Exhibit 99.1
REVOLVING CREDIT AGREEMENT
BETWEEN
X. X. XXXXX CORPORATION,
AS
BORROWER,
AND
THE HUNTINGTON NATIONAL BANK,
AS
LENDER.
DECEMBER 27, 2002
TABLE OF CONTENTS
SECTION 1. COMMITMENT ......................................................1
1.1 Basic Commitment Terms ..........................................1
1.2 Commitment Limitations .........................................1
1.3 Borrowing Base...................................................1
SECTION 2. REPRESENTATIONS AND WARRANTIES...................................2
2.1 Organization, Corporate Power, etc ..............................2
2.2 Litigation ......................................................2
2.3 Financial Condition .............................................2
2.4 Title to Properties .............................................2
2.5 Liabilities .....................................................2
2.6 Investments .....................................................3
2.7 Renegotiation of Government Contracts ...........................3
2.8 Taxes ...........................................................3
2.9 ERISA ...........................................................3
2.10 Use of Proceeds .................................................3
2.11 Compliance with Law .............................................3
2.12 Government Consent ..............................................4
2.13 Legal and Binding Obligation ....................................4
2.14 Investment Company Act ..........................................4
2.15 Locations of Business............................................4
SECTION 3. CERTAIN DEFINITIONS .............................................4
3.1 "Affiliate" .....................................................4
3.2 "Alternate Base Rate" ...........................................5
3.3 "Business Day" ..................................................5
3.4 "Capitalized Lease" .............................................5
3.5 "Capitalized Lease Obligation" ..................................5
3.6 "Commitment".....................................................5
3.7 "Consolidated Current Liabilities................................5
3.8 "Consolidated Net Income"........................................5
3.9 "Consolidated Net Interest Expense"..............................5
3.10 "Consolidated Net Tangible Assets" ..............................5
3.11 "Consolidated Tangible Net Worth"................................5
3.12 "Consolidated Total Assets" .....................................6
3.13 "Current Debt"...................................................6
3.14 "Debt"...........................................................6
3.15 "Default"........................................................6
3.16 "Dollars" and "$"................................................6
3.17 "Domestic Loans".................................................6
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3.18 "Eligible Accounts"..............................................6
3.19 "Eligible Inventory".............................................7
3.20 "Eurodollar Interest Rate".......................................8
3.21 "Eurodollar Loans" .............................................8
3.22 "Event of Default"...............................................8
3.23 "Federal Funds Rate".............................................8
3.24 "Funded Debt"....................................................8
3.25 "GAAP"...........................................................8
3.26 "Guaranties".....................................................8
3.27 "Interest Period"................................................9
3.27.1 ..........................................................9
3.27.2 ..........................................................9
3.28 "Investment".....................................................9
3.29 "LIBOR" .........................................................9
3.30 "LIBOR Business Day" ...........................................10
3.31 "Lien"..........................................................10
3.32 "Loan" or "Loans"...............................................10
3.33 "Loan Document".................................................10
3.34 "Metropolitan Agreement"........................................10
3.35 "Net Income"....................................................11
3.36 "Note" or "Notes" ..............................................11
3.37 "Permitted Investments" ........................................11
3.37.1..........................................................11
3.37.2..........................................................11
3.37.3..........................................................11
3.37.4..........................................................11
3.37.5..........................................................11
3.37.6..........................................................11
3.37.7..........................................................11
3.37.8..........................................................11
3.38 "Person" .......................................................12
3.39 "Prime Rate" ...................................................12
3.40 "Subsidiary" ...................................................12
3.41 "Termination Date" .............................................12
SECTION 4. BORROWING PROVISION.............................................12
4.1 Amount of Revolving Credit......................................12
4.2 Evidence of Loans Made Under Revolving Credit ..................13
4.3 Loan and Commitment Fees .......................................13
4.4 Conversion of Loans ............................................13
4.5 Prepayment .....................................................14
4.6 Termination or Reduction Options ...............................14
4.7 Interest Payment Dates .........................................14
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4.8 Payment Method .................................................14
4.9 No Setoff or Deduction .........................................15
4.10 Payment on Non-Business Day; Payment Computations ..............15
SECTION 5. SECURITY .......................................................15
SECTION 6. CONDITIONS OF LENDING ..........................................15
6.1 Opinion of Counsel for the Borrower ............................15
6.2 Supporting Documents ...........................................16
6.3 No Default .....................................................16
6.4 Delivery of Note and Security Agreement.........................16
SECTION 7. PROVISIONS RELATING TO EURODOLLAR LOANS ........................16
7.1 Additional Costs ...............................................17
7.2 Additional Eurocurrency Reserves ...............................17
7.3 Limitations of Requests and Elections ..........................18
7.4 Illegality and Impossibility ...................................18
7.5 Indemnification ................................................18
7.6 Survival of Obligations ........................................19
SECTION 8. AFFIRMATIVE COVENANTS ..........................................19
8.1 Financial Statements ...........................................19
8.2 Out of Pocket Expenses .........................................20
8.3 Compliance with Statutes; Payment of Taxes .....................20
8.4 Insurance ......................................................20
8.5 Corporate Existence ............................................20
8.6 ERISA ..........................................................20
8.7 Books and Records ..............................................21
8.8 Inspection of Books and Records ................................21
8.9 Notification by Borrower .......................................21
8.10 Amendments to Metropolitan Agreement ...........................21
8.11 Notice of Claims ...............................................21
8.12 Restriction on Consolidated Assets..............................21
8.13 Resting of Loan.................................................22
SECTION 9. NEGATIVE COVENANTS .............................................22
9.1 Limitations on Debt.............................................22
9.1.1 ..........................................................22
9.1.2 ..........................................................22
9.1.3...........................................................22
9.1.4...........................................................22
9.1.5...........................................................22
9.1.6...........................................................22
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9.1.7...........................................................22
9.2 Maintenance of Consolidated Tangible Net Worth .................23
9.3 Restricted Payments ............................................23
9.4 Capital Expenditures............................................23
9.5 Liens ..........................................................23
9.5.1...........................................................23
9.5.2...........................................................23
9.5.3...........................................................23
9.5.4...........................................................24
9.5.5...........................................................24
9.5.6...........................................................24
9.6 Restrictions on Subsidiaries ...................................24
9.6.1 ..........................................................24
9.6.2 ..........................................................24
9.6.3...........................................................24
9.7 Disposition of Assets ..........................................25
9.7.1 ..........................................................25
9.7.2 ..........................................................25
9.7.3 ..........................................................25
9.8 Transactions with Affiliates ...................................25
9.9 Restrictions on Borrower .......................................25
9.9.1 ..........................................................25
9.9.2 ..........................................................25
9.10 Permitted Investments ..........................................26
9.11 Limitation on Restrictive Covenants ............................26
9.12 Loan, Advances and Purchases of Stock ..........................26
9.12.1..........................................................26
9.12.2..........................................................26
9.13 EBITDA..........................................................26
9.14 Interest Coverage...............................................27
9.15 Cash Flow Leverage..............................................27
SECTION 10. FURTHER ASSURANCE ..............................................27
SECTION 11. TAXES AND STAMPS ...............................................27
SECTION 12. [INTENTIONALLY OMITTED] ........................................27
SECTION 13. DEFAULT ........................................................28
13.1 Events of Default ..............................................28
13.1.1..........................................................28
13.1.2..........................................................28
13.1.3..........................................................28
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13.1.4..........................................................28
13.1.5..........................................................28
13.1.6..........................................................29
13.1.7..........................................................29
13.1.8..........................................................29
13.1.9..........................................................29
13.1.10 ........................................................29
13.2. Remedies .......................................................30
13.2.1 .........................................................30
13.2.2 .........................................................30
13.2.3..........................................................30
SECTION 14. MISCELLANEOUS ..................................................31
14.1 Amendments, Etc. ...............................................31
14.2 Notices ........................................................31
14.3 Conduct No Waiver; Remedies Cumulative .........................31
14.4 Reliance on and Survival of Various Provisions .................31
14.5 Expenses .......................................................31
14.5.1 .........................................................32
14.5.2 .........................................................32
14.6 Successors and Assigns .........................................32
14.7 Assignment to Federal Reserve Banks ............................32
14.8 Counterparts ...................................................32
14.9 Governing Law, Consent to Jurisdiction and Waiver of Immunity ..32
14.10 Waiver of Jury Trial ...........................................33
14.11 Headings .......................................................33
14.12 Construction of Certain Provisions .............................33
14.13 Integration and Severability ...................................33
14.14 Usury ..........................................................34
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EXHIBITS AND SCHEDULES
Exhibit A - Form of Revolving Credit Note
Exhibit B - Metropolitan Agreement
Exhibit C - Form of Written Notice of Loan Conversion
Exhibit D - Form of Officer's Compliance Certificate
Exhibit E - Form of Monthly Borrowing Base Calculation
Schedule 2.1 - Corporate Structure of Borrower and Subsidiaries
Schedule 2.2 - Pending Litigation Against Borrower and its Subsidiaries
Schedule 2.4 - Liens on Property and Assets of Borrower and its Subsidiaries
Schedule 2.15 - Business Locations of Borrower and its Subsidiaries
Schedule 9.1 - Existing Debt
Schedule 9.3 - Permitted Payments
Schedule 9.6 - Existing Subsidiary Debt
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REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "Agreement"), is made and entered
into to be effective on December 27, 2002, by and between X. X. XXXXX
CORPORATION, an Ohio corporation (hereinafter called the "Borrower"), and THE
HUNTINGTON NATIONAL BANK, a national banking association (hereinafter called the
"Bank");
The Borrower and the Bank hereby agree as follows:
SECTION I. COMMITMENT.
1.1. BASIC COMMITMENT TERMS. The Borrower has applied to the Bank for
revolving credit loans up to an aggregate principal amount of $32,000,000, the
proceeds of which are to be used by the Borrower for general corporate purposes,
including, without limitation, seasonal financing of inventory and accounts
receivable. The Bank is willing to make such loans to the Borrower upon the
terms and subject to the conditions hereinafter set forth up to a maximum
aggregate principal amount not in excess of $32,000,000 (said amount being
hereinafter called the "Commitment" of the Bank). Notwithstanding anything to
the contrary contained in any Note evidencing the Loan, the principal amount
advanced by the Bank pursuant to the Note held by the Bank shall not exceed the
amount of the Bank's Commitment.
1.2. COMMITMENT LIMITATIONS. Notwithstanding the foregoing, during the
following periods in each year occurring during the term of this Agreement, the
Commitment of the Bank shall be in an amount equal to the lesser of the
following amounts or the amount to which the Commitment has been reduced
pursuant to Section 4.6 hereof.
PERIOD COMMITMENT
------ ----------
From 1/1 through 1/31 $3,000,000
From 2/1 through 4/30 $12,000,000
From 5/1 through 10/31 $32,000,000
From 11/1 through 12/31 $27,000,000
1.3 BORROWING BASE. Notwithstanding the foregoing provisions of
Sections 1.1 and 1.2, the aggregate principal balance of the Loans at any time
outstanding shall not exceed the lesser of (a) the Commitment of the Bank,
reduced as provided in Section 1.2 and (b) the Borrowing Base (as hereinafter
defined). As used herein, "Borrowing Base" shall mean the sum of (i) 80% of the
Company's Eligible Accounts plus (ii) 40% of the Company's Eligible Inventory.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Bank:
2.1 ORGANIZATION, CORPORATE POWER, ETC. Each of the Borrower and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was incorporated, and
each has the corporate power and authority to own its property and to carry on
its business as now being conducted and each is duly qualified (or is in the
process of becoming qualified) and where qualified, is in good standing, to do
business in every jurisdiction where such qualification is necessary, except
where failure to qualify would not have a material adverse effect upon the
financial condition, business or operations of the Borrower and its
Subsidiaries, taken as a whole. The Borrower has the corporate power to execute,
deliver and perform this Agreement, to borrow hereunder and to execute and
deliver the Note herein referred to and to do so will not violate any laws,
rules, regulations, orders or decrees, its Articles of Incorporation or Code of
Regulations or any other agreement or instrument to which it is a party.
SCHEDULE 2.1 attached hereto sets forth the corporate structure of the Borrower
and all Subsidiaries, including, in each instance, (i) the jurisdiction of
incorporation of each Subsidiary; and (ii) ownership of the shares of each
Subsidiary.
2.2 LITIGATION. Except as set forth in SCHEDULE 2.2 attached hereto,
there is no litigation or proceeding pending against the Borrower, or any
Subsidiary of the Borrower, nor to the knowledge of the officers of the Borrower
or its Subsidiaries threatened, which, if decided adversely to the Borrower or
any such Subsidiary, would have a material adverse effect upon the financial
condition, business or operations of the Borrower and its Subsidiaries, taken as
a whole.
2.3 FINANCIAL CONDITION. The audited financial statements of the
Borrower for the fiscal year ended December 29, 2001, certified by KPMG, LLP,
independent certified public accountants, and the unaudited financial statements
for the fiscal quarter ended September 28, 2002, fairly reflect the financial
condition of the Borrower and each Subsidiary and the results of their
operations as of the dates and for the periods stated, and no material adverse
change in the financial condition, business or operations of the Borrower and
its Subsidiaries, taken as a whole, has occurred since the dates of such
financial statements and interim statements. Such financial statements are
consolidated statements and have been prepared in accordance with generally
accepted accounting principles.
2.4 TITLE TO PROPERTIES. Each of the Borrower and each Subsidiary has
good and marketable title to its property and assets. Such property and assets
of the Borrower and its Subsidiaries are not subject to a mortgage or lien
except as shown on SCHEDULE 2.4 attached hereto except for current property
taxes not yet due.
2.5 LIABILITIES. The Borrower and its Subsidiaries have no liabilities,
direct or contingent, except (i) those disclosed in the audited financial
statements and unaudited statements referred to in Section 2.3 above, and (ii)
those incurred in the ordinary course of business since the dates of such
reports and unaudited statements referred to in Section 2.3
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above, having in the aggregate no materially adverse effect on the financial
condition, business or operations of the Borrower and its Subsidiaries, taken as
a whole.
2.6 INVESTMENTS. The Borrower and its Subsidiaries have made no
material investments in, advances to or Guaranties of the obligations of any
corporation, individual or other entity except those disclosed in the unaudited
statements referred to in Section 2.3 above and the Permitted Investments.
2.7 RENEGOTIATION OF GOVERNMENT CONTRACTS. The Borrower and its
Subsidiaries are not subject to the renegotiation of any government contract in
any material amount.
2.8 TAXES. The Borrower and its Subsidiaries have filed all required
federal, state and local tax returns and paid all required federal, state and
local taxes as they have become due. Federal income taxes have been audited
through 1994, and no material. claims have been assessed and are unpaid with
respect to such taxes except as shown in the audited financial statements or
unaudited financial statements referred to in Section 2.3 above.
2.9 ERISA. The Borrower and its Subsidiaries (i) have made prompt
payment of all contributions required to meet the minimum funding standards set
forth in Sections 302 and 305 of the Employee Retirement Income Security Act of
1974 as amended from time to time ("ERISA") with respect to any employee benefit
plan ("plan"), and (ii) have not:
(a) engaged in any "Prohibited Transaction", as that term is
defined in Section 406 of ERISA for which there is no exemption under
Section 408 of ERISA, or
(b) terminated any such plan in a manner which would result in
the imposition of a lien on the property of the Borrower pursuant to
Section 4068 of ERISA.
2.10 USE OF PROCEEDS. The proceeds of all borrowings hereunder will be
used for general corporate purposes, but not directly or indirectly to purchase
or to carry any margin stock as defined by Regulation U of the Board of
Governors of the Federal Reserve System, and the Borrower is not in the business
of extending credit to purchase or carry margin stock.
2.11 COMPLIANCE WITH LAW. The Borrower and its Subsidiaries are not in
violation of, whether foreign or domestic, any laws, ordinances, governmental
rules, regulations, judgments or agreements to which they are subject and have
not failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of their properties or to the conduct
of their businesses, which violation or failure to obtain might materially and
adversely affect the business, prospects, properties or condition (financial or
otherwise) of the Borrower.
2.12 GOVERNMENT CONSENT. Neither the nature of the Borrower or its
Subsidiaries, or of their businesses or properties, nor any relationship between
the Borrower or its Subsidiaries and
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any other entity or person, nor any circumstance in connection with the
execution of this Agreement, is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Borrower or its Subsidiaries as a
condition to the execution, delivery, performance, validity or enforceability of
this Agreement (including as to each borrowing hereunder), the Note and
documents contemplated herein.
2.13 LEGAL AND BINDING OBLIGATION. (i) The Board of Directors of the
Borrower has duly authorized the execution, delivery and performance of this
Agreement and the Note and this Agreement and the Note will constitute valid and
binding obligations of the Borrower enforceable in accordance with their terms;
and (ii) the execution of this Agreement, the Note and related documents and
compliance by the Borrower with all the provisions of this Agreement are within
the corporate powers of the Borrower, are legal and will not conflict with,
result in any breach of any of the provisions of, constitute a default under, or
result in the creation of any lien or encumbrance upon any property of the
Borrower under the provisions of, any agreement, charter instrument, bylaw or
other instrument to which the Borrower is a party or by which it is bound.
2.14 INVESTMENT COMPANY ACT. None of the Borrower or any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
2.15 LOCATIONS OF BUSINESS. SCHEDULE 2.15 attached to this Agreement
sets forth each place of business in the United States (including without
limitation any location at which personal property of such entity is stored or
located) for the Borrower and each Subsidiary.
SECTION 3. CERTAIN DEFINITIONS.
As used herein the following words and terms shall have the following
meanings, respectively:
3.1 "Affiliate" means any Person which, directly or indirectly,
controls or is controlled by or is under common control with the Borrower or a
Subsidiary or which beneficially owns or holds or has the power to direct the
voting power of 5% or more of the voting stock of the Borrower or a Subsidiary
or which has 5% or more of its voting stock (or, in the case of a Person which
is not a corporation, 5% or more of its equity interest) beneficially owned or
held, directly or indirectly, by the Borrower or a Subsidiary, and any director
or officer of the Borrower or its Subsidiaries. For purposes of this definition,
"control" means the power to direct the management and policies of a Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlled by" and "under common control
with" have meanings correlative to the foregoing. Subsidiaries are not included
within the definition of Affiliate.
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3.2 "Alternate Base Rate" means, for any day, a rate per annum equal to
the higher of (a) the Prime Rate in effect on such day or (b) the Federal Funds
Rate in effect on such day plus 1/2 of 1%.
3.3 "Business Day" means a day other than a Saturday, Sunday or other
day on which the Bank is not open for the transaction of substantially all of
its banking functions.
3.4 "Capitalized Lease" means and includes at any time any lease of
property, real or personal, which in accordance with GAAP would at such time be
required to be capitalized on a balance sheet of the lessee.
3.5 "Capitalized Lease Obligation" means at any time the capitalized
amount of the rental commitment under a Capitalized Lease which in accordance
with GAAP would at such time be required to be shown on a balance sheet of the
lessee.
3.6 "Commitment" is defined in Section 1.1.
3.7 "Consolidated Current Liabilities" means (i) the liabilities of the
Borrower and its Subsidiaries that would (determined on a consolidated basis in
accordance with GAAP consistently applied) be classified as "current
liabilities" on its consolidated balance sheet, (ii) Guaranties by the Borrower
of Current Debt of other Persons, and (iii) debt owed to banks.
3.8 "Consolidated Net Income" means the aggregate of the Net Income of
the Borrower and its Subsidiaries, after eliminating all intercompany items and
portions of earnings property attributable to minority interests, if any, in the
capital stock of such Subsidiaries, all computed and consolidated in accordance
with GAAP.
3.9 "Consolidated Net Interest Expense" means the aggregate of the
interest expense of the Borrower and its Subsidiaries less aggregate interest
income of the Borrower and its Subsidiaries, all computed and consolidated in
accordance with GAAP.
3.10 "Consolidated Net Tangible Assets" means as of the date of any
determination thereof, Consolidated Total Assets as of such date less the sum of
(i) Consolidated Current Liabilities and (ii) assets properly classified as
intangible assets in accordance with GAAP.
3.11 "Consolidated Tangible Net Worth" means as of the date of any
determination thereof the sum of all amounts which, in accordance with GAAP,
would be included under shareholders' equity plus (to the extent not included in
shareholders' equity) preferred stock, as determined on a consolidated basis, on
the balance sheet of the Borrower and its Subsidiaries, minus assets properly
classified as intangible assets in accordance with GAAP.
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3.12 "Consolidated Total Assets" means, as of the date of any
determination thereof, the total amount of all assets of the Borrower and its
Subsidiaries as determined on a consolidated basis in accordance with GAAP.
3.13 "Current Debt" of any Person shall mean as of the date of any
determination thereof (i) all indebtedness of such Person for borrowed money
other than Funded Debt of such Person, and (ii) Guaranties by such Person of
Current Debt of others.
3.14 "Debt" of any Person means (a) all indebtedness, obligations or
other liabilities (other than accounts payable and other accrued expenses
arising in the ordinary course of business payable on terms customary in the
trade, minority interests and deferred tax and compensation and pension plan
liabilities) which in accordance with GAAP should be classified as liabilities
on the balance sheet of such entity, including, without limitation, all
indebtedness (i) for borrowed money or evidenced by debt securities, debentures,
acceptances, notes or other similar instruments, and any accrued interest, fees
and charges relating thereto, (ii) under profit payment agreements or in respect
of obligations to redeem, repurchase or exchange any securities or to pay
dividends in respect of any stock, (iii) with respect to letters of credit
issued, (iv) to pay the deferred purchase price of property or services, except
accounts payable and accrued expenses arising in the ordinary course of
business, or (v) in respect of Capitalized Leases; (b) indebtedness secured by
any Lien upon property or assets owned by such Person, even though such Person
has not assumed or become liable for the payment of such obligations; and (c)
all indebtedness, obligations or other liabilities in respect of interest rate
contracts and currency agreements, net of liabilities owed by the counterparties
thereon.
3.15 "Default" means any event which, with the lapse of time or the
giving of notice pursuant to the terms of this Agreement, or both, becomes an
Event of Default.
3.16 "Dollars" and "$" mean the lawful money of the United States of
America.
3.17 "Domestic Loans" means the Loans carrying interest at rates based
upon the Alternate Base Rate.
3.18 "Eligible Accounts" means the portion of the Borrower's accounts
arising in the ordinary course of the Borrower's business from the sale of goods
or services to an individual, partnership, corporation, limited liability
company or other entity (an "Account Debtor") that the Bank determines, in its
sole and reasonable discretion, based on credit policies, market conditions, the
Borrower's business and other criteria, is eligible for inclusion in the
Borrowing Base. An account shall not be deemed an Eligible Account unless such
account is evidenced by an invoice or other documentary evidence reasonably
satisfactory to the Bank; is unconditionally due and payable in U.S. dollars to
the Borrower from the Account Debtor; and meets all the following requirements
until it is collected in full: (a) the account is due and payable (in U.S.
dollars), exclusive of sales or other taxes, not more than 60 days from the date
of the original invoice therefor and is not more than 60 days past-due, or if a
special dating program has been
6
approved in writing by the Bank, the account is due and payable on a date
permitted by the terms of such dating program and is not past-due; (b) the
account arises from the completed performance of a sale of goods and/or related
services, does not constitute a progress billing or advance billing, a "xxxx and
hold," guaranteed sale, sale and return, or other repurchase and return basis,
and all such goods have been lawfully shipped (or related services provided) and
invoiced to the Account Debtor, and upon the Bank's reasonable request, copies
of all invoices, together with all shipping documents and delivery receipts
evidencing such shipment having been delivered to the Bank; (c) the account does
not arise from a contract with any government or agency thereof or from an
individual; (d) the account is not subject to any dispute, prior assignment,
claim, lien, subrogation rights, security interest, levy or setoff; (e) the
account is not subject to any credit, contra account, allowance, adjustment,
levy, return of goods, or discount (collectively a "Contra"), provided, however,
that unless the Account Debtor has asserted a Contra, if the amount of the
account exceeds the amount of the Contra, such excess shall be considered for
eligibility if such excess meets all other requirements of this section; (f) the
account does not arise from an Affiliate of the Borrower or any Subsidiary; (g)
the account does not, when added to all other accounts of the Account Debtor
with the Borrower, produce an aggregate indebtedness from the Account Debtor of
more than 30% of the total of all the Borrower's Eligible Accounts; (h) the
Account Debtor is not subject to bankruptcy, receivership or similar proceedings
and is not insolvent; (i) the account is not evidenced by any chattel paper,
promissory note, payment instrument or written agreement; (j) the account does
not arise from an Account Debtor whose mailing address is located outside the
United States unless (i) the payment for the goods which give rise to such
account is assured by an irrevocable letter of credit received by the Borrower,
such letter of credit is from a bank acceptable to the Bank and is in form and
substance acceptable to the Bank, and payable in the full amount of the account
in United States dollars at a place of payment located within the United States,
and the proceeds of such letter of credit have been duly assigned to the Bank,
to its satisfaction, or (ii) the aggregate amount of all accounts outstanding of
such Account Debtor with its mailing address or chief executive office located
outside the United States does not exceed $1,000,000; provided, however, that,
for the purposes of this subsection, each of WalMart Mexico and WalMart Canada
shall not be deemed an Account Debtor with a mailing address or chief executive
office located outside the United States; (k) the account does not arise from an
Account Debtor to whom goods are shipped on a "cash on delivery" or C.O.D.
basis; (l) the account does not arise from an Account Debtor who has more than
50% of its accounts with the Borrower more than 90 days past due; and (m) the
Bank has not notified the Borrower that the account or the Account Debtor is
unsatisfactory or unacceptable (although the Bank reserves the right to do so in
its sole discretion at any time).
3.19 "Eligible Inventory" means that portion of the Borrower's
inventory, including finished goods and raw materials related to its principal
product lines, subject to no Liens, and that the Bank determines in its sole
discretion from time to time, based on credit policies, market conditions, the
Borrower's business and other matters, is eligible for use in calculating the
Borrowing Base. For purposes of determining the Borrowing Base, Eligible
Inventory shall not include tooling, work in process, slow moving, obsolete or
discontinued inventory, supply items,
7
packaging, or the freight portion of raw materials, inventory in the control of
a third Person for processing or storage, consigned inventory or inventory in
transit. All inventory shall be valued at the lesser of cost (on a FIFO basis)
or market.
3.20 "Eurodollar Interest Rate" means a rate per annum equal to LIBOR
plus two and three-quarters percent (2.75%).
3.21 "Eurodollar Loans" means the Loans carrying interest at rates
based upon the Eurodollar Interest Rate. "Quoted Eurodollar Loans" means Loans
carrying interest at rates based upon the London Interbank Offered Rate. "Daily
Eurodollar Loans" means Loans carrying interest at rates based upon the Daily
London Interbank Offered Rate.
3.22 "Event of Default" has the meaning specified in Section 13 hereof.
3.23 "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 from three Federal funds brokers of recognized
standing selected by the Bank.
3.24 "Funded Debt" of any Person means (i) indebtedness of such Person
for borrowed money or which has been incurred in connection with the acquisition
of assets or services, in each case having a final maturity of more than one
year from the date of creation thereof (or which is renewable or extendible at
the option of the obligor for a period or periods more than one year from the
date of creation), including all payments in respect thereof that are required
to be made within one year from the date of any determination of Funded Debt,
whether or not the obligation to make such payments shall constitute a current
liability of the obligor under GAAP, (ii) Capitalized Lease Obligations of such
Person, (iii) obligations secured by any Lien upon property or assets owned by
such Person, even though such Person has not assumed or become liable for the
payment of such obligations, (iv) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, and (v) all Guaranties by such
Person of Funded Debt of others.
3.25 "GAAP" means generally accepted accounting principles as in effect
at the time of application to the provisions hereof.
3.26 "Guaranties" by any Person means all obligations of such Person
guaranteeing, or in effect guaranteeing, any Debt of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an
8
agreement, contingent or otherwise, by such Person (i) to purchase such Debt or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Debt, (y) to maintain working
capital or other balance sheet condition or otherwise to advance or make
available funds for the purchase or payment of such Debt, (iii) to lease
property or to purchase securities or other property or services primarily for
the purpose of assuring the owner of such Debt of the ability of the primary
obligor to make payment of such Debt, or (iv) otherwise to assure the owner of
such Debt against loss in respect thereof. Guaranties does not include
endorsement of instruments for deposit or collection in the ordinary course of
business.
3.27 "Interest Period" means:
3.27.1 In the case of Quoted Eurodollar Loans, an initial
period commencing, as the case may be, on the day such a Loan shall be
made by the Bank, or on the day of conversion of any then outstanding
Loan to a Loan of such type, and ending on the date one, two, three or
six months thereafter, as the Borrower may elect, provided that (A) any
Interest Period with respect to a Quoted Eurodollar Loan that shall
commence on the last LIBOR Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last LIBOR
Business Day of the appropriate subsequent calendar month; and (B) each
Interest Period with respect to a Quoted Eurodollar Loan that would
otherwise end on a day which is not a LIBOR Business Day shall end on
the next succeeding LIBOR Business Day or, if such next succeeding
LIBOR Business Day falls in the next succeeding calendar month, on the
next preceding LIBOR Business Day.
3.27.2 With respect to Daily Eurodollar Loans and Domestic
Loans, an initial period commencing, as the case may be, on the day
such a Loan shall be made by the Bank, or on the day of conversion of
any then outstanding Loan to a Loan of such type, and ending on the
last Business Day of the month in which the Loan is made or converted,
and each period thereafter commencing on the first Business Day of each
month and ending on the last Business Day of each month.
Notwithstanding the provisions of 3.27.1 and 3.27.2 above, no Interest Period
may extend beyond the Termination Date.
3.28 "Investment" means any loan, advance, extension of credit or
contribution of capital or any investment in, or purchase or other acquisition
of, stock, notes, debentures or other securities.
3.29 "LIBOR" means: (a) with respect to any Quoted Eurodollar Loan, the
London Interbank Offered Rate, which is the per annum rate of interest at which
deposits in Dollars for the related Interest Period and in an aggregate amount
comparable to the amount of such Quoted Eurodollar Loan are offered to the Bank
by other prime banks in the London interbank market,
9
as determined by the Bank in its discretion based upon reference to information
appearing on page LIBOR01, captioned "British Bankers Assoc. Interest Settlement
Rates," of the Reuters America Network, a service of Reuters America Inc. (or
such other page that may replace that page on that service for the purpose of
displaying the London Interbank Offered Rate) or any comparable index selected
by the Bank, the obtaining of rate quotations, or any other reasonable
procedure, at approximately 11:00 a.m. London, England, time, on the second
LIBOR Business Day prior to the first day of the related Interest Period; all as
determined by the Bank, such sum to be rounded up, if necessary, to the nearest
whole multiple of 1/16 of 1%; and (b) with respect to any Daily Eurodollar Loan,
the Daily London Interbank Offered Rate, which is the per annum rate of interest
at which deposits in Dollars for a period of one (1) month and in an aggregate
amount comparable to the amount of such Daily Eurodollar Loan are offered to the
Bank by other prime banks in the London interbank market, as determined daily by
the Bank in its discretion on each LIBOR Business Day, or, when determination is
made on a day other than a LIBOR Business Day, on the most recently elapsed
LIBOR Business Day, based upon reference by the Bank to information appearing on
page LIBOR01, captioned "British Bankers Assoc. Interest Settlement Rates," of
the Reuters America Network, a service of Reuters America Inc. (or such other
page that may replace that page on that service for the purpose of displaying
the London Interbank Offered Rate) or any comparable index selected by the Bank,
the obtaining of rate quotations, or any other reasonable procedure, such sum to
be rounded up, if necessary, to the nearest whole multiple of 1/16 of 1%. The
Daily London Interbank Offered Rate shall be adjusted automatically, without
notice, on the effective date of each change in such rate.
3.30 "LIBOR Business Day" means a day which is both a Business Day and
a day on which dealings in Dollar deposits are carried out in the London
interbank market.
3.31 "Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or other encumbrance of any kind in respect of
such asset. For the purposes hereof, a Person shall be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capitalized Lease or
other title retention agreement relating to such asset.
3.32 "Loan" or "Loans" means any borrowings by the Borrower from the
Bank under Section 4 hereof.
3.33 "Loan Document" means each document, instrument and agreement
executed in connection with this Agreement.
3.34 "Metropolitan Agreement" means that certain note agreement between
the Borrower and Metropolitan Life Insurance Company dated July 5, 1994, with
respect to a $15,000,000 extension of credit, a copy of which is attached hereto
as EXHIBIT B.
10
3.35 "Net Income" means for any period the net income (or the net
deficit, if expenses and charges exceed revenues and other proper income
credits) of a corporation or other Person for such period determined in
accordance with GAAP.
3.36 "Note" or "Notes" means the Revolving Credit Note as defined in
Section 4.2.
3.37 "Permitted Investments" means Investments consisting of:
3.37.1 loans or advances by the Borrower and its Subsidiaries
to Subsidiaries in the ordinary course of business;
3.37.2 Investments in corporate debt obligations maturing in
one year or less from the date of issuance which, at the time of
acquisition by the Borrower or any Subsidiary, are rated "A" or better
(or the equivalent) by Standard & Poor's Ratings Group (currently a
division of XxXxxx-Xxxx, Inc.) or Xxxxx'x Investors Service, Inc.;
3.37.3 Investments in direct obligations of the United States
of America or any agent or instrumentality of the United States of
America, the payment or guarantee of which constitutes a full faith and
credit obligation of the United States of America, in either case
maturing in twelve months or less from the date of acquisition thereof;
3.37.4 Investments in certificates of deposit maturing within
one year from the date of issuance thereof, issued by a bank or trust
company organized under the laws of the United States or any state
thereof, having capital, surplus and undivided profits aggregating at
least $200,000,000;
3.37.5 loans or advances in the ordinary course of business to
suppliers, officers, directors and employees for expenses (including
moving expenses related to a transfer) incidental to carrying on the
business of the Borrower or any Subsidiary not exceeding $2,000,000 in
the aggregate;
3.37.6 receivables arising from the sale of goods and services
in the ordinary course of business of the Borrower and its
Subsidiaries;
3.37.7 other debt Investments by the Borrower and its
Subsidiaries not exceeding $5,000,000, maturing in six months or less
from the date of issuance thereof; and
3.37.8 other Investments by the Borrower and its Subsidiaries
not exceeding $1,000,000.
For purposes of this definition, at any time when a Person becomes a
Subsidiary, all Investments of such corporation at such time shall be deemed to
have been made by such corporation, as a Subsidiary, at such time.
11
3.38 "Person" means and includes an individual, a corporation, a
partnership, a firm, a joint venture, a limited liability company, a trust, an
unincorporated organization or a government or an agency or political
subdivision thereof.
3.39 "Prime Rate" means the prime commercial rate of The Huntington
National Bank, as such rate is established and made available from time to time
based on its consideration of economic, money market, business and competitive
factors, and it is not necessarily the Bank's most favored rate, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate.
3.40 "Security Agreement" is defined in Section 5.
3.41 "Subsidiary" means any corporation 50% or more of the outstanding
voting stock of which at the time is owned directly or indirectly by the
Borrower.
3.42 "Termination Date" means April 30, 2006.
SECTION 4. BORROWING PROVISION.
4.1 AMOUNT OF REVOLVING CREDIT. Relying on the foregoing
representations and warranties and subject to the agreements and covenants
hereinafter contained, the Bank agrees to make Loans (which may be either
Domestic Loans, Quoted Eurodollar Loans or Daily Eurodollar Loans, or any
combination) to the Borrower, from time to time from the date hereof to the
Termination Date, at such times and in such amounts as the Borrower shall
request, in the aggregate not in excess of Bank's Commitment or such lesser
amount as is determined in accordance with Section 1.3. The Borrower shall give
the Bank written or telephonic notice by 12:00 noon, Columbus, Ohio, time, three
(3) Business Days prior to the date of intended borrowing with respect to any
Quoted Eurodollar Loan hereunder and written or telephonic notice by 12:00 noon,
Columbus, Ohio, time, on the same Business Day with respect to any Daily
Eurodollar Loan or Domestic Loan, which notice shall specify the proposed date
of borrowing, the amount thereof, whether such loan is to be a Domestic Loan, a
Quoted Eurodollar Loan or a Daily Eurodollar Loan, and if a Quoted Eurodollar
Loan, the Interest Period selected. The Bank shall notify the Borrower of the
relevant Eurodollar Interest Rate at approximately 12:00 noon, Columbus, Ohio,
time, two (2) Business Days prior to the date of intended borrowing of any
Quoted Eurodollar Loan. The Borrower shall accept or reject such Eurodollar Rate
upon such notification, and such acceptance or rejection shall be irrevocable.
In the event of rejection such Loan shall be a Daily Eurodollar Loan or Domestic
Loan, as elected by the Borrower. Each Loan shall be in the amount of $100,000
or an integral multiple thereof in the case of a Daily Eurodollar Loan or
Domestic Loan or in an amount of not less than $1,000,000 and increments of
$250,000 thereafter in the case of a Quoted Eurodollar Loan. Notwithstanding the
foregoing, the Borrower shall not have outstanding any more than fifteen (15)
Quoted
12
Eurodollar Loans at any one time. The Loans shall be evidenced by Revolving
Credit Note (as defined in Section 4.2 hereof).
4.2 EVIDENCE OF LOANS MADE UNDER REVOLVING CREDIT. All Loans made by
the Bank pursuant to the Bank's Commitment shall be evidenced by a promissory
note, substantially in the form attached hereto as EXHIBIT A (hereinafter called
the "Revolving Credit Note"), payable to the order of the Bank, duly executed on
behalf of the Borrower, dated the date of this Agreement. The Bank is hereby
authorized by the Borrower to note on the schedule attached to the Revolving
Credit Note the date, amount and type of each Loan made to the Borrower, the
duration of the related Interest Period if applicable, the amount of each
payment or prepayment of principal thereon, and the other information provided
for on such schedule, which schedule shall constitute PRIMA FACIE evidence of
the information so noted; provided, that failure of the Bank to make any such
notation shall not relieve the Borrower of its obligation to repay the
outstanding principal amount of any Loan or Loans made to it, all accrued
interest thereon and all other amounts payable in accordance with the terms of
the Revolving Credit Note or this Agreement. Interest on the Loans evidenced by
the Revolving Credit Note shall be payable at the rates specified in Sections
3.2 and 3.20 hereof and on each Interest Payment Date, as hereinafter defined.
The terms and conditions of this Agreement are incorporated in the Revolving
Credit Note by reference as though the same were written therein.
4.3 LOAN AND COMMITMENT FEES. The Borrower agrees to pay to the Bank
annually in advance on the date of this Agreement and thereafter on each January
1 beginning on January 1, 2004, a loan fee (the "Loan Fee") in an amount equal
to one-half of one percent (1/2 of 1%) of the amount of the Commitment. The
Borrower further agrees to pay the Bank an annual commitment fee (hereinafter
called the "Commitment Fee") of one-half of one percent (1/2 of 1%) per annum
(computed on the basis of a 360-day year for the actual number of days elapsed
in each computation period) of the average daily unused amount of the Commitment
available to Borrower pursuant to Section 1.1 above, taking into consideration
the seasonal adjustment pursuant to Section 1.2 above. The Commitment Fee shall
commence to accrue on the date hereof through and including the Termination
Date, and shall be paid quarterly in arrears on the last day of March, June,
September and December in each year commencing March 31, 2003, and on the
termination of the Commitment.
4.4 CONVERSION OF LOANS. The Borrower may elect to continue a Loan as a
Quoted Eurodollar Loan, a Daily Eurodollar Loan or a Domestic Loan or convert a
Loan of one type to a Loan of another type by giving telephonic notice thereof
to the Bank not later than 12:00 noon, Columbus, Ohio, time, three (3) LIBOR
Business Days prior to the day on which the continuation of a Quoted Eurodollar
Loan or conversion to a Quoted Eurodollar Loan is to be effective, and not later
than 12:00 noon, Columbus, Ohio, time, one Business Day prior to the proposed
day of conversion of a Quoted Eurodollar Loan to a Daily Eurodollar Loan or
Domestic Loan, provided, that an outstanding Quoted Eurodollar Loan may only be
converted on the last day of the then current Interest Period with respect to
such Loan, and PROVIDED, FURTHER, that upon the continuation or conversion of a
Loan such notice shall also specify the Interest
13
Period (if applicable) to be applicable thereto upon such continuation or
conversion. If the Borrower shall fail to timely provide notice with respect to
any outstanding Quoted Eurodollar Loan, the Borrower shall be deemed to have
elected to convert such Loan to a Domestic Loan on the last day of the Interest
Period with respect to such Loan. Telephonic notice shall in each instance be
followed within a reasonable period of time by written notice substantially in
the form of EXHIBIT C hereto. In the event of any conflict between telephonic
and written notice, the telephonic notice shall control to the extent that such
notice has been relied upon by the Bank making the applicable Loan.
4.5 PREPAYMENT. The Borrower may at any time, upon three (3) Business
Days prior written notice to the Bank, repay any or all of the Loans without
penalty, except that Quoted Eurodollar Loans may only be paid at the end of the
applicable Interest Period and the Borrower may not prepay any portion of any
Loan as to which an election for a continuation of or a conversion to a Quoted
Eurodollar Loan is pending. Any prepayment shall be in the minimum amount of
$100,000 or multiples thereof. All partial prepayments under this Section 4.5
shall be accompanied by the payment of all accrued interest. The Borrower shall
make such prepayments as are necessary to keep the amounts outstanding to the
Bank hereunder within the Commitment limitations identified in Section 1.2
hereof.
4.6 TERMINATION OR REDUCTION OPTIONS. The Borrower shall have the right
at any time prior to the Termination Date, upon three (3) Business Days prior
written notice to the Bank, (i) to terminate or reduce permanently the aggregate
principal amount of the Commitment of the Bank to make Loans hereunder by
written notice to the Bank; PROVIDED that any permanent reduction of the
Commitment of the Bank to make Loans must be accompanied by the repayment of any
outstanding principal amount in excess of the amount of the Bank's Commitment,
as thereby reduced, together with interest accrued thereon; and PROVIDED FURTHER
that no such termination or reduction which would require prepayment of any
Quoted Eurodollar Loan shall be permitted except at the end of the applicable
Interest Period.
4.7 INTEREST PAYMENT DATES. "Interest Payment Date" shall mean (i) the
last day of each Interest Period in the case of each Quoted Eurodollar Loan,
except that in the case of any Interest Period that is longer than three (3)
months for any such Loan, "Interest Payment Date" shall also include the
ninetieth (90th) day of such Interest Period; and (ii) in the case of each
Domestic Loan and Daily Eurodollar Loan, the first Business Day of each month.
4.8 PAYMENT METHOD. All payments to be made by the Borrower hereunder
will be made in Dollars and in immediately available funds to the Bank at its
address set forth in Section 14.2 hereof not later than 3:00 p.m. Columbus, Ohio
time on the date on which such payment shall become due. Payments received after
3:00 p.m. Columbus, Ohio time shall be deemed to be payments made prior to 3:00
p.m. on the next succeeding Business Day. At the time of making each such
payment, the Borrower shall specify to the Bank that obligation of the Borrower
to which such payment is to be applied, or, in the event that the Borrower fails
to so
14
specify or if an Event of Default shall have occurred and be continuing, the
Bank may apply such payments to indebtedness due hereunder as it may determine
in its sole discretion.
4.9 NO SETOFF OR DEDUCTION. All payments of principal and interest on
the Loans and other amounts payable by the Borrower hereunder shall be made by
the Borrower without setoff or counterclaim, and free and clear of, and without
deduction or withholding for, or on account of, any present or future taxes,
levies, imposts, duties, fees, assessments, or other charges of whatever nature,
imposed by any governmental authority, or by any department, agency or other
political subdivision or taxing authority.
4.10 PAYMENT ON NON-BUSINESS DAY; PAYMENT COMPUTATIONS. Except as
otherwise provided in this Agreement to the contrary, whenever any installment
of principal of, or interest on, any Loan outstanding hereunder or any other
amount due hereunder, becomes due and payable on a day which is not a Business
Day, the maturity thereof shall be extended to the next succeeding Business Day
and, in the case of any installment of principal, interest shall be payable
thereon at the rate per annum determined in accordance with this Agreement
during such extension. Computations of interest and other amounts due under this
Agreement shall be made on the basis of a year of 360 days for the actual number
of days elapsed, including the first day but excluding the last day of the
relevant period.
SECTION 5. SECURITY.
As security for the Loan, the Borrower shall grant to the Bank a first
security interest in all its accounts, inventory, equipment, fixtures and other
personal property of every kind and description, whether now owned or hereafter
acquired or created by the Borrower, and, at the request of the Bank, the
Borrower shall authorize and cause to be executed a security agreement (the
"Security Agreement") any and all other documents that the Bank shall require in
order to effect the foregoing.
SECTION 6. CONDITIONS OF LENDING.
The obligations of the Bank hereunder are subject to the following
conditions precedent:
6.1 OPINION OF COUNSEL FOR THE BORROWER. On or before the date of first
borrowing hereunder, the Bank shall have received the favorable written opinion
of counsel for the Borrower acceptable to the Bank, addressed to the Bank, and
satisfactory to counsel for the Bank (i) confirming the accuracy of the
representations and warranties set forth in Section 2.1 hereof (except such
confirmation may exclude the Borrower's Subsidiaries and any opinion as to the
Borrower's qualification to do business in states other than Ohio), and to the
best knowledge of such counsel, confirming the accuracy of the representations
and warranties set forth in Sections 2.2, 2.12 and 2.14 hereof and those
portions of Section 2.13 hereof not described in Section 6.1
15
(ii) hereof; (ii) stating that (1) this Agreement has been duly executed and
delivered by the Borrower and constitutes the legal, valid and binding
obligation of the Borrower enforceable in accordance with its terms, and (2)
each of the Note and the Security Agreement when duly executed and delivered by
the Borrower to the Bank in accordance with the provisions hereof, will
constitute the legal, valid, and binding obligation of the Borrower enforceable
in accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency and similar laws and to
moratorium laws from time to time in effect and to such other exceptions as the
Bank may deem acceptable); and (iii) confirming that the terms of this Agreement
will not violate any of the terms or conditions of the Metropolitan Agreement.
6.2 SUPPORTING DOCUMENTS. The Bank shall have received on or before the
date of the first borrowing hereunder (i) a copy of the resolutions of the Board
of Directors of the Borrower authorizing the execution, delivery and performance
of this Agreement, the borrowings contemplated hereunder and the execution and
delivery of the Note provided for herein, (ii) a copy certified by the Secretary
of State of Ohio of the Articles of Incorporation of the Borrower; (iii) a copy
of the Bylaws or Code of Regulations of the Borrower, certified as true and
correct by its secretary or assistant secretary, (iv) a certificate of the
secretary or assistance secretary of the Borrower identifying the officers
authorized to sign this Agreement and the Note provided for herein and to borrow
hereunder, together with samples of each of their signatures, (v) a certificate
of good standing as to the Borrower from the Secretary of State of Ohio and of
each state in which the Borrower is doing business and required to qualify, and
(vi) such additional documents as counsel for the Bank may reasonably request.
6.3 NO DEFAULT. Each borrowing hereunder shall constitute a
certification by the Borrower that (i) the Borrower and each Subsidiary are in
compliance with all of the terms and provisions set forth herein on their part
to be observed and performed, (ii) no Default or Event of Default has occurred
or is continuing at the time of such borrowing and (iii) each of the
representations and warranties made in Section 2 hereof are true and correct
with the same effect as though such representations and warranties had been made
at the time of such borrowing, except that the representations and warranties
made in Sections 2.3 and 2.5 hereof shall be deemed to refer to the last audited
financial statements or interim financial statement delivered to the Bank
pursuant to Section 8.1 hereof and further excepting that the occurrence of any
material adverse change or effect shall be determined by reference to the
Borrower's financial condition, business and operations on the date of this
Agreement.
6.4 DELIVERY OF NOTE AND SECURITY AGREEMENT. The Borrower shall have
executed and delivered the Note and the Security Agreement to the Bank.
SECTION 7. PROVISIONS RELATING TO EURODOLLAR LOANS.
7.1 ADDITIONAL COSTS. In the event that any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter in effect, or
any interpretation or administration
16
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by the Bank with any request or directive
of any such authority (whether or not having the force of law), shall (i) impose
taxes on, or affect the basis of taxation of, payments to the Bank of any
amounts payable by the Borrower under this Agreement (other than taxes imposed
on the overall net income of the Bank by the jurisdiction, or by any political
subdivision or taxing authority of any such jurisdiction, in which the Bank has
its principal office), or (ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, the Bank, or (iii) shall impose
any other condition, requirement or charge with respect to this Agreement, the
Note or the Eurodollar Loans (including without limitation any capital adequacy
requirement, any requirement which affects the manner in which the Bank
allocates capital resources to its commitments or any similar requirement), and
the result of any of the foregoing is to increase the cost to the Bank of making
or maintaining any Loan, to reduce the amount of any sum receivable by the Bank
thereon, or to reduce the rate of return on the Bank's capital, then the
Borrower shall pay to the Bank, from time to time, upon request of the Bank,
additional amounts sufficient to compensate the Bank for such increased cost,
reduced sum receivable or reduced rate of return to the extent the Bank is not
compensated therefor in the computation of the interest rates applicable to the
Loans. A detailed statement as to the amount of such increased cost, reduced sum
receivable or reduced rate of return, prepared in good faith and submitted by
the Bank to the Borrower, shall be conclusive and binding for all purposes,
absent manifest error in computation.
7.2 ADDITIONAL EUROCURRENCY RESERVES. Without limiting the effect of
the provisions of Section 7.1 above, the Borrower shall, upon request the Bank,
pay to the Bank on each Interest Payment Date with respect to each Eurodollar
Loan at any time outstanding, additional amounts for each day upon which the
Bank is required to maintain reserves against "Eurocurrency liabilities" under
Regulation D of the Board of Governors of the Federal Reserve System, which
additional amount shall be calculated by the Bank with respect to its
outstanding Eurodollar Loans as follows:
R 1
----- -----
Additional amount = P x (1-r) - R x 360
where
P = the principal amount of such Loan outstanding on such date;
R LIBOR applicable to such Loan for such date (expressed as a
decimal); and
r = the stated rate (expressed as a decimal) at which such
reserve requirements are imposed on the Bank as determined by
the Bank.
This provision is for the benefit of the Bank and is not intended to increase
the expected yield to the Bank above the rates of interest provided for in this
Agreement.
17
7.3 LIMITATIONS OF REQUESTS AND ELECTIONS. Notwithstanding any other
provision of this Agreement to the contrary, if, upon receiving a request for a
Eurodollar Loan pursuant to Section 4.1 hereof, or a request for a continuation
of a Eurodollar Loan as a Eurodollar Loan pursuant to Section 4.4 hereof, or
conversion of a Domestic Loan to a Eurodollar Loan pursuant to Section 4.4
hereof, (i) deposits in Dollars for periods comparable to the Interest Period
elected by the Borrower are not available to the Bank in the London interbank
market, or (ii) it is otherwise impossible for any reason to determine LIBOR, or
(iii) LIBOR will not adequately and fairly reflect the cost to the Bank of
making or maintaining the related Eurodollar Loan, or (iv) by reason of national
or international financial, political or economic conditions or by reason of any
applicable law, treaty, rule or regulation (whether domestic or foreign) now or
hereafter in effect, or the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive of such
authority (whether or not having the force of law), including without limitation
exchange controls, it is impracticable, unlawful or impossible for the Bank (x)
to make the relevant Eurodollar Loan or (y) to continue such Loan as a
Eurodollar Loan or (z) to convert a Loan to a Eurodollar Loan, then the Borrower
shall not be entitled, so long as such circumstances continue, to request or
receive a Eurodollar Loan pursuant to Section 4.1 hereof or a continuation of or
conversion to such Loans pursuant to Section 4.4 hereof. In the event that such
circumstances no longer exist, the Bank shall again consider requests for
Eurodollar Loans pursuant to Section 4.1 hereof, and requests for continuations
of and conversions to such Loans pursuant to Section 4.4 hereof.
7.4 ILLEGALITY AND IMPOSSIBILITY. In the event that any applicable law,
treaty, rule or regulation (whether domestic or foreign) now or hereafter in
effect, or any interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive of such authority (whether
or not having the force of law), including without limitation exchange controls,
shall make it unlawful or impossible for the Bank to maintain any Loan under
this Agreement, the Borrower shall upon receipt of notice thereof from the Bank,
repay in full the then outstanding principal amount of all Loans made by the
Bank so affected together with all accrued interest thereon to the date of
payment and all amounts due to the Bank under Sections 4 and 7.5 hereof, (i) on
the last day of the then current Interest Period, if any, applicable to such
Loan if the Bank may lawfully continue to maintain such Loan to such day, or
(ii) immediately if the Bank may not continue to maintain such Loan to such day.
This provision is for the benefit of the Bank and is not intended to increase
the yield to the Bank above the rates of interest provided for in this
Agreement.
7.5 INDEMNIFICATION. If the Borrower makes any payment of principal
with respect to any Loan on any other date than the last day of an Interest
Period applicable thereto (whether pursuant to Sections 4.5, 7.4 or 13.2 hereof
or otherwise), or if the Borrower fails to borrow, continue or convert any Loan
after notice has been given to the Bank in accordance with Section 4.1 or 4.4
hereof, or fails to make any payment of principal or interest in respect of a
Loan when
18
due, or fails to make any prepayment after notice of intention to prepay has
been given to the Bank, the Borrower shall reimburse the Bank on demand for any
resulting loss or expense incurred by the Bank, including without limitation any
loss incurred in obtaining, liquidating or employing deposits from third
parties. A detailed statement as to the amount of such loss or expense, prepared
in good faith and submitted by the Bank to the Borrower shall be conclusive and
binding for all purposes absent manifest error in computation.
7.6 SURVIVAL OF OBLIGATIONS. The provisions of this Section 7 shall
survive the termination of the Commitment and the payment in full of the Note
outstanding pursuant to this Agreement.
SECTION 8. AFFIRMATIVE COVENANTS.
For as long as the Bank is obligated to lend hereunder and until
payment in full of the Note and interest thereon, the Borrower covenants that,
unless the Bank shall otherwise consent in writing, it will and will cause each
Subsidiary, except, as to a Subsidiary, in the case of Sections 8.1, 8.2, 8.9,
8.10 and 8.13 hereof, to:
8.1 FINANCIAL STATEMENTS. Furnish the Bank a copy of the report of the
certified audit of the Borrower and its Subsidiaries for each fiscal year
prepared by a certified public accountant of recognized standing and a balance
sheet and related statements of income and retained earnings and cash flow of
the Borrower and of the Subsidiaries as of the end of and for each quarter
certified as to fairness of presentation by an officer of the Borrower and/or
the respective Subsidiaries. All financial statements will be consolidated
financial statements, will be prepared in accordance with generally accepted
accounting principles, and will be in a form satisfactory to the Bank. The
annual audits and quarterly statements shall be in the format required for
filing with the Securities and Exchange Commission. The engagement of the
certified public accountant will require the reporting of any and all Defaults
and Events of Default as of the last day of the fiscal year of the Borrower
which have come to the attention of such accountant or that no Defaults or
Events of Default have come to its attention as of such date. Quarterly
financial statements will be accompanied by an officer's compliance certificate,
in the form attached hereto as EXHIBIT D, which shall also indicate whether a
Default or Event of Default has occurred and, if so, stating the facts with
respect thereto and whether the same has been cured prior to the date of such
certificate. In the event that any certificate furnished under this paragraph
shall state that a Default or Event of Default has occurred and is continuing,
such certificate shall be accompanied by a statement executed by the chief
financial officer of the Borrower as to the action taken and proposed to be
taken by the Borrower to cure such Default or Event of Default. Such annual and
quarterly statements shall, be delivered to the Bank within 120 days and 60
days, respectively, after the close of the fiscal period.
The Borrower will also furnish the Bank promptly after sending or
filing thereof, copies of all financial statements and reports which it sends to
its stockholders and copies of all regular
19
and periodic reports and registration statements which it files with the
Securities and Exchange Commission. The Borrower will furnish the Bank within a
reasonable period of time such additional information and financial statements
as the Bank may from time to time request.
The Borrower will furnish to the Bank within 25 days of the end of each
fiscal month a certificate in the form of EXHIBIT E signed by its chief
financial officer setting forth the calculation of the Borrowing Base as of the
end of such month.
8.2 OUT OF POCKET EXPENSES. Pay all out-of-pocket expenses of the Bank
arising in connection with the transactions contemplated by this Agreement,
whether or not consummated, including the reasonable fees and expenses of the
Bank's counsel for services rendered in connection with the transaction
contemplated hereby including the preparation of this Agreement and related
documents, and any amendments or modifications thereto.
8.3 COMPLIANCE WITH STATUTES; PAYMENT OF TAXES. Comply with all valid
and applicable statutes and governmental regulations and pay promptly when due
all taxes, assessments, governmental charges, claims for labor, supplies, rent
and other obligations, which, if unpaid might become a lien against the property
of the Borrower or any subsidiary, except liabilities being contested in good
faith by appropriate proceedings and against which the Borrower or applicable
Subsidiary has set up adequate reserves in conformity with GAAP.
8.4 INSURANCE. Maintain insurance in such amounts as is customarily
maintained by companies of the same relative size in the same or similar
businesses.
8.5 CORPORATE EXISTENCE. Maintain its corporate existence in good
standing and comply with all valid and applicable statutes, rules and
regulations, and maintain its properties in good operating condition, except a
Subsidiary may be merged into the Borrower or consolidated with another
Subsidiary.
8.6 ERISA. The Borrower and its Subsidiaries shall with respect to any
employee benefit plan under ERISA in effect now or in the future:
(a) at all times make prompt payment of contributions required
to meet the minimum funding standards set forth in Sections 302 through
305 of ERISA with respect to such plan,
(b) if requested by the Bank, promptly, after the filing
thereof, furnish to the Bank copies of each annual report required to
be filed pursuant to Section 103 of ERISA in connection with such plan
for the plan year most recently ended, including any certified
financial statements or actuarial statements required pursuant to said
Section 103,
20
(c) notify the Bank immediately of any fact, including, but
not limited to, any "Reportable Event," as that term is defined in
Section 4043 of ERISA, arising in connection with such plan which might
constitute grounds for termination thereof by the Pension Benefit
Guaranty Corporation, or any successor thereto, or for the appointment
by the appropriate United States District Court of a trustee to
administer such plan, and
(d) notify the Bank of any "Prohibited Transaction" as that
term is defined in Section 406 of ERISA for which there is no exemption
under Section 408 of ERISA.
8.7 BOOKS AND RECORDS. Maintain books and records in which full and
correct entries will be made of all its business transactions.
8.8 INSPECTION OF BOOKS AND RECORDS. Permit the Bank upon its
reasonable request to inspect the books and records of the Borrower, to make
copies and abstracts thereof and to discuss the affairs of the Borrower with the
Borrower's officers.
8.9 NOTIFICATION BY BORROWER. Give the Bank prompt written notice of:
(a) the occurrence of any Default or Event of Default or any
event or condition which, with notice or lapse of time, or both, would
constitute an Event of Default, and
(b) any development in the business or affairs of the Borrower
or any of its Subsidiaries which has resulted in or which is likely in
the reasonable judgment of the Borrower to result in a material adverse
change in the business, properties, operations or condition, financial
or otherwise, of the Borrower or any of its Subsidiaries.
8.10 AMENDMENTS TO METROPOLITAN AGREEMENT. Furnish the Bank promptly
with a copy of every amendment of the Metropolitan Agreement.
8.11 NOTICE OF CLAIMS. Give the Bank prompt written notice of any claim
in excess of $1,000,000, or in which no monetary amount is specified, that is
asserted against the Borrower or any of its Subsidiaries in any litigation to
which the Borrower or such Subsidiary is a party.
8.12 RESTRICTION ON CONSOLIDATED ASSETS. Maintain seventy-five percent
(75%) of consolidated tangible assets, excluding intercompany assets which are
eliminated when consolidated in accordance with GAAP, under the ownership of and
in the name of the Borrower. In the event the Borrower fails to maintain
seventy-five percent (75%) of its consolidated tangible assets under its
ownership or in its own name, then the Borrower, within a reasonable time
thereafter, shall make all significant Subsidiaries, as determined in a
commercially reasonable manner by the Bank, obligors on all indebtedness owing
to the Bank under this Agreement, either by assumption of such indebtedness as a
co-maker with Borrower or by the guaranty of such indebtedness, as the Borrower
may elect.
21
8.13 RESTING OF LOAN. So long as the Commitment is outstanding, the
Borrower shall reduce the principal balance of the Loan to zero and maintain the
same at zero for a period of not less than fifteen (15) days in calendar year
2003 and for a period of not less than thirty (30) days in each year thereafter.
SECTION 9. NEGATIVE-COVENANTS.
For as long, as the Bank is obligated to lend hereunder and until
payment in full of the Note and interest thereon, the Borrower covenants that it
will not, without the prior written consent of the Bank:
9.1 LIMITATIONS ON DEBT. Directly or indirectly create, incur, assume
or otherwise become or remain liable with respect to any Debt or any Guaranties
except:
9.1.1 the Loans;
9.1.2 Debt existing on the date hereof listed on
SCHEDULE 9.1 attached hereto, including extensions
and refinancings of such Debt;
9.1.3 Debt secured by Liens permitted pursuant to Section
9.5;
9.1.4 secured or unsecured purchase money Debt (including
Capitalized Leases) to finance the acquisition of
fixed assets, if such Debt (a) has a scheduled
maturity and is not due on demand, (b) in the
aggregate does not exceed the sum of $2,000,000
outstanding at any time, (c) does not exceed the
purchase price of the items being purchased, and (d)
is not secured by any property or assets other than
the item or items being purchased;
9.1.5 foreign currency agreements in an aggregate notional
amount not to exceed $3,000,000 (after netting
contracts to buy and sell the same national currency
on the same date);
9.1.6 interest rate contracts protecting the Borrower
against risks of interest rate fluctuation; and
9.1.7 commercial letters of credit in an aggregate amount
outstanding at any one time not exceeding $4,000,000.
9.2 MAINTENANCE OF CONSOLIDATED TANGIBLE NET WORTH. Permit
Consolidated Tangible Net Worth to be less than (i) $35,000,000 as of Xxxxx 00,
0000, (xx) $31,000,000 as of June 28,
22
2003, (iii) $35,000,000 as of September 27, 2003, and (iv) $42,500,000 as of
January 3, 2004, (v) $38,000,000 as of April 3, 2004, (vi) $34,000,000 as of
July 3, 2004, (vii) $37,500,000 as of October 2, 2004, (viii) $45,500,000 as of
January 1, 2005, (ix) $40,500,000 as of April 2, 2005, (x) $36,500,000 as of
July 2, 2005, (xi) $40,000,000 as of October 1, 2005, and (xii) $49,000,000 as
of December 31, 2005.
9.3 RESTRICTED PAYMENTS. Except as described in SCHEDULE 9.3 attached
hereto, declare or pay any dividends (other than dividends payable in capital
stock of the Borrower) on any shares of any class of its capital stock or apply
any of its property or assets to the purchase, redemption or other retirement
of, or make any other distribution, by reduction of capital or otherwise, in
respect of, or permit any Subsidiary to purchase, any shares of any class of
stock of the Borrower (herein, collectively, "Restricted Payments"); provided,
however, that the Borrower may perform its obligations under option agreements
to the extent that the consideration paid does not exceed $500,000 in any one
fiscal year.
9.4 CAPITAL EXPENDITURES. Permit total capital expenditures (including
expenditures in respect of capital lease obligations) of the Borrower and its
Subsidiaries in any one fiscal year to exceed $3,500,000.
9.5 LIENS. Permit, and will not permit any of its Subsidiaries to,
incur, create, assume or permit to exist any Lien on any property, whether owned
as of the date of this Agreement or thereafter acquired, except:
9.5.1 Liens on property of the Borrower or a Subsidiary
existing on the date of this Agreement identified on SCHEDULE 2.4
attached hereto;
9.5.2 Liens, pledges or deposits made or incurred by the
Borrower or a Subsidiary in connection with worker's compensation,
social security or unemployment insurance or to secure the performance
of letters of credit, bids, tenders, sales contracts, leases, statutory
obligations, surety, appeal and performance bonds and other similar
obligations incurred in the ordinary course of business and not in
connection with the borrowing of money, the obtaining of advances or
the payment of the deferred purchase price of property;
9.5.3 Liens incurred by the Borrower or a Subsidiary for
taxes, assessments or governmental charges or levies to the extent
permitted to remain unpaid by Section 8.3 hereof and materialmen's and
warehousemen's Liens securing obligations not overdue, or if overdue,
being contested in good faith by appropriate proceedings, PROVIDED that
adequate reserves are established in accordance with GAAP;
9.5.4 attachment, judgment and other similar Liens arising in
connection with judicial proceedings, PROVIDED that the execution or
other enforcement of such Lien is effectively stayed and the claims
secured thereby are being contested in good faith by
23
appropriate proceedings in such manner that the property subject to
such Lien is not subject to forfeiture or sale and PROVIDED FURTHER
that adequate reserves are established in accordance with GAAP;
9.5.5 encumbrances in the nature of zoning restrictions,
easements, restrictions of record on the use of real property, and
landlords' and lessors' Liens, in each case arising or existing in the
ordinary course of business of the Borrower or a Subsidiary and which
do not materially impair the Borrower's or a Subsidiary's use of the
property subject thereto; and
9.5.6 Liens in connection with purchase money Debt permitted
pursuant to Section 9.1.4.
Any Person which becomes a Subsidiary shall be deemed to have incurred,
at the time it becomes a Subsidiary, any Lien of such Person existing
immediately after it becomes a Subsidiary.
9.6 RESTRICTIONS ON SUBSIDIARIES. Permit any Subsidiary to:
9.6.1 issue or dispose of any shares of its capital stock to
any Person other than the Borrower or a Subsidiary, except to the
extent, if any, required to qualify directors under any applicable law
or required to be issued to other stockholders of such Subsidiary by
virtue of their exercise of preemptive rights or as their PRO RATA
share of any stock dividend; or
9.6.2 except as permitted by the proviso in Section 9.9
hereof, sell, assign, transfer, dispose of or in any way part with
control of any share of capital stock, of any other Subsidiary owned by
it, or any Debt owing to it from another Subsidiary, except in either
case to the Borrower or a Subsidiary; or
9.6.3 except for (a) Debt of Subsidiaries owing to Borrower or
another Subsidiary; (b) Guaranties of Debt of the Borrower permitted
under Section 9.1; (c) Debt of a Subsidiary of the type described in
Sections 9.1.2 and 9.1.3; (d) Guaranties of a Subsidiary of the Debt of
another Subsidiary of the type described in Sections 9.1.2 or 9.1.3; or
(e) Debt described in SCHEDULE 9.6, directly or indirectly create,
incur, assume or otherwise become or remain liable with respect to any
Debt or any Guaranties. Any corporation which becomes a Subsidiary
shall be deemed to have incurred, at the time it becomes a Subsidiary,
any Debt of such corporation existing immediately after it becomes a
Subsidiary.
9.7 DISPOSITION OF ASSETS. Permit, and will not permit any Subsidiary
to, sell, lease, transfer or otherwise dispose of all or any substantial part of
its properties and assets, or
24
consolidate with or merge into any other Person, or permit another Person to
merge into it, except that:
9.7.1 any Subsidiary may permit any corporation to merge into
such Subsidiary, or may consolidate with or merge into, or sell, lease
or otherwise dispose of its assets as an entirety or substantially as
an entirety to the Borrower, a Subsidiary or any corporation which
thereupon becomes a Subsidiary, PROVIDED that immediately after the
consummation of any such transaction and after giving effect thereto,
(A) the Borrower and each Subsidiary shall be in compliance with the
provisions of Section 9.1 and 9.6.3 hereof, and (B) no Default or Event
of Default shall exist;
9.7.2 the Borrower or any Subsidiary may sell or otherwise
dispose of any of its assets in the ordinary course of its business;
and
9.7.3 in addition to transactions permitted by Sections 9.7.1
and 9.7.2 above, the Borrower or any Subsidiary may sell or otherwise
dispose of any of its assets (including shares of stock and Debt of
Subsidiaries) at the fair market value thereof (as determined in good
faith by the Board of Directors of the Borrower) if the aggregate net
proceeds received by the Borrower and its Subsidiaries from all such
sales and all other sales and dispositions during the twelve (12)
consecutive calendar months immediately preceding any such sale or
other disposition shall not exceed 15% of Consolidated Net Tangible
Assets as of the end of the fiscal year of the Borrower immediately
preceding such sale or disposition.
9.8 TRANSACTIONS WITH AFFILIATES. Permit, and will not permit any
Subsidiary to, engage in any material transaction with an Affiliate on terms
more favorable to such Affiliate than would have been obtainable in arm's length
dealing in the ordinary course of business with a Person not an Affiliate.
9.9 RESTRICTIONS ON BORROWER. The Borrower will not:
9.9.1 sell, assign, transfer, dispose of, or in any way part
with control of, any share of capital stock of any Subsidiary except
(A) to the extent, if any, required to qualify directors of such
Subsidiary under any applicable law, or (B) to any Subsidiary; or
9.9.2 sell, assign, transfer, dispose of, or in any way part
with control of, any Debt owing from any Subsidiary to the Borrower
except to any Subsidiary;
PROVIDED, HOWEVER, that all shares of capital stock of all classes, together
with all Debt, of any Subsidiary owned by the Borrower and/or its other
Subsidiaries may be sold for the fair market value thereof (as determined in
good faith by the Board of Directors of the Borrower), as an entirety, if the
Subsidiary whose shares of capital stock and Debt are so sold does not own any
25
shares of capital stock or Debt of any other Subsidiary not being simultaneously
disposed of as permitted by this proviso and if such sale is permitted by
Section 9.7.3 hereof.
9.10 PERMITTED INVESTMENTS. Permit, and will not permit any Subsidiary
to, make any Investment other than Permitted Investments.
9.11 LIMITATION ON RESTRICTIVE COVENANTS. Except for the covenants in
the Metropolitan Agreement as existing on the date of this Agreement, incur, or
suffer to exist, any Funded Debt or Current Debt with covenants more restrictive
than the covenants contained herein. In the event the Borrower does enter into
any Current Debt or Funded Debt with covenants more restrictive than the
covenants contained herein (the "Restricted Debt") then the more restrictive
covenants shall automatically and immediately be incorporated herein without
further action or amendment to this Agreement. Once the Restricted Debt has been
paid in full and all documents in connection therewith terminated, the covenants
in this Agreement shall automatically and immediately revert back to the
covenants which existed on the date of this Agreement, or as subsequently
modified by agreement of the Borrower and the Bank, without further action or
amendment to this Agreement.
9.12 LOAN, ADVANCES AND PURCHASES OF STOCK. Make or permit to remain
outstanding or permit any Subsidiary to make or permit to remain outstanding any
loan or advance to, or own, purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any person or entity (other than any stock, obligations or securities of, or any
other interest in, the Borrower), PROVIDED that this Section 9.12 shall not
prohibit or restrict the Borrower's ability to own, purchase or acquire any
stock, obligations or securities of, or any other interest in, any Subsidiary if
otherwise permitted under the terms of this Agreement, and PROVIDED FURTHER that
if otherwise permitted under the terms of this Agreement the Borrower or any
Subsidiary may:
9.12.1 own, purchase or acquire stock, obligations or
securities of a Subsidiary or of a corporation which immediately after
such purchase or acquisition will be a Subsidiary; and
9.12.2 acquire and own stock, obligations or securities
received in settlement of debts (created in the ordinary course of
business) owing to the Borrower or any Subsidiary.
9.13 EBITDA. Permit Consolidated Net Income PLUS Consolidated Net
Interest Expense, consolidated taxes, consolidated amortization and consolidated
depreciation ("EBITDA") to be less than the following amounts at the end of each
of the following periods:
PERIODS EBITDA
------- ------
Quarter ending March 29, 2003 ($6,500,000)
26
Two quarters ending June 28, 2003 ($10,000,000)
Three quarters ending September 27, 2003 ($5,000,000)
Four quarters ending January 3, 2004 $5,000,000
Effective for the quarter beginning January 4, 2004, there shall be no minimum
EBITDA requirement.
9.14 INTEREST COVERAGE. Permit the ratio of Consolidated Net Income
PLUS Consolidated Net Interest Expense and consolidated taxes ("EBIT") to
interest expense at the end of any fiscal quarter ending on or after January 3,
2004, for the four quarter period then ending, to be less than 2.0 to 1.0.
9.15 CASH FLOW LEVERAGE. Effective beginning on January 3, 2004, permit
the ratio of average Funded Debt for the previous four quarters to EBITDA for
the same period to be more than the following at the end of any fiscal quarter:
PERIODS RATIO
------- -----
As of January 3, 2004, for the four quarters then ending 2.5 to 1.0
For quarters ending in fiscal year 2004 2.25 to 1.0
For quarters ending in fiscal year 2005 and thereafter 2.0 to 1.0
SECTION 10. FURTHER ASSURANCE.
The Borrower shall furnish at the reasonable request of the Bank
opinions of legal counsel and certificates of its officers satisfactory to the
Bank regarding matters incident to this Agreement. The Borrower agrees to
provide such other documents and information and to take such further action as
the Bank may reasonably require in connection with the execution and delivery of
this Agreement and the Borrower's performance hereunder.
SECTION 11. TAXES AND STAMPS.
If in connection with any borrowing hereunder any documentary or
recording tax should be assessed or the affixing, of any stamps be required by
state or federal governments, the Borrower will pay the tax and the cost of the
stamps.
SECTION 12. [INTENTIONALLY OMITTED]
27
SECTION 13. DEFAULT.
13.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events will constitute an Event of Default:
13.1.1 Default shall be made in the due and punctual payment
of any principal of any Note when and as the same shall become due and
payable, whether at maturity or by acceleration or otherwise;
13.1.2 Default shall be made in the due and punctual payment
of any installment of interest on any Note or Commitment Fees or other
amounts hereunder, when and as such payments shall become due and
payable, and such default shall have continued for a period of 10 days;
13.1.3 Default shall be made in the performance or observance
of any covenants, agreements or conditions contained in this Agreement,
the Security Agreement or the Note, other than as set forth in Sections
13.1.1 and 13.1.2 hereof and such default shall have continued for a
period of 30 days after any officer of the Borrower becomes aware
thereof;
13.1.4 Default shall occur with respect to any indebtedness of
the Borrower or any Subsidiary (other than the Note) for borrowed
money, including, but not limited to, failure to pay when due any
payments required pursuant to such indebtedness, or any other default
shall occur with respect to such indebtedness, and such other default
shall continue for more than any applicable grace period and the effect
of such other default is to cause such indebtedness to remain unpaid or
to cause or permit the obligee to cause such indebtedness to become
immediately due;
13.1.5 The Borrower or any of its Subsidiaries shall (A) admit
in writing its inability to pay its debts or be unable to pay its debts
generally as they become due, (B) file a petition in bankruptcy or a
petition to take advantage of any insolvency act, (C) make an
assignment for the benefit of its creditors, (D) consent to the
appointment of a receiver of itself or the whole or any substantial
part of its property, (E) file a petition or answer seeking
reorganization, arrangement or winding-up under the Federal bankruptcy
laws or any other applicable law or statute of the United States of
America or any State thereof or any other country or jurisdiction, (F)
have a petition in bankruptcy filed against it and such petition shall
remain undismissed for a period of 60 days, or (G) file any answer
admitting or not contesting the material allegations of a petition
filed against the Borrower or any of its Subsidiaries in any such case
or proceeding, or the Borrower or any of its Subsidiaries seeks,
approves, consents to or acquiesces in any such case or proceeding or
in the appointment of any custodian, trustee, receiver, liquidator or
fiscal
28
agent of the Borrower or any of its Subsidiaries for all or a
substantial part of the properties or assets of the Borrower or any of
its Subsidiaries;
13.1.6 A court of competent jurisdiction shall enter an order,
judgment or decree appointing, without the consent of the Borrower or
the Subsidiary involved, a receiver or custodian of the Borrower or any
of its Subsidiaries or of the whole or any substantial part of their
properties, or approving a petition filed against the Borrower and/or
any Subsidiary seeking reorganization, arrangement or winding-up of the
Borrower and/or such Subsidiary under the Federal bankruptcy laws or
any other applicable law or statute of the United States of America or
any State thereof or any other country or jurisdiction, and such order,
judgment or decree shall not be vacated or set aside or stayed within
15 days from the date of assumption of such custody or control;
13.1.7 Under the provisions of any other law for the relief or
aid of debtors, any court of competent jurisdiction shall assume
custody or control of the Borrower or any of its Subsidiaries or of the
whole or any substantial part of their respective properties and such
custody or control shall not be terminated or stayed within 60 days
from the date of assumption of such custody or control;
13.1.8 Final judgment or judgments for the payment of money in
the aggregate in excess of $2,000,000 shall be rendered by a court of
record against the Borrower and/or any of its Subsidiaries, either
individually or some combination thereof, and the Borrower or such
Subsidiary or Subsidiaries shall not discharge the same or provide for
its discharge in accordance with its terms, or procure a stay of
execution thereof within 30 days from the date of entry thereof and
within said period of 30 days, or such longer period during which
execution of such judgment shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal;
13.1.9 A representation or warranty by the Borrower in this
Agreement or in any financial statement, certificate, report or opinion
delivered pursuant to this Agreement proves to have been incorrect in
any material respect when made or deemed made or delivered; or
13.1.10 (A) either the Borrower or any of its Subsidiaries
shall engage in any "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time) involving any pension or profit-sharing plan
("Plan"); (B) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect
to any Plan; (C) a Reportable Event (as defined in ERISA) shall occur
with respect to, or proceedings shall commence to have a trustee
appointed (or a trustee shall be appointed) to administer, or to
terminate, any Single Employer Plan (as defined ERISA), which
Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Bank, likely to result in
the termination of such Plan for purposes of Title IV of
29
ERISA; (D) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA; (E) the Borrower or any Subsidiary shall, or is, in
the reasonable opinion of any of the Bank, likely to incur any
liability in connection with a withdrawal from, or the insolvency or
reorganization of, a Multiemployer Plan (as defined in ERISA); or (F)
any other event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (A) through (F) above, such event or
conditions, if any, could reasonably be expected to subject the
Borrower or any of its Subsidiaries to any tax, penalty or other
liabilities in the aggregate material in relation to the business,
operations, property or financial condition of the Borrower.
13.2. REMEDIES.
13.2.1 Upon the occurrence and during the continuance of any
Event of Default, the Bank may by notice to the Borrower terminate the
Commitment or declare to be immediately due and payable the outstanding
principal of, and accrued interest on, the Note and all other amounts
due and payable hereunder, or both, whereupon the Commitment of the
Bank shall terminate forthwith or all such amounts shall become
immediately due and payable, or both, as the case may be, without
further notice or demand, provided that in the case of any event or
condition described in Section 13.1.5 or 13.1.6 hereof with respect to
the Borrower, the Commitment shall automatically terminate forthwith
and all such amounts shall automatically become immediately due and
payable without notice or demand. The Borrower hereby expressly waives
presentment, notice of dishonor, protest, notice of protest, diligence
in bringing suit against any party and all other similar formalities.
13.2.2 Upon the occurrence and during the continuance of any
Event of Default, the Bank may, in addition to the remedies provided in
Section 13.2.1 hereof, enforce its rights either by suit in equity, or
by action at law, or by other appropriate proceedings, whether for the
specific performance (to the extent permitted by law) of any covenants
or agreements contained in this Agreement or the Note or in aid of the
exercise of any power granted in this Agreement or the Note and may
enforce the payment of the Note and any of its rights available at law
or in equity.
13.2.3 Upon the occurrence and during the continuance of any
Event of Default, the Bank is hereby authorized at any time and from
time to time, without notice to the Borrower (any requirement for such
notice being expressly waived by the Borrower) to set off and apply
against any and all of the obligations of the Borrower now or hereafter
existing under this Agreement any and all deposits (general or special,
time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Bank to or for the credit or the
account of the Borrower and any property of the Borrower from time to
time, in possession of the Bank, irrespective of whether or not the
Bank shall have made any demand hereunder and although such obligations
may be contingent and unmatured. The rights of the Bank under this
Section 13.2.3 are in addition to other
30
rights and remedies (including, without limitation, other rights of
setoff) which the Bank may have.
SECTION 14. MISCELLANEOUS.
14.1 AMENDMENTS, ETC. This Agreement may be amended from time to time
and any provision hereof may be waived by the parties hereto. No such amendment
or waiver of any provision of this Agreement nor consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by the Bank, and then such amendment, waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
14.2 NOTICES. Except as otherwise provided in this Agreement, all
notices, requests, consents and other communications hereunder shall be in
writing and shall be delivered or sent to the Borrower at 00000 Xxxxxxxx Xx.,
X.X., Xxxxxxxxxxxx, Xxxx 00000, Attention: Xxxxxx Xxxxx, Chief Financial
Officer; and to The Huntington National Bank at 00 Xxxxx Xxxx Xxxxxx, Xxxxxxxx,
Xxxx 00000, Attention: Xxx Xxxx; or to such other address as may be designated
by the Borrower or the Bank by notice to the other. All notices shall be deemed
to have been given at the time of actual delivery thereof to such address, or if
sent by certified or registered mail, postage prepaid, to such address, on the
third day after the date of mailing.
14.3 CONDUCT NO WAIVER; REMEDIES CUMULATIVE. No course of dealing on
the part of the Bank, nor any delay or failure on the part of the Bank in
exercising any rights, powers or privileges hereunder, shall operate as a waiver
of such rights, powers or privileges or otherwise prejudice the Bank's rights
and remedies hereunder; nor shall any single or partial exercise thereof
preclude any further exercise thereof or the exercise of any other right, power
or privilege by the Bank. No right or remedy conferred upon or reserved to the
Bank under this Agreement is intended to be exclusive of any other right or
remedy, and every right and remedy shall be cumulative and in addition to every
other right or remedy given hereunder or now or hereafter existing under any
applicable law. Every right and remedy given by this Agreement or by applicable
law to the Bank may be exercised from time to time as often as may be deemed
expedient by the Bank.
14.4 RELIANCE ON AND SURVIVAL OF VARIOUS PROVISIONS. All terms,
covenants, agreements, representations and warranties of the Borrower made
herein or in any certificate or other document delivered pursuant hereto shall
be deemed to be material and to have been relied upon by the Bank,
notwithstanding any investigation heretofore or hereafter made by the Bank or on
the Bank's behalf, and those covenants and agreements of the Borrower set forth
in Section 8 and Section 14.5 hereof shall survive the repayment in full of the
Loans and the termination of the Commitment.
14.5 EXPENSES.
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14.5.1 The Borrower agrees to pay and save the Bank harmless
from liability for the payment of the reasonable fees and expenses of
counsel to the Bank in connection with the preparation, execution and
delivery of this Agreement and the Note and the consummation of the
transactions contemplated hereby, and in connection with any
amendments, waivers or consents in connection therewith, and all
reasonable costs and expenses of the Bank (including reasonable fees
and expenses of counsel) in connection with any Event of Default or the
enforcement of this Agreement or any of the Note.
14.5.2 The Borrower agrees to pay, and indemnify and hold
harmless the Bank from and against, any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with
respect to the use of proceeds of the Loans.
14.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto and shall inure to the benefit of the Bank and the Bank's
respective successors and assigns. The Bank may assign its entire interest in
this Agreement, its Commitment and the Loans to another financial institution,
including, but not limited to, one of the Bank's affiliates. With the prior
written consent of the Borrower, which consent shall not be unreasonably
withheld, the Bank may sell participations in its Commitment and Loans to any
financial institution or institutions, PROVIDED that, prior to a Default or an
Event of Default, the Bank retains full power to make all decisions with respect
to any waiver relating to this Agreement, and makes any interest rate quotations
based on circumstances relating to it and not to any participant. The Borrower
shall not, without the prior consent of the Bank, assign its rights or
obligations hereunder or, as the case may be, under the Note and the Bank shall
not be obligated to make any Loans hereunder to any entity other than the
Borrower.
14.7 ASSIGNMENT TO FEDERAL RESERVE BANKS. The Bank may at any time
assign all or any portion of its rights under this Agreement and its Note to a
Federal Reserve Bank. No such assignment shall release the Bank from its
obligations hereunder.
14.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
14.9 GOVERNING LAW, CONSENT TO JURISDICTION AND WAIVER OF IMMUNITY.
This Agreement is a contract made under, and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with, the
laws of the State of Ohio applicable to contracts made and to be performed
entirely within such State. The Borrower further agrees that any legal action or
proceeding with respect to this Agreement or the Note or the transactions
contemplated hereby, may be brought in any court of the State of Ohio, or in the
United States courts for the Southern District of Ohio, and the Borrower hereby
irrevocably submits to and accepts generally and unconditionally the
jurisdiction of those courts with respect to its person,
32
property and revenues and irrevocably consents to service of process in any such
action or proceeding by the mailing thereof by U.S. mail to the Borrower at the
Borrower's address set forth in Section 14.2 hereof. To the extent permitted by
applicable law, the Borrower hereby waives and agrees not to assert in any such
action or proceeding, by way of motion, as a defense or otherwise, any claim
that (i) it is not personally subject to the jurisdiction of the aforesaid
courts, (ii) except as required by applicable law, its property is exempt or
immune from attachment or execution, (iii) any such action or proceeding brought
in any one of the aforesaid courts is brought in an inconvenient forum, (iv) the
venue of any such action or proceeding brought in any one of the aforesaid
courts is improper, or (v) this Agreement or any document contemplated herein or
the subject matter hereof or thereof may not be enforced in or by any such
Court.
Nothing in this paragraph shall affect the right of the Bank to serve
process in any other manner permitted by law or limit the right of the Bank to
bring any such action or proceeding against the Borrower or to obtain execution
on any judgment, in any other jurisdiction or in any other manner permitted by
law.
14.10 WAIVER OF JURY TRIAL. THE BORROWER WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i) UNDER THIS
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (ii) ARISING FROM
ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
14.11 HEADINGS. The headings of the various subdivisions hereof are for
the convenience of reference only and shall in no way modify any of the terms
and provisions hereof.
14.12 CONSTRUCTION OF CERTAIN PROVISIONS. All computations required
hereunder and all financial terms used herein shall be made or construed in
accordance with generally accepted accounting principles. If any provision of
this Agreement refers to any action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such Person, whether or not
expressly specified in such provision.
14.13 INTEGRATION AND SEVERABILITY. This Agreement embodies the entire
agreement and understanding between the Borrower and the Bank, and supersedes
all prior agreements and understandings, relating to the subject matter hereof.
In case any one or more of the provisions of this Agreement or the Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one
33
jurisdiction shall not affect the validity, legality or enforceability of the
provisions of this Agreement or the Note in any other jurisdiction.
14.14 USURY. Notwithstanding any provisions of this Agreement or the
Note, in no event shall the amount of interest paid or agreed to be paid by the
Borrower exceed an amount computed at the highest rate of interest permissible
under applicable law. If, from any circumstances whatsoever, fulfillment of any
provision of this Agreement or the Note at the time performance of such
provision shall be due shall involve exceeding the interest rate limitation
validly prescribed by law which a court of competent jurisdiction may deem
applicable hereto, then, IPSO FACTO, the obligations to be fulfilled shall be
reduced to an amount computed at the highest rate of interest permissible under
applicable law, and if for any reason whatsoever the Bank shall ever receive as
interest an amount which would be deemed unlawful under such applicable law such
interest shall be automatically applied by the Bank to the payment of principal
of the Loans outstanding hereunder (whether or not then due and payable) and not
to the payment of interest, or shall be refunded to the Borrower if such
principal has been paid in full.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed in duplicate originals as of the year and day first above written.
ATTEST: X. X. XXXXX CORPORATION
/s/XXXXXX XXXX By: /s/ XXXXXXX X. XXXXXXXX
----------------------------------- -----------------------------------
Xxxxxxx X. Xxxxxxxx
Vice President
THE HUNTINGTON NATIONAL BANK
/s/XXX XXXX By: /s/ XXX XXXX
----------------------------------- -----------------------------------
Xxx Xxxx
Senior Vice President
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