LOAN AND CONSIGNMENT AGREEMENT
LOAN AND CONSIGNMENT AGREEMENT, dated as of July __, 1999, by and among
BANKBOSTON, N.A., a national banking association with offices at 000 Xxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 ("Lender"); and WESTBURY METALS GROUP, INC.,
a Delaware corporation with its principal office at 000 Xxxxxx Xxxxx, Xxxxxxxx,
Xxx Xxxx (the "Parent"), WESTBURY ALLOYS, INC., a Delaware corporation with its
principal office at 000 Xxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx ("Alloys"),
RELIABLE-WEST TECH, INC., a Delaware corporation with its principal office at
000 Xxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx ("West Tech"), and WESTBURY INTERNATIONAL,
INC., a Rhode Island corporation with its principal office at 000 Xxxxxx Xxxxx,
Xxxxxxxx, Xxx Xxxx ("International") (collectively, Alloys, West Tech, and
International are hereinafter referred to together as the "Companies" and
individually as a "Company").
W I T N E S S E T H:
WHEREAS, the Parent, the Companies and the Lender desire to enter into
this Loan and Consignment Agreement pursuant to which the Lender will (i) extend
a revolving loan to the Companies, (ii) issue letters of credit on behalf of the
Companies, (iii) provide forward contracts on behalf of the Companies, and (iv)
extend a consignment facility to the Companies, all on the terms and conditions
and in reliance upon the representations and warranties of the Companies
hereinafter set forth; and
NOW, THEREFORE, in consideration of the premises and of the mutual
promises hereinafter contained, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
When used herein, the terms set forth below shall be defined as
follows:
1.1 "Advances" means all amounts loaned to the Companies under
Paragraph 3 hereof by the Lender.
1.2 "Affiliate" means (i) any Subsidiary of a Company; (ii) any entity
or corporation controlled by a Company, or by any Subsidiary, employee,
salesperson, officer, director or shareholder of a Company; (iii) any employee,
salesperson, officer, director or shareholder of a Company, and (iv) any entity
which controls a Company. For purposes of this definition, "control" shall
include the ownership of more than 10% of the outstanding stock of a corporation
or of the equity or income of a partnership, a limited liability company or a
joint venture.
1.3 "Approved Locations" means (a) Alloy's premises at 000 Xxxxxx
Xxxxx, Xxxxxxxx, Xxx Xxxx and 000 Xxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx, (b) West
Tech's premises at 000 Xxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx, and at 000 Xxxxxx Xxxx
Xxxx, Xxxxxxxxx, Xxxxxxxxxxx, (x) International's premises at 000 Xxxxxx Xxxxx,
Xxxxxxxx, Xxx Xxxx, and (d) such other locations as may be agreed upon from time
to time in writing by the parties hereto; provided, however, the Lender shall
have the right to give written notice that a location, whether now, or hereafter
approved, is no longer an Approved Location.
1.4 "Assignment of Key Man Life Insurance" means the Collateral
Assignment of Life Insurance Policy dated July __, 1999 pursuant to which Alloy
assigned all of its interest under a certain Insurance Policy No. XX0000000
issued by United of Omaha Life Insurance Company on the life of Xxxxxx Xxxxxxx
to secure the payment and performance of the Obligations.
1
1.5 "Authorized Representatives" means all person(s) who are authorized
by and on behalf of the Companies (a) to transact consignment and purchase and
sale transactions with Lender under the Consignment Facility; (b) to request
Advances from the Lender under the Revolving Loan; (c) to request that the
Lender issue Letters of Credit under the Revolving Loan; (d) to request that an
Advance under the Revolving Loan be continued as such or converted to an Advance
of another Type; and (e) to request Forward Contracts.
1.6 "Borrowing Limit" means the lesser of:
(a) Twelve Million Dollars ($12,000,000) minus the Consignment Facility
Indebtedness; or
(b) Eighty percent (80%) of Eligible Receivables of the
Companies plus Fifty percent (50%) of Eligible
In-House Catalytic Converter Inventory.
1.7 "Breakage Fees" means any reduced return to the Lender due to
redeployment loss or payment or expense incurred by the Lender as a result of
the prepayment or late payment by any Company of any Forward Contract.
1.8 "Business Day" means each and every day other than Saturdays,
Sundays and days on which the Lender is closed by virtue of a national holiday
or a holiday in the Commonwealth of Massachusetts.
1.9 "Company Guaranties" means, singly and collectively, the Unlimited
Guaranties of even date executed by each of the Companies of the Obligations
incurred by each other Company.
1.10 "Companies" means, individually and collectively, Alloys, West
Tech, and International.
1.11 "Companies' Address" means each Company's respective address as
set forth in the Preamble of this Agreement.
1.12 "Consigned Precious Metal" means Precious Metal which has been
consigned to the Companies by the Lender pursuant to the Consignment Facility.
1.13 "Consignment Facility" means the facility under Paragraph 2
hereof, whereby the Companies may request consignments of Precious Metal from
the Lender.
1.14 "Consignment Facility Indebtedness" means the value (as determined
in accordance with Paragraph 2.2 hereof) of Consigned Precious Metal plus any
unpaid purchase price for Consigned Precious Metal.
1.15 "Consignment Limit" means the least of:
(a) the least of:
(i) Seven Million Dollars ($7,000,000); or
(ii) the sum of (i) ninety percent (90%) of
Eligible In-House Silver Industrial Product
Inventory, plus (ii) ninety percent (90%) of
Eligible Precious Metal Bullion, plus (iii)
ninety percent (90%) of Eligible In-House
Catalyst, plus (iv) plus eighty percent
(80%) of Precious Metal contained in
Eligible In-House Assay Refining Lot
2
Inventory, plus (iii) seventy percent (70%)
of Precious Metal contained in Eligible
Off-Premises Primary Refiners Inventory; or
(b) such limit as the Lender and the Companies may agree
upon from time to time as evidenced by an amendment
in substantially the form of Exhibit C attached
hereto and made a part hereof or in such other form
as the Lender shall require; or
(c) such other limits as the Lender may approve in its
sole discretion immediately upon notice to the
Companies upon the occurrence of an Event of Default
(as hereinafter defined) or upon the occurrence of an
event which, with the passage of time or the giving
of notice, or both, would be an Event of Default.
1.16 "Conversion Request" means a notice given by an Authorized
Representative to the Lender of the Companies' election to convert or continue
an Advance under the Revolving Loan in accordance with Paragraph 4.3 hereof.
1.17 "Drawdown Date" means, with respect to the Revolving Loan, the
date on which any Advance under the Revolving Loan is made or is to be made and
the date on which any Advance under the Revolving Loan is converted or continued
in accordance with Paragraph 4.3 hereof, as applicable.
1.18 "Eligible Inventory" means Inventory, valued at the lower of cost
or market, which is acceptable to the Lender, in its sole discretion in all
respects, and which satisfies all of the following:
(a) The Inventory is salable through normal trade channels.
(b) The Inventory is owned by the Companies or on consignment to
the Companies by the Lender pursuant to the Consignment
Facility and is not subject to any lien or security interest
not expressly permitted by this Agreement and is not on
consignment from, or to, any person or entity other than from
the Lender to the Companies;
(c) The Inventory is located at an Approved Location and is
subject to a first lien in favor of the Lender;
(d) The Inventory is not of a class or type which the Lender, in
its sole discretion, shall have notified the Companies is not
to be included in Eligible Inventory;
(e) The Inventory has been made available to the Lender for
inspection and has been acceptable to the Lender after such
inspection, if any; and
(f) The Inventory is insured to the Lender's satisfaction.
1.19 "Eligible In-House Catalyst" means Eligible Inventory which is
comprised of platinum or palladium from catalytic converters.
1.20 "Eligible In-House Silver Industrial Product Inventory" means
Eligible Inventory, valued at the lower of cost or market, which is acceptable
to the Lender in its sole discretion in all respects, and which Inventory
constitutes finished goods comprised of silver.
3
1.21 "Eligible Precious Metal Bullion Inventory" means Eligible
Inventory which is acceptable to the Lender in its sole discretion in all
respects, and which Inventory consists of Precious Metal bullion.
1.22 "Eligible In-House Catalytic Converter Inventory" means Eligible
Inventory which consists of finished goods comprised of pre-processed catalytic
converters.
1.23 "Eligible In-House Assay Refining Lot Inventory" means Eligible
Inventory which is comprised of Precious Metal in refining lots, less toll-ins.
1.24 "Eligible Off-Premises Primary Refiners Inventory" means all
Eligible Precious Metal Bullion Inventory located at pre-approved principal
refiners of the Companies, which refiners have entered into such agreements with
the Lender as the Lender may reasonably request to confirm the Lender's security
interest therein.
1.25 "Eligible Receivable" means a Receivable which is satisfactory to
the Lender, in its sole discretion, in all respects and which satisfies all of
the following:
(a) The Receivable is an account which arose in the ordinary course of the
business of the applicable Company from or in connection with the performance of
services which have, to the best knowledge of such Company, been fully and
satisfactorily performed or from the absolute sale of Inventory to which such
Company had the sole and complete ownership (subject to the security interests
therein permitted hereby) and which has been shipped or delivered to the account
debtor as evidenced by shipping or delivery receipts in the possession of such
Company or the Lender;
(b) The Receivable is subject to a first lien in favor of
the Lender and not subject to set off, counterclaim,
defense, allowance or adjustment other than discounts
for prompt payment in accordance with the normal
terms of the applicable Company disclosed to the
Lender and shown on the invoice, or to dispute,
objection or complaint by the account debtor, and the
goods the sale of which gave rise to the Receivable
have not been rejected, returned, lost or damaged;
(c) The Receivable has been due and payable for not more
than thirty (30) days past the due date thereof ;
(d) The Receivable is not due from an Affiliate;
(e) The Receivable is not due from an account debtor
located in any state requiring qualification or
registration of foreign corporations making sales to
customers in such state unless either the applicable
Company, shall have qualified or registered in such
state;
(f) Except as otherwise approved by the Lender, the
Receivable is not due from an account debtor which
has no place of business within the United States
unless the applicable Company, has an irrevocable
letter of credit in the amount of the Receivable
securing payment thereof which is satisfactory to the
Lender in all respects;
4
(g) The Receivable is not due from any account debtor as
to whom twenty percent (20%) or more of the amount
outstanding under invoices submitted to such account
debtor are otherwise deemed ineligible hereunder;
(h) The Receivable does not arise out of a sale by the
Companies of goods consigned to the Companies, or
delivered to the Companies, as applicable, on sale or
return terms (whether or not compliance has been made
with Section 2-326 of the Uniform Commercial Code;
(i) The Receivable does not arise out of a sale made on a
"xxxx and hold" or on a delayed billing basis other
than upon terms usual to the current business
practices of the applicable Company;
(j) The Receivable is not owed pursuant to a contract
with the United States Government or any
instrumentality thereof;
(k) The Receivable is not evidenced by a promissory note; and
(l) The financial condition of the account debtor is
satisfactory to the Lender, in its sole discretion.
1.26 "Eurodollar Business Day" means any day on which commercial banks
are open for international business (including dealings in dollar deposits) in
London.
1.27 "Event of Default" means each and every event specified in
Paragraph 11.1 of this Agreement.
1.28 "Financial Statements" means the audited balance sheets of the
Parent and the Companies dated as of June 30, 1998, including combined and
combining statements and the statements of income and retained earnings of the
Companies for the Fiscal Year ended 1998 on such date prepared and certified by
independent certified public accountants and similar management prepared
statements for the Fiscal Year ended 1999.
1.29 "Fiscal Year" means the year ending on the Saturday closest to June 30th of
each ------------- year.
1.30 "Forward Contracts" means a contract to sell or purchase Precious
Metal at some time in the future between the Lender and any Company.
1.31 "Forward Contract Exposure" means with respect to any Forward
Contract, the percentage agreed upon between the Lender and the Companies of the
nominal value based on tenor and volatility up to $1,500,000.00.
1.32 "Forward Contract Maturity Date" means the maturity date mutually
agreed upon by a Company and the Lender for a Forward Contract, which date shall
not be later than the Maturity Date.
1.33 "GAAP" means generally accepted accounting principles consistently
applied.
1.34 "Handy & Xxxxxx Price" means with respect to silver, the Handy &
Xxxxxx published silver base price on the date of valuation, or if no such price
is available for such date, said published silver base price on the next
previous day for which such price was available.
5
1.35 "Indebtedness" means, as to the Companies, all items of
indebtedness, obligation or liability, whether matured or unmatured, liquidated
or unliquidated, direct or contingent, joint or several, including, without
limitation:
(a) All indebtedness guaranteed, directly or indirectly,
in any manner or endorsed (other than for collection
or deposit in the ordinary course of business) or
discounted with recourse;
(b) All indebtedness in effect guaranteed, directly or
indirectly, through agreements, contingent or
otherwise; (1) to purchase such indebtedness; or (2)
to purchase, sell or lease (as lessee or lessor)
property, products, materials or supplies or to
purchase or sell services, primarily for the purpose
of enabling the debtor to make payment of such
indebtedness or to assure the owner of the
indebtedness against loss; or (3) to supply funds to
or in any other manner invest in the debtor;
(c) All indebtedness secured by (or for which the holder
of such indebtedness has a right, contingent or
otherwise, to be secured by) any mortgage, deed of
trust, pledge, lien, security interest or other
charge or encumbrance upon property owned or acquired
subject thereto, whether or not the liabilities
secured thereby have been assumed;
(d) All indebtedness incurred as the consignee of goods
under consignment facilities whether or not, in
accordance with GAAP, such consignment facilities
should be reflected on the consignee's balance sheet;
and
(e) All indebtedness of any partnership or joint venture
in which the Companies or any of their Subsidiaries
is a general partner or joint venturer.
1.36 "Interest Payment Date" shall mean, as to any Prime Rate Advance,
the first day of each calendar month commencing with the month following the
Drawdown Date until such Advance is paid in full, and, as to any LIBOR Rate
Advance, initially, the thirtieth (30th) day after the Drawdown Date thereof,
and, thereafter, each successive thirtieth (30th) day until such Advance is paid
in full.
1.37 "Interest Period" shall mean:
(a) for any Prime Rate Advance, initially, the period
commencing on a Drawdown Date and ending on the last
day of the calendar month, and, thereafter, the
period commencing on the first day of the immediately
succeeding calendar month and ending on the last day
of such calendar month; and
(b) for any LIBOR Rate Advance, initially, the period commencing on a Drawdown
Date and ending on the 7th, 30th, 60th, 90th, or 180th day after such Drawdown
Date (as selected by the Companies or such other period as the Lender and the
Companies shall agree upon from time to time in selecting the corresponding
LIBOR Rate, but in no event later than the Maturity Date); and, thereafter, the
period commencing on the first day after the immediately preceding Interest
Period and ending on the thirtieth (30th) day thereafter (or such other period
as the Lender and the Companies shall agree upon from time to time in selecting
the corresponding LIBOR Rate, but in no event later than the Maturity Date);
6
provided that all of the foregoing provisions relating to Interest Periods are
subject to the following:
(i) if any Interest Period with respect to a
LIBOR Rate Advance would otherwise end on a
day that is not a Eurodollar Business Day,
that Interest Period shall be extended to
the next succeeding Eurodollar Business Day;
(ii) if any Interest Period with respect to a
Prime Rate Advance would end on a day that
is not a Business Day, that Interest Period
shall be extended to the next succeeding
Business Day; and
(iii) if the Companies shall fail to give notice
as provided in the Paragraph 4.3, the
Companies shall be deemed to have requested
a conversion of the affected LIBOR Rate
Advance to a Prime Rate Advance on the last
day of the then current Interest Period with
respect thereto.
1.38 "Inventory" means all inventory (as defined in Section 9-109(4) of
the Uniform Commercial Code), goods, merchandise and other personal property,
wherever located, now owned or hereafter acquired by the Companies or acquired
on consignment by the Companies which are held for sale or lease, or furnished
or are raw materials, work in process, supplies or materials used or consumed in
the Companies' business, and all products thereof, and substitutions,
replacements, additions or accessions thereto, all cash or non-cash proceeds of
all of the foregoing including insurance proceeds.
1.39 "Lender" means BankBoston, N.A., a national banking association.
1.40 "Lender's Address" means 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000,
Attn: Xxxxxxxxx Xxxxx, Vice President.
1.41 "Letters of Credit" means letters of credit which shall be issued
by the Lender for the account of the Companies pursuant to this Agreement.
1.42 "Letter of Credit Documents" means individual letter of credit
applications and agreements for each Letter of Credit to be issued by the
Lender, all in form and substance satisfactory to the Lender in accordance with
its usual and customary practice and containing such items and conditions, and
specifying such prices and in such amounts, as may be offered to the Companies
from time to time by the Lender in its sole discretion.
1.43 "LIBOR Lending Office" means the office of the Lender in London,
England.
1.44 "LIBOR Rate" means, with respect to each Interest Period the rate
per annum (adjusted for reserves, if any) at which U.S. dollar deposits in
immediately available funds are offered to the LIBOR Lending Office two (2)
Eurodollar Business Days prior to the beginning of such Interest Period in the
London interbank eurodollar market where the eurodollar and foreign currency and
exchange operations of such LIBOR Lending Office are customarily conducted at or
about the relevant local time of the LIBOR Lending Office, for delivery on the
first day of such Interest Period for the number of days or months comprised
therein and in an amount equal to the amount of the LIBOR Rate Advance to be
outstanding during such Interest Period. As used herein, "relevant local time"
shall mean 11:00 a.m., local time in London, England. In the event that the
Board of Governors of the Federal Reserve System shall impose a reserve
percentage with respect to LIBOR Deposits of the Lender, then for any period of
time during which such reserve percentage shall apply, the LIBOR Rate shall be
equal to the amount determined above divided by an amount
7
equal to 1 minus the reserve percentage. Each determination of the LIBOR Rate
made by the Lender in accordance with this definition shall be conclusive and
binding on the Companies, except in the case of manifest error.
1.45 "LIBOR Rate Advances" means Advances under the Revolving Loan
bearing interest calculated by reference to the LIBOR Rate.
1.46 "Loan Documents" means this Agreement, the Note, the Security
Agreement, the Trademark Security Agreement, the Lockbox Agreement, the Parent
Guaranty, the Parent Stock Pledge Agreement, the Company Guaranties, the
Assignment of Key Man Life Insurance and each additional document executed in
connection with any of the foregoing
1.47 "Lockbox Agreement" means the Agreement more particularly
described in Section 10.30 hereof.
1.48 "London Bullion Broker's Second Fixing Price": With respect to
gold, the London Bullion Broker's second fixing price on the date of valuation
of gold, or if no such price is available for such date, then the gold at issue
shall be valued on the basis of said London Second Fixing Price on the next
previous day for which such price was available.
1.49 "Maturity Date" means July 15, 2001.
1.50 "Merc" means the New York Mercantile Exchange.
1.51 "Merc Palladium Price": For any day, the closing spot settlement
price per xxxx ounce for the sale of palladium on the Merc (or if there is no
such price for such day, the price on the next preceding day for which such
price exists).
1.52 "Merc Platinum Price": For any day, the closing spot settlement
price per xxxx ounce for the sale of platinum on the Merc (or if no there is no
such price for such day, the price on the next preceding day for which such
price exists).
1.53 "Note" means the Secured Promissory Note of the Companies payable
to the Lender in the maximum principal amount of Twelve Million Dollars
($12,000,000.00) in the form of Exhibit A hereto, and any other promissory note
which may be issued by the Companies pursuant to this Agreement in substitution
therefor, as the same may be amended from time to time.
1.54 "Obligations" means any and all Indebtedness, obligations and
liabilities of the Companies to the Lender of every kind and description, direct
or indirect, secured or unsecured, joint or several, absolute or contingent, due
or to become due, whether for payment or performance, now existing or hereafter
arising, regardless of how the same arise or by what instrument, agreement or
book account they may be evidenced, or whether evidenced by any instrument,
agreement or book account, including, without limitation, all indebtedness and
obligations under the Consignment Facility, Revolving Loan, and Forward
Contracts; all indebtedness, liabilities or obligations owing from the Companies
to others which the Lender may have obtained by purchase, negotiation, discount,
assignment or otherwise; and all interest, taxes, fees, charges, expenses and
attorneys' fees chargeable to the Companies or incurred by the Lender hereunder,
or any other document or instrument delivered hereunder or as a supplement
hereto.
1.55 "Operating Cash Flow" means the net profit of the Parent and
Companies (and Alloy Tradings S.A.) on a consolidated basis (as determined by
GAAP on a first in-first out basis) before reduction for interest, consignment
fees, depreciation and amortization and other non-cash expenses, less capital
expenditures, less dividends paid, less cash taxes paid.
8
1.56 "Parent" means Westbury Metals Group, Inc., a Delaware
corporation.
1.57 "Parent Guaranty" means the Unlimited Guaranty of even date
executed by the Parent in favor of the Lender pursuant to which the Parent
unconditionally guaranteed the payment and performance of all Obligations of the
Companies to the Lender.
1.58 "Parent Stock Pledge Agreement" means the Stock Pledge Agreement
of even date executed by the Parent pursuant to which the Parent pledged to the
Lender all of its ownership interest in the Companies to secure the payment and
performance of the Obligations and the Parent Guaranty.
1.59 "Permitted Liens" means, so long as execution thereon has been
stayed:
(a) Liens for taxes, assessments or similar charges,
incurred in the ordinary course of business, which
either are not yet due or are being contested in good
faith by appropriate proceedings, and as to which the
Companies shall have set aside adequate reserves, and
for which a notice of lien has not been filed;
(b) Pledges or deposits made in the ordinary course of
business to secure payment of worker's compensation,
or to participate in any fund in connection with
worker's compensation, unemployment insurance,
old-age pensions or other social security payments;
(c) Liens of mechanics, materialmen, warehousemen,
carriers, or other like liens, securing obligations
incurred in the ordinary course of business that are
not yet due and payable;
(d) Good faith pledges or deposits made in the ordinary
course of business to secure performance of bids,
tenders, contracts (other than for the repayment of
borrowed money) or leases, not in excess of ten
percent (10%) of the aggregate amount due thereunder,
or to secure statutory obligations, or surety,
appeal, indemnity, performance or other similar bonds
required in the ordinary course of business;
(e) Encumbrances consisting of zoning restrictions,
easements, or other restrictions on the use of real
property, none of which materially impairs the use of
such property by the Companies or any Subsidiary in
the operation of their business, and none of which is
violated in any material respect by existing or
proposed structures of land use;
(f) Restrictions, easements and minor irregularities in
title which do not and will not interfere with the
occupation, use and enjoyment by the Companies of
such properties and assets in the normal course of
their businesses as presently conducted or materially
impair the value of such properties and assets for
the purpose of such business;
(g) Liens in favor of the Lender; and
(h) Existing liens set forth or described on Exhibit E
attached hereto and made a part hereof.
9
1.60 "Precious Metal" means (i) fine gold, having a minimum degree of
fineness of ninety-nine and 95/100 percent (99.95%), or being of such quality
and in such form as agreed upon by the Lender and the Companies, (ii) fine
silver, having a minimum degree of fineness of ninety nine and 99/100 percent
(99.9%), or being of such quality and in such form as agreed upon by the Lender
and the Companies, (iii) fine platinum, having a minimum degree of fineness of
ninety nine and 99/100 percent (99.9%), or being of such quality and in such
form as agreed upon by the Lender and the Companies, and (iv) fine palladium,
having a minimum degree of fineness of ninety nine and 95/100 percent (99.5%),
or such quality and in such form as agreed upon by the Lender and the Companies.
1.61 "Premises" means any real estate owned, used or leased by any of
the Companies.
1.62 "Prime Rate" means the rate of interest designated by the Lender
from time to time as being its so-called "base rate" of interest.
1.63 "Receivables" means all now owned and hereafter acquired, present
and future accounts (within the meaning of Section 9-106 of the Uniform
Commercial Code) of the Companies, any other obligations or indebtedness owed to
the Companies from whatever source arising and all rights of the Companies to
receive any payments in money or kind; and all records, documents and
instruments evidencing or relating to any of the foregoing, all cash and
non-cash proceeds of the foregoing.
1.64 "Reliable Acquisition" means the acquisition by West Tech of
Reliable Corporation, a Connecticut corporation, for the purchase price of
$2,100,000.00 as adjusted for inventory and accounts receivable.
1.65 "Revolving Loan" means the facility under Paragraph 3 hereof,
whereby the Companies may request Advances from the Lender and may request that
the Lender issue Letters of Credit.
1.66 "Revolving Loan Indebtedness" means (a) the outstanding principal
balance of the Advances made by the Lender under the Revolving Loan; and (b) the
undrawn amount of Letters of Credit issued by the Lender for the account of the
Companies.
1.67 "Security Agreement" means that certain security agreement of each
of the Companies dated the date hereof in favor of the Lender which secure the
payment and performance of the Obligations.
1.68 "Subordinated Indebtedness" means Indebtedness of the Companies
which is subordinated in writing to all indebtedness of the Companies to the
Lender on terms satisfactory to the Lender.
1.69 "Subsidiary" means any corporation of which more than fifty (50%)
percent of the outstanding voting securities shall, at the time of
determination, be owned by a corporation directly or indirectly through one or
more Subsidiaries.
1.70 "Suspension Event" means any occurrence which (a) is an Event of
Default or (b) would become an Event of Default if the notice and/or the running
of the period of time specified for that occurrence were to be given and/or were
to run and such occurrence was not cured within any applicable grace period.
1.71 "Tangible Net Worth" means the excess of the Parent's and
Companies' total assets on a consolidated basis (less any loans or other
indebtedness to any shareholder of the Companies), valuing inventory on a marked
to market basis (including the value of all Consigned Precious Metal,
10
whether or not such Precious Metal would be included as an asset of the
Companies in accordance with GAAP) over their total liabilities (including their
liabilities to the Lender under the Consignment Facility, Forward Contracts and
the Revolving Loan) computed in accordance with GAAP plus the amount of any
Subordinated Indebtedness, less all intangible assets and deferred charges,
including, without limitation, goodwill, debt discount, organization expenses,
trademarks and tradenames, patents, deferred product development costs and
similar items.
1.72 "Total Debt" means the total Indebtedness of the Parent and
Companies on a consolidated basis which is or which, in accordance with GAAP,
should be included on the Parent's and Companies' balance sheets plus
Consignment Facility Indebtedness.
1.73 "Total Debt Service" means the total of the Parent's and
Companies' (and Alloy Tradings S.A.'s) interest expense on a consolidated basis
(including consignment fees) on all interest bearing debt and current maturities
of long term debt, tested on a rolling four quarter basis.
1.74 "Trademark Security Agreement" means the Trademark Security
Agreement of even date executed by the Parent and the Companies in favor of the
Lender granting to the Lender a first perfected security interest in all
trademarks and tradenames of the Companies.
1.75 "Type" means, as to any Advance under the Revolving Loan, its
nature as a Prime Rate Advance or a LIBOR Rate Advance.
To the extent not defined in this Paragraph 1, unless the context
otherwise requires, accounting and financial terms used in this Agreement shall
have the meanings attributed to them by GAAP, and all other terms contained in
this Agreement shall have the meanings attributed to them by Article 9 of the
Uniform Commercial Code in force in the Commonwealth of Massachusetts, as of the
date hereof to the extent the same are used or defined therein.
2. CONSIGNMENT FACILITY.
2.1 Consigned Precious Metal; Insurance; Title.
(a) The commodities to be consigned to the Companies by the Lender under the
Consignment Facility will consist of Precious Metal as defined herein. EXCEPT
FOR THE FINENESS OF THE PRECIOUS METAL AS DEFINED HEREIN, THE LENDER MAKES NO
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE
GOODS CONSIGNED OR TO BE SOLD HEREUNDER, WHETHER AS TO MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR ANY OTHER MATTER, AND THE LENDER HEREBY DISCLAIMS
ALL SUCH WARRANTIES.
(b) Precious Metal shall be consigned to the Companies by the
Lender in amounts as requested by the Companies from time to time in
accordance, and in compliance, with the terms and provisions hereof. It
is understood that at no time shall the Consignment Facility
Indebtedness exceed the Consignment Limit.
(c) All deliveries requested by the Companies of Precious
Metal shall be made at the Companies' expense and risk by a recognized
reputable carrier of the Lender's selection. Following the delivery of
Consigned Precious Metal to the Companies, at the Approved Locations,
the Companies shall insure the Consigned Precious Metal, including all
Consigned Precious Metal which is in transit, to its full value against
all risks of loss and shall, as between the Lender and the Companies,
accept all risk of loss until its return to the Lender, as hereinafter
provided. All such insurance policies shall provide at least thirty
(30)
11
days' prior written notice to the Lender of any cancellation or
alteration thereof and shall insure all Consigned Precious Metal
wherever it is located. At the Lender's request, the Companies will
furnish the Lender with the certificate of an insurance company or
companies reasonably satisfactory to the Lender and a true and complete
copy of all insurance policies evidencing the satisfaction of the
Companies' insurance obligations hereunder and the inclusion of the
Lender as an additional insured and loss payee under any applicable
policy as its interest may appear; provided, however, that the Lender
shall be under no duty either to ascertain the existence of or to
examine any such policy or certificate or to advise the Companies in
the event such policy shall not comply with the requirements hereof.
(d) Title to Consigned Precious Metal shall remain in the
Lender until such Consigned Precious Metal is purchased and withdrawn
from consignment by the Companies, and Consigned Precious Metal shall
for the purposes of this Agreement be deemed to be outstanding on
consignment until paid for in full by the Companies as provided in
Paragraph 2.3(b) hereof, whereupon title to such purchased Consigned
Precious Metal shall pass to the Companies. Upon request by the Lender,
the Companies will execute such financing statements and other
documents as may be reasonably requested by the Lender to protect the
Lender's interests as a consignor and a secured party under the Uniform
Commercial Code.
(e) Until such time as title to Consigned Precious Metal shall
pass to the Companies as hereinabove provided, all Consigned Precious
Metal shall at all times be physically located at Approved Locations,
or in transit to or from an Approved Location.
(f) The Companies shall pay all license fees, assessments and
sales, use, excise, property and other taxes now or hereafter imposed
by any governmental body or authority with respect to the possession,
use, sale, transfer, consignment, delivery or ownership of the
Consigned Precious Metal.
(g) The Lender shall not be liable for any delay in delivery
or for any inability to deliver Precious Metal hereunder directly or
indirectly resulting from any unavailability or scarcity of precious
metals, foreign or domestic embargoes, seizure, acts of God,
insurrections, strikes, war, the adoption or enactment of any law,
ordinance, regulation, ruling or order directly or indirectly
interfering with the production, sale, consignment or delivery of
Precious Metal hereunder, lack of transportation, fire, flood,
explosions or other accidents, events or contingencies beyond the
Lender's reasonable control.
2.2 Valuation.
For the purpose of this Agreement, the value of the Consigned Precious
Metal shall be determined on the basis of (i) the London Bullion Brokers' Second
Fixing Price with respect to gold, (ii) the Handy & Harmon Price with respect to
silver, (iii) the Merc Palladium Price with respect to palladium, and (iv) the
Merc Platinum Price with respect to platinum, each, as applicable, on the
valuation date, or, if no price is available for such date, then on the basis of
said second fixing price on the next previous day for which such price was
available. In the event that any of the foregoing pricing indices, as
applicable, shall discontinue or alter its usual practice of quoting a price on
any day for which such a price is necessary for the purposes hereof, the Lender
shall so notify the Companies and the Lender shall at its option announce a
substituted index or mechanism which shall thereupon become the method of
valuation hereunder.
2.3 Payments by the Companies.
12
(a) During such time as Consigned Precious Metal is consigned
to the Companies hereunder and until the same is withdrawn from
consignment and paid for in full by the Companies as hereinafter
provided, the Companies will pay to the Lender a fee computed daily on
the value of such Consigned Precious Metal at the rate of the Lender's
cost of funds plus 2.50% per annum or at such other rate as the Lender
shall announce from time to time in writing in substantially the form
of Exhibit D attached hereto and made a part hereof, such fee to be
accrued on a daily basis and paid to the Lender not later than the
fifth Business Day following the receipt of billing.
(b) At such time as the Companies shall request the
consignment and delivery of Consigned Precious Metal under the
Consignment Facility, they shall become obligated to pay to the Lender
a market premium per xxxx ounce announced by the Lender at the time of
such consignment. Such payment is to be made within five (5) Business
Days of the Companies' receipt of the Lender's monthly invoice by bank
wire to a bank of the Lender's choice. At such time as the Companies
shall purchase and withdraw Consigned Precious Metal from consignment
under the Consignment Facility, they shall become obligated to pay to
the Lender (i) a purchase price computed in accordance with Paragraph
2.2 hereof if such purchase is effected by the Companies prior to 2:30
P.M., Greenwich Mean Time, on any Business Day, or (ii) such other
purchase price as shall be mutually agreed upon by the Lender and the
Companies. All payments of purchase price for Consigned Precious Metal
are to be made within two (2) Business Days of such purchase by bank
wire to a bank of the Lender's choice, provided, however, title to such
Consigned Precious Metal shall not pass until the payment of such
purchase price. Consigned Precious Metal shall be deemed to have been
purchased and withdrawn from consignment at the earlier of (i) such
time as either Consigned Precious Metal or inventory containing
Consigned Precious Metal is shipped from an Approved Location, or (ii)
such time as the Companies shall notify the Lender they elect to
purchase such Consigned Precious Metal from the Lender, or (iii) such
time as the Companies sell such Consigned Precious Metal in the
ordinary course of their business.
(c) The Companies hereby agree to pay upon demand, to the
extent permitted by law, late charges on any sum or amount not paid
when due under the Consignment Facility at a rate per annum equal to
the Prime Rate plus five percent (5%), from the date of delinquency
until payment in full.
(d) The Companies hereby authorize the Lender from time to
time to charge any demand deposit account(s) of the Companies
maintained with the Lender at any time and from time to time for the
purpose of paying any amounts which are at any time properly payable by
the Companies hereunder. The Lender shall be entitled to rely upon this
authorization.
2.4 Requests for Consignments.
(a) The Companies shall give to the Lender telephonic notice
(confirmed in writing by the Lender) of each request for a consignment
under the Consignment Facility.
(b) Requests for any consignments under the Consignment
Facility shall be furnished to the Lender no later than 12:00 noon
(Boston time) on the same Business Day of the proposed consignment.
2.5 Maintenance of Consignment Limit.
13
(a) If the Consignment Facility Indebtedness at any time
exceeds the Consignment Limit, the Companies will promptly, without
further notice or demand by the Lender, either:
(i) make payment to the Lender, as provided in
Paragraph 2.3(b) hereof, for Consigned Precious Metal having
an aggregate value sufficient to result in the remaining
Consignment Facility Indebtedness being not more than the
Consignment Limit, or
(ii) deliver to the Lender, either physically to the
Lender's vault in Boston, Massachusetts or through a
recognized third party, sufficient of such Consigned Precious
Metal to result in the remaining Consignment Facility
Indebtedness being not more than the Consignment Limit.
(b) Any physical return of Consigned Precious Metal shall be
at the Companies' expense and risk and shall only be credited to the
Companies' account upon the Lender's assaying the value thereof.
2.6 True Consignment, Grant of Security Interest.
(a) The parties hereto intend that this Agreement shall
provide for a true consignment and that all transactions hereunder
shall constitute true consignments of the Consigned Precious Metal.
(b) To secure the prompt and punctual payment and performance
of all the Obligations, whether now existing or hereafter incurred,
each of the Companies hereby grants to the Lender a continuing security
interest in (i) the Consigned Precious Metal from time to time
delivered hereunder by the Lender to the Companies, whether now
existing or hereafter arising, (ii) all inventory of the Companies
which contains Consigned Precious Metal, whether now existing or
hereafter arising, and (iii) all proceeds and products of the
foregoing. Nothing contained in the foregoing grant is intended to
conflict with the true consignment nature of this Agreement.
2.7 Termination, Return of Consigned Precious Metal.
(a) The Consignment Facility shall terminate on the Maturity Date. ALL SUMS
OUTSTANDING UNDER THE CONSIGNMENT FACILITY WILL BE DUE AND PAYABLE UPON THE
EARLIER OF THE OCCURRENCE OF AN EVENT OF DEFAULT AND ACCELERATION OF THE
OBLIGATIONS OR THE MATURITY DATE. Termination of the Consignment Facility shall
not affect the Companies' duty to pay and perform their obligations to the
Lender under the Consignment Facility in full. Notwithstanding termination,
until all Obligations have been fully satisfied, the Lender shall retain the
security granted under the Security Agreements, and, except for those specific
covenants and conditions dealing with the consigning of Precious Metal, all
terms and conditions of this Agreement shall remain in full force and effect.
(b) Upon termination of the Consignment Facility for any
reason, the Companies shall within twenty-four (24) hours following
such effective date of termination (i) deliver to the Lender any
Consigned Precious Metal theretofore consigned to but not purchased and
paid for in full by the Companies; or (ii) make payment for all
Consigned Precious Metal theretofore consigned to but not purchased and
paid for in full by the Companies, the purchase price thereof to be
determined in accordance with Paragraph 2.3(b) hereof, or (iii) deliver
to Lender, through a recognized third party, any Consigned Precious
Metal
14
theretofore consigned to but not purchased and paid for in full by the
Companies. Any physical return of Consigned Precious Metal to the
Lender shall be at the Companies' expense and risk and shall only be
credited to the Companies' account upon the Lender's assaying the value
thereof.
3. REVOLVING LOAN
3.1 Revolving Loan
(a) Subject to the terms and conditions herein set forth, the
Lender hereby agrees that it will lend to the Companies from time to
time such sums, and issue such Letters of Credit in such amounts, as
applicable, as are requested by the Companies in the manner set forth
herein, so long as the sum of the Revolving Loan Indebtedness does not
exceed at any time the Borrowing Limit. From the date hereof until the
termination of the Revolving Loan in accordance with the terms hereof,
and within the Borrowing Limit upon notice by the Companies to the
Lender given in accordance with the provisions hereof, the Companies
may borrow, repay and reborrow under this Paragraph 3. 1.
(b) The Revolving Loan will be evidenced by the Note of the
Companies in the form attached hereto as Exhibit A. The Companies
irrevocably authorize the Lender to make or cause to be made, at or
about the time of the Drawdown Date of any Advance or at the time of
receipt of any payment of principal on the Lender's Note, an
appropriate notation on the Lender's books and records reflecting the
making of such Advance or (as the case may be) the receipt of such
payment. The outstanding amount of the Advances set forth in the
Lender's books and records shall be prima facie evidence of the
principal amount thereof owing and unpaid to the Lender, but the
failure to record, or any error in so recording, any such amount on the
Lender's books and records shall not limit or otherwise affect the
obligations of the Companies hereunder or under the Note to make
payments of principal of or interest on the Note when due.
3.2 Interest.
(a) Each Advance under the Revolving Loan shall bear interest,
at the option of the Companies and subject to the terms and conditions
hereinafter set forth, at an interest rate based on either the Prime
Rate or the LIBOR Rate.
(b) Each Prime Rate Advance shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate equal to the
aggregate of the Prime Rate plus one-half percent (1/2%) per annum.
(c) Each LIBOR Rate Advance shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate equal to the
aggregate of the LIBOR Rate determined for such Interest Period plus
two and one half percent (2 1/2%) per annum.
3.3 Funds for Advances.
Not later than 3:00 p.m. (Boston time) on the proposed
Drawdown Date of any Advance, subject to the satisfaction of the
conditions set forth in Paragraph 4.2 and Paragraph 8.1 hereof, to the
extent applicable, the Lender will make available to the Companies the
amount of such requested Advances.
15
3.4 Late Fee
If the entire amount of a required principal and/or interest payment
under the Revolving Loan is not paid in full within ten (10) business days after
the same is due, the Companies shall pay to the Lender a late fee equal to five
percent (5%) of the required payment.
3.5 Use of Proceeds
The proceeds of the Revolving Loan will be used to pay off the
Companies' existing institutional lenders and the balance shall be used for
working capital purposes.
3.6 Loan Account
The Companies will open and maintain with the Lender an account.
Advances under the Revolving Loan will be made by the Lender to the Companies
upon telephonic request to credit such advance to the Companies' account made by
an Authorized Representative of the Companies. Such request shall be confirmed
in writing by the Lender indicating the date and the amount requested. The
Companies hereby authorize the Lender to charge or debit at any time and from
time to time any demand deposit account maintained by the Companies with the
Lender in order to pay sums properly payable hereunder. The Lender shall be
entitled to rely upon this authorization.
3.7 Letter of Credit
(a) Subject to and upon the terms and conditions set forth
herein, the Lender shall, at any time and from time to time, issue
Letters of Credit, in form and substance satisfactory to the Lender in
accordance with its usual and customary practice, for the account of
the Companies and for the use of the Companies in the ordinary course
of their business provided that at no time shall the aggregate face
amount of issued Letters of Credit exceed $1,000,000.00 nor shall the
Revolving Loan Indebtedness exceed the Borrowing Limit. No Letters of
Credit shall have an expiration of later than the Maturity Date. The
Letters of Credit shall be governed by the terms of this Agreement and
the Letter of Credit Documents signed or guaranteed or otherwise
verified by the Companies in a manner satisfactory to the Lender at the
time of issuance, extension or renewal thereof. In the event of any
inconsistency between this Agreement and the Letter of Credit
Documents, the Letter of Credit Documents shall prevail and govern.
(b) Each Letter of Credit issued by the Lender shall
constitute a utilization of the Borrowing Limit, except that such
utilization shall not create an outstanding balance under the Note for
purposes of imposing an interest charge until the time (and to the
extent) of any drawing under the Letter of Credit. To the extent that
any draw on a Letter of Credit is not immediately repaid by the
Companies to the Lender, it shall be deemed that the Companies have
requested a Prime Rate Advance under the Revolving Loan.
(c) The Companies shall pay to the Lender, on demand, all
drawing fees, acceptances, transfer fees, other administrative fees and
all other usual and customary fees and transaction charges of the
Lender in connection with Letters of Credit as described in Letter of
Credit Documents as in effect from time to time. The Companies hereby
irrevocably authorize the Lender to, and the Lender is hereby
irrevocably authorized to, debit any demand deposit account or checking
account of the Companies with the Lender for the purpose of making such
payments.
(d) If any restriction is imposed upon the Lender or the
Companies by any federal, state or other regulatory authority or any
applicable law which, in the sole judgment
16
of the Lender, prevents the Lender from issuing any further Letter of
Credit, then the Lender shall so notify the Companies or the Companies
shall notify the Lender, as the case may be, and the Lender shall not
thereafter be obligated to issue any further Letters of Credit in
violation of any restriction so long as such restriction shall remain
in effect.
3.8 Excess Borrowings
If at any time the Revolving Loan Indebtedness shall exceed the
Borrowing Limit, the Companies shall immediately pay cash to the Lender to be
credited to the Revolving Loan in such amount as shall be necessary to reduce
the Revolving Loan Indebtedness to the Borrowing Limit.
3.9 Facility Fee.
As a condition precedent to the effectiveness of this Agreement, the
Companies shall pay the Lender a closing fee in the amount of $60,000.00. In
addition, the Companies shall pay to the Lender a facility fee in an amount
equal to .375% of Twelve Million Dollars ($12,000,000) minus the sum of (a) the
Revolving Loan Indebtedness, plus (b) the Consignment Facility Indebtedness.
Such fee shall be payable quarterly in arrears, shall be computed on the basis
of a year of 360 days, counting the actual number of days elapsed and shall be
payable within fifteen (15) days of the end of each calendar quarter, commencing
with the calendar quarter ending September, 1999, and upon payment in full of
the Note.
3.10 Termination of Revolving Loan.
The Revolving Loan shall terminate on the Maturity Date. ALL SUMS
OUTSTANDING UNDER SAID REVOLVING LOAN WILL BE DUE AND PAYABLE UPON THE EARLIER
OF (1) THE OCCURRENCE OF AN EVENT OF DEFAULT AND ACCELERATION OF THE OBLIGATIONS
BY THE LENDER, OR (II) THE MATURITY DATE. Upon termination of the Revolving
Loan, the Lender may credit any amounts then held by it to reduce the amount of
such indebtedness in accordance with the provisions of Paragraph 15 hereof.
Notwithstanding termination, until all Obligations have been fully satisfied,
except for those specific covenants and conditions dealing with the making of
Advances and the issuance of Letters of Credit, all terms and conditions of this
Agreement shall remain in full force and effect.
3.11 Default Interest Rate.
The Companies hereby agree to pay upon demand, to the extent permitted
by law, late charges on any sum or amount not paid when due under the Revolving
Loan at a rate per annum equal to the Prime Rate plus five percent (5%), from
the date of delinquency until payment in full.
4. GENERAL PROVISIONS REGARDING ADVANCES UNDER REVOLVING LOAN.
4.1 Interest.
(a) The Companies shall pay interest on each Advance under the
Revolving Loan in arrears on each Interest Payment Date with respect
thereto.
(b) Interest shall be calculated daily as to the outstanding
principal balance on the basis of a 360 day year counting the actual
number of days elapsed. Interest based upon the Prime Rate shall change
on the effective date of each change in the Prime Rate.
(c) The Companies hereby authorize the Lender to charge or
debit at any time and from time to time any demand deposit account
maintained by the Companies with the Lender
17
in order to pay sums properly payable under the Revolving Loan. The
Lender shall be entitled to rely upon this authorization.
4.2 Requests for Advances under the Revolving Loan.
(a) The Companies shall give to the Lender telephonic notice
(confirmed in writing by the Lender) of each Advance under the
Revolving Loan requested hereunder. Each such notice shall be
irrevocable and binding on the Companies and shall obligate the
Companies to accept the Advance requested from the Lender on the
proposed Drawdown Date.
(b) Requests for any Advances with an interest rate based upon
the Prime Rate shall be furnished to the Lender no later than 10:00
a.m. (Boston time) on the same Business Day as the proposed Drawdown
Date. Each such notice shall specify (i) the principal amount of the
Advance requested, and (ii) the proposed Drawdown Date of such Advance
.
(c) Requests for any Advances with an interest rate based upon
the LIBOR Rate shall be furnished to the Lender by 12:00 noon (Boston
time) three (3) Eurodollar Business Days prior to the proposed Drawdown
Date. Each such notice shall specify (i) the principal amount of the
Advance requested, (ii) the proposed Drawdown Date of such Advance,
(iii) the Interest Period for such Advance, and (iv) whether it is an
Advance under the Revolving Loan.
4.3 Conversion Options.
(a) The Companies may elect from time to time to convert any
outstanding Advance to an Advance of another Type, provided that (i)
with respect to any such conversion of a LIBOR Rate Advance into an
Advance of another Type, such conversion shall only be made on the last
day of the Interest Period with respect thereto; (ii) with respect to
any such conversion of a Prime Rate Advance to a LIBOR Rate Advance,
the Companies shall give the Lender at least three (3) Eurodollar
Business Days' prior written notice of the day on which such election
is effective; and (iii) no Advance may be converted into a LIBOR Rate
Advance when the Lender has declared the existence of an Event of
Default hereunder. The Companies shall give to the Lender telephonic
notice (confirmed in writing by the Lender) of their decision to
convert an outstanding Advance to an Advance of another Type. All or
any part of outstanding Advances of any Type may be converted as
provided herein. Each Conversion Request shall be irrevocable by the
Companies.
(b) Any Advances of any Type may be continued as such upon the
expiration of an Interest Period with respect thereto by giving to the
Lender telephonic notice (confirmed in writing by the Lender) of the
Companies' decision to continue an outstanding Advance as such;
provided that no LIBOR Rate Advance may be continued as such when the
Lender has declared the existence of an Event of Default hereunder, but
shall be automatically converted to a Prime Rate Advance on the last
day of the first Interest Period relating thereto ending during the
continuance of such Event of Default.
(c) In the event that the Companies do not notify the Lender
of their election hereunder with respect to any Advance, such Advance
shall be automatically converted to a Prime Rate Advance at the end of
the applicable Interest Period.
18
4.4 Optional Repayments of Advances.
The Companies shall have the right, at their election, to repay the
outstanding amount of the Advances, as a whole or in part, at any time without
penalty or premium; provided that the full or partial prepayment of the
outstanding amount of any LIBOR Rate Advances pursuant to this Paragraph may be
made only on the last day of the Interest Period relating thereto. At the time
of any repayment of a LIBOR Rate Advance, the Companies shall give the Lender
notice that they are repaying a LIBOR Rate Advance and shall specify the
principal amount to be paid. Each such partial prepayment of the Advances shall
be accompanied by the payment of accrued interest on the principal repaid to the
date of payment. In the event that the Companies do not notify the Lender at the
time of a repayment of any Advance under this Paragraph whether they intend to
repay a Prime Rate Advance or a LIBOR Rate Advance, it shall be deemed that they
are repaying a Prime Rate Advance.
4.5 Inability to Determine LIBOR Rate,.
In the event, prior to the commencement of any Interest Period relating
to any LIBOR Rate Advance, the Lender shall determine that adequate and
reasonable methods do not exist for ascertaining the LIBOR Rate that would
otherwise determine the rate of interest to be applicable to any LIBOR Rate
Advance during any Interest Period, the Lender shall forthwith give notice of
such determination (which shall be conclusive and binding on the Companies) to
the Companies. In such event, (a) any request for a LIBOR Rate Advance shall be
automatically withdrawn and shall be deemed a request for a Prime Rate Advance,
(b) each LIBOR Rate Advance will automatically, on the last day of the then
current Interest Period thereof, become a Prime Rate Advance, and (c) the
obligation of the Lender to make LIBOR Rate Advances shall be suspended until
the Lender determines that the circumstances giving rise to such suspension no
longer exist, whereupon the Lender shall so notify the Companies.
4.6 Illegality.
Notwithstanding any other provisions herein, if any present or future
law, regulation, treaty or directive or in the interpretation or application
thereof shall make it unlawful for the Lender to make or maintain LIBOR Rate
Advances, the Lender shall forthwith give notice of such circumstances to the
Companies and thereupon (a) the agreement of the Lender to make LIBOR Rate
Advances shall forthwith be suspended and (b) the LIBOR Rate Advances then
outstanding shall be converted automatically to Prime Rate Advances on the last
day of each Interest Period applicable to such LIBOR Rate Advances or within
such earlier period as may be required by law. The Companies shall promptly pay
the Lender any additional amounts necessary to compensate the Lender for any
costs incurred by the Lender in making any conversion in accordance with this
Paragraph, including any interest or fees payable by the Lender to lenders of
funds obtained by it in order to make or maintain its LIBOR Rate Advances
hereunder.
4.7 Indemnity.
The Companies shall indemnify the Lender and hold the Lender harmless
from and against any reasonable loss, cost or expense (including loss of
anticipated profits) that the Lender may sustain or incur as a consequence of
(a) default by the Companies in payment of the principal amount of, or any
interest on, any LIBOR Rate Advances as and when due and payable, including any
such loss or expense arising from interest or fees payable by the Lender to
lenders of funds obtained by it in order to maintain its LIBOR Rate Advances;
(b) default by the Companies in making a borrowing or conversion after the
Companies have given (or are deemed to have given) a request for Advance or a
Conversion Request; and (c) the making of any payment of a LIBOR Rate Advance or
the making of any conversion of any such Advance to a Prime Rate Advance on a
day that is not
19
the last day of the applicable Interest Period with respect thereto, including
interest or fees payable by the Lender to lenders of funds obtained by it in
order to maintain any such Advances.
5. FORWARD CONTRACTS.
5.1 Forward Contracts. Subject to the terms, conditions and provisions
of this Agreement, the Lender, at the request of the Companies, shall provide
for Forward Contracts with respect to Precious Metals.
5.2 Limitations on Forward Contracts.
(a) The Lender's obligation to provide Forward Contracts to
the Companies is subject to the following:
(i) No Suspension Event is then existing; and
(ii) The aggregate Forward Contract Exposure does not
exceed $1,500,000.00.
(b) No Forward Contract shall have a maturity which is less
than ten (10) Business Days prior to the Maturity Date.
5.3 Procedures Concerning Forward Contracts. The Lender shall give
notice to the Companies of the terms and procedures which the Lender requires in
connection with the Forward Contracts and the payments required thereunder
(including the Breakage Fees).
6. AUTHORIZED REPRESENTATIVES.
The Companies shall deliver to the Lender a certificate or letter
certifying to the Lender the name(s) of all Authorized Representatives, in the
form attached hereto as Exhibit B. The Lender may conclusively rely on such
certificate or letter until it shall receive a further certificate from the
Companies in form acceptable to the Lender canceling or amending the prior list
of Authorized Representatives. Any person identifying himself or herself as an
Authorized Representative of the Companies shall have the right to effect
transactions under this Agreement. The Lender shall have no responsibility or
obligation to ascertain whether the person is in fact the Authorized
Representative of the Companies which he or she claims to be or is, in fact,
authorized to effect the transaction. At its option, the Lender may verify any
telephonic or telegraphic request for transaction by calling an Authorized
Representative, and where more than one Authorized Representative is so
authorized, by calling an Authorized Representative or other individual other
than the caller or the individual initiating the transaction. The Companies
authorize the Lender at its option to record electronically all telephonic
requests for transactions that the Lender may receive from the Companies or any
other person purporting to act on behalf of the Companies.
7. CONDITIONS.
7.1 Conditions to the Lender's Obligations Hereunder.
The obligation of the Lender to perform hereunder is subject to the
following conditions precedent:
20
(a) The representations and warranties set forth in Paragraph
8 hereof shall be true and correct on and as of the date hereof and the
date each Advance, consignment or other accommodation is requested and
is to occur.
(b) The Parent and the Companies shall have executed and
delivered to the Lender, or shall have caused to be executed and
delivered to the Lender in form and substance acceptable to the Lender,
upon the execution of this Agreement, all agreements required by the
Lender for the purpose of securing payment and performance of the
Parent's and/or Companies' obligations under this Agreement, together
with any other documents required by the terms hereof or thereof,
including, without limitation, the Security Agreements, and all
insurance required by the terms hereof and the Security Agreements, the
Parent Guaranty, the Parent Stock Pledge Agreement, the Trademark
Security Agreement, the Company Guaranties, the Assignment of the Key
Man Life Insurance and the Lockbox Agreement, all of which shall at all
times remain in full force and effect.
(c) The Lender shall have received on the date hereof (i) the
favorable written opinion of special counsel for the Parent and the
Companies, dated the date hereof, satisfactory to the Lender and its
counsel in scope and substance; and (ii) such other supporting
documents and certificates as the Lender or its special counsel may
request.
(d) There shall have been no material adverse change in the
Parent's or Companies' financial condition or their financial or
business prospects, from those represented in any financial statement
or other information submitted to the Lender or upon which the Lender
has relied.
(e) All legal matters incident to the transactions hereby
contemplated shall be satisfactory to counsel for the Lender.
(f) The Lender shall have completed an adequate pre-funding
examination of the Parent and the Companies evidencing, among other
things, satisfactory precious metal controls, physical security
controls and satisfactory account receivables.
(g) The Lender shall have received the Parent's and the
Companies' Financial Statements, which Financial Statements shall be
satisfactory to the Lender in all respects.
(h) The Lender shall have received the updated budget for the
Parent and the Companies, which shall be satisfactory to the Lender in
all respects.
(i) No Event of Default as specified in Paragraph 12.1 hereof,
nor any event which upon notice or lapse of time or both would
constitute such an Event of Default, shall have occurred and be
continuing.
7.2 Companies' Confirmation.
The Companies' request to the Lender for (i) the delivery of Precious
Metal under the Consignment Facility, or (ii) the making of an Advance under the
Revolving Loan, (iii) the entering into a Forward Contract, or (iv) the issuance
of a Letter of Credit, shall be deemed to be a representation and warranty to
the Lender that the respective conditions specified in Paragraph 6.1 for such
consignment and/or Advance and/or Forward Contract and/or Letters of Credit have
been satisfied.
21
8. SECURITY.
The Obligations of the Companies under this Agreement and the Company
Guaranties shall be secured by the Security Agreement and the Trademark Security
Agreement and the obligations of the Parent under the Parent Guaranty shall be
secured by the Parent Stock Pledge Agreement.
9. REPRESENTATIONS AND WARRANTIES.
As a material inducement to the Lender, the Parent and the Companies
hereby represent and warrant to the Lender (which representations and warranties
shall survive the execution of this Agreement and the consignment of Consigned
Precious Metals, the making of Advances, the entering into of Forward Contracts
and the issuance of Letters of Credit that:
9.1 Corporate Authority. The Parent and each Company (i) is duly
organized, validly existing and in good standing under the laws of its state of
incorporation, (ii) has the requisite corporate power and authority to own its
properties and to carry on business as now being conducted, and holds all
material permits, authorizations and licenses, without material restrictions or
limitations, which are necessary for such ownership or business activity, and
(iii) is qualified to do business in every jurisdiction where such failure to
qualify would have a material adverse effect on the Company, and has the
requisite corporate power to execute, deliver and perform this Agreement and the
Security Agreements. The Parent and Companies have no reason to believe that any
such material permits, authorizations or licenses will be revoked, canceled,
rescinded, modified or lost.
9.2 No Conflict. The execution, delivery and performance by the Parent
and the Companies of the terms and provisions of this Agreement, the Note, the
Security Agreement, the Parent Guaranty, the Parent Stock Pledge Agreement and
each other Loan Document have been duly authorized by all requisite corporate
action and will not violate any material provision of law, any order of any
court or other agency of government, the corporate charter, articles of
incorporation or by-laws of the Parent or any of the Companies or any material
term of any indenture, agreement or other instrument to which the Parent or any
Company is a party, or by which the Parent or any Company is bound, or be in
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under, or, except as may be provided by this Agreement,
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the property or assets of the Parent or the
Companies pursuant to, any such indenture, agreement or other instrument.
9.3 Litigation. There is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency now
pending or, to the knowledge of any of the Companies threatened, against or
affecting the Parent or any of the Companies which, if adversely determined,
would have a material adverse effect on the business, operations, properties,
assets or condition, financial or otherwise, of the Parent or the Companies.
9.4 Other Agreements. Neither the Parent nor any Company is a party to
any agreement or instrument or subject to any charter or other corporate
restriction adversely affecting its business, properties or assets, operations
or conditions, financial or otherwise.
9.5 Default. Neither the Parent nor any Company is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which it is a party.
9.6 Financing Statements. Other than the financing statements
identified on Schedule C, no financing statement or agreement is on file in any
public office pertaining to or affecting the Consigned Precious Metal,
Receivables, Inventory, or any assets of the Parent or the Companies,
22
now owned or hereafter acquired, except for financing statements in favor of the
Lender.
9.7 Assets. The Parent and each Company have good title to all of its
properties and assets, free and clear of all mortgages, security interests,
restrictions, liens and encumbrances of any kind, except for Permitted Liens.
9.8 Representations. No statement of fact made by or on behalf of the
Parent or any Company in this Agreement or in any certificate or schedule
furnished to the Lender pursuant hereto, contains any untrue statement of a
material fact or omits to state any material fact necessary to make statements
contained therein or herein not misleading. There is no fact presently known to
the Parent or any Company which has not been disclosed to the Lender which
materially affects adversely, nor as far as the Parent or the Companies can
reasonably foresee, will materially affect adversely the property, business,
operations or condition (financial or otherwise) of any Company.
9.9 Taxes. The Parent and each Company have filed all federal, state
and local tax returns required to be filed and has paid or made adequate
provision for the payment of all federal, state and local taxes, charges and
assessments, except those contested in good faith.
9.10 Binding Obligations. This Agreement, the Note, the Security
Agreements and all other agreements securing this Agreement have been duly
executed and delivered by the Parent and the Companies and constitute legal,
valid and binding obligations of the Parent and the Companies, enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization and other similar laws of general application affecting the
rights of creditors generally.
9.11 No Event of Default. No Event of Default as defined in Paragraph
10.1 hereof, and no event which, with the passage of time or the giving of
notice, or both, would become such an Event of Default, has occurred and is
continuing.
9.12 ERISA. No "prohibited transaction" or "accumulated funding
deficiency" or "reportable event" has occurred with respect to any "single
employer plan" of the Parent or any Company. Neither the Parent or any Company
has received notice that any "multi-employer plan" as to which it or any
"commonly controlled entity" would have liability if it or any "commonly
controlled entity" were to withdraw therefrom, is in "reorganization" or
"insolvent" (as each of the quoted terms is defined or used in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the Internal
Revenue Code of 1986, as amended (the "Code")).
9.13 Hazardous Substances. The Parent and each of the Companies are in
compliance in all material respects with all federal, state and local statutes
relating to the handling, storage, use or disposal of chemicals and other
hazardous substances used in the course of its business.
9.14 Financial Statements. The Parent and each of the Companies have
furnished to the Lender the Financial Statements which have been prepared in
accordance with GAAP on a basis consistent with that of preceding periods and
which are complete and correct and fairly present the financial condition of the
Companies as at said dates, and the results of their operations for the year or
other period ended on said date. Since the date of the Financial Statements,
there has been no material adverse change in the financial condition of the
Parent or any Companies.
9.15 Year 2000 Compliance: The Parent and each of the Companies have
(i) reviewed the areas within their business and operations which could be
adversely affected by failure to become "Year 2000 Compliant" (that is that
computer application, imbedded microchips and other systems used by the Parent
and the Companies will be able to properly recognize and perform date sensitive
functions involving certain dates prior to and any date after December 31,
1999); (ii) developed a
23
detailed plan and timetable to become Year 2000 Compliant in a timely manner;
and (iii) committed adequate resources to support their Year 2000 plan. Based on
such review and plans the Parent and each of the Companies reasonably believe
that they will become Year 2000 Compliant on a timely basis except to the extent
that a failure to do so will not have a material adverse effect on the business
and operations of the Parent and the Companies.
10. AFFIRMATIVE AND NEGATIVE COVENANTS.
From the date hereof and until (a) the Obligations have been paid in
full, (b) the Consignment Facility has been terminated, (c) no Letters of Credit
are outstanding, and (d) the Lender has no obligation to make Advances, consign
Precious Metal, provide Forward Contracts or issue Letters of Credit, the Parent
and the Companies shall:
10.1 Licenses and Permits. Do or cause to be done all things necessary
to preserve, renew and keep in full force and effect their corporate existence,
rights, licenses, permits and franchises and comply with all laws and
regulations applicable to the Parent and each Company; at all times maintain,
preserve and protect all franchises and trade names and preserve all the
remainder of their property used or useful in the conduct of their respective
businesses and keep the same in good repair, working order and condition, and
from time to time, make, or cause to be made, all needful and proper repairs,
renewals, replacements, betterments and improvements thereto, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
10.2 Taxes. Pay and discharge or cause to be paid and discharged all
taxes, assessments and governmental charges or levies imposed upon them or upon
their respective income and profits or upon any of their property, real,
personal or mixed, or upon any part thereof, before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might become a lien or charge upon such properties
or any part thereof, provided that the Parent and Companies shall not be
required to pay and discharge or cause to be paid and discharged any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and they shall have set aside
on their books adequate reserves with respect to any such tax, assessment,
charge, levy or claim, so contested, and provided, further, that payment with
respect to any such tax, assessment, charge, levy or claim shall be made before
any notice of lien has been filed.
10.3 Financial Condition. Furnish to the Lender promptly, from time to
time, such information regarding their operations, assets, business affairs and
financial condition, as the Lender may reasonably request and promptly advise
the Lender of any material adverse change in their condition, financial or
otherwise.
10.4 Litigation. Give prompt written notice to the Lender of any
proceedings instituted against the Parent or any Company or any entity with whom
the Parent or any Company is in partnership by or in any Federal or state court
or before any commission or other regulatory body, Federal, state or local,
which, if adversely determined, would have a materially adverse effect upon
their business, operations, properties, assets, or condition, financial or
otherwise.
10.5 Inspections. Permit agents or representatives of the Lender to
inspect, at reasonable hours and upon reasonable notice in the case of the
annual audit, the Consigned Precious Metal and the Parent's and Companies' books
and records and to make abstracts or reproductions of such books and records and
permit the Lender's audit staff to conduct audits and field examinations of the
Parent and the Companies at the Companies' expense and semi-annual field
examinations of the Corporation.
24
10.6 Inventories. Permit agents or representatives of the Lender, (i)
at reasonable times and upon reasonable notice in the case of the annual audit,
and at any time in case of emergency, to take a physical inventory of the
Consigned Precious Metal, at the Companies' expense, which physical inventory
shall take place not more frequently than twice every year; provided, however,
that if an Event of Default has occurred and is continuing, the Companies shall
permit agents or representatives of the Lender to take such physical inventory
at any time; and (ii) to make one unannounced spot check each year, at the
Companies' expense.
10.7 Financing Statements. Promptly join with the Lender from time to
time in executing one or more financing statements pursuant to the Uniform
Commercial Code in form satisfactory to the Lender, and execute such other
instruments in form suitable for recording or filing as may be reasonably
required by the Lender hereunder.
10.8 Liens. Not create, incur, assume or suffer to exist any mortgage,
pledge, lien, charge or other encumbrance of any nature whatsoever on (i) any of
the Consigned Precious Metal, (ii) any products or property now or hereafter
owned which does or will include Consigned Precious Metal, or (iii) any of the
Parent's or any of the Companies' assets and properties, whether now owned or
hereafter acquired except for:
(a) purchase money security interests securing no more than
Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate at any
time; and
(b) Permitted Liens.
10.9 Disposition of Property. Not sell, lease, transfer or otherwise
dispose of the Parent's or any of the Companies' properties, assets, rights,
licenses and franchises to any person, except for sales of inventory and other
assets in the ordinary course of the Parent's or such Company's business, and
sales or dispositions of machinery and equipment which are obsolete or no longer
useful to such Company in its business.
10.10 Corporate Status. Not dissolve, liquidate, consolidate with or
merge with, or otherwise acquire all or substantially all of the assets or
properties of, any other person or business other than (i) the purchase of
assets of failed businesses in the ordinary course of the Parent's or any of the
Companies' business and (ii) the Reliable Acquisition; or make any substantial
change in the Parent's or any Company's executive management or ownership (e.g.,
in excess of 10%); and not change the Parent's or any Company's corporate name
unless it has provided the Lender with forty-five (45) days' prior written
notice thereof.
10.11 Management Contract. Not turn over the management of, or enter
into a management contract with respect to, the Parent's or any of the
Companies' properties, assets, rights, licenses and franchises.
10.12 Consigned Precious Metal. Not grant any security interest or
ownership rights to any customer with respect to any of the Consigned Precious
Metal whether or not such customers have prepaid orders for the Consigned
Precious Metal or any products or property which does or will include the
Consigned Precious Metal.
10.13 Guaranties. Not guarantee, endorse or otherwise in any way become
or be responsible for obligations of any other person, except endorsements of
negotiable instruments for collection in the ordinary course of business, and in
connection herewith.
10.14 Sale - Leaseback. Not enter into any arrangement, directly or
indirectly, with any person whereby the Parent or any Company shall sell or
transfer any property, real, personal or
25
mixed, used or useful in the Parent's or such Company's business, whether now
owned or hereafter acquired, and thereafter rent or lease such property.
10.15 Loans and Investments. Not purchase, invest in or otherwise
acquire or hold securities, including, without limitation, capital stock and
evidences of indebtedness of, or make loans or advances to, or enter into any
arrangement for the purpose of providing funds or credit to, any other person,
including loans and investments to any Affiliates whether in the ordinary course
of business or not, except:
(a) advances to officers, employees with respect to reasonable
expenses incurred by such officers and employees for the benefit of the
Companies, which expenses are properly reimbursable by the Companies;
(b) investments in short-term obligations of the United States or certificates
of deposit of the Lender;
(c) loans and advances from one Company to another Company;
(d) advance payments made to the Companies' suppliers in amounts not to exceed
One Hundred Thousand Dollars ($100,000.00) in the aggregate outstanding at any
time.
10.16 Business. Not engage, directly or indirectly, in a business
substantially different from the business now being conducted.
10.17 Receivables. Not sell, assign, discount or dispose in any way of
any accounts receivable, promissory notes or trade acceptances held by the
Companies, with or without recourse, except:
(a) security interests granted pursuant to the Security Agreement, and
(b) for collection (including endorsements) in the ordinary course of business;
and
(c) security interests granted to Alliance Capital Investments Corp., which
security interests are junior in priority to the security interests granted to
the Lender pursuant to the Security Agreement.
10.18 Dividends. If (i) an Event of Default has occurred and is
continuing or (ii) the payment of cash dividends, redemption of capital stock,
or making of distributions shall immediately or solely with the passage of time
trigger an Event of Default, not declare or pay any dividends to, or redeem
capital stock held by, or make any distributions of cash or property to, any of
the stockholders of the Parent or the Companies (other than the payment of usual
and ordinary salaries to employees who are also stockholders).
10.19 Consignments. Not obtain Precious Metal on consignment or credit
from any supplier, lender, consignor or financial institution other than the
Lender or another Company unless, if required by the Lender, such consignor
enters into an intercreditor agreement reasonably satisfactory to the Lender.
10.20 Financial Statements. Unless otherwise explicitly waived by the Lender in
writing, furnish to the Lender:
(a) within forty-five (45) days after the end of each quarter
of the Parent's and each of the Companies' Fiscal Years, an unaudited
balance sheet as of the end of such
26
quarter, and an unaudited statement of earnings for the Fiscal Year
through the end of such quarter, including combined and combining
statements, prepared by the Parent or such Companies and certified by
their chief financial officers, which certification shall include a
calculation of compliance with all financial covenants, and
(b) within ninety (90) days after the end of each of the
Companies' Fiscal Years, (i) similar audited statements as of the end
of such Fiscal Year and for such Fiscal Year, prepared and certified by
an independent certified public accountant selected by the Companies
and acceptable to the Lender; such statements to be accompanied by such
accountant's written confirmation of the balance of all Consigned
Precious Metal as of the end of such Fiscal Year, and such accountant's
statement to the effect that such accountant has examined the
provisions of this Agreement and that, to the best of his knowledge,
the Companies are in compliance with all financial covenants contained
herein, and (ii) internally generated consolidated combined statements
of the Parent and the Companies as of the end of each Fiscal Year, and
(c) on Monday of each week, a weekly borrowing base
certificate as of the preceding Friday, in form acceptable to the
Lender, and
(d) within twenty (20) days of the end of each month, a
borrowing base certificate containing inventory reports and accounts
receivable and accounts payable reports and agings in the form attached
hereto as Exhibit F, and
(e) within thirty (30) days after the end of the Parent's and
Companies' Fiscal Year, financial projections, including balance sheets
and income statements, for the following Fiscal Year;
(f) within twenty (20) day of each month end, an internally
prepared monthly financial statement for the Parent and each of the
Companies setting forth comparisons with the projections to be
furnished in accordance with subsection (e) above; and
(g) promptly, from time to time, such other information
regarding its operations, assets, business, affairs and financial
condition, including, without limitation, accounts receivable reports
and agings as the Lender may reasonably request.
10.21 ERISA. Not permit any pension plan maintained by the Parent or
the Companies or by any member of a "controlled group" (ERISA 210(c)) or
"corporation or group of trades or businesses under common control" (ERISA
210(d)) of which the Companies is a member to: (i) engage in any "prohibited
transaction" (ERISA 406 that is not exempt under ERISA 408); (ii) fail to report
to the Lender a "reportable event" (ERISA 4043) within thirty (30) days after
its occurrence; (iii) incur any "accumulated funding deficiency" (ERISA 302);
(iv) terminate its existence at any time in a manner which could result in the
imposition of a lien on the property of the Parent or the Companies or any of
its Subsidiaries; or (v) fail to report to the Lender any "complete withdrawal"
or "partial withdrawal" by the Companies or any of its Subsidiaries of an
affiliate from a "multi-employer plan" (ERISA 4203, 4205 and 4001 respectively)
(the quoted terms are defined in the respective sections of ERISA cited above).
10.22 Environmental Matters. With respect to environmental matters:
(a) comply strictly and in all respects with the requirements
of all federal, state, and local environmental laws; notify the Lender
promptly upon knowledge thereof in the event of any spill, hazardous
waste pollution or contamination affecting the Premises;
27
(b) forward to the Lender promptly any notices relating to
such matters received from any governmental agency; and pay promptly
when due any fine or assessment against the Premises for which it or
they are responsible; immediately contain and remove any hazardous or
toxic material found on the Premises in violation of applicable law,
which work must be done in compliance with applicable laws and at the
Parent and the Companies' expense; and the Parent and the Companies
hereby agree that the Lender has the right, at its sole option but at
the Companies' expense, to have an environmental engineer or other
representative review the work being done;
(c) promptly upon the reasonable request of the Lender,
provide the Lender with an environmental site assessment report or an
update of any existing report, all in scope, form and content and
performed by such company as may be reasonably satisfactory to the
Lender; and
(d) indemnify, defend, and hold the Lender harmless from and
against any claim, cost, damage (including, without limitation,
consequential damages), expense (including, without limitation,
attorneys' fees and expenses), loss, liability, or judgment now or
hereafter arising as a result of any claim for environmental cleanup
costs, any resulting damage to the environment and any other
environmental claims against the Parent or Companies, the Lender, or
the Premises. The provisions of this subparagraph (d) shall continue in
effect and shall survive (among other events) any termination of this
Agreement, foreclosure, a deed in lieu of foreclosure transaction,
payment and satisfaction of the obligations evidenced hereby or
incurred pursuant hereto, and release of any collateral.
10.23 Insurance. Keep their insurable properties adequately insured at
all times, by financially sound and reputable insurers, to such extent and
against such risks, including fire and other risks insured against by extended
coverage, and maintain liability and such other insurance as is customarily
maintained by companies engaged in similar businesses.
10.24 Debt to Worth Covenant. Maintain a ratio of Total Debt to
Tangible Net Worth of not more than 3.50:1.00 as of the end of each fiscal
quarter.
10.25 Cash Flow. Maintain a ratio of the Operating Cash Flow to the
Total Debt Service of not less than 1.50:1.00 at the end of each fiscal quarter,
tested on a quarterly basis for each fiscal quarter ending prior to June 30,
2000, and thereafter on a rolling four quarter basis.
10.26 Minimum Excess Availability. Upon the execution of this
Agreement, have a minimum borrowing availability of $500,000.00 in excess of the
Borrowing Limit after payment of all closing costs.
10.27 Indebtedness. Not incur, create, assume, become or be liable in
any manner with respect to, or permit to exist, any Indebtedness or liability,
including indebtedness incurred as the lessee of goods or services under leases
whether or not, in accordance with GAAP, such leases should be reflected on the
lessee's balance sheet, except:
(a) Indebtedness to the Lender;
(b) Indebtedness with respect to trade obligations and other
normal accruals in the ordinary course of business not yet due and
payable, or with respect to which they are contesting in good faith the
amount or validity thereof by appropriate proceedings, and then only to
the extent they have set aside on their books adequate reserves
therefor;
(c) Indebtedness from one Company to any other Company;
28
(d) purchase money Indebtedness of no more than Two Hundred
Fifty Thousand Dollars ($250,000) in the aggregate at any time;
(e) Indebtedness incurred as the lessee of goods or services
under leases not to exceed Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate at any time; and
(f) Indebtedness set forth on Exhibit G.
10.28 Transactions with Affiliates. Not, directly or indirectly, enter
into any transaction (including the transfer or lease of any property or the
rendering of any service) with any Affiliate of a Company unless (a) such
transaction is in the ordinary course of business of such Company, and (b) such
transaction is on fair and reasonable terms no less favorable to such Company
than those terms that might be obtained at the time in a comparable arm's length
transaction with an entity who is not an Affiliate of such Company or, if such
transaction is not one that by its nature could be obtained from such other
entity, is on fair and reasonable terms and was negotiated in good faith.
10.29 Use of Proceeds. Not use for, pay or distribute to, or for the
benefit of, any Affiliate of the Companies, directly or indirectly, as a payment
or as a loan or investment, or in any other manner, any of the Consigned
Precious Metal or any of the proceeds of the Revolving Loan.
10.30 Lockbox Agreement. The Companies shall comply with the terms and
conditions of the Lockbox Agreement to be entered into with the Lender in the
form of Exhibit H prior to the effectiveness of this Agreement pursuant to
which, among other things, all domestic cash receipts of the Companies shall be
deposited, with the collection proceeds to be applied to the Advances on a daily
basis.
11. EVENTS OF DEFAULT AND ACCELERATION.
11.1 Events of Default. In each case of the occurrence of any one or
more of the following events (each of which is herein called an "Event of
Default"):
(a) the Companies shall fail to pay the purchase price for
Consigned Precious Metal pursuant to Section 2.3(b) hereof when the
same becomes due and payable as set forth in Section 2.3(b); or
(b) the Companies shall fail to pay any other principal,
interest, consignment fees or other charges in respect of any of the
Obligations within three (3) day of when due; or
(c) default in the performance of any of the Companies' other obligations or
agreements hereunder; or
(d) any representation or warranty made herein or in any
certificate, statement or agreement furnished by the Companies in
connection with this Agreement shall prove to be false or misleading in
any material respect; or
(e) default in the payment or performance of any other
obligation or indebtedness of the Companies to the Lender, whether now
or hereafter existing and howsoever arising, incurred or evidenced; or
(f) any of the Companies shall (A) make an assignment for the
benefit of creditors, or (B) file or, (for a period of ninety (90)
continuous days), suffer the filing of any voluntary or involuntary
petition under any chapter of the Bankruptcy Act by or against the
29
Companies, or (C) apply for or permit the appointment of a receiver,
trustee or custodian of any of the property or business of any of the
Companies; or (D) become insolvent to suffer the entry of an order for
relief under Title 11 of the United States Code; or (E) make an
admission of its inability to pay its debts as they become due; or
(g) the occurrence of any loss, theft or destruction of or
damage to any of the Consigned Precious Metal for which there is no
insurance acceptable to the Lender; or
(h) the occurrence of any attachment on any of the Consigned Precious Metal;
or
(i) the occurrence of any attachment on any collateral for the Companies'
obligations hereunder; or
(j) default with respect to any evidence of Indebtedness of
the Companies in excess of One Hundred Thousand Dollars ($100,000)
(other than to the Lender), if the effect of such default is to
accelerate the maturity of such indebtedness or to permit the holder
thereof to cause such indebtedness to become due prior to the stated
maturity thereof, or if any indebtedness of the Companies in excess of
One Hundred Thousand Dollars ($100,000) (other than to the Lender) is
not paid, when due and payable, whether at the due date thereof or a
date fixed for prepayment or otherwise; or
(k) the determination by the Lender in good faith that a
Company has suffered a material adverse change in its business or
financial condition; or
(l) the occurrence of any event of default (after the
expiration of any applicable grace period) under any agreement now or
at any time hereafter securing or guaranteeing performance of this
Agreement, including, without limitation, the Security Agreements; or
(m) The occurrence of any of the foregoing by or with respect
to the Parent.
then in any such event, at the option of the Lender (A) the obligations of the
Lender hereunder shall terminate, (B) the Companies shall promptly return to the
Lender all Consigned Precious Metal theretofore consigned to but not purchased
and paid for by the Companies, and (C) all the Companies' obligations to the
Lender (including, without limitation, those under the Consignment Facility and
the Revolving Loan shall become immediately due and payable without presentment,
demand or notice, all of which are hereby expressly waived, notwithstanding any
credit or time allowed to the Companies or any instrument evidencing any of the
Companies obligations to the Lender. The Lender shall in addition have all of
the rights and remedies of a secured party under the Uniform Commercial Code
with respect to any collateral now or hereafter securing the Companies'
obligations hereunder. The Companies shall, at the Lender's request, immediately
assemble all such collateral and Consigned Precious Metal, and the Lender may go
upon the Companies' premises to take immediate possession thereof. The Companies
shall pay all reasonable legal expenses and attorneys' fees incurred by the
Lender in enforcing the Lender's rights, powers and remedies under this
Agreement.
11.2 Waiver. No failure or delay on the Lender's part to exercise or to
enforce any of the Lender's rights hereunder or under any other instruments or
agreement evidencing any of the Companies' obligations to the Lender or to
require strict compliance with the terms hereof or thereof in any one or more
instances and no course of conduct on the Lender's part shall constitute or be
deemed to constitute a waiver or relinquishment of any such rights hereunder
unless it shall have signed a waiver thereof in writing and no such waiver,
unless expressly stated therein, shall be effective as to any transaction which
occurs after the date of such waiver or as to any continuance
30
of a breach after such waiver. The Lender's rights hereunder shall continue
unimpaired notwithstanding any extension of time, compromise or other indulgence
granted by the Lender, to the Companies with respect to any of the Companies'
obligations to the Lender or any instrument given the Lender in connection
therewith, and the Companies hereby waive notice of any such extension,
compromise or other indulgence and consent to be bound thereby as if they had
expressly agreed thereto in advance.
12. INDEMNIFICATION.
The Companies agree to indemnify and hold harmless the Lender from and
against any and all claims, actions and suits whether groundless or otherwise,
and from and against any and all liabilities, losses, damages and expenses of
every nature and character arising out of this Agreement or any other documents
or agreements executed or delivered in connection herewith and any related
documents or the transactions contemplated hereby other than to the extent that
such liability, claim, action, suit, loss, damages or expense is the result of
gross negligence or willful misconduct of the Lender, and excluding any of the
foregoing which arise out of claims, actions, and suits brought by the
Companies, including, without limitation, (a) any actual or proposed use by the
Companies or any of their Subsidiaries of the proceeds of any of the Advances,
(b) the Companies or any of their Subsidiaries entering into or performing this
Agreement or any of the other documents or agreements executed or delivered in
connection herewith and any related documents or (d) with respect to the
Companies and their Subsidiaries and their respective properties and assets, in
each case including, without limitation, the reasonable fees and disbursements
of counsel and allocated costs of internal counsel incurred in connection with
any such investigation, litigation or other proceeding. In litigation, or the
preparation therefor, the Lender shall be entitled to select its own counsel
and, in addition to the foregoing indemnity, the Companies agree to pay promptly
the reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Companies under this Paragraph are unenforceable for any
reason, the Companies hereby agree to make the maximum contribution to the
payment in satisfaction of such obligations which is permissible under
applicable law. The provisions of this Paragraph shall survive the repayment of
the Advance and the termination of the obligations of the Lender hereunder.
13. SET OFF
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits (general or specific, time or demand,
provisional or final, regardless of currency, maturity, or the branch of where
such deposits are held) or other sums credited by or due from the Lender to the
Companies and any securities or other property of the Companies in the
possession of the Lender may be applied to or set off against the payment of
Obligations and any and all other liabilities, direct, or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, of the
Companies to the Lender. The Lender agrees to furnish the Companies with notice
of set off after the occurrence of an Event of Default promptly after the
exercise of such right.
14. NO ASSIGNMENT.
The rights of the Companies under this Agreement may not be assigned to
any third party without the prior written consent of the Lender. All covenants
and agreements of the Companies contained herein shall bind the Companies and
their successors and assigns, and shall inure to the benefit of the Lender, and
its successors and assigns.
31
15. EXPENSES.
The Companies will upon request by the Lender pay the reasonable legal
and other expenses incurred by the Lender (including, without limitation, the
fees and disbursements of the Lender's special counsel) in connection with the
preparation, implementation, amendment or enforcement, if any, of this
Agreement.
16. GOVERNING LAW; MISCELLANEOUS.
16.1 Governing Law. This Agreement shall be governed by and shall be
construed under the laws of the Commonwealth of Massachusetts. Any provision of
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 or
affecting the validity or enforceability of such provision in any other
jurisdiction.
16.2 Waiver of Jury Trial. To the extent that they may lawfully do so,
the Companies hereby submit to the jurisdiction of the court of the Commonwealth
of Massachusetts and the United States District Court for the District of
Massachusetts, as well as to the jurisdiction of all courts from which an appeal
may be taken from the aforesaid courts, for the purpose of any suit, action or
other proceeding arising out of the breach by the Companies of any of its
obligations under and with respect to this Agreement, and expressly waives any
and an objections they may have as to venue in any of such courts. THE
COMPANIES, TO THE EXTENT THEY MAY LAWFULLY DO SO, HEREBY EXPRESSLY WAIVE TRIAL
BY JURY IN CONNECTION WITH ANY SUIT OR ACTION ARISING OUT OF OR CONCERNING THEIR
OBLIGATIONS IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT SECURING THIS
AGREEMENT.
16.3 Survival of Representations and Covenants. This Agreement and all
covenants, agreements, representations and warranties made herein and in the
certificates delivered pursuant hereto, shall survive the consigning of
Consigned Precious Metal by the Lender to the Companies, the making of Advances,
the issuing of Letters of Credit, and the execution and delivery to the Lender
of this Agreement, and shall continue in full force and effect so long as any
indebtedness or obligation of the Companies to the Lender is outstanding and
unpaid. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements contained in this Agreement by
or on behalf of the Companies shall inure to the benefit of the successors and
assigns of the Lender.
16.4 Notices. All notices and other communications hereunder shall be
in writing, except as otherwise provided in this Agreement; and shall be sent by
any one of the following: certified mail, return receipt requested; overnight
courier; confirmed telecopier; or by hand and shall be addressed (i) if to the
Companies, to them at the Companies' Address and (ii) if to the Lender, to the
Lender's Address set forth herein. Notices shall be deemed effective three (3)
days after deposit in the mail, if sent by certified mail; the next Business
Day, if sent by overnight courier; upon confirmation, if sent by confirmed
telecopier; and upon delivery, if sent by hand. The address of any party hereto
for such demands, notices and other communications may be changed by giving
notice in writing at any time to the other party hereto.
16.5 Amendments. No modification or waiver of any provision of this
Agreement, nor consent to any departure by the Companies therefrom, shall in any
event be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance, and for the purpose,
for which given. No notice to, or demand, on the Companies, in any case, shall
entitle the Companies to any other or future notice or demand in the same,
similar or other circumstances.
32
16.6 Waiver. Neither any failure or any delay on the part of the Lender
in exercising any right, power or privilege hereunder or under any other
instrument given as security therefor, shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or future
exercise, or the exercise of any right, power or privilege.
16.7 Federal Reserve Bank. The Lender may at any time pledge or assign
all or any portion of the Lender's rights under this Agreement and the other
Loan Documents to a Federal Reserve bank; provided, however, that no such pledge
or assignment shall release the Lender form the Lender's obligations hereunder
or any other Loan Document.
33
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WITNESS: WESTBURY METALS GROUP, INC.
____________________________________ By:________________________________
Title:
WITNESS: WESTBURY ALLOYS, INC.
____________________________________ By:________________________________
Title:
WITNESS: RELIABLE-WEST TECH, INC.
____________________________________ By:________________________________
Title:
WITNESS: WESTBURY INTERNATIONAL, INC.
____________________________________ By:______________________________
Title:
WITNESS: BANKBOSTON, N.A.
____________________________________ By:________________________________
Title:
501297.3
34
EXHIBIT INDEX
Exhibit A Secured Promissory Note
Exhibit B Authorized Representative Letter
Exhibit C Change in Consignment Limit Letter
Exhibit D Change in Consignment Rate
Exhibit E Liens
Exhibit F Borrowing Base Certificate
Exhibit G Indebtedness
Exhibit H Lockbox Agreement
SCHEDULE INDEX
Schedule A Financing Statements
35
EXHIBIT C
, 1999
WESTBURY ALLOYS, INC.
RELIABLE-WEST TECH, INC.
WESTBURY INTERNATIONAL, INC.
Ladies and Gentlemen:
Upon your acceptance of the terms of this letter agreement as evidenced
by your execution and delivery to BANKBOSTON, N.A. ("BKB") on or before
_______________, 199_, of a copy of this letter, WESTBURY ALLOYS, INC.,
RELIABLE-WEST TECH, INC., and WESTBURY INTERNATIONAL, INC., (together, the
"Companies"), and BKB agree, effective _______________, 199_, to amend the
definition of the Consignment Limit contained in Paragraph 1.15 of that certain
Loan and Consignment Agreement dated ______________, 1999, as the same may have
been heretofore amended (as amended, the "Loan and Consignment Agreement"), by
and among BKB and the Companies to read as follows:
1.19. "Consignment Limit" means an amount equal to:
(a) the least of :
(i) , or
(ii) , or
(iii) ;
(b) such limit as BKB and the Companies may agree upon from
time to time as evidenced by an amendment in substantially the form of
Exhibit D attached hereto and made a part hereof or in such other form
as BKB shall require; or
(c) such other limit as BKB may approve in its sole
discretion.
Except as amended hereby, the Loan and Consignment Agreement and an
agreements securing or guaranteeing the Loan and Consignment Agreement shall
remain in full force and effect and are in all respect hereby ratified and
affirmed.
Very truly yours,
BANKBOSTON, N.A.
__________________________________ By:_______________________
Title:________
36
Accepted and agreed as of the ____ day of ________, 199_.
WESTBURY ALLOYS, INC.
By:_________________________________
Title:_______________________________
RELIABLE-WEST TECH, INC.
By:_________________________________
Title:_______________________________
WESTBURY INTERNATIONAL, INC.
By:_________________________________
Title:_______________________________
37
EXHIBIT D
, 1999
WESTBURY ALLOYS, INC.
RELIABLE-WEST TECH, INC.
WESTBURY INTERNATIONAL, INC.
Ladies and Gentlemen:
Pursuant to Paragraph 2.3(a) of that certain Loan and Consignment
Agreement dated _______________. 1999, as the same may have been heretofore
amended (as amended, the "Loan and Consignment Agreement") by and among Westbury
Alloys, Inc., Reliable-West Tech, Inc., and Westbury International, Inc.
(collectively, the "Companies"), and BankBoston, N.A., the undersigned hereby
gives notice to the Companies that, effective _______________ the consignment
rate set forth in said Paragraph _____ shall be changed from _______________
percent (_____%) per annum to ______________ percent _____%) per annum.
Except as amended hereby, the Loan and Consignment Agreement shall
remain in full force and effect.
Very truly yours,
BANKBOSTON, N.A.
____________________________________ By:___________
Title:________
38
