SECOND AMENDED AND RESTATED
LOAN AGREEMENT
between
CORESTATES BANK, N.A.
(successor to Meridian Bank)
and
BLONDER TONGUE LABORATORIES, INC.
Dated as of September 26, 1996
SECOND AMENDED AND RESTATED LOAN AGREEMENT BETWEEN
CORESTATES BANK, N.A. (successor to Meridian Bank) and
BLONDER TONGUE LABORATORIES, INC.
TABLE OF CONTENTS
Article Page
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I. Definitions.................................................... 1
II. Credit Accommodations.......................................... 10
2.1 The Line of Credit.................................. 10
2.2 Real Estate Loan.................................... 12
2.3 Acquisition Facility................................ 12
2.4 Interest............................................ 14
2.5 Conversion and Continuation of Loans................ 16
2.6 Special Provisions Applicable to
Adjusted LIBO Rate Loans........................... 17
2.7 Requirements of Law................................. 19
2.8 Determinations...................................... 19
2.9 Payments and Computations........................... 20
2.10 Borrowing........................................... 20
2.11 Prepayment and Repayment............................ 20
III. Security....................................................... 21
3.1 Security Documents.................................. 21
IV. Representations and Warranties of the Borrower................. 21
4.1 Good Standing of the Borrower;
Authorization...................................... 21
4.2 Compliance with Laws and Other Agreements........... 21
4.3 No Conflict; Governmental Approvals................. 22
4.4 Financial and Other Information Regarding
Borrower........................................... 22
4.5 Taxes............................................... 22
4.6 Encumbrances and Guaranties......................... 22
4.7 Material Adverse Changes............................ 23
4.8 Margin Securities................................... 23
4.9 ERISA............................................... 23
4.10 Pending Litigation.................................. 23
4.11 Valid, Binding and Enforceable...................... 24
4.12 Priority of Security Interests...................... 24
4.13 Environmental Matters .............................. 24
4.14 No Untrue Statements................................ 24
4.15 Patents and Trademarks.............................. 25
V. Conditions Precedent to the Bank's Obligations................. 25
5.1 Documents to be Delivered by the Borrower
at Closing......................................... 25
5.2 Conditions Precedent to Making Line of
Credit Loans or Acquisition Loans.................. 26
VI. Affirmative Covenants of the Borrower.......................... 26
6.1 Use of Proceeds..................................... 26
(i)
Article Page
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6.2 Financial Statements................................ 26
6.3 Ordinary Course of Business; Records................ 27
6.4 Information for the Bank............................ 27
6.5 Insurance........................................... 27
6.6 Maintenance......................................... 28
6.7 Taxes............................................... 29
6.8 Leases.............................................. 29
6.9 Corporate Existence; Certain Rights; Laws........... 29
6.10 Notice of Litigation or Other Proceedings........... 29
6.11 Indebtedness........................................ 29
6.12 Notice of Events of Default......................... 29
6.13 ERISA............................................... 29
6.14 Deposit Accounts.................................... 30
6.15 Management.......................................... 30
6.16 Financial Covenants................................. 30
6.17 Compliance with Environmental Laws.................. 30
6.18 Further Actions..................................... 31
6.19 Material Adverse Change............................. 31
6.20 Meeting Regarding Projections....................... 31
6.21 Subordination of Debt............................... 31
VII. Negative Covenants............................................. 31
7.1 Fundamental Corporate Changes....................... 31
7.2 Indebtedness........................................ 32
7.3 Encumbrances........................................ 32
7.4 Guaranties.......................................... 33
7.5 Sales and Lease-Backs............................... 33
7.6 Loans, Investments.................................. 33
7.7 Change in Business.................................. 33
7.8 Sale or Discount of Receivables..................... 33
7.9 Prepayment of Indebtedness.......................... 33
7.10 ERISA............................................... 33
7.11 Compliance with Federal Reserve Board
Regulations........................................ 33
7.12 Blonder International............................... 34
VIII. Events of Default.............................................. 34
8.1 Borrower's Failure to Pay........................... 34
8.2 Breach of Covenants or Conditions................... 34
8.3 Defaults in Other Agreements........................ 34
8.4 Agreements Invalid.................................. 35
8.5 False Warranties; Breach of Representations......... 35
8.6 Judgments........................................... 35
8.7 Bankruptcy or Insolvency of the Borrower or
Other Loan Parties................................. 35
IX. Remedies....................................................... 36
9.1 Further Advances; Acceleration; Setoff.............. 36
9.2 Further Remedies.................................... 37
X. Miscellaneous.................................................. 37
10.1 Remedies Cumulative; No Waiver...................... 37
(ii)
Article Page
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10.2 Notices............................................. 37
10.3 Costs, Expenses and Attorneys' Fees................. 38
10.4 Survival of Covenants............................... 38
10.5 Counterparts; Effectiveness......................... 39
10.6 Headings............................................ 39
10.7 Payment Due On A Day Other Than a Business
Day................................................ 39
10.8 Judicial Proceedings................................ 39
10.9 Governing Law....................................... 39
10.10 Integration......................................... 39
10.11 Amendment and Waiver................................ 39
10.12 Successors and Assigns.............................. 40
10.13 Severability of Provisions.......................... 40
10.14 Consent to Jurisdiction and Service
of Process......................................... 40
10.15 Indemnification..................................... 41
(iii)
SECOND AMENDED AND RESTATED LOAN AGREEMENT
This SECOND AMENDED AND RESTATED LOAN AGREEMENT ("Agreement"),
dated as of September 26, 1996, is between CORESTATES BANK, N.A. (successor to
Meridian Bank), a national banking association (the "Bank"), and BLONDER TONGUE
LABORATORIES, INC., a Delaware corporation (the "Borrower").
BACKGROUND
A. The Bank and the Borrower are parties to an Amended and
Restated Loan Agreement dated October 2, 1995 as amended by a letter agreement
dated December 11, 1995, and as further amended by a certain Second Amendment to
Loan Agreement dated May 23, 1996 (as amended, modified and/or extended, the
"Existing Loan Agreement").
B. In accordance with the terms of the Existing Loan
Agreement, the Bank has extended to the Borrower (i) a line of credit in the
maximum principal amount of Fifteen Million Dollars ($15,000,000) (the "Existing
Line of Credit") pursuant to which there is an outstanding principal balance
(including the outstanding face amount of any letters of credit issued for the
account of the Borrower) on the date hereof of $1,491,000 (the "Existing Line of
Credit Indebtedness"), as evidenced by a certain Amended and Restated Line of
Credit Note dated October 2, 1995 made by the Borrower in favor of the Bank (the
"Existing Line of Credit Note"); and (ii) a real estate loan in the original
principal amount of Two Million Eight Hundred Thousand Dollars ($2,800,000) (the
"Existing Real Estate Loan") pursuant to which there is an outstanding principal
balance on the date hereof of $2,737,777.76 (the "Existing Real Estate Loan
Indebtedness").
C. The Bank and the Borrower now desire to set forth the terms
and conditions under which the Bank will make available to the Borrower certain
credit facilities to be used for the purposes specified in this Agreement.
Accordingly, the Bank and the Borrower, each intending to be legally bound
hereby, agree as follows:
ARTICLE I
DEFINITIONS
Terms used herein without definition that are defined in the
Uniform Commercial Code shall have the meanings ascribed to them therein, unless
the context requires otherwise. The following terms shall have the following
meanings in this Agreement:
"Account" shall have the meaning given to that term in the
Uniform Commercial Code and, in addition, shall include any right to payment for
goods sold or leased or services rendered which is evidenced by an instrument or
chattel paper.
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"Acquisition Facility" shall mean the credit facility extended
by the Bank to the Borrower pursuant to Section 2.3 hereof.
"Acquisition Loan" and "Acquisition Loans" shall have the
meaning given such terms in Section 2.3(a) hereof.
"Acquisition Loan Adjusted LIBO Rate" shall mean the interest
rate equal to the sum of the LIBO Rate plus (i) 1.25%, if the ratio of Senior
Debt to Capital Funds is less than or equal to .75:1.00, at the end of the
previous fiscal quarter, (ii) 1.75%, if the ratio of Senior Debt to Capital
Funds is greater than .75:1.00, but less than or equal to 1.00:1.00, at the end
of the previous fiscal quarter, (iii) 2.25%, if the ratio of Senior Debt to
Capital Funds is greater than 1.00:1.00, but less than or equal to 1.25:1.00, at
the end of the previous fiscal quarter, and (iv) 2.75%, if the ratio of Senior
Debt to Capital Funds is greater than 1.25:1.00, at the end of the previous
fiscal quarter.
"Acquisition Loan Applicable Rates" shall have the meaning
given such term in Section 2.4(b) hereof.
"Acquisition Loan Commitment" shall have the meaning given
such term in Section 2.3 hereof.
"Acquisition Loan Note(s)" shall have the meaning given such
term in Section 2.3(d) hereof.
"Adjusted LIBO Rate" shall mean, with respect to the Line of
Credit Loans, the Line of Credit Adjusted LIBO Rate, and, with respect to the
Acquisition Loans, the Acquisition Loan Adjusted LIBO Rate.
"Adjusted LIBO Rate Loan" shall mean any Loan accruing
interest at the Adjusted LIBO Rate.
"Affiliate" shall mean any Subsidiary of the Borrower and any
Person or entity that, now or hereafter, directly or indirectly through one or
more intermediaries, controls, is controlled by or is under common ownership or
control with the Borrower. For purposes of this definition, the terms "control,"
"controls" and "controlled" shall refer to the power to determine the management
or policies of a Person, whether resulting from an official position or capacity
with such Person, direct or indirect beneficial ownership of at least twenty
percent (20%) of the voting securities or other equity interests of such Person,
or otherwise.
"Agreement" shall mean this agreement, together with all
exhibits, amendments, modifications and supplements hereto as may be in effect
from time to time.
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"Allonge to Existing Real Estate Loan Note" shall mean
the allonge to Existing Real Estate Loan Note, dated the Closing
Date.
"Applicable Law" shall mean all applicable provisions of
(i) constitutions, statutes, rules, regulations and orders of governmental
authorities of any kind having jurisdiction over the Bank or the Borrower,
(ii) authorizations, consents, approvals, and licenses of such governmental
authorities, (iii) Judgments, and (iv) common law and equity.
"Applicable Rates" shall mean the Line of Credit
Applicable Rates and/or the Acquisition Loan Applicable Rates, as
applicable.
"Bank" shall have the meaning specified in the initial
paragraph of this Agreement, together with its successors and assigns.
"Blonder International" shall mean Blonder Tongue
International, Inc., a Delaware corporation, together with its successors and
assigns.
"Borrower" shall have the meaning specified in the initial
paragraph of this Agreement, together with its successors and assigns.
"Business Day" shall mean any day upon which the Bank is open
for business at its office in Reading, Pennsylvania.
"Capital Lease" shall mean any lease of property which, in
accordance with GAAP, should be capitalized on the lessee's balance sheet.
"Capital Lease Obligation" shall mean the amount of the
liability which, according to GAAP, should be capitalized or disclosed with
respect to a Capital Lease.
"Closing" shall mean the execution and delivery to the Bank of
all of the documents and instruments required by the terms of this Agreement and
the closing of the transactions contemplated by this Agreement.
"Closing Date" shall mean the date on which the Closing
takes place.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Collateral" shall have the meaning set forth in the
Security Agreement.
"Default Rate" shall mean the rate of interest applicable to
any Loan, plus two percent (2.0%).
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"Encumbrance" shall mean, as to any Person, any mortgage,
lien, pledge, adverse claim, charge, security interest or other encumbrance in
or on, or any interest or title of any vendor, lessor, lender to, or other
secured party of the Person under any conditional sale or other title retention
agreement or Capital Lease with respect to, any property or asset of the Person.
"Environmental Laws" shall mean all provisions of the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss.ss.9601 et seq., as amended by the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (October 17, 1986), the Resource
Conservation and Recovery Act, 42 U.S.C. ss.ss.6901 et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. ss.ss.1801 et seq., the Clean Water Act,
33 U.S.C. ss.ss.1251 et seq., the Clean Air Act, 42 U.S.C. ss.ss.7401 et seq.,
the Storage Tank and Spill Prevention Act, 35 P.S. ss.ss.6021.101 et seq., the
Solid Waste Management Act, 35 P.S. ss.ss.6018.101 et seq., the Clean Streams
Law, 35 P.S. ss.ss.691.1 et seq., the Hazardous Sites Cleanup Act, 35 P.S.
ss.ss.6021.101 et seq., and all other federal, state and local legal
requirements pertaining to the environment or regulating or restricting the use,
transfer, storage or disposal of Hazardous Materials and applicable to the
Borrower or its business, operations or assets.
"ERISA" shall mean the federal Employee Retirement Income
Security Act of 1974, as amended.
"Eurodollar Business Day" shall mean any day on which relevant
London international financial markets are open for dealings in deposits of U.S.
Dollars and which is also other than a Saturday, Sunday or other day on which
commercial banks are authorized or required to close in Philadelphia,
Pennsylvania.
"Event of Default" shall have the meaning set forth in Article
VIII of this Agreement.
"Existing Line of Credit Note" shall have the meaning given
such term in paragraph B of the Background Section of this Agreement.
"Existing Real Estate Loan" shall have the meaning given such
term in paragraph B of the Background Section of this Agreement.
"Existing Real Estate Loan Indebtedness" shall have the
meaning given such term in paragraph B of the Background Section of this
Agreement.
"Existing Real Estate Loan Note" shall mean the Real Estate
Loan Note, dated May 23, 1996 made by the Borrower in favor of the Bank,
evidencing the Existing Real Estate Loan Indebtedness, as amended by the Allonge
to Existing Real Estate Note.
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"Federal Reserve Board" shall mean the Board of Governors of
the United States Federal Reserve System.
"Financial Statements" shall have the meaning set forth in
Section 4.4(a) of this Agreement.
"GAAP" shall mean generally accepted accounting principles, as
in effect at the time of application to the provisions hereof, and consistently
applied.
"Guarantor" shall mean any Person who guarantees the payment
and performance of all or any part of the Obligations.
"Guaranty" shall mean any guaranty or agreement to be a surety
or other contingent liability (other than any endorsement for collection or
deposit in the ordinary course of business), direct or indirect, with respect to
any obligation of another Person.
"Hazardous Materials" shall mean all materials of any kind
which are flammable, explosive, toxic, radioactive or otherwise hazardous to
animal or plant life or the environment, including, without limitation,
"hazardous wastes," "hazardous substances" and "contaminants," as such terms are
defined by Environmental Laws.
"Indebtedness" shall mean any obligation for borrowed money,
including, without limitation:
(a) any obligation owed for all or any part of the
purchase price of property or other assets or for the cost of property or other
assets constructed or of improvements thereto, other than accounts payable
included in current liabilities and incurred in respect of property purchased in
the ordinary course of business;
(b) any Capital Lease Obligation; and
(c) any reimbursement obligations and other
obligations under any letter of credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other interest rate management devise,
or any forward sale or purchase agreement for foreign currencies.
"Interest Period" shall mean, with respect to any Adjusted
LIBO Rate Loan which is a Line of Credit Loan, a period of 30, 60, 90, 120, 150
or 180 days' duration as the Borrower may elect, and, with respect to any
Adjusted LIBO Rate Loan which is an Acquisition Loan, a period of 30 days'
duration; provided, however, that (a) if any Interest Period would otherwise end
on a day which shall not be a Eurodollar Business Day, such Interest Period
shall be extended to the next succeeding Eurodollar Business Day, subject to
clauses (c) and (d) below; (b) interest shall accrue from and including the
first day of each Interest Period to, but excluding, the day on which such
Interest Period
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expires; (c) any Interest Period which would otherwise end on a day which is not
a Eurodollar Business Day shall be extended to the next succeeding Eurodollar
Business Day, unless such Eurodollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Eurodollar Business Day; and (d) with respect to any Interest Period which
begins on the last Eurodollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) the Interest Period shall end on the last Eurodollar
Business Day of a calendar month.
"Judgment" shall have the meaning set forth in Section
8.6 of this Agreement.
"LIBO Rate" shall mean, for the applicable Interest Period,
(i) the rate, rounded upwards to the next one-hundredth of one percent,
determined by the Bank two Eurodollar Business Days prior to the date of the
corresponding Adjusted LIBO Rate Loan, at which the Bank is offered deposits in
dollars at approximately 11:00 a.m., London time by leading banks in the
interbank eurodollar or eurocurrency market for delivery on the date of such
Adjusted LIBO Rate Loan in an amount and for a period comparable to the amount
and Interest Period of such Adjusted LIBO Rate Loan and in like funds, divided
by (ii) a number equal to one (1.0) minus the Reserve Percentage. The LIBO Rate
shall be adjusted automatically with respect to any Adjusted LIBO Rate Loan
outstanding on the effective date of any change in the Reserve Percentage, as of
such effective date. The LIBO Rate shall be calculated on the basis of the
number of days elapsed in a year of 360 days.
"Life Insurance Assignments" shall mean the collateral
assignments to the Bank of (i) a certain policy of insurance on
the life of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ in the face amount of $1,000,000, and
(ii) a certain policy of insurance on the life of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
in the face amount of $1,000,000.
"Line of Credit" shall mean the line of credit from the Bank
to the Borrower established pursuant to Section 2.1 of this Agreement.
"Line of Credit Adjusted LIBO Rate" shall mean the interest
rate equal to the sum of the LIBO Rate plus (i) .95%, if the ratio of Senior
Debt to Capital Funds is less than or equal to .75:1.00, at the end of the
previous fiscal quarter, (ii) 1.45%, if the ratio of Senior Debt to Capital
Funds is greater than .75:1.00, but less than or equal to 1.00:1.00, at the end
of the previous fiscal quarter, (iii) 1.95%, if the ratio of Senior Debt to
Capital Funds is greater than 1.00:1.00, but less than or equal to 1.25:1.00, at
the end of the previous fiscal quarter, and (iv) 2.45%, if the ratio of Senior
Debt to Capital Funds is greater than 1.25:1.00, at the end of the previous
fiscal quarter.
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"Line of Credit Applicable Rates" shall have the meaning given
such term in Section 2.4(a) hereof.
"Line of Credit Commitment" shall have the meaning set forth
in Section 2.1 of this Agreement.
"Line of Credit Loans" shall mean the loans made by the Bank
to the Borrower pursuant to the Line of Credit.
"Line of Credit Note" shall have the meaning set forth in
Section 2.1 of this Agreement, together with all replacements, amendments and
renewals thereof.
"Loan Documents" shall mean this Agreement, the Security
Agreement, the Notes, the Mortgage, the Patent Assignment, the Trademark
Assignment, the Life Insurance Assignments and all agreements, amendments,
certificates, financing statements, schedules, reports, notices, and exhibits
now or hereafter executed or delivered in connection with any of the foregoing,
as may be in effect from time to time.
"Loans" shall mean the Line of Credit Loans, the
Existing Real Estate Loan and the Acquisition Loan(s).
"Mortgage" shall mean the Mortgage, Assignment of Leases, and
Security Agreement dated as of May 23, 1996 from the Borrower to the Bank, and
encumbering real and personal property located generally at Middlesex County,
New Jersey, and any amendments and supplements thereto.
"Notes" shall mean the Line of Credit Note, the Existing Real
Estate Loan Note, the Acquisition Note(s) and all replacements, amendments,
extensions and renewals thereof.
"Obligations" shall mean the obligations of the
Borrower:
(a) To pay the principal, interest, commitment fees
and any other liabilities of the Borrower to the Bank under this Agreement and
the other Loan Documents in accordance with the terms thereof;
(b) To satisfy all of the other direct or indirect
liabilities of the Borrower to the Bank, whether hereunder or otherwise, whether
now existing or hereafter incurred, whether or not evidenced by any note or
other instrument, matured or unmatured, direct, absolute or contingent, joint or
several, including any extensions, modifications, renewals thereof and
substitutions therefor;
(c) To repay the Bank all amounts advanced by the
Bank hereunder or otherwise on behalf of the Borrower, including, but without
limitation, advances for principal or interest payments to prior secured
parties, mortgagors or lienors, or for
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taxes, levies, insurance, rent, wages, repairs to or maintenance or storage of
any Collateral; and
(d) To reimburse the Bank, on demand, for all of the
Bank's expenses and costs, including the reasonable fees and expenses of its
counsel, in connection with the negotiation, preparation, administration,
amendment, modification, or enforcement of this Agreement and the documents
required hereunder, including all amounts payable under Section 10.3 hereof.
"Other Loan Parties" shall mean any Guarantor, together with
their successors or assigns.
"Patent Assignment" shall mean the Patent Collateral
Assignment made by the Borrower to the Bank, dated March 30, 1989, as amended
and reaffirmed pursuant to the Reaffirmation and Amendment of Patent Assignment,
together with all amendments, modifications, exhibits and schedules thereto as
may be in effect from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, court or governmental or political subdivision or agency thereof.
"Prime Rate" means the floating annual rate of interest that
is designated from time to time by the Bank as the "Prime Rate" and is used by
the Bank as a reference base with respect to different interest rates charged to
borrowers generally. Such rate of interest shall change automatically and
simultaneously upon the Bank's designation of any change in such reference rate,
and the Bank's determination and designation from time to time of the reference
rate shall not in any way preclude the Bank from making loans to other borrowers
at rates which are higher or lower or different from the referenced rate.
"Reaffirmation and Amendment of Patent Assignment" shall mean
that certain reaffirmation and amendment by the Borrower of the Patent
Assignment dated the same date as this Agreement.
"Reaffirmation and Amendment of Security Agreement" shall mean
that certain reaffirmation and amendment by the Borrower of the Security
Agreement, dated the same date as this Agreement.
"Reaffirmation and Amendment of Trademark Assignment" shall
mean that certain reaffirmation and amendment by the Borrower of the Trademark
Assignment dated the same date as this Agreement.
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"Reaffirmations" shall mean the Reaffirmation and Amendment of
Security Agreement, the Reaffirmation and Amendment of Patent Assignment, and
the Reaffirmation and Amendment of Trademark Assignment.
"Regulatory Change" means (a) the enactment or effectuation
after the date of this Agreement of any new, or change in any existing,
Applicable Law, (b) the adoption after such date of any new, or the adoption or
other effectuation after such date of any change in any existing,
interpretation, directive or request (whether or not having the force of law),
or (c) any change after such date in the administration or enforcement of any
Applicable Law to which the Bank is subject. As used in this definition, the
"effectuation" of a change shall include, without limitation, that consisting of
or resulting from a determination of a court or regulatory authority.
"Reserve Percentage" shall mean, for any Adjusted LIBO Rate
Loan for any Interest Period therefor, the daily average of the stated maximum
rate (expressed as a decimal) at which reserves (including, without limitation,
any basic, supplemental, marginal or emergency reserves) are required to be
maintained during such Interest Period against Eurocurrency liabilities (as that
term is defined in Regulation D of the Federal Reserve Board), as prescribed by
the Federal Reserve Board (or any successor or any other banking authority to
which the Bank is subject, including any board or governmental or administrative
agency of the United States or any other jurisdiction to which the Bank is
subject), but without benefit of credit proration, exemptions, or offsets that
might otherwise be available to the Bank from time to time under Regulation D.
Without limiting the effect of the foregoing, the Reserve Percentage shall
reflect any other reserves required to be maintained by the Bank against (1) any
category of liabilities which includes deposits by reference to which the rate
for Adjusted LIBO Rate Loans is to be determined; or (2) any category of
extension of credit or other assets which include Adjusted LIBO Rate Loans.
"Security Agreement" shall mean the Amended and Restated
Security Agreement between the Borrower as debtor and the Bank as secured party,
dated October 2, 1995 by which the Borrower granted security interests in
certain of its assets to the Bank, as amended and reaffirmed pursuant to the
Reaffirmation and Amendment of Security Agreement, together with all amendments,
modifications, exhibits, and schedules thereto as may be in effect from time to
time.
"Subsidiary" shall mean, as to any designated corporation, any
corporation, the outstanding shares of which having sufficient voting power (not
depending on the happening of a contingency) to elect at least a majority of the
members of its board of directors, are at the time owned by the designated
corporation.
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"Tax" means any federal, state or foreign tax, assessment or
other governmental levy or duty or other charge (including any withholding tax)
upon a person or entity or upon its assets, revenues, income or profits, other
than income and franchise taxes imposed upon the Bank by the jurisdictions (or
any political subdivision thereof) in which the Bank or any office of the Bank
is located.
"Termination Date" shall have the meaning set forth in Section
2.1 of this Agreement.
"Trademark Assignment" shall mean the Trademark Collateral
Assignment made by the Borrower to the Bank, dated March 30, 1989, as amended
and reaffirmed pursuant to the Reaffirmation and Amendment of Trademark
Assignment, together with all amendments, modifications, exhibits and schedules
thereto as may be in effect from time to time.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code of Pennsylvania as codified at 13 Pa. C.S.A. ss.ss.101 et seq., as in
effect on the date of this Agreement.
"Usage Fee" shall have the meaning given such term in Section
2.3(f) hereof.
ARTICLE II
CREDIT ACCOMMODATIONS
2.1 The Line of Credit. The Bank shall make available to the
Borrower, commencing on the Closing Date, a Line of Credit in the maximum
principal amount of $15,000,000 (the "Line of Credit Commitment"), upon the
terms and conditions set forth herein.
(a) Generally. At any time and from time to time during
the period commencing on the Closing Date and ending on June 30, 1998 (the
"Termination Date"), upon the request of the Borrower, the Bank shall provide to
the Borrower a loan or loans in multiples of One Thousand Dollars ($1,000),
which shall be used by the Borrower for working capital. The Existing Line of
Credit Indebtedness shall not be repaid or discharged, but shall be deemed
outstanding under the Line of Credit on and as of the Closing Date and shall be
evidenced by the Line of Credit Note. The Borrower may use the Line of Credit
during the period referred to in the preceding sentence by borrowing, repaying
and reborrowing in accordance with the terms of this Agreement. The aggregate
outstanding principal under the Line of Credit at any time shall not exceed the
Line of Credit Commitment. If, at any time, the aggregate outstanding principal
under the Line of Credit exceeds the Line of Credit Commitment, then, without
any requirement of demand or notice from the Bank, the Borrower shall
immediately pay to the Bank the amount of such excess. Upon the Termination
Date, unless the Bank has agreed in writing to extend the Termination Date
through June 30, 1999 based upon the
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Borrower's financial statements for the year ended December 31, 1997 and such
other information requested by the Bank, the Bank's commitment to make Line of
Credit Loans shall terminate, all Line of Credit Loans shall immediately mature
and all Obligations under the Line of Credit Loans shall be immediately due and
payable in full.
(b) Letters of Credit.
(1) Generally. In addition to making loans to the
Borrower under the Line of Credit as provided in Section 2.1(a) hereof, the Bank
shall, upon the request of the Borrower and subject to the terms of this
Agreement, also issue one or more letters of credit ("Letters of Credit") for
the account of the Borrower up to an aggregate amount not to exceed $1,000,000
(the "Letter of Credit Sublimit"). All amounts drawn under Letters of Credit
shall be deemed to be loans made under the Line of Credit and evidenced by the
Line of Credit Note, and the amount available to be borrowed under the Line of
Credit shall be reduced by the aggregate amounts drawn and available to be drawn
at any time under all outstanding Letters of Credit. In no event shall the
aggregate amount available to be drawn on all outstanding Letters of Credit plus
the outstanding principal balance of Line of Credit Loans exceed the Line of
Credit Commitment. The duration of any Letters of Credit shall not extend beyond
the Termination Date without the written consent of the Bank.
(2) Issuance of Letters of Credit. Subject to the
provisions of Section 2.1(b)(1), the Bank shall issue Letters of Credit for the
account of the Borrower, provided that the Borrower (i) provides a written
request for each such Letter of Credit specifying the terms thereof, including,
without limitation, the amount and the name and address of the beneficiary of
such Letter of Credit; (ii) executes and delivers to the Bank an application for
each such Letter of Credit pursuant to the form provided for such purpose by the
Bank; and (iii) executes and delivers to the Bank such other documents and
instruments which the Bank, in its sole and absolute discretion, deems
reasonable and necessary. The Borrower shall pay to the Bank all transactional
and customary fees required by the Bank in connection with the issuance of each
Letter of Credit hereunder, including, without limitation, the Bank's standard
remittance, transfer and issuance fees, which fees may be deducted by the Bank
from the Borrower's account as such fees are incurred.
(c) Line of Credit Note. The obligations of the Borrower
to repay the aggregate outstanding principal under the Line of Credit and to pay
accrued interest thereon shall be evidenced by a Second Amended and Restated
Line of Credit Note, in form and substance satisfactory to the Bank, to be
executed and delivered to the Bank concurrently with the execution and delivery
of this Agreement (the "Line of Credit Note").
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(d) Administrative Fee. In addition to the interest and
other fees payable by the Borrower, the Borrower shall pay to the Bank a
quarterly administrative fee of $1,500, payable on October 1, 1996 and on the
first day of each quarterly period thereafter.
(e) Existing Line of Credit Note. The Bank agrees to
return to the Borrower the Existing Line of Credit Note marked "cancelled."
2.2 Real Estate Loan.
(a) Generally. The Bank has made available to the Borrower
the Existing Real Estate Loan in the initial principal amount of $2,800,000, the
proceeds of which have been used refinance certain land and the buildings and
other improvements thereon owned by the Borrower and located at One ▇▇▇▇ ▇▇▇▇▇
Road, Old Bridge, New Jersey (the "Property"). The Borrower shall repay the
Existing Real Estate Loan Indebtedness in one hundred nineteen (119) equal,
consecutive, monthly installments in the amount of $15,555.56 on the first day
of each month, which payments commenced on June 1, 1996, together with a final
installment, consisting of the entire remaining principal balance of the
Existing Real Estate Loan, together with all accrued interest thereon, which
shall be due and payable May 1, 2006.
(b) Interest. Interest shall accrue on the outstanding
principal of the Existing Real Estate Loan at an annual rate equal to seven and
one quarter of one percent (7.25%) for the period commencing on the date of
disbursement thereof, and ending on June 1, 1999. Thereafter, interest shall
accrue at an annual rate equal at all times to the Prime Rate, which rate shall
change simultaneously and automatically upon each change in the Bank's Prime
Rate, or another fixed rate agreed upon between the Bank and the Borrower.
Interest shall continue to be paid monthly on the first day of each month
beginning October 1, 1996.
(c) Real Estate Loan Note. The obligations of the Borrower
to repay the aggregate outstanding principal under the Existing Real Estate Loan
are evidenced by the Existing Real Estate Loan Note, and the Borrower agrees to
repay the Existing Real Estate Loan Indebtedness in accordance with the terms of
this Agreement and the Existing Real Estate Loan Note.
2.3 Acquisition Facility. The Bank shall make available to
the Borrower, commencing on the Closing Date, an Acquisition Facility in the
maximum principal amount of $10,000,000 (the "Acquisition Loan Commitment"),
upon the terms and conditions set forth herein.
(a) Advances. Subject to the terms and conditions of this
Agreement, at any time or times on or before the Termination Date, the Bank
shall provide to the Borrower a loan or loans (each an "Acquisition Loan" and,
collectively, the
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"Acquisition Loans") to be used by the Borrower to finance acquisitions. Amounts
borrowed under the Acquisition Facility and repaid may not be reborrowed under
the Acquisition Facility. The aggregate amount of all Acquisition Loans made
under the Acquisition Facility shall not exceed the Acquisition Loan Commitment.
If, at any time, the aggregate amount of all Acquisition Loans made under the
Acquisition Facility exceeds the Acquisition Loan Commitment, then, without any
requirement of demand or notice from the Bank, the Borrower shall immediately
pay to the Bank the amount of such excess. Upon the Termination Date, the Bank's
commitment to make Acquisition Loans under the Acquisition Facility shall
terminate. The aggregate principal balance of each Acquisition Loan, together
with accrued interest thereon, shall be repaid in either (i) thirty-six (36)
equal consecutive monthly installments, (ii) forty-eight (48) equal consecutive
monthly installments, or (iii) sixty (60) equal consecutive monthly
installments, as selected by the Borrower on the date of funding of such
Acquisition Loan.
(b) Requirements for Acquisition Loans. The Bank shall not
be obligated to make any Acquisition Loan unless the Borrower has delivered to
the Bank the following documents in form and substance satisfactory to the Bank:
(1) an Acquisition Loan Note, duly executed
by the Borrower evidencing such Acquisition Loan;
(2) such security agreements, guaranty
agreements, financing statements and other documents as may be necessary or
desirable in order to insure that the Bank has a first priority perfected
security interest in the assets to be acquired by the Borrower, including,
without limitation, the assets owned by any corporation whose stock is being
acquired by the Borrower in connection with such Acquisition Loan; and
(3) the Usage Fee payable to the Bank in
connection with such Acquisition Loan, as provided in Section
2.3(f).
(c) Additional Deliveries. The Borrower shall deliver to
the Bank within thirty (30) days after the funding of any Acquisition Loan the
following documents:
(1) copies of any purchase agreement or other
agreement of sale entered into by the Borrower in connection with the
acquisition to be financed with the proceeds of such Acquisition Loan, together
with copies of all other documents executed or delivered in connection
therewith; and
(2) evidence satisfactory to the Bank of the
transfer of the assets or stock acquired by the Borrower, free
and clear of all liens and encumbrances.
(d) Acquisition Loan Notes. The obligations of the
Borrower to repay the outstanding principal of each
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Acquisition Loan and to pay accrued interest thereon shall be evidenced by a
promissory note, in the form attached hereto as Exhibit "A", to be executed and
delivered to the Bank on or prior to the date of funding such Acquisition Loan
(each, an "Acquisition Loan Note" and, collectively, the "Acquisition Loan
Notes").
(e) Commitment Fee. In addition to the interest and other
fees payable to the Bank in respect of the Acquisition Facility, the Borrower
agrees to pay to the Bank a commitment fee in connection with the Acquisition
Facility of $25,000, on or prior to the Closing Date.
(f) Usage Fee. On or prior to the disbursement of any
Acquisition Loan, in addition to the interest and other fees payable in respect
of the Acquisition Facility, the Borrower shall pay to the Bank a usage fee
("Usage Fee"), in an amount equal to .25% of the amount of such Acquisition
Loan.
2.4 Interest. Interest shall accrue on the outstanding
principal amounts of the Line of Credit Loans and the Acquisition Loans in
accordance with the following provisions:
(a) Line of Credit Applicable Rates. At the Borrower's
election, the Line of Credit Loans shall bear interest at any one of the
following rates (the "Line of Credit Applicable Rates"):
(A) the Prime Rate, such rate to change simultaneously
and automatically upon the Bank's designation of any change in the Prime
Rate; or
(B) the Line of Credit Adjusted LIBO Rate.
(b) Acquisition Loan Applicable Rates. At the Borrower's
election, each Acquisition Loan shall bear interest at any one of the following
rates (the "Acquisition Loan Applicable Rates"):
(A) the Prime Rate, such rate to change simultaneously
and automatically upon the Bank's designation of any change in the Prime Rate;
(B) the Acquisition Loan Adjusted LIBO Rate;
(C) a fixed rate of interest based upon either a three
(3), four (4) or a five (5) year amortization as quoted by the Bank to the
Borrower on the date of funding any Acquisition Loan.
(c) Determination of Interest Periods and Applicable
Rates. Interest Periods and the Applicable Rates shall be chosen with respect to
Loans as follows:
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(i) The Borrower may ask the Bank for indications of the
LIBO Rate for specified Line of Credit Loans and/or Acquisition
Loans and Interest Periods, as applicable, at any time. If the
Borrower anticipates that it may elect the Adjusted LIBO Rate to be
applicable to a Loan, the Borrower shall request an indication of
the LIBO Rate prior to 11:00 a.m. (Philadelphia time) at least
three Eurodollar Business Days prior to the commencement of the
applicable Interest Period, and if the Borrower desires to elect
the Adjusted LIBO Rate for such Interest Period, the Borrower must
accept such indication of the LIBO Rate by notice to the Bank in
writing or by telephone (confirmed promptly in writing) prior to
11:00 a.m. (Philadelphia time) on the date of acceptance, which
shall be at least two Eurodollar Business Days prior to the
commencement of the Interest Period selected by the Borrower. If
the Borrower does not provide the applicable notice of election of
the Adjusted LIBO Rate, then the Borrower shall be deemed to have
requested that the Prime Rate apply to any Loan which is subject to
any expiring Interest Period and to any new Loan, as the case may
be, until the Borrower shall have given appropriate notice of a
requested change in or determination of the rate of interest in
accordance with this Section 2.4. No acceptance of an indication of
rate hereunder shall bind the Bank unless timely made.
(ii) The Borrower shall not request and the Bank shall not
be required to provide, an indication of the LIBO Rate with respect
to a specified Interest Period for any Loan of less than $500,000.
(iii) All determinations and quotations of rate by the
Bank hereunder shall be conclusive and binding upon the Borrower,
in the absence of manifest error.
(iv) If no Interest Period is elected with respect to any
Adjusted LIBO Rate Loan, the request for such Loan shall be deemed
to be a request for a ninety (90) day Interest Period in respect of
any such Adjusted LIBO Rate Loan.
(v) Upon the occurrence of any Event of Default and a
resulting acceleration of Obligations pursuant to Section 9.1(b)
hereof, all Interest Periods shall automatically terminate and all
Adjusted LIBO Rate Loans shall be automatically converted to Loans
bearing interest at the Default Rate and shall be subject to the
payment of all amounts then due with respect to such termination
under Section 2.6 hereof.
(vi) Notwithstanding anything to the contrary contained
herein, the Bank shall not be required to administer concurrently
more than a combination of four
- 15 -
(4) Adjusted LIBO Rate Loans with respect to the Line of Credit
Loans.
(c) Payment of Interest. Notwithstanding anything to the
contrary in this Agreement, the Borrower shall pay interest accruing at the
Adjusted LIBO Rate monthly in arrears on the first Business Day of each
consecutive calendar month during an Interest Period commencing on the first
such date next succeeding the date on which such Interest Period commenced, and
on the expiration date of such Interest Period. The Borrower shall pay interest
on all Loans other than Adjusted LIBO Rate Loans monthly in arrears on the first
day of each consecutive calendar month commencing with the month immediately
following the date on which such Loan is made. All accrued but unpaid interest
under each of the Notes shall be payable, without demand, on the maturity
thereof (whether by its stated terms, or upon prepayment, acceleration or
otherwise).
2.5 Conversion and Continuation of Loans. The Borrower may convert
any Line of Credit Loan or Acquisition Loan, as the case may be, to an Adjusted
LIBO Rate Loan or continue any Adjusted LIBO Rate Loan subject to an expiring
Interest Period for an additional Interest Period upon the same advance notice
required pursuant to Section 2.4 hereof, subject, however, to the all of the
terms of this Agreement, including, without limitation, the following:
(a) Rate Availability. An Adjusted LIBO Rate shall be
available, notwithstanding Section 2.6(a) hereof.
(b) Limitation on Interest Period. No Interest Period may be
elected with respect to any Loan (i) which would expire after the Termination
Date in the case of an Adjusted LIBO Rate Loan, or (ii) for a period other than
those referred to in the definition of "Interest Period" set forth in Article I
hereof.
(c) Payment of Interest; No Default. All interest accrued
under an expiring Interest Period shall be paid by the Borrower on the last day
of such Interest Period, and no continuation or conversion of a Loan subject to
an expiring Interest Period shall be made for so long as an Event of Default
shall be continuing.
(d) Timing. No continuation or conversion of an Adjusted LIBO
Rate Loan may be effected on other than the last day of the Interest Period then
in effect with respect to such Adjusted LIBO Rate Loan, and a Loan which is not
an Adjusted LIBO Rate Loan may be converted into an Adjusted LIBO Rate Loan only
on a Eurodollar Business Day.
(e) Failure to Give Notice. In the event that the Borrower
shall not give notice to continue any Adjusted LIBO Rate Loan into a subsequent
Interest Period, the Borrower shall be deemed to have requested that such
Adjusted LIBO Rate Loan
- 16 -
(unless repaid) be converted to one accruing interest at the Prime Rate, at the
expiration of the then current Interest Period.
2.6 Special Provisions Applicable to Adjusted LIBO Rate
Loans. The following special provisions shall apply to Adjusted
LIBO Rate Loans:
(a) Mandatory Suspension and Conversion of Adjusted LIBO Rate
Loans. The Bank's obligations to make, maintain or convert into Adjusted LIBO
Rate Loans of any type shall be suspended, all outstanding Adjusted LIBO Rate
Loans shall be converted on the last day of their applicable Interest Periods
(or, if earlier, in the case of clause (ii) below, on the last day the Bank may
lawfully continue to maintain Adjusted LIBO Rate Loans or, in the case of clause
(iii) below, the day determined by such Bank to be the last Business Day before
the effective date of the applicable restriction) into, and all pending requests
for the making of or conversion into Adjusted LIBO Rate Loans shall be deemed
requests for, Loans at the Prime Rate if:
(i) on or prior to the determination of the interest rate
for an Adjusted LIBO Rate Loan for any Interest Period, the Bank
determines that for any reason appropriate quotations are not
available to it (including, quotations in the interbank market
selected by it for deposits with it) for purposes of determining
the Adjusted LIBO Rate or that such rate would not accurately
reflect the cost to the Bank of making, maintaining or converting
into an Adjusted LIBO Rate Loan of such type for such Interest
Period;
(ii) at any time the Bank determines that any Regulatory
Change makes it unlawful or impracticable for such Bank to make or
maintain any Adjusted LIBO Rate Loan, or to comply with its
obligations hereunder in respect thereof; or
(iii) the Bank determines that by reason of any Regulatory
Change it is restricted, directly or indirectly, in the amount that
it may hold of (x) a category of liabilities that include deposits
by reference to which, or on the basis of which, the interest rate
applicable to Adjusted LIBO Rate Loans is directly or indirectly
determined, or (y) the category of assets that includes Adjusted
LIBO Rate Loans.
The Bank shall promptly give notice to the Borrower of any
circumstance that would make the provisions of this Section 2.6(a) applicable,
but the failure to give any such notice shall not affect such Bank's rights
hereunder.
(b) Regulatory Changes. If any Regulatory Change:
- 17 -
(i) shall subject the Bank to any Tax determined by the
Bank to be applicable to any Adjusted LIBO Rate Loan, to the Bank's
obligation to make or maintain any such Adjusted LIBO Rate Loan, to
this Agreement or any of the Notes, or shall, in the determination
of the Bank, change the basis of taxation of payments to the Bank
of the principal of or interest on any Adjusted LIBO Rate Loan or
of any other amounts payable under this Agreement in respect of any
Adjusted LIBO Rate Loan or its obligation to make or maintain any
Adjusted LIBO Rate Loan; or
(ii) shall impose, increase, modify or deem applicable any
Tax, reserve, insurance charge, special deposit, assessment or
other requirement or condition (other than reserves and assessments
taken into account in the calculation of the Adjusted LIBO Rate)
against assets of, deposits with or to the account of, credit
extended by, or the obligations of the Bank under this Agreement,
or shall impose on the Bank or on any relevant interbank market for
U.S. Dollars, any condition;
and the result of the foregoing is to (x) reduce the amount of any
sum received or receivable by the Bank with respect to any Adjusted
LIBO Rate Loan or the return to be earned by the Bank on any such
Loan, (y) impose a cost on the Bank that is attributable to the
making or maintaining of, or its commitment to make, any such
Adjusted LIBO Rate Loan, or (z) require the Bank to make any
payment on, or calculated by reference to, the gross amount of any
amount received by it hereunder or under any such Loan, then,
within 15 days after request by the Bank, the Borrower shall pay to
the Bank such additional amount or amounts as the Bank determines
will compensate the Bank for such reduction, increased cost or
payment. The Bank will promptly notify the Borrower of any
Regulatory Change of which it has knowledge that will entitle the
Bank to compensation pursuant to this Section 2.6(b), but the
failure to give such notice shall not affect the Bank's right to
such compensation. The Bank agrees to take any reasonable action
which the Bank determines, in its discretion, may be available
without cost or expense to the Bank in order to eliminate or
mitigate the effect of such Regulatory Change.
(c) Funding Losses. The Borrower shall pay to the Bank, upon
request, such amount or amounts as the Bank determines are necessary to
compensate it for any loss, cost or expense incurred by it as a result of
(i) any payment, prepayment or conversion of an Adjusted LIBO Rate Loan on a
date other than the last day of an Interest Period for such Adjusted LIBO Rate
Loan or (ii) an Adjusted LIBO Rate Loan for any reason not being made or
converted, or any payment of principal thereof or interest thereon not being
made, on the date therefor determined in accordance with the applicable
provisions of this Agreement. At
- 18 -
the election of the Bank, and without duplication, such compensation on account
of losses may include an amount equal to the excess of (x) the interest that
would have been received from the Borrowers under this Agreement on any amounts
to be redeployed during an Interest Period or its remaining portion over (y) the
interest component of the return that the Bank determines it could have obtained
had it placed such amount on deposit in the interbank market selected by it for
a period equal to such Interest Period or its remaining portion.
2.7 Requirements of Law. In the event that after the date hereof,
any change in any law, regulation or treaty or in the interpretation or
application thereof or compliance by the Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority, agency or instrumentality:
(a) subjects or shall subject the Bank to any tax of any kind
whatsoever with respect to this Agreement, the loans made hereunder or the
issuance or maintenance of the Letters of Credit hereunder, or changes the basis
of taxation of payments to the Bank of principal, commitment fees, interest or
any other amount payable hereunder (except for changes in the rate of tax on the
overall net income of the Bank);
(b) imposes, modifies or holds or shall impose, modify or hold
applicable any reserve, special deposit, compulsory loan or similar requirement
against assets held by, or deposits or other liabilities in or for the account
of, advances or loans by, or other credit extended by, or any other acquisition
of funds by, any office of the Bank, which reserve, special deposit, compulsory
loan or similar requirement is not otherwise included in determination of the
interest rate hereunder;
(c) imposes or shall impose on the Bank any other condition;
and the result of any of the foregoing is to, directly or indirectly, increase
the cost to the Bank of making, renewing or maintaining advances or extensions
of credit or issuing or maintaining Letters of Credit or to reduce any amount
receivable thereunder then, in any such case, the Borrower shall promptly pay
the Bank, upon its demand, any additional amounts necessary to compensate the
Bank for such additional cost or reduced amount receivable. If the Bank becomes
entitled to claim any additional amounts pursuant to this subsection, it shall
promptly notify the Borrower of the event by reason of which it has become so
entitled. The good faith determination as to any additional amounts payable
pursuant to the foregoing sentence by the Bank shall be conclusive in the
absence of manifest error.
2.8 Determinations. In making the determinations contemplated by
Section 2.7 and 2.8 hereof the Bank may make such estimates, assumptions,
allocations and the like that it, in good
- 19 -
faith, determines to be appropriate. All such determinations shall be final,
binding and conclusive upon the Borrower, except to the extent of any manifest
error in computation or transmission, however, the Bank will permit the Borrower
to rebut such determinations if it does so in writing, with appropriate evidence
thereof, within ten (10) Business Days from the date of notification thereof by
the Bank. The Bank shall furnish to the Borrower a certificate outlining in
reasonable detail the computation of any amounts claimed by it under Section 2.8
or 2.9 and the assumptions underlying such computations, provided that the
failure to deliver a certificate shall not affect the Bank's right to such
amounts, but shall extend the time for the Borrower to respond thereto as
required above.
2.9 Payments and Computations. All amounts payable by the Borrower
to the Bank under this Agreement or the Notes shall be paid directly to the Bank
in immediately available funds at the address of the Bank set forth in Section
10.2 hereof or at such other address of which the Bank shall give notice to the
Borrower pursuant to Section 10.2 hereof. The Bank is authorized to charge any
account of the Borrower at the Bank for any payment due by the Borrower under
this Agreement or any of the Notes. All computations of interest hereunder shall
be made by the Bank on the basis of a year of 360 days for the actual number of
days elapsed. All payments under each of the Notes shall be applied first to the
payment of interest due and payable thereunder and then to the reduction of the
outstanding principal balance thereof.
2.10 Borrowing. The Borrower shall notify the Bank of each proposed
borrowing under the Line of Credit not later than 2:30 p.m., Philadelphia,
Pennsylvania time on the day of the proposed borrowing, except as provided in
Section 2.4 with respect to Adjusted LIBO Rate Loans.
2.11 Prepayment and Repayment. The Borrower shall pay a prepayment
premium with respect to Loans bearing interest at a fixed rate equal to the
difference between (x) the aggregate amount of interest which would otherwise
have been payable on such prepaid amount from the date of prepayment to the date
when such prepaid amount was due (but, with respect to the Existing Real Estate
Loan, in no event beyond the date on which interest on the Existing Real Estate
Loan converts from a fixed rate to a floating rate as prescribed in Section
2.2(b) above, unless the interest rate is thereafter fixed in accordance with
such Section), unless the parties have agreed to a new fixed rate of interest to
be applicable after such date and (y) the aggregate amount of interest which the
Bank would earn if such prepaid amount were invested at the Treasury Rate
Security Yield from the date of prepayment to the date when such prepaid amount
was due (but, with respect to the Existing Real Estate Loan, in no event beyond
the date on which interest on the Existing Real Estate Loan converts from a
fixed rate to a floating rate as prescribed in Section 2.2(b) above, unless the
interest rate is thereafter fixed in accordance with such Section), unless the
parties have
- 20 -
agreed to a new fixed rate of interest to be applicable after such date, which
difference in interest earnings shall be discounted to present value at the
Treasury Rate Security Yield. The term, "Treasury Rate Security Yield", means
the bond equivalent yield to maturity available on the secondary market on a
Treasury Security with a maturity as close as possible to the scheduled maturity
of the prepaid amount and a coupon as close as possible to the bond equivalent
yield. The Bank's determination of the amount of any prepayment premium will be
conclusive and binding absent manifest error, however, the Bank will permit the
Borrower to rebut such amounts if it does so in writing, with appropriate
evidence thereof, within ten (10) Business Days from the date of notification by
the Bank. All prepayments of outstanding principal shall be applied to
installments of principal due thereunder in the inverse order of maturity.
ARTICLE III
SECURITY
3.1 Security Documents. As security for the prompt payment,
performance, satisfaction and discharge when due of all the Obligations, the
Borrower shall execute and deliver or shall cause to be executed and delivered
to the Bank, concurrently with the execution of this Agreement, the
Reaffirmations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
In order to induce the Bank to execute and deliver this Agreement
and to make the Loans available to the Borrower, the Borrower represents and
warrants to the Bank that, as of the date hereof:
4.1 Good Standing of the Borrower; Authorization. The Borrower is
duly incorporated, organized and existing and in good standing in the State of
Delaware and is duly qualified as a foreign corporation and authorized to do
business in all other jurisdictions wherein the nature of its business or
property makes such qualification necessary, and has the corporate power to own
its properties and to carry on its business as now conducted. The execution,
delivery and performance of this Agreement, and the Loan Documents have been
duly authorized by all necessary corporate proceedings on the part of the
Borrower.
4.2 Compliance with Laws and Other Agreements. The Borrower is in
compliance with all laws, rules, regulations, judgments, decrees, orders,
agreements and requirements which affect in any material way the Borrower, its
assets or the operation of its business and has not received, and has no
knowledge of, any order or notice of any governmental investigation or of any
violation or claim of violation of any law, regulation, judgment, decree, order,
agreement, or other governmental requirement.
- 21 -
4.3 No Conflict; Governmental Approvals. The execution, delivery,
and performance of this Agreement and each of the Loan Documents will not
(i) conflict with, violate, constitute a default under, or result in a breach of
any provision of any applicable law, rule, regulation, judgment, decree, order,
instrument or other agreement, or (ii) conflict with or result in a breach of
any provision of the certificate of incorporation or by-laws of the Borrower. No
authorization, permit, consent or approval of or other action by, and no filing,
registration or declaration with, any governmental authority or regulatory body
is required to be obtained or made by the Borrower for the due execution,
delivery and performance of this Agreement or any of the Loan Documents, except
such as have been duly obtained or made prior to the Closing Date and are in
full force and effect as of the Closing Date (copies of which have been
delivered to the Bank on or before the Closing Date).
4.4 Financial and Other Information Regarding Borrower.
(a) The Borrower has delivered to the Bank true, correct and
complete copies of the balance sheets of the Borrower as of December 31, 1995,
and related statements of income for the period then ended, together with notes
thereto and the unqualified opinion thereon, dated February 16, 1996 of BDO
▇▇▇▇▇▇▇, LLP. Those financial statements ("Financial Statements") present fairly
the financial position of the Borrower and the results of the operations of the
Borrower as of the dates and for the periods indicated, in conformity with GAAP.
(b) Except as set forth on Schedule 4.4(b) hereto, the Borrower
has no Indebtedness other than as shown in the most recent Financial Statements,
and any subsequent interim financial statements which have been delivered to the
Bank.
(c) Except as set forth on Schedule 4.4(c) hereto, the Borrower
has no "investment" (as such term is defined under GAAP), whether by stock
purchase, capital contribution, loan, advance, purchase of property or
otherwise, in any Person, other than as shown in the most recent Financial
Statements, and any subsequent interim financial statements which have been
delivered to the Bank.
4.5 Taxes. The Borrower is not delinquent in payment of any income,
property or other tax, except for any delinquency in the payment of a tax which
is contested in good faith by the Borrower and for which appropriate reserves
have been established in accordance with GAAP.
4.6 Encumbrances and Guaranties.
(a) All properties and assets of the Borrower are owned by the
Borrower free and clear of all Encumbrances except (i) those for taxes or other
government charges either not yet delinquent or the nonpayment of which is
permitted by Section 4.5 of this Agreement; (ii) those not arising in connection
with
- 22 -
Indebtedness that do not materially impair the use or value of the properties or
assets of the Borrower in the conduct of its businesses; (iii) Encumbrances
whose release and termination is evidenced by the Borrower's delivery to the
Bank of appropriate documents on the Closing Date; (iv) Encumbrances otherwise
permitted under the Loan Documents, the Security Agreement and the Mortgage; and
(v) Encumbrances disclosed in the most recent Financial Statements.
(b) The Borrower is not obligated under any Guaranty.
4.7 Material Adverse Changes. Since December 31, 1995, there has
not been any material adverse change in the business, operations, properties or
financial position of the Borrower. The Borrower does not know of any fact
(other than matters of a general economic or political nature) which materially
adversely affects, or, so far as the Borrower can now reasonably foresee, will
materially adversely affect, the business, operations, properties or financial
position of the Borrower or the performance by the Borrower of its obligations
under this Agreement and the other Loan Documents.
4.8 Margin Securities. The assets of the Borrower do not include
any "margin securities" within the meaning of Regulations G or U of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207, 221), and the Borrower
does not have any present intention of acquiring any margin security.
4.9 ERISA. The provisions of each employee benefit plan as defined
in Section 3(3) of ERISA ("Plan") maintained by the Borrower complies with all
applicable requirements of ERISA and of the Code, and with all applicable
rulings and regulations issued under the provisions of ERISA and the Code
setting forth those requirements. No reportable event, as defined in Section
4043 of ERISA, has occurred with respect to any Plan; no Plan to which Section
4021 of ERISA applies has been terminated; no Plan has incurred any liability to
PBGC as provided in Section 4062, 4063 and 4064 of ERISA; no Plan has been
involved in any prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code; and there are no unfunded liabilities with
respect to any Plan which are not disclosed in the Financial Statements.
4.10 Pending Litigation. There are no actions, suits, proceedings
or investigations pending, or, to the knowledge of the Borrower, threatened
against or affecting the Borrower, before any court, arbitrator or
administrative or governmental body which, in the aggregate, might adversely
affect any action taken or to be taken by the Borrower under this Agreement and
the other Loan Documents or which, in the aggregate, might materially adversely
affect the business, operations, properties or financial position of the
Borrower, or the ability of the Borrower to perform its obligations under this
Agreement and the other Loan Documents.
- 23 -
4.11 Valid, Binding and Enforceable. This Agreement and the Loan
Documents to which the Borrower is a party have been duly and validly executed
and delivered by the Borrower and constitute the valid and legally binding
obligations of such parties enforceable in accordance with their respective
terms, except as enforcement of this Agreement and the other Loan Documents may
be limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights and except as
enforcement is subject to general equitable principles.
4.12 Priority of Security Interests. The Security Agreement,
together with the financing statements which have been filed in connection
therewith have created valid first perfected security interests in the personal
property of the Borrower described therein as collateral for all the Obligations
subject to no prior Encumbrances.
4.13 Environmental Matters.
(a) The Borrower has performed all of its obligations under,
has obtained all necessary approvals, permits, authorizations and other consents
required by, and is not in material violation of, any Environmental Laws.
(b) The Borrower has not received any notice, citation,
summons, directive, order or other communication, written or oral, from, and the
Borrower has no knowledge of the filing or giving of any such notice, citation,
summons, directive, order or other communication by, any governmental or
quasi-governmental authority or agency or any other Person concerning the
presence, generation, treatment, storage, transportation, transfer, disposal,
release or other handling of any Hazardous Materials within, on, from, related
to, or affecting any real property owned or occupied by the Borrower.
(c) To the best of the Borrower's knowledge, after reasonable
inquiry, no real property owned or occupied by the Borrower has ever been used,
either by the Borrower or any of its predecessors in interest, to generate,
treat, store, transport, transfer, dispose of, release or otherwise handle any
Hazardous Material in violation of any applicable Environmental Laws.
(d) To the best of the Borrower's knowledge, after due
inspection, there are no Hazardous Materials within, on or under any real
property owned or occupied by the Borrower in violation of any applicable
Environmental Laws.
4.14 No Untrue Statements. Neither this Agreement, the Loan
Documents nor any other document, certificate or statement furnished or to be
furnished by the Borrower or by any other party to the Bank in connection
herewith contains, or at the time of delivery will contain, any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order
- 24 -
to make the statements contained herein and therein not misleading.
4.15 Patents and Trademarks. Since March 30, 1989, the Borrower has
not held any patents or trademarks which have been registered with the United
States Patent and Trademark Office.
ARTICLE V
CONDITIONS PRECEDENT TO THE BANK'S OBLIGATIONS
The Bank's obligations hereunder are conditioned upon the
satisfaction by the Borrower of the following conditions precedent:
5.1 Documents to be Delivered by the Borrower at Closing. The
Borrower shall deliver or cause to be delivered to the Bank at the Closing the
following:
(a) This Agreement duly executed by the Borrower;
(b) The Line of Credit Note and the Allonge to Existing Real
Estate Loan Note duly executed by the Borrower;
(c) The Reaffirmations duly executed by the parties thereto;
(d) Evidence of the Borrower's having complied with those
covenants regarding insurance as are contained in this Agreement and the other
Loan Documents;
(e) A certificate of the Secretary or an Assistant Secretary
of the Borrower dated the Closing Date including (i) resolutions duly adopted by
the Borrower authorizing the transactions under the Loan Documents; (ii) a copy
of the by-laws of the Borrower; (iii) evidence of the incumbency and signature
of the officers executing on the Borrower's behalf any of the Loan Documents and
any other document to be delivered pursuant to any such documents, together with
evidence of the incumbency of such officers; (iv) a copy, certified by the
Delaware Secretary of State, as of the most recent date practicable, of the
Borrower's Articles of Incorporation, together with the certification of the
Secretary or Assistant Secretary of the Borrower as of the Closing Date that
such Articles of Incorporation have not been amended since the date of the
aforesaid certification by the Secretary of State; and (v) certificates of
authority or good standing for the Borrower from its jurisdiction of
incorporation and any other jurisdiction where the Borrower is qualified to do
business;
(f) A copy of each and every authorization, permit, consent,
and approval of and other action by, and notice to and filing with, every
governmental authority and regulatory body which is required to be obtained or
made by the Borrower for the
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due execution, delivery and performance of this Agreement and the
other Loan Documents; and
(g) The opinion of Stradley, Ronon, ▇▇▇▇▇▇▇ & Young dated as
of Closing Date, in form and substance reasonably satisfactory to the Bank and
its counsel.
5.2 Conditions Precedent to Making Line of Credit Loans
or Acquisition Loans. The Bank shall not be obligated to make any Line of Credit
Loans or any Acquisition Loan hereunder unless:
(a) As of the date of the proposed advance, no Event of
Default has occurred and is continuing and no event has occurred and is
continuing which, with the giving of notice or lapse of time, or both, would
constitute an Event of Default;
(b) The representations and warranties contained in Article IV
are true and correct on the date of the proposed advance, except that the
representations and warranties in Section 4.4 shall refer to the financial
statements most recently supplied to the Bank pursuant to Section 6.2 of this
Agreement; and
(c) No material adverse change has occurred in the business,
property, operations or condition (financial or otherwise) of the Borrower since
the date hereof; and
(d) The Borrower has delivered to the Bank, upon the Bank's
request, a certificate executed by the chief executive officer of the Borrower
confirming the statements made in paragraphs (a), (b), and (c) above.
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower hereby covenants and agrees that from the date hereof
and until satisfaction in full of the Obligations, unless the Bank shall
otherwise consent in writing, the Borrower shall do the following:
6.1 Use of Proceeds. Use the proceeds of the borrowings hereunder
only for the purposes specified in Sections 2.1, 2.2 and 2.3 of this Agreement.
6.2 Financial Statements. Furnish to the Bank the following
financial statements which shall be prepared in accordance with GAAP and signed
by the chief financial officer of the Borrower:
(a) within one hundred twenty (120) days after the end of each
fiscal year, the financial statements of the Borrower, including a balance
sheet, statement of income and
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statement of cash flows, as reported on the Form 10K of the Borrower as filed
with the United States Securities and Exchange Commission, and such other
financial statements of the Borrower in such detail as the Bank may reasonably
request. Such financial statements shall present fairly the financial condition
of the Borrower as of the close of such year and the results of its operations
and its cash flows during such year, in accordance with GAAP, and shall be
audited and accompanied by the opinion, satisfactory in form and substance to
the Bank, of BDO ▇▇▇▇▇▇▇, LLP or another independent public accountant
acceptable to the Bank;
(b) within sixty (60) days after the end of each fiscal
quarter, the financial statements of the Borrower, including a balance sheet,
statement of income and statement of cash flows, as reported on the Form 10Q of
the Borrower as filed with the United States Securities and Exchange Commission,
and such other financial statements of the Borrower in such detail as the Bank
may reasonably request. Such financial statements shall present fairly the
financial condition of the Borrower as of the close of such quarter and the
results of its operations and its cash flows during such quarter, in accordance
with GAAP, certified by the chief financial officer of the Borrower;
(c) within one hundred eighty (180) days after the end of each
fiscal year of the Borrower, a copy of the Management Letter of the Borrower
prepared by BDO ▇▇▇▇▇▇▇, LLP or another independent public accountant acceptable
to the Bank; and
(d) such other information in the Borrower's possession as the
Bank may reasonably request.
6.3 Ordinary Course of Business; Records. Conduct its business only
in the ordinary course and keep accurate and complete books and records of its
assets, liabilities and operations consistent with sound business practices and
in accordance with GAAP.
6.4 Information for the Bank. Make available during normal business
hours for inspection by the Bank or its designated representatives any of its
books and records when reasonably requested by the Bank to do so, and furnish
the Bank any information reasonably requested regarding its operations, business
affairs and financial condition within a reasonable time after the Bank gives
notice of its request therefor. In particular, and without limiting the
foregoing, the Borrower shall permit, during normal business hours,
representatives of the Bank's Audit Department to make such periodic inspections
of the Borrower's books, records and assets as such representatives deem
necessary and proper.
6.5 Insurance. Carry at all times in financially sound and
reputable insurers: (a) all workers' compensation or similar insurance as may be
required under the laws of any jurisdiction; (b) public liability insurance
against claims for personal
- 27 -
injury, death or property damage suffered upon, in or about any premises
occupied by it or occurring as a result of the ownership, maintenance or
operation by it of any automobile, truck or other vehicle or as a result of the
use of products manufactured, constructed or sold by it, or services rendered by
it; (c) business interruption insurance covering risk of loss as a result of the
cessation for all or any part of one year of any substantial part of the
business conducted by it; (d) hazard insurance against such other hazards as are
usually insured against by business entities of established reputation engaged
in like businesses and similarly situated, including, without limitation, fire
(flood, if applicable) and extended coverage; and (e) such other insurance as
the Bank may from time to time reasonably require, and pay all premiums on the
policies for all such insurance when and as they become due and take all other
actions necessary to maintain such policies in full force and effect at all
times. The insurance specified in Subsections (b), (c) and (d) shall be
maintained in such amounts (and with co-insurance and deductibles) as such
insurance is usually carried by business entities of established reputation
engaged in the same or similar business and similarly situated, provided that
the amount of such coverage shall not be in an amount less than 80% of the
insurable value of the Borrower's assets or 100% of the amount of the Loans. The
Borrower shall from time to time, upon request by the Bank, promptly furnish or
cause to be furnished to the Bank evidence, in form and substance satisfactory
to the Bank, of the maintenance of all insurance required to be maintained
hereby, including, without limitation, such originals or copies as the Bank may
request of policies, certificates of insurance, riders and endorsements relating
to such insurance and proof of premium payments. The Borrower shall cause each
hazard insurance policy to provide, and the insurer issuing each such policy to
certify to the Bank, that (a) if such insurance be proposed to be cancelled or
materially changed for any reason whatsoever, such insurer will promptly notify
the Bank and such cancellation or change shall not be effective for 30 days
after receipt by the Bank of such notice, unless the effect of such change is to
extend or increase coverage under the policy; (b) the Bank shall be named as
lender loss payee with respect to personal property and mortgagee with respect
to real property; and (c) the Bank will have the right, at its election, to
remedy any default in the payment of premiums within 30 days of notice from the
insurer of such default. The foregoing covenants regarding insurance are in
addition to, and not intended to supersede, those covenants regarding insurance
set forth in the Security Agreement. In the event and to the extent of any
conflict between the provisions of this Agreement and the provisions of the
Security Agreement regarding the insuring of Collateral, the provisions of the
Security Agreement with respect thereto shall govern.
6.6 Maintenance. Maintain its equipment, real property and other
properties in good condition and repair (normal wear and tear excepted) and pay
and discharge the cost of repairs thereto or maintenance thereof.
- 28 -
6.7 Taxes. Pay all taxes, assessments, charges and levies imposed
upon it or on any of its property, or which it is required to withhold and pay
over, and provide evidence of payment thereto to the Bank if the Bank so
requests, except where contested in good faith by lawful and appropriate
proceedings and where adequate reserves therefor have been set aside on its
books; provided, however, that the Borrower shall pay all such taxes,
assessments, charges and levies forthwith whenever foreclosure on any lien which
attaches or security therefor appears imminent.
6.8 Leases. Pay all rent or other sums required by every lease to
which the Borrower is a party as the same becomes due and payable, perform all
its obligations as tenant or lessee thereunder except where contested in good
faith by lawful and appropriate proceedings and where adequate reserves therefor
have been set aside; and keep all such leases at all times in full force and
effect during the terms thereof.
6.9 Corporate Existence; Certain Rights; Laws. Do all things
necessary to preserve and keep in full force and effect in each jurisdiction in
which it conducts business the business existence, licenses, permits, rights,
patents, trademarks, trade names and franchises of the Borrower and comply with
all present and future laws, ordinances, rules, regulations judgments, orders
and decrees which affect in any material way the Borrower, its assets or the
operation of its business.
6.10 Notice of Litigation or Other Proceedings. Give immediate
notice to the Bank of (i) the existence of any dispute, (ii) the institution of
any litigation, administrative proceeding or governmental investigation
involving the Borrower or (iii) the entry of any judgment, decree or order
against or involving the Borrower, any of which might materially and adversely
affect the operation, financial condition, property or business of the Borrower
or affect the enforceability of this Agreement or any of the other Loan
Documents.
6.11 Indebtedness. Pay or cause to be paid when due (or within
applicable grace periods) all Indebtedness of the Borrower.
6.12 Notice of Events of Default. Give immediate notice to the Bank
if the Borrower becomes aware of the occurrence of any Event of Default, or of
any fact, condition or event which with the giving of notice or lapse of time,
or both, would be an Event of Default, or of the failure of the Borrower to
observe or perform any of the conditions or covenants to be observed or
performed by it under this Agreement or any of the other loan Documents.
6.13 ERISA. Maintain each Plan in compliance with all applicable
requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and of the Code. As promptly as
practicable (but in any
- 29 -
event not later than ten days) after the Borrower receives from the PBGC a
notice of intent to terminate any Plan or to appoint a trustee to administer any
Plan, after the Borrower has notified the PBGC that any reportable event, as
defined in Section 4043 of ERISA, with respect to any Plan has occurred, or
after the Borrower has provided a notice of intent to terminate to each affected
party, as defined for purposes of Section 4041(a)(2) of ERISA, with respect to
any Plan, a certificate of the chief executive officer of the Borrower shall be
furnished to the Bank setting forth the details with respect to the events
resulting in such reportable event, as the case may be, and the action which the
Borrower proposes to take with respect thereto, together with a copy of the
notice of intent to terminate or to appoint a trustee from the PBGC, of the
notice of such reportable event or of the Borrower's notice of intent to
terminate, as the case may be.
6.14 Deposit Accounts. Use the Bank as its primary depository
institution to the extent reasonably feasible unless otherwise agreed in writing
by the Bank; and notify the Bank, in writing and on a continuing basis, of all
deposit accounts and certificates of deposit (including the numbers thereof)
maintained with or purchased from other banks and other financial institutions.
Notwithstanding the foregoing, Borrower may use a bank other than the Bank for
its payroll account, and working capital accounts (which accounts may not, at
any time, contain an average daily balance calculated on a monthly basis, in
excess of $250,000 in the aggregate) to be used for incidental expenses of
Borrower, including, travel expenses of its employees, and provided no Events of
Default exist, Borrower may, at Borrower's discretion, in lieu of the Lock Box
Agreement, use a New Jersey bank, satisfactory to the Bank, as a depository
transfer institution, pursuant to an agreement in form and substance
satisfactory to the Bank, establishing a depository transfer arrangement between
the Bank, the depository bank and the Borrower.
6.15 Management. Furnish to Bank within five (5) days of any
election or appointment of officers or directors, written notice of any change
in the persons who from time to time become officers and directors of Borrower
and retain executive management personnel at all times satisfactory to the Bank,
it being understood that management, which consists of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as
President and CEO, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as Executive Vice President, of the
Borrower as of the date hereof, is satisfactory.
6.16 Financial Covenants. Observe the financial covenants set forth
on Schedule 6.16 attached hereto and made a part hereof, provided that such
financial covenants shall be revised if the Line of Credit Commitment is
extended beyond the Termination Date.
6.17 Compliance with Environmental Laws. Comply fully with all
Environmental Laws and not use any property which it
- 30 -
owns or occupies to generate, treat, store, transport, transfer, dispose of,
release or otherwise handle any Hazardous Material, except in compliance with
all Environmental Laws.
6.18 Further Actions. Cooperate and join with the Bank, at its own
expense, in taking all such further actions as the Bank, in its sole judgment,
shall deem necessary to effectuate the provisions of the Loan Documents and to
perfect or continue the perfected status of all Encumbrances granted to the Bank
pursuant to the Loan Documents, including, without limitation, the execution,
delivery and filing of financing statements, amendments thereto and continuation
statements, the delivery of chattel paper, documents or instruments to the Bank,
and the notation of Encumbrances in favor of the Bank on certificates of title.
6.19 Material Adverse Change. Notify the Bank in writing upon any
material adverse change in the business, operations, properties or condition
(financial or otherwise) of the Borrower.
6.20 Meeting Regarding Projections. On or prior to May 1, 1997, the
Borrower shall participate in a meeting with the Bank at which time the Borrower
shall discuss with the Bank the Borrower's financial statement projections for
the 1997 fiscal year, including without limitation, the Borrower's projected
balance sheet, statement of income and statement of cash flows for such fiscal
year.
6.21 Subordination of Debt. Deliver to the Bank a subordination
agreement in form and substance satisfactory to the Bank with respect to any
Indebtedness of the Borrower (except Indebtedness permitted pursuant to Section
7.2 hereof) incurred after the date hereof.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that from the Closing Date
until satisfaction in full of the Obligations, it will not do any one or more of
the following without first obtaining the written consent of the Bank:
7.1 Fundamental Corporate Changes.
(a) Change its name, enter into or effect any merger (except
any merger where the Borrower is the surviving corporation), consolidation,
share exchange involving in excess of 25% of the Borrower's capital stock, or
dissolve.
(b) Sell, transfer, lease or otherwise dispose of all or
(except in the ordinary course of business) any material part of its assets or
any significant product line or process;
- 31 -
(c) Have any Subsidiary, except Blonder International and
Vu-Tech Communications, Inc.
7.2 Indebtedness. Incur, create, assume or have any
Indebtedness except:
(a) The Loans; and
(b) Indebtedness constituting either Capital Lease Obligations
or Indebtedness under agreements for the installment purchase of equipment,
provided that such Indebtedness does not exceed 100% of the installment purchase
price of such equipment; and
(c) Obligations to The Business Bank pursuant to a promissory
note dated July 22, 1993 in the original principal amount of $950,000.
7.3 Encumbrances. Create or allow any Encumbrances to be on or
otherwise affect any of its property or assets except:
(a) Encumbrances in favor of the Bank;
(b) Encumbrances for taxes, assessments and other governmental
charges incurred in the ordinary course of business which are not yet due and
payable or which are being properly contested in good faith by lawful and
appropriate proceedings;
(c) Pledges or deposits made in the ordinary course of business
to secure payment of workmen's compensation or to participate in any fund in
connection with workmen's compensation, unemployment insurance or other social
security obligations;
(d) Good faith pledges or deposits made in the ordinary course
of business to secure performance of tenders, contracts (other than for the
repayment of Indebtedness) or leases or to secure statutory obligations or
surety, appeal, indemnity, performance or other similar bonds required in the
ordinary course of business;
(e) Liens of mechanics, materialmen, warehousemen, carriers or
other similar liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable or are being contested in good faith
by appropriate and lawful proceedings;
(f) Encumbrances securing Indebtedness permitted under Section
7.2 (b), provided that (i) no other covenants of this Agreement are thereby
violated and (ii) no equipment other than the equipment so acquired secures such
Indebtedness;
(g) Encumbrances, if any, otherwise expressly permitted by the
Security Agreement or the Mortgage; and
- 32 -
(h) Encumbrances disclosed in the Financial Statements, and any
subsequent interim financial statements which have been delivered to the Bank
prior to the Closing Date, or as set forth on Schedule 7.3 attached hereto.
7.4 Guaranties. Directly or indirectly make any Guaranty, other
than for the benefit of Blonder International.
7.5 Sales and Lease-Backs. Sell, transfer or otherwise dispose of
any property, real or personal, now owned or hereafter acquired, with the
intention of directly or indirectly taking back a lease on such property.
7.6 Loans, Investments. Except as set forth on Schedule 4.4(c),
purchase, invest in, or make any loan in the nature of an investment in the
stocks, bonds, notes or other securities or evidence of Indebtedness of any
person, or make any loan or advance to or for the benefit of any Person except
for (i) short-term obligations of the Treasury of the United States of America;
(ii) certificates of deposit issued by banks with shareholders' equity of at
least $100,000,000; (iii) repurchase agreements not exceeding 29 days in
duration issued by banks with shareholders' equity of at least $100,000,000;
(iv) notes and other instruments generally known as "commercial paper" which
arise out of current transactions, which have maturities at the time of issuance
thereof not exceeding nine months and which have, at the time of such purchase,
investment or other acquisition, the highest credit rating of Standard & Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.
7.7 Change in Business. Discontinue any substantial part, or change
the nature of, the business of the Borrower, or enter into any new business
unrelated to the present business conducted by the Borrower.
7.8 Sale or Discount of Receivables. Sell any notes receivable or
accounts receivable, with or without recourse.
7.9 Prepayment of Indebtedness. Make any voluntary prepayments of
Indebtedness other than the Loans.
7.10 ERISA.
(a) Terminate any Plan maintained by the Borrower to which
Section 4021 of ERISA applies;
(b) Allow the value of the benefits guaranteed under Title IV
of ERISA to exceed the value of assets allocable to such benefits;
(c) Incur a withdrawal liability within the meaning of Section
4201 of ERISA.
7.11 Compliance with Federal Reserve Board Regulations. (i) Use any
of the proceeds of the Loans, directly or indirectly,
- 33 -
for the purposes of purchasing or carrying any "margin security" within the
meaning of Regulations G or U of the Board of Governors of the Federal Reserve
System (12 ▇.▇.▇. ▇▇▇, ▇▇▇), (▇▇) use any of the proceeds of the Loans, directly
or indirectly, for the purpose of purchasing, carrying or trading in any
securities under such circumstances as to involve the Borrower in a violation of
Regulation X of such Board (12 C.F.R. 224), or (iii) take or permit to be taken
any other action which would result in the Loans or the consummation of any of
the other transactions contemplated hereby being violative of such regulations
or any other regulation of such Board.
7.12 Blonder International. From and after the Closing Date, and
until satisfaction in full of all Obligations of the Borrower to the Bank,
unless the Bank shall otherwise consent in writing, the Borrower shall not
transfer assets having a value in excess of $200,000 in the aggregate to Blonder
International, and shall not permit Blonder International to have assets having
an aggregate book value in excess of $200,000.
ARTICLE VIII
EVENTS OF DEFAULT
An event of default ("Event of Default") under this Agreement shall
be deemed to exist if any one or more of the following events occurs and is
continuing, whatever the reason therefor:
8.1 Borrower's Failure to Pay. The Borrower fails to pay any amount
of principal interest, fees or other sums as and when due under this Agreement
or any of the Loan Documents, or any other Obligations, whether upon stated
maturity, acceleration, or otherwise and has not remedied and fully cured such
failure to pay within ten (10) Business Days after the date such payment is so
due.
8.2 Breach of Covenants or Conditions. The Borrower or any of the
Other Loan Parties fails to perform or observe any term, covenant, agreement or
condition in this Agreement or any of the other Loan Documents or is in
violation of or non-compliance with any provision of this Agreement or any of
the Loan Documents, and has not remedied and fully cured such non-performance,
non-observance, violation of or non-compliance within thirty (30) days after the
Bank has given written notice thereof to the Borrower, or such Other Loan Party;
provided, however, that during such thirty (30) day period the Bank's
obligations to make further Loans to the Borrower shall be suspended.
8.3 Defaults in Other Agreements. The Borrower or any of the Other
Loan Parties fails to perform or observe any term, covenant, agreement or
condition contained in, or there shall occur any default under or as defined in,
any other agreement applicable to the Borrower or any of the Other Loan Parties
or by
- 34 -
which any of them is bound involving a material liability of the Borrower or any
of the Other Loan Parties which shall not be remedied within the period of time
(if any) within which such other agreement permits such default to be remedied,
unless such default is waived by the other party thereto or excused as a matter
of law.
8.4 Agreements Invalid. The validity, binding nature of, or
enforceability of any material term or provision of any of the Loan Documents is
disputed by, on behalf of, or in the right or name of the Borrower or any of the
Other Loan Parties or any material term or provision of any such Loan Document
is found or declared to be invalid, avoidable, or non-enforceable by any court
of competent jurisdiction.
8.5 False Warranties; Breach of Representations. Any warranty or
representation made by the Borrower or any of the Other Loan Parties in this
Agreement or any other Loan Document or in any certificate or other writing
delivered under or pursuant to this Agreement or any other Loan Document, or in
connection with any provision of this Agreement or related to the transactions
contemplated hereby shall prove to have been false or incorrect or breached in
any material respect on the date as of which made.
8.6 Judgments. A final judgment or judgments is entered, or an
order or orders of any judicial authority or governmental entity is issued
against the Borrower or any of the Other Loan Parties (such judgment(s) and
order(s) hereinafter collectively referred to as "Judgment") (i) for payment of
money, which Judgment, in the aggregate, exceeds Two Hundred Thousand Dollars
($250,000.00) outstanding at any one time which is not covered by insurance; or
(ii) for injunctive or declaratory relief which would have a material adverse
effect on the ability of the Borrower or any of the Other Loan Parties to
conduct its business, and such Judgment is not discharged or execution thereon
or enforcement thereof stayed pending appeal, within thirty days after entry or
issuance thereof, or, in the event of such a stay, such Judgment is not
discharged within thirty days after such stay expires.
8.7 Bankruptcy or Insolvency of the Borrower or Other Loan Parties.
(a) The Borrower or any of the Other Loan Parties becomes
insolvent, or generally fails to pay, or is generally unable to pay, or admits
in writing its inability to pay, its debts as they become due or applies for,
consents to, or acquiesces in, the appointment of a trustee, receiver or other
custodian for the Borrower or any of the Other Loan Parties, as the case may be,
or a substantial part of its property, or makes a general assignment for the
benefit of creditors.
(b) The Borrower or any of the Other Loan Parties commences any
bankruptcy, reorganization, debt arrangement, or
- 35 -
other case or proceeding under any state or federal bankruptcy or insolvency
law, or any dissolution or liquidation proceeding.
(c) Any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under any state or federal bankruptcy or insolvency law, or
any dissolution or liquidation proceeding, is involuntarily commenced against or
in respect of the Borrower or any of the Other Loan Parties, or an order for
relief is entered in any such proceeding which is not terminated upon the
earlier of (i) the entry of an order to relief in any such proceeding or
(ii) within ninety (90) days after such case or proceeding is involuntarily
commenced.
(d) A trustee, receiver, or other custodian is appointed for
the Borrower or any of the Other Loan Parties or a substantial part of such
Person's property and such appointment is not terminated within ninety (90) days
thereafter.
ARTICLE IX
REMEDIES
9.1 Further Advances; Acceleration; Setoff.
(a) Upon the occurrence of any one or more Events of Default,
the Bank may, in its sole discretion, refuse to make any further advances or
Loans to the Borrower;
(b) Automatically upon the occurrence of any Event of Default
described in Section 8.7 of this Agreement, and in the sole discretion of the
Bank upon the occurrence of any other Event of Default, the unpaid principal
balance of all Loans, all interest and fees accrued and unpaid thereon, and all
other amounts and Obligations payable by the Borrower under this Agreement and
the other Loan Documents shall immediately become due and payable in full, all
without protest, presentment, demand, or further notice of any kind to the
Borrower, all of which are expressly waived by the Borrower;
(c) If any of the Obligations shall be due and payable or any
one or more Events of Default shall have occurred, the Bank shall have the
right, in addition to all other rights and remedies available to it, without
notice to the Borrower, to apply toward and set-off against and apply to the
then unpaid balance of the Notes and the other Obligations any items or funds
held by the Bank, any and all deposits (whether general or special, time or
demand, matured or unmatured, fixed or contingent, liquidated or unliquidated)
now or hereafter maintained by the Borrower for its own account with the Bank,
and any other indebtedness at any time held or owing by the Bank to or for the
credit or the account of the Borrower. For such purpose the Bank shall have, and
the Borrower hereby grants to the Bank, a first lien on all such deposits. The
Bank is hereby authorized to charge any such account or indebtedness for any
amounts due to the Bank. Such right of set-off shall exist
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whether or not the Bank shall have made any demand under this Agreement, the
Notes or any other Loan Document and whether or not the Notes and the other
Obligations are matured or unmatured. The Borrower hereby confirms the Bank's
lien on such accounts and right of set-off, and nothing in this Agreement shall
be deemed any waiver or prohibition of such lien and right of set-off.
9.2 Further Remedies. Upon the occurrence of any one or more Events
of Default, the Bank may proceed to protect and enforce its rights under this
Agreement and the other Loan Documents by exercising such remedies as are
available to the Bank in respect thereof under applicable law, either by suit in
equity or by action at law, or both, whether for specific performance of any
provision contained in this Agreement or any of the other Loan Documents or in
aid of the exercise of any power granted in this Agreement or any of the other
Loan Documents.
ARTICLE X
MISCELLANEOUS
10.1 Remedies Cumulative; No Waiver. The rights, powers and
remedies of the Bank provided in this Agreement and the other Loan Documents are
cumulative and not exclusive of any right, power or remedy provided by law or
equity, and no failure or delay on the part of the Bank in the exercise of any
right, power, or remedy shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power, or remedy preclude other or further
exercise thereof, or the exercise of any other right, power or remedy.
10.2 Notices. Every notice and communication under this Agreement
or any of the other Loan Documents shall be in writing and shall be given by
either (i) hand-delivery, (ii) first class mail (postage prepaid),
(iii) reliable overnight commercial courier (charges prepaid), or (iv) telecopy
or other means of electronic transmission, if confirmed promptly by any of the
methods specified in clauses (i), (ii) and (iii) of this sentence, to the
following addresses:
If to the Borrower:
Blonder Tongue Laboratories, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
Stradley, Ronon, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Bank:
Meridian Bank
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Assistant Vice President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Duane, Morris & Heckscher
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esquire
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Notice given by telecopy or other means of electronic
transmission shall be deemed to have been given and received when sent. Notice
by overnight courier shall be deemed to have been given and received on the date
scheduled for delivery. Notice by mail shall be deemed to have been given and
received three (3) calendar days after the date first deposited in the United
States Mail. Notice by hand delivery shall be deemed to have been given and
received upon delivery. A party may change its address by giving written notice
to the other party as specified herein.
10.3 Costs, Expenses and Attorneys' Fees. Whether or not the
transactions contemplated by this Agreement and the other Loan Documents are
fully consummated, the Borrower shall promptly pay (or reimburse, as the Bank
may elect) all costs and expenses which the Bank has incurred or may hereafter
incur in connection with the negotiation, preparation, reproduction,
interpretation and enforcement of this Agreement and the other Loan Documents,
the collection of all amounts due hereunder and thereunder, and any amendment,
modification, consent or waiver which may be hereafter requested by the Borrower
or otherwise required. Such costs and expenses shall include, without
limitation, the fees and disbursements of counsel to the Bank, the costs of
appraisal fees, searches of public records, costs of filing and recording
documents with public offices, and similar costs and expenses incurred by the
Bank. Upon the occurrence of an Event of Default, such costs shall also include
the fees of any accountants, consultants or other professionals retained by the
Bank. The Borrower's reimbursement obligations under this Section shall survive
any termination of this Agreement.
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10.4 Survival of Covenants. This Agreement and all covenants,
agreements, representations and warranties made herein and in any certificates
delivered pursuant hereto shall survive the making of the Loans and the
execution and delivery of the Notes and, subject to the provisions of 10.15
hereof, shall continue in full force and effect until all of the Obligations
have been fully paid, performed, satisfied and discharged.
10.5 Counterparts; Effectiveness. This Agreement may be
executed in any number of counterparts and by the different parties on separate
counterparts. Each such counterpart shall be deemed to be an original, but all
such counterparts shall together constitute one and the same Agreement. This
Agreement shall be deemed to have been executed and delivered when the Bank has
received counterparts hereof executed by all parties listed on the signature
page(s) hereto.
10.6 Headings. The headings of sections have been included
herein for convenience only and shall not be considered in interpreting this
Agreement.
10.7 Payment Due On A Day Other Than A Business Day. If any
payment due or action to be taken under this Agreement or any Loan Document
falls due or is required to be taken on a day which is not a Business Day, such
payment or action shall be made or taken on the next succeeding Business Day and
such extended time shall be included in the computation of interest.
10.8 Judicial Proceedings. Each party to this Agreement agrees
that any suit, action or proceeding, whether claim or counterclaim, brought or
instituted by any party hereto or any successor or assign of any party, on or
with respect to this Agreement or any of the other Loan Documents or the
dealings of the parties with respect hereto, or thereto, shall be tried only by
a court and not by a jury. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING. Further, each party waives any right it may have to claim or
recover, in any such suit, action or proceeding, any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. THE BORROWER ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THAT THE BANK WOULD NOT
EXTEND CREDIT TO THE BORROWER IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT
A PART OF THIS AGREEMENT.
10.9 Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the Commonwealth of
Pennsylvania.
10.10 Integration. This Agreement and the other Loan Documents
constitute the sole agreement of the parties with respect to the subject matter
hereof and thereof and supersede all oral negotiations and prior writings with
respect to the subject matter hereof and thereof.
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10.11 Amendment and Waiver. No amendment of this Agreement, and
no waiver of any one or more of the provisions hereof shall be effective unless
set forth in writing and signed by the parties hereto.
10.12 Successors and Assigns.
(a) Generally. This Agreement (i) shall be binding upon
the Borrower and the Bank and their respective successors and assigns, and
(ii) shall inure to the benefit of the Borrower and the Bank and its respective
successors and assigns, provided, however, that the Borrower may not assign its
rights hereunder or any interest herein without the prior written consent of the
Bank, and any such assignment or attempted assignment by the Borrower shall be
void and of no effect with respect to the Bank.
(b) Participations. The Bank may from time to time sell
or otherwise grant participations in the Loans and the Notes, and the holder of
any such participation, if the participation agreement so provides, (i) shall,
with respect to its participation, be entitled to all of the rights of the Bank
and (ii) may exercise any and all rights of setoff or banker's lien with respect
thereto, in each case as fully as though the Borrower were directly indebted to
the holder of such participation in the amount of such participation. The Bank
may disclose to prospective participants such information regarding the
Borrower's affairs as the Bank possesses. The Bank shall give notice to the
Borrower of the grant of such participations; however, the failure to give such
notice shall not affect any of the Bank's rights hereunder.
10.13 Severability of Provisions. Any provision in this
Agreement that is held to be inoperative, unenforceable, voidable, or invalid in
any jurisdiction shall, as to that jurisdiction, be ineffective, unenforceable,
void or invalid without affecting the remaining provisions, and to this end the
provisions of this Agreement are declared to be severable.
10.14 Consent to Jurisdiction and Service of Process. The
Borrower irrevocably appoints each and every officer of the Borrower as its
attorneys upon whom may be served, by regular or certified mail at the address
set forth in Section 10.2 hereof, any notice, process or pleading in any action
or proceeding against it arising out of or in connection with this Agreement or
any of the other Loan Documents; and the Borrower hereby (i) consents that any
action or proceeding against it be commenced and maintained in any court within
the Commonwealth of Pennsylvania or in the United States District Court for the
Eastern District of Pennsylvania by service of process on any such officer;
(ii) agrees that the courts of the Commonwealth of Pennsylvania and the United
States District Court for the Eastern District of Pennsylvania shall have
jurisdiction with respect to the subject matter hereof and the person of the
Borrower and the Collateral, and (iii) waives any objection that such Borrower
may
- 40 -
now or hereafter have as to the venue of any such suit, action or proceeding
brought in such a court or that such court is an inconvenient forum.
Notwithstanding the foregoing, the Bank, in its absolute discretion may also
initiate proceedings in the courts of any other jurisdiction in which the
Borrower may be found or in which any of its properties or the Collateral may be
located.
10.15 Indemnification
(a) If, after receipt of any payment of all or any part
of the Obligations, the Bank is compelled to surrender such payment to any
Person or entity for any reason (including, without limitation, a determination
that such payment is void or voidable as a preference or fraudulent conveyance,
an impermissible setoff, or a diversion of trust funds), then this Agreement and
the other Loan Documents shall continue in full force and effect, and the
Borrower shall be liable for, and shall indemnify, defend and hold harmless the
Bank with respect to the full amount so surrendered.
(b) The Borrower shall indemnify, defend and hold
harmless the Bank with respect to any and all claims, expenses, demands, losses,
costs, fines or liabilities of any kind, including reasonable attorneys' fees
and costs, arising from or in any way related to (i) acts or conduct of the
Borrower or any of the Other Loan Parties under, pursuant to or related to this
Agreement and the other Loan Documents, (ii) Borrower's or any Other Loan
Party's breach or violation of any representation, warranty, covenant or
undertaking contained in this Agreement or the other Loan Documents, and
(iii) Borrower's or any other Loan Party's failure to comply with any or all
laws, statutes, ordinances, governmental rules, regulations or standards,
whether federal, state, or local, or court or administrative orders or decrees,
including without limitation those resulting from any Hazardous Materials or
dangerous environmental condition within, on, from, related to or affecting any
real property owned or occupied by the Borrower, unless resulting from the acts
or conduct of the Bank constituting gross negligence or willful misconduct.
(c) The provisions of this section shall survive the
termination of this Agreement and the other Loan Documents and shall be and
remain effective notwithstanding the payment of the Obligations, the
cancellation of any of the Notes, the release of any Encumbrance securing the
Obligations or any other action which the Bank may have taken in reliance upon
its receipt of such payment. Any cancellation of any of the Notes, release of
any Encumbrance or other such action shall be deemed to have been conditioned
upon any payment of the Obligations having become final and irrevocable.
- 41 -
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed by their duly authorized officers on the date first above
written.
BLONDER TONGUE LABORATORIES, INC.
By:____________________________
Name:
Title:
CORESTATES BANK, N.A.
(successor to Meridian Bank)
By:____________________________
Name:
Title:
- 42 -
STATE OF :
: SS
COUNTY OF :
I CERTIFY that on September 26, 1996, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the President of
BLONDER TONGUE LABORATORIES, INC., a Delaware corporation, personally appeared
before me, who I am satisfied to be the person who signed the foregoing
instrument, and acknowledged that he was authorized to execute the same as the
act of said corporation.
------------------------------
Name:_________________________
Title:________________________
- 43 -
Schedule 4.4(b)
Lease commitment between Borrower and Meridian Capital Leasing dated
September 20, 1996 for the aggregate amount of $29,185, of which $9,719 is
presently outstanding.
- 44 -
Schedule 4.4(c)
Investment in Enhances Telecommunications, Inc. ("ETI") pursuant to
Share Exchange Agreement dated July 20, 1996 pursuant to which Borrower issued
8,333 shares of its common stock in exchange for 11,211 shares of ETI's common
stock.
- 45 -
Schedule 6.16
FINANCIAL COVENANTS
This Schedule is a part of the Second Amended and Restated Loan
Agreement dated September 26, 1996 between CoreStates Bank, N.A. (successor to
Meridian Bank) and Blonder Tongue Laboratories, Inc.
A. Debt Coverage Ratio--The Borrower shall have a Debt Coverage Ratio
at the end of the fiscal year ending December 31, 1996 of not less than
2:00:1.00, and for each fiscal year thereafter.
B. Net Working Capital--The Borrower shall have Net Working Capital of
not less than $12,000,000 for the fiscal year ending December 31, 1996, and for
each fiscal quarter thereafter.
C. Ratio of Senior Debt to Capital Funds--The Borrower shall have a
ratio of Senior Debt to Capital Funds of not more than 1.50:1.00 for the fiscal
year ending December 31, 1996, and for each fiscal quarter thereafter.
For purposes of this Schedule, all capitalized terms used herein and
not otherwise defined shall have the meanings given to them, respectively, in
the Loan Agreement, and the following terms shall have the following meanings:
"Capital Funds" shall mean, at any time, the sum of Subordinated
Indebtedness plus Tangible Net Worth.
"Current Assets" shall mean, at any time, all assets which, in
accordance with GAAP, should be classified as current assets of the Borrower.
"Current Liabilities" shall mean, at any time, all Liabilities which,
in accordance with GAAP, should be classified as current liabilities of the
Borrower.
"Debt Coverage Ratio" shall mean for each Fiscal Year the ratio of
(A) the Net Income for such Fiscal Year increased by the sum of (i) interest
expense for such Fiscal Year, plus (ii) income tax expense for such Fiscal Year,
plus (iii) the depreciation and amortization expense included in the income
statement for such Fiscal Year, to (B) interest expense for such Fiscal Year,
plus the prior Fiscal Year's current maturities of long term debt, all as
determined in accordance with GAAP.
"Liabilities" shall mean, at any time, all liabilities which, in
accordance with GAAP, shall be classified as liabilities of the Borrower.
"Net Income" shall mean, for any period, the net income of the
Borrower, determined in accordance with GAAP, excluding:
- 46 -
(a) the proceeds of any insurance policy;
(b) any gain or loss arising from:
(1) the sale or other disposition of any assets
(other than Current Assets);
(2) any write-up of assets; or
(3) the acquisition of outstanding securities
representing Indebtedness of the Borrower;
(c) any amount representing any interest in the
undistributed earnings of any Person;
(d) any earnings, prior to the date of acquisition,
of any Person acquired in any manner;
(e) any earnings of a successor to or transferee of
the assets of the Borrower prior to becoming such successor or
transferee;
(f) any deferred credit (or amortization of a
deferred credit) arising from the acquisition of any Person; and
(g) any other item constituting an extraordinary
gain or loss under GAAP.
"Net Working Capital" shall mean, at any time, the amount by which
Current Assets exceed Current Liabilities, less any amount due from any
Affiliate to the extent that such amount is included in Current Assets.
"Senior Debt" shall mean, at any time, all Liabilities
less all Subordinated Indebtedness.
"Subordinated Indebtedness" shall mean, at any time, all
Indebtedness subordinated to the Obligations on terms satisfactory to the Bank.
"Stockholders' Equity" shall mean, at any time, stockholders'
equity as determined in accordance with GAAP.
"Tangible Net Worth" shall mean, at any time, the aggregate
Stockholders' Equity, less all intangible assets of the Borrower, including,
without limitation, organization costs, securities issuance costs, unamortized
debt discount and expense, goodwill, excess of purchase costs over net assets
acquired, patents, trademarks, trade names, copyrights, trade secrets, knowhow,
licenses, franchises, capitalized research and development expenses, amounts
owing from officers and/or Affiliates and any amount reflected as treasury
stock.
- 47 -
Schedule 7.3
Liens securing indebtedness disclosed on Schedule 4.4(b).
- 48 -
Exhibit "A"
ACQUISITION LOAN NOTE
$_____________ Reading, Pennsylvania
___________, 199_
FOR VALUE RECEIVED, BLONDER TONGUE LABORATORIES, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of CORESTATES
BANK, N.A. (successor to Meridian Bank) (the "Bank") the principal amount of
____________________ ($__________) in _____________ consecutive monthly payments
of $_________, payable on the first day of the month, commencing __________ __,
199_, and a final installment, consisting of the entire remaining principal
balance, payable on ______________, 199_. This Acquisition Loan Note is issued
under the Second Amended and Restated Loan Agreement dated September 26, 1996 by
and between the Borrower and the Bank (the "Loan Agreement"). Terms capitalized
but not defined herein shall have the meanings given to them respectively in the
Loan Agreement. Reference is made to the Loan Agreement for a statement of the
terms and conditions under which the loan evidenced hereby has been made, is
secured, and may be prepaid or accelerated.
Until maturity (whether by acceleration or otherwise) interest
shall accrue on the outstanding principal balance hereof at [the rate or rates
set forth in the Loan Agreement] or [insert fixed rate]. Interest shall be
calculated on the basis of a 360- day year, counting the actual number of days
elapsed. Subsequent to maturity or the occurrence of any Event of Default, and
continuing after the entry of any judgment against the Borrower with respect to
the obligations evidenced by this Note, interest shall accrue at an annual rate
which shall be two percent (2%) above the rate of interest otherwise payable
hereunder. Accrued interest shall be payable monthly on the first day of each
month commencing with the month immediately following the date hereof and if not
paid when due, shall be added to the principal.
All amounts payable by the Borrower to the Bank hereunder shall be
paid directly to the Bank at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(or at such other address of which the Bank shall give notice to the Borrower in
accordance with the Loan Agreement) in immediately available funds.
The Borrower hereby waives the requirements of demand, presentment,
protest, notice of protest and dishonor and all other demands or notices of any
kind in connection with the delivery, acceptance, performance, default, dishonor
or enforcement of this Note.
The construction, interpretation and enforcement of this Note shall
be governed by the internal laws of the Commonwealth of Pennsylvania.
- 49 -
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
Borrower has caused this Note to be executed by its duly authorized officer as
of the day and year first above written.
Attest: BLONDER TONGUE LABORATORIES, INC.
By:_________________________ By: _________________________
Title:______________________ Title:_______________________
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