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EXHIBIT 10.1
CREDIT AGREEMENT
dated as of July 13, 2001
by and between
Steel City Products, Inc.
and
National City Bank of Pennsylvania
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TABLE OF CONTENTS
Section Title Page
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Article I Definitions; Construction...................................................... 1
Article II The Credits.................................................................... 1
2.01 Revolving Credit Loans......................................................... 1
2.02 Revolving Credit Fees.......................................................... 2
2.03 Making of Revolving Credit Loans............................................... 2
2.04 Interest Rates................................................................. 3
2.05 Prepayments.................................................................... 3
2.06 Interest Payment Dates......................................................... 4
2.07 Payments Generally; Interest on Overdue Amounts................................ 4
2.08 Additional Compensation in Certain Circumstances............................... 4
2.09 Borrowing Base................................................................. 6
Article III Representations and Warranties................................................. 9
3.01 Organizational Status.......................................................... 9
3.02 Power and Authorization........................................................ 9
3.03 Execution and Binding Effect................................................... 9
3.04 Governmental Approvals and Filings.............................................10
3.05 Absence of Conflicts...........................................................10
3.06 Audited Financial Statements...................................................10
3.07 Interim Financial Statements...................................................11
3.08 Absence of Undisclosed Liabilities.............................................11
3.09 Absence of Material Adverse Changes............................................11
3.10 Accurate and Complete Disclosure...............................................11
3.11 Margin Regulations.............................................................11
3.12 Partnerships, Etc..............................................................11
3.13 Ownership and Control..........................................................11
3.14 Litigation.....................................................................12
3.15 Absence of Events of Default...................................................12
3.16 Absence of Other Conflicts.....................................................12
3.17 Insurance......................................................................12
3.18 Intellectual Property..........................................................12
3.19 Taxes..........................................................................12
3.20 Employment Benefits............................................................13
3.21 Environmental Matters..........................................................13
3.22 Title to Property..............................................................13
Article IV Conditions of Lending..........................................................13
4.01 Conditions to Initial Loans....................................................13
4.02 Conditions to All Loans........................................................16
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Section Title Page
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Article V Affirmative Covenants..........................................................17
5.01 Basic Reporting Requirements...................................................17
5.02 Insurance......................................................................19
5.03 Payment of Taxes and Other Potential
Charges and Priority Claims....................................................20
5.04 Preservation of Organizational Status..........................................20
5.05 Governmental Approvals and Filings.............................................20
5.06 Maintenance of Properties......................................................20
5.07 Avoidance of Other Conflicts...................................................20
5.08 Financial Accounting Practices.................................................21
5.09 Use of Proceeds................................................................21
5.10 Continuation of or Change in Business..........................................21
5.11 Notice of Certain Changes......................................................21
Article VI Negative Covenants.............................................................21
6.01 Financial Covenants............................................................21
6.02 Liens..........................................................................21
6.03 Indebtedness...................................................................22
6.04 Guaranties, Indemnities, Etc...................................................22
6.05 Loans and Investments..........................................................22
6.06 Capital Expenditures...........................................................22
6.07 Merger, Acquisitions, Etc......................................................22
6.08 Dispositions of Properties.....................................................23
6.09 Dealings with Affiliates.......................................................23
6.10 Leases.........................................................................23
6.11 Distributions..................................................................23
6.12 Limitation on Other Restrictions on Liens......................................23
6.13 Limitation on Other Restrictions on
Amendment of the Loan Documents, etc...........................................24
6.14 Limitation on Other Agreements that Conflict
with the Loan Documents........................................................24
Article VII Defaults.......................................................................24
7.01 Events of Default..............................................................24
7.02 Consequences of an Event of Default............................................26
Article VIII Miscellaneous..................................................................27
8.01 Holidays.......................................................................27
8.02 Records........................................................................27
8.03 Amendments and Waivers.........................................................27
8.04 No Implied Waiver; Cumulative Remedies.........................................27
8.05 Notices........................................................................27
8.06 Expenses; Taxes; Indemnity.....................................................27
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Section Title Page
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8.07 Severability...................................................................29
8.08 Prior Understandings...........................................................29
8.09 Duration; Survival.............................................................29
8.10 Counterparts...................................................................29
8.11 Limitation on Payments.........................................................29
8.12 Set-Off........................................................................29
8.13 Successors and Assigns.........................................................30
8.14 Governing Law; Submission to Jurisdiction:
Limitation of Liability.......................................................30
8.15 Waiver of Jury Trial...........................................................31
Annex A Definitions; Construction ....................................................A-1
Exhibits
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Borrower's Security Agreement
Exhibit D Form of Leasehold Mortgage
Exhibit E-1 Form of Memorandum of Lease
Exhibit E Form of Ground Lessor Estoppel
Exhibit F Form of Landlord's Waiver and Consent
Exhibit G Form of Quarterly Compliance Certificate
Schedules
Schedule 3.01 Organizational Status
Schedule 3.04 Governmental Approvals and Filings
Schedule 3.05 Conflicts
Schedule 3.13 Ownership and Control
Schedule 3.14 Litigation
Schedule 3.20 Employee Benefit Plans
Schedule 3.21 Environmental Matters
Schedule 6.02 Liens
Schedule 6.03 Indebtedness
Schedule 6.04 Guaranty Equivalents
Schedule 6.05 Investments
Schedule 6.09 Dealings with Affiliates
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CREDIT AGREEMENT
THIS AGREEMENT, dated as of July 13, 2001, by and between Steel City
Products, Inc., a Delaware corporation (the "Borrower"), and National City Bank
of
Pennsylvania, a national banking association (the "Bank").
RECITALS:
WHEREAS, the Borrower has requested that the Bank make available to it
certain funds to be used for general working capital purposes and to replace an
existing credit facility with Finova Capital Corporation; and
WHEREAS, upon all of the terms and conditions herein set forth, the
Bank has agreed to make available to the Borrower a revolving credit facility to
be used by the Borrower for the purposes set forth above.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. In addition to other words and terms defined
elsewhere in this Agreement, as used in this Agreement the words and terms
defined in Annex A hereto have the meanings given them in such Annex A, and this
Agreement shall be construed in accordance with the provisions of Annex A.
ARTICLE II
THE CREDITS
2.01. Revolving Credit Loans
(a) Revolving Credit Commitment. Subject to the terms and conditions
and relying upon the representations and warranties herein set forth, the Bank
agrees (such agreement being herein called the Bank's "Revolving Credit
Commitment") to make loans (the "Revolving Credit Loans") to the Borrower at any
time or from time to time on or after the date hereof and to but not including
the Revolving Credit Maturity Date. The Bank shall have no obligation to make
any Revolving Credit Loan to the extent that the aggregate principal amount of
the Revolving Credit Loans outstanding at any time would exceed the lesser of
(i) the Revolving Credit Committed Amount or (ii) the Borrowing Base. The Bank's
"Revolving Credit Committed Amount" shall be equal to Five Million and 00/100
Dollars ($5,000,000.00).
(b) Nature of Credit. Within the limits of time and amount set forth in
this Section 2.01, and subject to the provisions of this Agreement, the Borrower
may borrow, repay and reborrow Revolving Credit Loans hereunder.
(c) Revolving Credit Note. The obligations of the Borrower to repay the
unpaid principal amount of the Revolving Credit Loans made to it by the Bank and
to pay interest thereon shall be evidenced in part by a promissory note of the
Borrower to the Bank dated the Closing Date (the "Revolving Credit Note") in
substantially the form attached hereto as Exhibit A, with the blanks
appropriately filled, payable to the order of the Bank in a face amount equal to
the Revolving Credit Committed Amount.
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(d) Maturity. To the extent not due and payable earlier, the entire
principal balance of all outstanding Revolving Credit Loans, together with all
unpaid accrued interest thereon and all other sums and costs owed to the Bank by
the Borrower pursuant to this Agreement, shall be immediately due and payable on
the Revolving Credit Maturity Date, without notice, presentment or demand of any
kind.
2.02. Revolving Credit Fees
(a) Revolving Credit Commitment Fee. The Borrower shall pay to the Bank
a commitment fee (the "Revolving Credit Commitment Fee") for each day from and
including the date hereof to but not including the Revolving Credit Maturity
Date, on the amount (not less than zero) of (i) the Revolving Credit Committed
Amount on such day, minus (ii) the aggregate principal amount of the Revolving
Credit Loans outstanding on such day equal to 25 basis points per annum (based
on a year of 360 days and actual days elapsed). Such Revolving Credit Commitment
Fee shall be due and payable for the preceding period for which such fee has not
been paid at the end of each Fiscal Quarter.
(b) Collateral Monitoring Fee. The Borrower shall pay to the Bank a
monthly fee in the amount of One Thousand and 00/100 Dollars ($1,000.00) (the
"Collateral Monitoring Fee") in respect of the Bank's monitoring of the
Collateral pursuant to this Agreement and the other Loan Documents.
(c) Closing Fee. The Borrower shall pay to the Bank on the Closing Date
a fee equal to one percent (1%) of the Revolving Credit Committed Amount (the
"Closing Fee").
2.03. Making of Revolving Credit Loans.
(a) Cash Collateral Account. The Bank shall maintain in its own name at
its Office a deposit account (the "Cash Collateral Account") over which the Bank
shall have sole dominion and control, and the Borrower shall have no right to
withdraw any funds deposited therein. The Bank shall each Business Day deposit
into the Cash Collateral Account receipts on accounts receivable, credits and
all other operating receipts, if any, collected by the Bank on such Day (the
"Lockbox Receipts Deposit"), pursuant to that certain Lockbox Agreement dated
___________ by and between the Borrower and the Bank.
On the Business Day following each Lockbox Receipts Deposit, the Bank shall make
an amount equal to such Deposit available to the Borrower for withdrawal as
Revolving Credit Loans, in accordance with subsection (b) below.
(b) Loan Request. Whenever the Borrower desires that the Bank make a
Revolving Credit Loan, the Borrower shall provide Standard Notice to the Bank
setting forth the following information:
(i) The date, which shall be a Business Day, on which such
proposed Loan is to be made;
(ii) The aggregate principal amount of such proposed Loan,
which shall be an integral multiple of $10,000 not less than $10,000;
and
(iii) A Borrowing Base Certificate.
Standard Notice having been so provided and unless any applicable condition
specified in Article IV hereof has not been satisfied, on the same day as such
Standard Notice (unless otherwise specified by the Borrower pursuant to
subsection (a) hereof) the Bank shall make the proceeds of such Loan available
to the Borrower at the Bank's Office as soon as reasonably practicable in
immediately available funds. Notwithstanding the
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foregoing, the Bank shall have no obligation to make available to the Borrower
any funds in excess of the amount set forth in Section 2.01(a) hereof.
(c) Additional Loan Amounts. In addition to Revolving Credit Loans made
pursuant to subsection (b) above, the Bank may elect in its sole discretion to
make Revolving Credit Loans to the Borrower, which Loans shall be subject to the
repayment and other obligations hereof.
2.04. Interest Rate.
(a) Interest Rate. Subject to the terms and conditions of this
Agreement, the aggregate outstanding principal balance of the Revolving Credit
Loans shall bear interest for each day at a rate per annum equal to the Prime
Rate plus one percent (1.0%) (the "Interest Rate").
(b) Calculation of Interest and Fees; Adjustment to Prime Rate.
Interest on the Revolving Credit Loans, unpaid fees and other sums payable
hereunder shall be computed on the basis of a year of three hundred sixty (360)
days and paid for the actual number of days elapsed. In the event of any change
in the Prime Rate, the rate of interest applicable to each Revolving Credit Loan
shall be adjusted to immediately correspond with such change.
2.05. Prepayments.
(a) Generally. Except as provided in subsection (d) below, whenever the
Borrower desires or is required to prepay any part of the Revolving Credit
Loans, the Borrower shall provide Standard Notice to the Bank setting forth the
following information:
(i) The date, which shall be a Business Day, on which the
proposed prepayment is to be made; and
(ii) The total principal amount of such prepayment.
Standard Notice having been so provided, on the date specified in such Standard
Notice, the principal amount specified in such notice, together with interest on
each such principal amount to such date, shall be due and payable.
(b) Optional Prepayments. The Borrower shall have the right at its
option from time to time to prepay the Revolving Credit Loans in whole or part
at any time without premium or penalty. Any such prepayment shall be made in
accordance with Section 2.05(a) hereof.
(c) Mandatory Prepayments. If on any date any Borrowing Base
Certificate is required to be furnished pursuant to Section 2.09(f) hereof the
aggregate principal amount of the Revolving Credit Loans outstanding on such
date exceeds the Borrowing Base, the Borrower shall immediately prepay after
delivery of such Borrowing Base Certificate a principal amount of Revolving
Credit Loans in an aggregate amount not less than the amount of such excess.
(d) Automatic Credits; Application of Funds. On the Business Day
following each Lockbox Receipts Deposit, the Bank shall apply an amount equal to
such Deposit (i) on account of the Revolving Credit Loans then outstanding, and
(ii) if no Revolving Credit Loans are then outstanding or if the balance of the
Cash Collateral Account exceeds the outstanding Revolving Credit Loans, the
excess shall be applied on account of the other Obligations secured hereby. If
all Obligations (other than Obligations constituting contingent obligations
under indemnification provisions which survive indefinitely, so long as no
unsatisfied
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claims has been made under any such indemnification provision) have been
indefeasibly paid in full in cash and the Revolving Credit Commitment has
terminated, the Bank shall release to the Borrower all remaining funds in the
Cash Collateral Account.
(e) Loan Account. The Bank will open and maintain on its books and
records, including computer records, in accordance with its customary
procedures, a loan account (the "Loan Account") for the Borrower in which shall
be recorded the date and amount of each Revolving Credit Loan made by the Bank
and the date and amount of each payment and prepayment in respect thereof;
provided, however, that any failure by the Bank to record any such information
shall not adversely affect the Bank. The Bank shall record in the Loan Account
the principal amount of the Revolving Credit Loans owing to the Bank from time
to time. The Loan Account will be presumptive evidence as to the information
contained therein. Any failure by the Bank to make any such notation or record
shall not affect the obligations of the Borrower to the Bank with respect to the
Revolving Credit Loans.
2.06. Interest Payment Dates. Interest on the aggregate outstanding
balance of the Revolving Credit Loans shall be due and payable on the last day
of each month. After maturity of any part of the Revolving Credit Loans (whether
upon the occurrence of an Event of Default, by acceleration or otherwise),
interest on such part of the Revolving Credit Loans shall be immediately due and
payable.
2.07. Payments Generally; Interest on Overdue Amounts.
(a) Payments Generally. All payments and prepayments to be made by the
Borrower in respect of principal, interest, fees, indemnity, expenses or other
amounts due from it hereunder or under any Loan Document shall be payable to the
Bank at its Office in immediately available funds in Dollars at or before 12:00
o'clock noon, Pittsburgh, PA time, on the day when due without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived,
and an action therefor shall immediately accrue, without setoff, counterclaim,
withholding or other deduction of any kind or nature.
(b) Interest on Overdue Amounts. To the extent permitted by law, on and
after 10 days after there shall have become due (whether upon the occurrence of
an Event of Default, by acceleration or otherwise) principal and interest from
the Borrower hereunder or under any other Loan Document, such amounts, together
with any fees or any other sums payable hereunder, shall bear interest for each
day until paid (before and after judgment) at a rate per annum which for each
day shall be equal to the greater of $20.00 or 5% above the rate applicable to
such amounts (the "Default Rate"). To the extent permitted by law, interest
accrued on any amount which has become due hereunder or under any Loan Document
shall compound on a day-by-day basis, and hence shall be added daily to the
overdue amount to which such interest relates.
2.08. Additional Compensation in Certain Circumstances.
(a) Yield Protection. If any Law (including, without limitation,
Regulation D), or if any change therein on or after the date hereof, or in the
interpretation thereof by any Governmental Authority charged with the
administration thereof, shall:
(i) subject the Bank to any tax, levy, impost, charge, fee,
duty, deduction or withholding of any kind with respect to payments of
principal or interest or other amounts due hereunder (other than any
tax imposed or based upon the income of the Bank and payable to any
Governmental Authority in the United States of America or any state
thereof); or
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(ii) change the basis of taxation of the Bank with respect to
payments of principal or interest or other amounts due hereunder (other
than any change which affects, and only to the extent that if affects,
the taxation by the United States or any state thereof of the total net
income of the Bank); or
(iii) impose, modify or deem applicable any reserve, special
deposit or similar requirements against assets held by the Bank
applicable to the Revolving Credit Commitment or Revolving Credit Loans
made hereunder (other than such requirements which are included in the
determination of the applicable rate of interest hereunder); or
(iv) impose upon the Bank any other obligation or condition
with respect to this Agreement,
and the result of any of the foregoing is to increase the cost to the
Bank, reduce the income receivable by the Bank, reduce the rate of
return on the Bank's capital, or impose any expenses upon the Bank, all
with respect to any of the Revolving Credit Loans (or any portion
thereof) by an amount which the Bank reasonably deems material, and if
the Bank is then demanding similar compensation for such occurrences
from other borrowers who are similarly situated and who have a similar
relationship with the Bank and from which the Bank has the right to
demand such compensation then and in any such case:
(A) the Bank shall promptly notify the Borrower of the
happening of such event;
(B) the Borrower shall pay to the Bank, on demand, such amount
as will compensate the Bank for such reduction in its rate of
return; and
(C) the Borrower may pay the affected portion of the Revolving
Credit Loans in full without the payment of any additional
amount, including prepayment premiums or penalties, other than
amounts payable on account of the Bank's out-of-pocket losses
which are not otherwise provided for in subparagraph (B)
immediately above.
A certificate as to the increased cost or reduced amount as a result of any
event mentioned in this Section 2.08(a)(i) shall be promptly submitted by the
Bank to the Borrower in accordance with the provisions hereof. Such certificate
shall be prima facie evidence as to the amount of such increased cost or reduced
amount.
(b) Capital Adequacy. If, after the date hereof, (i) any adoption of or
any change in or in the interpretation of any Law by the applicable Governmental
Authority, or (ii) compliance with any Law of any Governmental Authority
exercising control over banks or financial institutions generally or any court
of competent jurisdiction, requires that the Revolving Credit Commitment or the
Revolving Credit Loans (including, without limitation, obligations in respect of
any Revolving Credit Loans) hereunder be treated as an asset or otherwise be
included for purposes of calculating the appropriate amount of capital to be
maintained by the Bank or any corporation controlling the Bank (a "Capital
Adequacy Event"), the result of which is to reduce the rate of return on the
Bank's capital as a consequence of the Revolving Credit Commitment or the
Revolving Credit Loans to a level below that which the Bank could have achieved
but for such Capital Adequacy Event, taking into consideration the Bank's
policies with respect to capital adequacy, by an amount which the Bank
reasonably deems to be material, the Bank shall promptly deliver to the Borrower
a statement of the amount necessary to compensate the Bank or the reduction in
the rate of return on its capital attributable to the Revolving Credit
Commitment or the Revolving Credit Loans (the "Capital Compensation Amount").
The Bank shall determine the Capital Compensation Amount in good faith, using
reasonable attribution and averaging methods. The Bank shall from time to time
notify the
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Borrower of the amount so determined. Each such notification shall be prima
facie evidence of the amount of the Capital Compensation Amount set forth
therein, and such Capital Compensation Amount shall be due and payable by the
Borrower to the Bank thirty (30) days after such notice is given. As soon as
practicable after any Capital Adequacy Event, the Bank shall submit to the
Borrower estimates of the Capital Compensation Amounts that would be payable as
a function of the Revolving Credit Commitment or the Revolving Credit Loans
hereunder. Notwithstanding the foregoing, however, Bank shall not demand Capital
Compensation Amounts hereunder unless it is demanding similar compensation from
other borrowers who are similarly situated.
2.09 Borrowing Base.
(a) Borrowing Base. The "Borrowing Base" at any time shall mean the
sum, at the date of the most recent Borrowing Base Certificate required to be
furnished pursuant to Section 2.09(f) hereof, of
(i) 75% of the Net Value of Eligible Receivables; provided,
however, that at no time shall the Net Value of Eligible Receivables
due and owing from either of Giant Eagle Stores or Krogers Stores
exceed 30% of the total Net Value of Eligible Receivables of the
Borrower; and provided further that at no time shall the Net Value of
Eligible Receivables due and owing from ▇▇▇▇ Department Stores exceed
the lesser of (A) 20% of the total Net Value of Eligible Receivables of
the Borrower or (B) $600,000.00; and provided further that at no time
shall the Net Value of Eligible Receivables due and owing from any
other obligor exceed 20% of the total Net Value of Eligible Receivables
of the Borrower;
Notwithstanding the foregoing, at no time shall the
Net Value of Eligible Receivables due and owing from ▇▇▇▇ Department
Stores exceed (A) for the Borrowing Base calculated for the month of
July, 2001, $1,000,000.00, (B) for the Borrowing Base calculated for
the month of August, 2001, $900,000.00, and (C) for the Borrowing Base
calculated for the month of September, 2001, the lesser of (I) 23% of
the total Net Value of Eligible Receivables of the Borrower or (II)
$700,000.00; plus
(ii) 45% of the Net Value of Eligible Inventory; provided,
however, that the portion of the Borrowing Base attributable to
Eligible Inventory shall at no time exceed 50% of the Borrowing Base.
(b) Eligible Receivables. "Eligible Receivable" at any time shall mean
all rights to payments due and to become due to the Borrower which meet
each of the following requirements at such time:
(i) The Borrower has good title to such Eligible Receivable,
free and clear of any Lien, except for the Liens in favor of the Bank
securing the Obligations, and such Eligible Receivable is subject to
such a valid and perfected Lien in favor of the Bank.
(ii) Such Eligible Receivable constitutes an "account" as
defined in the Uniform Commercial Code as in effect in the Commonwealth
of
Pennsylvania (and, accordingly, without limitation, is not evidenced
by any promissory note or other instrument).
(iii) Such Eligible Receivable arises from the sale of goods
or rendering of services performed by the Borrower in the ordinary
course of its business. Such transaction was effected pursuant to the
Borrower's ordinary and customary policies, practices and procedures,
including but not limited to credit policies.
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(iv) Such Eligible Receivable is good and collectible, is not
disputed, and represents an unconditional payment obligation in favor
of the Borrower. All services rendered and merchandise sold in
connection with such Eligible Receivable has been finally delivered to
and accepted by the obligor on such Eligible Receivable without return,
rejection, repossession, dispute, offset, defense or counterclaim
(including but not limited to any claim for credits, allowances or
adjustments). No contra account or other obligation, contingent or
otherwise, exists from the Borrower to such obligor.
(v) Such Eligible Receivable has been fully invoiced by the
Borrower, is an unconditional payment obligation of the obligor
thereon, is payable by its terms in full in Dollars on ordinary trade
terms, and in any event is payable no later than 90 days after its
original invoice date. The due date of such Eligible Receivable has not
been extended.
(vi) Such invoice is not more than 90 days past the invoice
date; provided, however, that with respect to Eligible Receivables
reflected on the Borrowing Base Certificates during the months of June
and July 2001, such invoices due and owing from any of Giant Eagle
Stores, Kroger Stores or ▇▇▇▇ Department Stores shall be not more than
120 days past the invoice date. Except as provided herein, there are no
past due invoices from the obligor on such invoice to the Borrower or
any of its Subsidiaries.
(vii) The obligor on such Eligible Receivable (A) is a Person
whose principal office is located in the United States or Canada
(unless such receivable is backed by a guaranty by EXIM Bank, credit
insurance satisfactory to the Bank or a letter of credit in form and
substance and from a provider satisfactory to the Bank), (B) is not the
Borrower, any Subsidiary of the Borrower or an Affiliate of the
Borrower, (C) is not the United States of America, any State,
municipality or Governmental Authority and (D) is not insolvent,
subject to any bankruptcy, insolvency or similar proceeding or unable
to pay its debts as they become due.
(viii) Such Eligible Receivable shall not have arisen out of a
contract or agreement which by its terms purports to forbid or make
void or unenforceable any assignment thereof or Lien thereon.
The "Net Value" of an Eligible Receivable shall be its face amount, net of any
discount for prompt payment (and net of any other amount representing payment of
finance charges, late charges, or interest (however denominated)), and net of
any portion thereof which constitutes payment of sales, use or other taxes.
(c) Exclusion of Eligible Receivables.
(i) The Bank from time to time may exclude any otherwise
Eligible Receivables from the class of Eligible Receivables based on
determinations (in the Bank's discretion) as to the creditworthiness of
the obligor, or as to the aggregate amount of receivables owing by such
obligor and its affiliates. The Bank shall give notice to the Borrower
of the terms of any such exclusion. Except as otherwise expressly
stated in such notice, all such exclusions shall be continuing and
cumulative, and an exclusion as to any obligor shall apply in the
aggregate to all receivables of such obligor and its Affiliates.
(ii) If 50% or more of otherwise Eligible Receivables due and
owing from any obligor are more than 90 days past-the invoice date, the
aggregate amount of receivables of such obligor and its Affiliates
shall be excluded until such time as 50% or more of such Receivables
are no longer more than 90 days past the invoice date.
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(iii) The Borrower shall, not later than one Business Day
after the Bank effects any such exclusion, deliver to the Bank a
revised Borrowing Base Certificate reflecting the Borrowing Base as
redetermined in accordance with such exclusion. The making of a
Revolving Credit Loan in reliance on a Borrowing Base Certificate shall
not affect the Bank's right later to exclude any receivables in
accordance with this Section 2.09(c). No Eligible Receivable excluded
under this Section 2.09(c) shall be included by the Borrower in any
later Borrowing Base Certificate without prior written permission by
the Bank.
(d) Eligible Inventory. "Eligible Inventory" shall mean at any time
finished goods owned by the Borrower and held for sale by the Borrower in the
ordinary course of its business which meet each of the following requirements at
such time:
(i) The Borrower has good title to such Eligible Inventory,
free and clear of any Lien, except for the Liens in favor of the Bank
securing the Obligations, and such Eligible Inventory and proceeds
thereof is subject to such a valid and perfected Lien in favor of the
Bank.
(ii) Such Eligible Inventory is in good and merchantable
condition, is readily saleable by the Borrower in the ordinary course
of its business and has been held by the Borrower for sale for no more
than 12 months.
(iii) Such Eligible Inventory is located in the United States,
is in the possession of the Borrower and shall not include any imported
inventory for which the Borrower has previously paid but which is not
in the possession of the Borrower.
(iv) Such Eligible Inventory is not stored with a bailee,
warehouseman, consignee or similar party.
(v) Such Eligible Inventory is not packaging materials or
supplies, unless such materials or supplies have already been
incorporated into the finished goods.
(vi) Such Eligible Inventory meets all applicable standards
imposed by any Governmental Authority having jurisdiction over the
Inventory.
(vii) None of such Eligible Inventory, the manufacturing of
which is subject to such laws, has been manufactured in violation of
any Federal minimum wage or overtime laws, including without limitation
the Fair Labor Standards Act, 29 U.S.C. Section 215(a)(1) or any
similar or successor legislation.
(viii) No covenant, representation or warranty contained in
this Agreement or any of the other Loan Documents with respect to such
Eligible Inventory has been breached.
(ix) Such Eligible Inventory is not, and should not be,
disqualified for any other reason generally accepted in the commercial
finance business.
(x) Such Eligible Inventory is not defective, obsolete or
changeover inventory and is not offered for sale by the Borrower as
purchase or seasonal show discounted inventory.
The "Net Value" of Eligible Inventory shall be the Borrower's book value at
lower of cost or market, net of all reserves required by GAAP, with "cost"
calculated on a first-in, first-out basis, all determined in accordance with
GAAP.
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(e) Borrowing Base Certificates. On the Closing Date and from time to
time thereafter as specified herein the Borrower shall furnish to the Bank a
certificate ("Borrowing Base Certificate") substantially in the form of Exhibit
B hereto, appropriately completed, signed by a Responsible Officer of the
Borrower and setting forth the Borrowing Base and the other information required
therein. Each Borrowing Base Certificate shall be accompanied by copies of the
Borrower's sales journals, cash receipts journals and credit adjustment journal
entries, each for the time period corresponding to that of the Borrowing Base
Certificate. Borrowing Base Certificates shall be delivered to the Bank:
(i) pursuant to Section 2.03(b) hereof, on the date of each
request for Revolving Credit Loans hereunder;
(ii) on the first Business Day of each week hereafter;
(iii) as required by Section 2.09(c) and Section 5.01(b)
hereof; and
(iv) not later than two Business Days after request therefor
by the Bank from time to time.
To the extent the Borrower is required to deliver a Borrowing Base Certificate
on a particular day, the Eligible Receivables, Eligible Inventory reflected on
such Borrowing Base Certificate, the Net Values applicable thereto, and the
calculation of the Borrowing Base thereunder, shall be determined as of a day
(which shall be specified in the Borrowing Base Certificate) not earlier than
the Business Day before the day the Borrower are required to deliver such
Borrowing Base Certificate. The Borrowing Base set forth in any such Borrowing
Base Certificate shall be effective until delivery of a subsequent Borrowing
Base Certificate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Bank as follows:
3.01. Organizational Status. The Borrower is duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Borrower has all requisite power and authority to own its property and to
transact the business in which it is engaged or presently proposes to engage.
The Borrower is duly qualified to do business and is in good standing in all
jurisdictions in which the ownership of its properties or the nature of its
activities or both makes such qualification necessary or advisable.
3.02. Power and Authorization. The Borrower has all requisite power and
authority to execute, deliver, perform, and take all actions contemplated by,
each Loan Document to which it is a party, and all such action has been duly and
validly authorized by all necessary proceedings on its part. Without limitation
of the foregoing, the Borrower has the power and authority to borrow pursuant to
the Loan Documents to the fullest extent permitted hereby and thereby from time
to time, and has taken all necessary action to authorize such borrowings.
3.03. Execution and Binding Effect. This Agreement and each other Loan
Document to which it is a party and which is required to be delivered on or
before the Closing Date pursuant to Section 4.01 hereof has been duly and
validly executed and delivered by the Borrower. This Agreement and each such
other Loan Document constitutes, and each other Loan Document when executed and
delivered by the Borrower will constitute, the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws of general application affecting the
enforcement of creditors' rights or by general principles of equity limiting the
availability of equitable remedies.
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3.04. Governmental Approvals and Filings. No approval, order, consent,
authorization, certificate, license, permit or validation of, or exemption or
other action by, or filing, recording or registration with, or notice to, any
Governmental Authority (collectively, "Governmental Action") is or will be
necessary or advisable in connection with execution and delivery of any Loan
Document by the Borrower, consummation by the Borrower of the transactions
herein or therein contemplated, performance of or compliance with the terms and
conditions hereof or thereof by the Borrower or to ensure the legality,
validity, binding effect, enforceability or admissibility in evidence hereof or
thereof, except for (x) filings and recordings in respect of the Liens in favor
of the Bank securing the Obligations, and (y) matters set forth in Schedule 3.04
hereof. With respect to the each of the matters set forth in such Schedule 3.04
the Bank has received a true, correct and complete copy of (a) such Governmental
Action (including each amendment, modification or supplement thereto), (b) all
applications therefor and all exhibits thereto, and (c) all written
communications, and any memoranda relating to conversations, between the
Borrower, its officers, employees, accountants, counsel, consultants, lenders or
representatives, on the one hand, and such Governmental Authority, on the other
hand, pertaining thereto.
3.05. Absence of Conflicts. Except as set forth in Schedule 3.05
hereof, neither the execution and delivery of any Loan Document by the Borrower,
nor consummation by the Borrower of the transactions herein or therein
contemplated, nor performance of or compliance with the terms and conditions
hereof or thereof by the Borrower does or will
(a) violate or conflict with any Law, or
(b) violate, conflict with or result in a breach of any term or
condition of, or constitute a default under, or result in (or give rise to any
right, contingent or otherwise, of any Person to cause) any termination,
cancellation, prepayment or acceleration of performance of, or result in the
creation or imposition of (or give rise to any obligation, contingent or
otherwise, to create or impose) any Lien upon any of property of the Borrower
(except for any Lien in favor of the Bank securing the Obligations) pursuant to,
or otherwise result in (or give rise to any right, contingent or otherwise, of
any Person to cause) any change in any right, power, privilege, duty or
obligation of the Borrower under or in connection with,
(i) the Certificate of Incorporation or bylaws of the
Borrower,
(ii) any agreement or instrument creating, evidencing or
securing any Indebtedness or Guaranty Equivalent to which the Borrower
is a party or by which any of it or any of its properties (now owned or
hereafter acquired) may be subject or bound, or
(iii) any other agreement or instrument or arrangement to
which the Borrower is a party or by which it or any of its properties
(now owned or hereafter acquired) may be subject or bound.
3.06. Audited Financial Statements. The Borrower has heretofore
furnished to the Bank an audited consolidated and consolidating balance sheet of
the Borrower and its consolidated Subsidiaries as of February 28, 2001 and the
related consolidated and consolidating statements of income, cash flows and
changes in owners' equity for the fiscal year then ended, as examined and
reported on by independent certified public accountants of recognized national
standing selected by the Borrower and satisfactory to the Bank, who have
delivered an unqualified opinion in respect thereof. Such financial statements
(including the notes thereto) present fairly the financial condition of the
Borrower and its consolidated Subsidiaries as of the end of such fiscal year and
the results of its operations and its cash flows for the fiscal year then ended,
all in conformity with GAAP, consistently applied.
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3.07. Interim Financial Statements. The Borrower has heretofore
furnished to the Bank an interim consolidated and consolidating balance sheet of
the Borrower and its consolidated Subsidiaries, if any, as of the Fiscal Quarter
ending May 31, 2001, together with the related consolidated and consolidating
statements of income, cash flows and changes in owners' equity for such fiscal
period. Such financial statements (including the notes thereto) present fairly
the financial condition of the Borrower and its consolidated Subsidiaries as of
the end of such Fiscal Quarter and the results of its operations and its cash
flows for such fiscal period, all in conformity with GAAP, consistently applied,
subject to normal and recurring year-end audit adjustments.
3.08. Absence of Undisclosed Liabilities. The Borrower does not have
any liability or obligation of any nature whatever (whether absolute, accrued,
contingent or otherwise, whether or not due), forward or long-term commitments
or unrealized or anticipated losses from unfavorable commitments, except (x) as
disclosed in the financial statements referred to in Sections 3.06 hereof, and
(y) liabilities, obligations, commitments and losses incurred after February 28,
2001 in the ordinary course of business and consistent with past practices.
3.09. Absence of Material Adverse Change. Since February 28, 2001,
there has been no material adverse change in the business, operations or
condition (financial or otherwise) or prospects of the Borrower.
3.10. Accurate and Complete Disclosure. All information heretofore,
contemporaneously or hereafter provided (orally or in writing) by or on behalf
of the Borrower to the Bank pursuant to or in connection with any Loan Document
or any transaction contemplated hereby or thereby is or will be (as the case may
be) true and accurate in all material respects on the date as of which such
information is dated (or, if not dated, when received by the Bank) and does not
or will not (as the case may be) omit to state any material fact necessary to
make such information not misleading at such time in light of the circumstances
in which it was provided. The Borrower has disclosed to the Bank in writing
every fact or circumstance which has, or which could have a Material Adverse
Effect.
3.11. Margin Regulations. No part of the proceeds of any Revolving
Credit Loan hereunder will be used for the purpose of buying or carrying any
"margin stock," as such term is used in Regulation U of the Board of Governors
of the Federal Reserve System, as amended from time to time, or to extend credit
to others for the purpose of buying or carrying any "margin stock." The Borrower
is not engaged in the business of extending credit to others for the purpose of
buying or carrying "margin stock". The Borrower does not own any "margin stock."
Neither the making of any Revolving Credit Loan nor any use of proceeds of any
such Loan will violate or conflict with the provisions of Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System, as amended from time
to time.
3.12. Partnerships, etc. The Borrower is not a partner (general or
limited) of any partnership, or a party to any joint venture or owns
(beneficially or of record) any equity or similar interest in any Person
(including but not limited to any interest pursuant to which the Borrower has or
may in any circumstance have an obligation to make capital contributions to, or
be generally liable for or on account of the liabilities, acts or omissions of
such other Person).
3.13. Ownership and Control. Schedule 3.13 hereof states as of the date
hereof the authorized capitalization of the Borrower, the number of shares of
each class of capital stock issued and outstanding of the Borrower and the
number and percentage of outstanding shares of each such class of capital stock
and the names of the record owners of such shares and the direct or indirect
beneficial owners of such shares. The outstanding shares of capital stock of the
Borrower have been duly authorized and validly issued and are fully paid and
nonassessable. There are no options, warrants, calls, subscriptions, conversion
rights, exchange rights, preemptive rights or other rights, agreements or
arrangements (contingent or otherwise)
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which may in any circumstances now or hereafter obligate the Borrower to issue
any shares of its capital stock or any other securities, except for matters set
forth in Schedule 3.13 hereof. Schedule 3.13 hereof describes as of the date
hereof all options, rights, purchase agreements, buy-sell agreements,
restrictions on transfer, pledges, proxies, voting trusts, powers of attorney,
voting agreements and other agreements, instruments or arrangements to which the
Borrower is a party or is subject or bound, or to which any record or beneficial
owner of capital stock of the Borrower is a party or is subject or bound, which
pertain to any shares of capital stock (now or hereafter outstanding) of the
Borrower, including any matter which may affect beneficial or record ownership
thereof or transferability thereof or voting rights with respect thereto.
3.14. Litigation. There is no pending or threatened action, suit,
proceeding or investigation by or before any Governmental Authority against or
affecting the Borrower, except for (x) matters set forth in Schedule 3.14 hereof
and (y) matters described in the financial statements referred to in Section
3.06 hereof.
3.15. Absence of Events of Default. No event has occurred and is
continuing and no condition exists which constitutes an Event of Default or
Potential Default.
3.16. Absence of Other Conflicts. The Borrower is not in violation of
or conflict with, or is subject to any contingent liability on account of any
violation of or conflict with:
(a) any Law,
(b) its Certificate of Incorporation,
(c) its bylaws, or
(d) any agreement or instrument or arrangement to which it is party or
by which it or any of its properties (now owned or hereafter acquired) may be
subject or bound
3.17. Insurance. The Borrower maintains with financially sound and
reputable insurers insurance with respect to its properties and business and
against at least such liabilities, casualties and contingencies and in at least
such types and amounts as is customary in the case of businesses engaged in the
same or a similar business or having similar properties similarly situated.
3.18. Intellectual Property. The Borrower owns, or is licensed or
otherwise has the right to use, all the patents, trademarks, service marks,
names (trade, service, fictitious or otherwise), copyrights, technology
(including but not limited to computer programs and software), processes, data
bases and other rights, free from burdensome restrictions, necessary to own and
operate its properties and to carry on its business as presently conducted and
presently planned to be conducted without conflict with the rights of others.
3.19. Taxes. All tax and information returns required to be filed by or
on behalf of the Borrower have been properly prepared, executed and filed. All
taxes, assessments, fees and other governmental charges upon the Borrower or
upon any of its properties, incomes, sales or franchises which are due and
payable have been paid other than those not yet delinquent and payable without
premium or penalty, and except for those being diligently contested in good
faith by appropriate proceedings, and in each case adequate reserves and
provisions for taxes have been made on the books of the Borrower. The reserves
and provisions for taxes on the books of the Borrower are adequate for all open
years and for its current fiscal period. The Borrower does not know of any
proposed additional assessment or basis for any material assessment for
additional taxes (whether or not reserved against).
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3.20. Employee Benefits. A copy of the most recent Annual Report (5500
Series Form) including all attachments thereto as filed with the Internal
Revenue Service for each Plan has been provided to Bank and fairly presents the
funding status of each Plan. Since the date of such Annual Report, there has
been no material deterioration in any Plan's funding status and no Reportable
Event has occurred. Schedule 3.20 hereof sets forth as of the date hereof a list
of all Plans and Multiemployer Plans, and all information available to the
Borrower with respect to the direct, indirect or potential withdrawal liability
to any Multiemployer Plan of the Borrower or any Controlled Group Member. Except
as set forth in Schedule 3.20 hereof, the Borrower does not have any liability
(contingent or otherwise) for or in connection with, and none of its properties
is subject to a Lien in connection with, any Pension-Related Event. The Borrower
does not have any liability (contingent or otherwise) for or in connection with,
any Postretirement Benefits.
3.21. Environmental Matters. Except as disclosed in Schedule 3.21
hereof, the Borrower and each of its Environmental Affiliates is and has been in
full compliance with all applicable Environmental Laws. There are no
circumstances that may prevent or interfere with such full compliance in the
future. Except as disclosed in Schedule 3.21 hereof, the Borrower and its
Environmental Affiliates have all Environmental Approvals necessary or desirable
for the ownership and operation of their respective properties, facilities and
businesses as presently owned and operated and as presently proposed to be owned
and operated. Except as disclosed in Schedule 3.21 hereof, there is no
Environmental Claim pending or threatened, and there are no past or present
acts, omissions, events or circumstances (including but not limited to any
dumping, leaching, deposition, removal, abandonment, escape, emission, discharge
or release of any Environmental Concern Material at, on or under any facility or
property now or previously owned, operated or leased by the Borrower or any of
its Environmental Affiliates) that could form the basis of any Environmental
Claim, against the Borrower or any of its Environmental Affiliates. Except as
disclosed in Schedule 3.21 hereof, no facility or property now or previously
owned, operated or leased by the Borrower or any of its Environmental Affiliates
is an Environmental Cleanup Site, neither the Borrower nor any of its
Environmental Affiliates has directly transported or directly arranged for the
transportation of any Environmental Concern Materials to any Environmental
Cleanup Site and, no Lien exists, and no condition exists which could result in
the filing of a Lien, against any property of the Borrower or any of its
Environmental Affiliates, under any Environmental Law.
3.22. Title to Property. The Borrower and each Subsidiary of the
Borrower has good and marketable title in fee simple or leasehold to all real
property owned or purported to be owned by it and good title to all other
property of whatever nature owned or purported to be owned by it, including but
not limited to all property reflected in the most recent audited balance sheet
referred to in Section 3.06 hereof or submitted pursuant to Section 5.01(a)
hereof, as the case may be (except as sold or otherwise disposed of in the
ordinary course of business after the date of such balance sheet) free and clear
of all Liens, other than Permitted Liens.
ARTICLE IV
CONDITIONS OF LENDING
4.01. Conditions to Initial Loans. The obligation of the Bank to make
Revolving Credit Loans on the Closing Date is subject to the satisfaction,
immediately prior to or concurrently with the making of such Loans, of the
following conditions precedent, in addition to the conditions precedent set
forth in Section 4.02 hereof:
(a) Agreement; Notes. The Bank shall have received an executed
counterpart of this Agreement, duly executed by the Borrower, and the Revolving
Credit Notes each conforming to the requirements hereof, duly executed on behalf
of the Borrower.
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(b) Security Documents. The Bank shall have received the following,
each of which shall be in form and substance satisfactory to the Bank:
(i) Executed copies of a security agreement, duly executed on
behalf of the Borrower, in substantially the form of Exhibit C hereto
(as amended, modified or supplemented from time to time, the
"Borrower's Security Agreement");
(ii) Evidence of the completion of all recordings and filings
of or with respect to, and of all other actions with respect to, the
above Security Documents as may be necessary or, in the opinion of the
Bank, desirable to create or perfect the Liens created or purported to
be created by such Security Documents as valid, continuing and
perfected Liens in favor of the Bank securing the Obligations, prior to
all other Liens; and evidence of the payment of any necessary fee, tax
or expense relating to such recording or filing. Without limitation of
the foregoing, the Bank shall receive acknowledgment copies of proper
financing statements duly filed under the Uniform Commercial Code in
all jurisdictions as may be necessary or, in the opinion of the Bank,
desirable to create or perfect such Liens in favor of the Bank;
(iii) Evidence that all other actions necessary or, in the
opinion of the Bank, to create, perfect or protect the Liens created or
purported to be created by the above Security Documents have been
taken;
(iv) A contemporaneous search of UCC, real property, tax,
judgment and litigation dockets and records and other appropriate
registers shall have revealed no filings or recordings in effect with
respect to the Collateral (as defined in the Borrower's Security
Agreement) purported to be covered by the above Security Documents,
except such as are acceptable to the Bank (it being understood that
such acceptance does not limit the obligations of the Borrower with
respect to the priority of the Liens in favor of the Bank), and the
Bank shall have received a copy of the search reports received as a
result of the search and of the acknowledgment copies of the financing
statements or other instruments required to be filed or recorded
pursuant to this subsection bearing evidence of the recording of such
statements or instruments at each of such filing or recording places;
and
(v) An executed copy of a leasehold mortgage and security
agreement on each parcel of real property leased by the Borrower
pursuant to (i) that certain lease between the Borrower and Spedd,
Inc., dated November 21, 2000 (the "Spedd Lease") and (ii) that certain
lease between the Borrower and the Regional Industrial Development
Corporation of Southwestern
Pennsylvania dated November 11, 1997 (the
"RIDC Lease") (collectively, the "Mortgaged Property"), each duly
executed on behalf of the Borrower, in substantially the form of
Exhibit D hereto (collectively, the "Leasehold Mortgages");
(vi) A true, correct and complete copy of the Spedd Lease and
the RIDC Lease (collectively, the "Leases") relating to the Mortgaged
Property, which shall have been delivered to the Bank;
(vii) A Memorandum of Lease in respect of each of the Leases
and the Mortgaged Property in substantially the form of Exhibit E-1
hereto;
(viii) An executed copy of a Ground Lessor Estoppel in respect
of each of the Leases and the Mortgaged Property in substantially the
form of Exhibit E hereto;
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(ix) An executed copy of a Landlord's Waiver and Consent in
respect of each of the Leases and the Mortgaged Property in
substantially the form of Exhibit F hereto; and
(x) A Subordination Agreement executed by the Redevelopment
Authority of the City of McKeesport in favor of the Bank evidencing the
subordination of all of said Authority's liens on the assets of the
Borrower to the Liens created by the Security Documents.
(c) Organization. The organizational structure of the Borrower, the
Certificate of Incorporation and bylaws of the Borrower, and the terms,
conditions, amounts and holders of all equity, debt and other indebtedness,
obligations and liabilities of the Borrower, shall be satisfactory to the Bank.
(d) Governmental Approvals and Filings. The Bank shall have received
true and correct copies (in each case certified as to authenticity on such date
on behalf of the Borrower) of all items referred to in Schedule 3.04 hereof and
such items shall be reasonably satisfactory in form and substance to the Bank
and shall be in full force and effect.
(e) Other Conflicts. The Bank shall have received true and correct
copies (in each case certified as to authenticity on such date on behalf of the
Borrower) of all items referred to in Schedule 3.05 hereof and such items shall
be satisfactory in form and substance to the Bank and shall be in full force and
effect.
(f) Organizational Proceedings. The Bank shall have received
certificates by the Secretary or Assistant Secretary of the Borrower dated as of
the Closing Date as to (i) true copies of the Certificate of Incorporation and
bylaws of the Borrower in effect on such date (which, in the case of the
Certificate of Incorporation filed or required to be filed with the Secretary of
State of the State of Delaware, shall be certified to be true, correct and
complete by such Secretary of State not more than 30 days before the Closing
Date), (ii) true copies of all action taken by the Borrower relative to this
Agreement and the other Loan Documents and (iii) the incumbency and signature of
the respective officers of the Borrower executing this Agreement and the other
Loan Documents, together with satisfactory evidence of the incumbency of such
Secretary or Assistant Secretary. The Bank shall have received certificates from
the Secretary of State of the State of Delaware and Commonwealth of
Pennsylvania
or other applicable Governmental Authorities dated not more than 30 days before
the Closing Date showing the good standing of the Borrower in Delaware,
Pennsylvania and each other state in which the Borrower does business.
(g) No Material Adverse Change. Since the date of the balance sheets
and statements of income, cash flows and changes in owners' equity furnished to
the Bank in accordance with Section 3.06 hereof, there has been no material
adverse change in the business, operations or condition (financial or otherwise)
or prospects of the Borrower.
(h) No Material Litigation. There is no pending or threatened action,
suit, proceeding or investigation before any Governmental Authority affecting or
against the Borrower which would, if adversely decided, have a Material Adverse
Effect.
(i) Termination of Existing Credit Facilities. All existing bank credit
facilities (other than those credit facilities permitted pursuant to Section
6.03 hereof), shall have been terminated and all amounts outstanding thereunder
shall have been repaid as of the Closing Date.
(j) Legal Opinion of Counsel to the Borrower. The Bank shall have
received an opinion addressed to the Bank dated the Closing Date, of counsel to
the Borrower, as to such matters as may be requested by the Bank and in form and
substance satisfactory to the Bank.
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(k) Officers' Certificates. The Bank shall have received certificates
from such officers of the Borrower as to such matters as the Bank may request,
including, without limitation, a statement that the proceeds of the Revolving
Credit Loans are not to be used for the purpose of purchasing or carrying
"margin stock" as such term is used in Regulation U of the Board of Governors of
the Federal Reserve System, as amended from time to time.
(l) Bank Accounts; Lockbox. The Borrower shall open and maintain with
the Bank a primary deposit account from which it funds its day-to-day
operations. In addition, the Borrower agrees to keep in full force and effect
the Lockbox Agreement described more fully in Section 2.03(a) hereof.
(m) Secured Credit Audit. The Bank shall have completed a secured
credit audit of the Borrower and the results of such audit shall have been
satisfactory to the Bank.
(n) Inventory Appraisal. The Bank shall have received from an
independent appraiser satisfactory to the Bank an appraisal dated not earlier
than October 1, 2000 in form and substance satisfactory to the Bank of the
Eligible Inventory.
(o) Borrowing Base. On the Closing Date the Borrowing Base shall be in
an amount equal to $4,167,880.89.
(p) Financials. The Borrower shall provide a proforma consolidated and
consolidating balance sheet and income statement for the Borrower and its
consolidated Subsidiaries for fiscal year 2001. Such proforma statements will
illustrate the financial performance of the Borrower and its consolidated
Subsidiaries as at the end of each Fiscal Quarter of such fiscal year.
(q) Closing Date Balance Sheets. The Bank shall have received from the
Borrower a balance sheet as of the end of the month immediately preceding the
Closing Date in form and substance satisfactory to the Bank.
(r) Confession of Judgment Waivers. The Borrower shall execute a
confession of judgment waiver and disclosure form in form and substance
satisfactory to the Bank.
(s) Fees, Expenses, etc. All fees and other compensation required to be
paid to the Bank pursuant hereto or pursuant to any other agreement on or prior
to the Closing Date shall have been paid or received, including, without
limitation, the Closing Fee.
(t) Additional Matters. The Bank shall have received such other
certificates, opinions, documents and instruments as may be requested by the
Bank. All organizational and other proceedings, and all documents, instruments
and other matters in connection with the transactions contemplated by this
Agreement and the other Loan Documents shall be satisfactory in form and
substance to the Bank.
4.02. Conditions to All Loans. The obligation of the Bank to make any
Revolving Credit Loan is subject to performance by the Borrower of its
obligations to be performed hereunder or under the other Loan Documents on or
before the date of such Loan, satisfaction of the conditions precedent set forth
herein and in the other Loan Documents and to satisfaction of the following
further conditions precedent:
(a) Notice. Appropriate notice of such Loan shall have been given by
the Borrower as provided in Article II hereof.
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(b) Covenants. The Borrower shall be in compliance with all covenants
made by it herein on the date of such Loan.
(c) Representations and Warranties. Each of the representations and
warranties made by the Borrower in Article III hereof and in each other Loan
Document shall be true and correct in all material respects on and as of such
date as if made on and as of such date, both before and after giving effect to
the Loan requested to be made on such date.
(d) No Defaults. No Event of Default or Potential Default shall have
occurred and be continuing on such date or after giving effect to the Loan
requested to be made on such date.
(e) No Violations of Law, etc. Neither the making nor use of the Loan
requested to be made on such date shall cause the Bank to violate or conflict
with any Law.
Each request for any Revolving Credit Loan shall constitute a representation and
warranty by the Borrower that the conditions set forth in this Section 4.02 have
been satisfied as of the date of such request. Failure of the Bank to receive
notice from the Borrower to the contrary before such Loan is made shall
constitute a further representation and warranty by the Borrower that the
conditions referred to in this Section 4.02 have been satisfied as of the date
such Loan is made.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower hereby covenants to the Bank as follows:
5.01. Basic Reporting Requirements.
(a) Annual Audit Reports. As soon as practicable, and in any event
within 120 days after the close of each fiscal year, the Borrower City shall
furnish to the Bank audited consolidated and consolidating statements of income,
cash flows and changes in owners' equity of the Borrower and its consolidated
Subsidiaries for such fiscal year and a consolidated and consolidating balance
sheet of the Borrower and its consolidated Subsidiaries as of the close of such
fiscal year, notes to each, together with management letters, all in reasonable
detail, setting forth in comparative form the corresponding figures for the
preceding fiscal year. Such financial statements shall be accompanied by
opinions of independent certified public accountants of recognized national
standing selected by the Borrower and satisfactory to the Bank. Such opinions
shall be free of exceptions or qualifications not acceptable to the Bank. Such
opinions in any event shall, in the aggregate, contain a written statement of
such accountants substantially to the effect that (i) such accountants examined
such financial statements in accordance with generally accepted auditing
standards and accordingly made such tests of accounting records and such other
auditing procedures as such accountants considered necessary in the
circumstances, (ii) in the opinion of such accountants such financial statements
present fairly the financial position of the Borrower and its consolidated
Subsidiaries as of the end of such fiscal year and the results of its operations
and its cash flows and changes in owners' equity for such fiscal year, in
conformity with GAAP and (iii) in the opinion of such accountants the Borrower
and its consolidated Subsidiaries are in compliance with all financial covenants
contained herein with which the Borrower and its consolidated Subsidiaries are
required to comply.
Such financial statements shall be certified by a Responsible Officer of the
Borrower as presenting fairly the financial position of the Borrower and its
consolidated Subsidiaries as of the end of such fiscal year and the results of
their operations, cash flows and changes in owners' equity for such fiscal year,
in conformity with GAAP, subject to normal and recurring year-end audit
adjustments.
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(b) Monthly Reports.
(i) As soon as practicable, and in any event within 30 days
after the end of each month, the Borrower shall furnish to the Bank
unaudited statements of income, cash flows and changes in owners'
equity of the Borrower for such month and for the period from the
beginning of such fiscal year to the end of such month and an unaudited
balance sheet of the Borrower as of the end of such month, all in
reasonable detail, setting forth in comparative form the corresponding
figures for the same periods or as of the same date during the
preceding fiscal year (except for the balance sheet, which shall set
forth in comparative form the corresponding balance sheet as of the
prior fiscal year end).
(ii) As soon as practicable, and in any event within 10 days
after the end of each month, the Borrower shall furnish to the Bank a
report detailing the aging of accounts receivable and payable of the
Borrower and a summary of the inventory of the Borrower. Such report
will be accompanied by a Borrowing Base Certificate as of the end of
such month.
(c) Quarterly Reports. As soon as practicable, and in any event within
45 days after the close of each Fiscal Quarter, the Borrower will furnish to the
Bank a quarterly financial report including consolidated and consolidating
statements of income and cash flow of the Borrower and its consolidated
Subsidiaries for such Fiscal Quarter and for the portion of the fiscal year to
the end of such Fiscal Quarter, and a consolidated and consolidating balance
sheet of the Borrower and its consolidated Subsidiaries as of the close of such
Fiscal Quarter, all in reasonable detail. All such income statements, statements
of cash flow and balance sheets shall be prepared by the Borrower and certified
by a Responsible Officer of the Borrower as presenting fairly the consolidated
and consolidating financial position of the Borrower and its consolidated
Subsidiaries as of the end of such Fiscal Quarter and the results of its
operations for such periods, in conformity with GAAP (subject to normal and
recurring year-end audit adjustments) applied in a manner consistent with that
of the most recent audited financial statements furnished to the Bank.
(d) Quarterly Compliance Certificate. The income statements and balance
sheets as of and for the end of each Fiscal Quarter which are delivered pursuant
to Section 5.01(c) hereof shall be accompanied by a compliance certificate,
substantially in the form of Exhibit G attached hereto, executed by a
Responsible Officer of the Borrower, stating that no Event of Default or
Potential Default exists and that the Borrower is in compliance with all
applicable covenants contained in this Agreement. Such certificate shall include
all figures necessary to calculate the Borrower's compliance with all financial
covenants set forth in this Agreement. If an Event of Default or Potential
Default has occurred and is continuing or exists, such certificate shall specify
in detail the nature and period of existence of the Event of Default or
Potential Default and any action taken or contemplated to be taken by the
Borrower with respect thereto.
(e) Annual Budget and Forecasts. On or before 60 days prior to the end
of each fiscal year of the Borrower, the Borrower shall provide to the Bank an
annual budget and forecasts for the Borrower for the following fiscal year.
(f) Notice of Certain Events. Promptly upon becoming aware of any of
the following, the Borrower shall give the Bank notice thereof, together with a
written statement of a Responsible Officer of the Borrower setting forth the
details thereof and any action with respect thereto taken or proposed to be
taken by the Borrower:
(i) Any Event of Default or Potential Default.
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(ii) Any material adverse change in the business, operations
or condition (financial or otherwise) or prospects of the Borrower.
(iii) Any pending or threatened action, suit, proceeding or
investigation by or before any Governmental Authority against or
affecting the Borrower, or change in any of the foregoing.
(iv) Any material violation, breach or default by the Borrower
of or under any agreement or instrument material to the business,
operations, condition (financial or otherwise) or prospects of the
Borrower.
(v) Any material casualty to any of the assets of the
Borrower;
(vi) Any Pension-Related Event. Such notice shall be
accompanied by: (A) a copy of any notice, request, return, petition or
other document received by the Borrower or any Controlled Group Member
from any Person, or which has been or is to be filed with or provided
to any Person (including without limitation the Internal Revenue
Service, PBGC or any Plan participant, beneficiary, alternate payee or
employer representative), in connection with such Pension-Related
Event, and (B) in the case of any Pension-Related Event with respect to
a Plan, the most recent Annual Report (5500 Series), with attachments
thereto, and the most recent actuarial valuation report, for such Plan.
(vii) Any Environmental Claim pending or threatened against
the Borrower or any of its Environmental Affiliates, or any past or
present acts, omissions, events or circumstances (including but not
limited to any dumping, leaching, deposition, removal, abandonment,
escape, emission, discharge or release of any Environmental Concern
Material at, on or under any facility or property now or previously
owned, operated or leased by the Borrower or any of its respective
Environmental Affiliates) that could form the basis of such
Environmental Claim.
(g) Visitation; Verification. The Borrower agrees that it shall permit
such Persons as the Bank may designate from time to time to visit and inspect
any of the properties of the Borrower, to examine its books and records and take
copies and extracts therefrom and to discuss its affairs with its directors,
officers, employees and independent accountants at such times and as often as
the Bank may request. The Borrower hereby authorizes such officers, employees
and independent accountants to discuss with the Bank the affairs of the
Borrower. The Bank shall have the right to perform a secured credit audit of the
Borrower no less than each Fiscal Quarter, including, without limitation, the
right to examine and verify accounts, inventory and other properties and
liabilities of the Borrower from time to time, and the Borrower shall cooperate
with the Bank in such verification.
(h) Further Information. The Borrower agrees that it will promptly
furnish to the Bank such other information and in such form as the Bank may
reasonably request from time to time. The Bank may disclose to any affiliate and
agent, and to actual or potential assignees and participants, all information
concerning the Borrower which comes into the Bank's possession during the term
hereof.
5.02. Insurance. The Borrower shall maintain with financially sound and
reputable insurers insurance with respect to its properties and business and
against such liabilities, casualties and contingencies and of such types and in
such amounts as is customary in the case of businesses engaged in the same or
similar businesses or having similar assets or properties similarly situated.
The Borrower shall provide to the Bank a long form lender loss payable
endorsement in connection with each such insurance policy. Prior to the
cancellation of any such insurance policy, the Borrower shall give the Bank 30
days prior written notice.
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5.03. Payment of Taxes and Other Potential Charges and Priority Claims.
The Borrower shall pay or discharge:
(a) on or prior to the date on which penalties attach thereto, all
taxes, assessments and other governmental charges imposed upon it or any of its
assets or properties;
(b) on or prior to the date when due, all lawful claims of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons which, if
unpaid, might result in the creation of a Lien upon any such asset or property;
and
(c) on or prior to the date when due, all other lawful claims which, if
unpaid, might result in the creation of a Lien upon any such asset or property
or which, if unpaid, might give rise to a claim entitled to priority over
general creditors of the Borrower in a case under Title 11 (Bankruptcy) of the
United States Code, as amended;
provided, that unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced the Borrower need not pay or discharge any
such tax, assessment, charge or claim so long as (x) the validity thereof is
contested in good faith and by appropriate proceedings diligently conducted and
(y) such reserves or other appropriate provisions as may be required by GAAP
shall have been made therefor.
5.04. Preservation of Organizational Status. The Borrower shall
maintain its organizational status and shall remain validly existing and in good
standing under the laws of the State of Delaware, and shall continue to be duly
qualified to do business and in good standing in all jurisdictions in which the
ownership of its assets and properties or the nature of its business or both
make such qualification necessary or advisable.
5.05. Governmental Approvals and Filings. The Borrower shall keep and
maintain in full force and effect all Governmental Actions necessary or
advisable in connection with execution and delivery of any Loan Document by the
Borrower, consummation by the Borrower of the transactions hereon or therein
contemplated, performance of or compliance with the terms and conditions hereof
or thereof by the Borrower or to ensure the legality, validity, binding effect,
enforceability or admissibility in evidence hereof or thereof.
5.06. Maintenance of Properties.
(a) The Borrower shall maintain or cause to be maintained in good
repair, working order and condition the properties now or hereafter owned,
leased or otherwise possessed by it and shall make or cause to be made all
needful and proper repairs, renewals, replacements and improvements thereto so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
(b) The Borrower shall cause all conditions of renewal of the RIDC
Lease under Section 33 of said Lease to be met and shall exercise its option to
renew said Lease for an additional term of five years.
5.07. Avoidance of Other Conflicts. The Borrower shall not violate or
conflict with, be in violation of or conflict with, or be or remain subject to
any liability (contingent or otherwise) on account of any violation or conflict
with
(a) any Law,
(b) its Certificate of Incorporation or bylaws, or
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(c) any agreement or instrument to which it is party or by which its
properties (now owned or hereafter acquired) may be subject or bound.
5.08. Financial Accounting Practices. The Borrower shall make and keep
books, records and accounts which, in reasonable detail, accurately and fairly
reflect its transactions and dispositions of its assets and maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management's general or
specific authorization, (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with GAAP and (ii) to maintain
accountability for assets, (c) access to assets is permitted only in accordance
with management's general or specific authorization and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
5.09. Use of Proceeds. The Borrower shall not use the proceeds of any
Revolving Credit Loans hereunder directly or indirectly for any unlawful
purpose, in any manner inconsistent with Section 3.11 hereof, or inconsistent
with any other provision of any Loan Document.
5.10. Continuation of or Change in Business. The Borrower shall
continue to engage in its business substantially as conducted and operated
during the present and preceding fiscal year, and the Borrower shall not, engage
in any other line of business.
5.11. Notice of Certain Changes. Promptly, but in any event within 30
days of any such occurrence, the Borrower shall notify the Bank of any change in
its (a) name, (b) principal place of business, (c) location of records, (d)
offices, (e) registered office, (f) location of Collateral, (g) Certificate of
Incorporation, (h) bylaws, or (i) fiscal year.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower hereby covenants to the Bank as follows:
6.01. Financial Covenants. The EBITDA/Fixed Charges Ratio of the
Borrower determined as of the end of (i) the first and second Fiscal Quarters
ending on (in the case of the first such Fiscal Quarter) or after the Closing
Date shall be not less than 1.0 to 1.0, (ii) the third Fiscal Quarter ending
after the Closing Date shall be not less than 1.05 to 1.0 and (iii) each Fiscal
Quarter thereafter on a Rolling Four Quarter Basis shall not be less than 1.10
to 1.0.
6.02. Liens. The Borrower shall not, at any time create, incur, assume
or suffer to exist any Lien on any of its property (now owned or hereafter
acquired), or agree, become or remain liable (contingently or otherwise) to do
any of the foregoing, except for the following ("Permitted Liens"):
(a) Liens pursuant to the Security Documents in favor of the Bank;
(b) Liens existing on the date hereof securing obligations existing on
the date hereof, as such Liens and obligations are listed in Schedule 6.02
hereof;
(c) Liens arising from taxes, assessments, charges or claims described
in Section 5.03 hereof that are not yet due or that remain payable without
penalty or to the extent permitted to remain unpaid under the proviso to such
Section 5.03;
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(d) Deposits or pledges of cash or securities in the ordinary course of
business to secure (i) workmen's compensation, unemployment insurance or other
social security obligations, (ii) performance of bids, tenders, trade contracts
(other than for payment of money) or leases, (iii) stay, surety or appeal bonds,
or (iv) other obligations of a like nature incurred in the ordinary course of
business; and
(e) Liens on property of the Borrower securing all or part of the
purchase price thereof; provided, however, that the amount of Indebtedness
secured by such Liens shall not exceed $350,000.00 in the aggregate.
"Permitted Lien" shall in no event include any Lien imposed by, or required to
be granted pursuant to, ERISA or any Environmental Law. Nothing in this Section
6.02 shall be construed to limit any other restriction on Liens imposed by the
Security Documents or otherwise in the Loan Documents.
6.03. Indebtedness. The Borrower shall not create, incur, assume or
suffer to exist any Indebtedness, or agree, become or remain liable
(contingently or otherwise) to do any of the foregoing, except:
(a) Indebtedness to the Bank pursuant to this Agreement and the other
Loan Documents;
(b) Indebtedness of the Borrower existing on the date hereof and listed
in Schedule 6.03 hereof;
(c) Accounts payable to trade creditors arising out of purchases of
goods or services in the ordinary course of business; and
(d) Indebtedness incurred in connection with Liens permitted by Section
6.02(e) hereof.
6.04. Guaranties, Indemnities, etc. The Borrower shall not be or become
subject to or bound by any Guaranty Equivalent, or agree, become or remain
liable (contingently or otherwise) to do any of the foregoing, except:
(a) Guaranty Equivalents existing on the date hereof and listed in
Schedule 6.04 hereof; and
(b) Contingent liabilities arising from the endorsement of negotiable
or other instruments for deposit or collection or similar transactions in the
ordinary course of business.
6.05. Loans and Investments. The Borrower shall not purchase, own or
invest in any stock or other securities of any Person, or all or substantially
all of the assets of any Person, or any business or division of any Person
(whether in a single or series of related transactions) or make or permit to
exist any investment or capital contribution to or acquire any interest
whatsoever in any other Person or permit to exist any loans or advances to any
Person except loans and investments (including equity investments in any
Subsidiary of the Borrower) existing on the Closing Date and set forth on
Schedule 6.05 to this Agreement.
6.06. Capital Expenditures. The Borrower shall not at any time make
non-financed Capital Expenditures in excess of in the aggregate $150,000.00 for
any fiscal year.
6.07. Mergers, Acquisitions, etc. The Borrower shall not (v) merge with
or into or consolidate with any other Person, (w) liquidate, wind-up, dissolve
or divide, (x) acquire all or any substantial portion of the properties of any
going concern or going line of business, or (y) acquire all or any substantial
portion of the properties of any other Person other than in the ordinary course
of business without the prior written consent of the Bank.
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6.08. Dispositions of Properties. The Borrower shall not sell, convey,
assign, lease, transfer, abandon or otherwise dispose of, voluntarily or
involuntarily, any of its assets or properties, or agree, become or remain
liable (contingently or otherwise) to do any of the foregoing, except in the
ordinary course of its business without the prior written consent of the Bank.
6.09. Dealings with Affiliates. The Borrower shall not enter into or
carry out any transaction with (including, without limitation, purchase or lease
property or services from, sell or lease property or services to, pay cash
dividends to, loan or advance to, or enter into, suffer to remain in existence
or amend any contract, agreement or arrangement with) any Affiliate or employee
of the Borrower, directly or indirectly, or agree, become or remain liable
(contingently or otherwise) to do any of the foregoing, except for:
(a) The existence and performance of contracts, agreements and
arrangements in existence as of the date hereof and set forth in Schedule 6.09
hereof;
(b) Other transactions with Affiliates or employees in good faith and
on terms no less favorable to the Borrower than those that could have been
obtained in a comparable transaction on an arm's-length basis from an unrelated
Person.
(c) With respect to any Affiliate which is a S-corporation or other tax
pass-through entity, distributions of dividends to its shareholders in an amount
not to exceed the aggregate amount of tax owed by such shareholders as a result
of income of the Borrower which is attributed to such shareholders for income
tax purposes.
6.10. Leases. The Borrower shall not, nor shall it permit any
Subsidiary to, at any time enter into or suffer to remain in effect any lease,
as lessee, of any property, or agree, become or remain liable (contingently or
otherwise) to do any of the foregoing, except:
(a) Operating leases of data processing equipment, office equipment,
transportation equipment, real estate or office space used by the lessee in the
ordinary course of business, provided that such leases will not result in the
payment or accrual by the Borrower or any of its Subsidiaries of more than
$450,000.00 in the aggregate in any twelve-month period and no such lease has a
term longer than 5 years (other than the Spedd Lease and the RIDC Lease, which
have a term of 7 years and 5 years, respectively);
(b) Leases by the Borrower as lessor to a Subsidiary as lessee or by a
Subsidiary as lessor to the Borrower as lessee; and
(c) Capitalized Leases permitted under Section 6.03 hereof.
6.11. Distributions. The Borrower shall not declare, make, pay, or
agree, become or remain liable to make or pay, any Distributions of any nature
(whether in cash, property, securities or otherwise) on account of or in respect
of any shares of the capital stock of the Borrower on account of the purchase,
redemption, retirement or acquisition of any shares of the capital stock (or
warrants, options or rights for any shares of the capital stock of the Borrower)
other than (i) Distributions declared, made or paid by a Subsidiary of the
Borrower to the Borrower, and (ii) Distributions which, if made, would not
result in the violation of any of the financial covenants contained herein.
6.12. Limitation on Other Restrictions on Liens. The Borrower shall not
enter into, become or remain subject to any agreement or instrument to which the
Borrower is a party or by which it or any of its respective assets or properties
(now owned or hereafter acquired) may be subject or bound that would
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prohibit the grant of any Lien upon any of its assets or properties (now owed or
hereafter required), except the Loan Documents.
6.13. Limitation on other Restrictions on Amendment of the Loan
Documents, etc. The Borrower shall not enter into, become or remain subject to
any agreement or instrument to which the Borrower is a party or by which the
Borrower or any of its properties (now owned or hereafter acquired) may be
subject or bound that would prohibit or require the consent of any Person to any
amendment, modification or supplement to any of the Loan Documents, except for
the Loan Documents.
6.14. Limitation on other Agreements that Conflict with the Loan
Documents. The Borrower shall not enter into, become or remain subject to any
agreement or instrument to which the Borrower is a party or by which the
Borrower or any of its properties or assets (now owned or hereafter acquired)
may be subject or bound that conflicts in any manner whatsoever with the Loan
Documents.
ARTICLE VII
DEFAULTS
7.01. Events of Default. An Event of Default shall mean the occurrence
or existence of one or more of the following events or conditions (for any
reason, whether voluntary, involuntary or effected or required by Law):
(a) The Borrower shall fail to pay when due principal of any Loan.
(b) The Borrower shall fail to pay when due interest on any Loan, any
fees, indemnity or expenses, or any other amount due hereunder or under any
other Loan Document.
(c) Any representation or warranty made or deemed made by the Borrower
in or pursuant to or in connection with any Loan Document, or any statement made
by the Borrower in any financial statement, certificate, report, exhibit or
document furnished by the Borrower to the Bank pursuant to or in connection with
any Loan Document, shall prove to have been false or misleading in any material
respect as of the time when made or deemed made (including by omission of
material information necessary to make such representation, warranty or
statement not misleading).
(d) The Borrower shall default in the performance or observance of any
covenant contained in Article VI hereof or any of the covenants contained in
Sections 2.05(c), 5.01(f)(i), 5.09 or 5.10.
(e) The Borrower shall default in the performance or observance of any
other covenant, agreement or duty under this Agreement or any other Loan
Document and (i) in the case of a default under Section 5.01 hereof, such
default shall have continued for a period of ten days and (ii) in the case of
any other default such default shall have continued for a period of 30 days.
(f) Any Cross-Default Event shall occur with respect to any
Cross-Default Obligation; provided, that if a Cross-Default Event would have
occurred with respect to a Cross-Default Obligation but for the grant of a
waiver or similar indulgence, a Cross-Default Event shall nevertheless be deemed
to have occurred if the Borrower directly or indirectly gave or agreed to give
any consideration for such waiver or indulgence (including but not limited to a
reduction in maturity, an increase in rates or the granting of collateral). As
used herein, "Cross-Default Obligation" shall mean any indebtedness for borrowed
money (or set of related indebtedness for borrowed money) of the Borrower in
excess of $20,000.00 in aggregate principal amount. As used herein,
"Cross-Default Event" with respect to a Cross-Default Obligation shall mean the
occurrence of any default, event or condition which causes or which would with
the giving of notice or the passage of
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time or both would permit any Person or Persons to cause all or any part of such
Cross-Default Obligation to become due (by acceleration, mandatory prepayment or
repurchase, or otherwise) before its otherwise stated maturity, or failure to
pay all or any part of such Cross-Default Obligation at its stated maturity.
(g) One or more judgments for the payment of money shall have been
entered against the Borrower, which judgment or judgments exceed $20,000.00 in
the aggregate, and such judgment or judgments shall have remained undischarged
and unstayed for a period of thirty consecutive days.
(h) One or more writs or warrants of attachment, garnishment,
execution, distraint or similar process exceeding in value the aggregate amount
of $20,000.00 shall have been issued against the Borrower or any of its
respective properties and shall have remained undischarged and unstayed for a
period of thirty consecutive days.
(i) Any Governmental Action now or hereafter made by or with any
Governmental Authority in connection with any Loan Document is not obtained or
shall have ceased to be in full force and effect or shall have been modified or
amended or shall have been held to be illegal or invalid, and the Bank shall
have determined in good faith (which determination shall be conclusive) that
such event or condition could have a Material Adverse Effect.
(j) Any Security Document shall cease to be in full force and effect,
or any Lien created or purported to be created in any Collateral pursuant to any
Security Document shall fail to be valid, enforceable and perfected Lien in
favor of the Bank securing the Obligations, prior to all other Liens, or any
Borrower or Governmental Authority shall assert any of the foregoing.
(k) Any Loan Document or term or provision thereof shall cease to be in
full force and effect (other than by reason of an amendment hereof or a waiver
thereof by the Bank), or the Borrower shall, or shall purport to, terminate,
repudiate, declare voidable or void or otherwise contest, any Loan Document or
term or provision thereof or any obligation or liability of the Borrower
thereunder.
(l) The Bank shall have determined in good faith (which determination
shall be conclusive) that an event or condition has occurred which could
reasonably be expected to have a Material Adverse Effect.
(m) Any one or more Pension-Related Events shall have occurred and the
Bank shall determine in good faith (which determination shall be conclusive)
that such Pension-Related Events, individually or in the aggregate, could have a
Material Adverse Effect.
(n) A Change of Control shall have occurred.
(o) A proceeding shall have been instituted in respect of the Borrower.
(i) seeking to have an order for relief entered in respect of
such Person, or seeking a declaration or entailing a finding that such
Person is insolvent or a similar declaration or finding, or seeking
dissolution, winding-up, charter revocation or forfeiture, liquidation,
reorganization, arrangement, adjustment, composition or other similar
relief with respect to such Person, its assets or its debts under any
Law relating to bankruptcy, insolvency, relief of debtors or protection
of creditors, termination of legal entities or any other similar Law
now or hereafter in effect, or
(ii) seeking appointment of a receiver, trustee, liquidator,
assignee, sequestrator or other custodian for such Person or for all or
any substantial part of its property
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and such proceeding shall result in the entry, making or grant of any such order
for relief, declaration, finding, relief or appointment, or such proceeding
shall remain undismissed and unstayed for a period of sixty consecutive days.
(p) The Borrower shall become insolvent; shall fail to pay, become
unable to pay, or state that it is or will be unable to pay, its debts as they
become due; shall voluntarily suspend transaction of its business; shall make a
general assignment for the benefit of creditors; shall institute (or fail to
controvert in a timely and appropriate manner) a proceeding described in Section
7.01(o)(i) hereof, or (whether or not any such proceeding has been instituted)
shall consent to or acquiesce in any such order for relief, declaration, finding
or relief described therein; shall institute (or fail to controvert in a timely
and appropriate manner) a proceeding described in Section 7.01(o)(ii) hereof, or
(whether or not any such proceeding has been instituted) shall consent to or
acquiesce in any such appointment or to the taking of possession by any such
custodian of all or any substantial part of its or his property; shall dissolve,
wind-up, revoke or forfeit its charter (or other constituent documents) or
liquidate itself or any substantial part of its property; or shall take any
action in furtherance of any of the foregoing.
7.02. Consequences of an Event of Default.
(a) If an Event of Default specified in subsections (a) through (n) of
Section 7.01 hereof shall occur and be continuing or shall exist, then, in
addition to all other rights and remedies which the Bank may have hereunder or
under any other Loan Document, at law, in equity or otherwise, the Bank shall be
under no further obligation to make Revolving Credit Loans hereunder, and the
Bank may, without notice to the Borrower, from time to time do any or all of the
following:
(i) Declare the Revolving Credit Commitment terminated,
whereupon the Revolving Credit Commitment will terminate and any fees
hereunder shall be immediately due and payable without presentment,
demand, protest or further notice of any kind, all of which are hereby
waived, and an action therefor shall immediately accrue.
(ii) Declare the unpaid principal amount of the Revolving
Credit Loans, interest accrued thereon and all other Obligations to be
immediately due and payable without presentment, demand, protest or
further notice of any kind, all of which are hereby waived, and an
action therefor shall immediately accrue.
(b) If an Event of Default specified in subsection (o) or (p) of
Section 7.01 hereof shall occur or exist, then, in addition to all other rights
and remedies which the Bank may have hereunder or under any other Loan Document,
at law, in equity or otherwise, the Revolving Credit Commitment shall
automatically terminate and the Bank shall be under no further obligation to
make Revolving Credit Loans, and the unpaid principal amount of such Loans,
interest accrued thereon and all other Obligations shall become immediately due
and payable without presentment, demand, protest or notice of any kind, all of
which are hereby waived, and an action therefor shall immediately accrue.
(c) Upon the occurrence and, as applicable, continuation of any Event
of Default, all amounts due under this Section 7.02 shall bear interest for each
day until paid at the Default Rate, as specified in Section 2.07(b) hereof.
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ARTICLE VIII
MISCELLANEOUS
8.01. Holidays. Whenever any payment or action to be made or taken
hereunder or under any other Loan Document shall be stated to be due on a day
which is not a Business Day, such payment or action shall be made or taken on
the next following Business Day and such extension of time shall be included in
computing interest or fees, if any, in connection with such payment or action.
8.02. Records. The unpaid principal amount of the Revolving Credit
Loans owing to the Bank, the unpaid interest accrued thereon, the interest rate
or rates applicable to such unpaid principal amount, the duration of such
applicability, the Revolving Credit Committed Amount, and the accrued and unpaid
fees shall at all times be ascertained from the records of the Bank, which shall
be conclusive absent manifest error.
8.03. Amendments and Waivers. Neither this Agreement nor any Loan
Document may be amended, modified or supplemented except in accordance with the
provisions of this Section. The Bank and the Borrower may from time to time
amend, modify or supplement the provisions of this Agreement or any other Loan
Document for the purpose of amending, adding to, or waiving any provisions,
releasing any Collateral, or changing in any manner the rights and duties of the
Borrower or the Bank. Any such amendment, modification or supplement made by
Borrower and the Bank in accordance with the provisions of this Section shall be
binding upon the Borrower and the Bank.
8.04. No Implied Waiver, Cumulative Remedies. No course of dealing and
no delay or failure of the Bank in exercising any right, power or privilege
under this Agreement or any other Loan Document shall affect any other or future
exercise thereof or exercise of any other right, power or privilege; nor shall
any single or partial exercise of any such right, power or privilege or any
abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any other right, power or
privilege. The rights and remedies of the Bank under this Agreement and any
other Loan Document are cumulative and not exclusive of any rights or remedies
which the Bank would otherwise have hereunder or thereunder, at law, in equity
or otherwise.
8.05. Notices.
(a) Except to the extent otherwise expressly permitted hereunder or
thereunder, all notices, requests, demands, directions and other communications
(collectively "notices") under this Agreement or any Loan Document shall be in
writing (including telexed and telecopied communication) and shall be sent by
first-class mail, or by nationally-recognized overnight courier, or by telex or
telecopier (with confirmation in writing mailed first-class or sent by such an
overnight courier), or by personal delivery. All notices shall be sent to the
applicable party at the address stated on the signature pages hereof or in
accordance with the last unrevoked written direction from such party to the
other parties hereto, in all cases with postage or other charges prepaid. Any
such properly given notice to the Bank or the Borrower shall be effective when
received.
(b) The Bank may rely on any notice (whether or not such notice is made
in a manner permitted or required by this Agreement or any Loan Document)
purportedly made by or on behalf of the Borrower, and the Bank shall not have
any duty to verify the identity or authority of any Person giving such notice.
8.06. Expenses, Taxes, Indemnity.
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(a) The Borrower agrees to pay or cause to be paid and to save the Bank
harmless against liability for the payment of all reasonable out-of-pocket costs
and expenses (including but not limited to reasonable fees and expenses of
counsel, including local counsel, auditors, consulting engineers, appraisers,
and all other professional, accounting, evaluation and consulting costs)
incurred by the Bank from time to time arising from or relating to (i) the
negotiation, preparation, execution, delivery, administration and performance of
this Agreement and the other Loan Documents, (ii) any requested amendments,
modifications, supplements, waivers or consents (whether or not ultimately
entered into or granted) to this Agreement or any Loan Document, and (iii) the
enforcement or preservation of rights under this Agreement or any Loan Document
(including but not limited to any such costs or expenses arising from or
relating to (A) the creation, perfection or protection of the Bank's Lien on any
Collateral, (B) the protection, collection, lease, sale, taking possession of,
preservation of, or realization on, any Collateral, including without limitation
advances for storage, insurance premiums, transportation charges, taxes, filing
fees and the like, (C) collection or enforcement of an outstanding Revolving
Credit Loan or any other amount owing hereunder or thereunder by the Bank, and
(D) any litigation, proceeding, dispute, work-out, restructuring or rescheduling
related in any way to this Agreement or the Loan Documents).
(b) The Borrower hereby agrees to pay all stamp, document, transfer,
recording, filing, registration, search, sales and excise fees and taxes and all
similar impositions now or hereafter determined by the Bank to be payable in
connection with this Agreement or any other Loan Documents or any other
documents, instruments or transactions pursuant to or in connection herewith or
therewith, and the Borrower agrees to save the Bank harmless from and against
any and all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such fees, taxes or
impositions.
(c) The Borrower hereby agrees to reimburse and indemnify each of the
Indemnified Parties from and against any and all losses, liabilities, claims,
damages, expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnified Party in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnified Party shall be
designated a party thereto) that may at any time be imposed on, asserted against
or incurred by such Indemnified Party as a result of, or arising out of, or in
any way related to or by reason of, this Agreement or any other Loan Document,
any transaction from time to time contemplated hereby or thereby, or any
transaction financed in whole or in part or directly or indirectly with the
proceeds of any Loan (and without in any way limiting the generality of the
foregoing, including any violation or breach of any Environmental Law or any
other Law by the Borrower; any Environmental Claim arising out of the
management, use, control, ownership or operation of property by any of such
Persons, including all on-site and off-site activities involving Environmental
Concern Materials; any grant of Collateral; or any exercise by the Bank of any
of its rights or remedies under this Agreement or any other Loan Document); but
excluding any such losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements resulting solely
from the gross negligence or willful misconduct of such Indemnified Party, as
finally determined by a court of competent jurisdiction. If and to the extent
that the foregoing obligations of the Borrower under this subsection (c), or any
other indemnification obligation of the Borrower hereunder or under any other
Loan Document, are unenforceable for any reason, the Borrower hereby agree to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable Law. Notwithstanding the
foregoing, nothing herein shall be construed to be an indemnity by the Borrower
with respect to any violation by the Bank of any law, rule or regulation
applicable to the Bank.
(d) The Borrower shall pay to the Bank all amounts referred to in
Sections 8.06(a), (b) and (c) hereof upon demand therefor from the Bank. To the
extent permitted by law, such amounts shall bear interest for each day until
paid (before and after judgment) at a rate per annum (based on a year of 360
days and actual days elapsed) which for each day shall be equal to the Default
Rate.
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8.07. Severability. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
8.08. Prior Understandings. This Agreement, together with the other
Loan Documents, constitutes the entire agreement between the parties hereto
relating to this financing transaction and it supersedes all prior
understandings and agreements, whether written or oral, between the parties
hereto relating to the transactions provided for herein.
8.09. Duration, Survival. All representations and warranties of the
Borrower contained herein or in any other in the Loan Document or made in
connection herewith or therewith shall survive the making of, and shall not be
waived by the execution and delivery, of this Agreement or any other Loan
Document, any investigation by or knowledge of the Bank, the making of any Loan,
or any other event or condition whatever. All covenants and agreements of the
Borrower contained herein or in any other Loan Document shall continue in full
force and effect from and after the date hereof so long as the Borrower may
borrow hereunder and until payment in full of all Obligations. Without
limitation, all obligations of the Borrower hereunder or under any other Loan
Document to make payments to or indemnify the Bank or the Bank shall survive the
payment in full of all other Obligations, termination of the Borrower's right to
borrow hereunder, and all other events and conditions whatever. In addition, all
obligations of the Borrower to make payments to or indemnify the Bank shall
survive the payment in full by the Borrower of all Obligations, termination of
the Borrower's right to borrow hereunder, and all other events or conditions
whatever.
8.10. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
8.11. Limitation on Payments. The parties hereto intend to conform to
all applicable Laws in effect from time to time limiting the maximum rate of
interest that may be charged or collected. Accordingly, notwithstanding any
other provision hereof or of any other Loan Document, the Borrower shall not be
required to make any payment to or for the account of the Bank to the extent
that such requirement or such failure to refund would violate or conflict with
nonwaivable provisions of applicable Laws limiting the maximum amount of
interest which may be charged or collected by the Bank.
8.12. Set-off. To secure the repayment of the Obligations, the Borrower
hereby grants, conveys, assigns, pledges and transfers to the Bank, and creates
in favor of the Bank, a continuing Lien on and security interest in any
property, credits, securities or monies which may at any time be delivered to,
or be in the possession of, or owed by the Bank in any capacity whatever
(exclusive of funds held in trust by the Borrower on behalf of employees or
others by the Bank) including the balance of any deposit account maintained by
the Borrower with the Bank, the Disbursement Account and the Cash Collateral
Account, and all proceeds of the conversion (voluntary or involuntary) thereof
into cash, instruments, securities or other property, and all other proceeds
thereof (the "Secured Property"). The Borrower hereby represents, warrants,
covenants and agrees that such Lien shall at all times be valid and perfected,
prior to all other Liens, and the Borrower shall take or cause to be taken such
actions and execute and deliver such instruments and documents as may be
necessary or, in the Bank's judgment, desirable to perfect or protect such Lien.
The Borrower shall not create or suffer to exist any Lien on any of the Secured
Property other than the Lien in favor of the Bank granted under this Section
8.12.
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The Borrower authorizes the Bank in the case of an Event of Default, at the
Bank's option, at any time and from time to time, to apply, at the discretion of
the Bank, to the payment of Obligations, any and all such property, credits,
securities or monies now or hereafter in the hands of the Bank belonging or owed
to the Borrower. Such right shall be absolute and unconditional in all
circumstances and, without limitation, shall exist whether or not the Bank or
any other Person shall have given notice or made any demand to the Borrower or
any other Person, whether such property, credits, securities or monies owed to
the Borrower is contingent, absolute, matured or unmatured (it being agreed that
the Bank may deem such indebtedness, obligation or liability to be then due and
payable at the time of such setoff), and regardless of the existence or adequacy
of any collateral, guaranty or any other security, right or remedy available to
the Bank or any other Person.
8.13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Bank, all future holders of the Notes,
and their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights hereunder or interests herein without the
prior written consent of the Bank, and any purported assignment without such
consent shall be void.
8.14. Governing Law; Submission to Jurisdiction:, Limitation of
Liability.
(a) Governing Law. This Agreement and all other Loan Documents (except
to the extent, if any, otherwise expressly stated therein) shall be governed by,
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to choice of law principles.
(b) Certain Waivers. The Borrower hereby irrevocably and
unconditionally:
(i) agrees that any action;, suit or proceeding by any person
arising from or relating to this Agreement or any other Loan Document
or any statement, course of conduct, act, omission or event occurring
in connection herewith or therewith (collectively, "Related
Litigation") may be brought in any state or federal court of competent
jurisdiction sitting in Allegheny County,
Pennsylvania, submits to such
jurisdiction of such courts, and, to the fullest extent permitted by
law, agrees that it will not bring any related litigation in any other
forum "but nothing herein shall affect the right of the Bank to bring
any action, suit or proceeding in any other forum);
(ii) waives any objection which it may have at any time to the
laying of venue of any related litigation brought in any such court,
waives any claim that any such related litigation has been brought in
an inconvenient forum and waives any right to object, with respect to
any related litigation brought in any such court, that such court does
not have jurisdiction over the Borrower; and
(iii) consents and agrees to service of any summons, complain
or other legal process in any related litigation by registered or
certified U.S. Mail, postage prepaid, to the Borrower at the address
for notices described in Section 8.05 hereof, and consents and agrees
that such service shall constitute in every respect valid and effective
service (but nothing herein shall affect the validity or effectiveness
of process served in any other manner permitted by law).
(c) Limitation of Liability. To the fullest extent permitted by law, no
claim may be made by the Borrower against the Bank or any affiliate, director,
officer, employee, or attorney of the Bank for any special, incidental,
indirect, consequential or punitive damages in respect of any claim arising from
or relating to this Agreement or any other Loan Document or any statement,
course of conduct, act, omission or event occurring in connection herewith or
therewith (whether for breach of contract, tort or any other theory of
liability). The Borrower hereby waives, releases and agrees not to ▇▇▇ upon any
claim for any such
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damages, whether such claim presently exists or arises hereafter and whether or
not such claim is known or suspected to exist in its favor.
8.15. WAIVER OF TRIAL BY JURY. THE BORROWER INITIALS:
AND THE BANK EXPRESSLY, KNOWINGLY AND VOLUNTARILY
WAIVE ALL BENEFIT AND ADVANTAGE OF ANY RIGHT TO A /s/ TA
TRIAL BY JURY, AND NO PARTY HERETO WILL AT ANY TIME ------------------------
INSIST UPON, OR PLEAD OR IN ANY MANNER WHATSOEVER Borrower
CLAIM OR TAKE THE BENEFIT OR ADVANTAGE OF A TRIAL BY
JURY IN AN ACTION ARISING IN CONNECTION WITH THIS /s/ LS
AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN ------------------------
DOCUMENTS. Bank
[Intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, by their officers thereunto duly authorized, have executed and delivered
this Agreement as of the date first above written.
ATTEST: STEEL CITY PRODUCTS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------- ----------------------
Title Paralegal Title President, COO
(Seal) Address for Notices:
Attn:
Telephone:
Telecopier:
ATTEST: NATIONAL CITY BANK OF
PENNSYLVANIA
By: /s/ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------- ----------------------
Title Paralegal Title Vice President
Address for Notices:
(Seal) ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telex: (▇▇▇) ▇▇▇-▇▇▇▇
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ANNEX A
TO
CREDIT AGREEMENT
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. In addition to other words and terms defined
elsewhere in this Agreement, as used in this Agreement the following words and
terms defined have the meanings given them below, unless the context of this
Agreement otherwise clearly requires.
"Affiliate" of a Person (the "Specified Person") shall mean (a) any
Person which directly or indirectly controls, or is controlled by, or is under
common control with, the Specified Person , (b) any director or officer (or, in
the case of a Person which is not a corporation, any individual having analogous
powers) of the Specified Person or of a Person who is an Affiliate of the
Specified Person within the meaning of the preceding clause (a), and (c) for
each individual who is an Affiliate of the Specified Person within the meaning
of the foregoing clauses (a) or (b), any other individual related to such
Affiliate by consanguinity within the third degree or in a step or adoptive
relationship within such third degree or related by affinity with such Affiliate
or any such individual. For purposes of the preceding sentence, "control" of a
Person means (a) the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by contract or otherwise and (b) in
any case shall include direct or indirect ownership (beneficially or of record)
of, or direct or indirect power to vote, 5% or more of the outstanding shares of
any class of capital stock of such Person (or in the case of a Person that is
not a corporation, 5% or more of any class of equity interest).
"Bank" shall have the meaning set forth in the preamble hereto.
"Borrower" shall have the meaning set forth in the preamble hereto.
"Borrower's Security Agreement" shall have the meaning set forth in
Section 4.01(b) hereof.
"Borrowing Base" shall have the meaning set forth in Section 2.09(a)
hereof.
"Borrowing Base Certificate" shall have the meaning set forth in
Section 2.09(f) hereof
"Business Day" shall mean any day other than a Saturday, Sunday, public
holiday under the laws of the Commonwealth of
Pennsylvania or other day on which
banking institutions are authorized or obligated to close in the city in which
is located the Bank's Office.
"Capital Adequacy Event" shall have the meaning set forth in Section
2.08(b) hereof.
"Capital Compensation Amount" shall have the meaning set forth in
Section 2.08(b) hereof.
"Capital Expenditures" of a Person shall mean, for any period, all
expenditures (whether paid in cash or accrued as liabilities during such period)
of such Person during such period which would be classified as capital
expenditures for purposes of GAAP (including, without limitation, expenditures
for maintenance and repairs which are capitalized, and Capitalized Leases to the
extent an asset is recorded in connection therewith in accordance with GAAP).
38
"Capitalized Lease" shall mean at any time any lease which is, or is
required under GAAP to be, capitalized on the balance sheet of the lessee at
such time, and "Capitalized Lease Obligation" of any Person at any time shall
mean the aggregate amount which is, or is required under GAAP to be, reported as
a liability on the balance sheet of such Person at such time as lessee under a
Capitalized Lease.
"Cash Collateral Account" shall have the meaning set forth in Section
2.03(a) hereof.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and any successor statute of similar
import, and regulations thereunder, in each case as in effect from time to time.
"CERCLIS" shall mean the Comprehensive Environmental Response,
Compensation and Liability Information System List, as the same may be amended
from time to time.
"Change of Control" shall mean Oakhurst Company, Inc., a ____________
corporation, shall cease to own a majority of the common stock and Series "A"
Preferred Stock necessary to elect a majority of the board of directors of the
Borrower.
"Closing Date" shall mean the date of the first Loan hereunder.
"Closing Fee" shall have the meaning set forth in Section 2.02(c)
hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, and regulations thereunder, in each case as
in effect from time to time. References to sections of the Code shall be
construed also to refer to any successor sections.
"Collateral" shall have the meaning set forth in the Borrower's
Security Agreement.
"Collateral Monitoring Fee" shall have the meaning set forth in Section
2.02(b) hereof
"Controlled Group Member" shall mean each trade or business (whether or
not incorporated) which together with the Borrower is treated as a single
employer under Sections 4001(a)(14) or 4001(b)(1) of ERISA or Sections 414(b),
(c), (m) or (o) of the Code.
"Cross-Default Event" shall have the meaning set forth in Section
7.01(f) hereof.
"Cross-Default Obligation" shall have the meaning set forth in Section
7.01(f) hereof.
"Default Rate" shall have the meaning set forth in Section 2.07(b)
hereof.
"Distributions' shall mean, for the period of determination, (a) all
distributions of cash, securities or other property (other than capital stock)
on or in respect of any shares of any class of capital stock of the Borrower;
and (b) all purchases, redemptions or other acquisitions by the Borrower of any
shares of any class of capital stock of the Borrower, in each case determined
and consolidated for the Borrower and its Subsidiaries in accordance with GAAP.
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
"EBITDA" for any Person for any period, shall mean the sum of (a) Net
Income for such period, (b) Interest Expense for such period, (c) charges
against income for foreign, federal, state and local income taxes for such
period, (d) depreciation expense for such period, (e) amortization expense for
such period and (f)
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non-cash intercompany royalty and management fees during such period minus (x)
non-cash interest income for such period and (y) gains with respect to asset
sales or other non-cash income during such period, all as determined on a
consolidated basis for such Person in accordance with GAAP.
"EBITDA/Fixed Charges Ratio" shall mean the ratio of the EBITDA of the
Borrower City to Fixed Charges of the Borrower at such time determined on a
Rolling Four Quarter Basis (other than the first three Fiscal Quarters ending on
or after the Closing Date) and in accordance with GAAP.
"Eligible Inventory" shall have the meaning set forth in Section
2.09(d) hereof.
"Eligible Receivables" shall have the meaning set forth in Section
2.09(b) hereof.
"Environmental Affiliate" shall mean, with respect to any Person, any
other Person whose liability (contingent or otherwise) for any Environmental
Claim such Person has retained, assumed or otherwise is liable for (by Law,
agreement or otherwise).
"Environmental Approvals" shall mean any Governmental Action pursuant
to or required under any Environmental Law.
"Environmental Claim" shall mean, with respect to any Person, any
action, suit, proceeding, investigation, notice, claim, complaint, demand,
request for information or other communication (written or oral) by any other
Person (including but not limited to any Governmental Authority, citizens' group
or present or former employee of such Person) alleging, asserting or claiming
any actual or potential (a) violation of any Environmental Law, (b) liability
under any Environmental Law or (c) liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
the presence, or release into the environment, of any Environmental Concern
Materials at any location, whether or not owned by such Person.
"Environmental Cleanup Site" shall mean any location which is listed or
proposed for listing on the National Priorities List, on CERCLIS or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding or investigation
related to or arising from any alleged violation of any Environmental Law.
"Environmental Concern Materials" shall mean (a) any flammable
substance, explosive, radioactive material, hazardous material, hazardous waste,
toxic substance, solid waste, pollutant, contaminant or any related material,
raw material, substance, product or by-product of any substance specified in or
regulated or otherwise affected by any Environmental Law (including but not
limited to any "hazardous substance" as defined in CERCLA or any similar state
Law), (b) any toxic chemical or other substance from or related to industrial,
commercial or institutional activities, and (c) asbestos, gasoline, diesel fuel,
motor oil, waste and used oil, heating oil and other petroleum products or
compounds, polychlorinated biphenyls, radon and urea formaldehyde.
"Environmental Law" shall mean any Law, whether now existing or
subsequently enacted or amended, relating to (a) pollution or protection of the
environment, including natural resources, (b) exposure of Persons, including but
not limited to employees, to Environmental Concern Materials, (c) protection of
the public health or welfare from the effects of products, by-products, wastes,
emissions, discharges or releases of Environmental Concern Materials or (d)
regulation of the manufacture, use or introduction into commerce of
Environmental Concern Materials including their manufacture, formulation,
packaging, labeling,
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distribution, transportation, handling, storage or disposal. Without limitation,
"Environmental Law" shall also include any Environmental Approval and the terms
and conditions thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"Event of Default" shall mean any of the Events of Default described in
Section 7.01 hereof.
"EXIM Bank" shall mean Export-Import Bank of the United States, an
agency of the United States of America.
"Fiscal Quarter(s)" shall mean the period(s) of March 1 through May 31,
June 1 through August 31, September 1 through November 30 and December 1 through
February 28 of each year.
"Fixed Charges" for any period for any Person shall mean the sum of
Interest Expense paid in cash by such Person during such period, the current
maturities of long-term Indebtedness paid by such Person during such period,
taxes paid in cash by such Person during such period, unfunded Capital
Expenditures of such Person during such period, payments on Capitalized Lease
Obligations during such period, Distributions during such period, increases in
intercompany receivables during such period (including, without limitation,
increases in accounts receivable, notes receivable, loans or other distribution
of funds from such Person to its Parent, any Subsidiary of the Borrower or an
Affiliate of the Borrower) and payments by such Person during such period
permitted by Section 6.09(c) hereof, all as determined on a consolidated basis
in accordance with GAAP.
"GAAP" shall have the meaning set forth in Section 1.03 of this Annex
A.
"Governmental Action" shall have the meaning set forth in Section 3.04
hereof.
"Governmental Authority" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"Guaranty Equivalent": A Person (the "Deemed Guarantor") shall be
deemed to be subject to a Guaranty Equivalent in respect of any indebtedness,
obligation or liability (the "Assured Obligation") of another Person (the
"Deemed Obligor") if the Deemed Guarantor directly or indirectly guarantees,
becomes surety for, endorses, assumes, agrees to indemnify the Deemed Obligor
against, or otherwise agrees, becomes or remains liable (contingently or
otherwise) for, such Assured Obligation. Without limitation, a Guaranty
Equivalent shall be deemed to exist if a Deemed Guarantor agrees, becomes or
remains liable (contingently or otherwise), directly or indirectly: (a) to
purchase or assume, or to supply funds for the payment, purchase or satisfaction
of, an Assured Obligation, (b) to make any loan, advance, capital contribution
or other investment in, or to purchase or lease any property or services from, a
Deemed Obligor (i) to maintain the solvency of the Deemed Obligor, (ii) to
enable the Deemed Obligor to meet any other financial condition, (iii) to enable
the Deemed Principal to satisfy any Assured Obligation or to make any
Distribution or any other payment, or (iv) to assure the holder of such Assured
Obligation against loss, (c) to purchase or lease property or services from the
Deemed Obligor regardless of the non-delivery of or failure to furnish of such
property or services, (d) in a transaction having the characteristics of a
take-or-pay or throughput contract or as described in paragraph 6 of FASB
Statement of Financial Accounting Standards No. 47, or (e) in respect of any
other transaction the effect of which is to assure the payment or performance
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(or payment of damages or other remedy in the event of nonpayment or
nonperformance) of any Assured Obligation.
"Indebtedness" of a Person shall mean:
(a) All obligations on account of money borrowed by, or credit
extended to or on behalf of, or for or on account of deposits with or
advances to, such Person;
(b) All obligations of such Person evidenced by bonds,
debentures, notes or similar instruments;
(c) All obligations of such Person for the deferred purchase
price of property or services;
(d) All obligations secured by a Lien on property owned by
such Person (whether or not assumed); and all obligations of such
Person under Capitalized Leases (without regard to any limitation of
the rights and remedies of the holder of such Lien or the lessor under
such Capitalized Lease to repossession or sale of such property);
(e) The face amount of all letters of credit issued for the
account of such Person and, without duplication, the unreimbursed
amount of all drafts drawn thereunder, and all other obligations of
such Person associated with such letters of credit or draws thereon;
(f) All obligations of such Person in respect of acceptances
or similar obligations issued for the account of such Person;
(g) All obligations of such Person under a product financing
or similar arrangement described in paragraph 8 of FASB Statement of
Accounting Standards No. 49 or any similar requirement of GAAP; and
(h) All obligations of such Person under any interest rate or
currency protection agreement, interest rate or currency future,
interest rate or currency option, interest rate or currency swap or cap
or other interest rate or currency hedge agreement.
"Indemnified Parties" shall mean the Bank and its affiliates, and the
directors, officer, employees, attorneys and agents of the Bank.
"Interest Expense" for any Person for any period shall mean the total
interest expense of such Person for such Period determined on a consolidated
basis in accordance with GAAP.
"Interest Rate" shall have the meaning set forth in Section 2.04(a)
hereof.
"Law" shall mean any law (including common law), constitution, statute,
treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree
or award of any Governmental Authority.
"Leases" shall have the meaning set forth in Section 4.01(b) hereof.
"Leasehold Mortgages" shall have the meaning set forth in Section
4.01(b) hereof.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional
A-5
42
sale or title retention arrangement, and any assignment, deposit arrangement or
lease intended as, or having the effect of, security.
"Loan Account" shall have the meaning set forth in Section 2.05(e)
hereof.
"Loan Documents" shall mean this Agreement, the Note, and the Security
Documents, and all other agreements and instruments extending, renewing,
refinancing or refunding any indebtedness, obligation or liability arising under
any of the foregoing, in each case as the same may be amended, modified or
supplemented from time to time hereafter.
"Lockbox Receipts Deposit" shall have the meaning set forth in Section
2.03(a) hereof.
"Material Adverse Effect" shall mean: (a) a material adverse effect on
the business, operations, condition (financial or otherwise) or prospects of the
Borrower (b) a material adverse effect on the ability of the Borrower to perform
or comply with any of the terms and conditions of any Loan Document, or (c) an
adverse effect on the legality, validity, binding effect, enforceability or
admissibility into evidence of any Loan Document, or the ability of the Bank to
enforce any rights or remedies under or in connection with any Loan Document.
"Mortgaged Property" shall have the meaning set forth in Section
4.01(b) hereof.
"Multiemployer Plan" shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Borrower or any Controlled Group Member has or had an obligation to
contribute.
"Net Income" for any Person for any period shall mean the net earnings
(or losses) after taxes of such Person for such period determined on a
consolidated basis in accordance with GAAP.
"Net Value" shall have the meaning set forth in Section 2.09(b) hereof.
"Obligations" shall mean, with respect to the Borrower, all
indebtedness, obligations and liabilities of the Borrower (whether as a Borrower
or a Guarantor) to the Bank from time to time arising under or in connection
with or related to or evidenced by or secured by or under color of this
Agreement or any other Loan Document, and all extensions, renewals or
refinancings thereof, whether such indebtedness, obligations or liabilities are
direct or indirect, otherwise secured or unsecured, joint or several, absolute
or contingent, due or to become due, whether for payment or performance, now
existing or hereafter arising. Without limitation of the foregoing, such
indebtedness, obligations and liabilities include the principal amount of all
Loans, interest, fees, indemnities, expenses under or in connection with this
Agreement or any other Loan Document, and all extensions, renewals and
refinancings thereof, whether or not such Loans were made in compliance with the
terms and conditions of this Agreement or in excess of the obligation of the
Bank to lend. Obligations shall remain Obligations notwithstanding any
assignment or transfer or any subsequent assignment or transfer of any of the
Obligations or any interest therein.
"Office" when used in connection with the Bank, shall mean its office
located at National City Center, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, or at such other office or offices of the Bank or any branch, subsidiary
or affiliate thereof as may be designated in writing from time to time by the
Bank to the Borrower.
"Parent" shall have the meaning set forth within the definition of
"Subsidiary" herein.
A-6
43
"PBGC" means the Pension Benefit Guaranty Corporation established under
Title IV of ERISA or any other governmental agency, department or
instrumentality succeeding to the functions of said corporation.
"Pension-Related Event" shall mean any of the following events or
conditions:
(a) Any action is taken by any Person (i) to terminate, or
which would result in the termination of, a Plan, either pursuant to
its terms or by operation of law (including, without limitation, any
amendment of a Plan which would result in a termination under Section
4041(e) of ERISA), or (ii) to have a trustee appointed for a Plan
pursuant to Section 4042 of ERISA;
(b) PBGC notifies any Person of its determination that an
event described in Section 4042 of ERISA has occurred with respect to a
Plan, that a Plan should be terminated, or that a trustee should be
appointed for a Plan;
(c) Any Reportable Event occurs with respect to a Plan;
(d) Any action occurs or is taken which could result in the
Borrower becoming subject to liability for a complete or partial
withdrawal by any Person from a Multiemployer Plan (including, without
limitation, seller liability incurred under Section 4204(a)(2) of
ERISA), or the Borrower or any Controlled Group Member receives from
any Person a notice or demand for payment on account of any such
alleged or asserted liability; or
(e) (i) There occurs any failure to meet the minimum funding
standard under Section 302 of ERISA or Section 412 of the Code with
respect to a Plan, or any tax return is filed showing any tax payable
under Section 4971(a) of the Code with respect to any such failure, or
the Borrower or any Controlled Group Member receives a notice of
deficiency from the Internal Revenue Service with respect to any
alleged or asserted such failure, or (ii) any request is made by any
Person for a variance from the minimum funding standard, or an
extension of the period for amortizing unfunded liabilities, with
respect to a Plan.
"Permitted Liens" shall have the meaning set forth in Section 6.02
hereof.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, Governmental
Authority or any other entity.
"Plan" means any employee pension benefit plan within the meaning of
Section 3(2) of ERISA (other than a Multiemployer Plan) covered by Title IV of
ERISA by reason of Section 4021 of ERISA, of which the Borrower or any
Controlled Group Member is or has been within the preceding five years a
"contributing sponsor" within the meaning of Section 4001(a)(13) of ERISA, or
which is or has been within the preceding five years maintained for employees of
the Borrower or any Controlled Group Member.
"Postretirement Benefits" shall mean any benefits, other than
retirement income, provided by the Borrower to retired employees, or to their
spouses, dependents or beneficiaries, including, without limitation, group
medical insurance or benefits, or group life insurance or death benefits.
"Potential Default" shall mean any event or condition which with
notice, passage of time or a determination by the Bank, or any combination of
the foregoing, would constitute an Event of Default.
A-7
44
"Prime Rate" as used herein, shall mean the interest rate per annum
announced from time to time by the Bank as its prime rate of interest, which
rate may not be the lowest rate then being charged to commercial borrowers of
the Bank and which rate shall change automatically and without notice from time
to time effective as of the effective date of change in such prime rate of
interest.
"Related Litigation" shall have the meaning set forth in Section
8.14(b) hereof.
"Reportable Event" means (i) a reportable event described in Section
4043 of ERISA and regulations thereunder, (ii) a withdrawal by a substantial
employer from a Plan to which more than one employer contributes, as referred to
in Section 4063(b) of ERISA, (iii) a cessation of operations at a facility
causing more than twenty percent (20%) of Plan participants to be separated from
employment, as referred to in Section 4068(f) of ERISA, or (iv) a failure to
make a required installment or other payment with respect to a Plan when due in
accordance with Section 412 of the Code or Section 302 of ERISA which causes the
total unpaid balance of missed installments and payments (including unpaid
interest) to exceed $750,000.
"Responsible Officer" shall mean the President, Chief Financial Officer
or Treasurer of the Borrower.
"Revolving Credit Commitment" shall have the meaning set forth in
Section 2.01(a) hereof.
"Revolving Credit Commitment Fee" shall have the meaning set forth in
Section 2.02(a) hereof.
"Revolving Credit Committed Amount" shall have the meaning set forth in
Section 2.01(a) hereof.
"Revolving Credit Loans" shall have the meaning set forth in Section
2.01(a) hereof.
"Revolving Credit Maturity Date" shall mean July 30, 2003.
"Revolving Credit Note" shall have the meaning set forth in Section
2.01(c) hereof.
"RIDC Lease" shall have the meaning set forth in Section 4.01(b)
hereof.
"Rolling Four Quarter Basis" shall mean with respect to any component
of any ratio, the sum of such component for each of the four Fiscal Quarters
immediately preceding the date with respect to which such ratio is to be
determined.
"Secured Property" shall have the meaning set forth in Section 8.12
hereof.
"Security Documents" shall mean the Borrower's Security Agreement, the
Leasehold Mortgages and any other agreements or instruments from time to time to
time granting or purporting to grant the Bank a Lien in any property to secure
the Obligations.
"Spedd Lease" shall have the meaning set forth in Section 4.01(b)
hereof.
"Standard Notice" shall mean an irrevocable notice provided by the
Borrower no later than 2:00 p.m., Pittsburgh, PA time on a Business Day
requesting that the Bank make one or more Revolving Credit Loans.
"Subsidiary" or "Subsidiaries" of a Person ("Parent") shall mean,
singularly or collectively as the context may require, (i) any corporation more
than fifty percent (50%) of whose capital stock of any class or classes having
by the terms thereof ordinary voting power to elect a majority of the directors
of such
A-8
45
corporation is owned (directly or indirectly) by such Parent and/or one or more
Subsidiaries of such Parent, and (ii) any partnership, association, joint
venture or other entity in which such Parent and/or one or more Subsidiaries of
such Parent has more than a fifty percent (50%) equity interest.
1.02. Construction. Unless the context of this Agreement otherwise
clearly requires, references to the plural include the singular, the singular
the plural and the part the whole; "or" has the inclusive meaning represented by
the phrase "and/or"; and "property" includes all properties and assets of any
kind or nature, tangible or intangible, real, personal or mixed. References in
this Agreement to "determination" (and similar terms) by the Bank include good
faith estimates by the Bank (in the case of quantitative determinations) and
good faith beliefs by the Bank (in the case of qualitative determinations). The
words "hereof," "herein," "hereunder" and similar terms in this Agreement refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References herein to "out-of-pocket expenses" of a Person (and
similar terms) include, but are not limited to, the fees of in-house counsel and
other in-house professionals of such Person to the extent that such fees are
routinely identified and specifically charged under such Person's normal cost
accounting system. The section and other headings contained in this Agreement
and the Table of Contents preceding this Agreement are for reference purposes
only and shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection and exhibit
references are to this Agreement unless otherwise specified.
1.03. Accounting Principles.
(a) As used herein, "GAAP" shall mean generally accepted accounting
principles as such principles shall be in effect at the Relevant Date, subject
to the provisions of this Section 1.03. As used herein, "Relevant Date" shall
mean the date a relevant computation or determination is to be made or the date
of relevant financial statements, as the case may be.
(b) Except as otherwise provided in this Agreement, all computations
and determinations as to accounting or financial matters shall be made, and all
financial statements to be delivered pursuant to this Agreement shall be
prepared, in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP.
(c) If any change in GAAP after the date of this Agreement is or shall
be required to be applied to transactions then or thereafter in existence, and a
violation of one or more provisions of this Agreement shall have occurred or in
the opinion of the Borrower would likely occur which would not have occurred or
be likely to occur if no change in accounting principles had taken place,
(i) The parties agree that such violation shall not be
considered to constitute an Event of Default or a Potential Default for
a period of 10 days from the date the Borrower notifies the Bank of the
application of this Section 1.03(c);
(ii) The parties agree in such event to negotiate in good
faith an amendment of this Agreement which shall approximate to the
extent possible the economic effect of the original financial covenants
after taking into account such change in GAAP; and
(iii) If the parties are unable to negotiate such an amendment
within 10 days, the Borrower shall have the option of (A) prepaying the
Loan (pursuant to applicable provisions hereof) or (B) submitting the
drafting of such an amendment to a firm of independent certified public
accountants of nationally recognized standing acceptable to the
parties, which shall complete its draft of such amendment within 90
days of submission; if the Borrower and the Bank cannot agree, the firm
shall be selected by binding arbitration in the City of Pittsburgh,
Pennsylvania in accordance with
A-9
46
the rules then obtaining of the American Arbitration Association. If
the Borrower does not exercise either such option within said period,
then as used in this Agreement, "GAAP" shall mean generally accepted
accounting principles in effect at the Relevant Date. The parties agree
that if the Borrower elects the option in clause (B) above, until such
firm has been selected and completes drafting such amendment, no such
violation shall constitute an Event of Default or a Potential Default.
(d) If any change in GAAP after the date of this Agreement is required
to be applied to transactions or conditions then or thereafter in existence, and
the Bank shall assert that the effect of such change is or shall likely be to
distort materially the effect of any of the definitions of financial terms in
Article I hereof or any of the covenants of the Borrower in Section 6.01 hereof
(the "Financial Provisions"), so that the intended economic effect of any of the
Financial Provisions will not in fact be accomplished,
(i) The Bank shall notify the Borrower of such assertion,
specifying the change in GAAP which is objected to, and until otherwise
determined as provided below, the specified change in GAAP shall not be
made by the Borrower in its financial statements for the purpose of
applying the Financial Provisions; and
(ii) The parties shall follow the procedures set forth in
paragraph (ii) and the first sentence of paragraph (iii) of subsection
(b) of this Section. If the parties are unable to agree on an amendment
as provided in said paragraph (ii) and if the Borrower does not
exercise either option set forth in the first sentence of said
paragraph (iii) within the specified period, then as used in this
Agreement "GAAP" shall mean generally accepted accounting principles in
effect at the Relevant Date, except that the specified change in GAAP
which is objected to be the Bank shall not be made in applying the
Financial Provisions. The parties agree that if the Borrower elects the
option in clause (B) of the first sentence of said paragraph (iii),
until such independent firm has been selected and completes drafting
such amendment, the specified change in GAAP shall not be made in
applying the Financial Provisions.
(e) All expenses of compliance with this Section 1.03 shall be paid for
by the Borrower.
A-10
47
EXHIBIT A
[Form of Revolving Credit Note]
48
EXHIBIT B
[Form of Borrowing Base Certificate]
49
EXHIBIT C
[Form of Borrower's Security Agreement]
50
EXHIBIT D
[Form of Leasehold Mortgage]
51
EXHIBIT E-1
[Form of Memorandum of Lease]
52
EXHIBIT E
[Form of Ground Lessor Estoppel]
53
EXHIBIT F
[Form of Landlord's Waiver and Consent]
54
EXHIBIT G
[Form of Quarterly Compliance Certificate]
55
Revolving Credit Note
$5,000,000.00 Pittsburgh, Pennsylvania
July 13, 2001
FOR VALUE RECEIVED, the undersigned, Steel City Products, Inc., a Delaware
corporation (the "Borrower"), promises to pay to the order of National City Bank
of Pennsylvania (the "Bank") on or before July 30, 2003, the Revolving Credit
Maturity Date, and at such earlier dates as may be required by the Agreement (as
defined below), the lesser of (i) the principal sum of FIVE MILLION AND 00/100
DOLLARS ($5,000,000.00) or (ii) the aggregate unpaid principal amount of all
Revolving Credit Loans made by the Bank to the Borrower from time to time
pursuant to the Agreement. The Borrower further promises to pay to the order of
the Bank interest on the unpaid principal amount hereof from time to time
outstanding at the rate or rates per annum determined pursuant to the Agreement,
payable on the dates set forth in the Agreement.
This Note is a "Revolving Credit Note" as referred to in, and is entitled to the
benefits of, the Revolving
Credit Agreement, dated as of July 13, 2001, between
the Borrower and the Bank (as the same may be amended, modified or supplemented
from time to time, the "Agreement"), which among other things provides for the
acceleration of the maturity hereof upon the occurrence of certain events and
for prepayments in certain circumstances and upon certain terms and conditions.
Terms defined in the Agreement have the same meanings herein.
This Note is secured by and is entitled to the benefits of the Liens granted by
the Security Documents referred to in the Agreement.
The Borrower hereby expressly waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the Agreement, and upon the
occurrence of certain events specified in the Agreement, an action for amounts
due hereunder or thereunder shall immediately accrue.
The Borrower shall have the right to prepay the Loans in whole or in part at any
time or from time to time without premium or penalty except as specifically
provided otherwise in Article II of the Agreement.
Upon the occurrence of an Event of Default and the expiration of all applicable
cure periods, Borrower does hereby empower the Prothonotary or any attorney of
any court of record within the Commonwealth of Pennsylvania to appear for
Borrower and, with or without one or more complaints filed, confess judgment or
judgments against Borrower in any court of record within the Commonwealth of
Pennsylvania at any time after the date of this note, so long as an uncured
Event of Default shall continue to exist, in favor of the Bank, its successors
and assigns, for the unpaid principal balance of this note and all interest
accrued hereon, together with costs of suit and an attorney's commission of 10%
for collection of such sums, and Borrower hereby forever waives and releases any
and all errors in said proceedings and waives stay of execution and stay,
continuance or adjournment of sale on execution. The authority and power to
appear for and enter judgment against Borrower shall not be exhausted by one or
more exercises thereof, and may be exercised from time to time and as often as
lender or its successors and assigns shall deem necessary or desirable.
56
This Note shall be governed by, construed and enforced in accordance with the
laws of the Commonwealth of Pennsylvania, without regard to principles of choice
of law.
STEEL CITY PRODUCTS, INC.
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Title: President, COO
57
SECURITY AGREEMENT
THIS AGREEMENT, dated as of July 13, 2001, made by Steel City
Products, Inc., a Delaware corporation ("Grantor"), in favor of National City
Bank of Pennsylvania, a national banking association (the "Bank").
Recitals:
A. The Grantor has entered into a
Credit Agreement dated as of
July 13, 2001 (as amended from time to time, the "
Credit Agreement") with the
Bank pursuant to which the Bank has agreed to make certain a credit facility
available to the Grantor.
B. It is a condition precedent to the extension of credit
under the
Credit Agreement that the Grantor execute and deliver this Agreement.
This Agreement is made by Grantor among other things to induce the Bank to enter
into the Loan Documents (as defined below), and to induce the Bank to extend
credit under the
Credit Agreement.
NOW, THEREFORE, in consideration of the premises, and
intending to be legally bound, Grantor hereby agrees as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions.
(a) Certain Definitions. Capitalized terms not otherwise
defined herein shall have the meanings given in the
Credit Agreement.
In addition to the other terms defined elsewhere in this Agreement, as
used herein the following terms shall have the following meanings:
"Distributions" shall mean all property, rights and interests
of any kind or nature (whether cash, securities or other) from time to
time received, receivable or otherwise distributed with respect to or
in exchange for any Collateral, including all cash, securities or other
property received or receivable as dividends, or as a result of any
stock splits, reclassifications, mergers or consolidations, or as any
other distributions (whether similar or dissimilar to the foregoing),
or as a result of exercise of any options or warrants, or as principal,
interest or premium.
"Loan Documents" shall mean the
Credit Agreement, this
Agreement, and all agreements and instruments from time to time
delivered under or in connection with any of the foregoing, in each
case as the same may be amended from time to time.
"Secured Obligations" shall mean, with respect to Grantor, all
obligations from time to time of Grantor to the Bank under or in
connection with any Loan Document.
"UCC" shall mean the Uniform Commercial Code as in effect in
the Commonwealth of Pennsylvania from time to time.
(b) Certain Cross-References. The following terms are defined
in this Agreement in the Section or other place indicated:
Bank Preamble
Collateral 2.1
Credit Agreement Recitals
Equipment 2.1(a)
Grantor Preamble
58
Inventory 2.1(b)
Bank Preamble
Notices 6.3
Receivables 2.1(c)
Related Contracts 2.1(c)
1.2. UCC Definitions. Unless otherwise defined herein, terms
defined in Articles 8 or 9 of the UCC shall have the same meanings in this
Agreement.
ARTICLE II
THE SECURITY
2.1. Grant of Security. As security for the full and timely
payment and performance of the Secured Obligations, Grantor hereby assigns and
pledges to the Bank, and grants to the Bank a security interest in, all right,
title and interest of Grantor in, to and under all personal and fixture property
of every kind and nature, including, without limitation, the following, whether
now or hereafter existing or acquired (the "Collateral"):
(a) all equipment in all of its forms, all fixtures, and all
accessions, additions, attachments, parts, substitution, replacements
and documents of title to or for any of the foregoing, in each case
wherever located (collectively, the "Equipment");
(b) all inventory in all of its forms (including, without
limitation, (i) all raw materials and work in progress therefor,
finished goods thereof and materials used or consumed in the
manufacture or production thereof, (ii) all goods in which Grantor has
an interest in mass or a joint or other interest or right of any kind
(including, without limitation, goods in which Grantor has an interest
or right as consignee), and (iii) all goods which are returned to or
repossessed by Grantor, and all accessions to, products of and
documents for any of the foregoing, in each case wherever located
(collectively, the "Inventory");
(c) all accounts, contract rights, chattel paper, instruments,
documents, deposit accounts, general intangibles and rights to proceeds
of letters of credit, whether or not arising out of or in connection
with the sale or lease of goods or the rendering of services (and
specifically including, without limitation, all insurance refund
claims, insurance claims, tort claims and tax refund claims; all rights
in respect of any pension plan or similar arrangement; all patents,
trademarks (together with the goodwill of the business relating
thereto), trade names, service marks and copyrights, and all
applications for any of the foregoing; all trade secrets and other
proprietary information, all unpatented inventions (whether or not
patentable), and all other intellectual property of any kind or nature;
all licenses, permits and agreements of any type by which Grantor uses
or possesses or has authority to use or possess property or rights of
others, or by which others use, possess or have authority to use or
possess any property or rights of Grantor; all other licenses, permits
and consents of any kind or nature; and all computer software,
including source code and documentation; and all rights now or
hereafter existing in and to all security agreements, guaranties and
other agreements securing or otherwise relating to any such accounts,
contract rights, chattel paper, instruments, documents, deposit
accounts, general intangibles or rights to proceeds of letters of
credit (such accounts, contract rights, chattel paper, instruments,
documents, deposit accounts, and general intangibles and rights to
proceeds of letters of credit being collectively the "Receivables," and
such security agreements, guaranties and other agreements being
collectively the "Related Contracts");
(d) all books and records in whatever form (together with all
related software) relating to, or used or useful in connection with,
any Collateral;
-2-
59
(e) all other goods of any kind or nature, wherever located;
all money; and all other personal property of any kind or nature,
tangible or intangible, wherever located; and
(f) all proceeds of any of the foregoing (including, without
limitation, proceeds which constitute property of the types described
in the foregoing clauses (a) through (e)) and, to the extent not
otherwise included, all payments under insurance (whether or not the
Bank is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral.
2.2. Grantor Remains Liable. Notwithstanding anything to the
contrary herein or in any other Loan Document, (a) Grantor shall remain liable
under the contracts and agreements included in the Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (b) the exercise by the
Bank of any rights or remedies under or in connection with this Agreement or any
other Loan Document shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) the Bank shall not have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement or any other
Loan Document, nor shall the Bank be obligated to perform any of the obligations
or duties of Grantor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.
2.3. Continuing Agreement. This Agreement creates a continuing
security interest in the Collateral and shall continue in full force and effect
until all Secured Obligations have been paid in cash and performed in full, and
all commitments to extend credit under the Loan Documents have terminated. Upon
the payment in cash and performance in full of all Secured Obligations and
termination of all commitments to extend credit under the Loan Documents, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination, the Bank will, at
Grantor's request and expense, return to Grantor, without any representations,
warranties or recourse of any kind whatsoever, such of the Collateral as then
may be held by the Bank hereunder, and execute and deliver to Grantor such
documents as Grantor may reasonably request to evidence such termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Grantor hereby represents and warrants to the Bank as follows:
3.1. Title. The Grantor is the legal and beneficial owner of
the Collateral, free and clear of any lien, security interest, option or other
charge or encumbrance, except for the security interest under this Agreement in
favor of the Bank securing the Secured Obligations and except for Permitted
Liens. No financing statement or other item similar in effect covering any
Collateral is on file in any recording office, except such as may be filed in
favor of the Bank relating to this Agreement.
3.2. Validity, Perfection and Priority. This Agreement creates
a valid security interest in the Collateral in favor of the Bank securing the
Secured Obligations, which security interest has been duly perfected and is
prior to all other liens, security interests, options or other charges or
encumbrances except for Permitted Liens. All filings and other actions necessary
or desirable to perfect and protect such security interest in favor of the Bank
have been duly made and taken.
3.3. Governmental Approvals and Filings. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is or will be necessary (a) for the grant by the
Grantor of the security interest in the Collateral hereunder or for the
execution, delivery or performance of this Agreement by the Grantor, (b) to
ensure the validity, perfection or priority of the security interest in the
Collateral granted hereunder, or (c) for the exercise by the Bank of any of its
rights or remedies hereunder, except for the filing of financing statements and
continuation
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60
statements in appropriate jurisdictions pursuant to the Uniform Commercial Code
as in effect in such jurisdictions and except as to such Collateral as to which
perfection can be obtained solely by means other than by filing a financing
statement.
3.4. State of Incorporation; Offices, etc. The Grantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Schedule 3.4 identifies as of the date hereof the
address of the chief executive office of Grantor, of each office (whether
maintained by Grantor or otherwise) where books and records relating to the
Collateral are kept, and of each place of business of Grantor. Schedule 3.4 also
identifies all changes in the foregoing information during the one year period
ending on the date hereof.
3.5. Location of Equipment and Inventory. Schedule 3.5
identifies as of the date hereof the address of each place at which Equipment or
Inventory of Grantor is located. Schedule 3.5 also identifies all changes in the
foregoing information during the one year period ending on the date hereof.
3.6. Names, etc. During the one year period ending on the date
hereof, neither Grantor nor any of its direct or indirect predecessors by
merger, consolidation or other corporate reorganization is or has been known by
or used any corporate or fictitious name or trade name (other than the corporate
names of the Grantor as of the date hereof), nor has Grantor or any such
predecessor been the subject of any merger, consolidation or other corporate
reorganization, nor has Grantor or any such predecessor otherwise changed its
name, identity or corporate structure, except as set forth in Schedule 3.6. For
each such direct and indirect predecessor of Grantor, Schedule 3.6 also
identifies the respective addresses referred to in Sections 3.4 and 3.5 for all
times during such period.
3.7. [Reserved]
3.8. Possession and Control. Grantor has exclusive possession
and control of its Equipment and Inventory.
3.9. Certain Receivables. Grantor has delivered to the Bank
possession of all originals of all promissory notes or other instruments,
chattel paper and negotiable documents constituting Collateral. None of the
Receivables is evidenced by a promissory note or other instrument, chattel paper
or negotiable document.
3.10. Compliance with Laws, etc. All Inventory has been
produced in compliance with all requirements of the Fair Labor Standards Act.
Grantor is in compliance with all laws, the noncompliance with which might have
a material adverse effect on the value of the Collateral or the value of the
security interest in favor of the Bank under this Agreement in the Collateral.
ARTICLE IV
COVENANTS
4.1. Books and Records; Inspection. Grantor shall (a) keep
complete and accurate books and records concerning the Collateral and, at the
request of the Bank from time to time, permit the Bank or its representatives to
inspect and copy such books and records, (b) at the request of the Bank from
time to time, permit the Bank or its representatives to inspect any Collateral
not in the possession of the Bank, and (c) furnish to the Bank such information
and reports in connection with the Collateral at such times and in such form as
the Bank may reasonably request. The Bank shall have the right to examine and
verify the Collateral from time to time, and the Grantor shall cooperate with
the Bank in such examination and verification.
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61
4.2. Transfers and Other Liens, etc.
(a) Transfers. Grantor shall not sell, assign, transfer or
otherwise dispose of any Collateral (voluntarily or involuntarily, by
operation of law or otherwise), except (i) Inventory in the ordinary
course of business, and (ii) Equipment that is worn-out, obsolete or no
longer useful in the business of any Grantor, all in the ordinary
course of business.
(b) Other Liens. Grantor shall not create or permit to exist
any lien, security interest, option or other charge or encumbrance on
any Collateral (voluntarily or involuntarily, by operation of law or
otherwise), except for the security interest under this Agreement in
favor of the Bank securing the Secured Obligations and Permitted Liens.
4.3. Change in State of Incorporation or Name, etc. Grantor
shall not change the state of its incorporation without the Bank's prior written
consent. Grantor shall not have, use or be known by any corporate or fictitious
name or trade name (other than its corporate name as of the date hereof and
names set forth in Schedule 3.6), nor be the subject of any merger,
consolidation or other corporate reorganization, nor otherwise change its name,
identity or corporate structure.
4.4. Certain Covenants Relating Primarily to Equipment and
Inventory.
(a) Location. Grantor shall keep all Equipment and Inventory
at its addresses identified in Schedule 3.5, or upon 60 days' written
notice to the Bank (specifically referring to this Section 4.4(a)), at
such other locations in jurisdictions where all actions referred to in
Section 4.8(a) have been completed; provided, that the foregoing
restriction shall not apply to the following: (i) Inventory in transit
to purchasers from Grantor in the ordinary course of business, (ii)
Equipment and Inventory purchased by Grantor in the ordinary course of
business but not yet received, (iii) Equipment temporarily removed in
the ordinary course of business for repair, refurbishment, work at job
sites or routine service and (iv) Equipment constituting motor
vehicles, aircraft, shipping vessels, rolling stock or other mobile
goods and relocated in the ordinary course of business. Grantor agrees
that it shall keep all Equipment and Inventory in the 48 contiguous
United States (except for Equipment and Inventory described in the
proviso to the foregoing sentence).
(b) Maintenance and Repair. Grantor shall cause the Equipment
to be maintained and preserved in the same condition, repair and
working order as when new, ordinary wear and tear excepted; and Grantor
shall forthwith, or in the case of any loss or damage to any of the
Equipment as promptly as practicable after the occurrence thereof, make
or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable to such ends.
Grantor shall promptly notify the Bank of any material loss or damage
to any of the Equipment.
(c) Possession and Control. Grantor shall at all times retain
exclusive possession and control of all of its Equipment and Inventory.
(d) Negotiable Documents. Grantor will not permit any
Collateral to constitute or be covered by a negotiable document. If any
negotiable documents exists in violation of the foregoing prohibition,
Grantor will immediately deliver such negotiable documents to the Bank
in accordance with Section 4.8.
(e) Taxes, Claims; FLSA. Grantor shall pay promptly when due
all property and other taxes, assessments and governmental charges or
levies imposed upon, and all claims (including claims for labor,
materials and supplies) against, the Equipment and Inventory. In
producing Inventory, Grantor shall comply with all requirements of the
Fair Labor Standards Act.
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62
(f) Certificate of Title. Grantor shall cause the security
interests in favor of the Bank hereunder to be duly noted on any
certificate of title with respect to any Collateral (except for
Collateral which is subjected to a Permitted Lien), and shall promptly
(and in any event within 10 days after the acquisition of any property
subject to any certificate of title), deliver or cause to be delivered
to the Bank each such certificate of title.
4.5. Certain Covenants Relating Primarily to Receivables
(a) Offices. Grantor shall keep its chief executive office,
and the offices (whether maintained by Grantor or otherwise) where
books and records relating to the Collateral are kept, and its places
of business, at the respective addresses identified in Schedule 3.5 or,
upon 60 days' written notice (specifically referring to this Section
4.5(a)) to the Bank, at such other locations in jurisdictions where all
actions referred to in Section 4.9(a) have been completed. Grantor
shall maintain its chief executive office in the 48 contiguous United
States.
(b) Collection; Servicing. Except as otherwise provided in
this Section 4.5(b) or as provided in that certain Lockbox Agreement
dated ______________ between Grantor and the Bank, Grantor shall
continue to collect, at its own expense, all amounts due or to become
due Grantor under the Receivables. In connection with such collections,
Grantor may take (and, at the Bank's direction, shall take) such action
as Grantor or the Bank may deem necessary or advisable to enforce
collection of the Receivables; provided, however, that the Bank shall
have the right at any time upon the occurrence and during the
continuance of an Event of Default or Potential Default to notify (or
require Grantor to notify) the account debtors or obligors under any
Receivables of the security interest in favor of the Bank in the
Receivables and to direct such account debtors or obligors to make
payments of all amounts due or to become due to Grantor thereunder
directly to the Bank and, upon such notification and at the expense of
Grantor, to enforce collection of any such Receivables, and to adjust,
settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Grantor may have done. After receipt by
Grantor of the notice from the Bank referred to in the proviso to the
preceding sentence, (i) all amounts and proceeds (including
instruments) received by Grantor in respect of the Receivables shall be
received in trust for the benefit of the Bank hereunder, shall be
segregated from other funds of Grantor and shall be forthwith paid over
or delivered to the Bank in the same form as so received (with any
necessary endorsement) to be held as collateral hereunder and either
(A) released to Grantor so long as no Event of Default or Potential
Default shall have occurred and be continuing, or (B) if any Event of
Default or Potential Default shall have occurred and be continuing,
applied as provided in Section 5.6, and (ii) Grantor shall not adjust,
settle or compromise the amount or payment of any Receivable, release
wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
4.6 [Reserved]
4.7. Insurance.
(a) Maintenance, etc. Grantor shall, at its own expense,
maintain or cause to be maintained insurance of the type referred to in
Section 5.02 of the Credit Agreement.
(b) Reimbursement Generally. Reimbursement under any liability
insurance policy maintained by Grantor pursuant to Section 4.7(a) may
be paid directly to the Person who has incurred liability covered by
such insurance. Subject to Section 18 of the Leasehold Mortgage, in
case of any loss involving damage to Equipment or Inventory to which
Section 4.7(c) does not apply, Grantor shall make the necessary repairs
to or replacement of such Equipment or Inventory, and any proceeds of
insurance maintained by Grantor for such purpose shall be payable to
Grantor as reimbursement for the costs of such repairs or replacements.
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63
(c) Reimbursement in Certain Cases. Subject to Section 18 of
the Leasehold Mortgage, upon the occurrence and during the continuance
of any Event of Default or Potential Default, all insurance payments in
respect of Equipment or Inventory shall be paid to the Bank and applied
as specified in Section 5.6 or, if the Bank so elects, applied to
repair or replace such lost Equipment or Inventory.
4.8. Further Assurances.
(a) General. Grantor shall from time to time, at its expense,
promptly execute and deliver all further instruments and agreements,
and take all further actions, that may be necessary or appropriate, or
that the Bank may reasonably request, in order to perfect or protect
any assignment, pledge or security interest granted or purported to be
granted hereby or to enable the Bank to exercise or enforce its rights
and remedies hereunder. Without limiting the generality of the
foregoing, Grantor will:
(i) if any Collateral shall be evidenced by a
promissory note or other instrument, chattel paper or
negotiable document, immediately deliver to the Bank such
promissory note or instrument or chattel paper or negotiable
document, duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and
substance satisfactory to the Bank,
(ii) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments
or notices, as may be necessary or desirable, or as the Bank
may request, in order to perfect and preserve any assignment,
pledge or security interest granted or purported to be granted
hereby, and
(iii) ▇▇▇▇ conspicuously each copy of all chattel
paper and negotiable documents included in the Collateral and,
at the request of the Bank, each Related Contract and each of
its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Bank, indicating that
such chattel paper, negotiable document, Related Contract or
Collateral is subject to the security interest granted
pursuant hereto.
(b) Financing Statements, etc. Grantor hereby authorizes the
Bank to file one or more financing or continuation statements, and
amendments thereto, relating to any Collateral without the signature of
Grantor where permitted by law. A photocopy or other reproduction of
this Agreement or any financing statement covering any Collateral shall
be sufficient as a financing statement where permitted by law.
(c) Waiver by Landlords, Mortgagees, etc. To the extent that
any Collateral (other than Equipment and Inventory described in any of
clauses (i) through (v) of Section 4.4(a)) at any time is located on
premises that is leased from, or otherwise belonging to, any Person
other than Grantor, or that is subject to a mortgage or other lien in
favor of any Person other than Grantor, Grantor shall provide the Bank
with a waiver agreement in form and substance satisfactory to the Bank,
duly executed by such landlord, mortgagee or other Person.
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64
ARTICLE V
CERTAIN RIGHTS AND REMEDIES OF THE BANK
5.1. Bank May Perform. If Grantor fails to perform any
obligation under or in connection with this Agreement, the Bank may (but shall
have no duty to) itself perform or cause performance of such obligation, and the
expenses of the Bank incurred in connection therewith shall be payable by
Grantor pursuant to Section 6.4. The Bank may from time to time take any other
action which the Bank deems necessary or appropriate for the maintenance,
preservation or protection of any of the Collateral or of its security interest
therein.
5.2. No Duty to Exercise Powers. The powers of the Bank under
and in connection with this Agreement are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
5.3. Duties of Bank. Except for exercise of reasonable care in
the custody and preservation of any Collateral in its possession and accounting
for moneys received by it pursuant to this Agreement, the Bank shall have no
duty as to any Collateral. In any event the Bank (a) shall have no duty to take
any steps to preserve rights against prior parties or any other rights
pertaining to any Collateral, (b) shall have no duty as to ascertaining or
taking action with respect to calls, conversions, exchanges, tenders, maturities
or other matters pertaining to any Collateral, whether or not the Bank has any
knowledge of such matters, and (c) shall not be liable for any action, omission,
insolvency or default on the part of any agent or custodian (other than the
Bank) appointed by the Bank in good faith. The Bank shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if it takes such action for such purpose as Grantor requests in
writing from time to time (but failure to take any such action shall not in
itself be deemed a failure to exercise reasonable care or evidence of such
failure). Subject only to the performance by the Bank of its duties set forth in
this Section 5.3, risk of loss, damage and diminution in value of the
Collateral, of whatever nature and however caused, shall be on Grantor.
5.4. Power of Attorney. Grantor hereby irrevocably appoints
the Bank, with full power of substitution, to be the attorney-in-fact of
Grantor, with full authority in the place and stead of Grantor and in the name
of Grantor or otherwise, from time to time in the Bank's discretion, to take any
action and to execute any instruments and agreements which the Bank may deem
necessary or advisable to accomplish the purposes of this Agreement, including
the following:
(a) to demand, collect, enforce, file claims for, ▇▇▇ for,
recover, compromise, release, and take any action or institute any
proceedings to collect or enforce, all rights to payments due or to
become due and all other rights of Grantor under or in connection with
any Collateral,
(b) to receive, endorse and collect any checks, notes or other
instruments, documents, chattel paper or any other payment media in
connection with the foregoing clause (a), and
(c) to perform all obligations of Grantor hereunder;
provided, that except for taking actions referred to in Section 4.8(a), such
power of attorney may be exercised only so long as an Event of Default or
Potential Default has occurred and is continuing. Such power of attorney is
irrevocable and coupled with an interest. All third parties are entitled to rely
conclusively on a representation by the Bank that it is entitled to exercise
such power of attorney.
5.5. Certain Remedies. If any Event of Default shall have
occurred and be continuing, the Bank may exercise all rights and remedies which
it may have under this Agreement, any other agreement, at law or otherwise, and
in addition, the following provisions shall apply:
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65
(a) The Bank may exercise all rights and remedies with respect
to the Collateral and each part thereof as are provided by the UCC to a
secured party on default (whether or not the UCC applies to the
affected Collateral). To the extent, if any, the Bank does not
otherwise have the right to do so, the Bank may (i) take absolute
possession and control of the Collateral or any part thereof, (ii)
transfer any Collateral into the name of the Bank or its nominees,
(iii) notify the parties obligated on the Collateral to make to the
Bank any payments due or to become due, (iv) receive any payments made
under or in connection with the Collateral, (v) exercise and enforce
all rights and remedies of Grantor under or in connection with the
Collateral, (vi) demand, collect, enforce, file claims for, ▇▇▇ for,
recover, compromise, release, and take any action or institute any
proceedings to collect or enforce, all rights to payments due or to
become due and all other rights of Grantor under or in connection with
any Collateral, and (vii) otherwise deal in and act with respect to the
Collateral in all respects as though it were the outright owner
thereof;
(b) Upon the request of the Bank, Grantor will, at its
expense, forthwith assemble all or part of the Collateral as directed
by the Bank and make it available to the Bank at a place to be
designated by the Bank that is reasonably convenient to both parties.
The Bank may enter into, occupy and take possession of any premises
where any Collateral is located, without obligation to Grantor;
(c) All payments received by Grantor in respect of any
Collateral shall be received in trust for the benefit of the Bank,
shall be segregated from other funds of Grantor and shall be forthwith
paid over to the Bank in the same form as so received (with any
necessary endorsement);
(d) The Bank may, without notice except to the extent required
by law, sell the Collateral or any part thereof, in one or more
parcels, at public or private sale, at any of the Bank's offices or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Bank may deem commercially reasonable. Grantor
agrees that, to the extent notice of sale is required by law, at least
10 days' notice to Grantor of the time and place of any public sale or
the time after which any private sale is to be made, shall constitute
reasonable notification. The Bank shall not be obligated to make any
sale, regardless of notice of sale having been given. The Bank shall
not be obligated to clean-up or otherwise prepare the Collateral for
sale. The Bank may comply with any applicable state or federal law
requirements in connection with a disposition of the Collateral and
compliance will not be considered adversely to affect the commercial
reasonableness of any sale of Collateral. The Bank may specifically
disclaim any warranties of title or the like in connection with any
such sale. If Bank sells any of the Collateral upon credit, the Grantor
will be credited only with payments actually made by purchaser,
received by the Bank and applied to the indebtedness of purchaser. In
the event the purchaser fails to pay for the Collateral, the Bank may
resell the Collateral and Grantor shall be credited with proceeds of
the sale. The Bank may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned; and
(e) Grantor agrees that the Bank may comply with any
limitation or restriction in connection with any sale of any Collateral
as the Bank may deem be necessary or advisable in order to comply with
any law, or in order to obtain or make, or avoid the need to obtain or
make, any approval or registration of the offering, sale or purchase by
or with any governmental agency or regulatory body. Without limitation,
the Bank may, for the purpose of complying with applicable securities
laws, sell only by private sales to members of a restricted group of
offerees who will be obliged, among other things, to acquire such
Collateral for their own accounts for investment and not with a view to
distribution or resale. Grantor agrees that (i) the Bank may make sales
in compliance with such limitations and restrictions, even though such
sales may be at prices and on other terms less favorable to the seller
than if such approvals or registrations
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66
were obtained or made, (ii) the Bank shall have no obligation to delay
sale of any Collateral in order to obtain or make any such approval or
registration, and (iii) it shall not be commercially unreasonable to
make sales in compliance with such limitations and restrictions.
5.6. Application of Payments. All cash held by the Bank as
Collateral and all cash proceeds received by the Bank in respect of any sale of,
collection from, or other realization upon any of the Collateral, may in the
discretion of the Bank be held by the Bank as collateral for the Secured
Obligations, or then or at any time thereafter applied (after payment of any
amounts payable to the Bank pursuant to Section 6.4) in whole or part by the
Bank to the Secured Obligations (whether or not then due) in such order as the
Bank may elect. If and when all Secured Obligations shall have been paid in cash
in full and all commitments to extend credit under Loan Documents shall have
terminated, any surplus of such cash or cash proceeds held by the Bank shall be
paid over to Grantor or as otherwise required by law. Grantor shall remain
liable for any deficiency.
ARTICLE VI
MISCELLANEOUS
6.1. Amendments, etc. No amendment to or waiver of any
provision of this Agreement, and no consent to any departure by Grantor
herefrom, shall in any event be effective unless in a writing manually signed by
or on behalf of the Bank. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
6.2. No Implied Waiver; Remedies Cumulative. No delay or
failure of the Bank in exercising any right or remedy under this Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right or remedy preclude any other or further exercise thereof or the
exercise of any other right or remedy. The rights and remedies of the Bank under
this Agreement are cumulative and not exclusive of any other rights or remedies
available hereunder, under any other agreement, at law, or otherwise.
6.3. Notices. Except to the extent, if any, otherwise
expressly provided herein, all notices and other communications (collectively,
"notices") under this Agreement shall be given, shall be effective, and may be
relied upon, in the same way as notices under the Credit Agreement.
6.4. Indemnity and Expenses.
(a) Indemnity. Grantor agrees to indemnify the Bank from and
against any and all claims, losses, liabilities and expenses (including
reasonable attorneys' fees) arising out of or resulting from this
Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses, liabilities and expenses resulting
solely from the gross negligence or willful misconduct of the Bank.
(b) Expenses. Grantor will upon demand pay to the Bank the
amount of all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Bank
may incur in connection with (i) the administration of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of,
collection of or other realization upon, any Collateral, (iii) the
exercise or enforcement of any of the rights of the Bank hereunder, or
(iv) the failure by Grantor to perform or observe any of the provisions
hereof.
6.5. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous understandings and agreements.
6.6. Survival. The obligations of Grantor under Section 6.4
shall survive termination of this Agreement and all other events and conditions
whatever. All representations and warranties of
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Grantor contained in or made in connection with this Agreement shall survive,
and shall not be waived by, the execution and delivery of this Agreement, any
investigation by or knowledge of the Bank, any extension of credit, termination
of this Agreement, or any other event or circumstance whatever.
6.7. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute but one and the same agreement.
6.8. Construction. In this Agreement, unless the context
otherwise clearly requires, references to the plural include the singular, the
singular the plural, and the part the whole; the neuter case includes the
masculine and feminine cases; and "or" is not exclusive. In this Agreement, any
references to property (and similar terms) include an interest in such property
(or other item referred to); "include," "includes," "including" and similar
terms are not limiting; and "hereof," "herein," "hereunder" and similar terms
refer to this Agreement as a whole and not to any particular provision; and
"expenses," "costs," "out-of-pocket expenses" and similar terms include the
charges of in-house counsel, auditors and other professionals of the relevant
Person to the extent that such amounts are routinely identified and charged
under such Person's cost accounting system. Section and other headings in this
Agreement, and any table of contents herein, are for reference only and shall
not affect the interpretation of this Agreement in any respect. Section and
other references in this Agreement are to this Agreement unless otherwise
specified. This Agreement has been fully negotiated between the applicable
parties, each party having the benefit of legal counsel, and accordingly neither
any doctrine of construction of security agreements in favor of the grantor, nor
any doctrine of construction of ambiguities against the party controlling the
drafting, shall apply to this Agreement.
6.9. Successors and Assigns. This Agreement shall be binding
upon Grantor and its successors and assigns, and shall inure to the benefit of
and be enforceable by the Bank and its successors and assigns. Without
limitation of the foregoing, the Bank (and any successive assignee or
transferee) from time to time may assign or otherwise transfer all or any
portion of its rights or obligations under the Loan Documents (including all or
any portion of any commitment to extend credit), or any Secured Obligations, to
any other Person, and such Secured Obligations (including any Secured
Obligations resulting from extension of credit by such other Person under or in
connection with the Loan Documents) shall be and remain Secured Obligations
entitled to the benefit of this Agreement, and to the extent of its interest in
such Secured Obligations such other Person shall be vested with all the benefits
in respect thereof granted to the Bank in this Agreement or otherwise.
6.10. Certain Legal Matters.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania, exclusive of choice of law principles.
(b) Conflict. In the event of any conflict between this
Agreement and the Credit Agreement, the terms of this Agreement shall
control.
[Intentionally left blank]
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IN WITNESS WHEREOF, the Grantor has executed and delivered
this Agreement as of the date first above written.
STEEL CITY PRODUCTS, INC.
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Title: President, COO
-------------------------------------
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Schedule 3.4
to
Security Agreement
Location of Offices, etc.
A. Address (including street address and county) of the chief executive office
of the Grantor:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
B. Address (including street address and county) of each office (whether
maintained by the Grantor or otherwise) where books and records relating to
Collateral are kept:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
C. Address (including street address and county) of each place of business of
the Grantor other than in the jurisdiction containing its chief executive
office:
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Glassport Industrial Center, Ninth Street
Glassport, County of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
D. Changes in the foregoing information during the one year period ending on the
date of the Security Agreement:
The Glassport lease was entered into on on November 21, 2000.
70
Schedule 3.5
to
Security Agreement
Location of Equipment and Inventory
Address (including street address and county) of each location where Equipment
or Inventory is located:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and
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Glassport Industrial Center, Ninth Street
Glassport, County of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
71
Schedule 3.6
to
Security Agreement
Names, etc.