ACCOUNTS RECEIVABLE MANAGEMENT
AND SECURITY AGREEMENT
This Accounts Receivable Management and Security
Agreement is made as of ___________, 1997 by and between BNY
FINANCIAL CORPORATION ("Lender"), having offices at ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and Precision
Standard, Inc. ("Precision"), having its principal place of
business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, also at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, , Pemco Aeroplex, Inc. having its principal place of
business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, Pemco World Air Services, Inc. having its place of
business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ , Pemco Capital Corporation having its principal place
of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ Holdings I Inc. having its principal place of
business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
35212,, ▇▇▇▇▇ Holdings II Inc. having its principal place of
business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, Space Vector Corporation having its place of business
at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, , Pemco Nacelle Services, Inc. having its principal
place of business at Hanger #3, St. Petersburg - Clearwater
Int'l Airport, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Pemco Air Services
System, Inc.,having its principal place of business at ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and Air
International Incorporated having its place of business at
Hanger #3, St. Petersburg - Clearwater Int'l Airport,
Clearwater, FL 34622,(individually and collectively the
"Borrower" or "Borrowers").
WHEREAS, the Borrowers have requested that Lender
make loans and advances available to Borrowers; and
NOW, THEREFORE, in consideration of the mutual
covenants and undertakings and the terms and conditions
contained herein, the parties hereto agree as follows:
1. (A) GENERAL DEFINITIONS. When used in this
Agreement, the following terms shall have the following
meanings:
"ADVANCE RATES" means the Inventory Advance Rate and
the Receivables Advance Rate.
"AFFILIATE" of any Person means (a) any Person
which, directly or indirectly, is in control of, is controlled
by, or is under common control with such Person, or (b) any
Person who is a director or executive officer (i) of such
Person, (ii) of any Subsidiary of such Person or (iii) of any
Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct
or indirect, (i) to vote 5% or more of the securities having
ordinary voting power for the election of directors of such
Person, or (ii) to direct or cause the direction of the
overall management and material policies of such Person
whether by contract or otherwise.
"ALTERNATE BASE RATE" means, for any day, a rate per
annum equal to the higher of (i) the Prime Rate in effect on
such day and (ii) the Federal Funds Rate in effect on such day
plus 1/2 of 1%.
"ANCILLARY AGREEMENTS" means all agreements,
instruments, and documents including, without limitation,
mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, trust agreements
whether heretofore, concurrently, or hereafter executed by or
on behalf of any Borrower or delivered to Lender and as to
which Lender is a party or a beneficiary, relating to this
Agreement or to the transactions contemplated by this
Agreement.
"BANK" means The Bank of New York.
"BORROWING BASE CERTIFICATE" shall have the meaning
set forth in Section 9.
"BUSINESS DAY" means any day other than a day on
which commercial banks in New York are authorized or required
by law to close.
"CHANGE OF OWNERSHIP" means (a) any transfer
(whether in one or more transactions) of ownership of not less
than 50% of the common stock of any Borrower held by the
Original Owners, provided, however that changes of Ownership
shall not occur with respect to any transfer by an Original
Owner to, or for the benefit of an Original Owner's immediate
family (including for the purposes of the calculation of
percentage ownership, any shares of common stock into which
any capital stock of any Borrower held by any of the Original
Owners is convertible or for which any such shares of the
capital stock of any Borrower or of any other Person may be
exchanged and any shares of common stock issuable to such
Original Owners upon exercise of any warrants, options or
similar rights which may at the time of calculation be held by
such Original Owners), to a Person who is neither an Original
Owner nor an Affiliate of an Original Owner or (b) any merger,
consolidation or sale of substantially all of the property or
assets of any Borrower.
"CLOSING DATE" means the date set forth in the
first paragraph of this Agreement or such other date as may be
agreed upon by the parties hereto.
"COLLATERAL" means and includes:
(A) all Inventory;
(B) all Equipment;
(C) all General Intangibles;
(D) all Receivables;
(E) all books, records, ledgercards, files,
correspondence, computer programs, tapes, disks and related
data processing software (owned by the Borrowers or in which
it has an interest to the extent of such interest) which at
any time evidence or contain information relating to (A), (B),
(C) and (D) above or are otherwise necessary or helpful in the
collection thereof or realization thereupon;
(F) documents of title, policies and
certificates of insurance, securities, chattel paper, other
documents or instruments evidencing or pertaining to (A), (B),
(C), (D) and (E) above;
(G) all guaranties, liens on real or personal
property, leases, and other agreements and property which in
any way secure or relate to (A), (B), (C), (D), (E) and (F)
above, or are acquired for the purpose of securing and
enforcing any item thereof;
(H) (i) all cash held as cash collateral to
the extent not otherwise constituting Collateral, all other
cash or property at any time on deposit with or held by Lender
for the account of any Borrower (whether for safekeeping,
custody, pledge, transmission or otherwise), (ii) all present
or future deposit accounts (whether time or demand or interest
or non-interest bearing) of any Borrower with Lender or any
other Person including those to which any such cash may at any
time and from time to time be credited, (iii) all investments
and reinvestments (however evidenced) of amounts from time to
time credited to such accounts, and (iv) all interest,
dividends, distributions and other proceeds payable on or with
respect to (x) such investments and reinvestments and (y) such
accounts; and
(I) all products and proceeds of (A), (B),
(C), (D), (E), (F), (G) and (H) above (including, but not
limited to, all claims to items referred to in (A), (B), (C),
(D), (E), (F), (G) and (H) above) and all claims of any
Borrowers against third parties (x) for (i) loss of, damage
to, or destruction of, and (ii) payments due or to become due
under leases, rentals and hires of, any or all of (A), (B),
(C), (D), (E), (F), (G) and (H) above and (y) proceeds payable
under, or unearned premiums with respect to policies of
insurance in whatever form.
"CONTRACT RATE" means an interest rate per annum
equal to (i) Alternate Base Rate plus (ii) one and one-half
of one percent (1.5%) provided, however, the Contract Rate
shall not at any time be less than 6%.
"CREDIT RISK" means the risk of loss resulting
solely and exclusively from a Customer's financial inability
to pay at maturity with respect to any Receivable purchased
hereunder.
"CURRENT ASSETS" at a particular date, means all
cash, cash equivalents, accounts and inventory of the
Borrowers and all other items which would, in conformity with
GAAP, be included under current assets on a balance sheet of
Borrowers as at such date; provided, however, that such
amounts shall not include (a) any amounts for any indebtedness
owing by an Affiliate of any Borrower, unless such
indebtedness arose in connection with the sale of goods or
other property in the ordinary course of business and would
otherwise constitute current assets in conformity with GAAP,
(b) any shares of stock issued by an Affiliate of any
Borrower, (c) the cash surrender value of any life insurance
policy or (d) any assets which would be classified as
intangible assets under GAAP.
"CURRENT LIABILITIES" at a particular date, means
all amounts which would, in conformity with GAAP, be included
under current liabilities on a balance sheet of Borrowers as
at such date, but in any event including, without limitation,
the amounts of (a) all indebtedness payable on demand, or, at
the option of the Person to whom such indebtedness is owed,
not more than twelve (12) months after such date, (b) any
payments in respect of any indebtedness (whether installment,
serial maturity, sinking fund payment or otherwise) required
to be made not more than twelve (12) months after such date,
(c) all reserves in respect of liabilities or indebtedness
payable on demand or, at the option of the Person to whom such
indebtedness is owed, not more than twelve (12) months after
such date, the validity of which is contested at such date (d)
all accruals for federal or other taxes measured by income
payable within a twelve (12) month period and (e) the amount
of all outstanding Revolving Credit Advances.
"CUSTOMER" means and includes the account debtor
with respect to any Receivable and/or the prospective
purchaser of goods, services or both with respect to any
contract or contract right, and/or any party who enters into
or proposes to enter into any contract or other arrangement
with any Borrower, pursuant to which Borrower is to deliver
any personal property or perform any services.
"DEFAULT RATE" means a rate equal to two (2%)
percent per annum in excess of the Contract Rate or the
Overadvance Rate, whichever is then applicable.
"DISPUTE" means any cause asserted for nonpayment of
Receivables, including, without limitation, any alleged
defense, counterclaim, offset, dispute or other claim (real or
merely asserted) whether arising from or relating to the sale
of goods or rendition of services or arising from or relating
to any other transaction or occurrence.
"ELIGIBLE INVENTORY" means Inventory which Lender,
in the reasonable exercise of its discretion applied in good
faith, determines: (a) is subject to the security interest of
Lender and is subject to no other liens or encumbrances
whatsoever (other than Permitted Liens); (b) is in good
condition and meets all legal regulations or requirements
imposed by any governmental agency, or department or division
thereof having regulatory authority over such Inventory, its
use or sale including but not limited to the Federal Fair
Labor Standards Act of 1938 as amended, and all rules,
regulations and orders thereunder; (c) is currently either
usable or salable in the normal course of any Borrower's
business; and (d) is not determined by Lender, in the
reasonable exercise of its discretion applied in good faith,
to be ineligible for any other reason.
"ELIGIBLE RECEIVABLES" means and includes each
Receivable which conforms to the following criteria: (a)
shipment of the merchandise or the rendition of services has
been completed to the extent of the Receivable then due; (b)
is net of any return, rejection or repossession of the
merchandise; (c) is net of any merchandise or services which
have been rejected or disputed by the Customer and net of the
amount of any offset, defense, counterclaim, or Dispute; (d)
continues to be in full conformity with the representations
and warranties made by Borrowers to Lender with respect
thereto; (e) Lender is, and continues to be, in the exercise
of its reasonable commercial judgment, satisfied with the
credit standing of the Customer in relation to the amount of
credit extended; (f) is documented by an invoice, contract or
other legally enforeceable document (collectively referred to
in this definition as an "invoice") in a form approved by
Lender and shall not be unpaid more than ninety (90) days from
invoice date nor more than sixty (60) days from due date; (g)
less than 50% of the unpaid amount of invoices due from such
Customer remain unpaid more than sixty (60) days from due
date; (h) is not evidenced by chattel paper or an instrument
of any kind with respect to or in payment of the Receivable
unless such instrument is duly endorsed to and in possession
of Lender or represents a check in payment of a Receivable;
(i) if the Customer is located outside of the United States,
either (1) the goods which gave rise to such Receivable were
shipped after receipt by Borrower from or on behalf of the
Customer of an irrevocable letter of credit, assigned and
delivered to Lender and confirmed by a financial institution
acceptable to Lender and is in form and substance reasonably
acceptable to Lender, payable in the full amount of the
Receivable in United States dollars at a place of payment
located within the United States or, (2) is secured by a
perfected possessory mechanics lien in the aircraft,
equipment, or parts for which the goods or services are being
provided by Borrower and as to which Borrower's lien is
subject to Lenders security interest and assignable to Lender
and such Receivable is payable in U.S. Dollars; (j) such
Receivable is not subject to any lien, other than Permitted
Liens; (k) does not arise out of transactions with any
employee, officer, agent, director, stockholder or Affiliate
of Borrower; (l) is payable to Borrower; (m) does not arise
out of a ▇▇▇▇ and hold sale prior to shipment and, if the
Receivable arises out of a sale to any Person to which
Borrower is indebted, the amount of such indebtedness, and any
anticipated indebtedness, is deducted in determining the face
amount of such Receivable; (n) if the Receivable arises out of
contracts between Borrower and the United States, any state,
or any department, agency or instrumentality of any of them,
Borrower has so notified Lender, in writing, at the end of
each calendar quarter in which any such contract was entered
into and, there has been compliance with any governmental
notice or approval requirements, including without limitation,
compliance with the Federal Assignment of Claims Act at the
time such contract is entered into or at the time of the
creation of such Receivable; (o) is a good and valid account
representing an undisputed bona fide indebtedness incurred by
the Customer therein named, for a fixed sum as set forth in
the invoice relating thereto with respect to an unconditional
sale and delivery upon the stated terms of goods sold by
Borrower, or work, labor and/or services rendered by Borrower;
and (p) is otherwise satisfactory to Lender as determined in
good faith by Lender in the reasonable exercise of its
discretion.
"EQUIPMENT" means and includes all of Borrowers' now
owned or hereafter acquired equipment, machinery and goods
(excluding Inventory), whether or not constituting fixtures,
including, without limitation: plant and office equipment,
tools, dies, parts, data processing equipment, furniture and
trade fixtures, trucks, trailers, loaders and other vehicles
and all replacements and substitutions therefore and all
accessions thereto.
"EVENT OF DEFAULT" means the occurrence of any of
the events set forth in paragraph 18.
"FEDERAL FUNDS RATE" means, for any day, the
weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day
(or if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or if
such rate is not so published for any day which is a Business
Day, the average of quotations for such day on such
transactions received by The Bank of New York from three
Federal funds brokers of recognized standing selected by The
Bank of New York.
"FORMULA AMOUNT" shall have the meaning set forth in
paragraph 2(b).
"FUNDED DEBT" means the sum of the Obligations, the
outstanding obligations of Borrowers to Bank of America NT &
SA and the amount of any extensions of credit to the Borrowers
by any other third parties, other than extensions of customary
trade credit.
"GAAP" means generally accepted accounting
principles, practices and procedures in effect from time to
time.
"GENERAL INTANGIBLES" means and includes all of
Borrowers' now owned or hereafter acquired general intangibles
as said term is defined in the Uniform Commercial Code in
effect in the State of New York including, without limitation,
trademarks, tradenames, tradestyles, trade secrets, equipment
formulation, manufacturing procedures, Supplemental Type
Certificates, quality control procedures, product
specifications, patents, patent applications, copyrights,
registrations, contract rights, choses in action, causes of
action, corporate or other business records, inventions,
designs, goodwill, claims under guarantees, licenses,
franchises, tax refunds, tax refund claims, computer programs,
computer data bases, computer program flow diagrams, source
codes, object codes and all other intangible property of every
kind and nature.
"HAZARDOUS SUBSTANCE" means, without limitation, any
flammable explosives, radon, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated byphenyls,
petroleum and petroleum products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Sections
1801, et seq.), RCRA, Law or any other applicable
Environmental Law and in the regulations adopted pursuant
thereto.
"INCIPIENT EVENT OF DEFAULT" means any act or event
which, with the giving of notice or passage of time or both,
would constitute an Event of Default.
"INVENTORY" means and includes all of Borrowers' now
owned or hereafter acquired goods, merchandise and other
personal property, wherever located, to be furnished under any
contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might
be used or consumed in Borrowers' business or used in selling
or furnishing such goods, merchandise and other personal
property, and all documents of title or other documents
representing them.
"INVENTORY ADVANCE RATE" shall have the meaning set
forth in the definition of Inventory Availability.
"INVENTORY AVAILABILITY" means the amount of
Revolving Credit Advances against Eligible Inventory Lender
may from time to time during the Term make available to
Borrowers up to the lesser of (a) $12,000,000.00 or (b) 40%
("Inventory Advance Rate") of the value of Borrowers' Eligible
Inventory (calculated on the basis of the lower of cost or
market, on a first-in first-out basis).
"LOANS" means the Revolving Credit Advances and all
other extensions of credit hereunder.
"MATURED FUNDS RATE" means the rate of interest,
announced by Lender from time to time, as the rate applicable
to matured funds, such rate to be adjusted automatically on
the effective date of any change in such rate as announced by
Lender.
"MAXIMUM LOAN AMOUNT" means $20,000,000.00.
"MAXIMUM REVOLVING AMOUNT" means $20,000,000.00.
"NET FACE AMOUNT" of Receivables means the gross
face invoice amount thereof, less returns, discounts (the
calculation of which shall be reasonably determined by Lender
in good faith where optional terms are given), anticipation or
any other unilateral deductions taken by Customers, and
credits and allowances to Customers of any nature.
"OBLIGATIONS" means and includes all Loans, all
advances, debts, liabilities, obligations, covenants and
duties owing by Borrowers to Lender (or any corporation that
directly or indirectly controls or is controlled by or is
under common control with Lender) of every kind and
description (whether or not evidenced by any note or other
instrument and whether or not for the payment of money or the
performance or non-performance of any act), direct or
indirect, absolute or contingent, due or to become due,
contractual or tortious, liquidated or unliquidated, whether
existing by operation of law or otherwise now existing or
hereafter arising including, without limitation, any debt,
liability or obligation owing from Borrowers to others which
Lender in protecting its interests under this Agreement may
have obtained by assignment or otherwise and further
including, without limitation, all interest, charges or any
other payments Borrowers are required to make by law or
otherwise arising under or as a result of this Agreement and
the Ancillary Agreements, together with all reasonable
expenses and reasonable attorneys' fees chargeable to
Borrowers' account or incurred by Lender in connection with
Borrowers' account whether provided for herein or in any
Ancillary Agreement.
"ORIGINAL OWNERS" means Matthew ▇.▇▇▇▇.
"OVERADVANCE RATE" means a rate equal to one (1%)
percent per annum in excess of the Contract Rate.
"PERMITTED INDEBTEDNESS" shall mean the indebtedness
of Borrower to third parties described on Schedule 12(m)
hereof.
"PERMITTED LIENS" means (i) liens of carriers,
warehousemen, mechanics and materialmen incurred in the
ordinary course of business securing sums not overdue; (ii)
liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance
or other forms of governmental insurance or benefits, relating
to employees, securing sums (a) not overdue or (b) being
diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of
Borrowers in conformity with GAAP, (iii) liens in favor of
Lender, (iv) liens for taxes (a) not yet due or (b) being
diligently contested in good faith, provided that adequate
reserves with respect thereto are maintained on the books of
Borrowers in conformity with GAAP, (v) liens for purchase
money security interests granted in connection with the
acquisition of Equipment and attaching only to the Equipment
being acquired and no other property and (vi) liens specified
on Schedule 1(A) hereto.
"PERSON" means an individual, partnership,
corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"PRIME RATE" means the prime commercial lending rate
of The Bank of New York as publicly announced in New York, New
York to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date
of any change in such rate. This rate of interest is
determined from time to time and is neither tied to any
external rate of interest or index nor does it necessarily
reflect the lowest rate of interest actually charged to any
particular class or category of customers.
"RECEIVABLES" means and includes all of Borrowers'
now owned or hereafter acquired accounts and contract rights,
instruments, insurance proceeds, documents, chattel paper,
letters of credit and Borrowers' rights to receive payment
thereunder, any and all rights to the payment or receipt of
money or other forms of consideration of any kind at any time
now or hereafter owing or to be owing to Borrowers, all
proceeds thereof and all files in which Borrowers have any
interest whatsoever containing information identifying or
pertaining to any of Borrowers' Receivables, together with all
of Borrowers' rights to any merchandise which is represented
thereby, and all Borrowers' right, title, security and
guaranties with respect to each Receivable, including, without
limitation, all rights of stoppage in transit, replevin and
reclamation and all rights as an unpaid vendor.
"RECEIVABLES ADVANCE RATE" shall have the meaning
set forth in the definition of Receivables Availability.
"RECEIVABLES AVAILABILITY" means the amount of
Revolving Credit Advances against Eligible Receivables which
Lender may from time to time during the term of this Agreement
make available to Borrowers up to 85% ("Receivables Advance
Rate") of the amount of Borrowers' Eligible Receivables.
"REPORTS" shall have the meaning set forth in
Section 14.
"RETAINED GOODS" shall have the meaning set forth in
Section 8(h).
"REVOLVING CREDIT ADVANCES" shall have the meaning
set forth in paragraph 2(b).
"SETTLEMENT DATE" means two (2) Business Days after
the day on which the applicable Receivable is actually
collected by Lender.
"SUBORDINATED DEBT" means any debt subordinated to
Lender upon terms and conditions satisfactory to Lender in its
sole discretion.
"SUBSIDIARY" of any Person means a corporation or
other entity of whose shares of stock or other ownership
interests having ordinary voting power (other than stock or
other ownership interests having such power only by reason of
the happening of a contingency) to elect a majority of the
directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or
indirectly, by such Person.
"TANGIBLE NET WORTH" at a particular date means (a)
the aggregate amount of all assets of Borrowers as may be
properly classified as such in accordance with GAAP
consistently applied excluding such other assets as are
properly classified as intangible assets under GAAP, less (b)
the aggregate amount of all liabilities of the Borrowers.
"TERM" means the Closing Date to the third
anniversary of the Closing Date in the year 2000 subject to
acceleration upon the occurrence of an Event of Default
hereunder or other termination hereunder.
"TOTAL LIABILITIES" at a particular date means all
Indebtedness of Borrowers as at such date.
"WORKING CAPITAL" at a particular date means the
excess, if any, of Current Assets over Current Liabilities at
such date.
(B) ACCOUNTING TERMS. Any accounting terms used in
this Agreement which are not specifically defined shall have
the meanings customarily given them in accordance with GAAP.
(C) OTHER TERMS. All other terms used in this
Agreement and defined in the Uniform Commercial Code as
adopted in the State of New York, shall have the meaning given
therein unless otherwise defined herein.
2. LOANS.
(a) Lender shall not assume the Credit Risk on any
Receivables.,
(b) Subject to the terms and conditions set forth
herein and in the Ancillary Agreements, Lender shall make
revolving credit advances (the "Revolving Credit Advances") to
Borrowers from time to time during the Term which, in the
aggregate at any time outstanding, will not exceed the lesser
of (x) the Maximum Revolving Amount or (y) an amount equal to
the sum of:
(i) Receivables Availability, plus
(ii) Inventory Availability, minus
(iii) such reserves as Lender may in its sole
and absolute discretion deem proper and necessary from time to
time.
The sum of 2(b)(i), plus (ii) minus (iii) shall be
referred to as the "Formula Amount". In this regard,
Borrowers agree that they shall submit a Borrowing Base
Certificate to Lender, in form and substance and with such
frequency, as more fully described in Section 9 below, to
include such calculations, in each instance that Lender may
deem necessary or desirable in order to verify whether
Borrowers are in compliance with the preceding limitations
pertaining to Revolving Credit Advances.
(c) Notwithstanding the limitations set forth
above, Lender retains the right to lend Borrowers from time to
time such amounts in excess of such limitations as Lender may
determine in its sole discretion.
(d) If any Borrower does not pay any interest,
fees, costs, charges or commissions to Lender when due,
Borrower shall thereby be deemed to have requested, and Lender
is hereby authorized at its discretion to make and charge to
Borrower's account, a Revolving Credit Advance to Borrower as
of such date in an amount equal to such unpaid interest, fees,
costs, charges or commissions.
(e) Any sums expended by Lender due to any
Borrower's failure to perform or comply with its obligations
under this Agreement, including but not limited to the payment
of taxes, insurance premiums or leasehold obligations, shall
be charged to Borrower's account as a Revolving Credit Advance
and added to the Obligations.
(f) Lender will account to Borrowers monthly with
a statement of all Loans and other advances, charges and
payments made pursuant to this Agreement, and such account
rendered by Lender shall be deemed final, binding and
conclusive unless Lender is notified by Borrowers in writing
to the contrary within thirty (30) days of the date each
account was rendered specifying the item or items to which
objection is made.
(g) During the Term, Borrowers may borrow, prepay
and reborrow Revolving Credit Advances, all in accordance with
the terms and conditions hereof.
(h) The aggregate balance of Loans outstanding at
any time shall not exceed the Maximum Loan Amount. The
aggregate balance of Revolving Credit Advances outstanding at
any time shall not exceed the Formula Amount except as Lender
may permit in accordance with Section 2(c) above.
3. REPAYMENT OF LOANS.
Borrowers shall be required to (i) make a
mandatory prepayment hereunder on demand (except that no
demand need be made if any Borrower voluntarily files, or is
the subject of an involuntary filing, for relief under any
Chapter of the United States Bankruptcy Code) at any time that
the aggregate outstanding principal balance of the Loans made
by Lender to Borrowers hereunder is in excess of the Maximum
Loan Amount or the Formula Amount in an amount equal to such
excess, and (ii) repay on the expiration of the Term (x) the
then aggregate outstanding principal balance of Revolving
Credit Advances made by Lender to Borrowers hereunder together
with accrued and unpaid interest, fees, charges and
commissions and (y) all other amounts owed Lender under this
Agreement and the Ancillary Agreements.
4. PROCEDURE FOR REVOLVING CREDIT ADVANCES.
Each of the Borrowers appoint Precision as its agent and
attorney-in-fact to request and receive any Revolving Credit
Advances under this Agreement and to execute on behalf of each
of them any and all documents, amendments, reports, schedules,
waivers and agreements pertaining to, or in connection with,
this Agreement or any of the Ancillary Agreements. Any
Revolving Credit Advance shall be made to the account of the
Borrowers as requested by Precision as agent in accordance
with their requests to Precision in such regard. Precision may
by written notice request a borrowing of Revolving Credit
Advances prior to 1:00 P.M. New York time on the day such
Advance is requested . All Revolving Credit Advances shall
be disbursed from whichever office or other place Lender may
designate from time to time and, together with any and all
other Obligations of Borrowers' to Lender, shall be charged to
the Borrower's account on Lender's books. The proceeds of
each Revolving Credit Advance made by the Lender shall be made
available to the Borrowers on the day so requested by way of
credit to the Borrowers' operating account maintained with
such bank as Borrowers designated to Lender. Any and all
Obligations then due and owing hereunder may be charged to
Borrowers' account and shall constitute Revolving Credit
Advances.
5. INTEREST; FEES; COMMISSIONS.
(a) Interest.
(i) Except as modified by paragraph 5(a)(iii)
below, interest on Revolving Credit Advances shall be payable
in arrears on the last day of each month. Interest payments
hereunder may, at Lender's option be charged by Lender to
Borrowers' account. Interest charges shall be computed on the
unpaid balance of the Revolving Credit Advances for each day
they are outstanding at a rate per annum equal to with respect
to Revolving Credit Advances, the Contract Rate. In the event
the aggregate amount of Revolving Credit Advances exceeds the
Formula Amount for five (5) or more days in any month during
the Term, the average daily balance of Revolving Credit
Advances in that month shall bear interest at the Overadvance
Rate.
(ii) Interest shall be computed on the basis of
actual days elapsed over a 360-day year.
(iii) Upon the occurrence and during the continuance
of an Event of Default, interest shall be payable at the
Default Rate.
(iv) Notwithstanding the foregoing, in no event
shall interest exceed the maximum rate permitted under any
applicable law or regulation, and if any provision of this
Agreement or an Ancillary Agreement is in contravention of any
such law or regulation, such provision shall be deemed amended
to provide for interest at said maximum rate and any excess
amount shall either be applied, at Lender's option, to the
outstanding Loans in such order as Lender shall determine or
refunded by Lender to Borrowers.
(v) Borrowers shall pay principal, interest and all
other amounts payable hereunder, or under any Ancillary
Agreement, without any deduction whatsoever, including, but
not limited to, any deduction for any set-off or counterclaim.
(vi) Upon receipt of the Borrowers' audited year end
financial statements, for fiscal year ending 1997 and each
fiscal year thereafter, the Contract Rate shall be reduced, by
the number of basis points and on the circumstances as set
forth in the next sentence in this paragraph below, for the
balance of any such fiscal year, remaining after receipt of
such year end financial statement, through the date the next
fiscal year end statement is delivered or required under this
Agreement to be delivered (whichever is earlier) by Borrowers
to Lender. The reduction of the Contract Rate referred to in
the sentence above shall be equal to the number of basis
points corresponding to the ratio of Borrower's Funded Debt to
EBITDA ratio shown below:
FUNDED DEBT/EBITDA BASIS POINT REDUCTION
2.80 or greater: 1 0 basis points
from 2.0 up to 2.79 : 1 25 basis points
from 1.5 up to 1.99 : 1 50 basis points
1.49 or less to 1 75 basis points
Notwithstanding the foregoing in no event shall the Contract
Rate be reduced to a rate less than the Alternate Base Rate
plus three quarters of one percent (3/4%), nor shall any rate
reduction be in effect during the existence of or following
the occurrence of an Event of Default.
(b) Fees.
(i) CLOSING FEE. Upon execution of this Agreement
by Borrowers and Lender, Borrowers shall pay to Lender a
closing fee in an amount equal to $250,000.00
(ii) UNUSED LINE FEE. In the event the average
closing daily unpaid balances of all Revolving Credit Advances
hereunder during any calendar month is less than the Maximum
Revolving Amount, Borrowers shall pay to Lender a fee at a
rate per annum equal to one-half of one percent (.5%) on the
amount by which the Maximum Revolving Amount exceeds such
average daily unpaid balance. Such fee shall be calculated on
the basis of a year of 360 days and actual days elapsed, and
shall be charged to Borrower's account on the first day of
each month with respect to the prior month.
(iii) COLLATERAL MONITORING FEE. Borrowers shall pay
to Lender a monthly Collateral Monitoring Fee of $10,000.00
and in addition upon Lender's performance of any collateral
monitoring namely any field examination, collateral analysis
or other business analysis, the need for which is to be
reasonably determined by Lender and which monitoring is
undertaken by Lender or for Lender's benefit, a per diem
amount equal to Lender's then standard rate per person, for
each person employed to perform such monitoring together with
all costs, disbursements and expenses incurred by the Lender
and the person performing such collateral monitoring shall be
charged to Borrower's account.
(c) INCREASED COSTS. In the event that any
applicable law, treaty or governmental regulation, or any
change therein or in the interpretation or application
thereof, or compliance by Lender (for purposes of this Section
5(c), the term "Lender" shall include Lender and any
corporation or bank controlling Lender) with any request or
directive (whether or not having the force of law) from any
central bank or other financial, monetary or other authority,
shall:
(i) subject Lender to any tax of any kind
whatsoever with respect to this Agreement or change the basis
of taxation of payments to Lender of principal, fees, interest
or any other amount payable hereunder or under any Ancillary
Agreements (except for changes in the rate of tax on the
overall net income of Lender by the jurisdiction in which it
maintains its principal office);
(ii) impose, modify or hold applicable any reserve,
special deposit, assessment or similar requirement against
assets held by, or deposits in or for the account of, advances
or loans by, or other credit extended by, any office of
Lender, including (without limitation) pursuant to Regulation
D of the Board of Governors of the Federal Reserve System; or
(iii) impose on Lender any other condition with
respect to this Agreement or any Ancillary Agreements;
and the result of any of the foregoing is to increase the cost
to Lender of making, renewing or maintaining its Loans
hereunder by an amount that Lender deems to be material or to
reduce the amount of any payment (whether of principal,
interest or otherwise) in respect of any of the Loans by an
amount that Lender deems to be material, then, in any case
Borrowers shall promptly pay Lender, upon its demand, such
additional amount as will compensate Lender for such
additional cost or such reduction, as the case may be. Lender
shall certify the amount of such additional cost or reduced
amount to Borrowers, and such certification shall be
conclusive absent manifest error.
(d) CAPITAL ADEQUACY.
(i) In the event that Lender shall have determined
that any applicable law, rule, regulation or guideline
regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by Lender (for purposes of this Section 5(d), the
term "Lender" shall include Lender and any corporation or bank
controlling Lender) with any request or directive regarding
capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on
Lender's capital as a consequence of its obligations hereunder
to a level below that which Lender would have achieved but for
such adoption, change or compliance (taking into consideration
Lender's policies with respect to capital adequacy) by an
amount deemed by Lender to be material, then, from time to
time, Borrowers shall pay upon demand to Lender such
additional amount or amounts as will compensate Lender for
such reduction. In determining such amount or amounts, Lender
may use any reasonable averaging or attribution methods. The
protection of this Section shall be available to Lender
regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation
or condition.
(ii) A certificate of Lender setting forth such
amount or amounts as shall be necessary to compensate Lender
with respect to Section 5(d) hereof when delivered to
Precision shall be conclusive absent manifest error.
(e) MATURED FUNDS. On the last day of each month
during the Term, Lender shall credit Borrowers' account with
interest at the Matured Funds Rate in effect during such month
on the average daily balance during such month of any amounts
payable by Lender to Borrowers hereunder which are not drawn
by Precision as agent for Borrowers on the Settlement Date.
6. SECURITY INTEREST.
(a) To secure the prompt payment to Lender of the
Obligations, Borrowers hereby assign, pledge and grant to
Lender a continuing security interest in and to the
Collateral, whether now owned or existing or hereafter
acquired or arising and wheresoever located (whether or not
the same is subject to Article 9 of the Uniform Commercial
Code). All of the Borrowers' ledger sheets, files, records,
books of account, business papers and documents relating to
the Collateral shall, until delivered to or removed by Lender,
be kept by Borrowers in trust for Lender until all Obligations
have been paid in full. Each confirmatory assignment schedule
or other form of assignment hereafter executed by Borrowers
shall be deemed to include the foregoing grant, whether or not
the same appears therein.
(b) Lender may file one or more financing
statements disclosing Lender's security interest in the
Collateral without Borrower's signature appearing thereon or
Lender may sign on Borrower's behalf as provided in paragraph
13 hereof. The parties agree that a carbon, photographic or
other reproduction of this Agreement shall be sufficient as a
financing statement. If any Receivable becomes evidenced by
a promissory note or any other instrument for the payment of
money, Borrowers will immediately deliver such instrument to
Lender appropriately endorsed.
7. REPRESENTATIONS CONCERNING THE COLLATERAL.
Each Borrower represents and warrants (each of which such
representations and warranties shall be deemed repeated upon
the making of each request for a Revolving Credit Advance and
made as of the time of each and every Revolving Credit Advance
hereunder):
(a) all the Collateral (i) is owned by Borrowers
free and clear of all claims, liens, security interests and
encumbrances (including without limitation any claims of
infringement) except (A) those in Lender's favor and (B)
Permitted Liens and (ii) is not subject to any agreement
prohibiting the granting of a security interest or requiring
notice of or consent to the granting of a security interest;
(b) all Receivables known to Borrower (i) represent
complete (to the extent of the percentage of the work for
which the payment is due) bona fide transactions which require
no further act under any circumstances on Borrower's part to
make such Receivables payable by Customers, (ii) to the best
of Borrower's knowledge, are not subject to any present,
future or contingent Disputes which are not disclosed to
Lender; (iii) do not represent ▇▇▇▇ and hold sales,
consignment sales, guaranteed sales, sale or return or other
similar understandings or obligations of any Affiliate or
Subsidiary of Borrowers which are not disclosed to Lender;
(iv) included in any Borrowing Base Certificate as an Eligible
Receivable meets all criteria specified in the definition of
Eligible Receivables, except as may otherwise be specifically
disclosed in such Borrowing Base Certificate or as otherwise
theretofore disclosed in writing to Lender; and (v) Borrowers
have no knowledge of any fact or circumstance not disclosed
to Lender in the pertinent Borrowing Base Certificate or
otherwise in writing, which would impair the validity or
collectibility of any Receivable and that all documents in
connection with each Receivable are genuine.
(c) in the event any amounts due and owing from any
account debtor to Borrower on any Eligible Receivable shall
become subject to any Dispute, or to any other adjustment in
excess of $100,000.00 otherwise permitted to be made in
accordance with the terms and provisions hereof in the
ordinary course of business and prior to the occurrence of an
Event of Default hereunder, Borrower agrees that it shall, at
the time of the submission of the next Borrowing Base
Certificate required to be delivered to Lender immediately
following the date on which Borrower learns thereof, provide
Lender with notice thereof. Borrower further agrees that it
shall also notify Lender promptly of all returns and credits
in excess of $75,000.00 in respect of any Receivables included
within a Borrowing Base Certificate, which notice shall
specify the Receivables affected.
8. COVENANTS CONCERNING THE COLLATERAL. During
the Term, Borrowers covenant that they shall:
(a) not dispose of any of the Collateral whether by
sale, lease or otherwise except for (i) the sale of Inventory
in the ordinary course of business, and (ii) the disposition
or transfer of obsolete and wornout Equipment in the ordinary
course of business during any fiscal year having an aggregate
fair market value of not more than $100,000.00 and only to the
extent that (x) the proceeds of any such disposition are used
to acquire replacement Equipment which is subject to Lender's
first priority security interest or (y) the proceeds of which
are remitted to Lender in reduction of the Obligations;
(b) not encumber, mortgage, pledge, assign or grant
any security interest in any Collateral or any of Borrowers'
other assets to anyone other than Lender except for Permitted
Liens;
(c) place notations to the extent required by GAAP
and as required by the Securities and Exchange Commission upon
Borrowers' books of account and any financial statement
prepared by Borrower to disclose Lender's security interest in
the Collateral;
(d) defend the Collateral against the claims and
demands of all parties;
(e) keep and maintain the Equipment in good
operating condition, except for ordinary wear and tear, and
shall make all necessary repairs and replacements thereof so
that the value and operating efficiency shall at all times be
maintained and preserved. Borrower shall not permit any such
items to become a fixture to real estate or accessions to
other personal property;
(f) not extend the payment terms of any Receivable
without prompt notice thereof to Lender;
(g) perform all other steps requested by Lender to
create and maintain in Lender's favor a valid perfected first
security interest in all Collateral except for Permitted
Liens; and
(h) Borrowers shall promptly provide Lender with
duplicate originals of all credits which Borrowers issue to
their Customers and immediately notify Lender of any Disputes.
Borrowers shall settle all Disputes at no cost or expense to
Lender. Should Lender so elect, upon the occurrence and
during the continuance of any Event of Default, Lender may at
any time in its discretion (i) withdraw Borrowers' authority
to issue credits to its Customers without Lender's prior
written consent; (ii) litigate Disputes or settle them
directly with Customers on terms acceptable to Lender; or
(iii) direct Borrowers to set aside and identify as Lender's
property any returned or repossessed merchandise or other
goods which by sale resulted in Receivables theretofore
assigned to Lender ("Retained Goods"). All Retained Goods
(and the proceeds thereof) shall be (A) held by Borrowers in
trust for Lender as Lender's property, (B) subject to Lender's
security interest hereunder and (C) disposed of only in
accordance with Lender's express written instructions.
9. COLLECTION AND MAINTENANCE OF COLLATERAL AND
RECORDS.
Lender may at any time verify Borrowers' Receivables
utilizing an audit control company or any other agent of
Lender. Lender or Lender's designee may after the occurrence
and during the continuance of an Event of Default notify
Customers, at any time at Lender's sole discretion, of
Lender's security interest in Receivables, collect them
directly and charge the collection costs and expenses to
Borrowers' account, but, unless and until Lender does so or
gives Borrowers other instructions, Borrowers shall instruct
all of its Customers to make payments on account of
Receivables to an account under Lender's dominion and control
at such bank as Lender may designate, as provided by the terms
of Section 23. To the extent Borrowers receive any payments
on account of Receivables, they shall hold such payments for
Lender's benefit in trust as Lender's trustee and immediately
deliver them to Lender in their original form with all
necessary endorsements or, as directed by Lender, deposit such
payments as directed by Lender pursuant to Section 22 hereof.
Lender will credit (conditional upon final collection) all
such payments to Borrower's account on the Settlement Date.
Borrowers shall provide Lender on a weekly basis (or more
frequently as may be reasonably requested by Lender) with
schedules describing all Receivables created or acquired by
Borrowers, but Borrowers' failure to execute and deliver such
schedules of Receivables shall not affect or limit Lender's
security interest or other rights in and to the Receivables.
Borrowers shall furnish, at Lender's request, copies of
contracts, invoices or the equivalent, and any original
shipping and delivery receipts for all merchandise sold or
services rendered and such other documents and information as
Lender may require. All of Borrowers' invoices (to the extent
such are issued) shall either reference, or bear the terms
stated on, the applicable customer order, contract, or other
requests by customer for goods or services (referred to in
this section as a "Customer Order"), and no change from the
original terms of such Customer Order shall be made without
the prior written consent of Lender. Borrowers shall provide
Lender on a monthly (within ten (10) days after the end of
each month), or more frequent basis, as reasonably requested
by Lender, a summary report of Borrowers' current Inventory,
certified as true and accurate by Borrowers' President, Vice
President of Finance, Chief Financial Officer or other senior
executive officer , as well as an aged trial balance of
Borrowers' existing accounts payable. Borrowers shall provide
Lender, as requested by Lender, such other schedules,
documents and/or information regarding the Collateral as
Lender may require. Without limiting the foregoing, Borrowers
shall provide to Lender a borrowing base certificate at least
once daily("Borrowing Base Certificate"), which must be in
form and substance acceptable to Lender and which Borrowing
Base Certificate shall certify to Lender, and shall contain
sufficient information and calculations as Lender may deem
necessary or desirable, in order to verify any Receivables
Availability, Inventory Availability, the applicable Formula
Amount and whether or not Receivables and/or Inventory
included therein are Eligible Receivables and/or Eligible
Inventory. Without limiting the foregoing, a Borrowing Base
Certificate must be executed and delivered by Borrowers to
Lender at the time of or prior to each request for Revolving
Credit Advances pursuant to Section 4. Each such Borrowing
Base Certificate shall be delivered to Lender at its office
described in Section 25 below, on each relevant Business Day.
10. INSPECTIONS. At all times during normal
business hours and after at least one Business Days notice
(unless there exists an Event of Default or Incipient Event of
Default in which event no notice shall be necessary), Lender
shall have the right subject to any applicable governmental
prohibitions or restrictions on access to facilities to (a)
visit and inspect Borrower's properties and the Collateral,
(b) inspect, audit and make extracts from Borrower's relevant
books and records, including, but not limited to, management
letters prepared by independent accountants, and (c) discuss
with Borrowers' principal officers, and independent
accountants, Borrowers' business, assets, liabilities,
financial condition, results of operations and business
prospects. Borrowers will deliver to Lender any instrument
necessary for Lender to obtain records from any service bureau
maintaining records for Borrowers.
11. FINANCIAL INFORMATION. Borrowers shall provide
Lender (a) as soon as available, but in any event within
ninety (90) days after the end of each of Borrowers' fiscal
years, Borrowers' balance sheet as at the end of such fiscal
year and the related statements of income, retained earnings
and statement of cash flow for such fiscal year, setting forth
in comparative form the figures as at the end of and for the
previous fiscal year, which shall have been reported on by
independent certified public accountants who shall be
satisfactory to Lender and shall be accompanied by an
unqualified audit report issued by such independent certified
public accountants; (b) as soon as available, drafts of
Borrowers' balance sheet as at the end of each of Borrowers'
fiscal years and the related statements of income, retained
earnings and statement of cash flow for such fiscal year,
which have been internally prepared by Borrowers; (c) as soon
as available, but in any event within thirty (30) days after
the close of each month and within 45 days after the close of
each quarter, the balance sheet as at the end of such month
and quarter and the related statements of income, retained
earnings and changes in statement of cash flow for such month
and quarter, which have been internally prepared by Borrowers.
All financial statements required under (a), (b) and (c) above
shall be prepared in accordance with GAAP, subject to year end
adjustments in the case of monthly and quarterly statements.
Together with the financial statements furnished pursuant to
(a) above, Borrowers shall deliver a certificate of Borrowers'
certified public accountants addressed to Lender stating that
(i) they have caused this Agreement and the Ancillary
Agreements to be reviewed and (ii) in making the examination
necessary for the issuance of such financial statements,
nothing has come to their attention to lead them to believe
that any Event of Default or Incipient Event of Default exists
and, in particular, they have no knowledge of any Event of
Default or Incipient Event of Default or, if such is not the
case, specifying such Event of Default or Incipient Event of
Default and its nature, when it occurred and whether it is
continuing. At the times the financial statements are
furnished pursuant to (a), (b) and (c) above, a certificate of
Precision's President, Vice President of Finance, Chief
Financial Officer or other senior executive officer shall be
delivered to Lender stating that, based on an examination
sufficient to enable him to make an informed statement that to
their knowledge, no Event of Default or Incipient Event of
Default exists, or, if such is not the case, specifying such
Event of Default or Incipient Event of Default and its nature,
when it occurred, whether it is continuing and the steps being
taken by Borrowers with respect to such event. If any
internally prepared financial information, including that
required under this paragraph, is unsatisfactory in any manner
to Lender, Lender may request that Borrowers' independent
certified public accountants review same.
In addition to the foregoing financial statements,
Borrowers shall furnish Lender no less than thirty (30) days
prior to the beginning of each fiscal year commencing with
fiscal year 1998, a month by month projected operating budget
and cash flow for such fiscal year (including an income
statement for each month and a balance sheet as at the end of
the last month in each fiscal quarter), such projections to be
accompanied by a certificate signed by Precision's President,
Vice President of Finance Chief Financial Officer or other
senior executive officer to the effect that such projections
have been prepared on the basis of sound financial planning
practice consistent with past budgets and financial statements
and that such officer has no reason to question the
reasonableness of any material assumptions on which such
projections were prepared.
12. ADDITIONAL REPRESENTATIONS, WARRANTIES AND
COVENANTS. Each Borrower represents and warrants (each of
which such representations and warranties shall be deemed
repeated upon the making of a request for a Revolving Credit
Advance and made as of the time of each Revolving Credit
Advance made hereunder), and covenants that:
(a) Each Borrower is a corporation duly organized
and validly existing under the laws of its respective State of
incorporation set forth in Schedule 12(a) and duly qualified
and in good standing in every other state or jurisdiction in
which the failure to do so would have a material adverse
effect on Borrower's business.;
(b) the execution, delivery and performance of this
Agreement and the Ancillary Agreements (i) have been duly
authorized, (ii) are not in contravention of Borrower's
certificate of incorporation, by-laws or of any indenture,
agreement or undertaking to which Borrower is a party or by
which Borrower is bound and (iii) are within Borrower's
corporate powers;
(c) this Agreement and the Ancillary Agreements
executed and delivered by Borrower are Borrower's legal, valid
and binding obligations, enforceable in accordance with their
terms;
(d) it keeps and will continue to keep all of its
books and records concerning the Collateral at Borrower's
executive offices located at the address set forth in the
introductory paragraph of this Agreement or at such other
locations as are listed on Schedule 12(d) and will not move
such books and records without giving Lender at least thirty
(30) days prior written notice;
(e) (i) the operation of Borrower's business is
and will continue to be in compliance in all material respects
with all applicable federal, state and local laws, including
but not limited to all applicable environmental laws and
regulations.
(ii) Borrower will maintain a system to assure
and monitor continued compliance with all applicable
environmental laws, which system shall include periodic
reviews of such compliance.
(iii) in the event the Borrower obtains, gives
or receives notice of any release or threat of release of a
reportable quantity of any Hazardous Substances on its
property (any such event being hereinafter referred to as a
"Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially
responsible for investigation or cleanup of environmental
conditions on its property, demand letter or complaint, order,
citation, or other written notice with regard to any Hazardous
Discharge or violation of any environmental laws affecting its
property or Borrower's interest therein (any of the foregoing
is referred to herein as an "Environmental Complaint") from
any Person or entity, including any state agency responsible
in whole or in part for environmental matters in the state in
which such property is located or the United States
Environmental Protection Agency (any such person or entity
hereinafter the "Authority"), then the Borrower shall, within
five (5) Business Days, give written notice of same to the
Lender detailing facts and circumstances of which the Borrower
is aware giving rise to the Hazardous Discharge or
Environmental Complaint and periodically inform Lender of the
status of the matter. Such information is to be provided to
allow the Lender to protect its security interest in the
Collateral and is not intended to create nor shall it create
any obligation upon the Lender with respect thereto.
(iv) Borrower shall respond promptly to any
Hazardous Discharge or Environmental Complaint and take all
action reasonably necessary in order to safeguard the health
of any Person and to avoid subjecting the Collateral to any
lien, charge, claim or encumbrance. If Borrower shall fail to
respond promptly to any Hazardous Discharge or Environmental
Complaint or Borrower shall fail to comply with any of the
requirements of any environmental laws, the Lender may, but
without the obligation to do so, for the sole purpose of
protecting the Lender's interest in Collateral: (A) give such
notices or (B) enter onto Borrower's property (or authorize
third parties to enter onto such property) and take such
actions as the Lender (or such third parties as directed by
the Lender) deem reasonably necessary or advisable, to clean
up, remove, mitigate or otherwise deal with any such Hazardous
Discharge or Environmental Complaint. All reasonable costs
and expenses incurred by the Lender (or such third parties) in
the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation
or proceedings, fines and penalties, together with interest
thereon from the date expended at the Default Rate for
Revolving Credit Advances shall be paid upon demand by the
Borrower, and until paid shall be added to and become a part
of the Obligations secured by the Liens created by the terms
of this Agreement or any other agreement between Lender and
Borrower.
(v) Borrower shall defend and indemnify the
Lender and hold the Lender harmless from and against all loss,
liability, damage and expense, claims, costs, fines and
penalties, including attorney's fees, suffered or incurred by
the Lender under or on account of any environmental laws,
including, without limitation, the assertion of any lien
thereunder, with respect to any Hazardous Discharge, the
presence of any hazardous substances affecting Borrower's
property, whether or not the same originates or emerges from
Borrower's property or any contiguous real estate, including
any loss of value of the Collateral as a result of the
foregoing except to the extent such loss, liability, damage
and expense is attributable to any Hazardous Discharge
resulting from actions on the part of the Lender. The
Borrower's obligations under this paragraph 12(e) shall arise
upon the discovery of the presence of any Hazardous Substances
on the Borrower's property, whether or not any federal, state,
or local environmental agency has taken or threatened any
action in connection with the presence of any hazardous
substances. The Borrower's obligation and the
indemnifications hereunder shall survive the termination of
this Agreement.
(vi) For purposes of paragraph 12(e) all
references to Borrower's property shall be deemed to include
all of Borrower's right, title and interest in and to all
owned and/or leased premises;
(f) based upon the Employee Retirement Income
Security Act of 1974 ("ERISA"), and the regulations and
published interpretations thereunder: (i) Borrower has not
engaged in any Prohibited Transactions as defined in paragraph
406 of ERISA and paragraph 4975 of the Internal Revenue Code,
as amended; (ii) Borrower has met all applicable minimum
funding requirements under paragraph 302 of ERISA in respect
of its plans; (iii) Borrower has no knowledge of any event or
occurrence which would cause the Pension Benefit Guaranty
Corporation to institute proceedings under Title IV of ERISA
to terminate any employee benefit plan(s); (iv) Borrower has
no fiduciary responsibility for investments with respect to
any plan existing for the benefit of persons other than
Borrower's employees; and (v) Borrower has not withdrawn,
completely or partially, from any multiemployer pension plan
so as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980;
(g) it is solvent, able to pay its debts as they
mature, has capital sufficient to carry on its business and
all businesses in which it is about to engage and the fair
saleable value of its assets (calculated on a going concern
basis) is in excess of the amount of its liabilities;
(h) there is no pending or to Borrowers' knowledge
threatened litigation, actions or proceeding which involve the
possibility of materially and adversely affecting the
Borrower's business, assets, operations, condition or
prospects, financial or otherwise, or the Collateral or the
ability of Borrower to perform this Agreement;
(i) all balance sheets and income statements which
have been delivered to Lender fairly, accurately and properly
state Borrower's financial condition on a basis consistent
with that of previous financial statements and there has been
no material adverse change in Borrower's financial condition
as reflected in such statements since the date thereof and
such statements do not fail to disclose any fact or facts
which might materially and adversely affect Borrower's
financial condition;
(j) (x) it possesses all of the material licenses,
patents, copyrights, trademarks, tradenames and permits
necessary to conduct its business, (y) Borrower has received
no notice of a claim of violation or infringement with respect
thereof which has not been resolved without any material
adverse effect on Borrower and (z) all such licenses, patents,
copyrights, trademarks, tradenames and permits are listed on
Schedule 12(j);
(k) it will pay or discharge when due all taxes,
assessments and governmental charges or levies imposed upon
it; unless they are contested in good faith provided such
charges or levies have not become liens which are superior to
that of Lender in any of the Collateral on any of Borrowers'
assets and provided Borrowers maintain reserves sufficient to
fully pay such charges or levies and all interest thereon.
(l) it will promptly inform Lender in writing of:
(i) the commencement of all proceedings and investigations by
or before and/or the receipt of any notices from, any
governmental or nongovernmental body and all actions and
proceedings in any court or before any arbitrator against or
in any way concerning any of Borrower's properties, assets or
business, which might singly or in the aggregate, have a
materially adverse effect on Borrower; (ii) any amendment of
Borrower's certificate of incorporation or by-laws; (iii) any
change in Borrower's business, assets, liabilities, condition
(financial or otherwise), results of operations or business
prospects which has had or would have a materially adverse
effect on Borrower; (iv) any Event of Default or Incipient
Event of Default; (v) any default or any event which with the
passage of time or giving of notice or both would constitute
a default of which Borrower is aware, under any agreement for
the payment of money to which Borrower is a party or by which
Borrower or any of Borrower's properties may be bound which
would have a material adverse effect on Borrower's business,
operations, property or condition (financial or otherwise) or
the Collateral; (vi) any change in the location of Borrower's
executive offices; (vii) any change in the location of
Borrower's Inventory or Equipment from the locations listed on
Schedule 12(l) attached hereto, (viii) any change in
Borrower's corporate name; (ix) any material delay in
Borrower's performance of any of its obligations to any
Customer and of any assertion of any material claims, offsets,
counterclaims or Disputes by any Customer and of any
allowances, credits and/or other monies granted by it to any
Customer; (x) furnish to and inform Lender of all material
adverse information known to Borrower relating to the
financial condition of any account debtor of a material
nature; and (xi) any material return of goods;
(m) it will not except as otherwise permitted by
the Agreement (i) create, incur, assume or suffer to exist any
indebtedness (exclusive of trade debt, Indebtedness secured by
Permitted Liens, or Permitted Indebtedness) whether secured or
unsecured other than Borrower's indebtedness to Lender and as
set forth on Schedule 12(m) attached hereto and made a part
hereof; (ii) declare, pay or make any dividend (except as may
be permitted to be paid to Bank of America under the
provisions of a subordination agreement between Bank of
America and Lender) or distribution, make any payment or
otherwise apply any of its funds, property or assets, to or
for the benefit of any stockholder, and/or Affiliate of
Borrower (other than customary salaries and bonuses to
individuals who are employed by a Borrower and intercompany
dividends, distributions, and payments by and among
Borrowers), including without limitation in respect of the
purchase, redemption or other retirement of any common or
preferred stock of any Borrower; (iii) directly or indirectly,
prepay any indebtedness (other than to Lender or to realize
trade discounts, or to Bank of America, but only to the extent
as may be permitted to be paid to Bank of America under the
provisions of a subordination agreement between Bank of
America and Lender), or repurchase, redeem, retire or
otherwise acquire any indebtedness of Borrower; (iv) makes
advances, loans or extensions of credit (other than the
extension of ordinary and customary trade credit to customers)
to any Person, except in the ordinary course of business, and
as may be outstanding on the date of this Agreement, in an
amount not to exceed an aggregate of $50,000.00 at any one
time outstanding; (v) become either directly or contingently
liable upon the obligations of any Person by assumption,
endorsement except for the endorsement of checks in the
ordinary course of business or guaranty thereof or otherwise;
(vi) enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or
a portion of the assets or stock of any Person (except for the
purchase of inventory and equipment in the ordinary course of
business as otherwise permitted hereunder) or permit any other
Person to consolidate with or merge with it; (vii) form any
Subsidiary or enter into any partnership, joint venture or
similar arrangement; (viii) materially change the nature of
the business in which it is presently engaged; (ix) change its
fiscal year or make any changes in accounting treatment and
reporting practices without prior written notice to Lender
except as required by GAAP or in the tax reporting treatment
or except as required by law; (x) enter into any transaction
with any Affiliate other than another Borrower, except in
ordinary course on arms length terms; or (xi) ▇▇▇▇ Receivables
under any name except the present name of the Borrower; (xii)
sell, transfer or lease or otherwise dispose of any of its
properties or assets, except in the ordinary course of its
business;
(n) all financial projections of Borrower's
performance prepared by Borrowers or at Borrowers' direction
and delivered to Lender will represent, at the time of
delivery to Lender, Borrowers' best estimate of Borrowers'
future financial performance and will be based upon
assumptions which are reasonable in light of Borrowers' past
performance and then current business conditions;
(o) Borrowers will not make capital expenditures in
any fiscal year an amount in excess of $3,000,000 in the
aggregate;
(p) Borrowers shall not at any time permit their
Working Capital to be less than the dollar amounts set forth
below during the corresponding dates set forth below:
Date Amount
9/30/97 $ 550,000
12/31/97 $4,500,000
3/31/98 $6,500,000
6/30/98 $7,000,000
9/30/98 $7,500,000
12/31/98 $8,000,000
and at each end a
calendar quarter thereafter
(q) Borrowers shall cause to be maintained at all times
a ratio of Total Liabilities to Tangible Net Worth of not
greater than the ratios set forth below on the corresponding
dates set froth below:
Date Ratio
9/30/97 12:1
12/31/97 5.5:1
3/31/98 4.5:1
6/30/98 4.0:1
9/30/98 3.75:1
12/31/98 3.5:1
3/31/99 3.25:1
6/30/99 3.0:1
and at the end of each
calendar quarter thereafter
(r) Borrowers shall not sustain two consecutive
quarters of net after tax losses, and Borrowers shall not
sustain a net after tax loss in any single quarter in excess
of $500,000.
(s) Borrower shall maintain a Tangible Net Worth,
inclusive of indebtedness which is subordinated to Lender on
terms satisfactory to Lender, less 20% of the dollar amount of
any capital injections made to Borrowers, which are made
subsequent to the date hereof of no less than the amounts set
forth below on the corresponding dates set forth below:
Date Amount
9/30/97 $ 4,300,000
12/31/97 8,800,000
3/31/98 11,500,000
6/30/98 12,000,000
9/30/98 12,500,000
12/31/98 13,000,000
3/31/99 13,500,000
6/30/99 14,000,000
9/30/99 14,500,000
12/31/99 15,000,000
3/31/00 15,500,000
and at the end of each
calendar quarter thereafter
(t) none of the proceeds of the Loans hereunder
will be used directly or indirectly to "purchase" or "carry"
"margin stock" or to repay indebtedness incurred to "purchase"
or "carry" "margin stock" within the respective meanings of
each of the quoted terms under Regulation G of the Board of
Governors of the Federal Reserve System as now and from time
to time hereafter in effect; and
(u) it will bear the full risk of loss from any
loss of any nature whatsoever with respect to the Collateral.
At its own cost and expense in amounts and with carriers
acceptable to Lender, it shall (i) keep all its insurable
properties and properties in which it has an interest insured
against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of
companies engaged in businesses similar to Borrower's
including, without limitation, business interruption
insurance; (ii) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses
similar to Borrower's insuring against larceny, embezzlement
or other criminal misappropriation of insured's officers and
employees who may either singly or jointly with others at any
time have access to the assets or funds of Borrower either
directly or through authority to draw upon such funds or to
direct generally the disposition of such assets; (iii)
maintain public and product liability insurance against claims
for personal injury, death or property damage suffered by
others; (iv) maintain all such workmen's compensation or
similar insurance as may be required under the laws of any
state or jurisdiction in which Borrower is engaged in
business; (v) furnish Lender with (x) copies of all policies
and evidence of the maintenance of such policies at least
thirty (30) days before any expiration date, and (y)
appropriate loss payable endorsements in form and substance
satisfactory to Lender, naming Lender as loss payee and
providing that as to Lender the insurance coverage shall not
be impaired or invalidated by any act or neglect of Borrower
and the insurer will provide Lender with at least thirty (30)
days notice prior to cancellation. Borrower shall instruct
the insurance carriers that in the event of any loss
thereunder, the carriers shall make payment for such loss to
Lender (and if another person other than Borrower has an
interest in the property which is subject to such loss then
jointly with such person to the extent of their interest) and
not to Borrower and Lender jointly. If any insurance losses
are paid by check, draft or other instrument payable to
Borrower and Lender jointly, Lender may endorse Borrower's
name thereon and do such other things as Lender may deem
advisable to reduce the same to cash. Upon the occurrence and
during the continuance of an Event of Default Lender is hereby
authorized to adjust and compromise claims. All loss
recoveries received by Lender upon any such insurance may be
applied to the Obligations, in such order as Lender in its
sole discretion shall determine. Any surplus shall be paid by
Lender to Borrower or applied as may be otherwise required by
law. Any deficiency thereon shall be paid by Borrower to
Lender, on demand.
(v) it shall not purchase or acquire obligations or
stock of, or any other interest in, or make any investment in
any entity, except (A) obligations issued or guaranteed by the
United States of America or any agency thereof, (B) commercial
paper with maturities of not more than 180 days and a
published rating of not less than A-1 or P-1 (or the
equivalent rating), (C) certificates of time deposit and
bankers' acceptances having maturities of not more than 180
days and repurchase agreements backed by United States
government securities of a commercial bank if (x) such bank
has a combined capital and surplus of at least $500,000,000,
or (y) its debt obligations, or those of a holding company of
which it is a subsidiary, are rated not less than A (or the
equivalent rating) by a nationally recognized investment
rating agency and (D) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United
States of America or an Agency thereof, and (E) Eurodollar
time deposits with financial institutions with a published
rating of not less than A-1 or P-1 (or the equivalent rating).
13. POWER OF ATTORNEY. Borrowers hereby appoint
Lender or any other Person whom Lender may designate as
Borrowers' attorney, with power to: (i) endorse each
Borrower's name on any checks, notes, acceptances, money
orders, drafts or other forms of payment or security that may
come into Lender's possession; (ii) sign each Borrower's name
on any invoice or ▇▇▇▇ of lading relating to any Receivables,
drafts against Customers, schedules and assignments of
Receivables, notices of assignment, financing statements and
other public records, verifications of account and notices to
or from Customers; (iii) verify the validity, amount or any
other matter relating to any Receivable by mail, telephone,
telegraph or otherwise with Customers; (iv) execute customs
declarations and such other documents as may be required to
clear Inventory through Customs; (v) do all things necessary
to carry out this Agreement, any Ancillary Agreement and all
related documents; and (vi) on or after the occurrence and
continuation of an Event of Default which has prompted Lender
to exercise its remedies as a secured Lender and the
commencement of the liquidation by Lender of the Collateral,
notify the post office authorities to change the address for
delivery of Borrower's mail to an address designated by
Lender, and to receive, open and dispose of all mail addressed
to Borrower. Borrowers hereby ratify and approve all acts of
the attorney taken in good faith. Neither Lender nor the
attorney will be liable for any acts or omissions other than
for gross negligence or willful misconduct or for any error of
judgment or mistake of fact or law. This power, being coupled
with an interest, is irrevocable so long as any Receivable
which is assigned to Lender or in which Lender has a security
interest remains unpaid and until the Obligations have been
fully satisfied.
14. EXPENSES. Borrowers shall pay all of Lender's
out-of-pocket costs and expenses, including without limitation
reasonable fees and disbursements of counsel retained or
employed by Lender and appraisers, in connection with the
preparation, execution and delivery of this Agreement and the
Ancillary Agreements, and in connection with the prosecution
or defense of any action, contest, dispute, suit or proceeding
concerning any matter in any way arising out of, related to or
connected with this Agreement or any Ancillary Agreement.
Borrowers shall also pay all of Lender's out-of-pocket costs
and expenses, including without limitation reasonable fees and
disbursements of counsel retained or employed by Lender, in
connection with (a) the preparation, execution and delivery of
any waiver, any amendment thereto or consent proposed or
executed in connection with the transactions contemplated by
this Agreement or the Ancillary Agreements, (b) Lender's
obtaining performance of the Obligations under this Agreement
and any Ancillary Agreements, including, but not limited to,
the enforcement or defense of Lender's security interests,
assignments of rights and liens hereunder as valid perfected
security interests, (c) any attempt to inspect, verify,
protect, collect, sell, liquidate or otherwise dispose of any
Collateral, and (d) any consultations in connection with any
of the foregoing. Borrowers shall also pay Lender's then
standard price for furnishing Borrowers or its designees
copies of any statements, records, files or other data
(collectively, "Reports") requested by Borrowers or their
designees, other than reports of the kind furnished to
Borrowers and Lender's other borrowers on a regular, periodic
basis in the ordinary course of Lender's business. Borrowers
shall also pay Lender's customary bank charges, including,
without limitation, all wire transfer fees incurred by Lender,
for all bank services performed or caused to be performed by
Lender for Borrowers at Borrowers' request. All such costs
and expenses together with all filing, recording and search
fees, taxes and interest payable by Borrowers to Lender shall
be payable on demand and shall be secured by the Collateral.
If any tax by any governmental authority is or may be imposed
on or as a result of any transaction between Borrowers and
Lender which Lender is or may be required to withhold or pay,
Borrowers agree to indemnify and hold Lender harmless in
respect of such taxes, and Borrowers will repay to Lender the
amount of any such taxes which shall be charged to Borrower's
account; and until Borrowers shall furnish Lender with
indemnity therefor (or supply Lender with evidence
satisfactory to it that due provision for the payment thereof
has been made), Lender may hold without interest any balance
standing to Borrower's credit and Lender shall retain its
security interests in any and all Collateral. Borrowers
hereby acknowledge that Lender shall not be liable in any
manner whatsoever for any selling expenses, orders, purchases
or contracts of any kind resulting from any transaction
between a Borrower and any other Person and Borrowers hereby
indemnify and hold Lender harmless with respect thereto, which
indemnity shall survive termination of this Agreement.
15. ASSIGNMENT. Lender may assign any or all of
the Obligations together with any or all of the security
therefor and any transferee shall succeed to all of Lender's
rights with respect thereto. Upon such transfer, Lender shall
be released from all responsibility for the Collateral to the
extent same is assigned to any transferee. Lender may from
time to time sell or otherwise grant participations in any of
the Obligations and the holder of any such participation
shall, subject to the terms of any agreement between Lender
and such holder, be entitled to the same benefits as Lender
with respect to any security for the Obligations in which such
holder is a participant. Borrowers agree that each such
holder may exercise any and all rights of banker's lien, set-
off and counterclaim with respect to its participation in the
Obligations as fully as though Borrower were directly indebted
to such holder in the amount of such participation. Borrowers
may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of
Lender, and no such assignment or transfer of any such
obligation shall relieve Borrowers thereof unless Lender shall
have consented to such release in a writing specifically
referring to the obligation from which Borrowers are to be
released.
16. WAIVERS. Borrower waives presentment and
protest of any instrument and notice thereof, notice of
default and all other notices to which Borrower might
otherwise be entitled.
17. TERM OF AGREEMENT. This Agreement shall
continue in full force and effect until the expiration of the
Term. The Term shall be automatically extended for successive
periods of one (1) year each unless either party shall have
provided the other with a written notice of termination, at
least ninety (90) days prior to the expiration of the initial
Term or any renewal Term. The Borrowers may terminate this
Agreement at any time upon ninety (90) days' prior written
notice ("Termination Date") upon payment in full of the
Obligations (including without limitation the unpaid balance
through the end of the Term of the Unused Line Fee and during
the first year of the Term 100% of the balance of the
Collateral Monitoring Fee during the second year of the Term
50% of the balance of the Collateral Monitoring Fee and
thereafter none of the remaining balance of the Collateral
Monitoring Fee); provided, that Borrowers pay an early
termination fee in an amount equal to the Required Percentage
of the Maximum Revolving Advance Amount. For the purposes
hereof, Required Percentage shall mean (a) 3% from the Closing
Date through the day preceding the first anniversary of the
Closing Date and (b) 2% from the first anniversary of the
Closing Date through the day preceding the second anniversary
of the Closing Date and (c) 1% from the second anniversary or
any subsequent anniversary of the Closing Date through the
date preceding the third or any subsequent anniversary of the
Closing Date except that in the event that Lender invokes the
provisions of Sections 5(c) or 5(d) of this Agreement such
that the costs to Borrower are materially increased as a
result thereof, and Borrowers are able to obtain comparable
financing from a reputable financial institution, who is not
subject to such provisions, on terms which are more favorable
to Borrowers then those which are provided by Lender, then in
such event should Borrowers terminate this Agreement with
Lender prior to the end of a Term in accordance with the
provisions of this Agreement under such circumstances the
Required Percentage shall be zero.
18. EVENTS OF DEFAULT. The occurrence of any of
the following shall constitute an Event of Default:
(a) failure to make payment of any of the
Obligations when required hereunder within 3 Business Days of
when due;
(b) failure to pay any taxes when due unless such
taxes are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have
been provided on Borrowers' books;
(c) failure to perform under and/or committing any
breach of this Agreement not otherwise referred to in this
Section 18 or under any Ancillary Agreement or any other
agreement between Borrowers and Lender which is not cured
within 10 days of notice to Borrowers provided however that if
such default is cureable but cannot be reasonably cured within
10 days and Borrower is proceeding diligently to effect such
cure then such greater time period as may be reasonably
required to accomplish such cure, provided however such
additional period for a cure shall not be allowed if such
default has a material adverse effect on the business or
business prospects of Borrower or a material adverse effect on
the value, integrity or safety of the Collateral;
(d) occurrence of a default by any Borrower under
any agreement to which such Borrower is a party with third
parties which has a material adverse affect upon Borrowers'
business, operations, property or condition (financial or
otherwise) including all leases for any premises where
Inventory or Equipment is located;
(e) any representation, warranty or statement made
by Borrower hereunder, in any Ancillary Agreement, any
certificate, statement or document delivered pursuant to the
terms hereof, or in connection with the transactions
contemplated by this Agreement should at any time be false or
misleading in any material respect;
(f) an attachment or levy is made upon any of
Borrower's assets having an aggregate value in excess of
$100,000, or a judgment is rendered against Borrowers or any
of Borrowers' property involving a liability of more than
$100,000, which shall not have been vacated, discharged,
stayed or bonded pending appeal within thirty (30) days from
the entry thereof;
(g) any change in any Borrowers condition or
affairs (financial or otherwise) which in Lender's reasonable
opinion impairs a material portion of the Collateral or
materially impairs the ability of Borrowers to perform their
Obligations;
(h) any lien created hereunder or under any
Ancillary Agreement upon the Collateral for any reason ceases
to be or is not a valid and perfected lien having a first
priority interest;
(i) if any Borrower or Guarantor shall (i) apply
for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect), (iv) be adjudicated a
bankrupt or insolvent, (v) file a petition seeking to take
advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within
forty-five (45) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any
action for the purpose of effecting any of the foregoing;
(j) if any Borrower shall admit in writing its
inability, or be generally unable to pay its debts as they
become due or cease operations of its present business;
(k) any Subsidiary shall (i) apply for or consent
to the appointment of, or the taking possession by, a
receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property, (ii) admit in writing
its inability, or be generally unable, to pay its debts as
they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under the federal bankruptcy
laws (as now or hereafter in effect), (v) be adjudicated a
bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, within
forty-five (45) days, any petition filed against it in any
involuntary case under such bankruptcy laws, (viii) take any
action for the purpose of effecting any of the foregoing;
(l) any Borrowers directly or indirectly sell
assign, transfer, convey, or suffer or permit to occur any
sale, assignment, transfer or conveyance of any assets of
Borrowers or any interest therein, except as permitted herein;
(m) any Borrower fail to operate in the ordinary
course of business;
(n) a default by an Borrower in the payment, of any
principal of or interest on any indebtedness for money
borrowed which would permit acceleration of such indebtedness
whether or not such indebtedness is actually accelerated;
(o) if any Guarantor attempts to terminate,
challenges the validity of, or its liability under any
Guaranty Agreement or Guarantor Security Agreement;
(p) should any Guarantor default in its obligations
under any Guaranty Agreement or any Guarantor Security
Agreement or if any proceeding shall be brought to challenge
the validity, binding effect of any Guaranty Agreement or any
Guarantor Security Agreement, or should any Guarantor breach
any representation, warranty or covenant contained in any
Guaranty Agreement or any Guarantor Security Agreement or
should any Guaranty Agreement or Guarantor Security Agreement
cease to be a valid, binding and enforceable obligation; or
(q) any Change of Ownership.
19. REMEDIES. (a) Upon the occurrence of an Event
of Default pursuant to paragraph 18 (i) herein, all
Obligations shall be immediately due and payable and this
Agreement shall be deemed terminated; upon the occurrence and
continuation of any other of the Events of Default, Lender
shall have the right to demand repayment in full of all
Obligations, whether or not otherwise due and/or to terminate
this Agreement without advance notice. Until all Obligations
have been fully satisfied, Lender shall retain its security
interest in all Collateral. Lender shall have, in addition to
all other rights provided herein, the rights and remedies of
a secured party under the Uniform Commercial Code, and under
other applicable law, all other legal and equitable rights to
which Lender may be entitled, including without limitation,
the right to take immediate possession of the Collateral, to
require Borrowers to assemble the Collateral, at Borrowers'
expense, and to make it available to Lender at a place
designated by Lender which is reasonably convenient to both
parties and to enter any of the premises of Borrowers or
wherever the Collateral shall be located, with or without
force or process of law, and to keep and store the same on
said premises until sold (and if said premises be the property
of Borrowers, Borrowers agrees not to charge Lender for
storage thereof for a period up to at least sixty (60) days
after sale or disposition of said Collateral). Further,
Lender may, at any time or times after default by Borrowers,
sell and deliver all Collateral held by or for Lender at
public or private sale for cash, upon credit or otherwise, at
such prices and upon such terms as Lender, in Lender's sole
discretion, deems advisable or Lender may otherwise recover
upon the Collateral in any commercially reasonable manner as
Lender, in its sole discretion, deems advisable. Except as to
that part of the Collateral which is perishable or threatens
to decline speedily in nature or is of a type customarily sold
on a recognized market, the requirement of reasonable notice
shall be met if such notice is mailed postage prepaid to c/o
Precision at Precision's address as shown in Lender's records,
at least ten (10) days before the time of the event of which
notice is being given. Lender may be the purchaser at any
sale, if it is public. In connection with the exercise of the
foregoing remedies, Lender is granted permission to use all of
Borrower's trademarks, tradenames, tradestyles, patents,
patent applications, licenses, franchises and other
proprietary rights which are used in connection with (a)
Inventory for the purpose of disposing of such Inventory and
(b) Equipment for the purpose of completing the manufacture of
unfinished goods. The proceeds of sale shall be applied first
to all costs and expenses of sale, including attorneys' fees,
and second to the payment (in whatever order Lender elects) of
all Obligations. Lender will return any excess to Borrowers
and Borrowers shall remain liable to Lender for any
deficiency.
20. WAIVER; CUMULATIVE REMEDIES. Failure by Lender
to exercise any right, remedy or option under this Agreement
or any supplement hereto or any other agreement between
Borrowers and Lender or delay by Lender in exercising the
same, will not operate as a waiver; no waiver by Lender will
be effective unless it is in writing and then only to the
extent specifically stated. Lender's rights and remedies
under this Agreement will be cumulative and not exclusive of
any other right or remedy which Lender may have.
21. APPLICATION OF PAYMENTS. Borrower irrevocably
waive the right to direct the application of any and all
payments at any time or times hereafter received by Lender
from or on Borrowers' behalf and Borrowers hereby irrevocably
agree that Lender shall have the continuing exclusive right to
apply and reapply any and all payments received at any time or
times hereafter against Borrowers' Obligations hereunder in
such manner as Lender may deem advisable notwithstanding any
entry by Lender upon any of Lender's books and records.
22. DEPOSITORY ACCOUNTS. Any payment received by
Borrowers on account of any Collateral shall be held by
Borrowers in trust for Lender and Borrowers shall promptly
deliver same in kind to Lender or deposit all such payments
into a cash collateral account at such bank as Lender may
designate for application to payment of the Obligations.
Borrowers shall also execute such further documents as Lender
may deem necessary to establish such an account and all funds
deposited in such account shall immediately be deemed Lender's
property.
23. LOCK BOX ACCOUNTS. Borrowers shall, at
Lender's request, instruct all of its Customers to make such
payments on account of Receivables to an account under
Lender's dominion and control at such bank as Lender may
designate. Borrowers shall also execute such further
documents as Lender may deem necessary to establish such an
account and all funds deposited in such account shall
immediately be deemed Lender's property.
24. REVIVAL. Borrowers further agrees that to the
extent Borrowers make a payment or payments to Lender, which
payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy act, state or federal
law, common law or equitable cause, then, to the extent of
such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in
full force and effect as if said payment had not been made.
25. NOTICES. Any notice or request hereunder may
be given to Borrowers or Lender at the respective addresses
set forth below or as may hereafter be specified in a notice
designated as a change of address under this paragraph. Any
notice or request hereunder shall be given by personal
delivery or messenger, registered or certified mail, return
receipt requested, or by overnight mail delivery service or by
telecopy (confirmed by mail). Notices and requests shall be,
in the case of those by personal delivery or messenger be
deemed given when delivered, in the case of mail, deemed to
have been given 5 days after being deposited in the mail, in
the case of overnight delivery the Business Day following
deposit with the overnight delivery service, and, in the case
of a telecopy, when confirmed.
Notices shall be provided as follows:
If to the Lender: BNY Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President
Telephone: (212)
Telecopy: (212)
If to the Borrowers:
Precision Standard, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Gold
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy:
With a copy to: Seyforth, Shaw, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
26. GOVERNING LAW AND WAIVER OF JURY TRIAL. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. LENDER
SHALL HAVE E RIGHTS AND REMEDIES OF A SECURED PARTY UNDER
APPLICABLE LAW INCLUDING, BUT NOT LIMITED TO, THE UNIFORM
COMMERCIAL CODE OF NEW YORK. BORROWERS AGREE THAT ALL ACTIONS
AND PROCEEDINGS RELATING DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT OR ANY ANCILLARY AGREEMENT OR ANY OTHER OBLIGATIONS
SHALL BE LITIGATED IN THE FEDERAL DISTRICT COURT OF THE
SOUTHERN DISTRICT OF NEW YORK OR, AT LENDER'S OPTION, IN ANY
OTHER COURTS LOCATED IN NEW YORK STATE OR ELSEWHERE AS LENDER
MAY SELECT AND THAT SUCH COURTS ARE CONVENIENT FORUMS AND
BORROWERS SUBMIT TO THE PERSONAL JURISDICTION OF SUCH COURTS.
BORROWERS WAIVE PERSONAL SERVICE OF PROCESS AND CONSENTS THAT
SERVICE OF PROCESS UPON BORROWER MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, OR OVERNIGHT
DELIVERY SERVICE DIRECTED TO EACH BORROWER AT BORROWERS'
ADDRESSES APPEARING ON LENDER'S RECORDS, AND SERVICE SO MADE
SHALL BE DEEMED COMPLETED WHEN DELIVERED ALL PARTIES HERETO
WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BETWEEN BORROWERS AND LENDER AND BORROWERS WAIVE THE RIGHT TO
ASSERT IN ANY ACTION OR PROCEEDING INSTITUTED BY LENDER WITH
REGARD TO THIS AGREEMENT OR ANY OF THE OBLIGATIONS ANY OFFSETS
OR COUNTERCLAIMS WHICH ANY BORROWERS MAY HAVE.
27. LIMITATION OF LIABILITY. Borrowers acknowledge
and understands that in order to assure repayment of the
Obligations hereunder Lender may be required to exercise any
and all of Lender's rights and remedies hereunder and agrees
that neither Lender nor any of Lender's agents shall be liable
for acts taken or omissions made in connection herewith or
therewith except for actual bad faith.
28. ENTIRE UNDERSTANDING. This Agreement and the
Ancillary Agreements contain the entire understanding between
Borrowers and Lender and any promises, representations,
warranties or guarantees not herein contained shall have no
force and effect unless in writing, signed by the Borrowers'
and Lender's respective officers. Neither this Agreement, the
Ancillary Agreements, nor any portion or provisions thereof
may be changed, modified, amended, waived, supplemented,
discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in
writing, signed by the party to be charged.
29. MODIFICATION. This Agreement and the Ancillary
Agreements constitute the complete agreement between the
parties with respect to the subject matter hereof and thereof
and may not be modified, altered or amended except by an
agreement in writing signed by the parties hereto and thereto.
30. SEVERABILITY. Wherever possible each provision
of this Agreement or the Ancillary Agreements shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the
Ancillary Agreements shall be prohibited by or invalid under
applicable law such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions
thereof.
31. CAPTIONS. All captions are and shall be
without substantive meaning or content of any kind whatsoever.
32. COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which taken together
shall constitute one and the same instrument.
33. CONSTRUCTION. The parties acknowledge that
each party and its counsel have reviewed this Agreement and
that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement
or any amendments, schedules or exhibits thereto.
IN WITNESS WHEREOF, this Agreement has been duly executed
as of the day and year first above written.
PRECISION STANDARD, INC.
ATTEST:
By: /s/▇▇▇▇▇▇▇ ▇. Gold
/s/▇▇▇▇▇▇ ▇▇▇▇▇ Title: President,
SECRETARY Chairman and Chief
Executive Officer
PEMCO AEROPLEX, INC.
ATTEST:
By: /s/▇▇▇▇▇▇▇ ▇. Gold
/s/▇▇▇▇▇▇ ▇▇▇▇▇ Title: Chief Executive
SECRETARY Officer
PEMCO WORLD AIR SERVICES,
INC.
ATTEST:
By: /s/▇▇▇▇▇▇▇ ▇. Gold
/s/▇▇▇▇▇▇ ▇▇▇▇▇ Title: President
SECRETARY
PEMCO CAPITAL CORPORATION
ATTEST:
By: /s/▇▇▇▇▇▇▇ ▇. Gold
Title: President
/s/▇▇▇▇▇▇ ▇▇▇▇▇
SECRETARY:
▇▇▇▇▇ HOLDINGS I INC.
ATTEST:
By: /s/▇▇▇▇▇▇▇ ▇. Gold
/s/▇▇▇▇▇▇ ▇▇▇▇▇ Title: President
SECRETARY
ATTEST: ▇▇▇▇▇ HOLDINGS II INC.
/s/▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. Gold
SECRETARY Title: President
ATTEST: SPACE VECTOR CORPORATION
/s/▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. Gold
SECRETARY Title: Chief Executive
Officer
ATTEST: PEMCO NACELLE SERVICES, INC.
/s/▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. Gold
SECRETARY Title: President
ATTEST: PEMCO AIR SERVICES SYSTEM,INC.
/s/▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. Gold
SECRETARY Title: President
ATTEST: AIR INTERNATIONAL INCORPORATED
/s/▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. Gold
SECRETARY Title: President
BNY FINANCIAL CORPORATION
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
SCHEDULES
Schedule 1(A) - Permitted Liens
Schedule 12(a) - States of Incorporation
Schedule 12(d) - Offices of Borrowers
Schedule 12(j) - Licenses, Patents, Trademarks and Copyrights
Schedule 12(l) - Inventory Locations
Schedule 12(m) - Permitted Indebtedness