$7,500,000 TERM LOAN
from
BROWN BROTHERS XXXXXXXX & CO.
to
CENTRAL CPVC CORPORATION
-----------
May 30, 1997
TABLE OF CONTENTS
1. DEFINITIONS AND ACCOUNTING TERMS....................................................................... 1
1.01. Defined Terms and Accounting Terms................................................... 1
2. AMOUNT AND TERMS OF THE LOANS.......................................................................... 6
2.01. Loan................................................................................. 6
2.02. Conversion of Loan................................................................... 6
2.03. Term Loan Conversion to IRB.......................................................... 7
2.04. Note................................................................................. 7
2.05. Maturity Date........................................................................ 7
2.06. Default Interest..................................................................... 7
2.07. Optional Prepayments................................................................. 8
2.08. Mandatory Prepayments................................................................ 8
2.09. Method of Payment.................................................................... 8
2.10. Illegality........................................................................... 9
2.11. Disaster............................................................................. 9
2.12. Increased Cost....................................................................... 10
2.13. Bank's Determinations Conclusive; Notice of
Amounts Due........................................................................ 11
3. CONDITIONS TO LENDING.................................................................................. 11
3.01. Conditions Precedent................................................................. 11
4. REPRESENTATIONS AND WARRANTIES......................................................................... 12
4.01. Good Standing........................................................................ 12
4.02. Capital Stock........................................................................ 13
4.03. Indebtedness......................................................................... 13
4.04. Authority............................................................................ 13
4.05. No Action, Xxxxxx, Claim, Litigation or
Proceeding......................................................................... 13
4.06. Compliance with Laws, Regulations.................................................... 14
4.07. Title................................................................................ 14
4.08. Taxes................................................................................ 14
4.09. Financial Statements................................................................. 14
4.10. Indebtedness......................................................................... 14
4.11. Solvency, Capital.................................................................... 15
4.12. Information.......................................................................... 15
4.13. Margin Stock......................................................................... 15
4.14. Untrue Statement..................................................................... 15
5. COVENANTS.................................................................................................. 15
5.01. Financial Statements, Reports........................................................ 15
5.02. Indebtedness, Taxes, Insurance, etc.................................................. 16
5.03. Ownership............................................................................ 17
5.04. Management........................................................................... 18
5.05. Securities and Exchange Commission................................................... 18
5.06. Maintenance of Account............................................................... 18
5.07. Litigation, Violation of Laws, etc................................................... 18
5.08. ERISA................................................................................ 18
5.09. Liens................................................................................ 18
5.10. Indebtedness......................................................................... 20
5.11. Guarantees........................................................................... 21
5.12. Xxxx, Advance, Investment, Sale of Xxxxxx,
Xxxxxx............................................................................. 21
5.13 Financial Covenants.................................................................. 21
5.14. Subsequent Credit Terms.............................................................. 21
6. EVENTS OF DEFAULT AND REMEDIES......................................................................... 22
6.01. Events of Default and Remedies....................................................... 22
6.02. Set-Off.............................................................................. 23
7. NOTICES................................................................................................ 24
7.01. Notices.............................................................................. 24
8. MISCELLANEOUS.......................................................................................... 25
8.01. Governing Law; Consent to Jurisdiction;
WAIVER OF RIGHT TO TRIAL BY JURY................................................... 25
8.02. Entire Agreement..................................................................... 25
8.03. Fees, Costs and Expenses............................................................. 25
8.04. Severability......................................................................... 26
8.05. Survival............................................................................. 26
8.06. Binding Effect....................................................................... 26
8.07. Modification or Waiver............................................................... 26
8.08. Cumulative Effect.................................................................... 26
8.09. Counterparts......................................................................... 26
EXHIBITS AND SCHEDULES
Exhibits
--------
Exhibit A Form of Term Loan Note
Schedules
---------
Schedule 4.09 Loss Contingencies
Schedule 5.09 Liens
Schedule 5.10 Indebtedness
Schedule 5.11 Guarantees
TERM LOAN AGREEMENT (this "Agreement"), dated May 30, 1997,
among BROWN BROTHERS XXXXXXXX & CO., as lender ("Bank"); CENTRAL CPVC
CORPORATION, as borrower ("Borrower"); and CENTRAL SPRINKLER CORPORATION (the
"Company"), CENTRAL SPRINKLER COMPANY and CENTRAL CASTINGS CORPORATION
("Castings"), as guarantors.
1. DEFINITIONS AND ACCOUNTING TERMS.
1.01. Defined Terms and Accounting Terms. (a) As used in this
Agreement, the following terms have the following meanings (terms defined in the
singular to have the same meaning when used in the plural and vice versa):
"Account" has the meaning assigned to it in Section 5.06.
"Additional Costs" has the meaning assigned to it in Section
2.12.
"Additional Secured Indebtedness" has the meaning assigned to
it in Section 5.10(f).
"Agreement" has the meaning assigned to it in the first
paragraph hereof.
"Bank" has the meaning assigned to it in the first paragraph
of this Agreement.
"Base Rate" means the rate of interest determined from time to
time by Lender as its "base rate."
"Base Rate Loan" means the Loan when and to the extent the
interest rate therefor is determined by reference to the Base Rate.
"Borrower" has the meaning assigned to it in the first
paragraph of this Agreement.
"Business Day" means any day other than a Saturday, Sunday, or
other day on which commercial banks in Philadelphia, Pennsylvania, are
authorized or required to close under the laws of the Commonwealth of
Pennsylvania, if the applicable day relates to a LIBOR Loan or notice with
respect to a LIBOR Loan, a day on which dealings in Dollar deposits are also
carried on in the London interbank market and banks are open for business in
London, England.
"Castings" has the meaning assigned to it in the first
paragraph of this Agreement.
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"Company" has the meaning assigned to it in the first
paragraph hereof.
"Compliance Certificate" has the meaning assigned to it in
section 5.01(a).
"Consolidated Funded Indebtedness" means all obligations of
the Company and its consolidated Subsidiaries for borrowed money, including,
without limitation (and without duplication): (a) all obligations, contingent or
otherwise, of the Company and its consolidated Subsidiaries in connection with
all letter of credit facilities (whether or not drawn), acceptance facilities,
or other similar facilities issued for the account of the Company and its
consolidated Subsidiaries; (b) all obligations of the Company and its
consolidated Subsidiaries evidenced by bonds, debentures, or other similar
instruments; (c) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by the
Company and its consolidated Subsidiaries; (d) all capital lease obligations of
the Company and its consolidated Subsidiaries; (e) all guarantees, endorsements
(other than for collection or deposit in the ordinary course of business); and
(f) all debt referred to in clause (a) through (e) above secured by (or for
which the holder of such debt has existing rights, contingent or otherwise, to
be secured by) any lien, security interest, or other charge or encumbrance upon
or in property (including, without limitation, accounts and contract rights)
owned by such person; provided, however that trade indebtedness, tax and other
accruals, tax deferrals, and deferred compensation occurring in the ordinary
course of the Borrower's business shall be specifically excluded from the
foregoing definition.
"Current Assets" means all assets that would be classified as
current assets in accordance with GAAP.
"Current Liabilities" means all liabilities that would be
classified as current liabilities in accordance with GAAP.
"Default Rate" has the meaning assigned to it in Section 2.06.
"Dollars" and "$" mean lawful money of the United States of
America.
"Environmental Laws" means any presently existing or hereafter
enacted or decided federal, state or local statutory or common laws relating to
pollution or protection of the environment, including without limitation, any
common law of nuisance or trespass, and any law or regulation relating to
emissions, discharges, releases or threatened release of pollutants,
contaminants or chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or chemicals, or industrial,
toxic or hazardous substances or wastes.
2
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor statute, together with all
rules and regulations in connection therewith.
"Event of Default" means any of the events specified in
Section 6.01, provided that any requirement for the giving of notice, the lapse
of time, or both, or any other condition has been satisfied.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in
effect from time to time in the United States, consistently applied.
"Guarantors" means, individually, and "Guarantors" means,
collectively, jointly and severally, the Company, Central Sprinkler Company and
Castings.
"Guaranty" means the guaranty agreement of even date herewith,
executed and delivered by the Guarantors in favor of the Bank, as amended,
supplemented or modified.
"Interest Expense" means, for any period, the aggregate amount
of interest accrued (whether or not paid) by the Company and its consolidated
Subsidiaries during such period in respect of indebtedness.
"Interest Period" means (1) for Base Rate Loans, any period of
time during which the Base Rate applies to the Loan and (2) for LIBOR Loans,
each period of one month, two months, three months, six months or one year, as
designated by the Borrower by notice to the Bank prior to the first day of the
Interest Period, during which the interest rate on the Note will be determined
and calculated by reference to LIBOR. Notwithstanding anything herein to the
contrary, the Borrower may designate a single Interest Period which shall apply
to the entire principal amount of the Note or, alternatively, may designate two
(but not more than two) separate Interest Periods which may apply to separate
portions of the principal amount of the Note; provided that the principal amount
of the Loan bearing interest at the LIBOR Rate for each designated Interest
Period shall be at least $1,000,000.
"Investments" means (1) direct obligations of the United
States or any agency thereof and direct obligations of any state of the United
States or the District of Columbia or any political subdivision, agency or
instrumentality of any such state that, in each case, (a) have a remaining term
(to maturity or to the redemption date established by the issuer of such
obligations pursuant to the terms of such obligations) of three years or less
from the date of acquisition or (b) permit the holder, in its sole discretion,
to tender such obligations to the issuer for purchase within three years from
the date of acquisition and require the issuer to purchase such obligations upon
tender at a purchase price equal to at least 100% of the principal amount
thereof plus accrued interest to the date of purchase; (2) commercial paper of
3
a United States domestic issuer rated at least "A-1" by Standard & Poor's
Corporation or "A1-P1," by Xxxxx'x Investors Service, Inc.; (3) certificates of
deposit or foreign time deposits with maturities of three years or less from the
date of acquisition issued by any commercial bank having capital and surplus in
excess of One Hundred Million Dollars ($100,000,000); and (4) money market
preferred stock of a United States domestic issuer rated at least "BBB" by
Standard & Poor's Corporation or "Baa1" by Xxxxx'x Investors Service, Inc.
"LIBOR" means the London Inter-Bank Offered Rate for the
applicable Interest Period, determined by the Bank as of the opening of business
on the first day of each Interest Period, by reference to market reporting
services available to banks and financial institutions.
"LIBOR Adjustment" means three-quarters of one percent
(0.75%).
"LIBOR Rate" means LIBOR plus the LIBOR Adjustment.
"LIBOR Loan" means the Loan when and to the extent the
interest rate therefor is determined by reference to the LIBOR Rate.
"Liens" has the meaning assigned to it in Section 5.09.
"Loan" has the meaning assigned to it in Section 2.01 and
includes Base Rate and LIBOR Loans.
"Loan Documents" means this Agreement, the Note, the Security
Agreement, the Mortgage, the Guaranty and all other documents, instruments and
agreements executed or delivered in connection herewith or therewith.
"Material Adverse Effect" means (i) an adverse effect on the
business, properties, assets, results of operations or condition, financial or
otherwise, of the Borrower and its Subsidiaries, taken as a whole, in an amount
(which shall be determined in accordance with GAAP, consistently applied) equal
to or greater than 2% of the Net Worth of the Company and its consolidated
Subsidiaries, (ii) the material impairment of the power or authority of the
Borrower to perform its obligations under this Agreement, or (iii) the material
impairment of the right of the Bank to enforce any of such obligations.
"Maturity Date" has the meaning assigned to it in Section 2.05
of this Agreement.
"Mortgage" means a certain mortgage and security agreement of
even date herewith, as amended, supplemented or modified, from the Borrower, as
mortgagor, to the Bank, as mortgagee, covering certain property described
therein.
4
"Net Income" means, for any period, the net income (or net
loss) of the Company and its consolidated Subsidiaries for such period excluding
extraordinary items, determined in accordance with GAAP.
"Net Worth" means (a) the aggregate amount of all assets as
may be properly classified as such, less (b) the aggregate amount of all
liabilities, all determined in accordance with GAAP, consistently applied.
"Note" has the meaning assigned to it in Section 2.04 of this
Agreement.
"Obligors" means the Borrower and the Guarantors.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other entity of whatever nature.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as amended or supplemented from time to time.
"Regulatory Change" has the meaning assigned to it in Section
2.12.
"Security Agreement" means a certain security agreement of
even date herewith, as it may hereafter be amended, supplemented or modified,
pursuant to which Borrower grants to Bank a security interest in all equipment,
machinery, furniture and fixtures financed with the Loan.
"Subsidiary" means, as to any Person, any corporation the
shares of stock of which having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation are at the time
owned, or the management of which is otherwise controlled by such Person,
directly or indirectly through one or more intermediaries or both.
"Tangible Net Worth" means (a) the aggregate amount of all
assets as may be properly classified as such, other than (i) all assets which
are properly classified as intangible assets including, without limiting the
generality of the foregoing, franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names, goodwill, experimental or
organizational expense and other like intangibles and (ii) the amount of all
loans to shareholders, officers and employees in excess of $300,000 in the
aggregate, less (b) the aggregate amount of all liabilities, all determined in
accordance with GAAP, consistently applied.
(b) All accounting terms not specifically defined herein shall be
construed in accordance with GAAP consistent with those applied in the
preparation of the financial
5
statements referred to in Section 5.01, and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such principles.
2. AMOUNT AND TERMS OF THE LOANS
2.01. Loan. The Bank agrees, on the terms and conditions set forth in
this Agreement, to make a term loan (the "Loan") to the Borrower on the date
hereof in the original principal amount of $7,500,000.
2.02. Interest on the Loan. (a) The Borrower shall pay interest to the
Bank on the outstanding and unpaid principal amount of the Loan made under this
Agreement at a rate per annum equal to the Base Rate or the LIBOR Rate for such
Interest Period, as Borrower may choose. In the absence of Xxxxxxxx's
designation, the Loan shall be made and maintained as a Base Rate Loan. Such
interest, calculated on the basis of a 360-day year for the actual number of
days elapsed, shall accrue daily in each Interest Period and shall be payable
quarterly in arrears on the first day of each January, April, July and October,
commencing July 1, 1997, and on the Maturity Date hereof (each an "Interest
Payment Date"), to the Bank. Interest shall be paid in such manner as the
Borrower and the Bank shall agree. The Borrower may elect from time to time to
convert the Loan from a LIBOR Loan to a Base Rate Loan and vice versa by giving
the Bank notice of the proposed conversion before the beginning of the proposed
Interest Period.
2.03. Term Loan Conversion to IRB. Borrower intends to, and shall use
best efforts to, convert the Loan to a tax exempt Industrial Revenue Bond
("IRB") pursuant to the terms of a Financing Agreement to be entered into by and
between Borrower, the Bank and Industrial Development Board of the City of
Huntsville. Borrower shall execute all documents required in connection with the
issuance of the IRB, which documents shall be in form reasonably satisfactory to
the Bank. The Loan will become immediately due and payable upon conversion of
the Note to the IRB, however the proceeds from the issuance of the IRB may be
used to pay the Loan.
2.04. Note. The Loan made by the Bank under this Agreement shall be
evidenced by, and repaid with interest in accordance with a term loan note
delivered by the Borrower to the Bank, dated as of the date of this Agreement
(the "Note"), substantially in the form of Exhibit A attached hereto, as
amended, supplemented or modified.
2.05. Maturity Date. The Loan shall mature and be repayable in full on
that date (the "Maturity Date") which is the earlier of (a) conversion of the
Loan to an IRB; (b) May 31, 2000 or (c) that date which is eighteen (18) months
from the date on which Bank makes written demand for repayment in full under
Section 2.08.
6
2.06. Default Interest. At any time after the occurrence of an Event
of Default hereunder, the Bank may at its option begin to charge and accrue
interest on the unpaid principal balance of the Note, on any amounts outstanding
hereunder or thereunder and, to the extent permitted by law, on any overdue
interest thereon until paid in full, payable on demand, at a rate per annum (the
"Default Rate") equal to (a) during the then current Interest Period, the
interest rate per annum then in effect for the Loan plus 2.00% and (b) from and
after the end of the then current Interest Period for the Loan, the Base Rate
plus 1.50%.
2.07. Optional Prepayments. (a) The Borrower may, at its option,
prepay the Note in whole or in part, as follows:
(1) for a Base Rate Loan, on any Business Day, with unpaid
accrued interest to the date of such prepayment on the amount prepaid, provided
that each partial prepayment shall be in a principal amount of not less than
$100,000 or integral multiples of $5,000 in excess thereof.
(2) for a LIBOR Loan, on the last day of the applicable
Interest Period, in whole or in part (but if in part, in the principal amount of
$100,000 or integral multiples of $5,000 in excess thereof) at a prepayment
price equal to the principal amount so prepaid, together with unpaid accrued
interest to the date of prepayment.
If Borrower voluntarily elects to repay all or any portion of
principal of the Loan before the expiration of any LIBOR Interest Period, the
Borrower shall simultaneously pay to the Bank such amount as shall be sufficient
to compensate the Lender for any loss, cost or expense that the Bank reasonably
determines to be directly attributable to the prepayment, including costs,
losses and expenses incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by the Bank to make or maintain its investment
in the Loan at a LIBOR based fixed interest rate. The Bank shall provide the
Borrower with evidence of the calculation of any such loss, cost or expense.
The Borrower shall provide the Bank with notice of any
optional prepayment pursuant to this paragraph and the principal amount of the
Note to be redeemed, sent at least one (1) day before such prepayment date. On
each such prepayment date, payment of the prepaid principal having been made to
Bank as provided herein, the Note or the portion thereof prepaid shall become
due and payable on the prepayment date and interest shall cease to accrue
thereon from and after the prepayment date.
2.08. Mandatory Prepayments. Not later than eighteen (18) months
following written demand by Bank, Borrower shall prepay such portion (even if
all) of the outstanding principal of the Loan, together with unpaid accrued
interest, as the Bank may specify in its sole discretion.
7
2.09. Method of Payment. Each payment under this Agreement and under
the Note shall be due not later than 2:00 p.m. Philadelphia time on the date
when due and shall be made in lawful money of the United States to the Bank in
immediately available funds. The Borrower hereby authorizes the Bank, and the
Bank shall, debit the Account for the amount of each payment under this
Agreement and under the Note not later than 2:00 p.m. Philadelphia time on the
date such payment becomes due under this Agreement or the Note. The foregoing
rights of the Bank to debit the Account shall be in addition to, and not in
limitation of, any rights of set-off that the Bank may have under the Loan
Documents and any other rights and remedies of the Bank under the Loan Documents
or law and do not in any manner limit the provisions of Section 6.01. Whenever
any payment to be made under this Agreement or under the Note shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest.
2.10. Illegality. Notwithstanding any other provision in this
Agreement, if the adoption of any applicable law, rule, or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank, or comparable agency shall make it unlawful or
impossible for the Bank to make or maintain any LIBOR Loan, then upon notice to
the Borrower by the Bank the LIBOR Loan shall be converted to a Base Rate Loan
either (1) immediately upon demand of the Bank if such change or compliance with
such request, in the reasonable judgment of the Bank, requires immediate
conversion; or (2) upon the earlier of (i) the expiration of the Interest Period
for such LIBOR Loan and (ii) the effective date of any such change or request.
2.11. Disaster. Notwithstanding anything to the contrary herein, if the
Bank determines (which determination shall be conclusive) that:
(1) quotations of interest rates for the relevant deposits
referred to in the definition of LIBOR Rate are not being provided in the
relevant amounts or for the relative maturities for purposes of determining the
rate of interest on a LIBOR Loan as provided in this Agreement; or
(2) the relevant rates of interest referred to in the
definition of LIBOR Rate upon the basis of which the rate of interest, for such
type of Loan is to be determined do not accurately cover the cost to the Bank of
making or maintaining such type of Loan,
then the Bank shall give notice thereof to the Borrower whereupon until the Bank
notifies the Borrower that the circumstances giving rise to such suspension no
longer exist, (a) the obligation of the Bank to maintain a LIBOR Loan shall be
suspended immediately or, if the Loan is then outstanding as a LIBOR Loan, from
the last day of the Interest Period for such LIBOR Loan; and (b) if the Loan is
then outstanding as a LIBOR Loan, the Borrower shall
8
convert such LIBOR Loan to a Base Rate Loan on the last day of the Interest
Period for such LIBOR Loan.
2.12. Increased Cost. The Borrower shall pay to the Bank from time to
time such amounts as the Bank may determine to be necessary to compensate the
Bank for any costs incurred by the Bank which the Bank determines are
attributable to its making or maintaining the Loan as a LIBOR Loan hereunder or
its obligation to make or maintain the Loan as a LIBOR Loan hereunder, or any
reduction in any amount receivable by the Bank under this Agreement or the Note
in respect of any such Loan or such obligation (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"),
resulting from any change after the date of this Agreement in United States
federal, state, municipal, or foreign laws or regulations (including Regulation
D) or the adoption or making after such date of any interpretations, directives
or requirements applying to a class of banks including the Bank of or under any
United States federal, state, municipal, or any foreign laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof
("Regulatory Change"), which: (a) changes the basis of taxation of any amounts
payable to the Bank under this Agreement or the Note in respect of any of such
Loan (other than taxes imposed on the overall net income of the Bank or its
partners for any of such Loans by the jurisdiction where the Bank is located);
or (b) imposes or modifies any reserve, special deposit, or similar requirements
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities of, the Bank; or (c) imposes any other condition affecting
this Agreement or the Note (or any of such extensions of credit or liabilities).
2.13. Bank's Determinations Conclusive; Notice of Amounts Due.
(1) Determination by the Bank of Additional Costs pursuant to
Section 2.12 shall be conclusive absent manifest error.
(2) The Bank will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Bank to compensation
pursuant to Section 2.12 as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation. Said notice shall be in
writing and shall specify the applicable Section or Sections of this Agreement
to which it relates and shall set forth the amount or amounts then payable
pursuant to Section 2.12 and the Bank's calculation of such amount or amounts.
The Borrower shall pay the Bank the amount shown as due on any such notice
within 10 days after its receipt of the same.
(3) Failure on the part of the Bank to demand compensation for
Additional Costs with respect to any period pursuant to Section 2.12 shall not
constitute a waiver of the Bank's right to demand compensation with respect to
such period or any other period.
9
3. CONDITIONS TO LENDING.
3.01. Conditions Precedent. The obligation of the Bank to
make the Loan is subject to the conditions precedent that the Bank shall have
received on or before the date hereof, all of the following, in form and
substance satisfactory to the Bank:
(a) A copy, certified in writing by the Secretary or an
Assistant Secretary of Xxxxxxxx, of (1) resolutions of the Board of Directors of
Borrower evidencing approval of this Agreement, the Note, the Loan Documents and
the other matters contemplated hereby and (2) each document evidencing any other
necessary corporate action with respect to this Agreement, the Note, the Loan
Documents and other matters contemplated hereby;
(b) A written certificate by the Secretary or an Assistant
Secretary of Xxxxxxxx as to the names and signatures of the officers of Xxxxxxxx
authorized to sign this Agreement, the Note and the other documents or
certificates of Borrower to be executed and delivered pursuant hereto. The Bank
may conclusively rely on, and be protected in acting upon, such certificate
until it shall receive a further certificate by the Secretary or an Assistant
Secretary of Borrower amending the prior certificate;
(c) A copy, certified in writing by the Secretary or an
Assistant Secretary of each Guarantor, of (1) resolutions of the Board of
Directors of such Guarantor evidencing approval of this Agreement, the Guaranty,
the other Loan Documents to which such Guarantor is a party and the other
matters contemplated hereby and (2) each document evidencing any other necessary
corporate action with respect to this Agreement, the Guaranty, the other Loan
Documents to which such Guarantor is a party and other matters contemplated
hereby;
(d) A written certificate by the Secretary or an Assistant
Secretary of each Guarantor as to the names and signatures of the officers of
such Guarantor authorized to sign this Agreement, the Guaranty and the other
documents or certificates of Guarantors to be executed and delivered pursuant
hereto. The Bank may conclusively rely on, and be protected in acting upon, such
certificate until it shall receive a further certificate by the Secretary or an
Assistant Secretary of each Guarantor amending the prior certificate;
(e) Original executed counterparts of this Agreement, the
Security Agreement, the Mortgage, the Guaranty, the Note and other appropriate
documents;
(f) A certificate (dated the date of this Agreement) of an
Executive Vice President of Borrower certifying that the representations and
warranties in this Agreement are true and correct as of the date of this
Agreement and that no condition exists or event has occurred as of the date of
this Agreement that would constitute an Event of Default (whether upon the
giving of notice, passage of time or both);
10
(g) A certificate (dated the date of this Agreement) of an
Executive Vice President of each Guarantor certifying that the representations
and warranties in this Agreement are true and correct as of the date of this
Agreement and that no condition exists or event has occurred as of the date of
this Agreement that would constitute an Event of Default (whether upon the
giving of notice, passage of time or both);
(h) A favorable opinion of Xxxxxx, Xxxxx & Xxxxxxx LLP,
counsel for Xxxxxxxx and the Guarantors, in substantially the form approved by
Bank and as to such matters as Bank may reasonably request;
(i) The counsel fees of Bank in accordance with Section 8.03
of this Agreement;
(j) A certified copy of the minutes of the public hearing and
special meeting of the Board of Directors of the Industrial Development Board of
the City of Huntsville, held May 21, 1997, pursuant to which the Board of
Directors was authorized to execute and deliver to the Bank the Mortgage and
such other documents necessary for the Loan; and
(k) Such other approvals, opinions or documents as Bank may
reasonably request.
4. REPRESENTATIONS AND WARRANTIES
The Obligors hereby make the following representations and warranties
to Bank:
4.01. Good Standing. The Obligors and each of their Subsidiaries are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation; are duly qualified or
authorized to do business in each other jurisdiction in which they are required
to be so qualified or authorized because of the nature of their respective
business or properties, except where failure to be qualified or authorized to do
business could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on their financial condition or business;
and have the power to carry on their respective business and own their
respective properties as now conducted and owned.
4.02. Capital Stock. All of the issued and outstanding capital stock
of the Borrower is owned by Central Sprinkler Company. All of the issued and
outstanding capital stock of Central Sprinkler Company is owned by the Company.
The Borrower has no Subsidiaries. The Company's Common Stock, $.01 par value per
share, is registered pursuant to Section 12(g) of the Exchange Act and is
authorized for quotation in the National Association of Securities Dealers, Inc.
Automated Quotation System/National Market System.
11
4.03. Indebtedness. Neither the Obligors nor any of their Subsidiaries
are in default with respect to any of their existing indebtedness, and the
making and performance of their respective obligations under the Loan Documents
will not:
(a) (1) violate the provisions of their charter documents, or
(2) violate any applicable laws, ordinances, statutes, rules, regulations,
orders, injunctions, writs, or decrees of any governmental or political
subdivision or agency thereof, or of any court or similar entity established by
any thereof the sanctions and penalties resulting from which violations could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, or (3) be in conflict with, result in a breach of or result
(immediately, with the passage of time, or with the giving of notice and the
passage of time) in a default under any indenture, contract, agreement, or
instrument to which they are a party or by which it or any of their property is
bound, which conflicts, breaches or defaults could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect;
(b) result in the creation or imposition of any security
interest in, or lien or encumbrance upon, any of their assets other than as
contemplated by the Loan Documents; or
(c) require the consent or approval of or registration with
any governmental body, agency, authority, bureau, commission or court.
4.04. Authority. The Obligors have the power and authority to enter
into and perform the Loan Documents executed or to be executed by them, to incur
the obligations herein and therein provided for and have taken all proper and
necessary action to authorize the execution, delivery and performance of each of
said Loan Documents.
4.05. No Action, Notice, Claim, Litigation or Proceeding. There is no
action, notice, claim, litigation or proceeding before any court, governmental
instrumentality or administrative agency pending or, to the knowledge of the
officers of the Obligors, threatened against the Obligors or any of their
Subsidiaries, the outcome of which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
4.06. Compliance with Laws, Regulations. The Obligors and each of
their Subsidiaries, to the best of the Obligors' knowledge, have complied with
all laws, regulations or other requirements pertaining to the respective
businesses they conduct, including all Environmental Laws, except to the extent
that the failure to so comply could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and except as
described in the footnotes of the Company's consolidated financial statements
for the fiscal year ending October 31, 1996, copies of which have been delivered
to the Bank.
4.07. Title. The Obligors and each of their Subsidiaries have good and
marketable title to all of their respective properties and assets reflected in
the respective consolidating balance sheets of the Company and its consolidated
Subsidiaries for the fiscal year ended
12
October 31, 1996, heretofore furnished to the Bank, and to all properties and
assets acquired since the date of said financial statements.
4.08. Taxes. The Obligors and each of their Subsidiaries have filed or
have caused to be filed all tax returns and reports required by law to be filed,
and all taxes, assessments and other governmental charges (other than those
presently payable without penalty or interest and those for which the sanctions,
penalties and interest resulting from a failure to timely make payment could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect) upon them or any of their assets or income which are due and
payable, have been paid. Any charges, accruals and reserves on their books with
respect to federal income taxes for all fiscal periods to date are considered
adequate. There is no unpaid assessment against either of them for additional
federal income tax for any fiscal period (or any basis for a material unpaid
assessment) known to any of them.
4.09. Financial Statements. The consolidated balance sheets of the
Company and its consolidated Subsidiaries as of October 31, 1996, and October
31, 1995, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the fiscal years in the three-year period
ended October 31, 1996, were prepared in accordance with GAAP, consistently
applied, and fairly and accurately present the financial condition of the
Company and its consolidated Subsidiaries as of October 31, 1996 and October 31,
1995, and the results of their operations for the each of the fiscal years in
the three-year period ended October 31, 1996. Since October 31, 1996, there has
been no material adverse change in the financial condition or operations of the
Company and its Subsidiaries taken as a whole, except as otherwise disclosed to
the Bank in writing prior to the date hereof. Except as disclosed on Schedule
4.09, the Company and its consolidated Subsidiaries do not possess any "loss
contingency" (as that term is defined in Financial Accounting Standards Board,
Statement of Financial Accounting Standards No. 5 - "FASB 5") which is not
accrued, reflected, or reserved against in their balance sheet or disclosed in
the footnotes to such balance sheet.
4.10. Indebtedness. Neither the Obligors nor any of their Subsidiaries
are liable to any Person for indebtedness for money borrowed other than as
disclosed in the consolidated balance sheet of the Company and its consolidated
Subsidiaries as of October 31, 1996, the notes thereto or as otherwise disclosed
to the Bank in writing prior to the date hereof.
4.11. Solvency, Capital. After giving effect to the transactions
contemplated by this Agreement, (a) the present fair salable value of the assets
of the Obligors are in excess of the amount that will be required by them to pay
their probable liability on their existing debts as such debts become absolute
and matured, (b) the property remaining in the hands of the Obligors is not an
unreasonably small amount of capital, and (c) the Obligors are able to pay, and
do not intend to take or fail to take any action such that they will be unable
to pay, their debts as they mature.
13
4.12. Information. All information heretofore furnished by the Obligors
to the Bank orally or in writing for purposes of or in connection with the Loan
Documents or the borrowing contemplated thereby is true and accurate in every
material respect or based upon reasonable estimates on the date as of which such
information is stated or certified.
4.13. Margin Stock. The Borrower does not intend to use any of the
proceeds of the Loan to purchase or carry "margin stock" as that term is defined
in Regulation U published by the Board of Governors of the Federal Reserve
System (12 CFR ss. 221).
4.14. Untrue Statement. No representation or warranty contained herein
or in any certificate or other document furnished by any Obligor pursuant to
this Agreement or the Guaranty contains any untrue statement of material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made.
5. COVENANTS.
The Obligors, for themselves and in certain cases for their
Subsidiaries, hereby make the following covenants for the benefit of the Bank:
5.01. Financial Statements, Reports. The Obligors will furnish to the
Bank:
(a) Within 90 days after the end of each of the first three
fiscal quarters of each fiscal year of the Company and its consolidated
Subsidiaries, internally prepared consolidated financial statements of the
Company and its consolidated Subsidiaries, including consolidated balance sheets
and related consolidated statements of income, shareholders' equity and cash
flows of the Company and its consolidated Subsidiaries, certified by the Chief
Financial Officer of the Company as having been prepared in accordance with
GAAP, consistently applied, together with a certificate of the Chief Financial
Officer of the Company, dated as of the date of submission of such financial
statements to the Bank, (i) to the effect that such officer has re-examined the
terms and provisions of the Loan Documents and that at the date of such
certificate, during the periods covered by such financial statements and as of
the end of such periods, the Borrower or such Guarantor, as the case may be, is
not, or was not, in default in the fulfillment of any of the terms, covenants,
provisions and conditions of the Loan Documents and that no default or Event of
Default is occurring or has occurred as of the date of such certificate, during
such periods and as of the end of such periods, or if the signer is aware of any
default or Event of Default, such officer shall disclose in such statement the
nature thereof, its period of existence and what action, if any, the Borrower or
such Guarantor, as the case may be, has taken or proposes to take with respect
thereto and (ii) stating whether the Borrower or such Guarantor, as the case may
be, is in compliance with Sections 5.01 through 5.14, as applicable, and setting
forth, in sufficient detail, the information and computations required to
establish such compliance during the period covered
14
by the financial statements then being furnished and as of the end of such
period (a "Compliance Certificate"); and (iii) a management-prepared
consolidating worksheet for the Company and its consolidated Subsidiaries;
(b) Within 120 days after the close of each fiscal year of the
Company and its consolidated Subsidiaries, consolidated financial statements of
the Company and its consolidated Subsidiaries, including consolidated balance
sheets and related consolidated statements of income, shareholders' equity and
cash flows, all in reasonable detail, together with all supporting schedules and
notes, and prepared in accordance with GAAP consistently applied, and
accompanied by an opinion thereon by independent certified public accountants
acceptable to the Bank and a Compliance Certificate of the Chief Financial
Officer of the Company; and
(c) With reasonable promptness, such other information
relating to the business or financial condition of the Borrower and each
Guarantor as the Bank may reasonably request from time to time.
5.02. Indebtedness, Taxes, Insurance, etc. The Obligors will, and will
cause each of their Subsidiaries to:
(a) pay all of their indebtedness and obligations promptly and
in accordance with the terms thereof, except where the failure to pay any
indebtedness or obligation (other than to the Bank) could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;
(b) promptly pay and discharge all taxes, assessments, and
governmental charges or levies imposed upon it or upon their income and profits,
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 property or any part thereof; provided, however, that they need
not pay and discharge any such indebtedness, obligation, 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 indebtedness, obligation, tax,
assessment, charge, levy or claim;
(c) do all things reasonably necessary to preserve and keep in
full force and effect their corporate existence, material rights and franchises,
comply with all applicable laws and maintain and enforce all of their licenses,
patents and trademarks;
(d) conduct and operate their business substantially as
conducted and operated during the present and preceding calendar years;
15
(e) reasonably preserve all of their business and property,
keep the same in good repair, working order and condition, and make from time to
time all 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;
(f) at all times keep their insurable properties adequately
insured (in amounts and for such risks as may be required by law or as may be
customary for businesses of a similar nature under similar circumstances), and
maintain necessary workmen's compensation insurance, and maintain such other
insurance as may be required by law or as may be customary for businesses of a
similar nature under similar circumstances;
(g) keep books and records reflecting all of their business
affairs and transactions in accordance with GAAP consistently applied and permit
the Bank, or their agents, employees or representatives, on twenty-four (24)
hours prior notice, to inspect their books and records at any reasonable time
during regular business hours; provided that the Bank shall keep all information
obtained from such inspections confidential and, except as required by law, will
not disclose it to any Person unless the prior written consent of the Borrower
or the Guarantor, as applicable, is obtained or unless such information is
otherwise publicly available; and
(h) comply with all laws, rules, regulations and orders
applicable to it or their properties, including Environmental Laws, except to
the extent that the failure to comply with any laws, rules, regulations and
orders or the sanctions and penalties resulting from such failure, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
5.03. Ownership. The Company will continue to own directly or
indirectly all of the issued and outstanding capital stock of the Central
Sprinkler Company and Central Sprinkler Company will continue to own directly or
indirectly all of the issued and outstanding capital stock of the Borrower,
provided that (a) Central Sprinkler Company may transfer all of the outstanding
shares of the capital stock of the Borrower to the Company and (b) so long as no
Event of Default has occurred and is continuing, Castings may merge or
consolidate with Central Sprinkler Company or the Company.
5.04. Management. The Company will continue to be actively managed by
Xxxxxx X. Xxxxx as Chief Executive Officer; but in the event that Xxxxxx X.
Xxxxx shall cease to function in such capacity, he shall be replaced within 90
days by an individual selected by the Company and reasonably satisfactory to the
Bank.
5.05. Securities and Exchange Commission. The Company shall
simultaneously file with the Securities and Exchange Commission and the Bank all
reports required to be filed by the Company pursuant to the Exchange Act and the
rules and regulations promulgated thereunder as and when due.
16
5.06. Maintenance of Account. The Borrower shall maintain a deposit
account (the "Account") at the Bank continuously until all obligations of the
Borrower under this Agreement and the Note have been satisfied in full.
5.07. Litigation, Violation of Laws, etc. The Obligors shall, and
shall cause each of their Subsidiaries to, promptly notify the Bank of (a) any
litigation or administrative proceeding to which it is a party or of which it or
its property is subject, if it involves a claim for an amount or could
reasonably be expected to result in a loss equal to or greater than $5,000,000
and (b) any business development (including labor disputes and changes in
condition, financial or otherwise), any violation of any law, rule, regulation
or order applicable to it or its property, and any defaults under any indenture,
contract, agreement or instrument (including, without limitation, this
Agreement) to which it is a party or by which its property is bound, which
developments, violations and defaults could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
5.08. ERISA. (a) The Obligors shall, and shall cause each of their
Subsidiaries to, provide the Bank with all pertinent information relating to a
"reportable event" (as defined in section 4043 of ERISA) within 30 days after
the occurrence of such event.
(b) The Obligors will not, and will not cause any of their
Subsidiaries to, incur or suffer to exist any "accumulated funding deficiency"
(as defined in section 302 of ERISA) or any "reportable event" (as defined in
section 4043 of ERISA) under or in respect of any employee defined benefit plan
(as defined in ERISA) established or maintained by any Obligor.
5.09. Liens. The Obligors will not, and will not cause any of their
Subsidiaries to create, incur, assume or suffer to exist any lien, security
interest, mortgage, pledge or other encumbrance (hereinafter referred to as
"Liens") with respect to any of their properties, now owned or hereafter
acquired, without the prior written consent of the Bank, except
(a) Liens in favor of the Bank;
(b) Liens (i) in existence on the date of, and disclosed (A)
in the Company's Annual Report on Form 10-K for the fiscal year ended October
31, 1996; (B) in the Company's Quarterly Report on Form 10-Q for the period
ended January 31, 1997; (C) on Schedule 5.09 attached hereto; or (D) otherwise
to the Bank in writing on or prior to the date of this Agreement; provided
however, that such Liens permitted hereunder shall not include the extension
thereof to other property, but shall include those of such Liens that may be
renewed or maintained in effect to secure indebtedness that is renewed, extended
or refinanced in accordance with Section 5.10(a);
(c) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or, if due and payable, if they are being
contested in good faith by
17
appropriate proceedings promptly initiated and diligently conducted and for
which appropriate reserves are maintained and so long as no foreclosure,
distraint, sale or other similar proceedings shall have been commenced with
respect thereto;
(d) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than thirty (30) days or which are being contested in good
faith by appropriate proceedings promptly initiated and diligently conducted and
for which appropriate reserves have been established and so long as no
foreclosure, distraint, sale or other similar proceedings shall have been
commenced with respect thereto;
(e) Liens under workmen's compensation, unemployment
insurance, social security, or similar legislation;
(f) Liens, deposits, or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), or public or statutory
obligations; surety, indemnity, performance, or other similar bonds; or other
similar obligations arising in the ordinary course of business;
(g) judgment and other similar Liens arising in connection
with court proceedings, provided the execution or other enforcement of such
Xxxxx is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings promptly initiated and
diligently conducted and for which adequate reserves have been established;
(h) easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use, and enjoyment of the property or assets encumbered thereby in
the normal course of their business or materially impair the value of the
property subject thereto; or
(i) Liens created to secure Additional Secured Indebtedness
permitted under Section 5.10(f), provided that the book value of the properties
subject to such Liens shall not exceed $10,000,000 in the aggregate at any time
and provided further that no such Liens may encumber the collateral held by the
Bank under the Security Agreement and the Mortgage.
5.10. Indebtedness. The Obligors will not, and will not cause any of
their Subsidiaries to, incur, create or permit to exist any indebtedness without
the prior written consent of the Bank, except that the Borrower may incur,
create or permit to exist the following:
(a) existing indebtedness disclosed in the Company's Form 10-Q
for the period ended January 31, 1997, or listed and described on Schedule 5.10
attached hereto and
18
renewals, extensions and refinancings thereof, provided that the effective rate
of amortization thereof is not increased by any such renewal, extension or
refinancing and any such renewal extension or refinancing shall not be on terms
less favorable to the Obligors and their Subsidiaries than those provided in the
existing agreements for such indebtedness;
(b) indebtedness to the Bank;
(c) indebtedness subordinated to the indebtedness evidenced by
the Loan Documents on terms and conditions satisfactory to the Bank;
(d) indebtedness arising from purchase money mortgages or
capital leases for equipment financing;
(e) acquisition indebtedness provided by the seller in any
transaction, provided that such indebtedness is unsecured and is treated as
current debt for purposes of compliance with the covenants contained in this
Agreement and neither the Obligors nor any of their Subsidiaries make any
covenant (other than to repay such indebtedness) in incurring such indebtedness;
(f) additional secured indebtedness, provided that such
indebtedness shall not exceed $10,000,000 in the aggregate at any time
("Additional Secured Indebtedness"); and
(g) indebtedness under unsecured lines of credit or unsecured
revolving lines of credit, provided that such indebtedness shall not exceed
$55,000,000 in the aggregate for Obligors and their Subsidiaries at any time;
provided, however, that any indebtedness permitted under this Section 5.10(g)
shall be on terms and conditions reasonably acceptable to Bank. The terms and
conditions set forth in the proposed Commitment from CoreStates Bank, N.A. dated
March 17, 1997, as amended May 23, 1997, are acceptable to the Bank and will
continue to be acceptable so long as they are not changed in a way that is
materially adverse to the Obligors and their Subsidiaries.
5.11. Guarantees. The Obligors will not, and will not cause any of
their Subsidiaries to, guarantee or otherwise become liable or responsible for
indebtedness or other obligations of any other Person, contingent or otherwise,
without the prior written consent of the Bank, except that the Borrower may
incur, create or permit to exist the following:
(a) the existing guarantees disclosed in the Company's Form
10-Q for the period ended January 31, 1997 or listed and described on Schedule
5.11 attached hereto, as such guarantees may be extended or renewed in
connection with the renewal, extension or refinancing of indebtedness in
accordance with Section 5.10(a);
19
(b) by endorsement of negotiable instruments for deposit in
the normal course of business;
(c) guarantees issued in favor of the Bank;
(d) guarantees executed and delivered in connection with
unsecured lines of credit or unsecured revolving lines of credit permitted under
Section 5.10(g), provided that the amount of the indebtedness guaranteed shall
not exceed $55,000,000 in the aggregate for Obligors and their Subsidiaries at
any time; and
(e) additional unsecured guarantees for indebtedness, provided
that the amount of indebtedness guaranteed shall not exceed $5,000,000 in the
aggregate at any time.
5.12. Loan, Advance, Investment, Sale of Assets, Merger. The Obligors
shall not, and shall not cause any of their Subsidiaries to, without the prior
written consent of the Bank, (a) make any loan, advance or investment, except as
is customary and in the ordinary course of business; (b) sell, discount or
otherwise dispose of notes and accounts receivable except for the purpose of
collection in the ordinary course of business; (c) sell, lease, transfer or
otherwise dispose of any of their properties or assets, other than in the
ordinary course of business; or (d) consolidate or merge with or into any other
entity, except as permitted by Section 5.03 hereof.
5.13. Financial Covenants.
(a) Tangible Net Worth. The Company and its consolidated
Subsidiaries will maintain at all times a consolidated Tangible Net Worth of at
least $48,000,000, to be measured quarterly in connection with the delivery of
the financial statements pursuant to Section 5.01.
(b) Current Ratio. The Company and its consolidated
Subsidiaries will maintain at all times a ratio of Current Assets to Current
Liabilities of (1) not less than 1.40 to 1.00 from the date of this Agreement
through October 30, 1997 and (2) not less than 1.75 to 1.00 thereafter. The
current ratio is to be measured quarterly in connection with the delivery of the
financial statements pursuant to Section 5.01.
(c) Quick Ratio. The Company and its consolidated Subsidiaries
will maintain at all times (1) a ratio of (A) cash, Investments and accounts
receivable to (B) Current Liabilities of (i) not less than 0.69 from the date of
this Agreement through October 30, 1997, and (ii) not less than 0.87 to 1.00
thereafter, and (2) cash and Investments in an amount not less than $5,000,000;
each to be measured quarterly in connection with the delivery of the financial
statements pursuant to Section 5.01.
20
(d) Ratio of Funded Indebtedness to Tangible Net Worth. The
Company and its consolidated Subsidiaries will maintain at all times a ratio of
(1) Consolidated Funded Indebtedness, to (2) consolidated Tangible Net Worth of
(A) not greater than 1.37 to 1.00 from the date of this Agreement through
October 30, 1997, and (B) not greater than 1.20 to 1.00 thereafter; to be
measured quarterly in connection with the delivery of the financial statements
pursuant to Section 5.01.
5.14. Subsequent Credit Terms. The Borrower will notify Lender in
writing not less than five (5) Business Days prior to entering into any new
funded debt obligation or amendment or modification of any existing funded debt
obligation, of any new financial covenant entered as a result of the new or
existing funded debt obligation. At Lender's discretion, said covenants will be
included in this Agreement.
6. EVENTS OF DEFAULT AND REMEDIES.
6.01. Events of Default and Remedies. Each of the following shall be
an event of default ("Events of Default"):
(a) the Borrower shall fail to pay the principal, or interest
on, the Note or any other amount due thereunder or under this Agreement within
five days after the date when such payment was due; or
(b) the Obligors shall fail to observe or perform any term,
covenant or agreement contained in the Loan Documents (other than the Note) and
such failure shall continue uncured for a period of 30 days after the earlier of
(1) the date of which the Bank has given written notice of such failure to the
relevant Obligor, or (2) the date on which an executive officer of any Obligor
otherwise became aware of such failure; or
(c) any representation or warranty made by any Obligor in this
Agreement or the other Loan Documents, or otherwise in writing in connection
with the Loan, shall prove to have been false, incorrect or misleading in any
material respect on the date when made; or
(d) any of the Loan Documents shall cease for any reason to be
in full force and effect or the enforceability thereof shall be challenged or
disputed by any Obligor; or
(e) any Obligor or any of their Subsidiaries becomes insolvent
or makes an assignment for the benefit of creditors, or any petition is filed by
or against any Obligor or any of their Subsidiaries under any provision of any
law or statute alleging that such Person is insolvent or unable to pay its debts
as they mature; or
(f) the entry of any judgment against any Obligor or any of
their Subsidiaries in an amount exceeding $750,000 or the issuing of any
attachment or garnishment
21
against any property of any Obligor or any of their Subsidiaries in respect of
indebtedness of more than $750,000; or
(g) any Obligor or any Subsidiary of any Obligor shall fail to
pay when due (after giving effect to any grace period applicable thereto), any
principal of, premium (if any) on or interest on any other indebtedness of such
Obligor or Subsidiary, or the occurrence of any default under any mortgage,
agreement or other instrument under or pursuant to which such indebtedness is
incurred, secured, or issued, and continuance of such default beyond the period
of grace, if any, allowed with respect thereto; or
(h) any dissolution, merger, consolidation or reorganization
of any Obligor or any of their Subsidiaries, except as expressly permitted by
this Agreement and except that any Subsidiary of the Company may merge into or
consolidate with or transfer assets to any other Subsidiary of the Company; or
(i) any information furnished in writing to the Bank by any
Obligor in connection with the Loan or the Guaranty shall prove to have been
false, incorrect or misleading in any material respect on the date when made;
then, and in any such event, the Note and all interest thereon and all other
amounts payable under this Agreement shall become and be immediately due and
payable upon declaration to such effect delivered by the Bank to the Borrower;
provided that upon the happening of an Event of Default specified in section
6.01(e), the Note and all interest thereon and all other amounts payable
thereunder shall be immediately due and payable without declaration or other
notice to any Obligor. Thereupon, the Bank shall have the right to charge and
accrue interest at the applicable Default Rate and shall have all of the rights
and remedies available to it under the Loan Documents or otherwise at law or in
equity. The Obligors expressly waive any presentment, demand, protest or further
notice of any kind.
6.02. Set-Off. Without limiting the provisions of Section 6.01, as
security for the payment by the Borrower to the Bank of all amounts due under
the Note and this Agreement, the Borrower hereby grants to the Bank a lien and
security interest upon and in any property, credits, securities or monies
(whether matured or unmatured) of the Borrower which may at any time be
delivered to, or be in the possession of, or held by the Bank in any capacity
whatsoever, including the balance of the Account and all other accounts
maintained by the Borrower with the Bank from time to time. The Borrower
authorizes the Bank, in case of an occurrence of an Event of Default, at the
Bank's option, at any time and from time to time, to apply to the payment of any
or all of the amounts due under the Note and this Agreement any and all monies,
credits, claims or deposit balances now or hereafter in the possession or
control of the Bank belonging to or owned by the Borrower. The rights of the
Bank under this Section 6.02 are in addition to all other rights and remedies
available to the Bank, including other rights of set-off that the Bank may have.
22
7. NOTICES.
7.01. Notices. Any notices, statements, certificates, consents or
other documents required or permitted by the Loan Documents shall be in writing
and shall be given to such party at its address or telecopy number below or at
such other address or telecopy number as shall be designated by such party in a
notice to the other party complying with the terms of this Section 7.01. Unless
this Agreement specifically provides otherwise, all notices and other
communications will be effective (A) if given by mail, when received, (B) if
given by telecopy, when such telecopy is transmitted to the appropriate telecopy
number and the sender receives confirmation of transmission during normal
business hours, or (C) if given by any other means, when delivered at the
appropriate address.
If to any Obligor:
Xxxxxx X. Xxxxx
Executive Vice President
Finance & Administration
c/o Central Sprinkler Corporation
000 X. Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Phone: 000-000-0000
FAX: 000-000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Xxxxxxx
Xxxxxx, Xxxxx & Xxxxxxx LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Phone: 000-000-0000
FAX: 000-000-0000
If to Brown Brothers Xxxxxxxx & Co:
Xxxxxx X. Xxxxxxxx
Brown Brothers Xxxxxxxx & Co.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Phone: 000-000-0000
FAX: 000-000-0000
23
with a copy to:
Xxxxxx X. Xxxxxx, III, Esquire
Drinker Xxxxxx & Xxxxx
Suite 300, 0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Phone: 000-000-0000
FAX: 000-000-0000
8. MISCELLANEOUS.
8.01. Governing Law; Consent to Jurisdiction; WAIVER OF RIGHT TO TRIAL
BY JURY. This Agreement and the other Loan Documents shall be governed in all
respects by the law of the Commonwealth of Pennsylvania. The parties consent to
the jurisdiction of the courts of Pennsylvania and of the courts of the United
States sitting in Pennsylvania in any litigation concerning this Agreement and
the Loan Documents and waive any objection based on venue or inconvenient forum.
Service of the summons and complaint and any other process may be served in any
such suit, action or proceeding by sailing or delivering a copy of the process
to the Borrower at its address specified in, or provided to the Bank pursuant
to, this Agreement and in accordance with Section 7.01. The Borrower agrees that
a final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
or provided by law. The Borrower irrevocably waives the right to trial by jury
in any such suit, action or proceeding and the right to judgment for, and to
collect, damages in any such suit, action or proceeding other than for losses
and expenses actually incurred or paid.
8.02. Entire Agreement. This Agreement and the other Loan Documents
executed and delivered pursuant hereto, constitute the entire agreement between
the parties relating to the subject matter hereof and the transactions
contemplated hereby.
8.03. Fees, Costs and Expenses. The Borrower agrees to pay all
reasonable attorneys fees associated with the preparation in executable form of
the Loan Documents in form satisfactory to the Bank (excluding the preparation
of the IRB and related documents, and fees and expenses relating to the
Mortgage) in the amount of $5,000.00. The Borrower further agrees to pay (a) all
reasonable out of pocket expenses including reasonable counsel fees and
expenses, incurred by the Bank in connection with any negotiation and further
documentation of the Loan Documents; (b) the preparation of the IRB and related
documents; (c) all reasonable out of pocket expenses, including reasonable
attorneys fees and expenses, incurred by the Bank in connection with the
preparation and recording of the Mortgage; (d) all reasonable out of pocket
expenses including reasonable counsel fees and expenses, incurred by the Bank in
connection with the administration of the Loan and in connection with any
amendments to or modifications from time to time of the Loan Documents; (e) all
costs of
24
collection (including reasonable counsel fees) if default is made in the payment
of amounts due under the Note or under the Loan Documents; (f) all recording and
other taxes and all filing fees, if any, on any documents executed and delivered
or transactions effected pursuant to the Loan Documents; and (g) all Alabama
taxes imposed on Bank or its partners if the Loan and the transactions
contemplated hereby require the Bank to qualify to do business in the State of
Alabama and thereby subject the Bank or its partners to taxation by the State of
Alabama.
8.04. Severability. In case any one or more of the provisions
contained in any Loan Document should be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby, and any prohibition or unenforceability of any provision of
such Loan Document in any jurisdiction shall not render unenforceable such
provisions in any other jurisdiction.
8.05. Survival. All covenants, agreements, representations and
warranties made herein and in the other Loan Documents and in any certificates
delivered pursuant hereto shall survive the making by the Bank of the Loan(s)
and the execution and delivery to the Bank of the Loan Documents and shall
continue in full force and effect for so long as any amount due under the Note
or any amount due hereunder is outstanding and unpaid.
8.06. Binding Effect. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of the Obligors and the Bank and
their respective successors and assigns, except that no Obligor may assign,
transfer or convey any of Documents or its rights thereunder without the prior
written consent of the Bank.
8.07. Modification or Waiver. No modification or waiver of any
provision of this Agreement or any other Loan Document, nor consent to any
departure by any Obligor 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.
8.08. Cumulative Effect. Each and every right granted to the Bank
hereunder and under the other Loan Documents, or allowed it by law or equity,
shall be cumulative and may be exercised from time to time. No failure on the
part of the Bank to exercise, and no delay in exercising, any right shall
operate as a waiver thereof, nor shall any single or partial exercise by the
Bank of any right preclude any other or future exercise thereof or the exercise
of any other right.
8.09. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
agreement.
[remainder of page left intentionally blank]
25
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date above first written.
CENTRAL CPVC CORPORATION
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
CENTRAL SPRINKLER CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
CENTRAL SPRINKLER COMPANY
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
CENTRAL CASTINGS CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
BROWN BROTHERS XXXXXXXX & CO.
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxx
Deputy Manager
26
TERM LOAN NOTE
$7,500,000 May 30, 1997
FOR VALUE RECEIVED, the undersigned, CENTRAL CPVC CORPORATION, an
Alabama corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
BROWN BROTHERS XXXXXXXX & CO. (the "Bank") (i) the principal sum of $7,500,000
as provided in the Loan Agreement (as hereinafter defined), (ii) interest on the
outstanding principal balance of this Note from the date of this Note, as
provided in Section 2.02 of the Loan Agreement (as hereinafter defined) and
(iii) if required pursuant to Section 2.06 of the Loan Agreement, interest at
the Default Rate on the unpaid principal balance of this Note, any other amounts
owing under the Loan Agreement, and (to the extent permitted by law) on any
overdue installment of interest. Payments of the principal of and interest on
this Note shall be made in lawful money of the United States of America, in
immediately available funds, and in the manner and at the place provided in
Section 2.09 of the Loan Agreement.
This Note is the "Note" referred to in, and is entitled to the benefits
of, the term loan agreement, dated of even date herewith, among the Borrower and
the Bank (said term loan agreement, as it may be hereafter amended, renewed or
extended, is herein referred to as the "Loan Agreement"). Reference is made to
the Loan Agreement for a statement of such benefits. Capitalized terms not
otherwise defined herein have the meanings ascribed to them in the Loan
Agreement. The Loan Agreement, among other things, contains provisions for
acceleration of the maturity of this Note upon the happening of certain stated
events and also for prepayments on account of principal hereof prior to the
maturity of this Note upon the terms and conditions specified in the Loan
Agreement.
This Note shall be governed by the laws of the Commonwealth of
Pennsylvania.
CENTRAL CPVC CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
27
SCHEDULE 4.09 (1 OF 2)
Loss Contingencies
------------------
In October 1996, the Company recorded an unusual non-recurring charge to the
income statement. Discussion is presented on Schedule 6.6 Contingencies.
Disclosure was made in the SEC Form 10-Q dated July 31, 1996.
5-13
SCHEDULE 4.09 (2 OF 2)
15. Commitments and Contingent Liabilities:
Unusual Non-Recurring Omega[TM] Charge
The Company has become aware of installation problems
in certain steel pipe systems utilizing Omega[TM]
sprinklers. The addition of stop-leak products or the
presence of excessive hydrocarbons has been found in
certain circumstances to impair the operation of such
sprinklers. In order to assess the extent of the
problems, the Company has strongly recommended that a
sampling of Omega[TM] sprinklers from each such
installed system be returned to the Company for
testing. Based on the results of the tests, the
Company will review each situation with the building
owner and develop an appropriate action plan, as
needed.
The Company did not install such sprinklers and
installation of the sprinklers is the responsibility
of the building owner. However, the Company's
primary concern is to offer the finest possible fire
protection to building owners while working within
its sales and warranty policy to maintain customer
goodwill. In the fourth quarter of 1996, the Company
recorded an unusual non-recurring charge in cost of
sales of $3,750 ($2,362 net of tax or $.72 per share)
for the estimated costs to be incurred by the Company
for this program. The Company will continue to
monitor the results of the tests and costs incurred.
SCHEDULE 5.09
Liens
-------------
All items disclosed in the January 31, 1997 financial statements included with
Form 10-Q and the notes thereto and October 31, 1996 financial statements
included with Form 10-K and the notes thereto, as well as the following (certain
of which may be included in such financial statements and notes).
Company:
-------
1. Mortgage Lien - CoreStates Security Interest on
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxx, XX
2. All Warehouse Leases - lien upon property held at warehouse
3. All Auto Leases - lien upon autos under lease
4. All Auto Loans - lien upon autos subject to loan
5. Lien of First Union National Bank ("First Union") in
and to any property, credits, securities or monies in
the possession of First Union from time to time, as
provided in Section 6.02 of the Term Loan Agreement.
6. Mortgage Lien - CoreStates Security Interest on
00 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX
7. Xxxxxx Financial Services - lien upon one copier under lease
Central CPVC Corporation:
-------------------------
*1. Mortgage Lien - CoreStates Security Interest on
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX
*(to be terminated promptly following repayment from the proceeds
of the Brown Brothers term loan)
5-12
SCHEDULE 5.10
Indebtedness
------------
All items disclosed in the January 31, 1997 financial statements included with
Form 10-Q and the notes thereto and October 31, 1996 financial statements
included with Form 10-K and the notes thereto, as well as the following
(certain of which may be included in such financial statements and notes).
Company 5-28-97 Maturity
Limit Description Lender Balance Date
----- ----------- ------ ------- ----
1. $25,000,000 Line of Credit CoreStates $24,364,000 on going
2. 10,000,000 Line of Credit First Union 10,000,000 on going
3. 5,000,000 Line of Credit Brown Brothers 5,0000,000 on going
4. 5,000,000 Term Note CoreStates 500,000 00-00-00
5. 7,275,000 Term Note Central ESOP 6,817,000 00-00-00
6. 1,100,000 Mortgage Loan CoreStates 354,000 00-00-00
7. 10,000,000 Term Loan First Union 6,916,000 00-00-00
8. 10,000,000 Term Loan CoreStates 7,000,000 00-00-00
9. 688,000 Mortgage Loan CoreStates 642,000 00-00-00
10. 11,000,000 L/C - IRB F. Union/CoreSt. 10,450,000 00-00-00
Central CPVC Corp.
------------------
*1. $3,500,000 Demand Note CoreStates $3,500,000 Demand
Spraysafe Ltd:
--------------
1. $4,223,700 Line of Credit Nat'l Westminster 2,181,100 on going
2. 1,110,000 Term Note " " 995,300 7 years
5-8-1
* (to be repaid with the proceeds of the Brown Brothers term loan)
SCHEDULE 5.11
Guarantees
----------
All items disclosed in the January 31, 1997 financial statements included with
Form 10-Q and the notes thereto and October 31, 1996 financial statements
included with Form 10-K and the notes thereto, as well as the following (certain
of which may be included in such financial statements and notes).
Company Obligation Maturity
Limit Beneficiary Balance Guaranteed Date
----- ----------- ------- ---------- ----
1. $16,411 Yong An Valve 16,411 Letter of Credit 5-30-97
2. 25,400 Bldrs United Corp. 25,400 Letter of Credit 6-1-97
3. 29,707 FuSan Machinery 29,707 - 6-15-97
Corp. and Castings
------------------
1. All debt of Spraysafe, Company, Central Castings, Central CPVC as well as
Warehouse Leases, Auto Leases of subsidiaries.
5-8-2
