LOAN AGREEMENT
Dated: September 28, 1999
Between
PENN ENGINEERING & MANUFACTURING CORP.
and
FIRST UNION NATIONAL BANK
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS.......................................................1
1.1. General Provisions...........................................1
1.2. Defined Terms................................................1
SECTION 2. AMOUNT AND TERMS OF LOANS........................................13
2.1. Working Capital Line of Credit..............................13
2.2. Working Capital Line of Credit Note.........................14
2.3. Acquisition Line of Credit..................................14
2.4. Acquisition Line of Credit Note.............................15
2.5. Term Loan Facility..........................................15
2.6. Term Loan Note..............................................15
2.7. Interest Rate Elections.....................................16
2.8. Loan Account................................................18
2.9. Maximum Legal Rate..........................................18
2.10. Payments...................................................18
2.11. Application of Payments....................................18
2.12. Late Charges...............................................19
2.13. Mandatory Payments.........................................19
2.14. Voluntary Prepayments......................................19
2.15. Yield Protection; Capital Adequacy.........................20
SECTION 3. REPRESENTATIONS AND WARRANTIES...................................20
3.1. Organization and Qualification..............................20
3.2. Power and Authority.........................................21
3.3. Enforceability..............................................21
3.4. Conflict with Other Instruments.............................21
3.5. Litigation..................................................21
3.6. Title to Assets.............................................21
3.7. Licenses; Intellectual Property.............................21
3.8. Default.....................................................22
ii
3.9. Taxes.......................................................22
3.10. Financial Condition........................................22
3.11. ERISA......................................................22
3.12. Use of Proceeds............................................23
3.13. Regulation U...............................................23
3.14. No Notices; No Violations..................................23
3.15. Labor......................................................23
3.16. Group Health Plans.........................................23
3.17. Year 2000 Matters..........................................24
3.18. No Omissions...............................................24
SECTION 4. CONDITIONS OF BORROWING..........................................24
4.1. Initial Advance.............................................24
4.2. Subsequent Advances.........................................26
4.3. Conditions to Term Loan.....................................27
4.4. Satisfaction of Conditions..................................27
SECTION 5. AFFIRMATIVE COVENANTS............................................28
5.1. Financial Statements; Reports...............................28
5.2. Liabilities.................................................28
5.3. ERISA.......................................................28
5.4. Notices.....................................................29
5.5. Environmental Matters; Compliance with Laws.................29
5.6. Corporate Existence; Properties.............................30
5.7. Insurance...................................................30
5.8. Books and Records...........................................31
5.9. Location of Business........................................31
5.10. Funded Debt to EBITDA Ratio................................31
5.11. Funds Flow Coverage Ratio..................................31
5.12. Group Health Plans.........................................31
5.13. Deposit Accounts...........................................31
iii
SECTION 6. NEGATIVE COVENANTS...............................................31
6.1. Debt........................................................32
6.2. Liens.......................................................32
6.3. Investments, Loans and Advances.............................33
6.4. Mergers, Consolidations.....................................33
6.5. Disposition of Assets.......................................33
6.6. Guaranty Obligations........................................33
6.7. Sales and Lease-Backs.......................................33
6.8. Continuance of Business.....................................34
6.9. Voluntary Prepayments.......................................34
6.10. Transactions with Affiliates...............................34
6.11. Handling of Hazardous Substances...........................34
6.12. Use of Proceeds............................................34
6.13. Management Changes.........................................35
SECTION 7. EVENTS OF DEFAULT, REMEDIES......................................35
7.1. Events of Default...........................................35
7.2. Acceleration................................................37
7.3. Right of Setoff.............................................37
7.4. No Marshalling, Etc., Required..............................38
7.5. Remedies Cumulative.........................................38
SECTION 8. MISCELLANEOUS....................................................38
8.1. No Waiver; Cumulative Remedies..............................38
8.2. Notices.....................................................38
8.3. Reimbursement of Lender.....................................39
8.4. Payment of Expenses and Taxes...............................39
8.5. Survival of Representations and Warranties..................39
8.6. Participations..............................................39
8.7. Successors..................................................40
8.8. Construction................................................40
8.9. Severability................................................40
8.10. Indemnity...................................................40
8.11. Waiver of Trial by Jury; Jurisdiction.......................40
iv
8.12. Actions Against Lender; Release.............................41
8.13. Performance by Lender.......................................41
8.14. Counterparts................................................41
8.15. Further Actions.............................................42
8.16. Entire Agreement............................................42
8.17. Arbitration.................................................42
v
LOAN AGREEMENT
THIS LOAN AGREEMENT made and entered into September 28, 1999, between PENN
ENGINEERING & MANUFACTURING CORP., a Delaware corporation, and FIRST UNION
NATIONAL BANK, a national banking association.
SECTION 1. DEFINITIONS.
1.1. General Provisions. Unless expressly provided otherwise in this
Agreement or in the Loan Documents, or unless the context requires otherwise:
(a) all accounting terms used in this Agreement and in the Loan
Documents shall have the meanings given to them in accordance with GAAP;
(b) all terms used herein and in the Loan Documents that are defined
in the Pennsylvania Uniform Commercial Code, as amended from time to time,
shall have the meanings set forth therein;
(c) all capitalized terms defined in this Agreement shall have the
defined meanings when used in the Loan Documents and in any other documents
made or delivered pursuant to this Agreement;
(d) the singular shall include the plural, the plural shall include
the singular, and the use of any gender shall include all genders;
(e) all references to any particular party defined herein shall be
deemed to refer to each and every person defined herein as such party
individually, and to all of them, collectively, jointly and severally, as
though each were named wherever the applicable defined term is used;
(f) all references to "Sections," "Subsections," "Paragraphs" and
"Subparagraphs" shall refer to provisions of this Agreement;
(g) all references to time herein shall mean Eastern Standard Time or
Eastern Daylight Time, as then in effect; and
(h) all references to sections, subsections, paragraphs or other
provisions of statutes or regulations shall be deemed to include successor,
amended, renumbered and replacement provisions.
1.2. Defined Terms. As used herein, the following terms shall have the
meanings indicated, unless the context otherwise requires:
"Accumulated Funding Deficiency" shall mean any accumulated funding
deficiency as defined in ERISA ss.302(a).
1
"Acquisition" shall mean any purchase or acquisition by the Borrower
of any properties, assets, common stock, or business completed after the
Closing Date.
"Acquisition Line of Credit" shall mean the revolving line of credit
facility in the maximum amount of Thirty Million Dollars ($30,000,000)
described in Section 2.3.
"Acquisition Line of Credit Commitment" shall mean, as at any
applicable time, the Borrower's maximum credit availability under the
Acquisition Line of Credit, as established in Section 2.3(a) whether or not
then fully extended.
"Acquisition Line of Credit Note" shall mean the promissory note
described in Section 2.4 and any future amendments, restatements,
modifications or supplements thereof or thereto.
"Acquisition Line of Credit Termination Date" shall mean September 27,
2000 unless extended in writing by the Lender.
"Additional Costs" shall have the meaning ascribed to it in Section
2.15(a).
"Adjusted LIBOR Rate" shall mean, for and with respect to any LIBOR
Loan and LIBOR Period applicable thereto, (i) the LIBOR Rate, plus (ii)
fifty (50) basis points.
"Adjusted LIBOR Market Index Rate" shall mean, for and with respect to
any LMIR Loan, (i) the LIBOR Market Index Rate (as in effect from time to
time), plus (ii) fifty (50) basis points.
"Adjusted Prime Rate" shall mean, as appropriate, (i) for and with
respect to any Prime Rate Loan made under the Working Capital Line of
Credit, the Prime Rate minus fifty (50) basis points, and (ii) for and with
respect to any Prime Rate Loan made under the Acquisition Line of Credit,
the Prime Rate minus twenty-five (25) basis points.
"Advance" and "Advances" shall mean, individually or collectively, as
appropriate any and/or all advances under (i) the Working Capital Line of
Credit , (ii) the Acquisition Line of Credit, and/or (iii) the Term Loan.
"Affiliate" shall mean, as to any Person:
(a) if such Person is an individual, any (i) relative of such
Person or of a general partner of such Person, (ii) partnership in
which such Person is a general partner, (iii) general partner of such
Person, or (iv) corporation of which such Person is a director,
officer, or person in control;
(b) if such Person is a corporation, any (i) director of such
Person, (ii) officer of such Person, (iii) person in control of such
Person, (iv) partnership in which such Person is a general partner,
(v) general partner of or joint venturer with such Person, or (vi)
relative of a general partner, director, officer, or person in control
of such Person; or
2
(c) if such Person is a partnership, any (i) general partner in
such Person, (ii) relative of a general partner in such Person, (iii)
partnership in which such Person is a general partner, (iv) general
partner of such Person, or (v) person in control of such Person.
As used in this definition, "control" shall mean possession, directly
or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise), provided that,
in any event, any Person which owns or holds directly or indirectly
twenty percent (20%) or more of the voting securities or twenty
percent (20%) or more of the partnership or other equity interests of
any other Person (other than as a limited partner of such other
Person) will be deemed to control such corporation or other Person.
"Agreement" shall mean this Loan Agreement and any future amendments,
restatements, modifications or supplements hereof or hereto.
"Amortization Period" shall mean, for and with respect to the Term
Loan, the amortization period selected by the Borrower pursuant to Section
4.3, which may be from a minimum of one (1) year to a maximum of seven (7)
years from the date on which the Term Loan is made.
"Authorized Officer" shall mean, collectively, the President, Chief
Financial Officer, or any other officer of the Borrower designated as an
Authorized Officer in writing to the Lender by the President of the
Borrower.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, Title
11 of the United States Code, as amended, or any successor law thereto, and
any rules promulgated in connection therewith.
"Borrower" shall mean Penn Engineering & Manufacturing Corp., a
Delaware corporation.
"Borrowing Notice" shall mean a written request by the Borrower to the
Lender for an Advance pursuant hereto, which Borrowing Notice shall be in
the form of Exhibit "A" attached hereto (as such form of Borrowing Notice
may be modified and amended from time to time by the Lender).
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday or any day that
shall be in the City of Philadelphia, Pennsylvania, a legal holiday or a
day on which banking institutions are authorized by law or other
governmental agencies to close, and (ii) with respect to all determinations
and notices in connection with, and payments of principal and interest on,
LIBOR Loans, any day that is a Business Day described in clause (i) above
that is also a day for trading by and between banks in Dollars ($) deposits
in the London interbank market.
"Capital Expenditures" shall mean, with respect to any Person for any
applicable period, the sum, without duplication, of the aggregate amount of
all expenditures of such Person during such period which, pursuant to and
3
in accordance with GAAP, would be classified as capital expenditures
including, without limitation, Capital Lease Obligations.
"Capital Lease Obligations" shall mean, collectively, the obligations
of any Person to pay rent or other amounts under any lease of or other
arrangement conveying the right to use real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person pursuant
to and accordance with GAAP, and the amount of such obligations shall be
the capitalized amount thereof determined in accordance with GAAP.
"Closing Date" shall mean the date hereof.
"COBRA Continuation Coverage" shall mean those provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, found
in Code ss.4980B(f), which impose certain continuation coverage
requirements upon group health plans in order for such plans to retain
certain tax advantages.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor law thereto, and any regulations promulgated thereunder.
"Commitment Letter" shall mean the letter dated August 26, 1999 from
the Lender to the Borrower and any amendments, restatements, modifications
or supplements thereof or thereto.
"Compliance Certificate" shall mean a certificate in the form of
Exhibit "B" attached hereto and made a part hereof executed by an
Authorized Officer certifying as to the matters therein described.
"Consolidated Debt" shall mean the aggregate sum of all Debt of the
Borrower and its Subsidiaries, if any, on a consolidated basis and after
eliminating all intercompany items.
"Contamination" shall mean the presence of any Hazardous Substance
which may require Remedial Actions under applicable law.
"Controlled Group Member" shall mean:
(a) any corporation included with the Borrower in a controlled
group of corporations within the meaning of Code ss.414(b);
(b) any trade or business (whether or not incorporated) which is
under common control with the Borrower within the meaning of Code
ss.414(c); and
(c) any member of an affiliated service group of which the
Borrower is a member within the meaning of Code ss.414(m).
"Debt" shall mean, with respect to any Person at any applicable time
(without duplication), (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments, (iii) all obligations of such Person under
conditional sale or other title retention agreements relating to property
4
purchased by such Person to the extent of the value of such property (other
than customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (iv) all
obligations, other than intercompany items, of such Person issued or
assumed as the deferred purchase price of property or services purchased by
such Person which would appear as liabilities on a balance sheet of such
Person, (v) all Debt of others secured by (or for which the holder of such
Debt has an existing right, contingent or otherwise, to be secured by) any
Lien on, or payable out of the proceeds of production from, property owned
or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (vi) all Guaranty Obligations of such Person, (vii) the
principal portion of all Capital Lease Obligations, (viii) all obligations
of such Person in respect of interest rate protection agreements, foreign
currency exchange agreements, or other interest or exchange rate or
commodity price hedging agreements, (ix) the maximum amount of all
performance and standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without duplication,
all drafts drawn thereunder (to the extent unreimbursed), (x) all preferred
stock issued by such Person and required by the terms thereof to be
redeemed, or for which mandatory sinking fund payments are due, by a fixed
date, and (xi) any other item of indebtedness or liability that would be
reflected on the liabilities side of a balance sheet of such Person in
accordance with GAAP. The Debt of any Person shall also include the Debt of
any partnership or unincorporated joint venture in which such Person is
legally obligated or has a reasonable expectation of being liable with
respect thereto.
"Default" shall mean any event specified in Section 7.1, whether or
not any requirement for notice or lapse of time or any other condition has
been satisfied.
"Default Rate" shall mean a rate per annum equal to (i) two percent
(2%) in excess of (ii) the Prime Rate (as in effect from time to time).
"EBITDA" shall mean, for any applicable period and for the Borrower,
the earnings of the Borrower before interest expense, taxes, depreciation
and amortization expense (determined without regard to extraordinary or
similar items of gain), all as determined on a consolidated basis after
eliminating all intercompany items in accordance with GAAP consistently
applied.
"Employee Pension Plan" shall mean any employee pension benefit plan
as defined in ERISA ss.3(2) and which is (i) maintained by the Borrower or
any Controlled Group Member, and (ii) qualified under Code ss.401.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any regulations issued thereunder by the United
States Department of Labor or the PBGC.
"Event of Default" shall mean any event specified in Section 7.1,
provided that any requirement for notice or lapse of time or any other
condition has been satisfied.
"Funded Debt" shall mean, as at any applicable time and for the
Borrowers (without duplication), the sum of (i) all Debt of the Borrowers
and their Subsidiaries for borrowed money, (ii) all purchase money Debt of
the Borrowers and their Subsidiaries, (iii) the principal portion of all
5
obligations of the Borrowers and their Subsidiaries in respect of Capital
Lease Obligations, (iv) commercial letters of credit and the maximum amount
of all performance and standby letters of credit issued or bankers'
acceptance facilities created for the account of any Borrower or any of its
Subsidiaries, including, without duplication, all unreimbursed draws
thereunder, (v) all Guaranty Obligations of the Borrowers and their
Subsidiaries with respect to Funded Debt of another Person, (vi) all Funded
Debt of another Person secured by a Lien on any property of the Borrowers
and their Subsidiaries whether or not such Funded Debt has been assumed by
any Borrower or any of its Subsidiaries, (vii) all Funded Debt of any
partnership or unincorporated joint venture to the extent any Borrower or
any of its Subsidiaries is legally obligated or has a reasonable
expectation of being liable with respect thereto, net of any assets of such
partnership or joint venture, and (viii) the principal balance outstanding
under any synthetic lease, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing product where such transaction
is considered borrowed money indebtedness for tax purposes but is
classified as an operating lease in accordance with GAAP.
"Funds Flow Coverage Ratio" shall mean, for the Borrower and with
respect to any applicable period of the Borrower, the ratio of (i) (A) net
income after taxes of the Borrower (excluding, however, extraordinary or
similar items of gain to the extent included in the calculation of net
income), plus (B) the aggregate amount of depreciation and amortization
expense taken by the Borrower pursuant to and in accordance with GAAP, plus
(C) interest expense on all Debt of the Borrower (including payments in the
nature of interest under Capital Lease Obligations), minus (D) dividends
and distributions paid to the Borrower's shareholders for the previous four
consecutive fiscal quarters, to (ii) (A) the current maturities portion of
all long-term Debt of the Borrower (including payments in the nature of
principal under Capital Lease Obligations), plus (B) the amount referred to
in paragraph (C) of clause (i) of this definition.
"GAAP" shall mean, at any particular time, generally accepted
accounting principles as in effect at such time, provided, however, that,
if employment of more than one principle shall be permissible at such time
in respect of a particular accounting matter, "GAAP" shall refer to the
principle which is then employed by the Borrower with the agreement of its
independent certified public accountants.
"Guaranty Obligations" shall mean, as at any applicable time and for
any Person, without duplication, any obligations (other than endorsements
in the ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Debt of any other
Person in any manner, whether direct or indirect, and including without
limitation any obligation, whether or not contingent, (i) to purchase any
such Debt or other obligation or any property constituting security
therefor, (ii) to advance or provide funds or other support for the payment
or purchase of such Debt or obligation or to maintain working capital,
solvency or other balance sheet condition of such other Person (including,
without limitation, maintenance agreements, comfort letters, take or pay
arrangements, put agreements or similar agreements or arrangements) for the
benefit of the holder of Debt of such other Person, (iii) to lease or
purchase property, securities or services primarily for the purpose of
assuring the owner of such Debt, or (iv) to otherwise assure or hold
harmless the owner of such Debt or obligation against loss in respect
6
thereof. The amount of any Guaranty Obligation hereunder shall (subject to
any limitations set forth therein) be deemed to be an amount equal to the
outstanding principal amount (or maximum principal amount, if larger) of
the Debt in respect of which such Guaranty Obligation is made.
"Hazardous Substances" shall mean any chemical, solid, liquid, gas, or
other substance having the characteristics identified in, listed under, or
designated pursuant to:
(a) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. ss.9601(14), as a
"hazardous substance;"
(b) the Clean Water Act, 33 U.S.C. ss.1321(b)(2)(A), as a
"hazardous substance;"
(c) the Clean Water Act, 33 U.S.C. ss.ss.1317(a) and 1362(13), as
a "toxic pollutant;"
(d) Table 1 of Committee Print Numbered 95-30 of the Committee on
Public Works and Transportation of the United States House of
Representatives, as a "toxic pollutant;"
(e) the Clean Air Act, 42 U.S.C. ss.7412(a)(1), as a "hazardous
air pollutant;"
(f) the Toxic Substances Control Act, 15 U.S.C. ss.2606(f), as an
"imminently hazardous chemical substance or mixture;"
(g) the Resource, Conservation and Recovery Act, 42
U.S.C. ss.ss.6903(5) and 6921, as a "hazardous waste;" or
(h) any other laws, regulations or governmental publications, as
presenting an imminent and substantial danger to the public health or
welfare or to the environment, or as otherwise requiring special
handling, collection, storage, treatment, disposal, or transportation.
The term "Hazardous Substances" shall also include: (w) petroleum, crude
oil, gasoline, natural gas, liquefied natural gas, synthetic fuel, and all
other petroleum, oil, or gas based products; (x) nuclear, radioactive, or
atomic substances, mixtures, wastes, compounds, materials, elements,
products or matters; (y) asbestos, asbestos-containing materials,
polychlorinated biphenyls, and (z) any other substance, mixture, waste,
compound, material, element, product or matter that presents an imminent
and substantial danger to the public health or welfare or to the
environment upon its Release.
"Investment" in any Person shall mean, collectively, (i) the
acquisition (whether for cash, property, services, assumption of
Indebtedness, securities or otherwise) of assets, shares of capital stock,
bonds, notes, debentures, partnership, joint ventures or other ownership
interests or other securities of such other Person, (ii) any deposit with,
or advance, loan or other extension of credit to, such Person (other than
deposits made in connection with the purchase of equipment or other assets
7
in the ordinary course of business), or (iii) any other capital
contribution to or investment in such Person, including, without
limitation, any Guaranty Obligation (including any support for a letter of
credit issued on behalf of such Person) incurred for the benefit of such
Person.
"Lender" shall mean First Union National Bank, a national banking
association.
"LIBOR" shall mean, for each LIBOR Loan and LIBOR Period applicable
thereto, the rate per annum (rounded upwards, if necessary, to the nearest
1/16th of 1%) determined by the Lender according to the following formula:
R = X
---
1-Y
where R = LIBOR
X = London Interbank Offered Rate for such LIBOR Loan for the
applicable LIBOR Period
Y = The average of the daily rates (expressed as a decimal fraction)
of maximum reserve requirements which are, at any time,
applicable during such LIBOR Period (including, without
limitation, basic, special, supplemental, marginal and emergency
reserves) under any regulations of the Board of Governors of the
Federal Reserve System or other banking authority, domestic or
foreign, as now and from time to time hereafter in effect,
prescribed for eurocurrency funding (currently referred to as
Eurocurrency Liabilities in Regulation D of such Board) to which
the Lender (including any branch, Affiliate, or other fronting
office making or holding a LIBOR Loan) is subject, as now and
from time to time hereafter in effect
"LIBOR Loan" shall mean any Loan or portion thereof which bears
interest at the Adjusted LIBOR Rate pursuant hereto.
"LIBOR Period" shall mean, with respect to any Loan or portion thereof
bearing interest at the Adjusted LIBOR Rate pursuant hereto, the period
commencing on the date on which the Loan or portion thereof begins to bear
interest at the Adjusted LIBOR Rate in accordance herewith and ending one
(1) month, two (2) months, three (3) months, six (6) months, or nine (9)
months thereafter, as appropriate, as selected by the Borrower pursuant to
Section 2.7, subject to the following:
(a) if the last day of the LIBOR Period selected by the Borrower
pursuant to Section 2.7 does not fall on a Business Day:
8
(1) the LIBOR Period shall be automatically extended until
the next succeeding Business Day unless such Business Day falls
in another calendar month, in which case such LIBOR Period shall
end on the next preceding Business Day;
(2) interest shall, to the extent applicable, continue to
accrue at the Adjusted LIBOR Rate; and
(3) the next LIBOR Period elected, or deemed to have been
elected, by the Borrower with respect to the LIBOR Loan to which
the LIBOR Period relates, if any, shall commence on the Business
Day described in clause (a)(1) above; and
(b) any LIBOR Period that begins on the last Business Day of the
calendar month (or on a date for which there is no numerically
corresponding day in the calendar month in which such LIBOR Period
ends) shall end on the last Business Day of a calendar month and the
next LIBOR Period with respect to the LIBOR Loan to which the LIBOR
Period relates, if any, shall commence on such Business Day.
"LIBOR Market Index Rate" shall mean, for any day, the rate (rounded
to the next higher 1/100 of 1%) or one (1) month U.S. Dollar deposits as
reported on Telerate page 3750 as of 11:00 a.m. London time, for any such
day, provided, if such day is not a London business day, the immediately
preceding London business day (or if not so reported, then as determined by
the Lender from another recognized source or interbank quotation).
"LMIR Loan" and "LMIR Loans" shall mean, individually or collectively,
as appropriate, any Advance and/or all Advances which bear interest at the
Adjusted LIBOR Market Index Rate pursuant hereto.
"Lien" shall mean, collectively, any mortgage, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance, lien
(statutory or otherwise), preference, priority or charge of any kind,
including, without limitation, any agreement to give any of the foregoing,
any conditional sale or other title retention agreement, and any lease in
the nature thereof.
"Loan" and "Loans" shall mean, individually or collectively, as
appropriate, (i) any or all Advances under the Working Capital Line of
Credit, (ii) any or all Advances under the Acquisition Line of Credit
and/or (iii) any or all Advances under the Term Loan.
"Loan Account" shall mean, collectively, the account or accounts of
the Borrower on the books of Lender in which are recorded the Loans and the
payments of principal and interest made by the Borrower to Lender thereon.
"Loan Documents" shall mean this Agreement, the Notes and all other
documents executed and delivered to the Lender by or on behalf of the
Borrower in connection therewith and any modifications, amendments,
restatements, substitutions and replacements of or for any of the
foregoing.
9
"London Interbank Offered Rate" shall mean, for and with respect to
any LIBOR Loan and any LIBOR Period applicable thereto, the rate (rounded
upwards, if necessary, to the nearest 1/16th of 1%) equal to the composite
London Interbank Offered Rate for dollar ($) deposits approximately equal
in principal amount to the amount of such LIBOR Loan and for a maturity
comparable to such LIBOR Period appearing on the Telerate Screen Page 3750
at approximately 11:00 A.M., London time, on the date that is two (2) LIBOR
Business Days prior to the commencement of such LIBOR Period; provided,
however, that if such rate shall for any reason not be available on the
Telerate Screen Page 3750 at such time, the London Interbank Offered Rate
shall be the arithmetic average of the rates at which Dollar ($) deposits
approximately equal in principal amount to the amount of such LIBOR Loan
and for a maturity comparable to such LIBOR Period are offered to the
principal London office of any bank designated by the Lender in immediately
available funds in the London interbank market at approximately 11:00 A.M.,
London time, two (2) LIBOR Business Days prior to the commencement of such
Interest Period. As used herein, the term "Telerate Screen Page 3750" shall
mean the display designated as the page for LIBOR on the Dow Xxxxx Telerate
Service (or such other page as may replace the LIBOR page on that service
for the purpose of displaying London interbank offered rates of major
banks).
"Material Adverse Effect" shall mean, collectively and with respect to
any event, occurrence, or condition of any kind or nature, a material
adverse effect on (i) the assets, liabilities, operations, profits,
financial condition or business of the Borrower, (ii) the ability of the
Borrower to perform its obligations under this Agreement or any of the Loan
Documents, or (iii) the validity or enforceability of this Agreement, any
of the other Loan Documents, or any of the rights and remedies of the
Lender hereunder or thereunder.
"Minimum LIBOR Loan Amount" shall mean Five Hundred Thousand Dollars
($500,000).
"Notes" shall mean, collectively, (i) the Working Capital Line of
Credit Note, (ii) the Acquisition Line of Credit Note and (iii) the Term
Loan Note.
"Obligations" shall mean, collectively, all liabilities, duties and
obligations of the Borrower to the Lender with respect to any covenants,
representations or warranties herein or in the Loan Documents, with respect
to the principal of and interest on the Loans, and all other present and
future fixed and/or contingent obligations of the Borrower to the Lender
hereunder and under the Loan Documents, including, without limitation,
obligations with respect to interest accruing (or which would accrue but
for ss.502 of the Bankruptcy Code) after the date of any filing by Borrower
of any petition in bankruptcy or the commencement of any bankruptcy,
insolvency or similar proceedings with respect to Borrower.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean those liens and encumbrances
listed on Schedule 3.6.
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"Permitted Indebtedness" shall mean any and all Debt permitted under
Section 6.1.
"Person" shall mean an individual, a corporation, a partnership, a
joint venture, a trust or unincorporated organization, a joint stock
company or other similar organization, a government or any political
subdivision thereof, or any other legal entity.
"Prevailing Rate" shall mean, with respect to any Loan or portion
thereof, the rate per annum at which the Loan or portion thereof bears
interest pursuant to Section 2.7.
"Prime Rate" shall mean the floating annual rate of interest that is
designated from time to time by the Lender as the "Prime Rate" and is used
by the Lender as a reference base with respect to different interest rates
charged to borrowers generally. Such rate of interest shall change
simultaneously and automatically upon the Lender's designation of any
change in such reference rate, and the Lender's determination and
designation from time to time of the reference rate shall not in any way
preclude the Lender from making loans to other borrowers at rates which are
higher or lower than or different from the referenced rate.
"Prime Rate Loan" and "Prime Rate Loans" shall mean, individually or
collectively, as appropriate, any Advance and/or all Advances which bear
interest at the Adjusted Prime Rate pursuant hereto.
"Regulatory Change" shall mean (a) any change on or after the date of
this Agreement in United States federal, state, or any foreign, laws or
regulations (including Regulation D of the Board of Governors of the
Federal Reserve System) applying to the class of banks including the Lender
(or any Affiliate thereof), or (b) the adoption or making on or after such
date of any interpretations, directives or requests applying to a class of
banks including the Lender (or any Affiliate thereof) of or under any
United States federal or state, or any foreign, laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration
thereof.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, or dumping.
"Remedial Actions" shall mean:
(a) clean-up or removal of Hazardous Substances;
(b) such actions as may be necessary to monitor, assess, or
evaluate the Release or threatened Release of Hazardous Substances;
(c) proper disposal or removal of Hazardous Substances;
(d) the taking of such other actions as may be necessary to
prevent, minimize, or mitigate the damages caused by a Release or
threatened Release of Hazardous Substances to the public health or
welfare or to the environment; and
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(e) the providing of emergency assistance after a Release.
Remedial Actions include, but are not limited to, such actions at the
location of a Release as: storage; confinement; perimeter protection using
dikes, trenches, or ditches; clay cover; neutralization; clean-up of
Hazardous Substances or contaminated materials; recycling or reuse;
diversion; destruction; segregation of reactive wastes; dredging or
excavations; repair or replacement of leaking containers; collection of
leachate and runoff; onsite treatment or incineration; providing
alternative water supplies; and any monitoring reasonably required to
assure that such actions protect the public health and welfare and the
environment.
"Reportable Event" shall mean with respect to any Employee Pension
Plan subject to Title IV of ERISA, an event described in ERISA ss.4043(b).
"Solvent" shall mean, as at any applicable time and for any Person,
that at such time (i) such Person is able to pay its debts and other
liabilities, contingent obligations and other commitments as they mature in
the normal course of business, (ii) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature in their
ordinary course, (iii) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person's assets would constitute unreasonably small capital
after giving due consideration to the prevailing practice in the industry
in which such Person is engaged or is to engage, (iv) the fair value of the
assets of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person, and
(v) the present fair saleable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured. In computing
the amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Subordinated Indebtedness" shall mean, collectively, all Debt of the
Borrower and its Subsidiaries, if any, for money borrowed, whether now
existing or hereafter incurred, and which is subordinated in right of
payment of principal and interest to the Obligations, either absolutely or
upon the occurrence of and during the continuance of a Default or an Event
of Default, pursuant to and in accordance with the terms, conditions, and
restrictions of a subordination agreement with the Lender which is
satisfactory, in form and substance, to the Lender.
"Subsidiary" shall mean any corporation more than fifty percent (50%)
of the outstanding shares of capital stock of which (except for directors'
qualifying shares, if required by law) are at the time owned by the
Borrower and/or one or more Subsidiaries.
"Term Loan" shall mean the term loan made by the Lender to the
Borrower under and pursuant to the Term Loan Facility.
"Term Loan Facility" shall mean the term loan facility described in
Section 2.5.
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"Term Loan Note" shall mean the promissory note described in Section
2.6, and any future amendments, restatements, modifications or supplements
thereof or thereto.
"Working Capital Line of Credit" shall mean the revolving line of
credit facility in the maximum amount of Ten Million Dollars ($10,000,000)
described in Section 2.1.
"Working Capital Line of Credit Commitment" shall mean, as at any
applicable time, the Borrower's maximum credit availability under the
Working Capital Line of Credit, as established in Section 2.1(a) whether or
not then fully extended.
"Working Capital Line of Credit Note" shall mean the promissory note
described in Section 2.2 and any future amendments, restatements,
modifications or supplements thereof or thereto.
"Working Capital Line of Credit Termination Date" shall mean September
27, 2000 unless extended in writing by the Lender.
SECTION 2. AMOUNT AND TERMS OF LOANS.
2.1. Working Capital Line of Credit.
(a) Subject to, and in accordance with, the terms and conditions of
this Agreement, the Lender agrees to extend credit to the Borrower by
making Advances to it under the Working Capital Line of Credit, from time
to time during the period commencing on the Closing Date and ending on the
Business Day preceding the Working Capital Line of Credit Termination Date,
in an aggregate outstanding amount that shall not exceed, at any one time,
Ten Million Dollars ($10,000,000).
(b) During the period referred to in Section 2.1(a), the Borrower may
use the Lender's commitment under the Working Capital Line of Credit by
borrowing, repaying and reborrowing. The Borrower shall notify the Lender
verbally or in writing of each proposed borrowing under the Working Capital
Line of Credit not later than 2:00 p.m., Philadelphia, Pennsylvania, time
on the day of such proposed borrowing pursuant to a Borrowing Notice. The
Borrower authorizes and directs the Lender to disburse the proceeds of each
such borrowing by direct deposit to Borrower's demand deposit account
maintained with the Lender.
(c) The Working Capital Line of Credit shall be used solely for the
Borrower's working capital requirements. The initial Advance under the
Working Capital Line of Credit shall be used to repay the outstanding
balance of the borrower's existing line of credit facility with the Lender
(which line of credit facility is hereby terminated and canceled.)
(d) The Working Capital Line of Credit Termination Date may be
extended or renewed by the Lender, in its sole discretion, on a day-to-day
basis or otherwise, based on a letter to such effect from the Lender to the
Borrower or by a written agreement between the parties hereto; provided,
however, the Lender shall have no duty or obligation, express or implied,
to extend the Working Capital Line of Credit Termination Date or consider
any request for such an extension.
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2.2. Working Capital Line of Credit Note. On the Closing Date, the Borrower
shall execute and deliver to the Lender its promissory note, which shall
evidence the Borrower's obligations to repay the principal of, interest on, and
other amounts due in connection with the Working Capital Line of Credit, and
which shall:
(a) be dated the Closing Date and be payable to the Lender's order in
the principal amount of Ten Million Dollars ($10,000,000);
(b) bear interest on the unpaid principal amount of any funds advanced
and outstanding thereunder at the Prevailing Rate;
(c) be payable as to interest monthly, with respect to the LMIR Loans
and Prime Rate Loans evidenced thereby, commencing on November 1, 1999, and
continuing on the same day of each month thereafter until payment in full
of the unpaid principal amount of, and all accrued but unpaid interest
thereon;
(d) be payable as to interest, with respect to LIBOR Loans evidenced
thereby, at the expiration of the LIBOR Period applicable thereto, unless
the LIBOR Period exceeds three (3) months in which case interest shall be
payable at each three (3) month interval of the LIBOR Period and at the
expiration of LIBOR Period; and
(e) be payable in full as to the entire unpaid principal balance, all
accrued interest and other sums due thereunder on the Working Capital Line
of Credit Termination Date.
2.3. Acquisition Line of Credit.
(a) Subject to, and in accordance with, the terms and conditions of
this Agreement, the Lender agrees to extend credit to the Borrower by
making Advances to it under the Acquisition Line of Credit, from time to
time during the period commencing on the Closing Date and ending on the
Business Day preceding the Acquisition Line of Credit Termination Date, in
an aggregate outstanding amount that shall not exceed, at any one time,
Thirty Million Dollars ($30,000,000).
(b) During the period referred to in Section 2.3(a), the Borrower may
use the Lender's commitment under the Acquisition Line of Credit by
borrowing, repaying and reborrowing. The Borrower shall notify the Lender
in writing of each proposed borrowing under the Acquisition Line of Credit
not later than 10:00 a.m., Philadelphia, Pennsylvania, time on the day of
such proposed borrowing pursuant to a Borrowing Notice. The Borrower
authorizes and directs the Lender to disburse the proceeds of each such
borrowing by direct deposit to the demand deposit account of the Borrower
with the Lender.
(c) The Borrower shall be permitted to use Advances under the
Acquisition Line of Credit solely to finance all or any portion of a
transaction, pursuant to which the Borrower shall purchase all or a portion
of the assets, properties, equity securities, and/or business of a Person
engaged in a business similar to or related to the industry of the business
conducted by the Borrower as of the Closing Date, the completion of which
has been approved by Borrower's Board of Directors.
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(d) The Acquisition Line of Credit Termination Date may be extended or
renewed by the Lender, in its sole discretion, on a day-to-day basis or
otherwise, based on a letter to such effect from the Lender to the Borrower
or by a written agreement between the parties hereto; provided, however,
the Lender shall have no duty or obligation, express or implied, to extend
the Acquisition Line of Credit Termination Date or consider any request for
such an extension.
2.4. Acquisition Line of Credit Note. On the Closing Date, the Borrower
shall execute and deliver to the Lender a promissory note, which shall evidence
the Borrower's obligation to repay the principal of, interest on, and other
amounts due in connection with the Acquisition Line of Credit, and which shall:
(a) be dated the Closing Date and be payable to the Lender's order in
the principal amount of Thirty Million Dollars ($30,000,000);
(b) bear interest on the unpaid principal amount of any funds advanced
and outstanding under the Acquisition Line of Credit from the dates of such
advances at an annual rate equal to the Prevailing Rate;
(c) be payable as to interest monthly, with respect to the LMIR Loans
and Prime Rate Loans evidenced thereby, commencing on November 1, 1999, and
continuing on the same day of each month thereafter until payment in full
of the unpaid principal amount of, and all accrued but unpaid interest
thereon;
(d) be payable as to interest, with respect to LIBOR Loans evidenced
thereby, at the expiration of the LIBOR Period applicable thereto, unless
the LIBOR Period exceeds three (3) months in which case interest shall be
payable at each three (3) month interval of the LIBOR Period and at the
expiration of LIBOR Period; and
(e) be payable in full as to the entire unpaid principal balance, all
accrued interest and other sums due thereunder on the Acquisition Line of
Credit Termination Date.
2.5. Term Loan Facility.
(a) Subject to the terms and conditions of this Agreement, the Lender
agrees to make a term loan to the Borrower, on the Acquisition Line of
Credit Termination Date, in the maximum amount equal to the outstanding
balance of the Acquisition Line of Credit on the Acquisition Line of Credit
Termination Date.
(b) The Borrower shall be permitted to use the Term Loan solely to
repay the Acquisition Line of Credit.
(c) The Term Loan shall be subject to those conditions more fully
described in Section 4.3.
2.6. Term Loan Note. As more fully set forth in Section 4.3, concurrently
with the making of the Term Loan, the Borrower shall execute and deliver to the
Lender its promissory note, which shall evidence the Borrower's obligation to
repay the principal of, interest on, and other amounts due in connection with
the Term Loan, and which shall:
15
(a) be dated the date on which the Term Loan is made and be payable to
the Lender's order in the principal amount of the Term Loan;
(b) bear interest on the unpaid principal amount thereof at an annual
rate equal to the Prevailing Rate;
(c) be payable as to interest monthly, with respect to LMIR Loans and
Prime Rate Loans evidenced thereby, commencing on the first day of the
first month of the Amortization Period applicable thereto, and continuing
on the same day of each month thereafter until payment in full of the
unpaid principal amount of, and all accrued but unpaid interest thereon;
(d) be payable as to interest, with respect to LIBOR Loans evidenced
thereby, at the expiration of the LIBOR Period applicable thereto, unless
the LIBOR Period exceeds three (3) months in which case interest shall be
payable at each three (3) month interval of the LIBOR Period and at the
expiration of LIBOR Period;
(e) be payable as to principal in equal, consecutive monthly
installments during the Amortization Period with respect thereto commencing
on the first day of the first month of the Amortization Period and
continuing on the same day of each month thereafter, each such installment
to be equal to (i) the original principal amount of the Term Loan, divided
by (ii) the number of months comprising the Amortization Period;
(f) have a maturity date occurring on the last day of the Amortization
Period applicable thereto, at which time the entire outstanding principal
amount thereof, and all accrued interest thereon, shall be paid in full;
and
(g) be in the form of Exhibit "C" attached hereto.
2.7. Interest Rate Elections.
(a) The Borrower, subject to any prior continuing interest rate
elections made pursuant to Sections 2.7(b) and 2.7(c), at any time and from
time to time, may notify the Lender that it is electing to have interest
accrue at the Prime Rate on a specific portion (up to and including 100%)
of the aggregate unpaid amount of any Advance(s). All Advances for which an
interest rate option is not specifically designated by the Borrower under
this Section 2.7, pursuant to the terms hereof, or not requested in
conformity with the terms hereof, shall be Prime Rate Loans.
(b) Subject to the notice provisions set forth in this Section 2.7(b),
at any time and from time to time, the Borrower may notify (which notice
shall be irrevocable) the Lender it is electing to have interest accrue for
a LIBOR Period specified in writing by the Borrower at the Adjusted LIBOR
Rate on a specific portion (up to and including 100%) of the aggregate
unpaid amount of any Advance (including any Advance to be made by the
Lender to the Borrower on the date of election) equal to the amount
specified by the Borrower. The Borrower shall notify the Lender not later
than 10:00 A.M. two (2) Business Days before the date on which the Borrower
desires any Advance to bear interest at the Adjusted LIBOR Rate.
Notwithstanding anything contained herein to the contrary, (i) any LIBOR
Loan shall be in minimum denominations equal to the Minimum LIBOR Loan
Amount and in multiples thereof if in excess thereof, and (ii) the Borrower
shall not be permitted to request a LIBOR Loan (including a conversion
16
thereto) that, if made, would result in more than four (4) LIBOR Loans
outstanding at any time (it being understood that LIBOR Loans having
different LIBOR Periods, regardless of whether they commence on the same
date, shall be considered separate LIBOR Loans).
(c) The Borrower, subject to any prior continuing interest rate
elections made pursuant to Sections 2.7(a) or 2.7(b), at any time and from
time to time, may notify the Lender that it is electing to have interest
accrue at the LIBOR Market Index Rate on a specific portion (up to and
including 100%) of the aggregate unpaid amount of any Advance.
(d) Following an interest rate election made by the Borrower with
respect to any Advance pursuant to Sections 2.7(a), 2.7(b) or 2.7(c), but
subject to all other conditions of this Agreement, the Borrower may, in
accordance with the provisions of Sections 2.7(a), 2.7(b) and 2.7(c), from
time to time, elect to convert or continue the type of interest rate borne
by such Advance. In the event that the Borrower fails to provide the Lender
with any notice of conversion or continuance, as described above, such
Advance shall immediately and automatically become a Prime Rate Loan and
shall commence bearing interest at the Adjusted Prime Rate. Notwithstanding
anything contained herein to the contrary, the Borrower shall not convert,
or permit the conversion of, any LIBOR Loan to a Prime Rate Loan or LMIR
Loan until the expiration of the LIBOR Period then in effect with respect
thereto.
(e) Any LIBOR Period for LIBOR Loans under the Acquisition Line of
Credit and Working Capital Line of Credit shall end prior to the
Acquisition Line of Credit Termination Date or the Working Capital Line of
Credit Termination Date, as appropriate, and the Borrower's election of
LIBOR Periods hereunder shall not violate the provisions of this Section
2.7(e). Any LIBOR Period for LIBOR Loans under the Term Loan shall end
prior to the expiration of the Amortization Period and the Borrower's
election of LIBOR Periods hereunder shall not violate the provisions of
this Section 2.7(e).
(f) In the event that the Lender shall determine (which determination
shall be conclusive and binding upon the Borrower) that, by reason of
circumstances affecting the interbank eurodollar market or otherwise,
adequate and reasonable means do not exist for ascertaining LIBOR and/or
LIBOR Market Index Rate, the Borrower's right to elect to have interest
accrue on any Advance at the Adjusted LIBOR Rate or Adjusted LIBOR Market
Index Rate shall be suspended until such time that the Lender determines
that adequate and reasonable means exist for ascertaining LIBOR or LIBOR
Market Index Rate.
(g) Notwithstanding anything contained herein to the contrary, if any
applicable law, treaty, regulation or directive, or any change in or in the
application or interpretation of such law, treaty, regulation or directive,
or any other event shall make it unlawful for the Lender to make or
maintain LIBOR Loans and/or LMIR Loans:
(1) The obligation of the Lender to make or maintain LIBOR Loans
and/or LMIR Loans shall be canceled automatically and immediately; and
(2) Such LIBOR Loans and/or LMIR Loans shall convert
automatically and immediately to Prime Rate Loans.
(h) The Borrower shall not prepay, in whole or in part, any LIBOR
Loans prior to the expiration of the appropriate LIBOR Period applicable
thereto. The Borrower shall indemnify the Lender and hold the Lender
17
harmless from and against any loss or expense that the Lender may sustain
or incur as a result of (i) any prepayment of a LIBOR Loan, (ii) the
conversion of a LIBOR Loan to a Prime Rate Loan or LMIR Loan prior to the
expiration of the LIBOR Period applicable thereto, (iii) a Loan being
converted from a LIBOR Loan to a Prime Rate Loan or LMIR Loan by reason of
the circumstances described in Section 2.7(g), or (iv) a LIBOR Loan not
being made after notice thereof is provided to the Lender pursuant hereto.
Such agreement to indemnify shall include, without limitation, any interest
payable by the Lender to lenders of funds obtained by the Lender in order
to make or maintain LIBOR Loans pursuant hereto.
(i) Following the occurrence of a Default or an Event of Default, the
Borrower may not elect to have any Advance made or maintained as, or
converted into, a LIBOR Loan after the expiration of any LIBOR Period then
in effect for that Advance.
2.8. Loan Account. The Lender shall record in one or more Loan Accounts,
the Loans, all advances to and all payments made by Borrower on account of the
Loans, and all other appropriate debits and credits. Each month the Lender shall
render to Borrower a statement setting forth the debit balance of the Loan
Account as of the close of the preceding month, together with a statement of the
amount of interest and other charges due the Lender as of that time. Each
statement shall be considered correct and accepted by the Borrower and
conclusively binding upon the Borrower unless the Borrower notifies the Lender
to the contrary in writing within sixty (60) days from the receipt of the
statement.
2.9. Maximum Legal Rate. Borrower shall not be obligated to pay and Lender
shall not collect interest on any Obligation at a rate in excess of the maximum
permitted by law or the maximum that will not subject Lender to any civil or
criminal penalties. If, because of the acceleration of maturity, the payment of
interest in advance or any other reason, Borrower is required, under the
provisions of any Loan Document or otherwise, to pay interest at a rate in
excess of such maximum rate, the rate of interest under such provisions shall
immediately and automatically be reduced to such maximum rate, and any payment
made in excess of such maximum rate, together with interest thereon at the rate
provided herein from the date of such payment, shall be immediately and
automatically applied to the reduction of the unpaid principal balance of the
Obligations as of the date on which such excess payment was made. If the amount
to be so applied to reduction of the unpaid principal balance exceeds the unpaid
principal balance, the amount of such excess shall be refunded by Lender to
Borrower.
2.10. Payments. All payments (including prepayments) by the Borrower
hereunder shall be made at the Lender's address set forth in Section 8.2, or
such other place or places as the Lender may direct, prior to 2:00 p.m. on the
date of payment, in lawful money of the United States of America, and in
immediately available funds, and, when due or upon instruction from the
Borrower, may be made by debit to any of the Borrower's general accounts with
the Lender.
2.11. Application of Payments. All payments shall be applied first to the
payment in full of any costs incurred in the collection of any Obligation,
including (without limitation) reasonable attorneys' fees, then to the payment
in full of any late charges, then to the payment in full of accrued, unpaid
interest and finally to the reduction of the unpaid principal balance.
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2.12. Late Charges. If the Borrower shall fail to pay any installment of
interest or principal due under the Loans or any other sum due to the Lender
under any of the Loan Documents on the date it is due, the Borrower shall pay to
the order of the Lender, immediately, without notice or demand, a late charge
equal to five percent (5%) of the amount overdue to defray part of the
additional expense incurred by the Lender in connection with the delinquency and
collection of the overdue amount. The provision for such late charge shall not
be construed to permit the Borrower to make any payment after its due date,
obligate the Lender to accept any overdue installment, or affect the Lender's
rights and remedies upon the occurrence of a Default or an Event of Default.
2.13. Mandatory Payments.
(a) If (i) the unpaid principal balance of the Working Capital Line of
Credit Note exceeds (ii) the Working Capital Line of Credit Commitment at
any time, the Borrower shall immediately pay to the Lender, for application
to the Working Capital Line of Credit Note, an amount equal to such excess.
If the Lender shall determine, in its reasonable discretion, that the
unpaid principal balance of the Working Capital Line of Credit Note exceeds
the Working Capital Line of Credit Commitment, then the Lender shall have
the right to set-off any funds of the Borrower on deposit with the Lender
to the extent necessary to eliminate such excess.
(b) If (i) the unpaid principal balance of the Acquisition Line of
Credit Note exceeds (ii) the Acquisition Line of Credit Commitment at any
time, the Borrower shall immediately pay to the Lender, for application to
the Acquisition Line of Credit Note, an amount equal to such excess. If the
Lender shall determine, in its reasonable discretion, that the unpaid
principal balance of the Acquisition Line of Credit Note exceeds the
Acquisition Line of Credit Commitment, then the Lender shall have the right
to set-off any funds of the Borrower on deposit with the Lender to the
extent necessary to eliminate such excess.
2.14. Voluntary Prepayments.
(a) Except as otherwise provided herein, the Borrower at any time and
from time to time may voluntarily prepay Prime Rate Loans or LMIR Loans, or
any of them, in whole or in part, upon notification to the Lender of such
prepayment not later than 10:00 a.m. on the date of prepayment, in integral
multiples of Twenty-Five Thousand Dollars ($25,000). Any partial
prepayments of principal shall be applied against scheduled payments of
principal in the inverse order of maturity and shall not postpone or reduce
any regularly scheduled payment of principal or interest thereon.
(b) The Borrower shall not prepay, in whole or in part, any LIBOR
Loans prior to the expiration of the appropriate LIBOR Period applicable
thereto. The Borrower shall indemnify the Lender and hold the Lender
harmless from and against any loss or expense that the Lender may sustain
or incur as a result of (i) any prepayment of a LIBOR Loan, or (ii) a Loan
being converted from a LIBOR Loan to a Prime Rate Loan or LMIR Loan by
reason of the circumstances described in Section 2.7(f) or Section 2.7(g).
Such agreement to indemnify shall include, without limitation, any interest
payable by the Lender to lenders of funds obtained by the Lender in order
to make or maintain LIBOR Loans pursuant hereto.
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2.15. Yield Protection; Capital Adequacy.
(a) The Borrower shall pay to the Lender from time to time such
amounts as the Lender may determine to be necessary to compensate it for
any costs incurred by the Lender or any reduction in any amount receivable
by the Lender hereunder (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to the Lender under this Agreement or the Notes (other than taxes
imposed on the overall net income of the Lender by the jurisdiction in
which the Lender has its principal office); or (ii) imposes or modifies any
reserve, special deposit or similar requirements relating to any extensions
of credit, or other assets of, or any deposits with or other liabilities
of, the Lender (but excluding any such requirement to the extent reflected
in an applicable reserve requirement); or (iii) imposes any other condition
affecting this Agreement (or any of such extensions of credit or
liabilities). The Lender will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Lender to
compensation pursuant to this Section 2.15 as promptly as practicable after
it obtains knowledge thereof and determines to request such compensation.
The Lender will furnish the Borrower with a statement setting forth the
basis and amount of each such request.
(b) If after the date hereof, the Lender shall have determined that
the adoption of any applicable law, rule, regulation or treaty regarding
capital adequacy, or any Regulatory Change, has or would have the effect of
reducing the rate of return on the Lender's capital as a consequence of its
obligations hereunder to a level below that which the Lender could have
achieved but for such adoption, change or compliance (taking into
consideration the Lender's policies with respect to capital adequacy) by an
amount the Lender deems material, the Borrower shall pay to the Lender such
additional amount or amounts as will compensate the Lender for such
reduction.
(c) In determining the amounts due under this Section 2.15, the Lender
may use any reasonable averaging and attribution methods. Determination by
the Lender for purposes of this Section 2.15 of the effect of any
Regulatory Change on its costs of making or maintaining Loans hereunder or
on amounts receivable by it hereunder and of the additional amounts
required to compensate the Lender shall be conclusive, absent manifest
error.
(d) Lender agrees to use reasonable efforts to minimize any amounts
which become due and payable by the Borrower to the Lender by reason of the
provisions of this Section 2.15, although the Lender shall have no
liability to the Borrower in connection therewith.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
To induce Lender to enter into this Agreement and to make the Loans, the
Borrower represents and warrants to Lender that:
3.1. Organization and Qualification. The Borrower and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction in which
the conduct of its business or the ownership of its assets requires such
qualification.
20
3.2. Power and Authority. The Borrower has the corporate power to execute,
deliver and perform under, the Loan Documents, to borrow under this Agreement,
and has taken all necessary corporate action to authorize the borrowings
hereunder on the terms and conditions of this Agreement and the execution and
delivery of, and performance under, the Loan Documents. No consent of any other
party (including stockholders of the Borrower) and no consent, license, approval
or authorization of, or registration or declaration with, any governmental
authority, bureau or agency is required in connection with the execution,
delivery, performance, validity or enforceability of the Loan Documents.
3.3. Enforceability. The Loan Documents, when executed and delivered to
Lender pursuant to the provisions of this Agreement, will constitute valid
obligations of the Borrower legally binding upon it and enforceable in
accordance with their respective terms, except as enforceability of the
foregoing may be limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights.
3.4. Conflict with Other Instruments. The execution and delivery of, and
performance under, the Loan Documents will not violate or contravene any
provision of any existing law or regulation or decree of any court, governmental
authority, bureau or agency having jurisdiction in the premises or of the
Articles or Certificate of Incorporation or Charter or of the By-Laws of the
Borrower or of any mortgage, indenture, security agreement, contract,
undertaking or other agreement to which the Borrower is a party or which
purports to be binding upon it or any of its properties or assets, and will not
result in the creation or imposition of any lien, charge, encumbrance on, or
security interest in, any of its properties or assets pursuant to the provisions
of any such mortgage, indenture, security agreement, contract, undertaking or
other agreement.
3.5. Litigation. Except as set forth on Schedule 3.5, no actions, suits or
proceedings before any court or governmental department or agency (whether or
not purportedly on behalf of the Borrower or any Subsidiary) are pending or, to
the knowledge of the Borrower, threatened (a) with respect to any of the
transactions contemplated by this Agreement or (b) against or affecting the
Borrower or any Subsidiary or any of its properties that, if adversely
determined, could reasonably be expected to have a Material Adverse Effect.
3.6. Title to Assets. The Borrower has good and marketable title in fee to,
or valid, enforceable leases of, all property owned, leased, or otherwise used
by the Borrower, and good and marketable title to all of its other assets now
carried on its books, or used by it, including those reflected in the most
recent consolidated balance sheet of the Borrower delivered to the Lender or
acquired since the date of such balance sheet (except personal property disposed
of since said date in the ordinary course of business), free of any Liens,
except those indicated in Schedule 3.6.
3.7. Licenses; Intellectual Property. The Borrower owns or has a valid
right to use the patents, patent rights, permits, licenses, trade secrets,
trademarks, trademark rights, trade names or trade name rights or franchises,
copyrights, inventions, and intellectual property rights being used to conduct
its business as now operated and as now contemplated to be operated; and the
conduct of the business of Borrower as now operated and as now proposed to be
operated does not and will not conflict with valid patents, patent rights,
permits, licenses, trade secrets, trademarks, trademark rights, trade names or
trade name rights or franchises, copyrights, inventions, and intellectual
property rights of others. No claim is pending or threatened to the effect that
21
any such intellectual property owned or licensed by the Borrower or which the
Borrower otherwise has the right to use, is invalid or unenforceable by the
Borrower, as the case may be. Except as set forth on Schedule 3.7, the Borrower
has no obligation to compensate any Person other than Subsidiaries of the
Borrower for the use of any such patents or rights, and no Person has been
granted any license or other rights to use in any manner any of the patents or
rights of the Borrower or any Subsidiary, whether requiring the payment of
royalties or not.
3.8. Default. The Borrower is not in default under any material existing
agreement, and no Default or Event of Default hereunder has occurred and is
continuing.
3.9. Taxes. The Borrower has filed or caused to be filed all tax returns
(including, without limitation, those relating to federal and state income
taxes) required to be filed and has paid all taxes shown to be due and payable
on said returns or on any assessments made against it (other than those being
contested in good faith by appropriate proceedings for which adequate reserves
have been provided on its books). No tax Liens have been filed against the
assets of the Borrower or any Subsidiary, and no claims are being asserted with
respect to such taxes which could have a Material Adverse Effect.
3.10. Financial Condition.
(a) All consolidated and consolidating balance sheets, profit and loss
statements, and other financial statements of the Borrower, dated as of
June 30, 1999 all of which have heretofore been delivered to the Lender,
and all financial statements and data of the Borrower which will hereafter
be furnished to the Lender, are or will be (when furnished) true and
correct and do or will (when furnished) present fairly, accurately and
completely the consolidated financial position of the Borrower and the
results of its operations as of the dates and for the periods for which the
same are furnished. All such financial statements have been prepared in
accordance with GAAP applied on a consistent basis. Neither the Borrower
nor any Subsidiary possesses any "loss contingency" (as that term is
defined in Financial Accounting Standards Board, Statement of Financial
Accounting Standards No. 5 - "FASB 5") which is not accrued, reflected, or
reserved against in its balance sheet or disclosed in the footnotes to such
balance sheet. There has been no material adverse change in the business,
properties, operations or condition (financial or otherwise) of the
Borrower or any Subsidiary since the date of the financial statements which
were most recently furnished by the Borrower to Lender. No event has
occurred that could reasonably be expected to interfere substantially with
the normal business operations of the Borrower.
(b) The Borrower is Solvent and will (after taking into account the
completion of the transactions described herein and contemplated hereby) be
Solvent.
3.11. ERISA.
(a) Except as specifically disclosed to the Lender in writing prior to
the date of this Agreement:
(1) there is no Accumulated Funding Deficiency with respect to
any Employee Pension Plan;
(2) no Reportable Event has occurred with respect to any Employee
Pension Plan;
22
(3) to the best of Borrower's knowledge, no violations of the
Code have occurred that could potentially cause the loss of the tax
qualified status of any Employee Pension Plan;
(4) neither the Borrower nor any Controlled Group Member
contributes to or has ever contributed to or otherwise incurred
Withdrawal Liability with respect to any Multiemployer Plan; and
(b) No liability (whether or not such liability is being litigated)
has been asserted against the Borrower or any Controlled Group Member in
connection with any Employee Pension Plan by the PBGC, by a trustee
appointed pursuant to ERISA ss.4042(b) or (c), and no Lien has been
attached and no person has threatened to attach a Lien on any of the
Borrower's or its Controlled Group Members' property as a result of failure
to comply with ERISA or as a result of the termination of any Employee
Pension Plan.
(c) Each Employee Pension Plan, as most recently amended, including
amendments to any trust agreement, group annuity or insurance contract, or
other governing instrument, is the subject of a favorable determination
letter by the Internal Revenue Service with respect to its qualifications
under Code ss.401(a) and such Employee Pension Plan's related trusts are
exempt from taxation under Code ss.501(a). The Borrower has furnished
Lender with a copy of the most recent actuarial report for each Employee
Pension Plan which is a defined benefit pension plan and each such report
is accurate in all material respects.
3.12. Use of Proceeds. The proceeds of the Working Capital Line of Credit
shall be used solely for the purposes set forth in Section 2.1(c). The proceeds
of the Acquisition Line of Credit shall be used solely for the purposes set
forth in Section 2.3(c). The proceeds of the Term Loan shall be used solely for
the purposes set forth in Section 2.5(b).
3.13. Regulation U. Neither the Borrower nor any Subsidiary is engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System), and no part of the proceeds of the Loans will be
used to purchase or carry any margin stock or to reduce or retire any
indebtedness incurred for such purpose or to extend credit to others for such
purpose.
3.14. No Notices; No Violations. Neither the Borrower nor any Subsidiary
has received any notice from any federal, state or local authority or any
insurance or inspection body to the effect that any of its properties,
facilities, equipment or business procedures or practices fail to comply, in any
material respect, with any applicable law, ordinance, regulation, building or
zoning law, judicial or administrative determination, or any other requirements
of any such authority or body, and the Borrower and all Subsidiaries, and all
such properties, facilities, equipment, procedures and practices, are in
material compliance with all such laws, ordinances, determinations, regulations
and requirements (including, without limitation, all environmental laws, rules
and regulations).
3.15. Labor. Neither the Borrower nor any Subsidiary is involved in any
strike, lock-out, boycott or any other material labor trouble, similar or
dissimilar, nor is it involved in negotiations with any labor union.
3.16. Group Health Plans. The Borrower and each Subsidiary (a) provide
COBRA Continuation Coverage under group health plans for separating employees in
23
accordance with the provisions of Code ss.4980B(f), (b) are in compliance with
the provisions of ss.1862(b)(1) of the Social Security Act, and (c) are in
compliance with the provisions of the Health Insurance Portability and
Accountability Act of 1996.
3.17. Year 2000 Matters. The advent of the year 2000 shall not materially
and adversely affect the Borrower's operations or the performance of its
information technology. Without limiting the generality of the foregoing, (i)
the hardware and software utilized by the Borrower are designed, in all material
respects, to be used prior to, during, and after the calendar 2000 A.D. and such
hardware and software will operate during each such time period without error
relating to date data, specifically including any error relating to, or the
conduct of, date data which represents or references different centuries or more
than one century, (ii) the hardware and software utilized by the Borrower will
not, in any material respect, abnormally end or provide invalid or incorrect
results as a result of date data, and (iii) the hardware and software utilized
by the Borrower have been designed to ensure year 2000 A.D. compatibility in all
material respects, including date data, century recognition, leap year,
calculations which accommodate same century and multi-century formulae in date
values, and date data interface values that reflect the century.
3.18. No Omissions. Neither this Agreement, any Schedule or any other Loan
Document contains or will contain any untrue statement of material fact or omits
or will omit to state a material fact required to be stated in order to make
such statement, document or other instrument not misleading.
SECTION 4. CONDITIONS OF BORROWING.
4.1. Initial Advance. As a condition precedent to the Lender's obligation
to make the initial Advance under the Notes, the following conditions shall all
be satisfied:
(a) Loan Documents. The Borrower shall have delivered or caused to be
delivered to the Lender duly executed copies of each of the Loan Documents.
(b) Borrower's Authorizations.
(1) The Borrower shall have delivered to Lender:
(A) a copy, certified by the Secretary of the Borrower, of
the resolutions of the Board of Directors of the Borrower
authorizing and approving the execution and delivery of and
performance under this Agreement and the other Loan Documents;
(B) the Borrower's articles or certificate of incorporation,
certified by the Secretary of State of the state of the
Borrower's incorporation as of a recent date;
(C) a good standing or subsistence certificate with respect
to the Borrower certified by the Secretary of State of the state
of the Borrower's incorporation as of a date within ten (10) days
of the Closing Date; and
24
(D) a copy of the Borrower's By-Laws, as currently in
effect, certified by the Borrower's Secretary or Assistant
Secretary.
(2) The President and Secretary of the Borrower shall have duly
executed and delivered to the Lender certificates of incumbency, in
form and substance satisfactory to the Lender.
(c) Legal Opinions. Counsel for the Borrower shall have delivered to
the Lender a favorable opinion, dated the Closing Date, addressed to the
Lender, and satisfactory in form and substance to Lender.
(d) Representations. The representations and warranties contained in
Section 3 hereof shall be true and correct on and as of the date of the
making of the Loans and the date of any Advance with the same effect as if
made on and as of such date, and no Event of Default or Default shall be in
existence on the date of the making of such Advance or shall occur as a
result thereof.
(e) No Material Adverse Effect. No Material Adverse Effect to the
business, properties, operations, or financial condition of the Borrower
shall have occurred since June 30, 1999.
(f) No Litigation. No suit, action, investigation, inquiry or other
proceeding by or before any arbitrator or any governmental authority shall
be pending and no preliminary or permanent injunction or order by a state
or federal court shall have been entered (i) in connection with this
Agreement, the other Loan Documents, or any of the transactions
contemplated hereby or thereby, or (ii) which, in the reasonable judgment
of the Lender, could reasonably be expected to have a Material Adverse
Effect.
(g) Compliance with Commitment Letter. The Borrower shall have
otherwise complied with all of the terms and conditions set forth in the
Commitment Letter.
(h) No Violation. The completion of the transactions contemplated
hereby and by the Loan Documents shall not contravene, violate or conflict
with, nor involve the Lender in violation of, any law, rule, or regulation
applicable to it.
(i) Closing Date Compliance Certificate. The Borrower shall have
delivered to the Lender a duly executed Compliance Certificate dated as of
the Closing Date.
(j) Lien Searches. The Lender shall have received such secured
transaction, judgment and lien searches as it deems appropriate, all of
which shall be satisfactory to the Lender.
(k) Borrowing Notice. The Borrower shall have provided the Lender with
a Borrowing Notice describing:
(i) The amount of the requested Advance;
(ii) The initial rate at which the Advance will bear interest
pursuant to Section 2.7; and
25
(iii) Whether the Advance will be under the Acquisition Line of
Credit or Working Capital Line of Credit.
(l) Legal Matters. All legal matters incident to the transactions
contemplated by this Agreement shall be reasonably satisfactory to Xxxxxxx
& Xxx, counsel for the Lender.
4.2. Subsequent Advances. As a condition precedent to the Lender's
obligation to make to make any Advance after the Closing Date, the following
conditions shall all be satisfied on the date of such Advance:
(a) Material Adverse Change. No material adverse change shall have
occurred in the financial condition, assets, or results of operations of
the Borrower from the date of the latest quarterly financial statements
provided to the Lender under Section 5.1(b).
(b) No Default. No Default or Event of Default shall exist on the date
of such Advance or shall occur as a result of the making of such Advance.
(c) Representations. Without limiting the generality of Section
4.2(b), the representations and warranties contained in Section 3 shall be
true and correct on and as of the date of the making of such Advance with
the same effect as if made on and as of such date.
(d) No litigation. No litigation, investigation, or proceeding before
or by any arbitrator or governmental authority shall be pending and no
preliminary or permanent injunction or order by a state or federal court
shall have been entered (i) in connection with this Agreement, the other
Loan Documents, or any of the transactions contemplated hereby or thereby,
or (ii) which, in the reasonable judgment of the Lender, could reasonably
be expected to have a Material Adverse Effect.
(e) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be reasonably satisfactory, in form and substance, to the Lender.
(f) Borrowing Notice. The Borrower shall have provided the Lender with
a Borrowing Notice describing:
(i) The amount of the requested Advance;
(ii) The initial rate at which the Advance will bear interest
pursuant to Section 2.7; and
(iii) Whether the Advance will be under the Acquisition Line of
Credit or Working Capital Line of Credit; and
(iv) If the Advance is made under the Acquisition Line of Credit
and will exceed Fifteen Million Dollars ($15,000,000) for any single
Acquisition transaction (taking into account all Advances made, or to
be made, in connection with such Acquisition, but specifically
excluding the pending Acquisitions of XX Xxxxx and Company, Inc. and
Rivnet) containing (i) a pro-forma balance sheet of the Borrower
26
taking into account the completion of the Acquisition relating thereto
and evidencing that no Default or Event of Default will occur as a
result of the Borrower's completion of the Acquisition and that the
Borrower will be in full and complete compliance with the financial
covenants set forth in Sections 5.10 and 5.11 immediately after the
Acquisition, (ii) a pro-forma income statement of the Borrower
restating the Borrower's income statement for the immediately
preceding four (4) fiscal quarters prior to the completion of the
Acquisition taking into account the projected effect of the
Acquisition on the Borrower's income and cash flows for such four (4)
quarter period, (iii) a description of the Acquisition transaction
relating thereto, and (iv) copies of any and all agreements,
documents, and instruments relating and/or pertaining to such
Acquisition, all of which the Lender shall have a reasonable
opportunity to review and which shall be satisfactory to the Lender.
4.3. Conditions to Term Loan. As a condition precedent to the Lender's
obligation to make the Term Loan, the following conditions shall all be
satisfied:
(a) Representations. The representations and warranties contained in
Section 3 shall be true and correct on and as of the date of the making of
the Term Loan with the same effect as if made on and as of such date, and
no Default or Event of Default shall be in existence on the date of the
making of the Term Loan or shall occur as a result thereof.
(b) Borrowing Notice. The Borrower shall have provided the Lender with
a Borrowing Notice describing the following:
(i) The amount of the Term Loan;
(ii) The initial rate at which the Term Loan will bear interest
pursuant to Section 2.7; and
(iii) The Amortization Period selected by the Borrower for the
Term Loan.
(c) Payment of Fees. The Borrower shall have paid to the Lender a
non-refundable facility fee in the following amount:
Fee Amortization Period
--- -------------------
$30,000 Up to 3 Year Amortization Period
$37,500 4 to 5 Year Amortization Period
$45,000 6 to 7 Year Amortization Period
4.4. Satisfaction of Conditions. The Lender's reasonable determination with
respect to whether an Advance or other Loan is required to be made pursuant to
the provisions hereof and whether any condition herein described has been
satisfied shall be binding upon the Borrower.
27
SECTION 5. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that from and after the Closing Date and
so long as any of the Obligations remain outstanding and unpaid, in whole or in
part, the Borrower will observe the following covenants, unless the Lender shall
otherwise consent in writing:
5.1. Financial Statements; Reports. The Borrower will furnish to Lender:
(a) Annual Reports: as soon as available, but in any event not later
than one hundred twenty (120) days after the close of each fiscal year of
the Borrower, the annual audit report of the Borrower containing
consolidated and consolidating balance sheets of the Borrower and any
Subsidiaries, as at the end of such fiscal year, and related consolidated
and consolidating statements of income, shareholders' equity and cash flows
of the Borrower and any Subsidiaries, for such fiscal year, setting forth
in each case in comparative form the corresponding figures for the
preceding fiscal year, all in reasonable detail, prepared in accordance
with GAAP applied on a consistent basis and certified without exception or
qualification by independent public accountants selected by the Borrower
and satisfactory to the Lender, together with a copy of the management
letter prepared by such accountants in connection with such audit;
(b) Compliance Certificates: concurrently with the delivery of the
quarterly reports on Form 10-Q required to be furnished by the Borrower to
the Lender pursuant to the provisions of paragraph (B) of Section 5.1(c), a
Compliance Certificate executed by the Borrower's Chief Financial Officer;
(c) Securities Filings: promptly upon sending, making available, or
filing the same, such reports and financial statements as the Borrower or
any Subsidiary shall send or make available to the shareholders of the
Borrower or file with the Securities and Exchange Commission or any state
securities agencies including, without limitation, (A) annual reports filed
on Form 10-K, and (B) quarterly reports filed on Form 10-Q (and all related
exhibits and schedules thereto); and
(d) Other Information: from time to time, such additional financial
and other information as Lender may reasonably request.
5.2. Liabilities. The Borrower and any Subsidiaries will pay and discharge,
at or before their maturity, all their respective obligations and liabilities
(including, without limitation, tax liabilities and all employee wages as
provided in the Fair Labor Standards Act, 29 U.S.C. ss.ss.206-207 and any
successor statute), except those which may be contested in good faith, and
maintain adequate reserves for any of the same in accordance with GAAP;
provided, however, no Event of Default shall be deemed to have occurred by
reason of the Borrower's failure to comply with the covenant set forth in this
Section 5.2 unless such failure results in an Event of Default under Section
7.1(d).
5.3. ERISA.
(a) The Borrower will furnish to Lender (i) within thirty (30) days
after it has reason to know that any Reportable Event has occurred with
respect to any Employee Pension Plan or that the PBGC has instituted or
will institute proceedings under Title IV of ERISA to terminate any
28
Employee Pension Plan or to appoint a trustee to administer any Employee
Pension Plan, a statement setting forth the details as to such Reportable
Event, termination or appointment proceedings and the action which it (or
the Employee Pension Plan sponsor other than the Borrower) proposes to take
with respect thereto, together with a copy of any notice of such Reportable
Event given to PBGC if a copy of such notice is available to the Borrower
or any of its Controlled Group Members; and (ii) promptly after receipt
thereof, a copy of any notice the Borrower or any of its Controlled Group
Members or the sponsor of any Employee Pension Plan received from PBGC or
the Internal Revenue Service which sets forth or proposes any action or
determination with respect to such Employee Pension Plan.
(b) The Borrower will notify Lender of (i) any excise taxes which have
been assessed or which the Borrower or any of its Controlled Group Members
have reason to believe may be assessed against the Borrower or any of its
Controlled Group Members by the Internal Revenue Service with respect to
any Employee Pension Plan or (ii) any revocation of qualification under
Code ss.401 which has occurred or which the Borrower or any of its
Controlled Group Members have reason to believe may occur with respect to
any Employee Pension Plan.
5.4. Notices. The Borrower will promptly give notice in writing to Lender
of the occurrence of any of the following:
(a) any Event of Default or Default under this Agreement, or any event
of default or similar occurrence under any material instrument or other
material agreement of the Borrower or any Subsidiary entitling any Person
to accelerate the maturity of any material obligation of the Borrower or
any Subsidiary or to exercise any other remedy against the Borrower or such
Subsidiary;
(b) any strike, lock-out, boycott or any other material labor trouble;
(c) the commencement of any litigation, proceeding or dispute
affecting the Borrower or any Subsidiary, or any dispute between the
Borrower or any Subsidiary, and any Person, if such litigation, proceeding
or dispute might interfere with the normal business operations of the
Borrower or any Subsidiary, or, if resolved other than in the favor of the
Borrower or any Subsidiary, such litigation, proceeding or dispute would
have a material adverse effect on the Borrower's or such Subsidiary's
financial condition;
(d) any material and adverse change in the financial position,
operations, business or prospects of the Borrower; or
(e) any changes in the personnel holding executive management
positions with the Borrower at the time of closing, including but not
limited to, the Borrower's president, vice-president, and chief financial
officer.
5.5. Environmental Matters; Compliance with Laws.
(a) The Borrower, and each of its Subsidiaries, shall:
(1) immediately notify the Lender (and any other person that
Borrower or any Subsidiary is required to notify pursuant to any
applicable laws) once it is aware of a material Release or threatened
29
material Release of Hazardous Substances on, from, or near any of the
properties owned or used by the Borrower which might cause
Contamination;
(2) immediately notify the Lender once an environmental
investigation or clean-up proceeding is instituted by any Person in
connection with such properties;
(3) fully comply with and assist any such environmental
investigation and clean-up proceeding;
(4) promptly execute and complete any Remedial Actions necessary
to ensure that such properties are in material compliance with all
applicable laws and free from Contamination, and to ensure that no
environmental liens or encumbrances are levied against or exist with
respect to such properties; and
(5) comply, and cause all properties, assets, and operations
owned or used by the Borrower and its Subsidiaries to comply, in all
material respects, with all applicable federal, state, local and other
environmental, zoning, occupational safety, health, employment,
discrimination, labor and other laws and regulations.
(b) The Borrower shall defend, indemnify the Lender and hold the
Lender harmless from and against all loss, liability, damage, cost, and
expense, including without limitation, reasonable attorneys' fees, fines,
or other civil and criminal penalties or payments, for failure of the
assets or property owned or used by the Borrower or its Subsidiaries to
comply in all respects with all environmental and other laws, caused, in
whole or in part, regardless of fault, by the Borrower, by any Subsidiary,
or by any past, present or future owner, occupier, tenant, subtenant,
licensee, guest or other person. The provisions of this Section 5.5(b)
shall survive payoff, release, foreclosure, or other disposition of this
Agreement. The Borrower shall remain liable hereunder regardless of any
other provisions hereof which may limit the Borrower's liability.
5.6. Corporate Existence; Properties. The Borrower will notify the Lender
at least thirty (30) days before any change of name of the Borrower and will
maintain:
(a) its corporate existence and its qualification to do business and
good standing in each jurisdiction in which qualification is necessary for
the proper conduct of its businesses;
(b) all material licenses, permits and other authorizations necessary
for the ownership and operation of its properties and businesses; and
(c) its assets and properties in good repair, working order and
condition and to make all necessary or appropriate repairs, renewals,
replacements and substitutions, so that the value and efficiency of all
such assets and properties shall at all times be properly preserved and
maintained.
5.7. Insurance. The Borrower and each Subsidiary shall carry at all times,
in coverage, form and amount satisfactory to the Lender, hazard insurance (with
fire, extended and vandalism and malicious mischief coverage and coverage
against such other hazards as are customarily insured against by companies in
the same or similar business), commercial general liability insurance, worker's
30
compensation insurance, comprehensive automobile liability insurance, and such
other insurance as is customarily carried by similarly situated companies, and
pay all premiums on the policies for such insurance when and as they become due
and do all other things necessary to maintain such policies in full force and
effect. The Borrower shall from time to time, upon request by the Lender,
promptly furnish or cause to be furnished to the Lender evidence, in form and
substance satisfactory to the Lender, of the maintenance of all insurance
required to be maintained by this Section 5.7 including, but not limited to,
such originals or copies, as the Lender may request, of policies, certificates
of insurance, riders and endorsements relating to such insurance and proof of
premium payments.
5.8. Books and Records. The Borrower will maintain, and will cause each
Subsidiary to maintain, accurate and complete, in all material respects, records
and books of account with respect to all its operations in accordance with GAAP,
and will permit, and will cause each Subsidiary to permit, officers or
representatives of the Lender to examine and make excerpts from such books and
records and to visit and inspect its properties, both real and personal, at all
reasonable times and, provided no Event of Default has occurred, upon reasonable
advance notice by the Lender to the Borrower.
5.9. Location of Business. The Borrower will notify the Lender in writing
at least five (5) days prior to any change in the location of any place of
business of Borrower and each Subsidiary, if any, whether the establishment of a
new place of business or the discontinuance of a present place of business.
5.10. Funded Debt to EBITDA Ratio. Borrower shall maintain a ratio of
Funded Debt to EBITDA of not more than 1.75 to 1.00 measured at the close of
each fiscal quarter..
5.11. Funds Flow Coverage Ratio. The Borrower shall maintain a Funds Flow
Coverage Ratio of not less than 1.50 to 1.00 measured at the close of each
fiscal quarter for the rolling four (4) quarter period ending as at the close of
the fiscal quarter as of which the Funds Flow Coverage is being measured.
5.12. Group Health Plans. The Borrower will comply, and cause each
Subsidiary to comply, in all material respects with the group health plan COBRA
Continuation Coverage requirements of Code ss.4980B(f), with all provisions of
ss.1862(b)(1) of the Social Security Act and the provisions of the Health
Insurance Portability and Accountability Act of 1996. The Borrower will furnish
to Lender, as soon as possible and in any event within thirty (30) days after
the Borrower knows or has reason to know, notice that the Borrower or any
Subsidiary is not in compliance with any provision of Code ss.4980B(f),
ss.1862(b)(1) of the Social Security Act, or the Health Insurance Portability
and Accountability Act of 1996.
5.13. Deposit Accounts. The Borrower and all Subsidiaries shall maintain
one or more of their deposit accounts with the Lender.
SECTION 6. NEGATIVE COVENANTS.
The Borrower covenants and agrees that from and after the Closing Date and
so long as any of the Obligations remain outstanding and unpaid, in whole or in
part, the Borrower will observe the following covenants unless the Lender shall
otherwise consent in writing:
31
6.1. Debt. The Borrower will not, nor will it permit any Subsidiary to,
create, incur, assume or suffer or permit to exist any Debt, including
indebtedness for borrowed money or any indebtedness constituting the deferred
portion of the purchase price of any property, except:
(a) any Obligations, whether evidenced by the Notes or any other
instruments;
(b) Debt to suppliers and other trade creditors incurred in the
ordinary course of business by the Borrower and its Subsidiaries, if any;
(c) Subordinated Indebtedness;
(d) so long as no Default or Event of Default has occurred or would be
caused thereby, Debt constituting the deferred purchase price of equipment
purchased or acquired as permitted by Section 6.2(b) in an aggregate amount
which does not exceed Two Hundred Thousand Dollars ($200,000) during any
fiscal year;
(e) Debt described on Schedule 6.1(e); and
(f) any other Debt permitted under the Loan Documents.
6.2. Liens. The Borrower will not, nor will it permit any Subsidiary to,
create, assume, or suffer to exist, any Lien of any kind upon any of its assets,
whether now owned or hereafter acquired, except:
(a) purchase money Liens on equipment hereafter acquired securing Debt
permitted by Section 6.1(d), provided that such Liens attach only to the
equipment so acquired and do not encumber any other property of the
Borrower or any Subsidiary;
(b) Liens for taxes not yet payable or being contested in good faith
by appropriate proceedings and for which adequate reserves have been
provided on the books of the Borrower or a Subsidiary;
(c) mechanics', materialmen's, warehousemen's, carriers' or other like
Liens arising in the ordinary course of business of the Borrower or any
Subsidiary, if any, arising with respect to obligations which are not
overdue for a period longer than thirty (30) days or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided on the books of the Borrower or a Subsidiary;
(d) deposits or pledges to secure the performance of bids, tenders,
contracts, leases, public or statutory obligations, surety or appeal bonds
or other deposits or pledges for purposes of a like general nature or given
in the ordinary course of business by the Borrower or any Subsidiary; and
(e) other encumbrances consisting of zoning restrictions, easements,
restrictions on the use of real property or minor irregularities in the
title thereto, which do not arise in connection with the borrowing of, or
any obligation for the payment of, money and which, in the aggregate, do
not materially detract from the value of the Premises or the business,
properties or assets of the Borrower or any Subsidiary.
32
6.3. Investments, Loans and Advances. The Borrower will not, nor will it
permit any Subsidiary to, make or suffer to exist any Investment (by way of
transfer of property, contribution to capital, purchase of stock, securities,
partnership or other ownership interests or evidence of indebtedness,
acquisition of the business or assets or otherwise) in, or make or suffer to
exist any advances or loans to, any Person, except that:
(a) the Borrower and its Subsidiaries, if any, may extend trade credit
under usual and customary arm's length terms in the ordinary course of
business;
(b) the Borrower and its Subsidiaries, if any, may purchase and own
marketable direct obligations of the United States of America or any agency
thereof, marketable obligations directly and fully guaranteed by the United
States of America and certificates of deposit issued by the Lender or by
any other bank with a shareholders' equity of at least $50,000,000
organized under the laws of the United States of America or any state
thereof, provided that such obligations and certificates of deposit have a
maturity of one year or less from the date of purchase;
(c) Acquisitions financed with the Acquisition Line of Credit; and
(d) the Borrower and its Subsidiaries may make investments in
marketable securities satisfying the investment criteria of Borrower's
investment policy (as in effect from time to time, which shall be
reasonably satisfactory to the Lender).
6.4. Mergers, Consolidations. The Borrower will not, nor will it permit any
Subsidiary to, enter into any transaction of merger or consolidation; provided,
however, so long as no Default or Event of Default has occurred or would be
caused thereby, so long as advance written notice thereof is furnished by the
Borrower to the Lender, (i) mergers and consolidations among Subsidiaries of the
Borrower may be completed, and (ii) any Subsidiary of the Borrower may be merged
with and into the Borrower if the Borrower is the surviving corporation in
connection with such merger.
6.5. Disposition of Assets. The Borrower will not, nor will it permit any
Subsidiary to, liquidate or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, pledge, or otherwise transfer or dispose
of all or any substantial part of its properties, assets or business except that
(a) the Borrower and any Subsidiaries may sell used equipment no longer used or
useful in connection with their respective businesses having a value not in
excess of One Million Dollars ($1,000,000), in the aggregate, in any fiscal
year, and (b) the Borrower may sell inventory in the ordinary course of its
business.
6.6. Guaranty Obligations. The Borrower will not, nor will it permit any
Subsidiary to, become or remain liable, directly or indirectly, in connection
with Guaranty Obligations, except that the Borrower and any Subsidiary may
endorse negotiable instruments for collection in the ordinary course of their
respective businesses.
6.7. Sales and Lease-Backs. The Borrower will not, nor will it permit any
Subsidiary to, enter into any arrangement, directly or indirectly, with any
Person, whereby the Borrower or any Subsidiary shall sell or transfer any
property, real or personal, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which the Borrower or
33
such Subsidiary intends to use for substantially the same purpose or purposes as
the property being sold or transferred.
6.8. Continuance of Business. The Borrower will not, nor will it permit any
Subsidiary to, engage in any line of business other than those which are the
same as or similar to those in which the Borrower or any such Subsidiary is
actively engaged on the Closing Date including those businesses acquired with
Advances under the Acquisition Line of Credit.
6.9. Voluntary Prepayments. The Borrower will not, nor will it permit any
Subsidiary to, prepay, purchase, redeem or otherwise acquire for value prior to
the stated maturity thereof all or any part of any Debt of the Borrower or any
Subsidiary, if any, for borrowed money (other than the Obligations as provided
herein).
6.10. Transactions with Affiliates. Except as expressly permitted by this
Agreement, the Borrower will not, nor will it permit any Subsidiary to, directly
or indirectly:
(a) make any Investment in, or loan or advance to, an Affiliate;
provided, however, so long as no Default or Event of Default has occurred
or would be caused thereby, the Borrower and its Subsidiaries may make
intercompany advances to one another in the ordinary course of their
respective businesses as heretofore conducted and for proper corporate
purposes;
(b) transfer, sell, lease, assign or otherwise dispose of any assets
to an Affiliate;
(c) merge into or consolidate with or purchase or acquire assets from
an Affiliate; or
(d) enter into any other transaction directly or indirectly with or
for the benefit of any Affiliate (including, without limitation, any
guarantees or assumptions of obligations of an Affiliate);
provided that Borrower and any Subsidiary may enter into any transaction
with an Affiliate for the leasing of property, the rendering or receipt of
services or the purchase or sale of assets in the ordinary course of
business for a consideration which is substantially as advantageous to
Borrower or such Subsidiary as the consideration which it would obtain in a
comparable arm's length transaction with a Person not an Affiliate.
6.11. Handling of Hazardous Substances. The Borrower will not permit, nor
will it permit any Subsidiary to, use in its business or operations, or produce
as a result or as a by-product of its business or operations, or store or hold
at any site or location at which it conducts its business or operations, or at
any other property, Hazardous Substance unless the Borrower or any Subsidiary
complies, in all material respects, with all requirements of any applicable law,
regulation, decision or edict relating to the special handling, collection,
storage, treatment, disposal, or transportation of such Hazardous Substance. The
Borrower will not, nor will it permit any Subsidiary to, permit the Release or
threatened Release of any Hazardous Substance on, from, or near their respective
properties which might cause Contamination.
6.12. Use of Proceeds. The Borrower will not, nor will it permit any
Subsidiary to, directly or indirectly, apply any part of the proceeds of the
34
Loans to the purchasing or carrying of any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, or any
regulations, interpretations or rulings thereunder.
6.13. Management Changes. The Borrower acknowledges that the Lender is
relying upon the abilities of the Borrower's senior executive management as a
material inducement for the Lender to enter into this Agreement and agree to
make the Loans. Therefore, the Borrower shall maintain, at all times, senior
executive management which is reasonably satisfactory to the Lender. Lender
acknowledges that the present senior executive management of the Borrower is
satisfactory to it.
SECTION 7. EVENTS OF DEFAULT, REMEDIES.
7.1. Events of Default. The following shall constitute Events of Default:
(a) Non-Payment. (i) Failure by the Borrower to pay the principal of
or accrued interest on the Notes or any other instrument evidencing any
Obligation when due, or (ii) the failure of the Borrower or any Subsidiary
to pay any other amount payable to Lender, whether under this Agreement or
otherwise, within three (3) days after such amount becomes due.
(b) Falsity of Representations and Warranties. Any representation or
warranty made by the Borrower in this Agreement or in any other Loan
Document or in any certificate, financial or other statement furnished at
any time under or in connection with this Agreement or any other Loan
Document shall appear to be false or misleading in any material respect.
(c) Failure to Perform Certain Covenants. Failure by the Borrower to
observe or perform any other covenants, conditions or provisions contained
in this Agreement or in any other Loan Document, provided that, except with
respect to a violation of the covenants contained in Sections 5.10 and
5.11, or Section 6, such failure shall continue for a period of fifteen
(15) days after the earlier of (i) written notice thereof from Lender to
the Borrower, or (ii) the date on which an officer of the Borrower knew, or
should have known, of such failure.
(d) Default Under Other Obligations. The Borrower or any Subsidiary:
(1) defaults in any payment of principal of or interest on any
material obligations for borrowed money (other than under the Notes)
or for the deferred purchase price of property beyond any period of
grace provided with respect thereto; or
(2) defaults in the performance of any other agreement, term or
condition contained in any such material obligation or in any
agreement relating thereto, if the effect of such default is to cause,
or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to then cause, such obligation to
become due prior to its stated maturity. As used in this Section
7.1(d), "material obligation" shall mean any obligation of the
Borrower or any Subsidiary, under which the aggregate liability of the
Borrower or such Subsidiary (whether fixed or contingent) exceeds Two
Hundred Thousand Dollars ($200,000).
35
(e) Voluntary Bankruptcy, Etc. The commencement by the Borrower or any
Subsidiary of a voluntary case under the Bankruptcy Code, as now
constituted or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency, reorganization, rehabilitation or other similar
law, or the consent by it to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Borrower or any Subsidiary or for any substantial
part of its property, or the making by it of any assignment for the benefit
of creditors, or the failure of the Borrower or any Subsidiary generally to
pay its debts as such debts become due, or the taking of corporate action
by the Borrower or any Subsidiary in furtherance of any of the foregoing.
(f) Involuntary Bankruptcy, Etc. The entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of the
Borrower or any Subsidiary in an involuntary case under the Bankruptcy
Code, as now or hereafter constituted, or any other applicable federal or
state bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of the Borrower or any Subsidiary or for any substantial
part of its property, or ordering the winding-up or liquidation of its
affairs and the continuance of any such decree or order unstayed and in
effect for a period of sixty (60) days.
(g) ERISA.
(1) (A)(1) Any Employee Pension Plan is terminated within the
meaning of Title IV of ERISA, or (2) a trustee is appointed by the
appropriate United States District Court to administer any Employee
Pension Plan, or (3) the PBGC institutes proceedings to terminate any
Employee Pension Plan, or (4) any Reportable Event occurs which the
Lender determines in good faith indicates a substantial likelihood
that an event described in (1), (2), or (3) above will occur, and (B)
with respect to events described in (1)-(4) above, only, the benefit
commitments (within the meaning of ERISA ss.4001(a)(16)), exceed the
market value of the assets in the fund under the Employee Pension Plan
by, five percent (5%) or more of the Borrower's or its Controlled
Group Members' tangible net worth;
(2) there occurs any Accumulated Funding Deficiency with respect
to any Employee Pension Plan and the Borrower or any of its Controlled
Group Members fails to correct such Accumulated Funding Deficiency
prior to the end of the taxable period within the meaning of Code
ss.4971(c)(3); or
(3) any Employee Pension Plan loses its tax-qualified status.
(h) COBRA Continuation Coverage. (i) Failure by the Borrower or any
Subsidiary to provide COBRA Continuation Coverage under group health plans
for separating employees in accordance with Code ss.4980B(f) at the time
continuation coverage is to be made available; (ii) failure by the Borrower
or any Subsidiary to comply with all provisions of ss.1862(b)(1) of the
Social Security Act; or (iii) failure by the Borrower or any Subsidiary to
comply with all provisions of the Health Insurance Portability and
Accountability Act of 1996.
36
(i) Material Adverse Change. The Lender in good faith believes the
prospect of timely repayment of the Obligations to be materially impaired
by reason of a material adverse change in the Borrower's operations,
financial condition, earnings or physical assets.
(j) Default Under Other Documents. An "Event of Default" or similar
event shall have occurred and be continuing under any Loan Document.
(k) Unenforceability. (i) Any material provision of any of the Loan
Documents shall at any time for any reason cease to be a valid and binding
obligation of the Borrower, or shall be declared to be null and void or
(ii) the validity or enforceability thereof shall be contested by the
Borrower or any governmental agency or authority, or the Borrower shall
deny that it has any further liability or obligation under any Loan
Document to which it is a party.
(l) Judgments. One or more judgments are entered against Borrower in
the aggregate amount of Five Hundred Thousand Dollars ($500,000) or more,
and the Borrower shall not obtain the satisfaction, release, stay or
dismissal thereof within thirty (30) days thereof.
7.2. Acceleration.
(a) Upon the occurrence of an Event of Default specified in Sections
7.1(a) through 7.1(d), and 7.1(g) through 7.1(l), the Lender may, by
written notice to Borrower, terminate immediately and irrevocably the
Acquisition Line of Credit, the Acquisition Line of Credit Commitment, the
Working Capital Line of Credit, the Working Capital Line of Credit
Commitment, the Term Loan and any other obligation of the Lender to make
any advances to or for the account of the Borrower or any of its
Affiliates, and declare the Notes, and all other instruments evidencing the
Obligations to be due and payable, whereupon the principal amount of the
Notes and all outstanding Obligations, together with accrued interest
thereon and all other amounts payable thereunder, shall become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, anything contained herein
or in the documents evidencing the same to the contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in Sections
7.1(e) or 7.1(f), the Acquisition Line of Credit, the Acquisition Line of
Credit Commitment, the Working Capital Line of Credit, the Working Capital
Line of Credit Commitment, the Term Loan, and any other obligation of the
Lender to make any advances to or for the account of the Borrower or any of
its Affiliates, shall automatically and immediately terminate and the
unpaid principal balances of, all accrued, unpaid interest on, and all
other sums payable with regard to, the Notes and all instruments evidencing
the Obligations shall automatically and immediately become due and payable,
in all cases without any action on the part of the Lender.
7.3. Right of Setoff. Upon the occurrence of a Default or an Event of
Default, the Lender shall have the right, in addition to all other rights and
remedies available to it, to set off against the unpaid balance of the
Obligations, any debt owing to the Borrower by the Lender and any funds in any
deposit account maintained by the Borrower with the Lender.
37
7.4. No Marshalling, Etc., Required. If an Event of Default shall have
occurred and be continuing, the Lender shall not be required to marshal any
present or future security for, or guarantees of, the Obligations or to resort
to any such security or guarantee in any particular order and the Borrower
waives, to the fullest extent that it lawfully can, (a) any right it might have
to require the Lender to pursue any particular remedy before proceeding against
it, and (b) any right to the benefit of, or to direct the application of the
proceeds of any collateral until the Obligations have been paid in full.
7.5. Remedies Cumulative. Lender may exercise any of its rights and
remedies set forth in this Loan Agreement and the other Loan Documents. The
remedies of Lender shall be cumulative and concurrent, and may be pursued
singly, successively, or together, at its sole discretion, and may be exercised
as often as the occasion therefore shall occur; and the failure to exercise any
such right or remedy shall in no event be construed as a waiver or release
thereof.
SECTION 8. MISCELLANEOUS.
8.1. No Waiver; Cumulative Remedies. No failure or delay on the part of the
Lender in exercising any right, power or privilege hereunder or under the other
Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder or thereunder
preclude or require any other or further exercise thereof or the exercise of any
other right, power or privilege. The Lender shall not be deemed, by any act of
omission or commission, to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by the Lender, and then only to the
extent specifically set forth in writing. A waiver with respect to one event
shall not be construed as continuing or as a bar to or a waiver of any right or
remedy with respect to a subsequent event. The rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies provided by
law.
8.2. Notices. All notices and other communications shall have been duly
given and shall be effective (i) when delivered, (ii) when transmitted via
telecopy (or other facsimile device) to the numbers set forth below, (iii) the
Business Day following the day on which the same has been delivered prepaid to a
reputable national overnight air courier service, or (iv) the third Business Day
following the day on which the same is sent by certified or registered mail,
post prepaid, in each case to the respective parties at the address or telecopy
number set forth below, or at such other address or telecopy number as such
party may hereafter specify by written notice to the other party hereof:
The Borrower: Penn Engineering & Manufacturing Corp.
X.X. Xxx 0000
Xxxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxx, Treasurer
with a copy to: Xxxxx Xxxxxx & Heckscher LLP
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, Xx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
38
Lender: First Union National Bank
PA5416
0000 Xxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxxx,
Vice President
with a copy to: Xxxxxxx & Xxx
One Glenhardie Corporate Center
0000 Xxxxxxxx Xxxx
X.X. Xxx 000
Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esquire
8.3. Reimbursement of Lender. The Borrower hereby agrees to reimburse the
Lender for its out-of-pocket expenses, including counsel fees, incurred by the
Lender in connection with the development, preparation, execution and
enforcement of this Agreement and all the Loan Documents, including all counsel
fees in connection with any bankruptcy or insolvency proceeding involving the
Borrower, this Agreement or any of the other Loan Documents. Such expenses and
counsel fees shall be paid simultaneously with the execution of this Agreement
and all such expenses hereafter incurred shall be paid within ten (10) days
after notice by the Lender.
8.4. Payment of Expenses and Taxes. In addition to payment of the expenses
and counsel fees provided for in Section 8.3, the Borrower agrees to pay, and to
save the Lender harmless from any delay in paying, stamp and other similar
taxes, if any, including, without limitation, all levies, impositions, duties,
charges or withholdings, together with any penalties, fines or interest thereon
or other additions thereto, which may be payable or determined to be payable in
connection with the execution and delivery of this Agreement and the Loan
Documents or any modification of any thereof or any waiver or consent under or
in respect of any thereof.
8.5. Survival of Representations and Warranties. All representations,
warranties, covenants and agreements made in this Agreement and all other Loan
Documents shall survive the execution and delivery of the Loan Documents and the
making of the Loans hereunder. All such representations and warranties shall be
deemed to be made again at the date of each request for a borrowing under the
Loans. The provisions of Sections 5.5, 8.3, 8.4, 8.10, 8.11 and 8.12 hereof
shall survive payment of the Obligations.
8.6. Participations. The Lender reserves the absolute right to assign all
or any of its interest in any or all of the Loans and the Loan Documents or to
participate with other lenders in the Loans, the Loan Documents on such terms
and at such times as the Lender may determine from time to time, with prior
notice to and the consent of the Borrower (which consent shall not be
unreasonably withheld, conditioned or delayed); provided, however, no such
notice to or consent of the Borrower shall be required if a Default or Event of
Default has occurred. The Borrower hereby grants to each such assignee and
participant the right to set off deposit accounts maintained by the Borrower or
any of its Subsidiaries with such assignee or participant or any other
39
obligations such assignee or participant may owe to Borrower or any of its
Subsidiaries, to the extent of all Obligations. The Lender may disclose all
financial, business and other information about the Borrower or any of its
Subsidiaries which the Lender may possess at any time to all prospective and
actual assignees and participants.
8.7. Successors. This Agreement shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower may not assign or transfer its rights
hereunder without the prior written consent of the Lender.
8.8. Construction. This Agreement, all Loan Documents, and the rights and
obligations of the parties hereunder and thereunder, shall be governed by and
construed and interpreted in accordance with, the domestic internal laws of the
Commonwealth of Pennsylvania without regard to its rules pertaining to conflict
of laws. The Section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8.9. Severability. Any provision contained in this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.10. Indemnity. The Borrower hereby agrees, whether or not any of the
transactions contemplated in the Loan Documents shall be consummated, to pay,
assume liability for, and indemnify, protect, defend, save and keep harmless the
Lender from and against, any and all liabilities, obligations, losses, damages,
settlements, claims, actions, suits, penalties, costs and expenses (including,
but not limited to, legal and investigative fees and expenses) of whatsoever
kind and nature, including, but not limited to claims based upon negligence,
strict or absolute liability, liability in tort, latent and other defects
(whether or not discoverable), and any claim for patent, trademark or copyright
infringement which may from time to time be imposed on, incurred by or asserted
against the Lender (whether or not any such claim is also indemnified or insured
against by any other person) in any way relating to or resulting from this
Agreement, any Loan Document, or any of the transactions contemplated herein or
therein. The provisions of this Section 8.10 shall survive the payoff, release,
foreclosure or other disposition, as applicable, of this Agreement and the
Obligations.
8.11. Waiver of Trial by Jury; Jurisdiction.
(a) Each party to this Agreement agrees that any suit, action, or
proceeding, whether claim or counterclaim, brought or instituted by either
party hereto or any successor or assign of any party on or with respect to
this Agreement or any other Loan Document or which in any way relates,
directly or indirectly, to the Loans or any event, transaction, or
occurrence arising out of or in any way connection with the Loans, or the
dealings of the parties with respect thereto, shall be tried only by a
court and not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING. THE BORROWER
ACKNOWLEDGES AND AGREES THAT THIS SECTION 8.11 IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT BETWEEN THE PARTIES AND THAT THE LENDER WOULD NOT
40
EXTEND THE LOANS TO THE BORROWER IF THIS WAIVER OF JURY TRIAL SECTION WERE
NOT A PART OF THIS AGREEMENT.
(b) For the purpose of any suit, action or proceeding arising out of
or relating to this Agreement, the Notes or the Loans , the Borrower hereby
irrevocably consents and submits to the jurisdiction and venue of any of
the Courts of the Commonwealth of Pennsylvania including, without
limitation, the Court of Common Pleas of Philadelphia County and the
Federal District Court for the Eastern District of Pennsylvania, and
appoints and constitutes the Secretary of State of the Commonwealth of
Pennsylvania as its agent to accept and acknowledge on its behalf all
service of process in connection with any such matter, copies of which
process shall be mailed or delivered to the Borrower. The Borrower
irrevocably waives any objection which it may now or hereinafter have to
the laying of the venue of any suit, action or proceeding brought in such
court and any claim that such suit, action or proceeding brought in such a
court has been brought in an inconvenient forum and agrees that service of
process in accordance with the foregoing sentence shall be deemed in every
respect effective and valid personal service of process upon the Borrower.
The provisions of this Section 8.11(b) shall not limit or otherwise affect
the right of the Lender to institute and conduct action in any other
appropriate manner, jurisdiction or court.
8.12. Actions Against Lender; Release.
(a) Any action brought by the Borrower or any Subsidiary against the
Lender which is based, directly or indirectly, or on this Agreement or any
other Loan Document or any matter in or related to this Agreement or any
other Loan Document, including but not limited to the making of the Loans
or the administration or collection thereof, shall be brought only in the
courts of the Commonwealth of Pennsylvania.
(b) Upon full payment and satisfaction of the Loans and the interest
thereon, as provided in Section 2 hereof, the parties shall thereupon
automatically each be fully, finally, and forever released and discharged
from any further claim, liability or obligation in connection with the
Loans except as expressly set forth herein, except to the extent an payment
received by the Lender is determined to be a preference or similar voidable
transfer.
8.13. Performance by Lender. If the Borrower shall fail to observe or
perform any of the terms, agreements or covenants contained in this Agreement,
or in any other Loan Document, the Lender may, in its discretion, but without
any obligation or duty to do so, and without waiving any Default, or Event of
Default, and with prior written notice to the Borrower, perform any of such
terms, agreements or covenants, in part or in whole, and any money advanced or
expended by the Lender in or toward the fulfillment of such terms, agreements or
covenants, shall be due on demand and become a part of and be added to the
indebtedness due under the Notes and secured as herein provided with interest
thereon at the rate specified in such Note from the date of the respective
advance or expenditure. Lender's rights contained in this Section 8.13 shall be
in addition to all of Lender's rights under Section 5.5(b) and otherwise, and
Lender may, at its sole election, exercise any one or more, or all, of such
rights alternatively or concurrently.
8.14. Counterparts. This Agreement may be executed in any number of
counterparts with then same effect as if the signatures thereto and hereto were
41
upon the same instrument, but all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
8.15. Further Actions. The Borrower shall execute and deliver such
documents and instruments, and take such other actions, as the Lender deems
necessary to consummate the transactions described in this Agreement.
8.16. Entire Agreement. This Agreement and the Loan Documents represent the
entire agreement between the Lender and the Borrower with respect to the
financing transactions to which they relate, and cannot be changed or amended
except by an agreement in writing signed by the party against whom enforcement
of the change or amendment is sought.
8.17. Arbitration.
(a) Notwithstanding anything contained herein or in any other Loan
Document to the contrary, upon demand of any party hereto, whether made
before or after institution of any judicial proceeding, any dispute, claim
or controversy arising out of, connected with or relating to this Agreement
and other Loan Documents ("Disputes") between or among parties to this
Agreement shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of
that party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, disputes as to whether a matter is
subject to arbitration, claims brought as class actions, claims arising
from Loan Documents executed in the future, or claims arising out of or
connection with the transaction reflected by this Agreement.
(b) Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules")
of the American Arbitration Association (the "AAA") and Title 9 of the U.S.
Code. All arbitration hearings shall be conducted in the City of
Philadelphia. The expedited procedures set forth in Rule 51 et seq. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000.
All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction.
The panel from which all arbitrators are selected shall be comprised of
licensed attorneys. The single arbitrator selected for expedited procedure
shall be a retired judge from the highest court of general jurisdiction,
state or federal, of the state where the hearing will be conducted or if
such person is not available to serve, the single arbitrator may be a
licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to swap agreements.
(c) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that
any party hereto may employ or exercise freely, independently or in
connection with an arbitration proceeding or after an arbitration action is
brought. Lender and Companies shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any
real or personal property or other security by exercising a power of sale
granted under the Loan Documents or under applicable law or by judicial
foreclosure and sale, including a proceeding to confirm the sale; (ii) all
rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
42
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
(d) The parties hereto agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby
waive any right or claim to punitive or exemplary damages they have now or
which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially.
IN WITNESS WHEREOF the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
PENN ENGINEERING & MANUFACTURING CORP.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Treasurer
("Borrower")
FIRST UNION NATIONAL BANK
By /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
("Lender")
SCHEDULES
3.5 Litigation
3.6 Title to Assets; Liens
3.7 Licenses; Intellectual Property
6.1(d) Permitted Debt
Exhibits
"A" Form of Borrowing Notice
"B" Form of Compliance Certificate
"C" Form of Term Note
43
EXHIBIT "A"
FORM OF BORROWING NOTICE
First Union National Bank
0000 Xxxxxx Xxxx
Plymouth Meeting. PA 19462
Attention: Xx. Xxxxxx X. Xxxxxxxx, Vice President
Ladies and Gentlemen:
The undersigned, Penn Engineering & Manufacturing Corp. ("Borrower"),
refers to the Loan Agreement dated September 28, 1999 (as it may be amended,
modified, extended or restated from time to time, the "Loan Agreement"), between
Borrower and Lender. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Loan Agreement. The
undersigned hereby gives you notice that it requests an Advance in accordance
with the provisions of Section 2.7 of the Loan Agreement, and in that connection
therewith sets forth below the terms on which such Advance is requested to be
made:
REQUEST FOR [Insert Advance Type] ADVANCE
(A) Date of Borrowing
(which is a Business Day) ______________________________
(B) Principal Amount of
Advance ______________________________
(C) Interest rate basis ______________________________
(D) Interest Period and the last
day thereof if a LIBOR Loan ______________________________
Upon acceptance of any or all of the Advances made by the Lender in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Sections 4.2 and 4.3 of
the Loan Agreement have all been satisfied.
Very truly yours,
PENN ENGINEERING & MANUFACTURING CORP.
By_______________________________________
Name:_________________________________
Title:________________________________
44
EXHIBIT "B"
Form of Compliance Certificate
In accordance with the provisions of Section 5.1(b) of the Loan Agreement
(the "Loan Agreement") dated September 28, 1999, by and between Penn Engineering
& Manufacturing Corp. (the "Borrower") and First Union National Bank (the
"Lender"), the undersigned, being the Chief Financial Officer of the Borrower,
does hereby certify to the Lender, on behalf of the Borrower, as follows:
(i) The representations and warranties made by the Borrower in Section
3 of the Loan Agreement are true and complete in all material respects as
on and as of the date hereof as if made on and as of this date;
(ii) The Borrower has, as of the date hereof, performed all covenants
and agreements required to be performed by it under the Loan Agreement and
related Loan Documents; and
(iii) No Default or Event of Default has occurred, [except and to the
extent specifically set forth on Exhibit "A" attached hereto and made a
part hereof].
(iv) The Borrower is in compliance with the financial covenants set
forth in Sections 5.10 and 5.11 of the Loan Agreement, as provided below:
[Calculation of Financial Covenants to be provided].
Any capitalized terms which are used in this Certificate and which are not
defined herein, but which are defined in the Loan Agreement, shall have the
meanings given to those terms in the Loan Agreement.
IN WITNESS WHEREOF, I have executed this Certificate the ____ day of
___________________.
PENN ENGINEERING & MANUFACTURING CORP.
By (SEAL)
-------------------------------------
Name:
Title: Chief Financial Officer of the Borrower
45
