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AMENDED AND RESTATED LOAN AGREEMENT
by and among
GRIFFON CORPORATION,
TELEPHONICS CORPORATION,
THE LENDERS PARTY HERETO,
FLEET NATIONAL BANK,
AS ADMINISTRATIVE AGENT
and
THE CHASE MANHATTAN BANK, AS DOCUMENTATION AGENT
Dated as of October 25, 2001
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TABLE OF CONTENTS
Article 1 Definitions. 1
Article 2 Commitments; Loans. 25
Section 2.1. Loans. 25
Section 2.2. Notices Relating to Loans. 26
Section 2.3. Disbursement of Loan Proceeds. 27
Section 2.4. Notes. 27
Section 2.5. Repayment of Principal of Loans. 28
Section 2.6. Interest. 29
Section 2.7. Fees. 30
Section 2.8. Changes in Commitment. 31
Section 2.9. Use of Proceeds of Loans; Existing Indebtedness. 32
Section 2.10. Computations. 32
Section 2.11. Minimum Amounts of Borrowings, Conversions,
Prepayments and Interest Periods. 33
Section 2.12. Time and Method of Payments. 33
Section 2.13. Lending Offices. 34
Section 2.14. Failure to Fund. 34
Section 2.15. Pro Rata Treatment Between Banks. 34
Section 2.16. Sharing of Payments, and Set-Off Among Banks. 35
Section 2.17. Conversions of Loans. 35
Section 2.18. Additional Costs; Capital Requirements. 36
Section 2.19. Limitation on Types of Loans. 38
Section 2.20. Illegality. 38
Section 2.21. Certain Conversions pursuant to Sections 2.18
and 2.20. 38
Section 2.22. Indemnity. 39
Section 2.23. Security. 40
Section 2.24. Letters of Credit. 41
Article 3 Representations and Warranties. 45
Section 3.1. Organization. 45
Section 3.2. Power, Authority, Consents. 45
Section 3.3. No Violation of Law or Agreements. 46
Section 3.4. Due Execution, Validity, Enforceability. 46
Section 3.5. Properties, Priority of Liens; Existing Guarantees. 46
Section 3.6. Judgments, Actions, Proceedings. 47
Section 3.7. No Defaults, Compliance With Laws. 47
Section 3.8. Burdensome Documents. 47
Section 3.9. Financial Statements. ▇▇
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▇▇▇▇▇▇▇ 3.10. Tax Returns. 48
Section 3.11. Intangible Assets. 48
Section 3.12. Regulation U. 49
Section 3.13. Name Changes, Mergers, Acquisitions. 49
Section 3.14. Full Disclosure. 49
Section 3.15. Licenses and Approvals. 49
Section 3.16. Labor Disputes; Collective Bargaining Agreements;
Employee Grievances. 49
Section 3.17. Condition of Assets. 50
Section 3.18. ERISA. 50
Section 3.19. Termination of Certain Lines of Credit. 52
Article 4 Conditions to the Loans. 53
Section 4.1. Conditions to Initial Extensions of Credit 53
Section 4.2. Conditions to Effectiveness of Amended and
Restated Loan Agreement. 53
Section 4.3. Conditions to Subsequent Extensions of Credit. 54
Article 5 Delivery of Financial Reports, Documents and Other
Information. 55
Section 5.1. Annual Financial Statements. 55
Section 5.2. Quarterly Financial Statements. 55
Section 5.3. Projections. 56
Section 5.4. Compliance Information. 56
Section 5.5. No Default Certificate. 56
Section 5.6. Certificate of Accountants. 56
Section 5.7. Accountants, Reports. 57
Section 5.8. Copies of Documents. 57
Section 5.9. Certain Notices. 57
Section 5.10. ERISA Notices and Requests. 57
Section 5.11. Permitted Acquisition Deliveries. 58
Article 6 Affirmative Covenants. 59
Section 6.1. Books and Records. 59
Section 6.2. Inspections and Audits. 59
Section 6.3. Maintenance and Repairs. 59
Section 6.4. Continuance of Business. 60
Section 6.5. Copies of Corporate Documents. 60
Section 6.6. Perform Obligations. 60
Section 6.7. Notice of Litigation. 60
Section 6.8. Insurance. 60
Section 6.9. Financial Covenants. 61
Section 6.10. Notice of Certain Events. 61
-ii-
Section 6.11. Comply with ERISA. 62
Section 6.12. Environmental Compliance. 62
Section 6.13. Reserved. 63
Section 6.14. Projections. 63
Article 7 Negative Covenants. 63
Section 7.1. Indebtedness. 63
Section 7.2. Liens. 63
Section 7.3. Guaranties. 64
Section 7.4. Mergers, Acquisitions. 65
Section 7.5. Redemptions; Distributions. 65
Section 7.6. Stock Issuance. 66
Section 7.7. Changes in Business and Sales or Pledges of Assets. 66
Section 7.8. Investments. 66
Section 7.9. Fiscal Year. 67
Section 7.10. ERISA Obligations. 67
Section 7.11. Reserved. 68
Section 7.12. Transactions with Affiliates. 68
Section 7.13. Hazardous Material. 69
Section 7.14. Regulation U. 69
Section 7.15. Limitations on Restrictions on Upstreaming of Funds 69
Section 7.16. Derivative Protection Arrangements 70
Article 8 Events of Default. 70
Section 8.1. Payments. 70
Section 8.2. Certain Covenants. 70
Section 8.3. Other Covenants. 70
Section 8.4. Other Defaults. 71
Section 8.5. Representations and Warranties. 71
Section 8.6. Bankruptcy. 71
Section 8.7. Judgments. 72
Section 8.8. ERISA. 72
Section 8.9. Liens. 72
Section 8.10. Change of Control. 73
Article 9 Miscellaneous Provisions. 73
Section 9.1. Fees and Expenses, Indemnity. 73
Section 9.2. Taxes. 74
Section 9.3. Payments. 75
Section 9.4. Survival of Agreements and Representations;
Construction. 75
Section 9.5. Lien on and Set-off of Deposits. 76
Section 9.6. Modifications, Consents and Waivers; Entire
Agreement. 76
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Section 9.7. Remedies Cumulative. 77
Section 9.8. Further Assurances. 78
Section 9.9. Notices. 78
Section 9.10. Counterparts. 80
Section 9.11. Severability. 80
Section 9.12. Binding Effect; No Assignment or Delegation by
Borrowers. 80
Section 9.13. Assignments and Participations by Banks. 81
Section 9.14. Relief From Bankruptcy Stay. 83
Section 9.15. Governing Law; Consent to Jurisdiction; Waiver of
Trial by Jury. 83
Section 9.16. Reserved 85
Section 9.17. Interest Adjustment. 85
Section 9.18. Lost Notes. 86
Article 10 The Administrative Agent. 86
Section 10.1. Appointment. 86
Section 10.2. Individual Capacity. 86
Section 10.3. Exculpatory Provisions. 86
Section 10.4. Reliance by Administrative Agent. 87
Section 10.5. Delegation. 87
Section 10.6. Resignation; Successor Administrative Agent. 88
Section 10.7. NonReliance on Other Credit Parties. 88
Section 10.8. Notices Binding. 88
Section 10.9. Amendment and Restatement 89
Article 11 Mutual Guarantees. 90
Section 11.1. Guarantee 90
Section 11.2. Absolute Obligation 91
Section 11.3. Repayment in Bankruptcy, etc. 92
Section 11.4. Miscellaneous 92
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EXHIBITS
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A Form of Note
B. States of Incorporation and Qualification, and Capitalization and
Ownership of Stock, of each Borrower and Subsidiaries
C. Consents, Waivers, Approvals; Violation of Agreements
D. Permitted Security Interests, Liens and Encumbrances
E. Judgments, Actions, Proceedings
F. Defaults; Compliance with Laws, Regulations, Agreements
G. Burdensome Documents
H. Name Changes, Mergers, Acquisitions
I. Labor Disputes; Collective Bargaining Agreements; Employee Grievances
J. Pension Plans
K. Permitted Contingent Obligations and Guaranties and Existing Guarantees,
Contingent Obligations and Investments
L. Form of Assignment and Acceptance
SCHEDULES
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Schedule 1 - Fleet L/Cs
Schedule 2 - Chase L/Cs
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LOAN AGREEMENT
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THIS LOAN AGREEMENT, made this 25th day of October, 2001 (this
"Agreement"), is by and among GRIFFON CORPORATION, a Delaware corporation
("Griffon"), TELEPHONICS CORPORATION, a Delaware corporation ("Telephonics;"
Griffon and Telephonics are at times referred to herein as a "Borrower" and
collectively as the "Borrowers"), the several banks and other parties from time
to time that are permitted parties hereto (individually, a "Bank" and,
collectively, the "Banks"), FLEET NATIONAL BANK, successor by merger to Fleet
Bank, National Association, a national banking association, in its capacity as
Administrative Agent (as hereinafter defined) and THE CHASE MANHATTAN BANK, a
New York banking corporation, in its capacity as Documentation Agent (as
hereinafter defined).
W I T N E S S E T H:
- - - - - - - - - -
RECITALS:
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(1) Griffon, the Administrative Agent, the Documentation Agent and the
Banks are parties to the Loan Agreement dated as of August 31, 1999 (as
heretofore amended, modified and supplemented the "Original Agreement").
(2) Griffon desires to add its wholly-owned Subsidiary, Telephonics, as a
Borrower under this Agreement, subject to the sublimit and other terms and
conditions hereinafter set forth.
(3) Griffon, Telephonics, the Administrative Agent, the Documentation Agent
and the Banks wish to amend the Original Agreement to make certain changes in
the terms of the Original Agreement, and to restate the Original Agreement as
amended by such amendments for their convenience.
(4) Following such restatement, except where otherwise indicated or
otherwise referred to in this Agreement, this Agreement will set forth the
definitive terms and conditions of the agreement of Griffon, Telephonics, the
Administrative Agent, the Documentation Agent and the Banks regarding the
matters covered by this Agreement as of and after the date the Original
Agreement is restated, and the Original Agreement will continue to govern such
terms prior to such date.
NOW, THEREFORE, the parties hereto agree as follows:
Article 1 Definitions.
As used in this Agreement, in addition to the other terms defined herein,
the following terms shall have the following meanings:
"Additional Costs" is defined in subsection 2.18(b) hereof.
"Adjusted Net Income" means, for any period, the aggregate income (or loss)
for such period which shall be an amount equal to net revenues and other proper
items of income, plus extraordinary and unusual non-cash losses for such period,
plus minority interest in earnings of consolidated Subsidiaries for such period,
less any and all items that are treated as expenses under generally accepted
accounting principles, less, without duplication, Federal, state and local
income taxes and income taxes expensed for taxes payable to jurisdictions
outside of the United States, [less minority interests in losses of consolidated
Subsidiaries for such period] and less extraordinary and unusual non-cash gains
for such period, as determined in accordance with generally accepted accounting
principles.
"Administrative Agent" means Fleet National Bank, a national banking
association, in its capacity as administrative and collateral agent pursuant to
the terms and conditions of this Agreement, and any successor thereto.
"Affected Loans" is defined in Section 2.21 hereof.
"Affected Type" is defined in Section 2.21 hereof.
"Affiliate" means, as to any Person, any other Person that directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event: (i) any Person that owns directly or indirectly 10% or more of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation or 10% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such corporation or other Person; and
(ii) each director and officer of a Borrower shall be deemed to be an Affiliate
of each Borrower.
"Agent" means the Administrative Agent or the Documentation Agent.
"Agents" means the Administrative Agent and the Documentation Agent
collectively.
"Aggregate Revolving Commitment" means, at any time, the sum at such time
of the Commitments of all the Banks, as such amount is subject to reduction in
accordance with the terms hereof.
2
"Aggregate Revolving Exposure" means, at any time, the sum at such time of
(i) the outstanding principal balance of the Loans of all the Banks, plus (ii)
an amount equal to the Letter of Credit Exposure of all Banks.
"Aggregate Telephonics Revolving Commitment" means Forty Five Million
Dollars ($45,000,000.00), as such amount is subject to reduction in accordance
with the terms hereof.
"Aggregate Telephonics Revolving Exposure" means, at any time, the sum at
such time of (i) the outstanding principal balance of the Loans of all the Banks
made to Telephonics, plus (ii) an amount equal to the Letter of Credit Exposure
of all Banks on account of Letters of Credit issued for the account of
Telephonics.
"Applicable L/C Fee Distributor" means (i) the Administrative Agent in the
case of all Letters of Credit other than Chase L/Cs and (ii) Chase in the case
of all Chase L/Cs.
"Applicable Lending Office" means, with respect to each Bank, with respect
to each type of Loan, the Lending Office as designated for such type of Loan
below its name on the signature pages hereof or such other office of such Bank
or of an affiliate of such Bank as such Bank may from time to time specify to a
Borrower as the office at which its Loans of such type are to be made and
maintained.
"Applicable Margin" means as at any date of determination thereof, (i) if
the Funded Debt to Cash Flow Ratio is less than 1.75 to 1.00, then with respect
to any Prime Rate Loans, 0%, and with respect to any Eurodollar Loans, 1.25%;
(ii) if the Funded Debt to Cash Flow Ratio is equal to or greater than 1.75 to
1.00, but less than 2.25 to 1.00, then with respect to any Prime Rate Loans, 0%,
and with respect to any Eurodollar Loans, 1.50% and (iii) if the Funded Debt to
Cash Flow Ratio is equal to or greater than 2.25 to 1.00, then with respect to
any Prime Rate Loans, .25%, and with respect to any Eurodollar Loans, 1.75%,
plus any Post-Default Rate, if applicable. The determination of the applicable
percentage set forth above shall be made on a quarterly basis based on the
financial statements of Griffon and its Subsidiaries delivered pursuant to and
in compliance with Section 5.1 or Section 5.2 hereof; provided, however, that
the applicable percentages as of the date of this Agreement shall be as set
forth in clause (ii) above until December 31, 2001 and thereafter shall only be
adjusted based on the financial statements of Griffon delivered pursuant to and
in compliance with Section 5.1 or Section 5.2 for its fiscal quarter ending
September 30, 2001 at which time (which in no event shall be prior to December
31, 2001) and thereafter it shall be adjusted pursuant to this definition; and
provided further, that upon the occurrence and during the continuance of a
Default or an Event of Default (other than a Default or Event of Default under
Section 8.1 hereof), the Applicable Margin shall be 1% in excess of the
applicable percentages set forth in clause (iii) above.
3
The determination of the applicable percentage set forth above shall be
made on a quarterly basis based on the financial statements of Griffon and its
Subsidiaries delivered pursuant to and in compliance with Section 5.1 or Section
5.2 hereof. Each determination of the Applicable Margin shall be effective as of
(a) the first day of the calendar month following the date on which the
financial statements on which such determination was based were to be delivered
pursuant to Section 5.1 hereof and (b) the first day of the calendar quarter
following the date on which the financial statements on which such determination
was based were to be delivered pursuant to Section 5.2 hereof. In the event that
financial statements for the four full fiscal quarters most recently completed
prior to such date of determination either: (i) have not been delivered to the
Banks in compliance with Section 5.1 or 5.2 hereof, or (ii) if delivered, do not
comply in form or substance with Section 5.1 or 5.2 hereof (in the sole judgment
of the Banks), then the Banks may determine, in their reasonable judgment, the
ratio referred to above that would have been in effect as at such date, and
consequently, the Applicable Margin in effect for the period commencing on such
date.
"Assessment Rate" means, at any time, the rate (rounded upwards, if
necessary, to the nearest 1/100 of 1%) then charged by the Federal Deposit
Insurance Corporation (or any successor) to the applicable Principal Office for
deposit insurance for Dollar time deposits with such Principal Office as
determined by such Principal Office.
"Assignment and Acceptance" - an agreement in the form of Exhibit L hereto.
"Bohme" means Bohme-Clopay Verpackungsfolien GmbH, a wholly- owned
subsidiary of Clopay Plastic Products and successor in interest to Bohme
Verwaltungs-Gesellschaft mbH and Bohme GmbH & Co. KG Verpackungsfolien.
"Borrowing Date" means any Business Day on which the Banks make Loans.
"Borrowing Notice" is defined in Section 2.2 hereof.
"Business Day" means, any day other than Saturday, Sunday or any other day
on which commercial banks in New York City are authorized or required to close
under the laws of the State of New York.
"Capital Expenditures" means for any period, the sum of (a) expenditures
for any fixed assets or improvements and replacements, substitutions or
additions thereto which would be treated as capital expenditures in accordance
with generally accepted accounting principles and (b) the portion of all
payments with respect to each Capitalized Lease which are required to be
capitalized on the balance sheet of the applicable lessee in accordance with
generally accepted accounting principles.
4
"Capitalized Lease" means, any lease the obligations to pay rent or other
amounts under which constitute Capitalized Lease Obligations.
"Capitalized Lease Obligations" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under generally accepted accounting principles and, for
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with generally accepted
accounting principles.
"Cash" means, as to any Person, such Person's cash and cash equivalents, as
defined in accordance with generally accepted accounting principles consistently
applied.
"Change of Control" means (a) the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 30% or more of the outstanding shares of voting stock of
Griffon, or (b) during any period of 25 consecutive calendar months,, commencing
on the date of this Agreement, the ceasing of those individuals (the "Continuing
Directors") who (i) were directors of Griffon on the first day of each such
period or (ii) subsequently became directors of Griffon and whose initial
election or initial nomination for election subsequent to that date was approved
by a majority of the Continuing Directors then on the board of directors of
Griffon, to constitute a majority of the board of directors of Griffon.
"Chase" means The Chase Manhattan Bank, a New York banking corporation, in
its capacity as a Bank hereunder.
"Chase L/Cs" means the standby letters of credit issued by Chase prior to
the date of this Agreement as described on Schedule 2 hereto.
"Clopay" means Clopay Corporation, a Delaware corporation.
"Clopay Plastic Products" means Clopay Plastic Products Company, Inc., a
Delaware Corporation.
"Clopay Service" means Clopay Service Company, Inc., a Delaware
Corporation.
"Code" means the Internal Revenue Code of 1986, as it may be amended from
time to time.
5
"Commitment" means, in respect of any Bank, the maximum amount of such
Bank's Revolving Exposure as set forth on the signature page of such Bank
adjacent to the heading "Commitment" or in an Assignment and Acceptance or other
document pursuant to which it became a Bank, as such amount may be adjusted from
time to time in accordance herewith; provided, that, without limiting the
foregoing, if the Borrowers have elected to extend the Commitment Termination
Date in accordance with the provisions of Section 2.8(b) hereof, on the
Commitment Termination Date and on each Quarterly Reduction Date thereafter
until the Termination Date, the Commitment of each Bank shall automatically
reduce by an amount equal to the product of such Bank's Revolving Percentage
multiplied by Ten Million Dollars ($10,000,000).
"Commitment Fee" is defined in subsection 2.7(a) hereof.
"Commitment Termination Date" means October 1, 2005.
"Compliance Certificate" means a certificate executed by the president or
chief financial officer of Griffon to the effect that: (i) as of the effective
date of the certificate, no Default or Event of Default under this Agreement
exists or would exist after giving effect to the action intended to be taken by
the Borrowers as described in such certificate, including, without limitation,
that the covenants set forth in Section 6.9 hereof would not be breached after
giving effect to such action, together with a calculation in reasonable detail,
and in form and substance satisfactory to the Administrative Agent and the
Documentation Agent, of such compliance, and (ii) the representations and
warranties contained in Article 3 hereof are true and with the same effect as
though such representations and warranties were made on the date of such
certificate, except for changes in the ordinary course of business none of
which, either singly or in the aggregate, have had a Material Adverse Effect.
"Contingent Obligation" as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person, without
duplication: (a) with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; (b) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings; (c) under any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect that Person against fluctuations in interest
rates; or (d) under any foreign exchange contract, currency swap agreement or
other similar agreement or arrangement designed to protect that Person against
fluctuations in currency values. Contingent Obligations shall include (i) the
direct or indirect guaranty, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
6
sale with recourse by such Person of the obligation of another, (ii) the
obligation to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement, and (iii) any
liability of such Person for the obligations of another through any agreement to
purchase, repurchase or otherwise acquire such obligation or any property
constituting security therefor, to provide funds for the payment or discharge of
such obligation or to maintain the solvency, financial condition or any balance
sheet item or level of income of another. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if not a fixed and determined amount, the maximum amount
so guaranteed.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with either or both Borrowers, are treated as a single employer
under Section 414(b), 414(c) or 414(m) of the Code and Section 4001(a)(14) of
ERISA.
"Credit Party" means the Administrative Agent or a Bank, as the case may
be.
"Current Liabilities" means current liabilities, as determined in
accordance with generally accepted accounting principles, consistently applied,
and shall include, as of the date of determination thereof: (i) all Indebtedness
payable on demand or maturing within one year after such date without any option
on the part of the obligor to extend or renew beyond such year, (ii) final
maturities, installments and prepayments of Indebtedness required to be made
within one year after such date, (iii) the unpaid principal balance of the Notes
due within one year after such date, and (iv) all other items (including taxes
accrued as estimated and reserves for deferred income taxes) that in accordance
with generally accepted accounting principles, would be included on a balance
sheet as current liabilities.
"Debt Instrument" is defined in subsection 8.4(a) hereof.
"Default" means an event which with notice or lapse of time, or both, would
constitute an Event of Default.
"Defined Contribution Plan" means a plan which is not covered by Title IV
of ERISA or subject to the minimum funding standards of Section 412 of the Code
and which provides for an individual account for each participant and for
benefits based solely on the amount contributed to the participant's account,
and any income, expenses, gains and losses, and any forfeitures of accounts of
other participants which may be allocated to such participant's account.
"Derivative Protection Arrangement" means (i) any interest rate swap, cap
or collar arrangement or any other derivative product customarily offered by
banks or other financial institutions to their customers in order to reduce the
exposure of such customers to interest rate fluctuations, as the same may be
amended, supplemented or otherwise modified from time to time or (ii) any
7
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement customarily offered by banks or other financial institutions to
their customers designed to protect such customers against fluctuations in
currency values.
"Documentation Agent" means The Chase Manhattan Bank, a New York banking
corporation, in its capacity as Documentation Agent pursuant to the terms and
conditions of this Agreement, and any successor thereto.
"Dollars" and "$" means lawful currency of the United States of America.
"Domestic Debt Service Coverage Ratio" means, for any period, the ratio of
(a) EBITDA of the Domestic Loan Parties on a consolidated basis for the most
recently completed four fiscal quarters of the Domestic Loan Parties minus,
Federal, state and local income taxes expensed with respect to the most recently
completed four fiscal quarters minus, Unfunded Capital Expenditures of the
Domestic Loan Parties on a consolidated basis for the most recently completed
four fiscal quarters to (b) the current portion of Long-term Indebtedness for
borrowed money of the Domestic Loan Parties on a consolidated basis outstanding
as of the last day of such period (excluding the final payment of $1,973,000 due
January 26, 2002 on a mortgage note in the original face amount of $3,200,000
payable by Western Synthetic Real Estate Corp. to The Chase Manhattan Bank
(formerly known as Chemical Bank)) plus, Interest Expense of the Domestic Loan
Parties on a consolidated basis for the most recently completed four fiscal
quarters, all determined in accordance with generally accepted accounting
principles consistently applied.
"Domestic Funded Debt Coverage Ratio" means, for any period, the ratio of
(a) Long-term Indebtedness for borrowed money of the Domestic Loan Parties on a
consolidated basis plus, without duplication, any Indebtedness for money
borrowed of the Domestic Loan Parties on a consolidated basis which will be due
and payable during the immediately succeeding twelve month period plus, the
Domestic Guarantee Amount, in each case outstanding as of the last day of such
period, to (b) EBITDA of the Domestic Loan Parties on a consolidated basis for
the most recently completed four fiscal quarters, all determined in accordance
with generally accepted accounting principles consistently applied.
"Domestic Guarantee Amount" means the aggregate amount of outstanding
obligations of Foreign Loan Parties that are guaranteed by Domestic Loan
Parties.
"Domestic Loan Party" means each Borrower and each Subsidiary of each
Borrower that is organized under the laws of any State of the United States.
8
"EBITDA" means, for any period, the sum of (i) Adjusted Net Income, (ii)
Interest Expense, (iii) depreciation and amortization and (iv) Federal, state
and local income taxes, in each case, computed in accordance with generally
accepted accounting principles.
"Eligible Assignee" - (a) any of the following that have been approved by
the Required Banks: (i) a commercial bank organized under the laws of the United
States, or any state thereof; (ii) a savings and loan association or savings
bank organized under the laws of the United States, or any state thereof; (iii)
a commercial bank organized under the laws of any other country that is a member
of the OECD or has concluded special lending arrangements with the International
Monetary Fund associated with its General Arrangements to Borrow, or a political
subdivision of any such country, so long as such bank is acting through a branch
or agency located in the country in which it is organized or another country
that is described in this clause (iii); (iv) the central bank of any country
that is a member of the OECD which bank has assumed the assets and liabilities
of a Bank; and (v) a finance company, insurance company or other financial
institution or fund (whether a corporation, partnership, trust or other entity)
that is engaged in making, purchasing or otherwise investing in commercial loans
in the ordinary course of its business; (b) any other Person approved by the
Administrative Agent and the Required Banks; and (c) a Bank or an Affiliate of a
Bank or an entity of the type referred to in (a)(v) above which is administered
or managed by a Bank or an Affiliate of a Bank.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of a Borrower or
any of its ERISA Affiliates or (b) has at any time within the preceding six (6)
years been maintained for employees of such Borrower or any current ERISA
Affiliate while an ERISA Affiliate.
"Employee Welfare Benefit Plan" means any employee benefit plan within the
meaning of Section 3(1) of ERISA.
"Environmental Laws and Regulations" means all environmental, health and
safety laws, regulations, resolutions, and ordinances applicable to either
Borrower or any Subsidiary, or any of their respective assets or properties,
including, without limitation: (i) all regulations, resolutions, ordinances,
decrees, and other similar documents and instruments of all courts and
governmental authorities, bureaus and agencies, domestic and foreign, whether
issued by environmental regulatory agencies or otherwise, and (ii) all laws,
regulations, resolutions, ordinances and decrees relating to Environmental
Matters.
"Environmental Liability" means any liability under any applicable law for
any release of a hazardous substance caused by the seeping, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of hazardous wastes or other chemical substances,
9
pollutants or contaminants into the environment, and any liability for the costs
of any clean-up or other remedial action including, without limitation, costs
arising out of security fencing, alternative water supplies, temporary
evacuation and housing and other emergency assistance undertaken by any
environmental regulatory body having jurisdiction over either Borrower or any
Subsidiary to prevent or minimize any actual or threatened release by either
Borrower or any Subsidiary of any hazardous wastes or other hazardous
substances, pollutants and contaminants into the environment that would endanger
the public health or the environment.
"Environmental Matter(s)" means a release of any toxic or hazardous waste
or other hazardous substance, pollutant or contaminant into the environment or
the generation, treatment, storage or disposal of any toxic or hazardous wastes
or other hazardous substances.
"Environmental Proceeding" means any judgment, action, proceeding or
investigation pending before any court or governmental authority, bureau or
agency, including, without limitation, any environmental regulatory body, with
respect to, or to the best of each Borrower's knowledge threatened against,
either Borrower or any Subsidiary or relating to the assets or liabilities of
any of them, including, without limitation, in respect of any "facility" owned,
leased or operated by any of them under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or under any
state, local or municipal statute, ordinance or regulation in respect thereof,
in connection with any release of any toxic or hazardous waste or other chemical
substance, pollutant or contaminant into the environment, or with the
generation, storage or disposal of any toxic or hazardous wastes or other
chemical substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time, and the regulations promulgated thereunder.
"ERISA Affiliate" means as applied to each Borrower, any corporation,
person or trade or business which is a member of such Borrower's Controlled
Group.
"ERISA MAE" means any matter which would result in liability to either
Borrower or any ERISA Affiliate in an amount which would materially adversely
affect the business or financial condition of Griffon and its Subsidiaries on a
consolidated basis.
"Eurodollar Business Day" means a Business Day on which dealings in Dollar
deposits are carried out in the Eurodollar interbank market.
"Eurodollar Loans" means Loans the interest on which is determined on the
basis of rates referred to in the definition of "Fixed Base Rate" in this
Article 1.
"Existing Banks" means Fleet, Chase and Firstar, as the case may be.
"Extensions of Credit" means, collectively, the Loans, the Letters of
10
Credit and any participations therein pursuant to Section 2.24(c).
"Event of Default" is defined in Article 8 hereof.
"Facility Fee" is defined in subsection 2.7(b) hereof.
"Federal Funds Rate" means, for any day, the weighted average of the rates
on overnight federal funds transactions with member banks of the Federal Reserve
System arranged by federal funds brokers as published by the Federal Reserve
Bank of New York for such day, or if such day is not a Business Day, for the
next preceding Business Day (or, if such rate is not so published for any such
day, the average rate charged to each Bank on such day on such transactions as
reasonably determined by the Banks).
"Fee(s)" is defined in subsection 2.7(d) hereof.
"Financial Statements" means: (i) Griffon's consolidated audited Balance
Sheet as at September 30, 2000, together with the related audited Income
Statement, Statement of Shareholders' Equity and Statement of Cash Flows for the
fiscal year then ended, (ii) Griffon's consolidated unaudited Balance Sheet as
at June 30, 2001, together with the related unaudited Income Statement and
Statement of Cash Flows for the 9-month period then ended, and (iii) each of the
financial statements delivered to the Banks pursuant to subsections 5.1 and 5.2
hereof.
"Finotech" means Finotech Verbundstoffe GmbH, a 60% owned subsidiary of
Clopay Plastic Products.
"Firstar" means Firstar Bank, National Association, a national banking
association, in its capacity as a Bank hereunder.
"Fixed Base Rate" means, with respect to any Eurodollar Loan for any
Interest Period therefor, the rate per annum as determined by the Administrative
Agent on the basis of the offered rates for deposits in U.S. dollars, for a
period of time comparable to such Eurodollar Loan which appears on the Telerate
page 3750 as of 11:00 a.m. London time on the day that is two Eurodollar
Business Days preceding the first day of such Eurodollar Loan; provided,
however, if the rate described above does not appear on the Telerate System on
any applicable interest determination date, Fixed Base Rate shall be the rate
(rounded upward, if necessary, to the nearest one hundred-thousandth of a
percentage point), determined by the Administrative Agent on the basis of the
11
offered rates for deposits in dollars for a period substantially equal to the
Interest Period on the Reuters Page "LIBO" (or such other page as may replace
the LIBO Page on that service for the purpose of displaying such rates), as of
11:00 a.m.(London Time), on the day that is two (2) Eurodollar Business Days
prior to the beginning of such Interest Period. If both the Telerate and Reuters
system are unavailable, then the rate for that date will be determined by the
Administrative Agent on the basis of the offered rates for deposits in U.S.
dollars for a period of time comparable to such Eurodollar Loan which are
offered by four major banks in the London interbank market at approximately
11:00 a.m. London time, on the day that is two (2) Eurodollar Business Days
preceding the first day of such Eurodollar Loan as selected by the
Administrative Agent. The principal London office of each of the four major
London banks will be requested to provide a quotation of its U.S. dollar deposit
offered rate. If at least two such quotations are provided, the rate for the
date will be the arithmetic mean of the quotations. If fewer than two quotations
are provided as requested, the rate for that date will be determined by the
Administrative Agent on the basis of the rates quoted for loans in U.S. dollars
to leading European banks for a period of time comparable to such Eurodollar
Loan offered by major banks in New York City at approximately 11:00 a.m. New
York City time, on the day that is two Eurodollar Business Days preceding the
first day of such Eurodollar Loan. In the event that the Administrative Agent is
unable to obtain any such quotation as provided above, it will be deemed that
the Fixed Base Rate pursuant to a Eurodollar Loan cannot be determined.
"Fixed Rate" means, for any Eurodollar Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Administrative Agent equal to (x) the Fixed Base
Rate for such Loan for such Interest Period; divided by (y) 1 minus the Reserve
Requirement for such Loan for such Interest Period. The Administrative Agent
shall use its best efforts to advise the applicable Borrower upon its request of
the Fixed Rate for each Interest Period as soon as practicable after each change
in the Fixed Rate; provided, however, that the failure of the Administrative
Agent to so advise such Borrower on any one or more occasions shall not affect
the rights of any Agent or any Bank or the obligations of either Borrower
hereunder.
"Fleet" means Fleet National Bank, successor by merger to Fleet Bank,
National Association, a national banking association, in its capacity as a Bank
hereunder.
"Fleet L/Cs" means the standby letters of credit issued by Fleet prior to
the date of this Agreement as described on Schedule 1 hereto.
"Foreign Loan Party" means each Subsidiary of either Borrower that is
organized under the laws of a jurisdiction other than any State of the United
States.
"Funded Debt to Cash Flow Ratio" means, for any period, the ratio of (a)
all Indebtedness for borrowed money of Griffon and its Subsidiaries outstanding
as of the last day of such period, to (b) EBITDA of Griffon and its Subsidiaries
minus, Unfunded Capital Expenditures made by Griffon and/or any of its
Subsidiaries, each for the most recently completed four fiscal quarters.
"Guarantor" means (i) Griffon in the case of all Extensions of Credit made
to Telephonics and (ii) Telephonics in the case of all Extensions of Credit made
to Griffon.
12
"Guarantor Obligations" means, with respect to each Guarantor, all of the
obligations and liabilities of such Guarantor under the Loan Documents, whether
fixed, contingent, now existing or hereafter arising, created, assumed, incurred
or acquired.
"Indebtedness" means, with respect to any Person and without duplication,
all: (i) liabilities or obligations, direct and contingent, which in accordance
with generally accepted accounting principles would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
Person at the date as of which Indebtedness is to be determined, including,
without limitation, contingent liabilities that in accordance with such
principles, would be set forth in a specific Dollar amount on the liability side
of such balance sheet, and Capitalized Lease Obligations of such Person; (ii)
liabilities or obligations of others for which such Person is directly or
indirectly liable, by way of guaranty (whether by direct guaranty, suretyship,
discount, endorsement, take-or-pay agreement, agreement to purchase or advance
or keep in funds or other agreement having the effect of a guaranty) or
otherwise; (iii) liabilities or obligations secured by Liens on any assets of
such Person, whether or not such liabilities or obligations shall have been
assumed by it; and (iv) liabilities or obligations of such Person, direct or
contingent, with respect to letters of credit (other than documentary letters of
credit used in connection with the purchase of goods) issued for the account of
such Person and bankers acceptances created for such Person.
"Interest Expense" means, for the applicable period of determination
thereof, the interest expense during such period determined in accordance with
generally accepted accounting principles; provided, that, notwithstanding any
such determination under generally accepted accounting principles, in each event
"Interest Expense" shall be net of all interest income for the applicable
period of determination.
"Interest Period" means, with respect to any Eurodollar Loan, each period
commencing on the date such Loan is made or converted from a Loan or Loans of
another type, or the last day of the next preceding Interest Period with respect
to such Loan, and ending on the same day in the first, second, third or sixth
calendar month thereafter, as the applicable Borrower may select as provided in
Section 2.2 hereof, except that each such Interest Period that commences on the
last Eurodollar Business Day of a calendar month (or on any day for which there
is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Eurodollar Business Day of the appropriate
subsequent calendar month. Notwithstanding the foregoing: (i) each Interest
Period that would otherwise end on a day that is not a Business Day shall end on
the next succeeding Business Day (or, in the case of an Interest Period for
Eurodollar Loans, if such next succeeding Eurodollar Business Day falls in the
next succeeding calendar month, on the next preceding Eurodollar Business Day);
(ii) no more than five (5) Interest Periods for Eurodollar Loans for each
Borrower shall be in effect at the same time; (iii) any Interest Period for any
type of Loan that commences before the Commitment Termination Date shall end no
later than the Commitment Termination Date, and if the Commitment Termination
13
Date has been extended in accordance with the terms hereof, any Interest Period
for any type of Loan that commences before the Termination Date shall end no
later than the Termination Date; (iv) notwithstanding clause (iii) above, no
Interest Period shall have a duration of less than one month (in the case of
Eurodollar Loans). In the event that a Borrower fails to select the duration of
any Interest Period for any Loan within the time period and otherwise as
provided in Section 2.2 hereof, such Loans will be automatically converted into
a Prime Rate Loan on the last day of the preceding Interest Period for such Loan
and (iv) no portion of any Loan shall be continued as or converted into a
Eurodollar Loan with an Interest Period which extends beyond a Quarterly
Reduction Date if, after giving effect to the continuation or conversion of such
Eurodollar Loan, the amount payable on any Quarterly Reduction Date would exceed
the sum of (i) the aggregate principal amount of the outstanding portion of the
Loans constituting Eurodollar Loans with Interest Periods ending on or prior to
such Quarterly Reduction Date and (ii) the aggregate outstanding portion of the
Loans constituting Prime Rate Loans.
"Investment" means, by any Person:
(a) the amount paid or committed to be paid, or the value of property or
services contributed or committed to be contributed, by such Person for or in
connection with the acquisition by such Person of any stock, bonds, notes,
debentures, partnership or other ownership interests or other securities of any
other Person; and
(b) the amount of any advance, loan or extension of credit by such Person,
to any other Person, or guaranty or other similar obligation of such Person with
respect to any Indebtedness of such other Person (other than Indebtedness
constituting trade payables in the ordinary course of business), and (without
duplication) any amount committed to be advanced, loaned, or extended by such
Person to any other Person, or any amount the payment of which is committed to
be assured by a guaranty or similar obligation by such Person for the benefit
of, such other Person.
"IRS" means the Internal Revenue Service.
"Issuer" means (i) Fleet in the case of all Letters of Credit other than
the Chase L/Cs and (ii) Chase in the case of the Chase L/Cs.
"Latest Balance Sheet" is defined in subsection 3.9(a) hereof.
"LC Disbursement" means a payment made by the Issuer pursuant to a Letter
of Credit.
"Leases" means leases and subleases (other than Capitalized Leases),
licenses for the use of real property, easements, grants, and other attachment
rights and similar instruments under which either Borrower has the right to use
real or personal property or rights of way.
"Letter of Credit" has the meaning set forth in Section 2.24.
14
"Letter of Credit Fees" has the meaning set forth in Section 2.7(c).
"Letter of Credit Commitment" means the commitment of the Issuer to issue
Letters of Credit having an aggregate outstanding face amount up to Thirty
Million Dollars ($30,000,000.00).
"Letter of Credit Exposure" means in respect of any Bank at any time, an
amount equal to (i) the sum (without duplication) at such time of (x) the
aggregate undrawn face amount of the outstanding Letters of Credit, (y) the
aggregate amount of unpaid drafts drawn on all Letters of Credit, and (z) the
aggregate unpaid Reimbursement Obligations, multiplied by (ii) such Bank's
Revolving Percentage at such time.
"Lien" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing), any conditional sale or other title retention agreement, any
lease in the nature of any of the foregoing, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction.
"Limited Contingent Obligation" as applied to any Person, means any direct
or indirect liability, contingent or otherwise, of that Person, without
duplication: (a) with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto or (b) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings. Limited Contingent Obligations shall include (i) the
direct or indirect guaranty, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of the obligation of another, (ii) the
obligation to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement, and (iii) any
liability of such Person for the obligations of another through any agreement to
purchase, repurchase or otherwise acquire such obligation or any property
constituting security therefor, to provide funds for the payment or discharge of
such obligation or to maintain the solvency, financial condition or any balance
sheet item or level of income of another. The amount of any Limited Contingent
Obligation shall be equal to the amount of the obligation so guaranteed or
otherwise supported or, if not a fixed and determined amount, the maximum amount
so guaranteed.
"Loan(s)" is defined in Section 2.1 hereof. Loans of different types made
or converted from Loans of other types on the same day (or of the same type but
having different Interest Periods) shall be deemed to be separate Loans for all
purposes of this Agreement.
15
"Loan Documents" means this Agreement, the Notes, each reimbursement
agreement executed in connection with Letters of Credit, the Pledge Agreement
and all other documents required to be executed and delivered in connection
herewith or therewith, including all amendments, modifications and supplements
of or to all such documents.
"Loan Party" means Griffon, Telephonics and any Subsidiary which on the
date hereof or hereafter executes and delivers to any Agent or any Bank any Loan
Document.
"Long-term Indebtedness" means:
(i) any Indebtedness payable more than one year from the date of creation
thereof (including, without limitation and without duplication, any portion
thereof payable on demand or maturing within one year after such date), which
under generally accepted accounting principles is shown on the balance sheet as
a liability (including Capitalized Lease Obligations but excluding reserves for
deferred income taxes and other reserves to the extent that such reserves do not
constitute an obligation), and
(ii) Indebtedness payable more than one year from the date of creation
thereof (including, without limitation and without duplication, any portion
thereof payable on demand or maturing within one year after such date), which is
secured by any Lien on property owned by either Borrower or any Subsidiary,
whether or not the indebtedness secured thereby shall have been assumed by such
Borrower or such Subsidiary.
Any obligation shall be treated as Long-term Indebtedness, regardless of its
term if such obligation is renewable pursuant to the terms thereof or of a
revolving credit or similar agreement effective for more than one year after the
date of the creation of such obligation, or may be payable out of the proceeds
of a similar obligation pursuant to the terms of such obligation or of any such
agreement.
"Material Adverse Effect" means any matter which would materially adversely
affect the business, operations, properties or financial condition of Griffon
and its Subsidiaries on a consolidated basis.
"Monthly Dates" means the first day of each calendar month, the first of
which shall be the first day of the first calendar month following the date of
this Agreement.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001 (a) (3) of ERISA which is a Pension Plan and to which either Borrower or
any ERISA Affiliate is making, or is accruing an obligation to make,
16
contributions or has made, or been obligated to make, contributions within the
preceding six (6) years while an ERISA Affiliate.
"New Type Loans" is defined in Section 2.21 hereof.
"Note(s)" is defined in Section 2.4 hereof.
"Obligations" means collectively, all of the Indebtedness, liabilities and
obligations of each Borrower to the Administrative Agent, the Documentation
Agent and/or the Banks arising under the Loan Documents (including Reimbursement
Obligations), in each case whether fixed, contingent (including without
limitation those Obligations incurred as a Guarantor pursuant to Article 11
hereof), now existing or hereafter arising, created, assumed, incurred or
acquired, and whether before or after the occurrence of any Event of Default
under Section 8.6 and including any obligation or liability in respect of any
breach of any representation or warranty and all post-petition interest and
funding losses, whether or not allowed as a claim in any proceeding arising in
connection with such an event.
"Original Agreement" shall have the meaning set forth in the Recitals
hereto.
"Payment Office" means the office of the Administrative Agent located at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means at any time an employee pension benefit plan that is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either: (i) maintained by either Borrower or any
ERISA Affiliate for employees of such Borrower, or by such Borrower for
employees of any ERISA Affiliate, or (ii) maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes contributions and to which such Borrower or any ERISA Affiliate is then
making or accruing an obligation to make contributions or has, while an ERISA
Affiliate, within the preceding five plan years made contributions.
"Permitted Acquisition" means the acquisition by either Borrower or any
Subsidiary of any Person or of any division or line of business of any Person
(whether a Person, or division or line of business, an "Eligible Business"),
either by merger, consolidation, purchase of stock, or purchase of all or a
substantial part of the assets of such Eligible Business (any such type of
transaction is referred to in this Agreement as an "acquisition" and the
principal agreement relating thereto, whether a stock purchase agreement, an
asset purchase agreement, a merger agreement or otherwise, is referred to in
this Agreement as the "acquisition agreement"); provided that (i) the aggregate
17
Permitted Acquisition Purchase Price of all such Permitted Acquisitions during
the term of this Agreement does not exceed (a) Two Hundred Million Dollars
($200,000,000) in the aggregate, and (b) after excluding the value of any
capital stock issued by Griffon in connection with any Permitted Acquisition,
One Hundred Million Dollars ($100,000,000) in the aggregate, (ii) no Default or
Event of Default shall exist immediately before and after giving affect to such
Permitted Acquisition or result from the consummation thereof, and (iii) each of
the following conditions shall have been satisfied:
(a) such transaction shall not be a "hostile" acquisition or other
"hostile" transaction (i.e., such transaction shall not be opposed by the Board
of Directors (or similar governing body) of the Eligible Business), provided
that in the event a Borrower proposes to initiate such transaction as a hostile
transaction with the intent to subsequently obtain the approval of the Board of
Directors of the Eligible Business, such Borrower may notify the Administrative
Agent and each Bank in writing in advance of the initiation of such proposed
transaction together with any information concerning such transaction as the
Administrative Agent or any Bank may request, and, provided that the
Administrative Agent and each Bank shall have approved such transaction in
writing prior to the initiation of such transaction, with the approval of the
each Bank being based on any possible conflict of any kind or other policy
considerations of such Bank concerning such proposed acquisition and with such
approval not to be unreasonably withheld, such Borrower may proceed with such
transaction so long as the transaction ultimately is approved by the Board of
Directors (or similar governing body) of the Eligible Business (and a majority
of which were members of such Board of Directors (or similar governing body) at
the time such transaction was initiated) and is otherwise in accordance with the
terms of this Agreement;
(b) such acquisition (1) if such acquisition is a stock acquisition, shall
be of greater than 50% of the issued and outstanding capital stock of such
Eligible Business, whether by purchase or as a result of merger or consolidation
(provided that a Borrower shall be the surviving corporation in any such merger
or consolidation in which it is directly involved), and in any event shall
consist of shares of capital stock with sufficient voting rights which entitles
such Borrower to elect a majority of the directors of such Eligible Business and
to control the outcome of any shareholder votes with respect to the shareholders
of such Eligible Business, and (2) if such acquisition is an asset acquisition,
shall be of all or a substantial part of an Eligible Business; and
(c) the applicable Borrower or its Subsidiaries shall have (1) pledged to
the Administrative Agent for the benefit of the Banks all of the issued and
outstanding capital stock acquired by such Borrower or any Subsidiary of (A) any
Eligible Business the capital stock of which is to be acquired pursuant to such
acquisition in which the Permitted Acquisition Purchase Price is greater than
$25,000,000, and (B) any new Subsidiary created as an acquisition vehicle with
respect to such acquisition, (2) delivered to the Administrative Agent,
simultaneously with consummation of such acquisition, all of the stock
18
certificates representing such shares, together with stock powers executed in
blank and proxies with respect thereto and (3) caused to be delivered to the
Banks from any new Subsidiary customary corporate documents (including certified
certificate of incorporation, by-laws and good standing certificates); provided,
however, that so long as (i) Clopay remains a wholly-owned direct Subsidiary of
Griffon and all of the issued and outstanding capital stock of Clopay remains
subject to a first priority security interest in favor of the Administrative
Agent, Clopay shall not be obligated to pledge, or cause the pledge of, the
capital stock of any of its direct or indirect Subsidiaries; and (ii)
Telephonics remains a wholly-owned direct Subsidiary of Griffon Telephonics
shall not be obligated to pledge, or cause the pledge of, the capital stock of
any of its direct or indirect Subsidiaries.
"Permitted Acquisition Purchase Price" means, with respect to any Permitted
Acquisition, collectively, without duplication, (i) all Cash paid by the
applicable Borrower or any of its Subsidiaries in connection with such Permitted
Acquisition, including in respect of transaction costs, fees and other expenses
incurred by such Borrower or any of its Subsidiaries in connection with such
Permitted Acquisition, (ii) all Indebtedness created, and all Indebtedness
assumed, by such Borrower or any of its Subsidiaries in connection with such
Permitted Acquisition, including, without limitation, the maximum amount of any
purchase price to be paid pursuant to any "earn out" provision contained in the
agreements related to any Permitted Acquisition, (iii) the value of all capital
stock issued by such Borrower or any of its Subsidiaries in connection with such
Permitted Acquisition and (iv) any deferred portion of the purchase price or any
other costs paid by such Borrower or any of its Subsidiaries in connection with
such Permitted Acquisition.
"Permitted Liens" means, as to any Person: (i) pledges or deposits by such
Person under workers' compensation laws, unemployment insurance laws, social
security laws, or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness of such
Person), or leases to which such Person is a party, or deposits to secure public
or statutory obligations of such Person or deposits of Cash or United States
Government Bonds to secure surety, appeal, performance or other similar bonds to
which such Person is a party, or deposits as security for contested taxes or
import duties or for the payment of rent; (ii) Liens imposed by law, such as
carriers', warehousemen's, materialmen's and mechanics' liens, or Liens arising
out of judgments or awards against such Person with respect to which such Person
at the time shall currently be prosecuting an appeal or proceedings for review;
(iii) Liens for taxes not yet subject to penalties for non-payment and Liens for
taxes the payment of which is being contested as permitted by Section 6.6
hereof; and (iv) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of, others for rights of way, highways and railroad
crossings, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real
properties, or Liens incidental to the conduct of the business of such Person or
to the ownership of such Person's property that were not incurred in connection
19
with Indebtedness of such Person, all of which Liens referred to in the
preceding clause (iv) do not in the aggregate materially detract from the value
of the properties to which they relate or materially impair their use in the
operation of the business taken as a whole of such Person, and as to all the
foregoing only to the extent arising and continuing in the ordinary course of
business.
"Person" means an individual, a corporation, a partnership, a joint
venture, a trust or unincorporated organization, a joint stock company or other
similar organization, a government or any political subdivision thereof, a
court, or any other legal entity, whether acting in an individual, fiduciary or
other capacity.
"Pledge Agreement" means that certain Pledge Agreement dated August 31,
1999 between Griffon and the Administrative Agent, for the ratable benefit of
the Banks, and any other pledge agreement executed and delivered by either
Borrower or any Subsidiary from time to time in connection herewith, including
all amendments, modifications and supplements of or to all such agreements.
"Post-Default Rate" means (i) in respect to principal of or interest on any
Loans not paid when due (whether at stated maturity, by acceleration or
otherwise), a rate per annum during the period commencing on the due date until
such unpaid principal is paid in full equal to: (x) if such Loans are Prime Rate
Loans, 2% above the Prime Rate as in effect from time to time plus the
Applicable Margin for Prime Rate Loans (but in no event less than the interest
rate in effect on the due date), or (y) if such Loans are Eurodollar Loans, 2%
above the rate of interest in effect thereon at the time of such default until
the end of the then current Interest Period therefor and, thereafter, 2% above
the Prime Rate as in effect from time to time plus the Applicable Margin for
Prime Rate Loans (but in no event less than the interest rate in effect on the
due date); and (ii) in respect of other amounts payable by the Borrowers
hereunder (other than interest) not paid when due (whether at stated maturity,
by acceleration or otherwise), a rate per annum during the period commencing on
the due date until such other amounts are paid in full equal to 2% above the
Prime Rate as in effect from time to time plus the Applicable Margin for Prime
Rate Loans (but in no event less than the interest rate in effect on the due
date).
"Primary Borrower Obligor" means (i) Griffon in the case of all Loans made
to Griffon pursuant to Section 2.1 and (ii) Telephonics in the case of all Loans
made to Telephonics pursuant to Section 2.1.
"Prime Rate" means the variable per annum rate of interest so designated
from time to time by Fleet as its prime rate. Notwithstanding the foregoing,
each Borrower acknowledges that Fleet may regularly make domestic commercial
loans at rates of interest less than the rate of interest referred to in the
preceding sentence and that the Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate being charged to any borrower.
Each change in any interest rate provided for herein based upon the Prime Rate
resulting from a change in the Prime Rate shall take effect immediately at the
20
time of such change in the Prime Rate when and as the Prime Rate changes without
notice or demand of any kind.
"Prime Rate Loans" means Loans that bear interest at a rate based upon the
Prime Rate.
"Principal Office" means, as to the Administrative Agent or any Bank, the
principal office designated from time to time by such Person.
"Principal Subsidiary" means Clopay or Telephonics.
"Projections" means the projections delivered to the Banks pursuant to
Section 5.3 hereof (in the format provided in connection with the Original
Agreement).
"Purchase Money Indebtedness" means Indebtedness (other than Loans)
incurred in connection with a Borrower's acquisition of fixed assets; provided,
that:
(i) The transaction in which any Purchase Money Indebtedness is
proposed to be created is not then prohibited by this Agreement and
(ii) The Indebtedness incurred or to be incurred does not exceed the
cost of the property or asset acquired.
"Purchase Money Security Interest" is defined in subsection 7.2(c) hereof.
"Quarterly Dates" means the first day of each January, April, July and
October of each year, the first of which shall be the first such day after the
date of this Agreement, provided that, if any such date is not a Eurodollar
Business Day, the relevant Quarterly Date shall be the next succeeding
Eurodollar Business Day (or, if the next succeeding Eurodollar Business Day
falls in the next succeeding calendar month, then on the next preceding
Eurodollar Business Day).
"Quarterly Reduction Dates" means the first day of each April, July,
October and January of each year, provided that, if any such date is not a
Business Day, the relevant Quarterly Reduction Date shall be the next succeeding
Business Day.
"Quick Ratio" means as at any date, the ratio of cash, Investments of the
type described in Section 7.8(a) hereof, accounts receivable and contract costs
and recognized income not yet billed (as described in the Financial Statements)
to Current Liabilities.
"Real Property" is defined in Section 7.13 hereof.
21
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as the same may be amended or supplemented from time to time.
"Regulatory Change" means, as to any Bank, any change after the date of
this Agreement in United States federal, state or foreign laws or regulations
(including Regulation D and the laws or regulations that designate any
assessment rate relating to certificates of deposit or otherwise (including the
"Assessment Rate" if applicable to any Loan) or the adoption or making after
such date of any interpretations, directives or requests applying to a class of
banks, including such Bank, of or under any United States federal, state or
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reimbursement Obligation" means, collectively, the obligation of a
Borrower to the Issuer with respect to each Letter of Credit and all documents,
instruments and other agreements related thereto, including the obligation of
such Borrower to reimburse the Issuer for amounts drawn under such Letter of
Credit.
"Related Parties" means, with respect to any Person, such Person's
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person's Affiliates.
"Required Banks" means, at any time while no Revolving Exposure is
outstanding hereunder, Banks having at least sixty six and two-thirds percent
(66 2/3%) of the aggregate amount of the Commitments and, at any time while
Revolving Exposure is outstanding hereunder, Banks holding at least sixty six
and two-thirds percent (66 2/3%) of the outstanding aggregate principal amount
of the Revolving Exposure hereunder.
"Reserve Requirement" means, for any Eurodollar Loans for any quarterly
period (or, as the case may be, shorter period) as to which interest is payable
hereunder, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
period under Regulation D by member banks of the Federal Reserve System in New
York City with deposits exceeding one billion Dollars against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks by reason of any Regulatory
Change against: (i) any category of liabilities that includes deposits by
references to which the Fixed Rate for Eurodollar Loans is to be determined as
provided in the definition of "Fixed Base Rate" in this Article 1, or (ii) any
category of extensions of credit or other assets that include Eurodollar Loans.
"Revolving Credit Period" means the period commencing on the date of this
Agreement and ending on the Commitment Termination Date, unless the Commitment
Termination
22
Date has been extended in accordance with the terms of Section 2.8(b) of this
Agreement, in which case the "Revolving Credit Period" shall end on the
Termination Date.
"Revolving Exposure" means, with respect to any Bank as of any date, the
sum as of such date of (i) the outstanding principal balance of such Bank's
Loans, plus (ii) such Bank's Letter of Credit Exposure.
"Revolving Percentage" means, as of any date and with respect to each Bank,
the percentage equal to a fraction (i) the numerator of which is the Commitment
of such Bank on such date (or, if there are no Commitments on such date, on the
last date upon which one or more Commitments were in effect), and (ii) the
denominator of which is sum of the Commitments of all the Banks on such date
(or, if there are no Commitments on such date, on the last date upon which one
or more Commitments were in effect).
"Rolling Four Quarters" shall mean the consecutive twelve-month period
computed from the last day of the most recent fiscal quarter to the day 12
months prior to such last day.
"Security Documents" is defined in subsection 2.23(b) hereof.
"Subordinated Debt" means unsecured Indebtedness for money borrowed that is
subordinated upon terms and in form and substance reasonably satisfactory to the
Administrative Agent and the Banks, as evidenced by the Administrative Agent's
and Banks' written consent thereto given prior to the creation of such
Indebtedness.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or joint venture whether now existing or hereafter organized or
acquired: (i) in the case of a corporation, of which a majority of the
securities having ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) are at the time owned by such Person and/or one or more
Subsidiaries of such Person, or (ii) in the case of a partnership or joint
venture in which such Person is a general partner or joint venturer or of which
a majority of the partnership or other ownership interests are at the time owned
by such Person and/or one or more of its Subsidiaries. Unless the context
otherwise requires, references in this Agreement to "Subsidiary" or
"Subsidiaries" shall be deemed to be references to a Subsidiary or Subsidiaries
of Griffon, Telephonics, or any of their Subsidiaries.
"Tangible Net Worth" means the sum of capital surplus, earned surplus and
capital stock, minus deferred charges (including, but not limited to,
unamortized debt discount and expense, organization expenses and experimental
and development expenses, but excluding prepaid expenses and deferred income tax
23
assets), intangibles and treasury stock, all as determined in accordance with
generally accepted accounting principles consistently applied.
"Telephonics" means Telephonics Corporation, a Delaware corporation.
"Telephonics Sublimit Commitment" means, in respect of any Bank, the
maximum amount of such Bank's Telephonics Revolving Exposure as set forth on the
signature page of such Bank adjacent to the heading "Telephonics Sublimit
Commitment" or in an Assignment and Acceptance or other document pursuant to
which it became a Bank, as such amount may be adjusted from time to time in
accordance herewith.
"Telephonics Revolving Exposure" means, with respect to any Bank as of any
date, the sum as of such date of (i) the outstanding principal balance of such
Bank's Loans to Telephonics, plus (ii) such Bank's Letter of Credit Exposure
with respect to Telephonics.
"Termination Date" means October 1, 2007.
"Termination Event" means (a) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder for which the 30-day notice
requirement is not waived by the regulations; or (b) the withdrawal of a
Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a) (2) of ERISA or
was deemed such under Section 4068(f) of ERISA; or (c) the termination of a
Pension Plan subject to Title IV of ERISA, the filing of a notice of intent to
terminate a Pension Plan subject to Title IV of ERISA, or the treatment of a
Pension Plan amendment as a termination under Section 4041 of ERISA; or (d) the
institution of proceedings to terminate a Pension Plan by the PBGC; or (e) any
other event or condition which would constitute grounds under Section 4042 (a)
of ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan subject to such Section 4042(a); or (f) the partial or complete
withdrawal of a Borrower or any ERISA Affiliate from a Multiemployer Plan; or
(g) the imposition of a Lien pursuant to Section 412 of the IRC or Section 302
of ERISA; or (h) any event or condition which results in the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of ERISA,
respectively; or (i) any event or condition which results in the termination of
a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC
of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.
"Unfunded Capital Expenditures" shall mean Capital Expenditures during the
applicable period of determination minus increases in Purchase Money
Indebtedness and offsetting cash sales of capital equipment, all determined in
accordance with generally accepted accounting principles applied on a consistent
basis.
24
"Unsubordinated Liabilities" means, with respect to any Person, all
Indebtedness as defined in clause (i) of the definition of "Indebtedness" but
excluding any Subordinated Debt.
Any accounting terms used in this Agreement that are not specifically defined
herein shall have the meanings customarily given to them in accordance with
generally accepted accounting principles as in effect on the date of this
Agreement, except that references in Article 5 to such principles shall be
deemed to refer to such principles as in effect on the date of the financial
statements delivered pursuant thereto. Any reference to "Griffon and its
Subsidiaries" shall mean Griffon and its Subsidiaries on a consolidated basis.
Article 2 Commitments; Loans.
Section ▇.▇.▇▇▇▇▇.
Each Bank hereby severally agrees, on the terms and subject to the
conditions of this Agreement, to make loans to Griffon and/or Telephonics (each
a "Loan" and, as the context may require, collectively with all other Loans of
such Bank and with the Loans of all other Banks to Griffon and/or Telephonics,
the "Loans") from time to time on any Business Day during the Revolving Credit
Period to and including the Commitment Termination Date, or, if the Commitment
Termination Date has been extended in accordance with the terms of Section
2.8(b) of this Agreement, the Termination Date; provided, that, after giving
effect thereto (i) such Bank's Revolving Exposure would not exceed such Bank's
Commitment as then in effect, (ii) the Aggregate Telephonics Revolving Exposure
would not exceed the Aggregate Telephonics Revolving Commitment as then in
effect, (iii) the Aggregate Revolving Exposure would not exceed the Aggregate
Revolving Commitment as then in effect and (iv) such Bank's Telephonics
Revolving Exposure would not exceed such Bank's Telephonics Sublimit Commitment
as then in effect,. Subject to the terms of this Agreement, during the Revolving
Credit Period the Borrowers may borrow, repay (provided that repayment of
Eurodollar Loans shall be subject to the provisions of Section 2.22 hereof) and
reborrow up to the amount of each Bank's Commitment, the Aggregate Revolving
Commitment and in the case of Telephonics the Aggregate Telephonics Revolving
Commitment (in each case after giving effect to the mandatory and voluntary
reductions required and permitted herein) by means of Prime Rate Loans or
Eurodollar Loans, and during such period and thereafter until the date of the
payment in full of all of the Loans, the Borrowers may convert Loans of one type
into Loans of another type (as provided in section 2.17 hereof). IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT THE TELEPHONICS SUBLIMIT COMMITMENT IS A SUBLIMIT OF
THE COMMITMENT AND THAT IN NO EVENT SHALL (I) ANY BANK'S TOTAL REVOLVING
EXPOSURE WITH RESPECT TO GRIFFON AND TELEPHONICS EXCEED SUCH BANK'S COMMITMENT,
OR (II) SHALL THE AGGREGATE REVOLVING EXPOSURE WITH RESPECT TO GRIFFON AND
TELEPHONICS EXCEED THE AGGREGATE REVOLVING COMMITMENT.
25
Section 2.2. Notices Relating to Loans.
To the extent Griffon requests a termination or reduction of the
Commitments, or to the extent Telephonics requests a termination or reduction of
the Aggregate Telephonics Revolving Commitment or to the extent either Borrower
requests that the Banks make a Loan to such Borrower, or to the extent either
Borrower requests a conversion and prepayment of a Loan, the applicable Borrower
shall give the Administrative Agent written notice of each such event and to the
extent same involves a Eurodollar Loan, the duration of each Interest Period
applicable to each such Eurodollar Loan (in each case, a "Borrowing Notice");
provided, that, it is expressly agreed that (i) only Griffon shall be authorized
to furnish a Borrowing Notice with respect to a termination or reduction of the
Commitments (other than a reduction in the Commitments solely as a result of a
reduction or termination of the Aggregate Telephonics Revolving Credit
Commitment), or a Loan to be made to Griffon, or a conversion or prepayment of a
Loan made to Griffon, and (ii) only Telephonics shall be authorized to furnish a
Borrowing Notice with respect to a termination or reduction of the Aggregate
Telephonics Revolving Commitment, or a Loan to be made to Telephonics, or a
conversion or prepayment of a Loan made to Telephonics. Each such written notice
shall be executed and acknowledged by the applicable Borrower, shall be
irrevocable and shall be effective only if received by the Administrative Agent
not later than 11 a.m., New York City time, on the date that is:
(a) in the case of each notice of termination or reduction and each notice
of borrowing or prepayment of, or conversion into, Prime Rate Loans, the same as
the date of the related termination, reduction, borrowing, prepayment or
conversion; and
(b) in the case of each notice of borrowing or prepayment of, or conversion
into, Eurodollar Loans, or the duration of an Interest Period for Eurodollar
Loans, three (3) Eurodollar Business Days prior to the date of the related
borrowing, prepayment, or conversion or the first day of such Interest Period.
Each such notice of termination or reduction shall specify the amount thereof.
Each such notice of borrowing, conversion or prepayment shall specify the amount
(subject to Section 2.1 hereof) and type of Loans to be borrowed, converted or
prepaid (and, in the case of a conversion, the type of Loans to result from such
conversion), the date of borrowing, conversion or prepayment (which shall be:
(x) a Business Day in the case of each borrowing or prepayment of Prime Rate
Loans and (y) a Eurodollar Business Day in the case of each borrowing or
prepayment of Eurodollar Loans and each conversion of or into a Eurodollar
Loan). Each such notice of the duration of an Interest Period shall specify the
Loans to which such Interest Period is to relate.
26
Section 2.3. Disbursement of Loan Proceeds.
(a) Each Borrower shall give the Administrative Agent notice of each
borrowing hereunder as provided in Section 2.2 hereof. Upon receipt of each
Borrowing Notice, the Administrative Agent shall promptly notify each Bank
thereof. Subject to its receipt of the notice referred to in the preceding
sentence, each Bank will make the amount of its Revolving Percentage of the
requested Loans available to the Administrative Agent for the account of the
applicable Borrower at the Payment Office not later than 2:00 p.m. on the
relevant Borrowing Date specified for each borrowing hereunder, in funds
immediately available to the Administrative Agent at such office. The amounts so
made available to the Administrative Agent on such Borrowing Date will then,
subject to the satisfaction of the terms and conditions of this Agreement, be
made available on such date to the applicable Borrower by the Administrative
Agent at the Payment Office by crediting the account of such Borrower on the
books of the Administrative Agent at such office with the aggregate of said
amounts (in like funds) received by the Administrative Agent.
(b) Unless the Administrative Agent shall have confirmed that prior to its
funding of a Loan it received notice from a Bank (by telephone or otherwise,
such notice to be promptly confirmed by facsimile or other writing) that such
Bank will not make available to the Administrative Agent such Bank's share of
the requested Loans, the Administrative Agent may assume that such Bank has made
such share available to the Administrative Agent on the Borrowing Date in
accordance with this Section and, in reliance upon such assumption, make
available to the applicable Borrower on such Borrowing Date a corresponding
amount. If and to the extent such Bank shall not have so made such share
available to the Administrative Agent, such Bank and the applicable Borrower
severally agree to pay to the Administrative Agent forthwith on demand such
corresponding amount (to the extent not previously paid by the other), together
with interest thereon for each day from the date such amount is made available
to such Borrower to the date such amount is paid to the Administrative Agent, at
a rate per annum equal to, in the case of such Borrower, the interest rate
otherwise applicable to such Loan, and, in the case of such Bank, at a rate of
interest per annum equal to the greater of the Federal Funds Rate and a rate
determined by the Administrative Agent in accordance with banking industry rates
on interbank compensation. If such Bank shall pay to the Administrative Agent
such corresponding amount, such amount so paid shall constitute such Bank's Loan
as part of the relevant borrowing for purposes of this Agreement.
Section 2.4. Notes.
(a) The Loans made by the Banks shall be evidenced by separate promissory
notes of each Borrower payable to each Bank (each, a "Note" and collectively,
the "Notes"), each in substantially the form of Exhibit A hereto. Each Note
shall be dated the date of this Agreement, shall be payable to the order of such
Bank and (i) in the case of the Note made by Griffon shall be in a principal
27
amount equal to such Bank's Commitment as originally in effect and (ii) in the
case of the Note made by Telephonics shall be in a principal amount equal to
such Telephonics Sublimit Commitment. Each Note shall also otherwise be duly
completed. The Notes shall be payable as provided in Sections 2.1 and 2.5
hereof.
(b) Each Bank shall enter on a schedule attached to its Note a notation
with respect to each Loan made hereunder of: (i) the date and principal amount
thereof, (ii) each payment and prepayment of principal thereof, (iii) whether
the interest rate is initially to be determined in accordance with subsection
2.6(a) (i) or 2.6(a) (ii) hereof, and (iv) the Interest Period, if applicable.
The failure of any Bank to make a notation on the schedule to its Note as
aforesaid shall not limit or otherwise affect the obligation of either Borrower
to repay the Loans in accordance with their respective terms as set forth
herein.
(c) The Notes executed by Griffon in connection with this Agreement payable
to the order of each Existing Bank shall amend, restate, replace and supersede
the promissory notes made by Griffon to the order of each such Bank in
connection with the Original Agreement.
(d) The Notes executed by Telephonics in connection with this Agreement
payable to the order of Fleet and Chase shall amend, restate, replace and
supersede the promissory notes made by Telephonics to the order of each such
Bank in connection with the each such Bank's prior lending relationship with
Telephonics.
Section 2.5. Repayment of Principal of Loans.
(a) The Commitments of the Banks to make additional Loans shall terminate
on the Commitment Termination Date or, if the Commitment Termination Date has
been extended in accordance with the terms of this Agreement, on the Termination
Date, and each Borrower shall pay to each Bank the Revolving Exposure owing to
such Bank outstanding on the close of business on such date.
(b) The Extensions of Credit: (i) shall be repaid as and when necessary to
cause the aggregate principal amount of the Aggregate Revolving Exposure
outstanding not to exceed each Bank's Commitment, as reduced pursuant to Section
2.8 hereof, and (ii) may be repaid at any time and from time to time, in whole
or in part, without premium or penalty (except as otherwise provided in Section
2.22 hereof), upon prior written notice to each Bank as provided in Section 2.2
hereof, in a minimum amount of $500,000 and in integral multiples of $100,000 in
the case of Prime Rate Loans, and in a minimum amount of $2,000,000 and in
integral multiples of $100,000 in the case of Eurodollar Loans, except as
otherwise provided in Section 2.11 hereof, and any amount so repaid may, subject
to the terms and conditions hereof, including the borrowing limitation imposed
by the Commitments, be reborrowed hereunder during the Revolving Credit Period;
provided, however, that: (A) Eurodollar Loans may be repaid only on the last day
28
of an Interest Period for such Loans, and (B) all repayments of Loans or any
portion thereof shall be made together with payment of all interest accrued on
the amount repaid through the date of such repayment.
(c) Except as set forth in Sections 2.18, 2.19 and 2.21 hereof, all
payments and repayments of Loans made pursuant to the terms hereof shall be
applied first to Prime Rate Loans, and shall be applied to Eurodollar Loans only
to the extent any such payment exceeds the principal amount of Prime Rate Loans
outstanding at the time of such payment.
(d) A Borrower may request a Eurodollar Loan only if compliance with
subsection 2.8(b) hereof (with the payments provided for therein being applied
in accordance with subsection 2.5(c) hereof) would not result in any portion of
the principal amount of such Eurodollar Loan being paid prior to the last day of
the Interest Period applicable thereto.
Section 2.6. Interest.
(a) For all Loans each Borrower agrees to pay to the Administrative Agent,
for the account of the Banks in accordance with each Bank's Revolving
Percentage, interest on the unpaid principal amount of each Loan made by such
Bank for the period commencing on the date of such Loan until such Loan shall be
paid in full, at the following rates per annum:
(i) During such periods that such Loan is a Prime Rate Loan, the Prime
Rate plus the Applicable Margin; and
(ii) During such periods that such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Fixed Rate for such Loan for such
Interest Period plus the Applicable Margin.
(b) Notwithstanding the foregoing, each Borrower shall pay interest on any
Loan or any installment thereof, and on any other amount payable by such
Borrower hereunder (to the extent permitted by law) that shall not be paid in
full when due (whether at stated maturity, by acceleration or otherwise) for the
period commencing on the due date thereof until the same is paid in full at the
applicable Post-Default Rate.
(c) Except as provided in the next sentence, accrued interest on each Loan
shall be payable: (i) in the case of a Prime Rate Loan, monthly in arrears on
the Monthly Dates, (ii) in the case of a Eurodollar Loan, on the last day of
each Interest Period for such Loan (and, if such Interest Period exceeds three
months in duration, on the last day of each three-month period occurring during
such Interest Period) and (iii) in the case of any Loan, upon the payment or
prepayment thereof or the conversion thereof into a Loan of another type (but
only on the principal so paid, prepaid or converted). Interest that is payable
29
at the Post-Default Rate shall be payable from time to time on demand of any
Bank. Promptly after the establishment of any interest rate provided for herein
or any change therein, the Administrative Agent will notify a Borrower thereof,
provided that the failure to so notify a Borrower shall not affect the
obligations of either Borrower hereunder or under any of the Notes in any
respect.
(d) Anything in this Agreement or any of the Notes to the contrary
notwithstanding, the obligation of the Borrowers to make payments of interest
shall be subject to the limitation that payments of interest shall not be
required to be made to any Bank to the extent that such Bank's receipt thereof
would not be permissible under the law or laws applicable to such Bank limiting
rates of interest that may be charged or collected by such Bank. Any such
payments of interest that are not made as a result of the limitation referred to
in the preceding sentence shall be made by the applicable Borrower(s) to such
Bank on the earliest interest payment date or dates on which the receipt thereof
would be permissible under the laws applicable to such Bank limiting rates of
interest that may be charged or collected by such Bank. Such deferred interest
shall not bear interest.
Section 2.7. Fees.
(a) Griffon agrees to pay to the Administrative Agent, for the account of
the Banks in accordance with each Bank's Revolving Percentage, a commitment fee
(the "Commitment Fee"), at a rate per annum equal to .25% on the average daily
unused Aggregate Revolving Commitment. The accrued Commitment Fee shall be
payable quarterly in arrears on the Quarterly Dates, commencing January 1, 2002
to and including (i) the earlier of the date such Bank's Commitment is
terminated or the Commitment Termination Date, or (ii) if the Commitment
Termination Date has been extended in accordance with the terms of Section
2.8(b) of this Agreement, the earlier of the date such Bank's Commitment is
terminated or the Termination Date, and, in the event the Commitments are
reduced as provided in section 2.8 hereof, on the effective date of such
reduction.
(b) Simultaneously with the execution and delivery of this Agreement, the
Borrowers shall pay to the Administrative Agent, for the account of the Banks in
accordance with each Bank's Revolving Percentage, a non-refundable facility fee
(the "Facility Fee") in an amount equal to Three Hundred Twenty Thousand Dollars
($320,000.00) in the aggregate.
(c) Each Borrower agrees to pay commissions (the "Letter of Credit Fees")
with respect to the Letters of Credit for its account for the period from and
including the date of issuance of each thereof through the expiration date in
accordance with the following:
(i) In the case of Letters of Credit, at a rate per annum equal to
1.25% on the average daily maximum amount available under any contingency
to be drawn under such Letter of Credit (but in no event less than $1,000),
30
such commissions to be payable to the Applicable L/C Fee Distributor for
the account of the Banks in accordance with each Bank's Revolving
Percentage. Letter of Credit Fees on account of Letters of Credit shall be
(i) calculated on the basis of a 360-day year for the actual number of days
elapsed and (ii) payable on (x) the date hereof in the case of the Fleet
L/Cs and the Chase L/Cs, each for the period beginning on the date hereof
to the next Quarterly Date, (y) the date of issuance of such Letter of
Credit, in each case for the period beginning on the date of such issuance
to the next Quarterly Date and (z) with respect to each Letter of Credit,
quarterly in advance on each Quarterly Date of each year, commencing on the
first such day following the date of this Agreement, and on the date that
the Commitments shall expire.
(ii) With respect to each Letter of Credit and in addition to the
Letter of Credit Fees, the requesting Borrower agrees to pay to the Issuer,
for its own account, its standard fees and charges customarily charged to
customers similar to such Borrower with respect to any Letter of Credit.
(d) The Commitment Fee, the Facility Fee and the Letter of Credit Fees are
hereinafter sometimes referred to individually as a "Fee" and collectively as
the "Fees".
Section 2.8. Changes in Commitment.
(a) Subject to Section 2.15 hereof, Griffon shall be entitled to terminate
or reduce the Banks' Commitments and Telephonics shall be entitled to terminate
or reduce the Aggregate Telephonics Revolving Commitment provided that the
applicable Borrower shall give notice of such termination or reduction to the
Administrative Agent as provided in Section 2.2 hereof and that any partial
reduction of the Commitments shall be in an aggregate amount equal to $500,000
or an integral multiple thereof. Any such termination or reduction shall be
permanent and irrevocable.
(b) At the option of the Borrowers, to be exercised on the Commitment
Termination Date, provided that the Borrowers can satisfy the conditions set
forth in Section 4.3 hereof as if an Extension of Credit were being made on such
date, in lieu of paying the outstanding Extensions of Credit on such date, the
Borrowers may elect to extend the Commitment Termination Date on the decreasing
basis as provided in the definition of "Commitment" and in such event the
Commitment Termination Date shall be deemed to have been extended for purposes
of this Agreement and the Commitments shall be deemed to automatically decrease
as provided in the definition of "Commitment." The Borrowers shall give notice
of its intention to exercise such option by delivering a written notice to the
Administrative Agent on, or at any time prior to 10 days of the Commitment
Termination Date. If the Commitment Termination Date has been extended in
accordance with this Section 2.8(b), on the Commitment Termination Date and on
each Quarterly Reduction Date thereafter, if, the Aggregate Revolving Exposure
exceeds the Aggregate Revolving Commitment as then required to be reduced,
within one Business Day of the first day there exists such excess Griffon shall
31
make payment to the Administrative Agent (to be distributed in accordance with
the terms of Section 2.15 of this Agreement) in an amount equal to such excess
together with any amounts payable pursuant to Section 2.22 in connection
therewith.
(c) If on the date of any reduction of the Aggregate Revolving Commitment,
the Aggregate Revolving Exposure exceeds the Aggregate Revolving Commitment
after giving effect to such reduction and, if the Loans have been paid in full
and the Letter of Credit Exposure of all Lenders is greater than zero, the
Borrowers shall deposit into a cash collateral account an amount in cash which
would cause the balance on deposit in the cash collateral account to equal or
exceed the Letter of Credit Exposure of all Lenders.
(d) If on the date of any reduction of the Aggregate Telephonics Revolving
Commitment, the Aggregate Telephonics Revolving Exposure exceeds the Aggregate
Telephonics Revolving Commitment after giving effect to such reduction and, if
the Telephonics Loans have been paid in full and the Telephonics Letter of
Credit Exposure of all Banks is greater than zero, Telephonics shall deposit
into a cash collateral account an amount in cash which would cause the balance
on deposit in the cash collateral account to equal or exceed the Telephonics
Letter of Credit Exposure of all Banks.
Section 2.9. Use of Proceeds of Loans; Existing Indebtedness.
(a) The proceeds of Loans made to Telephonics shall refinance certain
obligations of Telephonics in the aggregate amount of $19,800,000 owing to
Fleet, Chase and Citibank, N.A. and the proceeds of the other Extensions of
Credit hereunder may be used by the Borrowers solely for such Borrower's working
capital purposes and for other corporate purposes permitted hereunder
(including, without limitation, Permitted Acquisitions and the repurchase,
redemption, retirement or acquisition of Griffon's capital stock not prohibited
by Section 7.5 hereof).
(b) With respect to all loans outstanding under the Original Agreement,
Griffon shall pay to each Existing Bank on the date hereof, the then outstanding
principal balance of each such loan, if any, together with all accrued and
unpaid interest with respect thereto. With respect to all loans owing to a Bank
by Telephonics as of the date of this Agreement, Telephonics shall pay to each
appropriate Bank on the date hereof, the then outstanding principal balance of
each such loan, if any, together with all accrued and unpaid interest with
respect thereto.
Section 2.10. Computations.
Interest on all Loans and each Fee shall be computed on the basis of a year
of 360 days and actual days elapsed (including the first day but excluding the
last) occurring in the period for which payable.
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Section 2.11. Minimum Amounts of Borrowings, Conversions, Prepayments and
Interest Periods.
Except for borrowings, conversions and prepayments that exhaust the full
remaining amount of the Aggregate Revolving Commitment (in the case of
borrowings) or result in the conversion or prepayment of all Loans of a
particular type (in the case of conversions or prepayments) or conversions made
pursuant to Section 2.18 or Section 2.20 hereof, each borrowing from each Bank,
each conversion of Loans of one type into Loans of another type and each
prepayment of principal of Loans hereunder shall be in an amount at least equal
to $500,000 and in integral multiples of $100,000 in the case of Prime Rate
Loans, and in an amount at least equal to $2,000,000 and in integral multiples
of $100,000 in the case of Eurodollar Loans (borrowings, conversions and
prepayments of different types of Loans at the same time hereunder to be deemed
separate borrowings, conversions and prepayments for purposes of the foregoing,
one for each type).
Section 2.12. Time and Method of Payments.
(a) Except as provided below, all payments of principal, interest, Fees and
other amounts (including indemnities) to be paid by a Borrower under the Loan
Documents or payable by a Borrower hereunder shall be made in Dollars, in
immediately available funds, shall be made to the Administrative Agent, prior to
11:00 a.m. on the date such payment is due, for the account of the applicable
Credit Party at the Payment Office, without counterclaim or setoff and free and
clear of, and without any deduction or withholding for, any taxes or other
payments. The failure of either Borrower to make any such payment by such time
shall not constitute a Default, provided that such payment is made on such due
date, but any such payment made after 1:00 p.m. on such due date shall be deemed
to have been made on the next Business Day for the purpose of calculating
interest on amounts outstanding on the Revolving Loans. As between each Borrower
and each Credit Party, any payment by a Borrower to the Administrative Agent for
the account of such Credit Party shall be deemed to be payment by such Borrower
to such Credit Party. Notwithstanding the foregoing, (i) all payments pursuant
to Sections 2.18, 2.22, 9.1 and 9.2 shall be paid directly to the Credit Party
entitled thereto and (ii) all payments pursuant to Section 2.7(c)(i) shall be
made to the Applicable L/C Fee Distributor for the account of and distribution
to the Credit Parties. Furthermore, the Administrative Agent and any Bank for
whose account any such payment is to be made may, but shall not be obligated to,
debit the amount of any such payment that is not made by such time to any
ordinary deposit account of either Borrower with the Administrative Agent or
such Bank, as the case may be. If any payment under the Loan Documents shall be
due and payable on a day which is not a Business Day, the due date thereof
(except as otherwise provided with respect to Interest Periods) shall be
extended to the next Business Day and (except with respect to payments in
respect of the Fees) interest shall be payable at the applicable rate specified
herein during such extension, provided, however, that if such next Business Day
33
would be after the Commitment Termination Date (or, if the Commitment
Termination Date has been extended in accordance with the terms of Section
2.8(b) of this Agreement, the Termination Date), such payment shall instead be
due on the immediately preceding Business Day. Additional provisions relating to
payments are set forth in Section 9.3 hereof.
(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, interest and fees
then due hereunder, such funds shall be applied (A) first, towards payment of
interest and fees then due under the Loan Documents, ratably among the parties
entitled thereto in accordance with the amounts of interest and fees then due to
such parties, and (B) second, towards payment of principal then due under the
Loan Documents, ratably among the parties entitled thereto in accordance with
the amounts of principal then due to such parties.
Section 2.13. Lending Offices.
The Loans of each type made by each Bank shall be made and maintained at
such Bank's Applicable Lending Office for Loans of such type.
Section 2.14. Failure to Fund.
The failure of any Bank to make any Loan to be made by it on the date
specified therefor shall not relieve any other Bank of its respective
obligations to make its Loans on such date, but no Bank shall be responsible for
the failure of any other Bank to make Loans to be made by such other Bank.
Section 2.15. Pro Rata Treatment Between Banks.
Notwithstanding anything to the contrary provided herein: (i) each
borrowing from the Banks under Section 2.1 hereof will be made from the Banks
and each payment of each Fee shall be made to the Banks pro rata according to
each Bank's Revolving Percentage (without giving effect to the termination
thereof, whether pursuant to subsection 2.5 (a), Article 8 or otherwise); (ii)
each partial reduction of the Commitments shall be applied to the Commitments of
the Banks pro rata according to each Bank's Revolving Percentage; (iii) each
conversion of Loans of a particular type under Section 2.17 hereof (other than
conversions provided for by Section 2.20 or 2.21 hereof) will be made pro rata
among the Banks holding Loans of such type according to the respective principal
amounts of such Loans held by such Banks; (iv) each payment and prepayment of
principal of or interest on Extensions of Credit of a particular type will be
made to the Banks pro rata in accordance with the respective unpaid principal
amounts of such Extensions of Credit held by such Banks; and (v) each borrowing
from the Banks under Section 2.1 hereof will be made from the Banks at the same
Interest Period (if applicable) with respect to each such borrowing.
34
Section 2.16. Sharing of Payments, and Set-Off Among Banks.
Each Borrower hereby agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Bank may otherwise
have, each Bank shall be entitled, at its option, to offset balances held by it
at any of its offices against any Revolving Exposure hereunder, or any Fee or
other amount payable to it, that is not paid when due (regardless of whether
such balances are then due to such Borrower), in which case it shall promptly
notify a Borrower and the other Banks thereof, provided that its failure to give
such notice shall not affect the validity thereof. If any Bank shall, by
exercising any right of setoff or counterclaim or otherwise, obtain payment in
respect of any principal of, or interest on, any of its Loans or participations
in LC Disbursements resulting in such Bank receiving payment of a greater
proportion of the aggregate amount of its Loans and participations in LC
Disbursements and accrued interest thereon than the proportion received by any
other applicable Bank, then the applicable Bank receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
and participations in LC Disbursements of other applicable Banks to the extent
necessary so that the benefit of all such payments shall be shared by the
applicable Banks ratably in accordance with the aggregate amount of principal
of, and accrued interest on, their respective Loans and participations in LC
Disbursements, provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrower pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Bank as consideration for the assignment of or sale of a
participation in any of its Loans or participations in LC Disbursements to any
assignee or participant, other than to a Borrower or any Subsidiary or Affiliate
thereof (as to which the provisions of this paragraph shall apply). Each Loan
Party consents to the foregoing and agrees, to the extent it may effectively do
so under applicable law, that any Bank acquiring a participation pursuant to the
foregoing arrangements may exercise against such Loan Party rights of setoff and
counterclaim with respect to such participation as fully as if such Bank were a
direct creditor of such Loan Party in the amount of such participation. Nothing
contained herein shall require any Bank to exercise any such right or shall
affect the right of any Bank to exercise and retain the benefits of exercising,
any such right with respect to any other indebtedness or obligation of either
Borrower.
Section 2.17. Conversions of Loans.
Each Borrower shall have the right to convert Loans of one type into Loans
of another type from time to time, provided that: (i) such Borrower shall give
the Administrative Agent notice of each such conversion as provided in Section
2.2 hereof; (ii) Eurodollar Loans may be converted only on the last day of an
Interest Period for such Loans; and (iii) except as required by Sections 2.18 or
2.21 hereof, no Prime Rate Loan may be converted into a Eurodollar Loan if on
35
the proposed date of conversion a Default or an Event of Default exists. The
Administrative Agent shall use its best efforts to notify a Borrower of the
effectiveness of such conversion, and the new interest rate to which the
converted Loans are subject, as soon as practicable after the conversion;
provided, however, that any failure to give such notice shall not affect either
Borrower's obligations, or the Banks' or the Administrative Agent's rights and
remedies, hereunder in any way whatsoever.
Section 2.18. Additional Costs; Capital Requirements.
(a) In the event that any existing or future law or regulation, guideline
or interpretation thereof, by any court or administrative or governmental
authority charged with the administration thereof, or compliance by any Bank
with any request or directive (whether or not having the force of law) of any
such authority shall impose, modify or deem applicable or result in the
application of, any capital maintenance, capital ratio or similar requirement
against loan commitments made by any Bank hereunder, and the result of any event
referred to above is to impose upon any Bank or increase any capital requirement
applicable as a result of the making or maintenance off such Bank's Commitment
or the obligation of either Borrower hereunder with respect to such Commitment
(which imposition of capital requirements may be determined by each Bank's
reasonable allocation of the aggregate of such capital increases or
impositions), then, upon demand made by such Bank as promptly as practicable
after it obtains knowledge that such law, regulation, guideline, interpretation,
request or directive exists and determines to make such demand, each Borrower
shall immediately pay to such Bank from time to time as specified by such Bank
additional commitment fees which shall be sufficient to compensate such Bank for
such imposition of or increase in capital requirements together with interest on
each such amount from the date demanded until payment in full thereof at the
Post-Default Rate. A certificate setting forth in reasonable detail the amount
necessary to compensate such Bank as a result of an imposition of or increase in
capital requirements submitted by such Bank to a Borrower shall be conclusive,
absent manifest error, as to the amount thereof. For purposes of this Section
2.18: (i) in calculating the amount necessary to compensate any Bank for any
imposition of or increase in capital requirements, such Bank shall be deemed to
be entitled to a rate of return on capital (after federal, state and local
taxes) of fifteen percent per annum, and (ii) all references to any "Bank" shall
be deemed to include any participant in such Bank's Commitment.
(b) In the event that any Regulatory Change shall: (i) change the basis of
taxation of any amounts payable to any Bank under this Agreement or the Notes in
respect of any Loans including, without limitation, Eurodollar Loans (other than
taxes imposed on the overall net income of such Bank for any such Loans by the
United States of America or the jurisdiction in which such Bank has its
Principal Office); or (ii) impose or modify any reserve, Federal Deposit
Insurance Corporation premium or assessment, special deposit or similar
requirements relating to any Extensions of Credit or other assets of, or any
36
deposits with or other liabilities of, such Bank (including any of such Loans or
any deposits referred to in the definition of "Fixed Base Rate" in Article 1
hereof); or (iii) impose any other conditions affecting this Agreement in
respect of Loans, including, without limitation, Eurodollar Loans (or any of
such extensions of credit, assets, deposits or liabilities); and the result of
any event referred to in clause (i), (ii) or (iii) above shall be to increase
such Bank's costs of making or maintaining any Loans, including, without
limitation, Eurodollar Loans, or its Commitment, or to reduce any amount
receivable by such Bank hereunder in respect of any of its Eurodollar Loans, or
its Commitment, or to increase the cost to any Bank of issuing or maintaining
the Letters of Credit or participating therein, as the case may be (such
increases in costs and reductions in amounts receivable are hereinafter referred
to as "Additional Costs") in each case, only to the extent that such Additional
Costs are not included in the Fixed Base Rate applicable to such Eurodollar
Loans, then, upon demand made by such Bank as promptly as practicable after it
obtains knowledge that such a Regulatory Change exists and determines to make
such demand, each Borrower shall pay to such Bank from time to time as specified
by such Bank, additional commitment fees or other amounts which shall be
sufficient to compensate such Bank for such increased cost or reduction in
amounts receivable by such Bank from the date of such change, together with
interest on each such amount from the date demanded until payment in full
thereof at the Post-Default Rate. All references to any "Bank" shall be deemed
to include any participant in such Bank's Commitment.
(c) Without limiting the effect of the foregoing provisions of this Section
2.18, in the event that, by reason of any Regulatory Change, any Bank either:
(i) incurs Additional Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of such Bank
which includes deposits by reference to which the interest rate on Eurodollar
Loans is determined as provided in this Agreement or a category of extensions of
credit or other assets of such Bank which includes Eurodollar Loans, or (ii)
becomes subject to restrictions on the amount of such a category of liabilities
or assets that it may hold, then, if such Bank so elects by notice to a Borrower
(with a copy to the other Banks), the obligation of such Bank to make, and to
convert Loans of any other type into, Loans of such type hereunder shall be
suspended until the date such Regulatory Change ceases to be in effect (and all
Loans of such type then outstanding shall be converted into Prime Rate Loans or
into Eurodollar Loans of another duration, as the case may be, in accordance
with Sections 2.17 and 2.21 hereof).
(d) Determinations by any Bank for purposes of this Section 2.18 of the
effect of any Regulatory Change on its costs of making or maintaining Loans or
on amounts receivable by it in respect of Loans, and of the additional amounts
required to compensate such Bank in respect of any Additional Costs, shall be
set forth in writing in reasonable detail and shall be conclusive, absent
manifest error.
37
Section 2.19. Limitation on Types of Loans.
Anything herein to the contrary notwithstanding, if, on or prior to the
determination of an interest rate for any Eurodollar Loans for any Interest
Period therefor, the Administrative Agent or any Bank determines (which
determination shall be conclusive):
(a) by reason of any event affecting the Eurodollar interbank market,
quotations of interest rates for the relevant deposits are not being provided in
the relevant amounts or for the relevant maturities for purposes of determining
the rate of interest for such Loans under this Agreement; or
(b) the rates of interest referred to in the definition of "Fixed Base
Rate" in Article 1 hereof upon the basis of which the rate of interest on any
Eurodollar Loans for such period is determined, do not accurately reflect the
cost to the Banks of making or maintaining such Loans for such period;
then the Administrative Agent or such Bank, as the case may be, shall give a
Borrower and the other Banks prompt notice thereof (and shall thereafter give a
Borrower and such other Banks prompt notice of the cessation, if any, of such
condition), and so long as such condition remains in effect, the Banks shall be
under no obligation to make Loans of such type or to convert Loans of any other
type into Loans of such type and each Borrower shall, on the last day(s) of the
then current Interest Period(s) for the outstanding Loans of the affected type
either prepay such Loans in accordance with Section 2.8 hereof or convert such
Loans into Loans of another type in accordance with Section 2.17 hereof.
Section 2.20. Illegality.
Notwithstanding any other provision in this Agreement, in the event that it
becomes unlawful for any Bank or its Applicable Lending Office to: (i) honor its
obligation to make Eurodollar Loans hereunder, or (ii) maintain Eurodollar Loans
hereunder, then such Bank shall promptly notify a Borrower thereof (with a copy
to the other Banks), describing such illegality in reasonable detail (and shall
thereafter promptly notify a Borrower and the other Banks of the cessation, if
any, of such illegality), and such Bank's obligation to make Eurodollar Loans
and to convert other types of Loans into Eurodollar Loans hereunder shall, upon
written notice given by such Bank to a Borrower, be suspended until such time as
such Bank may again make and maintain Eurodollar Loans and such Bank's
outstanding Eurodollar Loans shall be converted into Prime Rate Loans in
accordance with Sections 2.17 and 2.21 hereof.
Section 2.21. Certain Conversions pursuant to Sections 2.18 and 2.20.
If the Loans of any Bank of a particular type (Loans of such type are
hereinafter referred to as "Affected Loans" and such type is hereinafter
referred to as the "Affected Type") are to be converted pursuant to Section 2.18
or 2.20 hereof, such Bank's Affected Loans shall be converted into Prime Rate
38
Loans, or Eurodollar Loans of another type, as the case may be (the "New Type
Loans") on the last day(s) of the then current Interest Period(s) for the
Affected Loans (or, in the case of a conversion required by subsection 2.18(c)
or Section 2.20 hereof, on such earlier date as such Bank may specify to a
Borrower with a copy to the other Banks) and, until such Bank gives notice as
provided below that the circumstances specified in Section 2.18 or 2.20 hereof
that gave rise to such conversion no longer exist:
(a) to the extent that such Bank's Affected Loans have been so converted,
all payments and prepayments of principal that would otherwise be applied to
such Affected Loans shall be applied instead to its New Type Loans; and
(b) all Loans that would otherwise be made by such Bank as Loans of the
Affected Type shall be made instead as New Type Loans and all Loans of such Bank
that would otherwise be converted into Loans of the Affected Type shall be
converted instead into (or shall remain as) New Type Loans.
Section 2.22. Indemnity.
Each Borrower hereby agrees to indemnify each Bank against any loss or
expense which such Bank may sustain or incur as a consequence of any of the
following:
(a) the failure of such Borrower to borrow a Eurodollar Loan after
agreement shall have been reached on the amount, interest rate and Interest
Period thereof;
(b) the receipt or recovery by such Bank, whether by voluntary prepayment,
acceleration or otherwise, of all or any part of a Eurodollar Loan prior to the
last day of an Interest Period applicable thereto; or
(c) the conversion, prior to the last day of an applicable Interest Period,
of a Eurodollar Loan into a Prime Loan.
Without limiting the effect of the foregoing, the amount to be paid by such
Borrower to such Bank in order to so indemnify such Bank for any loss occasioned
by any of the events described in the preceding paragraph, and as liquidated
damages therefor, shall be equal to the excess, discounted to its present value
as of the date paid to such Bank, of (i) the amount of interest which otherwise
would have accrued on the principal amount so received, recovered, converted or
not borrowed during the period (the "Indemnity Period") commencing with the date
of such receipt, recovery, conversion, or failure to borrow to the last day of
the applicable Interest Period for such Eurodollar Loan at the rate of interest
applicable to such Loan (or the rate of interest agreed to in the case of a
failure to borrow) provided for herein (prior to default) over (ii) the amount
of interest which would be earned by such Bank during the Indemnity Period if it
39
invested the principal amount so received, recovered, converted or not borrowed
at the rate per annum determined by such Bank as the rate it would bid in the
London interbank market for a deposit of eurodollars in an amount approximately
equal to such principal amount for a period of time comparable to the Indemnity
Period.
A certificate as to any additional amounts payable pursuant to this Section
2.22 setting forth the basis and method of determining such amounts shall be
conclusive, absent manifest error, as to the determination by such Bank set
forth therein if made reasonably and in good faith. Each Borrower shall pay any
amounts so certified to it by such Bank within 10 days of receipt of any such
certificate. For purposes of this Section 2.22, all references to the "Bank"
shall be deemed to include any participant in such Bank's Commitment and/or
Loans.
The indemnities set forth herein shall survive payment in full of all
Eurodollar Loans and all other Loans made pursuant to this Agreement.
Section 2.23. Security.
(a) In order to secure the due payment and performance by the Borrowers of
the Obligations Griffon:
(A) Has granted to the Administrative Agent for the ratable benefit of
the Banks a first Lien on, and pledge to the Administrative Agent for the
ratable benefit of the Banks, all of the issued and outstanding shares of
the capital stock of Clopay by the execution and delivery to the
Administrative Agent of a Pledge Agreement dated August 31, 1999 (which is
hereby confirmed in all respects); it being expressly agreed that the grant
of a Lien on, and pledge to the Administrative Agent for the ratable
benefit of the Banks of, all of the issued and outstanding shares of the
capital stock of Telephonics pursuant to the Original Agreement is being
released contemporaneously with the effectiveness of this Agreement;
provided, that, same is subject to being reinstated pursuant to Section
2.23(a)(C) hereof;
(B) Shall grant, or cause each of its Subsidiaries to grant, to the
Administrative Agent a first Lien on, and pledge to the Administrative
Agent for the ratable benefit of the Banks, all of the issued and
outstanding shares of the capital stock of any Eligible Business acquired
after the date hereof in a Permitted Acquisition, provided that the
foregoing terms of this subsection (B) in respect of Subsidiaries of Clopay
and of Telephonics shall be subject to the terms of the proviso at the
conclusion of subsection (c) of the definition of "Permitted Acquisition";
(C) At any time the Aggregate Revolving Exposure exceeds $130,000,000,
shall grant to the Administrative Agent a first Lien on, and pledge to the
Administrative Agent for the ratable benefit of the Banks, all of the
issued and outstanding shares of the capital stock of Telephonics, such
grant of Lien and pledge to thereafter remain in effect regardless of
whether the Aggregate Revolving Exposure falls below such $130,000,000; and
40
(D) Shall execute and deliver or cause to be executed and delivered
such other agreements, instruments and documents as the Administrative
Agent or any Bank may reasonably require in order to effect the purposes of
the Pledge Agreement, this Section 2.23 and this Agreement.
(b) All of the agreements, instruments and documents provided for or
referred to in this Section 2.23 are hereinafter sometimes referred to
collectively as the "Security Documents".
Section 2.24. Letters of Credit.
(a) Availability; Procedure. Either Borrower may request the Issuer to
issue standby letters of credit (the "Letters of Credit"; each, individually, a
"Letter of Credit;" which term, as used herein, shall include the Chase L/Cs and
Fleet L/Cs) during the period from the date hereof through the Commitment
Termination Date, or, if the Commitment Termination Date has been extended in
accordance with the terms of Section 2.8(b) of this Agreement, through the
Termination Date, provided that (i) immediately after the issuance of each
Letter of Credit the Letter of Credit Exposure of all Lenders would not exceed
the Letter of Credit Commitment, (ii) the Aggregate Revolving Exposure would not
exceed the Aggregate Revolving Commitment, (iii) the Aggregate Telephonics
Revolving Exposure would not exceed the Aggregate Telephonics Revolving
Commitment and (iv) the issuance, amendment, renewal or extension of any Letter
of Credit shall be in the reasonable discretion of the Issuer and in no event
shall any Letter of Credit be issued unless the issuance thereof is consistent
with the Issuer's policies and procedures for standby letters of credit. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the requesting Borrower shall at
least three Business Days prior to the requested date thereof issuance, hand
deliver or telecopy (if by telecopy it shall be confirmed promptly, and in any
event within five Business Days) to the Issuer, the Applicable L/C Fee
Distributor and the Administrative Agent a notice (which shall be irrevocable)
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying (A) the date of
issuance, amendment, renewal or extension (which shall be a Business Day), (B)
the name and address of the beneficiary thereof, (C) the date on which such
Letter of Credit is to expire (which shall comply with paragraph (b) of this
Section), (D) such Borrower's proposal as to the conditions under which a
drawing may be made under such Letter of Credit and the documentation to be
required in respect thereof, (E) the maximum amount to be available under such
Letter of Credit and (F) such other information as shall be necessary to
prepare, amend, renew or extend such Letter of Credit. Such notice shall be
41
accompanied by a duly completed application for such Letter of Credit on such
forms as may be made available from time to time by the Issuer and such other
certificates, documents (including a reimbursement agreement) and other
information as may be required by the Issuer in accordance with its customary
procedures (collectively, the "Letter of Credit Documentation"). Upon receipt of
such notice from such Borrower, the Applicable L/C Fee Distributor shall
promptly notify each Bank thereof. Subject to the satisfaction of the terms and
conditions of this Agreement, the Issuer shall issue each requested Letter of
Credit. In the event of any conflict between the provisions of this Agreement
and any Letter of Credit Documentation, the provisions of this Agreement shall
control. Notwithstanding the foregoing, with respect to the Chase L/Cs, the
applicable Borrower shall only be required to notify the Administrative Agent as
to an Amendment of a Chase L/C if same involves an increase in the amount
thereof or a renewal or extension of the expiration date thereof.
(b) Terms of Letters of Credit. Each Letter of Credit shall (i) be
denominated in Dollars, (ii) be issued for the account of the requesting
Borrower and in support of obligations, contingent or otherwise, of such
Borrower arising in the ordinary course of its business, and (iii) have an
expiration date which shall be not later than the earlier of five Business Days
before the Commitment Termination Date or, if the Commitment Termination Date
has been extended in accordance with the terms of Section 2.8(b) of this
Agreement, five Business Days before the Termination Date, provided that the
expiration date of such Letter of Credit may be extended or such Letter of
Credit may be renewed (but not beyond the Commitment Termination Date or
Termination Date, as applicable, as aforesaid), provided, further, that any
renewal, or any extension of any expiry date, of a Letter of Credit shall
constitute the issuance of such Letter of Credit for all purposes of this
Agreement.
(c) Letter of Credit Participations. Immediately upon the issuance of a
Letter of Credit (and in the case of the Chase L/Cs and Fleet L/Cs, upon the
effectiveness of this Agreement), the Issuer shall be deemed to have sold and
transferred to each Bank, and each Bank shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuer, without recourse or
warranty, an undivided interest and participation, to the extent of such Bank's
Revolving Percentage thereof, in such Letter of Credit and the obligations of
such Borrower with respect thereto and any security therefor and any guaranty
pertaining thereto at any time existing.
(d) Drawings on Letters of Credit. The Issuer shall promptly notify (i)
each Bank of the Issuer's receipt of a drawing request under any Letter of
Credit, stating the amount of such Bank's Revolving Percentage of such drawing
request and the date on which such request will be honored and (ii) the
Administrative Agent and a Borrower of the amount of such drawing request and
the date on which such request will be honored. Any failure of the Issuer to
give or any delay in the Issuer's giving any such notice shall not release or
diminish the obligations of the Borrower or any Bank hereunder. In determining
whether to pay under any Letter of Credit, the Issuer shall have no obligation
to any Bank or either Borrower other than to confirm that any documents required
42
to be delivered under such Letter of Credit have been delivered and that they
appear to comply on their face with the requirements of such Letter of Credit.
In the absence of gross negligence or willful misconduct on the part of the
Issuer, the Issuer shall have no liability to any Bank or either Borrower for
any action taken or omitted to be taken by it under or in connection with any
Letter of Credit, including any such action negligently taken or negligently
omitted to be taken by it.
(e) Reimbursement. The Borrower that is the account party under a Letter of
Credit shall pay to the Administrative Agent for the account of the Issuer on
demand therefor, in Dollars in immediately available funds, the amount of all
Reimbursement Obligations owing to the Issuer under any such Letter of Credit,
together with interest thereon until paid (i) a rate per annum during the period
commencing on the first date there exists such a Reimbursement Obligation until
five Business Days thereafter, equal to the Prime Rate as in effect from time to
time plus the Applicable Margin for Prime Rate Loans and (ii) beginning with the
date that is five Business Days after the first date there exists such a
Reimbursement Obligation and thereafter until paid in full, equal to the
Post-Default Rate, in each case irrespective of any claim, setoff, defense or
other right which such Borrower may have at any time against the Issuer or any
other Person. In the event that the Issuer makes any payment under any Letter of
Credit and such Borrower shall not have repaid such amount to the Issuer when
due, the Issuer shall promptly notify each Bank of such failure, and each Bank
shall promptly and unconditionally pay to the Administrative Agent, for the
account of the Issuer, the amount of such Bank's Revolving Percentage of such
payment in Dollars in immediately available funds on the Business Day the Issuer
so notifies such Bank if such notice is given prior to 12:00 Noon or, if such
notice is given after 12:00 Noon, such Bank shall make its Revolving Percentage
of such payment available to the Issuer prior to 12:00 Noon on the next
succeeding Business Day.
(f) Banks' Obligations. If and to the extent any Bank shall not make such
Bank's Revolving Percentage of any Reimbursement Obligations available to the
Issuer when due in accordance with Section 2.24(e), such Bank agrees to pay
interest to the Issuer on such unpaid amount for each day from the date such
payment is due until the date such amount is paid in full to the Issuer at the
Federal Funds Rate until (and including) the third Business Day after the date
due and thereafter at the Prime Rate. The obligations of the Banks under this
Section 2.24(f) are several and not joint or joint and several, and the failure
of any Bank to make available to the Issuer its Revolving Percentage of any
Reimbursement Obligations when due in accordance with Section 2.24(e) shall not
relieve any other Bank of its obligation hereunder to make its Revolving
Percentage of such Reimbursement Obligations so available when so due, but no
Bank shall be responsible for the failure of any other Bank to make such other
Bank's Revolving Percentage of such Reimbursement Obligations so available when
so due.
(g) Rescission. Whenever the Issuer receives a payment of a Reimbursement
Obligation from or on behalf of a Borrower as to which the Issuer has received
any payment from a Bank pursuant to Section 2.24(e), the Issuer shall promptly
pay to such Bank an amount equal to such Bank's Revolving Percentage of such
43
payment from or on behalf of such Borrower. If any payment by or on behalf of
such Borrower and received by the Issuer with respect to any Letter of Credit is
rescinded or must otherwise be returned by the Issuer for any reason and the
Issuer has paid to any Bank any portion thereof, each such Bank shall forthwith
pay over to the Issuer an amount equal to such Bank's Revolving Percentage of
the amount which must be so returned by the Issuer.
(h) Expenses. Each Bank, upon the demand of the Issuer, shall reimburse the
Issuer, to the extent the Issuer has not been reimbursed by a Borrower after
demand therefor, for the reasonable costs and expenses (including reasonable
attorneys' fees) incurred by the Issuer in connection with the collection of
amounts due under, and the preservation and enforcement of any rights conferred
by, any Letter of Credit or the performance of the Issuer's obligations as
issuer of the Letters of Credit under this Agreement in respect thereof, to the
extent of such Bank's Revolving Percentage of the amount of such costs and
expenses provided, however, that no Bank shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent the same result
solely from the gross negligence or willful misconduct of the Issuer. The Issuer
shall refund any costs and expenses reimbursed by such Bank that are
subsequently recovered from a Borrower in an amount equal to such Bank's
Revolving Percentage thereof.
(i) Obligations Absolute. The obligation of the Borrowers to reimburse the
Issuer pursuant to this Section 2.25, and the obligation of each Bank to make
available to the Issuer the amounts set forth in this Section 2.24 shall be
absolute, unconditional and irrevocable under any and all circumstances, shall
be made without reduction for any set-off, counterclaim or other deduction of
any nature whatsoever, may not be terminated, suspended or delayed for any
reason whatsoever, shall not be subject to any qualification or exception and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including any of the following circumstances: (1) any
lack of validity or enforceability of this Agreement or any of the other Loan
Documents, (2) the existence of any claim, setoff, defense or other right which
either Borrower may have at any time against a beneficiary named in a Letter of
Credit, any transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting), the Issuer, any Bank or any other Person, whether in
connection with this Agreement, any other Loan Document, any Letter of Credit,
the transactions contemplated in the Loan Documents or any unrelated
transactions (including any underlying transaction between either Borrower and
the beneficiary named in any such Letter of Credit), (3) any draft, certificate
or any other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect, (4) the surrender or impairment of
any collateral for the performance or observance of any of the terms of any of
the Loan Documents, or (5) the occurrence of any Default or Event of Default.
Nothing contained in this Section 2.24(i), however, shall require either
Borrower or any Lender to reimburse the Issuer for any amounts that become due
by reason of the Issuer's gross negligence or willful misconduct.
44
Article 3 Representations and Warranties.
Each Borrower hereby represents and warrants to the Administrative Agent
and the Banks that:
Section 3.1. Organization.
(a) Each Borrower and each Subsidiary is duly organized and validly
existing under the laws of its state of organization and has the power to own
its assets and to transact the business in which it is presently engaged and in
which it proposes to be engaged. Exhibit B hereto accurately and completely
lists, as to each Borrower and each Principal Subsidiary: (i) the state of
incorporation or organization, and the type of legal entity that each of them
is, and (ii) the classes and number of authorized and outstanding shares of
capital stock of each such corporation, and the owners of such outstanding
shares of capital stock (other than with respect to Griffon). All of the shares
of capital stock of each Borrower and each Subsidiary or other equity interests
that are issued and outstanding have been duly and validly issued and are fully
paid and non-assessable, and are owned by the Persons (other than with respect
to Griffon and any Subsidiary that is not a Principal Subsidiary) referred to on
Exhibit B, free and clear of any Lien except as otherwise provided for herein.
Except as set forth on Exhibit B, there are no outstanding warrants, options,
contracts or commitments of any kind entitling any Person to purchase or
otherwise acquire any shares of capital stock or other equity interests of any
Subsidiary nor are there outstanding any securities that are convertible into or
exchangeable for any shares of capital stock or other equity interests of any
Subsidiary. Except as set forth on Exhibit B, neither Borrower nor any
Subsidiary has any Subsidiary.
(b) Each Borrower and each Subsidiary is in good standing in its state of
organization and in each state in which it is qualified to do business. There
are no jurisdictions other than as set forth on Exhibit B hereto in which the
character of the properties owned or proposed to be owned by either Borrower or
any Principal Subsidiary or in which the transaction of the business of either
Borrower or any Principal Subsidiary as now conducted or as proposed to be
conducted requires or will require either Borrower or any Principal Subsidiary
to qualify to do business and as to which failure to so qualify could have a
Material Adverse Effect.
Section 3.2. Power, Authority, Consents.
Each Borrower and each Loan Party has the power to execute, deliver and
perform the Loan Documents to which it is a party. Each Borrower has the power
to borrow hereunder and has taken all necessary corporate action to authorize
the borrowing hereunder on the terms and conditions of this Agreement. Each
Borrower and each Loan Party has taken all necessary action, corporate or
45
otherwise, to authorize the execution, delivery and performance of the Loan
Documents to which it is a party. No consent or approval of any Person
(including, without limitation, any stockholder of either Borrower or any Loan
Party ), no consent or approval of any landlord or mortgagee, no waiver of any
Lien or right of distraint or other similar right and no consent, license,
certificate of need, approval, authorization or declaration of any governmental
authority, bureau or agency, is or will be required in connection with the
execution, delivery or performance by either Borrower or any Loan Party, or the
validity, enforcement or priority, of the Loan Documents or any Lien created and
granted thereunder, except as set forth on Exhibit C hereto, each of which
either has been duly and validly obtained on or prior to the date hereof and is
now in full force and effect, or is designated on Exhibit C as waived by the
Required Banks.
Section 3.3. No Violation of Law or Agreements.
The execution and delivery by each Borrower and each Subsidiary of each
Loan Document to which it is a party and performance by it hereunder and
thereunder, will not violate any provision of law applicable to either Borrower
and its Subsidiaries and will not, except as set forth on Exhibit C hereto,
conflict with or result in a breach of any order, writ, injunction, ordinance,
resolution, decree, or other similar document or instrument of any court or
governmental authority, bureau or agency, domestic or foreign applicable to
either Borrower and its Subsidiaries, or any certificate of incorporation or
by-laws of either Borrower or any Subsidiary or create (with or without the
giving of notice or lapse of time, or both) a default under or breach of any
agreement, bond, note or indenture to which either Borrower or any Subsidiary is
a party, or by which it is bound or any of its properties or assets is affected,
or result in the imposition of any Lien of any nature whatsoever upon any of the
properties or assets owned by or used in connection with the business of either
Borrower or any Subsidiary.
Section 3.4. Due Execution, Validity, Enforceability.
This Agreement and each other Loan Document has been duly executed and
delivered by each Borrower and each Loan Party and each constitutes the valid
and legally binding obligation of each Borrower and each Loan Party, enforceable
in accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws, now or hereafter in effect, relating to or affecting the enforcement of
creditors' rights generally and except that the remedy of specific performance
and other equitable remedies are subject to judicial discretion.
Section 3.5. Properties, Priority of Liens; Existing Guarantees.
All of the properties and assets owned by each Borrower and each Subsidiary
are owned by each of them, respectively, free and clear of any Lien of any
nature whatsoever, except as provided for in the Security Documents, and as
46
permitted by Section 7.2 hereof. The Liens that have been created and granted by
the Security Documents constitute valid perfected first Liens on the properties
and assets covered by the Security Documents, subject to no prior or equal Lien
except as permitted by Section 7.2 hereof. Exhibit K correctly sets forth all
Guarantees, Investments in Foreign Loan Parties and other known Contingent
Obligations of each Borrower and each of its Subsidiaries as of the date hereof.
Section 3.6. Judgments, Actions, Proceedings.
Except as set forth on Exhibit E hereto, there are no outstanding
judgments, actions or proceedings, including, without limitation, any
Environmental Proceeding, pending before any court or governmental authority,
bureau or agency, with respect to or, to the best of each Borrower's knowledge,
threatened against or affecting either Borrower or any Subsidiary that would, if
adversely determined, in the case of any action or court proceeding, have a
Material Adverse Effect, nor, to the best of each Borrower's knowledge, is there
any reasonable basis for the institution of any such material action or
proceeding that is probable of assertion, nor are there any such actions or
proceedings in which either Borrower or any Subsidiary is a plaintiff or
complainant.
Section 3.7. No Defaults, Compliance With Laws.
Except as set forth on Exhibit F hereto, neither Borrower nor any
Subsidiary is in default under any agreement, ordinance, resolution, decree,
bond, note, indenture, order or judgment to which it is a party or by which it
is bound, or any other agreement or other instrument by which any of the
properties or assets owned by it or used in the conduct of its business is
affected, which default could have a material adverse effect on the business,
operations, financial condition or properties of Griffon and its Subsidiaries on
a consolidated basis or on the ability of either Borrower to perform its
obligations under the Loan Documents. Each Borrower and each Subsidiary has
complied and is in compliance in all respects with all applicable laws,
ordinances and regulations, resolutions, ordinances, decrees and other similar
documents and instruments of all courts and governmental authorities, bureaus
and agencies, domestic and foreign, including, without limitation, all
applicable Environmental Laws and Regulations, non-compliance with which could
have a material adverse effect on the business, operations, financial condition
or properties of Griffon on a consolidated basis or on the ability of either
Borrower to perform its obligations under the Loan Documents.
Section 3.8. Burdensome Documents.
Except as set forth on Exhibit G hereto, neither Borrower nor any
Subsidiary is a party to or bound by, nor are any of the properties or assets
owned by either Borrower or any Subsidiary used in the conduct of their
respective businesses affected by, any agreement, ordinance, resolution, decree,
bond, note, indenture, order or judgment, including, without limitation, any of
47
the foregoing relating to any Environmental Matter, that materially and
adversely affects their respective businesses, assets or conditions, financial
or otherwise, on a consolidated basis.
Section 3.9. Financial Statements.
Each of the Financial Statements is correct and complete and presents
fairly the consolidated financial position, the consolidated results of
operations and cash flows of Griffon and its Subsidiaries, as at and for its
date, and has been prepared in accordance with generally accepted accounting
principles consistently applied. Neither Borrower nor any Subsidiary has any
material obligation, liability or commitment, direct or contingent (including,
without limitation, any Environmental Liability and any Contingent Obligation) ,
that is required to be but is not reflected in the Financial Statements. There
has been no material adverse change in the financial position or operations of
Griffon and its Subsidiaries on a consolidated basis since the date of the
latest balance sheet included in the Financial Statements (the "Latest Balance
Sheet") which could reasonably result in either Borrower's inability to perform
its obligations under the Loan Documents. Griffon's fiscal year is the
twelve-month period ending on September 30th in each year.
Section 3.10. Tax Returns.
Each Borrower and each of the Subsidiaries has filed all federal, state and
local tax returns required to be filed by it and has not failed to pay any
taxes, or interest and penalties relating thereto, on or before the due dates
thereof. Except to the extent that reserves therefor are reflected in the
Financial Statements: (i) there are no material federal, state or local tax
liabilities of either Borrower or any subsidiary due or to become due for any
tax year ended on or prior to the date of the Latest Balance Sheet relating to
such entity, whether incurred in respect of or measured by the income of such
entity, that are not properly reflected in the Latest Balance Sheet relating to
such entity, and (ii) there are no material claims pending or, to the knowledge
of each Borrower, proposed or threatened against either Borrower or any
Subsidiary for past federal, state or local taxes, except those, if any, as to
which proper reserves are reflected in the Financial Statements.
Section 3.11. Intangible Assets.
Each Borrower and each Subsidiary possesses all patents, trademarks,
service marks, trade names, and copyrights, and rights with respect to the
foregoing, necessary to conduct its business as now conducted and as proposed to
be conducted, without any conflict with the patents, trademarks, service marks,
trade names, and copyrights and rights with respect to the foregoing, of any
other Person.
48
Section 3.12. Regulation U.
No part of the proceeds received by either Borrower from the Extensions of
Credit will be used directly or indirectly for: (a) any purpose other than as
set forth in Section 2.9 hereof, or (b) the purpose of purchasing or carrying,
or for payment in full or in part of Indebtedness that was incurred for the
purposes of purchasing or carrying, any "margin stock", as such term is defined
in 221.3 of Regulation U of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II, Part 221, other than purchases made in compliance
with Regulation U.
Section 3.13. Name Changes, Mergers, Acquisitions.
Except as set forth on Exhibit H hereto, neither Borrower nor any Principal
Subsidiary has within the six-year period immediately preceding the date of this
Agreement changed its name, been the surviving entity of a merger or
consolidation, or acquired all or substantially all of the assets of any Person,
where the value of the assets acquired in such merger, consolidation or
acquisition was material in relation to the total assets of Griffon and its
Subsidiaries on a consolidated basis.
Section 3.14. Full Disclosure.
None of the Financial Statements, nor any certificate, opinion, or any
other statement made or furnished in writing to the Administrative Agent or the
Banks by or on behalf of either Borrower or any Subsidiary in connection with
this Agreement or the transactions contemplated herein, contains any untrue
statement of a material fact, or omits to state a material fact necessary in
order to make the statements contained therein or herein not misleading, as of
the date such statement was made. There is no fact known to either Borrower that
has, or would in the forseeable future have, a Material Adverse Effect, which
fact has not been set forth herein, or in the Financial Statements, or any
certificate, opinion or other written statement so made or furnished to the
Administrative Agent or the Banks.
Section 3.15. Licenses and Approvals.
Each Borrower and each of the Subsidiaries has all material licenses,
permits and governmental authorizations, including, without limitation,
licenses, permits and authorizations relating to Environmental Matters, to own
and operate its properties and to carry on its business as now conducted.
Section 3.16. Labor Disputes; Collective Bargaining Agreements; Employee
Grievances.
Except as set forth on Exhibit I hereto: (a) no collective bargaining
agreement or other labor contract will expire during the term of this Agreement;
(b) to each Borrower's knowledge, no union or other labor organization is
seeking to organize, or to be recognized as bargaining representative for, a
49
bargaining unit of employees of either Borrower or any Subsidiary; (c) there is
no pending or threatened strike, work stoppage, material unfair labor practice
claim or charge, arbitration or other material labor dispute against or
affecting either Borrower or any Subsidiary or their representative employees,
in each case the consequences of which could reasonably be expected to affect
aggregate business (regardless of division or entity) of Griffon and its
Subsidiaries which business generated gross revenues in excess of $50,000,000
individually or in the aggregate in the prior fiscal year; and (d) there are no
actions, suits, charges, demands, claims, counterclaims or proceedings pending
or, to the best of each Borrower's knowledge, threatened against either Borrower
or any of the Subsidiaries, by or on behalf of, or with, its employees, other
than any such actions, suits, charges, demands, claims, counterclaims or
proceedings arising in the ordinary course of business that are not, in the
aggregate, material.
Section 3.17. Condition of Assets.
All of the assets and properties of each Borrower and the Subsidiaries that
are reasonably necessary for the operation of their respective businesses, are
in good working condition, ordinary wear and tear excepted, and are able to
serve the function for which they are currently being used.
Section 3.18. ERISA.
(a) Except as disclosed on Exhibit J hereto, no Pension Plan or Defined
Contribution Plan which is an Employee Benefit Plan including, without
limitation, any Multiemployer Plan, exists or has ever, within the six-year
period immediately preceding the date of this Agreement, existed and neither
Borrower nor any ERISA Affiliate is a participating employer in any Pension Plan
which is an Employee Benefit Plan in which more than one employer makes
contributions as described in Sections 4063 and 4064 of ERISA. Except as
disclosed on Exhibit J, neither Borrower nor any ERISA Affiliate has any
contingent liability with respect to any post-retirement benefit under any
Employee Welfare Benefit Plan which is a welfare plan (as defined in Section
3(l) of ERISA), other than liability for health plan continuation coverage
described in Part 6 of Title I of ERISA, which together with any disclosed
liability on Exhibit J, will not have an ERISA MAE. Each Borrower has given,
made available, or upon request will deliver, to the Administrative Agent and
the Banks true and complete copies of all the following: each Pension Plan or
Defined Contribution Plan which is an Employee Benefit Plan and related trust
agreement (including all amendments and commitments with respect to such
Employee Benefit plan or trust) which either Borrower or any ERISA Affiliate
maintains or is committed to contribute to as of the date hereof and the most
recent summary plan description, actuarial report, determination letter issued
by the Internal Revenue Service and Form 5500 filed in respect of each such
Employee Benefit Plan; a listing of all of the Multiemployer Plans to which
50
either Borrower or any ERISA Affiliate contributes or is committed to contribute
and the aggregate amount of the most recent annual contributions required to be
made to each such Multiemployer Plan, and any information which has been
provided to either Borrower or any ERISA Affiliate regarding withdrawal
liability under any Multiemployer Plan and the collective bargaining agreement
pursuant to which such contribution is required to be made.
(b) Each Employee Benefit Plan complies, in both form and operation in all
material respects, with its terms, ERISA and the Code including, without
limitation, Code Section 4980B, and no condition exists or event has occurred
with respect to any such plan which would result in the incurrence by either
Borrower or any ERISA Affiliate of any material liability, fine or penalty.
Neither Borrower nor any ERISA Affiliate has incurred any liability to the PBGC
which remains outstanding other than the payment of premiums, and there are no
premiums which have become due which are unpaid. Neither Borrower nor any ERISA
Affiliate has engaged in any transaction which could subject it to material
liability under Section 4069 or Section 4212(c) of ERISA. Each Employee Benefit
Plan, related trust agreement, arrangement and commitment of each Borrower and
each ERISA Affiliate is legally valid and binding and in full force and effect.
Except as provided on Exhibit J and subject to amendment and submission for a
determination letter with regard to the Tax Reform Act of 1986 requirements and
other post 1986 requirements, each Employee Benefit Plan that is intended to be
qualified under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified, and each trust related to such plan has been
determined to be exempt under Section 501(a) of the Code. To the knowledge of
each Borrower, nothing has occurred or is expected to occur that would adversely
affect the qualified status of the Employee Benefit Plan or any related trust
subsequent to the issuance of such determination letter. No Employee Benefit
Plan is being audited or, to the knowledge of each Borrower, investigated by any
government agency or subject to any pending or threatened claim or suit.
(c) Each Pension Plan currently meets the minimum funding standard of
Section 302 of ERISA and Section 412 of the Code (without regard to any funding
waiver). All contributions or payments due and owing as required by Section 302
of ERISA, Section 412 of the Code or the terms of any Pension Plan have been
made by the due date for such contributions or payments. With respect to each
Multiemployer Plan, each Borrower and each ERISA Affiliate has paid or accrued
all contributions pursuant to the terms of the applicable collective bargaining
agreement required to be paid or accrued by it and neither Borrower nor any
ERISA Affiliate has incurred any withdrawal liability in connection with a
complete withdrawal or partial withdrawal from any Multiemployer Plan that has
not been discharged. With respect to each Pension Plan, the market value of
assets (exclusive of any contribution due to the Pension Plan) equals or exceeds
or is not more than $250,000 below the present value of benefit liabilities (FAS
35) (assuming such Plan were to continue in existence) as of the latest
actuarial valuation date for such plan (but not prior to 24 months prior to the
date hereof), determined on the basis of such Pension Plan's actuarial
51
assumptions set forth in the most recent actuarial report, and since its last
valuation date, there have been no amendments to such plan that materially
increased the present value of accrued benefits nor any other material adverse
changes in the funding status of such plan. Neither Borrower nor any ERISA
Affiliate is required to provide security to a Pension Plan pursuant to Section
307 of ERISA or Section 401(a) (29) of the Code.
(d) Neither Borrower nor any ERISA Affiliate, nor, to the best of each
Borrower's knowledge, any fiduciary of any Employee Benefit Plan, has engaged in
a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code
with regard to any such Employee Benefit Plans. The execution, delivery and
carrying out of the terms of any agreements that are related to this transaction
will not constitute a prohibited transaction under the aforementioned sections.
(e) No Termination Event has occurred or is reasonably expected to occur.
(f) None of the following "reportable events" which are subject to the
30-day notice requirement of Section 4043(b) of ERISA in respect of any of the
Pension Plans has occurred: (i) an inability to pay benefits when due, (ii)
bankruptcy or insolvency of the sponsor of the Pension Plan, (iii) liquidation
or dissolution of the sponsor of the Pension Plan, (iv) a failure to meet the
minimum funding standards, or (v) certain transactions involving a change of
employer. Neither Borrower has received any notice from the PBGC that any of the
Pension Plans is being involuntarily terminated or from the Secretary of the
Treasury that any partial or full termination of any of the Employee Benefit
Plans has occurred and no event shall have occurred, and there shall exist as of
the date hereof no condition or set of circumstances which present a material
risk of the involuntary termination of any of the Pension Plans.
(g) All references to a Borrower in this Section 3.18 or in any other
Section of this Agreement relating to ERISA shall be deemed to refer to such
Borrower, and any other entity which is considered an ERISA Affiliate.
(h) All references in this Section 3.18, and in other provisions of this
Agreement relating to ERISA, to materiality or material liability or similar
phrases shall be deemed to refer to the event or matter described both
individually and when taken together in the aggregate with respect to all other
events and matters referred to in this Agreement relating to ERISA as to which a
materiality standard applies.
Section 3.19. Termination of Certain Lines of Credit.
At such time as this Agreement shall become effective in accordance with
its terms and all sums due and owing under the lines of credit facilities made
available by Chase and Fleet to Telephonics shall have been paid in full, each
of such lines of credit shall been deemed terminated and of no further force or
effect.
52
Article 4 Conditions to the Loans.
Section 4.1.Conditions to Initial Extensions of Credit
The conditions precedent fulfilled in connection with the obligation of
each Bank to make the initial Loans under this Agreement are set forth in
Section 4.1 of the Original Agreement, which conditions were satisfied in
connection with the Original Agreement. Each of the parties hereto has copies of
the documents referred to in such Section 4.1.
Section 4.2. Conditions to Effectiveness of Amended and Restated Loan
Agreement.
The amendments effected by this Amended and Restated Loan Agreement shall
not become effective unless and until it has been executed and delivered by each
party hereto and each of the following conditions has been fulfilled to the
satisfaction of the Administrative Agent:
(a) Each Borrower shall have executed and delivered to each Bank its Note.
(b) The Borrowers shall have paid to the Administrative Agent (for the
ratable benefit of the Banks) the Facility Fee.
(c) The Borrowers shall have paid all amounts required to be paid by
Section 2.7(c) and the Administrative Agent shall have received all fees and
other amounts due and payable to the Administrative Agent under the Loan
Documents on or prior to the date hereof.
(d) Blau, Kramer, Wactlar & ▇▇▇▇▇▇▇▇▇, P.C., general counsel to the
Borrowers and the Subsidiaries shall have delivered its opinion to, and in form
and substance satisfactory to, the Banks.
(e) The Administrative Agent shall have received and reviewed to its
satisfaction copies of the following:
(i) All of the consents, approvals and waivers referred to on Exhibit
C hereto (except only those which, as stated on Exhibit C, shall not be
delivered);
(ii) The certificate of incorporation of each Borrower and each
Principal Subsidiary certified by the Secretary of State of its state of
incorporation;
53
(iii) The by-laws of each Borrower and each Principal Subsidiary certified
by its secretary or assistant secretary;
(iv) All corporate action taken by each Borrower to authorize the
execution, delivery and performance of the Loan Documents and the transactions
contemplated thereby, certified by its secretary or assistant secretary,
including, without limitation, resolutions of the Board of Directors of each
Borrower;
(v) Good standing certificates as of dates not more than forty (40) days
prior to the date of the initial Loan, with respect to each Borrower and each
Principal Subsidiary from the Secretary of State of its state of incorporation
and each state in which it is qualified to do business;
(vi) An incumbency certificate (with specimen signatures) with respect to
each Borrower; and
(vii) Lien searches from such jurisdictions and in such names as the Banks
may request.
(f) (i) Each Borrower and each Subsidiary shall have complied and shall
then be in compliance with all of the terms, covenants and conditions of this
Agreement;
(ii) After giving effect to the initial Loan, there shall exist no Default
or Event of Default hereunder; and
(iii) The representations and warranties contained in Article 3 hereof and
in the other Loan Documents shall be true and correct on the date hereof;
and the Administrative Agent shall have received a Compliance Certificate dated
the date hereof certifying, inter alia, that the conditions set forth in this
subsection 4.2(f) are satisfied on such date.
(g) All sums due and owing under the lines of credit facilities made
available by Chase and Fleet to Telephonics shall have been paid in full.
(h) All legal matters incident to the initial Loans shall be satisfactory
to counsel to the Administrative Agent and each Bank.
Section 4.3. Conditions to Subsequent Extensions of Credit.
The obligation of each Bank to make each Extension of Credit subsequent to
its initial Extension of Credit shall be subject to the fulfillment of the
condition precedent that the Administrative Agent shall have received a
Borrowing Notice in accordance with Section 2.2 hereof, containing, in addition
54
to the notice of borrowing, a representation by the applicable Borrower (signed
by the president or chief financial officer or treasurer in the case of Griffon
and signed by the president or chief financial officer or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (as
vice president) in the case of Telephonics) that (i) no Default or Event of
Default has occurred and is continuing and (ii) the representations and
warranties made by the Borrowers under Section 3.9 hereof shall be correct on
and as of the borrowing date for such Extension of Credit as if made on and as
of such date.
Article 5 Delivery of Financial Reports, Documents and Other Information.
While the Commitments are outstanding, and, until the principal of, and
interest on, each Loan, all Reimbursement Obligations, all Fees and all other
amounts payable under the Loan Documents shall have been paid in full and there
shall have been full and complete performance of all other obligations arising
hereunder, Griffon, and Telephonics (as required), shall deliver to the
Administrative Agent and each Bank:
Section 5.1. Annual Financial Statements.
Annually, as soon as available, but in any event within one hundred (100)
days after the last day of each of its fiscal years, a consolidated balance
sheet of Griffon and its Subsidiaries as at such last day of the fiscal year,
and consolidated statements of income, shareholders' equity and cash flows, for
such fiscal year, each prepared in accordance with generally accepted accounting
principles consistently applied, in reasonable detail, and certified without a
"going concern" or like qualification or exception, or qualification arising out
of the scope of the audit by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or another firm of independent
certified public accountants satisfactory to the Banks, which shall state that
such consolidated financial statements present fairly the consolidated financial
position, the consolidated results of operations and cash flows of Griffon as at
and for the year ending on its date and as having been prepared in accordance
with generally accepted accounting principles.
Section 5.2. Quarterly Financial Statements.
As soon as available, but in any event within (i) seventy (70) days after
the end of each of Griffon's first three fiscal quarterly periods and (ii) one
hundred, (100) days after the end of each of Griffon's fourth fiscal quarterly
periods, a consolidated and consolidating balance sheet of Griffon and the
Subsidiaries as of the last day of such quarter and consolidated and
consolidating statements of income and cash flows, for such quarter, and on a
comparative basis figures for the corresponding period of the immediately
preceding fiscal year, all in reasonable detail, each such statement to be
certified in a certificate of the president or chief financial officer of
Griffon and the Subsidiaries as fairly presenting the consolidated and
55
consolidating financial position, the consolidated and consolidating results of
operations and cash flows of Griffon as at its date and for such quarter and as
having been prepared in accordance with generally accepted accounting principles
consistently applied (subject to year-end audit adjustments).
Section 5.3. Projections.
Annually, as soon as available, but in any event within 60 days after the
last day of each of Griffon's fiscal years, consolidated and consolidating
projections of Griffon and the Subsidiaries for the following five (5) fiscal
years of Griffon.
Section 5.4. Compliance Information.
Promptly after a written request therefor, such other financial data or
information evidencing compliance with the requirements of this Agreement, the
Notes and the other Loan Documents, as any Bank may reasonably request from time
to time.
Section 5.5. No Default Certificate.
At the same time as it delivers the financial statements required under the
provisions of Section 5.1 and Section 5.2 hereof, a certificate of the president
or chief financial officer of Griffon to the effect that no Default or Event of
Default hereunder and that no default under any other agreement to which either
Borrower or any of the Subsidiaries is a party or by which it is bound, or by
which, to the best knowledge of each Borrower or any Subsidiary any of its
properties or assets, taken as a whole, may be materially adversely affected,
and no event which, with the giving of notice or the lapse of time, or both,
would constitute such an Event of Default or default, exists, or, if such cannot
be so certified, specifying in reasonable detail the exceptions, if any, to such
statement. Such certificate shall be accompanied by a detailed calculation
indicating compliance with the covenants contained in Sections 6.9, 7.3 and 7.8
(other than 7.8(a)) hereof.
Section 5.6. Certificate of Accountants.
At the same time as it delivers the financial statements required under the
provisions of Section 5.1 hereof, a certificate of the independent certified
public accountants of Griffon to the effect that during the course of their
audit of the operations of Griffon and its condition as of the end of the fiscal
year, nothing has come to their attention which would indicate that Griffon was
not in compliance with any of the terms, covenants, provisions or conditions of
Section 6.9 or Article 7 insofar as they relate to accounting matters, or, if
such cannot be so certified, specifying in reasonable detail the exceptions, if
any, to such statement.
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Section 5.7. Accountants, Reports.
Promptly upon receipt thereof, copies of all other reports submitted to
Griffon by its independent certified public accountants in connection with any
annual or interim audit or review of the books of Griffon made by such
accountants.
Section 5.8. Copies of Documents.
(a) Promptly upon their becoming available, copies of any: (i) financial
statements, projections, and requests for waivers, in each case, delivered by
either Borrower or any of the Subsidiaries to any lending institution other than
the Banks; (ii) correspondence or notices received by either Borrower from any
federal, state or local governmental authority that regulates the operations of
either Borrower or any of its Subsidiaries or relating to an actual or
threatened change or development that would be materially adverse to either
Borrower or any Subsidiary; (iii) registration statements and any amendments and
supplements thereto, and any regular and periodic reports, if any, filed by
either Borrower or any of its Subsidiaries with any securities exchange or with
the Securities and Exchange Commission or any governmental authority succeeding
to any or all of the functions of the said Commission; and (iv) any other items
which the Banks may reasonably request.
(b) Promptly upon request by any Bank, copies of all acquisition
agreements, exhibits, schedules, documents and other agreements relating to any
Permitted Acquisition (as and when available and whether in draft or final
form).
Section 5.9. Certain Notices.
Promptly, notice of the occurrence of any Default or Event of Default, or
any event that would constitute or cause a material adverse change in the
condition, financial or otherwise, or the operations of Griffon and its
Subsidiaries on a consolidated basis.
Section 5.10. ERISA Notices and Requests.
Notice of any of the following within twenty (20) days after such event or
occurrence:
(a) either Borrower or any ERISA Affiliate knowing or having reason to know
that a Termination Event has occurred or that a Defined Contribution Plan has
been terminated or partially terminated, and a written statement by the
appropriate chief financial officer setting forth the details of such event;
(b) the filing of a request for a funding waiver by either Borrower or any
ERISA Affiliate with respect to any Pension Plan, and a copy of such request and
all communications received by either Borrower or any ERISA Affiliate with
respect to such request;
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(c) receipt by either Borrower or any ERISA Affiliate of a notice of the
PBGC's intent to terminate a Pension Plan, and a copy of such notice;
(d) either Borrower or any ERISA Affiliate failing to make a required
installment or payment under Section 302 of ERISA or Section 412 of the Code by
the due date, and a written notice of such failure;
(e) either Borrower or any ERISA Affiliate knowing or having reason to know
that a prohibited transaction (as defined in Section 406 of ERISA or Section
4975 of the Code) has occurred with respect to any Employee Benefit Plan, and a
written statement of the appropriate chief financial officer describing such
transaction and the action taken;
(f) the establishment of a Pension Plan and written notice of such
occurrence;
(g) receipt by either Borrower or any ERISA Affiliate of any
disqualification notice from the Internal Revenue Service regarding the
qualification of a Pension Plan under Section 401(a) of the Code and a copy of
such letter;
(h) upon the request of any Bank, the filing of an annual report (Form 5500
series), including Schedule B thereto, filed by either Borrower or any ERISA
Affiliate with respect to a Employee Benefit Plan, and a copy of such report;
(i) upon request of any Bank, receipt by either Borrower or any ERISA
Affiliate of an actuarial report for any Pension Plan, and a copy of such
report;
(j) receipt by either Borrower or any ERISA Affiliate of all correspondence
from the PBGC, the Secretary of Labor or any representative of the IRS with
respect to any Employee Benefit Plans, relating to an actual or threatened
change or development which would have a materially adverse effect on either
Borrower's business; and
(k) receipt by either Borrower or any ERISA Affiliate of any correspondence
from a Multiemployer Plan with respect to withdrawal liability.
Section 5.11. Permitted Acquisition Deliveries.
Not later than ten (10) Business Days after the consummation of a Permitted
Acquisition, (i) on a pro forma basis after giving effect to the proposed
acquisition and based on reasonable assumptions made by Griffon in good faith, a
consolidated and consolidating balance sheet of Griffon, its subsidiaries and
58
each Eligible Business, and a related consolidated and consolidating statement
of income and statements of cash flow for the three (3) fiscal years following
the date of such acquisition, each such statement (1) to show all deferred and
contingent payments which either Borrower or the Eligible Business, as
applicable, directly or indirectly, would be required to make based on the
Eligible Business' projected pro forma results of operations, and (2) to be
accompanied by a certificate of the chief financial officer of Griffon
certifying that after giving effect to the acquisition, no Default or Event of
Default has occurred and is continuing, which certificate shall be accompanied
by a list of Liens, Indebtedness, guaranties and letters of credit incurred or
otherwise assumed in connection with such acquisition and such other information
as the Administrative Agent or any Bank may reasonably request.
Article 6 Affirmative Covenants.
While the Commitments are outstanding, and, until the principal of, and
interest on, each Loan, all Reimbursement Obligations, all Fees and all other
amounts payable under the Loan Documents shall have been indefeasibly paid in
full, Griffon shall and shall cause each Subsidiary to:
Section 6.1. Books and Records.
Keep proper books of record and account in which full, true and correct
entries shall be made of all dealings or transactions in relation to its
business and activities.
Section 6.2. Inspections and Audits.
Permit the Administrative Agent and the Banks (i) to make or cause to be
made (and, after the occurrence of and during the continuance of an Event of
Default, at the Borrowers' expense), inspections and audits of any books,
records and papers of each Borrower and each of its Subsidiaries and to make
extracts therefrom and copies thereof and (ii) make inspections and examinations
of any properties' and facilities of the Borrowers and the Subsidiaries on
reasonable notice, at all such reasonable times and as often as the
Administrative Agent or any Bank may reasonably require, in order to assure the
Administrative Agent and each Bank that the Borrowers are and will be in
compliance with their obligations under the Loan Documents or to evaluate any
Bank's investment in the then outstanding Notes.
Section 6.3. Maintenance and Repairs.
Maintain in good repair, working order and condition, subject to normal
wear and tear, all material properties and assets from time to time owned by it
and used in or necessary for the operation of its business, and make all
reasonable repairs, replacements, additions and improvements thereto.
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Section 6.4. Continuance of Business.
Do, or cause to be done, all things reasonably necessary to preserve and
keep in full force and effect its corporate existence and all permits, rights
and privileges necessary for the proper conduct of its business and continue to
engage in the same line of business and comply in all material respects with all
applicable laws, regulations and orders.
Section 6.5. Copies of Corporate Documents.
Promptly deliver to the Administrative Agent and the Banks copies of any
amendments or modifications to its and any Subsidiary's certificate of
incorporation and by-laws, certified with respect to the certificate of
incorporation by the Secretary of State of its state of incorporation and, with
respect to the by-laws, by the secretary or assistant secretary of such
corporation.
Section 6.6. Perform Obligations.
Pay and discharge all of its obligations and liabilities, including,
without limitation, all taxes, assessments and governmental charges upon its
income and properties when due, unless and to the extent only that such
obligations, liabilities, taxes, assessments and governmental charges shall be
contested in good faith and by appropriate proceedings and that, to the extent
required by generally accepted accounting principles then in effect, proper and
adequate book reserves relating thereto are established by the appropriate
Borrower, or, as the case may be, by the appropriate Subsidiary and then only to
the extent that a bond is filed in cases where the filing of a bond is necessary
to avoid the creation of a Lien, other than a Permitted Lien, against any of its
properties.
Section 6.7. Notice of Litigation.
Promptly notify the Administrative Agent and the Banks in writing of any
litigation, legal proceeding or dispute (including, without limitation, any
Environmental Proceeding), other than disputes in the ordinary course of
business or, whether or not in the ordinary course of business, involving
amounts in excess of One Million ($1,000,000) Dollars, affecting either
Borrower, any Subsidiary or any Eligible Business whether or not fully covered
by insurance, and regardless of the subject matter thereof (excluding, however,
any actions relating to workers' compensation claims or negligence claims
relating to use of motor vehicles, if fully covered by insurance, subject to
deductibles).
Section 6.8. Insurance.
(a) (i) Maintain with responsible insurance companies such insurance on
such of its properties, in such amounts and against such risks as is customarily
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maintained by similar businesses; (ii) file with the Administrative Agent and
each of the Banks upon its request a detailed list of the insurance then in
effect, stating the names of the insurance companies, the amounts and rates of
the insurance, the dates of the expiration thereof and the properties and risks
covered thereby; and (iii) within ten (10) days after notice in writing from the
Administrative Agent or any of the Banks, obtain such additional insurance as
the Administrative Agent or any Bank may reasonably request; provided, that,
Griffon may maintain self-insurance consistent with its past practices and
policies; and
(b) Carry all insurance available through the PBGC or any private insurance
companies covering its obligations to the PBGC.
Section 6.9. Financial Covenants.
Have or maintain, with respect to Griffon on a consolidated basis:
(a) As of the end of each fiscal quarter, a Quick Ratio of not less than
1.30 to 1.00.
(b) As of the end of each fiscal quarter, on a Rolling Four Quarters basis,
a Funded Debt to Cash Flow Ratio of not more than 3.25 to 1.00.
(c) As of the end of each fiscal quarter, a ratio of (i) Unsubordinated
Liabilities of Griffon and its Subsidiaries to (ii) the sum of Tangible Net
Worth plus Subordinated Debt of Griffon and its Subsidiaries of not more than
2.00 to 1.00.
(d) As of the end of each fiscal quarter, on a Rolling Four Quarters basis,
a Domestic Funded Debt Coverage Ratio of not more than 3.00 to 1.00.
(e) As of the end of each fiscal quarter, on a Rolling Four Quarters basis,
a Domestic Debt Service Coverage Ratio of not less than 1.60 to 1.00.
Section 6.10. Notice of Certain Events.
(a) Promptly notify the Administrative Agent and the Banks in writing of
the occurrence of any "Reportable Event", as defined in Section 4043 of ERISA,
if a notice of such Reportable Event is required under ERISA to be delivered to
the PBGC within 30 days after the occurrence thereof, together with a
description of such Reportable Event and a statement of the action the
appropriate Borrower or ERISA Affiliate intends to take with respect thereto,
together with a copy of the notice thereof given to the PBGC.
(b) Promptly notify the Administrative Agent and the Banks in writing of
the receipt by either Borrower or any ERISA Affiliate of an assessment of
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withdrawal liability in connection with a complete or partial withdrawal with
respect to any Multiemployer Plan, which liability of either Borrower and/or any
ERISA Affiliate may exceed $1,000,000 in aggregate amount, and a statement of
the action that the appropriate Borrower or ERISA Affiliate intends to take with
respect thereto.
(c) Promptly notify the Administrative Agent and the Banks in writing if
either Borrower or any Subsidiary receives: (i) any notice of any violation or
administrative or judicial complaint or order having been filed or about to be
filed against such Borrower or such subsidiary alleging violations of any
Environmental Law and Regulation which could reasonably be expected to result in
liability to either Borrower or any subsidiary in excess of $1,000,000, or (ii)
any notice from any governmental body or any other Person alleging that such
Borrower or such Subsidiary is or may be subject to any Environmental Liability
in excess of $1,000,000; and promptly upon receipt thereof, provide the Banks
with a copy of such notice together with a statement of the action such Borrower
or such Subsidiary intends to take with respect thereto.
Section 6.11. Comply with ERISA.
Materially comply with all applicable provisions of ERISA and the Code now
or hereafter in effect.
Section 6.12. Environmental Compliance.
Operate all property owned or leased by it such that no obligation,
including a clean-up obligation, shall arise under any Environmental Law and
Regulation, which obligation would constitute a Lien on any property of either
Borrower or any of its Subsidiaries; provided, however, that in the event that
any such claim is made or any such obligation arises, such Borrower or such
Subsidiary shall, at its own cost and expense:
(a) provide the Administrative Agent and the Banks with prompt written
notice with respect to any suit or claim initiated or threatened against either
Borrower or any of its Subsidiaries involving liability in excess of $1,000,000;
and
(b) either: (i) immediately satisfy such claim or obligation; or (ii)
contest such claim by appropriate proceedings and upon final judgment (subject
to no further appeal) immediately satisfy such judgment; provided, however,
that, in all such cases, the appropriate Borrower shall file a bond when
necessary to avoid the creation of a Lien against any of its or any of its
Subsidiaries' properties; and provided, further, that each Borrower shall
indemnify and hold harmless the Administrative Agent and the Banks from any
liability, responsibility or obligation in respect thereof or in respect of any
clean-up or any other liability, as successor, secured party or otherwise for
any reason, including, without limitation the enforcement of the Administrative
Agent and/or the Banks' rights under any Loan Document or by operation of law.
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Section 6.13. Reserved.
Section 6.14. Projections.
Take all necessary action to ensure that the Projections when delivered
reflect as of the date thereof Griffon's good faith projections, after
reasonable analysis, of the matters set forth therein.
Article 7 Negative Covenants.
While the Commitments are outstanding, and, until the principal of, and
interest on, each Loan, all Reimbursement Obligations, all Fees and all other
amounts payable under the Loan Documents shall have been indefeasibly paid in
full, Griffon shall not and shall not permit any of its Subsidiaries to do or
agree to do, or permit to be done, any of the following:
Section 7.1. Indebtedness.
Create, incur, permit to exist or have outstanding any Indebtedness that
would violate the terms of this Agreement.
Section 7.2. Liens.
Create, or assume or permit to exist, any Lien on any of the properties or
assets of either Borrower or any of its Subsidiaries whether now owned or
hereafter acquired, except:
(a) Permitted Liens;
(b) Liens in favor of the Banks under the Loan Documents;
(c) Purchase money mortgages or security interests, conditional sale
arrangements and other similar security interests, on property acquired by
either Borrower or any Subsidiary (hereinafter referred to individually as a
"Purchase Money Security Interest") with the proceeds of Indebtedness; provided,
however, that:
(i) The transaction in which any Purchase Money Security Interest is
proposed to be created is not then prohibited by this Agreement;
(ii) Any Purchase Money Security Interest shall attach only to the
property or asset acquired in such transaction and shall not extend to or
cover any other assets or properties of either Borrower or, as the case may
be, a Subsidiary;
63
(iii) The Indebtedness secured or covered by any Purchase Money
Security Interest is secured solely by such Purchase Money Security
Interest and shall not exceed the cost of the property or asset acquired;
and
(iv) Such Indebtedness may be refinanced provided that the principal
amount of such outstanding Indebtedness is not increased;
(d) The interests of the lessor under any Capitalized Lease as permitted
hereunder;
(e) Liens on specifically identified inventory and accounts receivable
covered by bankers acceptances resulting from import letters of credit which do
not cover any assets other than those financed with such bankers acceptances;
(f) Liens securing Indebtedness permitted to exist in accordance with the
terms of Section 7.4 hereof in connection with a Permitted Acquisition which
Liens are of the type otherwise permitted under subsections 7.2(a), (c), (d) and
(e) hereof, provided that (i) such Liens were existing prior to the Permitted
Acquisition in which such Indebtedness was assumed or acquired and not created
in contemplation of such Permitted Acquisition, and (ii) such Liens shall only
attach to or encumber the property and assets acquired in the Permitted
Acquisition in which such Indebtedness was assumed or acquired and shall not
attach to or encumber any other property or assets of either Borrower or any
subsidiary (including, without limitation, any Eligible Business);
(g) As set forth on Exhibit D hereto;
(h) Liens on the properties or assets of Finotech securing Indebtedness of
Finotech not in excess of an aggregate of $32,000,000 at any one time
outstanding and liens on the properties or assets of Bohme not in excess of an
aggregate of $35,000,000 at any one time outstanding; and
(i) Liens on the properties or assets of Clopay Service or any subsidiaries
of Clopay Service securing Indebtedness of Clopay Service and any subsidiaries
of Clopay Service not in excess of any aggregate of $5,000,000 at any one time
outstanding.
Section 7.3. Guaranties.
Assume, endorse, be or become liable for, or guarantee, (a) the obligations
of any Person (except by the endorsement of negotiable instruments for deposit
or collection in the ordinary course of business), or (b) any Limited Contingent
Obligations, except (i) as set forth on Exhibit K hereto, (ii) guarantees of
Griffon and its Subsidiaries not in excess of an aggregate of $5,000,000 at any
one time outstanding, (iii) guarantees by Griffon or any Subsidiary of
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obligations of the Subsidiaries; provided, that either Borrower or any Domestic
Loan Party may guarantee the Indebtedness of any Foreign Loan Party as long as
the aggregate amount of Indebtedness which is so guaranteed does not in the
aggregate at any one time outstanding exceed the sum of $20,000,000, (iv)
guarantees by a Subsidiary of obligations of either or both Borrowers under
leases for real or personal property, provided, that such Subsidiary will
utilize all or a portion of such property, and (v) other Limited Contingent
Obligations not described in the preceding clauses (i) through (iv) of Griffon
and the Subsidiaries not in excess of an aggregate amount of 20% of the
consolidated Tangible Net Worth of Griffon and its Subsidiaries (as computed at
any time as shown on Griffon's Financial Statements most recently delivered to
the Banks) at any one time outstanding. For the purposes hereof, the term
"guarantee" shall include any agreement, whether such agreement is on a
contingency or otherwise, to purchase, repurchase or otherwise acquire
Indebtedness of any other Person, or to purchase, sell or lease, as lessee or
lessor, property or services, in any such case primarily for the purpose of
enabling another person to make payment of Indebtedness, or to make any payment
(whether as an advance, capital contribution, purchase of an equity interest or
otherwise) to assure a minimum equity, asset base, working capital or other
balance sheet or financial condition, in connection with the Indebtedness of
another Person, or to supply funds to or in any manner invest in another Person
in connection with such Person's Indebtedness.
Section 7.4. Mergers, Acquisitions.
Merge or consolidate with any Person (whether or not a Borrower or any
Subsidiary is the surviving entity), or acquire all or substantially all of the
assets or any of the capital stock of any Person; provided, however, that (i)
any Subsidiary may merge with and into any other Subsidiary or either Borrower
(so long as a Borrower or a wholly-owned Subsidiary is the surviving entity) and
(ii) each Borrower or any Subsidiary may make Permitted Acquisitions.
Section 7.5. Redemptions; Distributions.
Upon the occurrence and during the continuance of a Default or Event of
Default, or if a Default or Event of Default would be caused thereby:
(a) Purchase, redeem, retire or otherwise acquire, directly or indirectly,
or make any sinking fund payments with respect to, any shares of any class of
stock of either Borrower now or hereafter outstanding or set apart any sum for
any such purpose; or
(b) Declare or pay any dividends or make any distribution of any kind on
Griffon's outstanding stock, or set aside any sum for any such purpose, except
that Griffon may declare or pay any dividend payable solely in shares of its
capital stock.
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Section 7.6. Stock Issuance.
Issue any additional shares or any right or option to acquire any shares,
or any security convertible into any shares, of the capital stock of any
Subsidiary, except (a) in connection with stock dividends permitted under
subsection 7.5(b) hereof and (b) to either Borrower or a Subsidiary.
Section 7.7. Changes in Business and Sales or Pledges of Assets.
Make any material change in its business on a consolidated basis, or in the
nature of its operation, or liquidate or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, assets or business except in the
ordinary course of business and for a fair consideration or dispose of any
shares of stock (other than sales or issuances of Griffon's capital stock) or
any Indebtedness, whether now owned or hereafter acquired, or discount, sell,
pledge, hypothecate or otherwise dispose of accounts receivable, except in the
ordinary course of business and for fair consideration; provided, however, that
Western Synthetic Real Estate Corp. and/or SKG Realty Corp. may dispose of the
real property presently owned by such corporations and either Borrower or any
Subsidiary may convey, sell, lease, assign, transfer or otherwise dispose of (a)
its property and assets the fair market value of which does not exceed in the
aggregate in any fiscal year five percent (5%) of the consolidated assets of
Griffon and its Subsidiaries as of the end of the immediately preceding fiscal
year for fair consideration and (b) the capital stock of any Subsidiary (i) the
net revenues of which do not exceed five percent (5%) of the consolidated net
revenues of Griffon and its Subsidiaries or (ii) the assets of which do not
exceed five percent (5%) of the consolidated assets of Griffon and its
Subsidiaries; provided, however, that in no event may either Borrower or any
subsidiary convey, sell, lease, assign, transfer or otherwise dispose of any
capital stock that is at any time pledged to the Banks pursuant to the Security
Documents.
Section 7.8. Investments.
Make, or suffer to exist, any Investment in any Person, including, without
limitation, any shareholder, director, officer or employee of either Borrower or
any of the Subsidiaries, except Investments which do not in the aggregate,
exceed $1,000,000 and:
(a) Investments in:
(i) obligations issued or guaranteed by the United States of America;
(ii) certificates of deposit, bankers acceptances and other "money
market instruments" issued by any bank or trust company organized under the
66
laws of the United States of America or any State thereof and having
capital and surplus in an aggregate amount of not less than $100,000,000;
(iii) open market commercial paper bearing the highest credit rating
issued by Standard & Poor's Corporation or by another nationally recognized
credit rating agency;
(iv) repurchase agreements entered into with any bank or trust company
organized under the laws of the United States of America or any State
thereof and having capital and surplus in an aggregate amount of not less
than $100,000,000 relating to United States of America government
obligations;
(v) shares of "money market funds", each having net assets of not less
than $100,000,000; and
(vi) corporate bonds rated at least AA or the equivalent thereof by
Standard & Poor's Corporation or Aa or the equivalent thereof by ▇▇▇▇▇'▇
Investors Service, Inc.;
in each case maturing or being due or payable in full not more than 180 days
after the applicable Borrower's acquisition thereof;
(b) Investments by either Borrower or any Subsidiary in entities related to
the business of either Borrower or any Subsidiary in an aggregate amount not to
exceed $5,000,000;
(c) Investments, other than guarantees permitted by Section 7.3, by either
Borrower or any Subsidiary in any majority-owned Subsidiary of either Borrower
or any Subsidiary; provided, that either Borrower or any Domestic Loan Party may
make an Investment in any Foreign Loan Party as long as the aggregate amount of
such Investments does not in the aggregate at any one time outstanding exceed
the sum of $10,000,000 plus the aggregate amount of such Investments that are
outstanding as of June 30, 2001; and
(d) Permitted Acquisitions by either Borrower or any subsidiary pursuant to
Section 7.4 hereof.
Section 7.9. Fiscal Year.
Change its fiscal year.
Section 7.10. ERISA Obligations.
Neither Borrower will:
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(a) permit the occurrence of any Termination Event, or the occurrence of a
termination or partial termination of a Defined Contribution Plan which would
have a material adverse effect on either Borrower; or
(b) permit any accumulated deficiency (as defined in Section 302 of ERISA
and Section 412 of the Code) in excess of $1,000,000 in the aggregate liability
to either Borrower and its ERISA Affiliates with respect to all Pension Plans,
whether or not waived; or
(c) engage, or permit either Borrower or any ERISA Affiliate to engage, in
any prohibited transaction under Section 406 of ERISA or Section 4975 of the
Code for which a civil penalty pursuant to Section 502(i) of ERISA or a tax
pursuant to Section 4975 of the Code which would have a material adverse effect
on either Borrower; or
(d) engage or permit either Borrower or any ERISA Affiliate to engage, in
any breach of fiduciary duty under Part 4 of Title I of ERISA for which 20
percent of the applicable recovery amount under Section 502(l) of ERISA which
would have a material adverse effect on either Borrower; or
(e) fail, or permit any ERISA Affiliate to fail, to establish, maintain and
operate each Employee Benefit Plan in compliance in all material respects with
the provisions of ERISA, the Code and all other applicable laws and the
regulations and interpretations thereof.
Section 7.11. Reserved.
Section 7.12. Transactions with Affiliates.
Except as expressly permitted by this Agreement, directly or indirectly:
(a) make any Investment in an Affiliate; (b) transfer, sell, lease, assign or
otherwise dispose of any assets to an Affiliate; (c) merge into or consolidate
with or purchase or acquire assets from an Affiliate; or (d) enter into any
other transaction directly or indirectly with or for the benefit of any
Affiliate (including, without limitation, guarantees and assumptions of
obligations of an Affiliate); provided, however, that: (i) payments on
Investments expressly permitted by Section 7.8 hereof may be made, (ii) any
Affiliate who is a natural person may serve as an employee or director of either
Borrower and receive reasonable compensation for his services in such capacity,
(iii) either Borrower may enter into any transaction with an Affiliate providing
for the leasing of property, the rendering or receipt of services or the
purchase or sale of product, inventory and other assets in the ordinary course
of business if the monetary or business consideration arising therefrom would be
substantially as advantageous to such Borrower as the monetary or business
consideration that would obtain in a comparable arm's length transaction with a
Person not an Affiliate and (iv) either Borrower or any Subsidiary may make
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loans to Persons who are stockholders, officers or directors of either Borrower
or a Subsidiary which do not, in the aggregate, exceed $250,000; provided,
however, that for purposes of this Section 7.12 an Affiliate shall not be deemed
to include a Subsidiary of either Borrower.
Section 7.13. Hazardous Material.
(a) Cause or permit (i) any "Hazardous Material" (as defined in any
applicable Environmental Laws and Regulations) to be placed, held, located or
disposed of, on, under or at any real property used in connection with the
operation of the business of either Borrower or any of its Subsidiaries ("Real
Property") or any part thereof, except for such Hazardous Materials which are
necessary for either Borrower's operation of its business thereon and which
shall be used, stored and disposed of in compliance with all applicable
Environmental Laws and Regulations or (ii) such Real Property or any part
thereof to be used as a collection, storage or dump site for any Hazardous
Material.
(b) Each Borrower and each Subsidiary acknowledges and agrees that the
Banks shall have no liability or responsibility for either:
(i) damage, loss, or injury to human health, the environment or
natural resources caused by the presence, disposal, release or threatened
release of Hazardous Materials on any part of such real property; or
(ii) abatement and/or clean-up required under any applicable
Environmental Laws and Regulations for a release, threatened release or
disposal of any Hazardous Materials located at such real property or used
by or in connection with either Borrower's or any Subsidiary's or any such
tenant's business.
Section 7.14. Regulation U.
Not use any part of the proceeds received by either Borrower from the Loans
directly or indirectly for: (a) any purpose other than as set forth in Section
2.9 hereof, or (b) the purpose of purchasing or carrying, or for payment in full
or in part of Indebtedness that was incurred for the purposes of purchasing or
carrying, any "margin stock", as such term is defined in 221.3 of Regulation U
of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II,
Part 221, other than purchases made in compliance with Regulation U.
Section 7.15. Limitations on Restrictions on Upstreaming of Funds
No Loan Party shall enter into any agreement which prohibits or limits the
ability of any Subsidiary to pay dividends or otherwise advance funds to another
Subsidiary or to either Borrower, the effect of which would, with respect to any
fiscal year, not allow the payment by such Subsidiary of an aggregate amount at
least equal to the sum of (i) the amount of Federal, state and local income
taxes payable by a Borrower with respect to the income of such Subsidiary (as
69
determined in accordance with generally accepted accounting principles
consistently applied) for such fiscal year and (ii) 50% of the net income of
such Subsidiary (as determined in accordance with generally accepted accounting
principles consistently applied) for such fiscal year.
Section 7.16. Derivative Protection Arrangements.
No Loan Party shall enter into any Derivative Protection Arrangement unless
such Loan Party has reasonably determined that entering into such Derivative
Protection Arrangement is in the best interests of such Loan Party and is not
for speculative purposes.
Article 8 Events of Default.
If any one or more of the following events ("Events of Default") shall
occur and be continuing, the Commitments shall terminate and the entire unpaid
balance of the principal of and interest on the Notes outstanding and all other
obligations and Indebtedness of each Borrower to each Bank arising hereunder and
under the other Loan Documents shall immediately become due and payable upon
written notice to that effect given to Griffon by the Administrative Agent upon
the direction of the Required Banks (except that in the case of the occurrence
of any Event of Default described in Section 8.6 no such notice shall be
required), without presentment or demand for payment, notice of non-payment,
protest or further notice or demand of any kind, all of which are expressly
waived by each Borrower:
Section 8.1. Payments.
Failure to make (i) any payment or mandatory prepayment of principal under
any Note when due; (ii) any payment or mandatory prepayment of interest upon any
Note or to make any payment of any Fee not later than five (5) days after such
payment or prepayment is due; (iii) any payment in respect of any Reimbursement
Obligation, within five (5) days of when due and payable; or (iv) any deposit
into a cash collateral account when required hereby; or
Section 8.2. Certain Covenants.
Failure to perform or observe any of the agreements of either Borrower
contained in Section 6.9 or Article 7 hereof; or
Section 8.3. Other Covenants.
Failure by either Borrower or any Subsidiary to perform or observe any
other term, condition or covenant of this Agreement or of any of the other Loan
70
Documents to which it is a party, which shall remain unremedied for a period of
15 days after notice thereof shall have been given to Griffon by any Bank; or
Section 8.4. Other Defaults.
(a) Failure to perform or observe any term, condition or covenant of any
bond, note, debenture, loan agreement, indenture, guaranty, trust agreement,
mortgage or similar instrument to which either Borrower or any Subsidiary is a
party or by which it is bound, or by which any of its properties or assets may
be affected (a "Debt Instrument"), so that, as a result of any such failure to
perform, the Indebtedness included therein or secured or covered thereby has
been declared due and payable prior to the date on which such Indebtedness would
otherwise become due and payable; or
(b) Any event or condition referred to in any Debt Instrument shall occur
or fail to occur, so that, as a result thereof, the Indebtedness included
therein or secured or covered thereby has been declared due and payable prior to
the date on which such Indebtedness would otherwise become due and payable; or
(c) Failure to pay any Indebtedness for borrowed money when due;
provided, however, that the provisions of this Section 8.4 shall not be
applicable to any Debt Instrument that on the date this Section 8.4 would
otherwise be applicable thereto, relates to or evidences Indebtedness in a
principal amount of less than $1,000,000; or
Section 8.5. Representations and Warranties.
Any representation or warranty made in writing to the Administrative Agent
or the Banks in any of the Loan Documents, or any certificate, statement or
report made or delivered in compliance with this Agreement, shall have been
false or misleading in any material respect when made or delivered; or
Section 8.6. Bankruptcy.
(a) Either Borrower or any Subsidiary shall make an assignment for the
benefit of creditors, file a petition in bankruptcy, be adjudicated insolvent,
petition or apply to any tribunal for the appointment of a receiver, custodian,
or any trustee for it or a substantial part of its assets, or shall commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect, or either Borrower or any Subsidiary shall take any
corporate action to authorize any of the foregoing actions; or there shall have
been filed any such petition or application, or any such proceeding shall have
been commenced against it, that remains undismissed for a period of thirty (30)
days or more; or any order for relief shall be entered in any such proceeding;
or either Borrower or any Subsidiary by any act or omission shall indicate its
consent to, approval of or acquiescence in any such petition, application or
71
proceeding or the appointment of a custodian, receiver or any trustee for it or
any substantial part of any of its properties, or shall suffer any
custodianship, receivership or trusteeship to continue undischarged for a period
of thirty (30) days or more; or
(b) Either Borrower or any Subsidiary shall generally not pay its debts as
such debts become due; or
(c) Either Borrower or any Subsidiary shall have concealed, removed, or
permitted to be concealed or removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them or made or suffered a
transfer of any of its property that may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or shall have made any transfer of its
property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or shall have suffered or permitted,
while insolvent, any creditor to obtain a Lien upon any of its property through
legal proceedings or distraint that is not vacated within thirty (30) days from
the date thereof; or
Section 8.7. Judgments.
Any judgment against either Borrower or any Subsidiary or any attachment,
levy or execution against any of their properties for any amount in excess of
$1,000,000 shall remain unpaid, unstayed on appeal, undischarged, unbonded or
undismissed for a period of thirty (30) days or more; or Section 8.8. ERISA.
(a) The termination of any Pension Plan or the institution by the PBGC of
proceedings for the involuntary termination of any Pension Plan, in either case,
by reason of, or that results in, a material "accumulated funding deficiency"
with respect to either Borrower and its ERISA Affiliates, individually or in the
aggregate, under Section 412 of the Code; or
(b) Failure by either Borrower to make required contributions, in
accordance with the applicable provisions of ERISA, to each of the Pension Plans
hereafter established or assumed by it; or
Section 8.9. Liens.
Any of the Liens created and granted to the Administrative Agent for the
ratable benefit of the Banks under the Security Documents shall fail to be
valid, first, perfected Liens, subject to no prior or equal Lien, except as
permitted by Section 7.2 hereof; or
72
Section 8.10. Change of Control.
A Change of Control shall occur.
Upon any Event of Default, the Commitments shall terminate and the entire
unpaid balance of the principal of and interest on the Notes outstanding and all
other obligations and Indebtedness of each Borrower to each Agent and each Bank
arising hereunder and under the other Loan Documents shall immediately become
due and payable upon written notice to that effect given to either Borrower by
the Administrative Agent upon consent of the Required Banks (except that in the
case of the occurrence of any Event of Default described in Section 8.6 no such
notice shall be required) and in any such event the Administrative Agent (i)
upon the direction of the Required Banks, shall proceed to enforce the rights of
the holders of the Notes by suit in equity, action at law and/or other
appropriate proceedings, whether for payment or the specific performance of any
covenant or agreement contained in the Loan Documents and (ii) may exercise any
and all rights and remedies provided to the Administrative Agent by the Loan
Documents. Except as otherwise expressly provided in the Loan Documents, each
Borrower expressly waives presentment, demand, notice of non-payment, protest
and any similar notice. Furthermore, upon any such Event of Default, each
Borrower shall deposit into a cash collateral account and grant the
Administrative Agent, for the ratable benefit of the Banks, a first Lien on cash
or cash equivalents in an amount equal to the then Letter of Credit Exposure of
such Borrower.
Article 9 Miscellaneous Provisions.
Section 9.1. Fees and Expenses, Indemnity.
Each Borrower will on demand pay: (a) all reasonable costs of the
Administrative Agent in preparing the Loan Documents and (b) all costs and
expenses of the issuance of the Notes and of the Borrowers' performance and the
Subsidiaries' performance of and compliance with all agreements and conditions
contained herein on its part to be performed or complied with (including,
without limitation, all costs of filing or recording any assignments, mortgages,
financing statements and other documents), and (c) the fees and expenses and
disbursements of special counsel to the Administrative Agent in connection with
the preparation, execution and delivery, review, administration, interpretation
and enforcement of the Loan Documents, the consummation of the transactions
contemplated by all such documents, the negotiation, preparation, execution and
delivery of any amendment, modification or supplement of or to, or any consent
or waiver under, any such document (or any such instrument which is proposed but
not executed and delivered) and with any claim or action threatened, made or
brought against any Bank or the Administrative Agent arising out of or relating
to any extent to the Loan Documents, or the transactions contemplated hereby or
73
thereby and (d) the fees and expenses and disbursements of counsel to the Banks
and of examiners and consultants of each Bank in connection with enforcement of
the Loan Documents and with any claim or action threatened, made or brought
against any Bank arising out of or relating to any extent to the Loan Documents,
or the transactions contemplated hereby or thereby. In addition, each Borrower
will on demand pay all costs and expenses (including, without limitation, fees
and disbursements of counsel) suffered or incurred by the Administrative Agent
and/or the Banks in connection with its enforcement of the payment of any Note
or any sum due to the Administrative Agent and/or the Banks under the Loan
Documents, as the case may be, or any of Administrative Agent's and/or the
Banks' other rights hereunder or thereunder. In addition to the foregoing, each
Borrower shall indemnify the Administrative Agent and each Bank and each of
their respective directors, officers, employees, attorneys, agents and
Affiliates against, and hold each of them harmless from, any loss, liabilities,
damages, claims, costs and expenses (including reasonable attorneys' fees and
disbursements) suffered or incurred by any of them arising out of, resulting
from or in any manner connected with, the execution, delivery and performance of
each of the Loan Documents, the Extensions of Credit and any and all
transactions related to or consummated in connection with the Extensions of
Credit, including, without limitation, losses, liabilities, damages, claims,
costs and expenses suffered or incurred by the Administrative Agent, such Bank
and/or any of their respective directors, officers, employees, attorneys or
Affiliates in investigating, preparing for, defending against, or providing
evidence, producing documents or taking any other action in respect of any
commenced or threatened litigation, administrative proceeding or investigation
under any federal securities law or any other statute of any jurisdiction, or
any regulation, or at common law or otherwise. The indemnity set forth herein
shall be in addition to any other obligations or liabilities of the Borrowers to
the Administrative Agent and/or each such Bank hereunder or at common law or
otherwise. All fees, expenses, costs, charges and other amounts payable by the
Borrowers hereunder shall be deemed to be Obligations, and the Administrative
Agent and each Bank may, in its sole discretion, exercise its rights under
Section 9.5 of this Agreement in respect of any or all thereof. The provisions
of this Section 9.1 shall survive the payment of the Notes and the termination
of this Agreement.
Section 9.2. Taxes.
If, under any law in effect on the date of the closing of any Extension of
Credit hereunder, or under any retroactive provision of any law subsequently
enacted, it shall be determined that any Federal, state or local tax is payable
in respect of the issuance of any Note, or in connection with the filing or
recording of any assignments, mortgages, financing statements, or other
documents (whether measured by the amount of Indebtedness secured or otherwise)
as contemplated by this Agreement, then the Borrowers will pay any such tax and
all interest and penalties, if any, and will indemnify each Bank and the
Administrative Agent against and save each of them harmless from any loss or
damage resulting from or arising out of the nonpayment or delay in payment of
any such tax. If any such tax or taxes shall be assessed or levied against any
Bank or the Administrative Agent, such Bank or the Administrative Agent, as the
case may be, may notify either Borrower and make immediate payment thereof,
74
together with interest or penalties in connection therewith, and shall thereupon
be entitled to and shall receive immediate reimbursement therefor from the
Borrowers. Notwithstanding any other provision contained in this Agreement, the
covenants and agreements of the Borrowers in this Section 9.2 shall survive
payment of the Notes and the termination of this Agreement.
Section 9.3. Payments.
As set forth in Article 2 hereof, all payments by each Borrower on account
of principal, interest, Reimbursement Obligations, Fees and other charges
(including any indemnities) shall be made to the Administrative Agent for the
account of the applicable Credit Party at the Payment Office, in lawful money of
the United States of America in immediately available funds, by wire transfer or
otherwise, not later than 11:00 A.M. New York City time on the date such payment
is due. Any such payment made on such date but after such time shall, if the
amount paid bears interest, be deemed to have been made on, and interest shall
continue to accrue and be payable thereon until, the next succeeding Business
Day. If any payment of principal or interest becomes due on a day other than a
Business Day, such payment may be made on the next succeeding Business Day and
such extension shall be included in computing interest in connection with such
payment. All payments hereunder, under the Notes and in connection with any
Reimbursement Obligation, shall be made without set-off or counterclaim and in
such amounts as may be necessary in order that all such payments shall not be
less than the amounts otherwise specified to be paid under this Agreement, the
Notes and the other Loan Documents (after withholding for or on account of: (i)
any present or future taxes, levies, imposts, duties or other similar charges of
whatever nature imposed by any government or any political subdivision or taxing
authority thereof, other than any tax (except those referred to in clause (ii)
below) on or measured by the net income of the Bank or the Administrative Agent
to which any such payment is due pursuant to applicable federal, state and local
income tax laws, and (ii) deduction of amounts equal to the taxes on or measured
by the net income of such Bank or the Administrative Agent payable by such Bank
or the Administrative Agent with respect to the amount by which the payments
required to be made under this sentence exceed the amounts otherwise specified
to be paid in this Agreement and the Notes). Upon payment in full of any Note,
the Bank holding such Note shall ▇▇▇▇ the Note "Paid" and return it to the
appropriate Borrower.
Section 9.4. Survival of Agreements and Representations; Construction.
All agreements, representations and warranties made herein shall survive
the delivery of this Agreement and the Notes and the making of any Extensions of
Credit. The headings used in this Agreement and the table of contents are for
convenience only and shall not be deemed to constitute a part hereof. All uses
herein of the masculine gender or of singular or plural terms shall be deemed to
75
include uses of the feminine or neuter gender, or plural or singular terms, as
the context may require.
Section 9.5. Lien on and Set-off of Deposits.
As collateral security for the payment of the Obligations, each Borrower
hereby grants to each Bank and the Administrative Agent, a continuing Lien,
security interest and right of setoff as security for all Obligations, whether
now existing or hereafter arising, upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of any Bank or any entity under the control of any
holding company controlling such Bank and its successors or assigns, or in
transit to any of them. At any time after the occurrence and during the
continuance of any Event of Default, without demand or notice (any such notice
being expressly waived by each Borrower), any Bank may setoff same, or any part
thereof and apply the same to any of the Obligations even though unmatured and
regardless of the adequacy of any other collateral securing the Obligations, all
subject to the terms of Section 2.16 hereof. ANY AND ALL RIGHTS TO REQUIRE A
BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF A BORROWER ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
Section 9.6. Modifications, Consents and Waivers; Entire Agreement.
No modification, amendment or waiver of or with respect to any provision of
this Agreement, any Notes, the Security Documents, or any of the other Loan
Documents and all other agreements, instruments and documents delivered pursuant
hereto or thereto, nor consent to any departure by either Borrower from any of
the terms or conditions thereof, shall in any event be effective unless it shall
be in writing and signed by the Required Banks; provided, however, that
notwithstanding the foregoing, without the written consent of each Bank and the
Administrative Agent, in no event shall any amendment, modification, waiver or
consent:
(a) Be effective with respect to Article 2 or Article 3 (it being
understood that a waiver of any Default or Event of Default under Section 8.5
hereof shall not constitute an amendment or modification of any Section
therein), or Sections 8.1 or 9.6 hereof or the definitions in Article 1 which
are used in any of the foregoing;
(b) Extend the final maturity of any Extension of Credit (it being
understood that any waiver of the application of any prepayment of or the method
of application of any prepayment to the amortization of, the Loans shall not
constitute any such extension) or reduce or extend the time of payment of the
principal amount of any Extension of Credit, or reduce the rate or extend the
time of payment of interest or fees thereon;
76
(c) Reduce the percentage specified in the definition of Required Banks;
(d) Increase the amount of the Commitment of any Bank hereunder (it being
understood that a waiver of any Default or Event of Default shall not constitute
a change in the terms of any Commitment of any Bank);
(e) Extend the Commitment Termination Date except in accordance with
Section 2.8(b) hereof, or amend Section 2.8(b) hereof;
(f) Extend the Termination Date;
(g) Release or permit the release of any asset pledged under any of the
Security Documents; or
(h) Consent to any assignment by either Borrower of the Obligations.
Any such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No consent to or demand on either Borrower
in any case shall, of itself, entitle it to any other or further notice or
demand in similar or other circumstances. Without limiting the generality of the
foregoing, the making of an Extension of Credit shall not be construed as a
waiver of any Default, regardless of whether any Bank may have had notice or
knowledge of such Default at the time. This Agreement and the other Loan
Documents are intended by the parties as the final, complete and exclusive
statement of the transactions evidenced thereby. All prior or contemporaneous
promises, agreements and understandings, whether oral or written, are deemed to
be superceded by this Agreement and such other Loan Documents, and no party is
relying on any promise, agreement or understanding not set forth in this
Agreement or such other Loan Documents.
Section 9.7. Remedies Cumulative.
Each and every right granted to the Banks and the Administrative Agent
hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be
exercised from time to time. No failure on the part of any Bank or the
Administrative Agent to exercise, and no delay in exercising, any right shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right preclude any other or future exercise thereof or the exercise of any other
right. The due payment and performance of the obligations shall be without
regard to any counterclaim, right of offset or any other claim whatsoever that
either Borrower may have against any Bank or the Administrative Agent and
without regard to any other obligation of any nature whatsoever that any Bank or
the Administrative Agent may have to either Borrower, and no such counterclaim
or offset shall be asserted by either Borrower in any action, suit or proceeding
instituted by any Bank or the Administrative Agent for payment or performance of
the obligations.
77
Section 9.8. Further Assurances.
At any time and from time to time, upon the request of any Bank or the
Administrative Agent, each Borrower shall execute, deliver and acknowledge or
cause to be executed, delivered and acknowledged, such further documents and
instruments and do such other acts and things as any Bank or the Administrative
Agent may reasonably request in order to fully effect the purposes of this
Agreement, the other Loan Documents and any other agreements, instruments and
documents delivered pursuant hereto or in connection with the Extensions of
Credit.
Section 9.9. Notices.
All notices, requests, reports and other communications pursuant to this
Agreement shall be in writing, either by letter (delivered by hand or commercial
messenger service or sent by certified mail, return receipt requested, except
for routine reports delivered in compliance with Article 5 hereof which may be
sent by ordinary first-class mail) or telegram or telecopy, addressed as
follows:
(a) If to Griffon:
Griffon Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Blau, Kramer, Wactlar & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Telephonics:
Telephonics Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
Griffon Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
AND
Blau, Kramer, Wactlar & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to the Administrative Agent:
Fleet National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Vice President
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (other than in the case of Borrowing Notices and
reports and other documents delivered in compliance with Article
5 hereof) to:
▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(d) If to the Documentation Agent:
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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(e) If to a Bank:
To its respective address (telecopy number) set forth on its signature
page to this Agreement.
Any notice, request or communication hereunder shall be deemed to have been
given on the day on which it is telecopied to such party at the telecopier
number referred to above or delivered by hand or such commercial messenger
service to such party at its address referred to above, or, if sent by mail, on
the third Business Day after the day deposited in the mail, postage prepaid, or
in the case of telegraphic notice, when delivered to the telegraph company,
addressed as aforesaid. Any party may change the person, address or telecopier
number to whom or which notices are to be given hereunder, by notice duly given
hereunder; provided, however, that any such notice shall be deemed to have been
given hereunder only when actually received by the party to which it is
addressed.
Section 9.10. Counterparts.
This Agreement may be signed in any number of counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
Section 9.11. Severability.
The provisions of this Agreement are severable, and if any clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision in this Agreement in any jurisdiction. Each of the
covenants, agreements and conditions contained in this Agreement is independent
and compliance by either Borrower with any of them shall not excuse
non-compliance by either Borrower with any other. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
Section 9.12. Binding Effect; No Assignment or Delegation by Borrowers.
This Agreement shall be binding upon and inure to the benefit of each
Borrower and its successors and to the benefit of the Banks and the
Administrative Agent and their respective successors and assigns. The rights and
obligations of each Borrower under this Agreement shall not be assigned or
delegated without the prior written consent of each Bank and the Administrative
Agent, and any purported assignment or delegation without such consent shall be
void.
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Section 9.13. Assignments and Participations by Banks.
(a) Each Bank may assign to one or more banks or other entities all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Extensions of Credit owing
to it, and the Note or Notes held by it); provided, however, that: (i) each such
assignment shall be of a constant, and not a varying, percentage of all of the
assigning Bank's rights and obligations under this Agreement, (ii) the amount of
the Commitment of the assigning Bank being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $5,000,000 and shall
be an integral multiple of $500,000, (iii) each assignee shall agree in writing
satisfactory in form and substance to the Administrative Agent to be bound by
the terms and conditions of this Agreement, (iv) each such assignment other than
to a Bank party hereto, or a banking Affiliate of such a Bank, or an entity
described in clause (a)(iv) of the definition of "Eligible Assignee" which is
administered or managed by a Bank or an Affiliate of a Bank shall require the
consent of Griffon (unless an Event of Default has occurred and is continuing in
which case such consent shall not be required), and (v) each such assignment
shall be to an Eligible Assignee. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days after
the execution thereof: (x) the assignee thereunder shall be a party hereto and,
to the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and obligations of a
Bank hereunder, and (y) the Bank assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such Bank shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of either Borrower or
the performance or observance by either Borrower of any of its obligations under
this Agreement or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
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together with copies of such financial statements and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon such assigning Bank or the
Administrative Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; and (vi) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Bank.
(c) Upon its receipt of an Assignment and Acceptance executed by an
assignee representing that it is an Eligible Assignee, together with any Note
subject to such assignment, the assigning Bank shall: (i) accept such Assignment
and Acceptance, and (ii) give prompt notice thereof to the Administrative Agent,
each Borrower and each of the other Banks. Within five Business Days after its
receipt of such notice, each appropriate Borrower, at its own expense, shall
execute and deliver to the assignee Bank in exchange for the surrendered Note a
new Note to the order of such Eligible Assignee in an amount equal to the
Commitment assumed by it pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained a Commitment hereunder, a new Note to the order of
the assigning Bank in an amount equal to the Commitment retained by it
hereunder. Such new Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibit A-1 hereto.
(d) Each Bank may, without the prior consent of any other Bank or either
Borrower, sell participations to one or more banks or other entities in all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Extensions of Credit owing
to it, and the Note held by it); provided, however, that: (i) such Bank's
obligations under this Agreement (including, without limitation, its Commitment
hereunder) shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Bank shall remain the holder of any such Note for all purposes of
this Agreement, and each Borrower and the other Bank shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement.
(e) Each Bank may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 9.13, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to either Borrower furnished to such Bank by or on behalf of either
Borrower; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to either Borrower
received by it from such Bank.
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(f) Notwithstanding any other provision contained in this Agreement or any
other Loan Document to the contrary, each Bank may at any time pledge all or any
portion of its rights under the Loan Documents including any portion of the
Notes to any of the twelve (12) Federal Reserve Banks organized under Section 4
of the Federal Reserve Act, 12 U.S.C. Section 341 or the United States Treasury
(and its transferees) as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any operating Circular
issued by such Federal Reserve Bank, provided that any payment in respect of
such assigned Note made by a Borrower to or for the account of the assigning
Bank in accordance with the terms of this Agreement shall satisfy such
Borrower's obligations hereunder in respect of such assigned Note to the extent
of such payment. No such pledge or enforcement thereof shall release any such
Bank from its obligations under any of the Loan Documents.
Section 9.14. Relief From Bankruptcy Stay.
In the event that either Borrower or any of the persons or parties
constituting a Borrower shall (i) file with any bankruptcy court of competent
jurisdiction or be the subject of any petition under Title 11 of the U.S. Code,
as amended ("Bankruptcy Code"), (ii) be the subject of any order for relief
issued under the Bankruptcy Code, (iii) file or be the subject of any petition
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or other relief for debtors
(collectively, "Insolvency Law") , (iv) have sought or consented to or
acquiesced in the appointment of any trustee, receiver, conservator, or
liquidator, or (v) be the subject of any order, judgment, or decree entered by
any court of competent jurisdiction approving a petition filed against such
party for any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any Insolvency Law, the
Administrative Agent and each Bank shall thereupon be entitled and each Borrower
irrevocably consents to immediate and unconditional relief from any automatic
stay imposed by Section 362 of the Bankruptcy Code, or any other stay issued
pursuant to the Bankruptcy Code or any Insolvency Law, on or against the
exercise of the rights and remedies otherwise available to each Bank or the
Administrative Agent as provided in connection herewith and as otherwise
provided by law, and each Borrower hereby irrevocably waives any right to object
to such relief and will not contest any motion by each Bank or the
Administrative Agent seeking relief from such stay and each Borrower will
cooperate with each Bank and the Administrative Agent, in any manner requested
by each Bank or the Administrative Agent, in its efforts to obtain relief from
any such stay.
Section 9.15. Governing Law; Consent to Jurisdiction; Waiver of Trial by
Jury.
(a) THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS
AND DUTIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND
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CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
(b) EACH BORROWER IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING
AGAINST IT UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT,
AND EACH OTHER LOAN DOCUMENT MAY BE BROUGHT IN ANY COURT OF THE STATE OF NEW
YORK, COUNTY OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK. EACH BORROWER, BY THE EXECUTION AND DELIVERY OF
THIS AGREEMENT, EXPRESSLY AND IRREVOCABLY ASSENTS AND SUBMITS TO THE PERSONAL
JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING. EACH
BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY COMPLAINT, SUMMONS,
NOTICE OR OTHER PROCESS RELATING TO ANY SUCH ACTION OR PROCEEDING BY DELIVERY
THEREOF TO IT BY HAND OR BY MAIL IN THE MANNER PROVIDED FOR IN SECTION 9.9
HEREOF. EACH BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR
DEFENSE IN ANY SUCH ACTION OR PROCEEDING BASED ON ANY ALLEGED LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS.
NEITHER BORROWER SHALL BE ENTITLED IN ANY SUCH ACTION OR PROCEEDING TO ASSERT
ANY DEFENSE GIVEN OR ALLOWED UNDER THE LAWS OF ANY STATE OTHER THAN THE STATE OF
NEW YORK UNLESS SUCH DEFENSE IS ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE
OF NEW YORK. NOTHING IN THIS SECTION 9.15 SHALL AFFECT OR IMPAIR IN ANY MANNER
OR TO ANY EXTENT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY BANK TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST EITHER BORROWER IN ANY
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
(c) EACH BORROWER AND EACH BANK (BY ACCEPTANCE OF THE NOTES) MUTUALLY
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY
JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, THE NOTES AND/OR ANY OTHER LOAN DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS OR ACTIONS OF THE ADMINISTRATIVE AGENT AND/OR THE BANKS RELATING TO
THE ADMINISTRATION OF THE EXTENSIONS OF CREDIT OR ENFORCEMENT OF THE LOAN
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DOCUMENTS AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT
AS PROHIBITED BY LAW, EACH BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM
OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH
BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
ADMINISTRATIVE AGENT OR ANY BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT A
CREDIT PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE CREDIT
PARTIES TO ENTER INTO THIS AGREEMENT, ACCEPT THE NOTES AND MAKE THE EXTENSIONS
OF CREDIT.
Section 9.16. Reserved
Section 9.17. Interest Adjustment.
All agreements between each Borrower, the Administrative Agent and the
Banks are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to be paid to any
Bank for the use or the forbearance of the indebtedness evidenced hereby exceed
the maximum permissible under applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date hereof provided,
however, that in the event there is a change in the law which results in a
higher permissible rate of interest, then the Loan Documents shall be governed
by such new law as of its effective date. In this regard, it is expressly agreed
that it is the intent of each Borrower and the Bank in the execution, delivery
and acceptance of this Agreement to contract in strict compliance with the laws
of the State of New York from time to time in effect. If, under or from any
circumstances whatsoever, fulfillment of any provision hereof or of any of the
Loan Documents at the time of performance of such provision shall be due, shall
involve transcending the limit of such validity prescribed by applicable law,
then the obligation to be fulfilled shall automatically be reduced to the limits
of such validity, and if under or from circumstances whatsoever the applicable
Bank should ever receive as interest and amount which would exceed the highest
lawful rate, such amount which would be excessive interest shall be applied to
the reduction of the principal balance evidenced by a Note (in such manner as
such Bank may determine in its sole discretion) and not to the payment of
interest. This provision shall control every other provision of all agreements
between the Borrowers and such Bank.
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Section 9.18. Lost Notes.
Upon receipt of a certificate of an officer of any Bank as to the loss,
theft, destruction or mutilation of any Note or any other security document
which is not of public record, and, in the case of any such loss, theft,
destruction or mutilation, upon surrender and cancellation of such Note or other
security document, the appropriate Borrower(s) will issue, in lieu thereof, a
replacement Note or other security document in the same principal amount thereof
and otherwise of like tenor.
Article 10 The Administrative Agent.
Section 10.1. Appointment.
Each of the Banks hereby irrevocably appoints the Administrative Agent as
its agent and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof, together with such actions and powers as are reasonably
incidental thereto.
Section 10.2. Individual Capacity.
The Person serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Bank as any other Bank and may
exercise the same as though it were not the Administrative Agent, and such
Person and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with either Borrower, any Subsidiary, or any
Affiliate of either Borrower as if it were not the Administrative Agent
hereunder.
Section 10.3. Exculpatory Provisions.
The Administrative Agent shall not have any duties or obligations except
those expressly set forth herein. Without limiting the generality of the
foregoing, (1) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (2) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise in writing pursuant to a written directive from the
Required Banks (or such other number or percentage of the Banks as shall be
necessary under the circumstances as provided in Section 9.6), and (3) except as
expressly set forth herein, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
86
relating to either Borrower or any Subsidiary that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity. The Administrative Agent shall not be liable for any action taken
or not taken by it with the consent or at the request of the Required Banks (or
such other number or percentage of the Banks as shall be necessary under the
circumstances as provided in Section 9.6) or in the absence of its own gross
negligence or willful misconduct. The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by a Borrower or another Credit Party and the
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement, (ii) the contents of any certificate, report or
other document delivered hereunder or in connection herewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement or any other agreements, instrument or document,
or (v) the satisfaction of any condition set forth in Article 4 or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.
Section 10.4. Reliance by Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel to the Borrowers), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
Section 10.5. Delegation.
The Administrative Agent may perform any and all of its duties and exercise
its rights and powers by or through any one or more subagents appointed by the
Administrative Agent, including, without limitation, the appointment of Chase as
Documentation Agent, provided that no such delegation shall serve as a release
of the Administrative Agent or waiver by the Borrowers of any rights hereunder;
provided further that although Chase, as Documentation Agent shall be entitled
to all the benefits of the exculpatory provisions set forth in this Agreement,
Chase, as Documentation Agent shall have no duties, responsibilities or
liabilities whatsoever, in such capacity. The Administrative Agent and any such
subagent may perform any and all of its duties and exercise its rights and
powers through their respective Related Parties. The exculpatory provisions of
this Article 10 shall apply to any such subagent and to the Related Parties of
the Administrative Agent and any such subagent, and shall apply to their
respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
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Section 10.6. Resignation; Successor Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this Section 10.6, the Administrative Agent may resign at
any time by notifying the Banks and a Borrower. Upon any such resignation, the
Required Banks shall have the right, in consultation with a Borrower, to appoint
a successor. If no successor shall have been so appointed by the Required Banks
and shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent which shall be a bank with an office in New York, New York,
or an Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After the Administrative
Agent's resignation hereunder, the provisions of this Article and Section 9.6
shall continue in effect for the benefit of such retiring Administrative Agent,
its subagents and their respective Related Parties in respect of any actions
taken or permitted to be taken by any of them while it was acting as
Administrative Agent.
Section 10.7. NonReliance on Other Credit Parties.
Each Credit Party acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Credit Party and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Credit Party also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Credit Party and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.
Section 10.8. Notices Binding.
(a) Each Borrower agrees that the Banks shall not have any responsibility
to inquire into the apportionment, allocation or disposition of extensions of
credit as among the Borrowers.
(b) For the purpose of implementing the provisions of this Agreement and
each of the Loan Documents, Telephonics hereby irrevocably appoints Griffon as
its agent and attorney-in-fact for all purposes of this Agreement and each of
the Loan Documents, including the giving and receiving of notices (excluding
Borrowing Notices which shall be furnished in accordance with Section 2.2
hereof) and other communications, the execution and delivery of certificates and
the receipt and allocation of disbursements. Each Borrower hereby accepts such
appointment. Except for Borrowing Notices (which shall be furnished in
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accordance with Section 2.2 hereof), each Credit Party may regard any notice or
other communication pursuant to any Loan Document from any Borrower as a notice
or communication from each Borrower and may give any notice or communication
required or permitted to be given to any Borrower or Borrowers hereunder to
Griffon on behalf of such Borrower or Borrowers. Each Borrower agrees that (i)
each notice, communication, election, representation and warranty, covenant,
agreement and undertaking made on its behalf by any other Borrower shall be
deemed for all purposes to have been made by such Borrower and shall be binding
upon and enforceable against such Borrower to the same extent as if the same had
been made directly by such Borrower and (ii) any notice or communication
required or permitted to be given to any Borrower hereunder that is given to
Griffon shall be deemed for all purposes to have been given to each Borrower and
shall be binding upon and enforceable against each such Borrower to the same
extent as if the same had been given directly to each such Borrower.
(c) Each Borrower hereby waives, with respect to itself and its obligations
hereunder, any right (except as shall be required by applicable statute and
cannot be waived) to require the Banks to (i) proceed against any other Borrower
or any other Person, (ii) proceed against or exhaust any security held from any
other Borrower or any other Person or (iii) pursue any other remedy in the
Banks' power whatsoever. Each Borrower hereby waives any defense based on or
arising out of any defense of any other Borrower or any other Person other than
payment in full of the Obligations, including any defense based on or arising
out of the disability of any other Borrower or any other Person, or the
enforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of any Borrower other than payment in
full of the Obligations.
(d) Each Borrower assumes all responsibility for being and keeping itself
informed of the other Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Obligations and
the nature, scope and extent of the risks which such Borrower assumes and incurs
under any Loan Document, and agrees that the Bank shall have no duty to advise
such Borrower, the other Borrower of information known to the Bank regarding
such circumstances or risks.
Section 10.9. Amendment and Restatement
Commencing with the date of this Agreement, but not prior to such date of
this Agreement, this Agreement shall amend, restate, replace and supersede the
Original Agreement (within the limitations of Recital (4) to this Agreement));
provided, however, that the execution and delivery of this Agreement shall not
in any circumstance be deemed to have terminated, extinguished or discharged
Griffon's Obligations under such Original Agreement, all of which Obligations
shall continue under and be governed by this Agreement and the other Loan
Documents. This Agreement is a replacement, consolidation, amendment and
restatement of the Original Agreement and IS NOT A NOVATION. The Borrowers shall
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also pay any and all unpaid interest on all Loans made by the Bank to Griffon
pursuant to Original Agreement, and at the interest rate specified therein.
Article 11 Mutual Guarantees.
Section 11.1. Guarantee
(a) Subject to Section 11.1(b), each Borrower hereby absolutely,
irrevocably and unconditionally guarantees the full and prompt payment when due
(whether at stated maturity, by acceleration or otherwise) of the other
Borrower's Obligations and in such capacity each such Borrower is a Guarantor of
such Obligations. The agreements of each Borrower under this Article 11
constitute a guarantee of payment, and no Bank shall have any obligation to
enforce any Loan Document or exercise any right or remedy with respect to any
collateral security thereunder by any action, including making or perfecting any
claim against any Person or any collateral security for any of the Obligations
prior to being entitled to the benefits of this Agreement. The Administrative
Agent may, at its option, proceed against the Guarantor, in the first instance,
to enforce the Guarantor Obligations without first proceeding against the
Primary Borrower Obligor or any other Person, and without first resorting to any
other rights or remedies, as the Administrative Agent may deem advisable. In
furtherance hereof, if any Bank is prevented by law from collecting or otherwise
hindered from collecting or otherwise enforcing any Obligation in accordance
with its terms, such Bank shall be entitled to receive hereunder from the
Guarantor after demand therefor, the sums that would have been otherwise due had
such collection or enforcement not been prevented or hindered.
(b) Notwithstanding anything to the contrary contained herein, the maximum
aggregate amount of the obligations of each Guarantor hereunder shall not, as of
any date of determination, exceed the lesser of (i) the greatest amount that is
valid and enforceable against such Guarantor under principles of New York State
contract law, and (ii) the greatest amount that would not render such
Guarantor's liability hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
provisions of applicable state law (collectively, the "Fraudulent Transfer
Laws"), in each case after giving effect to all other liabilities of such
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liability (A) in respect of
intercompany indebtedness to the Primary Borrower Obligor or any affiliate or
subsidiary of the Primary Borrower Obligor, to the extent that such intercompany
indebtedness would be discharged in an amount equal to the amount paid by such
Guarantor hereunder, and (B) under any guarantee of (1) senior unsecured
indebtedness, or (2) indebtedness subordinated in right of payment to any
Obligation, in either case that contains a limitation as to maximum liability
similar to that set forth in this Section 11.1(b) and pursuant to which the
90
liability of such Guarantor hereunder is included in the liabilities taken into
account in determining such maximum liability) and after giving effect as assets
to the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, contribution, reimbursement,
indemnity or similar rights of such Guarantor pursuant to applicable law or any
agreement providing for an equitable allocation among such Guarantor and other
affiliates or subsidiaries of the Primary Borrower Obligor of obligations
arising under guarantees by such parties.
(c) Each Guarantor agrees that the Guarantor Obligations may at any time
and from time to time exceed the maximum aggregate amount of the obligations of
such Guarantor hereunder without impairing this Agreement or affecting the
rights and remedies of any Bank hereunder.
Section 11.2. Absolute Obligation.
No Guarantor shall be released from liability hereunder unless and until
the Commitments have terminated and either (i) each Borrower shall have paid in
full the outstanding principal balance of the Extensions of Credit owing by such
Borrower, together with all accrued and unpaid interest thereon, and all other
amounts then due and owing under the Loan Documents, or (ii) the Obligations of
such Guarantor shall have been paid in full in cash. Each Guarantor acknowledges
and agrees that (a) no Bank has made any representation or warranty to such
Guarantor with respect to either Borrower, any of its Subsidiaries, any Loan
Document, or any agreement, instrument or document executed or delivered in
connection therewith, or any other matter whatsoever, and (b) such Guarantor
shall be liable hereunder, and such liability shall not be affected or impaired,
irrespective of (A) the validity or enforceability of any Loan Document, or any
agreement, instrument or document executed or delivered in connection therewith,
or the collectability of any of the Obligations, (B) the preference or priority
ranking with respect to any of the Obligations, (C) the existence, validity,
enforceability or perfection of any security interest or collateral security
under any Loan Document, or the release, exchange, substitution or loss or
impairment of any such security interest or collateral security, (D) any
failure, delay, neglect or omission by any Bank to realize upon or protect any
direct or indirect collateral security, indebtedness, liability or obligation,
any Loan Document, or any agreement, instrument or document executed or
delivered in connection therewith, or any of the Obligations, (E) the existence
or exercise of any right of set-off by any Bank, (F) the existence, validity or
0enforceability of any other guarantee with respect to any of the Obligations,
the liability of any other Person in respect of any of the Obligations, or the
release of any such Person or any other guarantor of any of the Obligations, (G)
any act or omission of any Bank in connection with the administration of any
Loan Document or any of the Obligations, (H) the bankruptcy, insolvency,
reorganization or receivership of, or any other proceeding for the relief of
debtors commenced by or against, any Person, (I) the disaffirmance or rejection,
or the purported disaffirmance or purported rejection, of any of the
91
Obligations, any Loan Document, or any agreement, instrument or document
executed or delivered in connection therewith, in any bankruptcy, insolvency,
reorganization or receivership, or any other proceeding for the relief of
debtor, relating to any Person, (J) any law, regulation or decree now or
hereafter in effect that might in any manner affect any of the terms or
provisions of any Loan Document, or any agreement, instrument or document
executed or delivered in connection therewith or any of the Obligations, or that
might cause or permit to be invoked any alteration in the time, amount, manner
or payment or performance of any of the Primary Borrower Obligor's obligations
and liabilities (including its Obligations), (K) the merger or consolidation of
the Primary Borrower Obligor into or with any Person, (L) the sale by the
Primary Borrower Obligor of all or any part of its assets, (M) the fact that at
any time and from time to time none of the Obligations may be outstanding or
owing to any Bank, (N) any amendment or modification of, or supplement to, any
Loan Document, or (O) any other reason or circumstance that might otherwise
constitute a defense available to or a discharge of the Primary Borrower Obligor
in respect of its obligations or liabilities (including the Obligations) or of
such Guarantor in respect of any of the Guarantor Obligations (other than by the
performance in full thereof).
Section 11.3. Repayment in Bankruptcy, etc.
If, at any time or times subsequent to the payment of all or any part of
the Obligations or the Guarantor Obligations, any Bank shall be required to
repay any amounts previously paid by or on behalf of the Primary Borrower
Obligor or any Guarantor in reduction thereof by virtue of an order of any court
having jurisdiction in the premises, including as a result of an adjudication
that such amounts constituted preferential payments or fraudulent conveyances,
the Guarantors unconditionally agree to pay to the Administrative Agent, within
10 days after demand, a sum in cash equal to the amount of such repayment,
together with interest on such amount from the date of such repayment by such
Bank to the date of payment to the Administrative Agent at the applicable
Post-Default Rate.
Section 11.4. Miscellaneous
Each Guarantor agrees that any statement of account with respect to the
Obligations from any Bank that binds the Primary Borrower Obligor shall also be
binding upon such Guarantor, and that copies of said statements of account
maintained in the regular course of such Bank's business may be used in evidence
against such Guarantor in order to establish its Guarantor Obligations.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date first above written.
GRIFFON CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
TELEPHONICS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
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Commitment FLEET NATIONAL BANK, individually
and in its capacity as Administrative Agent
$60,000,000.00
/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Telephonics Sublimit Commitment: By:______________________________
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
$16,875,000.00 Title: Vice President
Lending Office for Prime Rate Loans and
Eurodollar Loans:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Address for Notices:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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Commitment THE CHASE MANHATTAN BANK,
individually and in its capacity as
$50,000,000.00 Documentation Agent
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephonics Sublimit Commitment: By:______________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
$14,062,500.00 Title:Vice President
Lending Office for Prime Rate Loans and
Eurodollar Loans:
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Address for Notices:
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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Commitment FIRSTAR BANK, NATIONAL
ASSOCIATION
$25,000,000.00
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephonics Sublimit Commitment: By:______________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
$7,031,250.00 Title: Vice President
Lending Office for Prime Rate Loans and
Eurodollar Loans:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇-▇▇-▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
Address for Notices:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇-▇▇-▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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Commitment HSBC BANK USA
$25,000,000.00 /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephonics Sublimit Commitment: By:______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
$7,031,250.00 Title: Vice President
Lending Office for Prime Rate Loans and
Eurodollar Loans:
▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Agent Servicing Manager
Address for Notices:
▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Agent Servicing Manager
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇/5863
97
EXECUTION COPY