any fiscal quarter ending after the
date hereof, and expressed as a percentage, to be less than 3.0%; provided,
however, that for the fiscal quarters ending June 30, 1998 and September 30,
1998, respectively, such percentage will not be less than 2.7%.
As used herein, "Net Profit Before Taxes" means, for any given period, the
pre-tax income of the Borrower and its Subsidiaries for such period as
determined in accordance with GAAP, consistently applied (excluding any
extraordinary income or losses); "Revenue" means, for any given period, the net
sales of the Borrower and its Subsidiaries for such period as determined in
accordance with GAAP, consistently applied.
Section 5.30. Year 2000. The Borrower will take all action necessary to
assure that its and each Subsidiary's computer based systems are able
effectively to process data, including dates, on and after January 1, 2000. The
Borrower will promptly notify the Bank in writing of any Year 2000 problem
arising in any such system and, at the request of the Bank, will provide the
Bank with assurance reasonably acceptable to the Bank of the Borrower's and each
Subsidiary's Year 2000 capability.
ARTICLE VI. EVENTS OF DEFAULT.
If, while any part of the principal of or interest on the Notes remains
unpaid or while any part of the Credit shall be in effect, any one of the
following "Events of Default" shall occur:
(a) the failure of the Borrower or any Subsidiary to pay any amount of
principal, interest or other sum when due to the Bank under any of the
Credit Documents;
(b) the Borrower or any Subsidiary shall (i) apply for or consent to
the appointment of a receiver, trustee or liquidator of it or of all or a
substantial part of its assets; (ii) admit in writing of its inability to
pay its debts as they mature; (iii) make a general assignment for the
benefit of creditors; (iv) be adjudicated a bankrupt or insolvent; (v) file
a voluntary petition in bankruptcy or a petition or an answer seeking
reorganization or an arrangement with creditors to take advantage of any
insolvency law; (vi) file any answer admitting the material allegations of
a petition filed against it in any bankruptcy, reorganization or insolvency
proceeding or fail to dismiss such petition within thirty (30) days after
the filing thereof; or (vii) take any corporate action for the purpose of
effecting any of the foregoing;
(c) an order, judgment or decree shall be entered, without the
application, approval or consent of the Borrower or any Subsidiary by any
court of competent jurisdiction, approving a petition seeking
reorganization or liquidation of the Borrower or a Subsidiary or appointing
a receiver, trustee or liquidator of the Borrower or a Subsidiary or of all
or a substantial part of its assets;
36
(d) any representation or warranty made by the Borrower or the
Subsidiaries hereunder or under any other Credit Document or in any
certificate, document or instrument furnished pursuant hereto or thereto
shall prove to have been false or incorrect in any material respect when
made;
(e) the failure of the Borrower or any Subsidiary to punctually
perform, observe, comply with or satisfy any covenant, agreement or
condition contained in this Agreement or any of the other Credit Documents
(other than those covenants, agreements or conditions referred to elsewhere
in this Article VI) and such failure continues for a period of ten (10) or
more days;
(f) the occurrence of any of the following: (i) any failure of the
Borrower punctually to perform, observe, comply with or satisfy the
provisions of Section 5.05 through 5.07 (inclusive), 5.10 through 5.20
(inclusive), and 5.23 through 5.29 (inclusive) of this Agreement; or (ii)
any failure with respect to any requirement of the Borrower or any
Subsidiary to give notice to the Bank as provided in any of the Credit
Documents;
(g) any failure of the Borrower or any of its Subsidiaries to perform
any covenant or agreement contained in any other agreement to which the
Borrower or such Subsidiary, whichever is applicable, is a party, or by
which the Borrower or such Subsidiary, whichever is applicable, is bound
involving a liability or obligation of the Borrower or such Subsidiary,
whichever is applicable, in excess of $100,000, which shall not be remedied
within the period of time (if any) within which such other agreement
permits such default to be remedied without the consent or waiver of the
other party thereto, unless such default is waived or excused as a matter
of law;
(h) the termination, revocation or curtailment by any of the
Subsidiaries of the Guaranty Agreement (or any provision contained
therein);
(i) any of the Security Documents shall, at any time after their
execution and delivery for any reason, cease: (i) to create a valid and
perfected first priority security interest in and to all of the collateral
pledged or granted thereunder; or (ii) to be in full force and effect or be
declared null and void;
(j) a material portion of the property of the Borrower or any of its
Subsidiaries is damaged by fire or other casualty, or otherwise lost or
stolen, the restoration or replacement cost of which property exceeds, in
the aggregate, the amount of insurance proceeds readily available for such
restoration or replacement, and such loss would have a material adverse
effect upon the Borrower and its Subsidiaries;
(k) the loss, suspension or revocation of any material governmental
license required or necessary in connection with the operation of the
business of the Borrower or any of its Subsidiaries;
(l) a judgment or judgments for the payment of money in excess of the
sum of $50,000 in the aggregate (not covered by insurance) shall be
rendered against the Borrower or any Subsidiary and such judgment or
37
judgments shall remain unsatisfied and in effect for any period of sixty
(60) days without a stay of execution;
(m) there shall occur any material adverse change in the (i)
consolidated financial condition of the Borrower; or (ii) the financial
condition of any Subsidiary; or
(n) Any default shall exist and remains unwaived or uncured with
respect to any of the Canadian Debt or the UK Debt if, as a result of such
default, any holder of all or any portion of the Canadian Debt or the UK
Debt, is entitled to cause all or any portion of the Canadian Debt or the
UK Debt to become due prior to its stated date of maturity;
then and in every such event, while such event shall be continuing, the Bank may
(i) terminate the Credit with respect to further advances, whereupon no advances
may be made or L/Cs issued hereunder, and/or (ii) declare the Note to be
forthwith due and payable, whereupon the Notes shall forthwith become due and
payable without presentment, demand, protest or further notice of any kind, all
of which are expressly waived by the Borrower, and the right to borrow or
request the issuance of L/Cs hereunder shall terminate.
ARTICLE VII. MISCELLANEOUS
Section 7.01. Term of Agreement. This Agreement shall terminate whenever
both of the following conditions shall have been met: (i) all principal of and
interest on the Notes and all other amounts due and payable under this Agreement
have been paid and discharged in full and (ii) the Borrower shall have no
further right to borrow under this Agreement.
Section 7.02. Notices. Except as otherwise specifically provided in this
Agreement, all notices and other communications hereunder shall be in writing
and shall be delivered in person, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or
telexed, telegraphed, telecopied or telefaxed to the parties hereto addressed as
follows:
To the Bank: State Street Bank and Trust Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: Peabody & ▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
To the Borrower: Applied Cellular Technology, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
38
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President, ACT Financial Corporation
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇ ▇▇▇▇ LLP
One Metropolitan Square
▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ Sale, Esq.
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (a) if delivered by hand or overnight courier, or
sent by telegraph, telecopy, facsimile or telex, at the time of the receipt
thereof or the sending of such telegraph, telecopy, facsimile or telex, if
during normal business hours on a Business Day, and (b) if sent by registered or
certified first-class mail, postage prepaid, on the third Business Day following
the mailing thereof.
Section 7.03. No Waiver. No failure to exercise, and no delay in
exercising, on the part of the Bank, any right, power or privilege hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law.
Section 7.04. Construction. This Agreement and the Note shall each be
deemed to be a contract made under the laws of The Commonwealth of
Massachusetts, and shall be construed in accordance with the laws of The
Commonwealth of Massachusetts (excluding conflicts of law provisions). The
descriptive headings of the several Sections hereof are for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof. This Agreement, together with the Exhibits, Schedules hereto and all
documents, certificates instruments and agreements executed pursuant hereto,
constitutes the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof, supersedes all prior agreements,
understandings or representations pertaining to the subject matter hereof,
whether oral or written, and may not be contradicted by evidence of any alleged
oral agreement.
Section 7.05. Amendments, Waivers and Consents; No Assignment. Compliance
by the Borrower with any term, covenant or condition of this Agreement may be
omitted or waived (either generally or in a particular instance and either
retroactively or prospectively) only by a consent or consents in writing signed
by the Bank.
This Agreement shall be binding upon and inure to the benefit of the
Borrower and the Bank and their respective successors and permitted assigns. The
Bank may sell, assign or otherwise transfer all or any portion of its right,
39
title and interest in, and its obligations under, this Agreement and the Credit,
or grant participation interests in its right, title and interest herein and
therein. The Borrower may not assign or transfer its rights or obligations
hereunder.
Section 7.06. Closing. The closing of the Credit shall take place at 9:00
a.m. on the date hereof (the "Closing Date"), at the offices of Peabody & ▇▇▇▇▇▇
LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such place as the parties
hereto may agree.
Section 7.07. Consent to Jurisdiction. The Borrower and any Guarantor of
the Borrower's obligations under this Agreement irrevocably consents and submits
to the non-exclusive jurisdiction of the Superior Court in The Commonwealth of
Massachusetts and the United States District Court for the Eastern District of
Massachusetts in connection with any action, proceeding or claim arising out of
or relating to this Agreement or other document executed in connection with this
Agreement. In any such litigation, the Borrower and all guarantors waive
personal service and agree that service may be made by certified mail directed,
in the case of the Borrower, to the location specified for notices under this
Agreement and, in the case of any guarantor, to its last known address.
Section 7.08. Waiver of Jury Trial. THE BORROWER AND THE BANK HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY OF THE CREDIT DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
Section 7.09 Indemnity. The Borrower hereby indemnifies and agrees to hold
harmless the Bank (exclusive of the Bank's cost of funds and allocation of
overhead and salaries), any other financing institutions that participate in the
Credit, and each of their directors, officers, agents, employees and counsel,
from and against any and all losses, claims, damages, liabilities or expenses
imposed on or incurred by any of them in connection with the lending
relationship reflected in this Agreement except as a result of any indemnified
party's gross negligence or willful misconduct. This indemnity shall survive
termination of the Agreement.
Section 7.10. Setoff. Any sums due from the Bank to the Borrower and any
property of the Borrower in the possession of the Bank may be held and treated
as collateral security for the payment of the obligations of the Borrower to the
Bank and upon the occurrence of any Event of Default and while such Event of
Default is continuing, may be applied to the payment of such obligations
regardless of the adequacy of other collateral. Any sums due from any financing
institution that may participate in the Credit or property of the Borrower in
the possession of such institution may be held as collateral security for the
payment of the obligations of the Borrower to the Bank as if such institution
had extended the Credit directly to the Borrower and, upon the occurrence of an
Event of Default and while such Event of Default is continuing, may be applied
to the payment of such obligations regardless of the adequacy of other
collateral.
Section 7.11. Reliance on Representations and Actions of the Borrower. The
Borrower hereby agrees that the Bank may rely upon any representation, warranty,
40
certificate, notice, document or telephone request which purports to be executed
or made or which the Bank in good faith believes to have been executed or made
by the Borrower or any of its executive officers, and the Borrower hereby
further agrees to indemnify and hold harmless the Bank for any action, including
the making of Revolving Credit Advances hereunder, and any loss or expense taken
or incurred by the Bank as a result of its good faith reliance upon any such
representation, warranty, certificate, notice, document or telephone request.
Section 7.12. Participation. The Bank may grant participation in the Credit
to other financial institutions. The Borrower invites any financial institution
which may consider investing or participating in the Credit (each such financing
institution being referred to in this Section as a "Participant") to rely upon
all of the representations, warranties, covenants and other provisions of this
Agreement, the Note and the other Credit Document and agreements, instruments
and documents referred to herein or contemplated hereby in making such
investment or participation and agrees that its becoming a Participant in the
Credit shall constitute an acceptance of such offer and shall make the
Participant a creditor of the Borrower. Any Participant may exercise the rights
of set-off given to the Bank in this Agreement with respect to any outstanding
Indebtedness of the Borrower to such Participant hereunder.
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41
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
WITNESS: APPLIED CELLULAR TECHNOLOGY, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------- By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
WITNESS: STATE STREET BANK AND TRUST COMPANY
/s/ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------- By: /s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ------------------------------------
R. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President