CREDIT AGREEMENT
Among
CENTRAL SPRINKLER CORPORATION
CENTRAL SPRINKLER COMPANY
CENTRAL CASTINGS CORPORATION
CENTRAL CPVC CORPORATION
CENTRAL SPRINKLER EXPORT CORPORATION,
Collectively as Borrowers,
and
THE LENDERS IDENTIFIED HEREIN,
and
CORESTATES BANK, N.A.,
as Agent
Dated: October 28, 1997
TABLE OF CONTENTS
Section Page
------- ----
SECTION 1. DEFINITIONS
1.1 General Provisions........................................................................... 1
1.2 Defined Terms................................................................................ 2
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT FACILITY
2.1 Revolving Credit Facility; Reduction in Revolving Credit
Commitment; Extension of Termination Date.................................................... 16
2.2 Revolving Credit Note........................................................................ 17
2.3 Interest Rate Elections...................................................................... 18
2.4 Inability to Determine LIBOR; Illegality..................................................... 19
2.5 Funding of Advances; Reduction in Revolving Credit
Commitment; Pro Rata Treatment............................................................... 20
2.6 Fees......................................................................................... 20
2.7 Loan Account................................................................................. 21
2.8 Computation of Interest...................................................................... 21
2.9 Maximum Legal Rate........................................................................... 21
2.10 Payments..................................................................................... 21
2.11 Application of Payments...................................................................... 22
2.12 Late Charges................................................................................. 22
2.13 Voluntary Prepayments........................................................................ 22
2.14 Yield Protection; Capital Adequacy........................................................... 23
2.15 Taxes........................................................................................ 23
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 Organization and Qualification............................................................... 24
3.2 Power and Authority.......................................................................... 25
3.3 Enforceability............................................................................... 25
3.4 Conflict with Other Instruments.............................................................. 25
3.5 Litigation................................................................................... 25
3.6 Title to Assets.............................................................................. 25
3.7 Licenses; Intellectual Property.............................................................. 25
3.8 Default...................................................................................... 26
3.9 Taxes........................................................................................ 26
3.10 Financial Condition.......................................................................... 26
3.11 ERISA........................................................................................ 26
3.12 Use of Proceeds.............................................................................. 27
3.13 Regulation U................................................................................. 27
3.14 No Notices; No Violations.................................................................... 27
3.15 Labor........................................................................................ 28
3.16 Group Health Plans........................................................................... 28
3.17 Material Transactions with Affiliates........................................................ 28
3.18 Environmental Matters........................................................................ 28
3.19 Fees......................................................................................... 28
3.20 Location of Collateral....................................................................... 28
3.21 Fictitious Names............................................................................. 28
3.22 Accuracy of Information...................................................................... 28
3.23 No Omissions................................................................................. 29
SECTION 4. CONDITIONS OF BORROWING
4.1 Initial Advance.............................................................................. 29
4.2 Subsequent Advances.......................................................................... 30
4.3 Satisfaction of Conditions................................................................... 31
SECTION 5. AFFIRMATIVE COVENANTS
5.1 Financial Statements; Reports................................................................ 31
5.2 Liabilities.................................................................................. 32
5.3 ERISA........................................................................................ 32
5.4 Notices...................................................................................... 33
5.5 Environmental Matters; Compliance with Laws.................................................. 33
5.6 Corporate Existence; Properties.............................................................. 35
5.7 Insurance.................................................................................... 35
(i)
5.8 Books and Records............................................................................ 36
5.9 Adjusted Current Ratio....................................................................... 36
5.10 Funded Debt To Total Capitalization.......................................................... 36
5.11 Minimum Cash and Investments................................................................. 36
5.12 Tangible Net Worth........................................................................... 36
5.13 Group Health Plans........................................................................... 36
5.14 Lender's Lien................................................................................ 36
5.15 Joinder by Future Subsidiaries............................................................... 36
5.16 Cross-Guaranty by Borrowers.................................................................. 37
5.17 Satisfactory Management...................................................................... 37
5.18 Location of Business......................................................................... 37
5.19 Location of Collateral....................................................................... 37
5.20 Landlord's Waivers........................................................................... 37
5.21 The Federal Assignment of Claims Act......................................................... 37
SECTION 6. NEGATIVE COVENANTS
6.1 Debt......................................................................................... 38
6.2 Liens........................................................................................ 39
6.3 Investments and Advances..................................................................... 40
6.4 Mergers, Consolidations...................................................................... 40
6.5 Disposition of Assets........................................................................ 40
6.6 Disposition of Accounts...................................................................... 41
6.7 Guaranty Obligations; Letters of Credit/Bankers'
Acceptances.................................................................................. 41
6.8 Sales and Lease-Backs........................................................................ 41
6.9 Continuance of Business...................................................................... 41
6.10 Transactions with Affiliates................................................................. 41
6.11 Handling of Hazardous Substances............................................................. 42
6.12 Use of Proceeds.............................................................................. 42
6.13 Removal and Protection of Collateral......................................................... 42
SECTION 7. EVENTS OF DEFAULT, REMEDIES
7.1 Events of Default............................................................................ 42
7.2 Acceleration................................................................................. 45
7.3 Exercise of Rights and Remedies by Agent..................................................... 45
7.4 Right of Setoff.............................................................................. 45
7.5 No Marshalling, Etc.......................................................................... 45
7.6 Remedies Cumulative.......................................................................... 45
7.7 Allocation of Payments After Event of Default................................................ 45
7.8 Sharing of Payments.......................................................................... 46
7.9 Interest on Overdue Amounts.................................................................. 46
SECTION 8. AGENCY PROVISIONS
8.1 Appointment.................................................................................. 46
8.2 Delegation of Duties......................................................................... 47
8.3 Exculpatory Provisions....................................................................... 47
8.4 Reliance on Communications................................................................... 47
8.5 Notice of Default............................................................................ 48
8.6 Non-Reliance on Agents and Other Lenders..................................................... 48
8.7 Indemnification.............................................................................. 48
8.8 Agent in Its Individual Capacity............................................................. 49
8.9 Successor Agent.............................................................................. 49
SECTION 9. MISCELLANEOUS
9.1 No Waiver; Cumulative Remedies............................................................... 49
9.2 Notices...................................................................................... 49
9.3 Payment of Expenses; Indemnification......................................................... 50
9.4 Payment of Expenses and Taxes................................................................ 51
9.5 Survival of Indemnification and Representations and
Warranties................................................................................... 51
9.6 Benefit of Agreement......................................................................... 51
9.7 Amendments, Waivers and Consents............................................................. 53
9.8 Construction................................................................................. 53
9.9 Severability................................................................................. 53
9.10 Confidentiality.............................................................................. 54
(ii)
9.11 Defaulting Lender............................................................................ 54
9.12 Waiver of Trial by Jury; Jurisdiction........................................................ 54
9.13 Actions Against Lenders; Release............................................................. 54
9.14 Performance by Lenders....................................................................... 55
9.15 Counterparts................................................................................. 55
9.16 Further Actions.............................................................................. 55
9.17 Entire Agreement............................................................................. 55
Table of Schedules .....................................................................................................
Table of Exhibits ......................................................................................................
(iii)
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into this 28th day
of October, 1997, by and among CENTRAL SPRINKLER CORPORATION, a Pennsylvania
corporation, CENTRAL SPRINKLER COMPANY, a Pennsylvania corporation, CENTRAL
CASTINGS CORPORATION, an Alabama corporation, CENTRAL CPVC CORPORATION, an
Alabama corporation, and CENTRAL SPRINKLER EXPORT CORPORATION, a Barbados
corporation, the LENDERS identified herein, and CORESTATES BANK, N.A., a
national banking association in its capacity as administrative agent for the
LENDERS.
BACKGROUND:
A. The Lenders have agreed to provide a revolving credit
facility in the maximum principal amount of Fifty-Five Million Dollars
($55,000,000) to the Borrowers, on the terms and subject to the conditions
hereinafter set forth.
B. CoreStates Bank, N.A. has been appointed by the Lenders to
serve as their administrative agent in connection with such revolving credit
facility, on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, covenant and agree as follows:
SECTION 1. DEFINITIONS.
1.1 General Provisions. Unless expressly provided otherwise in
this Agreement or in the Loan Documents, or unless the context requires
otherwise:
(a) all accounting terms used in this Agreement and
in the Loan Documents shall have the meanings given to them in accordance with
GAAP;
(b) all terms used herein and in the Loan Documents
that are defined in the Pennsylvania Uniform Commercial Code, as amended from
time to time, shall have the meanings set forth therein;
(c) all capitalized terms defined in this Agreement
shall have the defined meanings when used in the Loan Documents and in any other
documents made or delivered pursuant to this Agreement;
(d) the singular shall include the plural, the plural
shall include the singular, and the use of any gender shall include all genders;
(e) all references to any particular party defined
herein shall be deemed to refer to each and every Person defined herein as such
party individually, and to all of them, collectively, jointly and severally, as
though each were named wherever the applicable defined term is used;
(f) all references to "Sections," "Subsections,"
"Paragraphs" and "Subparagraphs" shall refer to provisions of this Agreement;
(g) all references to time herein shall mean Eastern
Standard Time or Eastern Daylight Time, as then in effect; and
(h) all references to sections, subsections,
paragraphs or other provisions of statutes or regulations shall be deemed to
include successor, amended, renumbered and replacement provisions.
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1.2 Defined Terms. As used herein, the following terms shall
have the meanings indicated, unless the context otherwise requires:
"Accumulated Funding Deficiency" shall have the
meaning ascribed to it in ss.302(a) of ERISA.
"Additional Costs" shall have the meaning ascribed to
it in Section 2.14(a).
"Adjusted Current Ratio" shall mean, as at any
applicable time and for the Borrowers, the ratio of (i) Current Assets
to (ii) (A) Current Liabilities plus (B) the outstanding principal
balance of the Revolving Credit Facility.
"Adjusted LIBOR Rate" shall mean, for and with
respect to any LIBOR Loan and LIBOR Period applicable thereto, (i) the
LIBOR Rate, plus (ii) the Applicable LIBOR Margin.
"Advance" or "Advances" shall mean, individually or
collectively, as appropriate, any and/or all advances under the
Revolving Credit Facility.
"Affiliate" shall mean, as to any Person:
(a) if such Person is an individual, any
(i) relative of such Person, (ii) partnership in which such Person is a
general partner, or (iii) corporation of which such Person is a
director, officer, or person in control;
(b) if such Person is a corporation, any
(i) director of such Person, (ii) officer of such Person, (iii) person
in control of such Person, (iv) partnership in which such Person is a
general partner, (v) joint venturer with such Person, or (vi) relative
of a director, officer, or person in control of such Person; or
(c) if such Person is a partnership, any
(i) general partner in such Person, (ii) relative of a general partner
in such Person, (iii) partnership in which such Person is a general
partner, or (iv) person in control of such Person.
As used in this definition, "control" shall mean possession, directly
or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise), provided that, in
any event, any Person which owns or holds directly or indirectly five
percent (5%) or more of the voting securities or five percent (5%) or
more of the partnership or other equity interests of any other Person
(other than as a limited partner of such other Person) will be deemed
to control such corporation or other Person.
"Agent" shall mean CoreStates Bank, N.A., in its
capacity as administrative agent for the Lenders under this Agreement,
and any successor agent hereunder.
"Agent's Fee" shall mean the Fee payable by the
Borrowers to the Agent pursuant to Section 2.6(c).
"Agreement" shall mean this Credit Agreement and any
future amendments, restatements, modifications or supplements hereof or
hereto.
"Applicable LIBOR Margin" shall mean that number of
basis points (bp) reflected in the table below under the Applicable
LIBOR Margin based upon and determined by reference to the ratio of the
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Borrowers' Funded Debt to Total Capitalization as of the relevant date
of determination:
Pricing Ratio of Funded Debt to
Category Total Capitalization Applicable LIBOR Margin
-------- ----------------------- -----------------------
1 less than or equal to .45 45 bp
2 greater than .45 or equal to .50 60 bp
3 greater than .50 or equal to .55 75 bp
4 greater than .55 or equal to .60 100 bp
5 greater than .60 125 bp
For purposes hereof, the Applicable LIBOR Margin will change on that
date (a "Calculation Date") five (5) Business Days following the
delivery by the Borrowers to the Agent of the applicable Compliance
Certificate and the accompanying financial statements of the Borrowers
required pursuant to Section 5.1(b) indicating that the ratio of the
Borrowers' Funded Debt to Total Capitalization has changed to a
different Pricing Category than the Pricing Category then in effect;
provided, however, (i) the Applicable LIBOR Margin prior to the
delivery to the Agent of the initial Compliance Certificate pursuant
hereto shall be the Applicable LIBOR Margin for Pricing Category 4 set
forth above based upon the quarterly financial statements of the
Borrowers for the fiscal quarter ending July 31, 1997 (which have
heretofore been furnished by the Borrowers to Agent); (ii) if the
Borrowers shall fail to deliver the Compliance Certificate on or before
the date on which it is required to be delivered pursuant hereto and
such failure has not given rise to an Event of Default, the ratio of
the Borrowers' Funded Debt to Total Capitalization shall, for purposes
hereof and during the period from such required delivery date until the
date on which such Compliance Certificate is actually delivered to the
Lender, be assumed to be in the Pricing Category then in effect
(provided that, if the Compliance Certificate, when so delivered,
indicates a Pricing Category higher than the Pricing Category then in
effect, the Applicable LIBOR Margin tied to such higher Pricing
Category shall be immediately applied retroactively to all LIBOR Loans
as of the date on which the Compliance Certificate was required to have
been furnished hereunder); (iii) at any time after the occurrence of an
Event of Default which has not been waived in writing by the Required
Lenders, the ratio of the Borrowers' Funded Debt to Total
Capitalization shall, for purposes hereof, be deemed to be in Pricing
Category 5 (subject, however, to the Default Rate provisions of the
Revolving Credit Note); and (iv) if a change to the Applicable LIBOR
Margin is ever made based upon a false, misleading, or inaccurate
Compliance Certificate or accompanying financial statements,
retroactive adjustments to the interest rates hereunder shall be
immediately made to take into effect the rates at which the LIBOR Loans
should have borne interest (which amount shall be due and payable by
the Borrowers upon demand by the Agent, together with interest thereon
at the Default Rate from the date as of which the retroactive
adjustment is made until payment is made by the Borrowers). Each
Applicable LIBOR Margin shall be effective from one Calculation Date to
the next Calculation Date except as hereinbefore provided. Any
adjustment in the Applicable LIBOR Margin shall be applicable to all
existing Advances as well as any new Advances.
"Assignment Agreement" shall mean an instrument of
assignment and assumption, pursuant to which a Lender shall transfer
and assign all or any portion of its Commitment and rights pertaining
thereto to an Eligible Assignee pursuant to and in accordance with (but
only to the extent permitted by) the provisions hereof, which
instrument of assignment and assumption shall be reasonably
satisfactory to the Agent.
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"Bankruptcy Code" shall mean the United States
Bankruptcy Code, Title 11 of the United States Code, as amended, or any
successor law thereto, and any rules promulgated in connection
therewith.
"Base Rate" shall mean, as at any applicable time,
the greater of (i) the Prime Rate, or (ii)(A) the Federal Funds Rate
plus (B) one-half of one percent (0.5%). If for any reason the Agent
shall have determined (which determination shall be conclusive for
purposes hereof) that it is unable after due inquiry to ascertain the
Federal Funds Rate for any reason, including the inability or failure
of the Agent to obtain sufficient quotations in accordance with the
terms hereof, the Base Rate shall be determined without regard to
clause (ii) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change
in the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate, as the case may be, shall be effective on the effective date of
such change in the Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" and "Base Rate Loans" shall mean,
individually or collectively, as appropriate, any and/or all Advances
bearing interest at the Base Rate.
"Borrower" shall mean Central Sprinkler.
"Borrowers" shall mean, collectively, (i) the
Borrower, and (ii) the Co-Borrowers.
"Borrowers' Agent" shall mean Central Sprinkler,
which has been designated and appointed by the Co-Borrowers to serve as
their agent for the purpose of making requests for Advances, making
interest rate elections, and for certain other purposes set forth
herein.
"Borrowing Notice" shall mean a written request by
Borrowers' Agent to the Agent for an Advance pursuant hereto, which
Borrowing Notice shall be in the form of Exhibit "A" attached hereto
(as such form of Borrowing Notice may be modified and amended from time
to time by the Agent).
"Xxxxx Brothers" shall mean Xxxxx Brothers Xxxxxxxx &
Co., a Pennsylvania limited partnership.
"Xxxxx Brothers Liens" shall mean, collectively, the
Liens heretofore granted by CPVC to and in favor of Xxxxx Brothers as
security for the Xxxxx Brothers Loan.
"Xxxxx Brothers Loan" shall mean the loan made by
Xxxxx Brothers to CPVC on May 30, 1997 in the original principal amount
of Seven Million Five Hundred Thousand Dollars ($7,500,000).
"Xxxxx Brothers Replacement Loan" shall have the
meaning ascribed to in Section 6.1(h).
"Business Day" shall mean (i) for all purposes other
than as covered by clause (ii) below, any day excluding Saturday,
Sunday or any day that shall be in the City of Philadelphia,
Pennsylvania or New York, New York, a legal holiday or a day on which
banking institutions are authorized by law or other governmental
agencies to close, and (ii) with respect to all determinations and
notices in connection with, and payments of principal and interest on,
LIBOR Loans, any day that is a Business Day described in clause (i)
above and that is also a day for trading by and between banks in Dollar
($) deposits in the London interbank market.
"Calculation Date" shall have the meaning ascribed to
it in the definition of Applicable LIBOR Margin.
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"Capital Lease Obligations" shall mean, collectively,
the obligations of any Person to pay rent or other amounts under any
lease of or other arrangement conveying the right to use real or
personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a
balance sheet of such Person pursuant to and accordance with GAAP, and
the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Castings" shall mean Central Castings Corporation,
an Alabama corporation.
"Castings Bonds" shall mean, collectively, (i) the
industrial revenue bonds issued on or about December 5, 1995 by the
State Industrial Development Authority of the State of Alabama for the
benefit of Castings in the aggregate principal amount of Eight Million
Dollars ($8,000,000), and (ii) the industrial revenue bonds issued on
or about December 5, 1995 by Xxxxxxx County Economic Development
Council of the State of Alabama for the benefit of Castings in the
aggregate principal amount of Three Million Dollars ($3,000,000).
"Castings LC" shall mean that certain standby letter
of credit issued on or about December 5, 1995 by First Union for the
benefit of the trustee for the owners of the Castings Bonds in the
original stated amount of Eleven Million Two Hundred Six Thousand Two
Hundred Fifty Dollars ($11,206,250), which letter of credit assures the
repayment of the principal of and a certain portion of the interest
under the Castings Bonds.
"Central Sprinkler" shall mean Central Sprinkler
Company, a Pennsylvania corporation.
"Closing Date" shall mean the date hereof.
"Closing Fee" shall mean the fee due and payable by
the Borrowers pursuant to Section 2.6(b).
"Co-Borrowers" shall mean, collectively, (i) CSC,
(ii) Castings, (iii) CPVC, (iv) Export, and (v) any other Subsidiaries
that are required to become parties to this Agreement by Joinder hereto
pursuant to the provisions of Section 5.15.
"COBRA Continuation Coverage" shall mean those
provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, found in Code ss.4980B(f), which impose certain
continuation coverage requirements upon group health plans in order for
such plans to retain certain tax advantages.
"Code" shall mean the Internal Revenue Code of 1986,
as amended, or any successor law thereto, and any regulations
promulgated thereunder.
"Collateral" shall mean, collectively, (i) those
properties and assets of the Secured Borrowers in which a lien,
security interest, or similar right has been granted in favor of the
Agent pursuant to the Security Agreement, and (ii) any other real or
personal property, rights and interests now or hereafter pledged,
mortgaged or assigned to the Agent, or in which the Agent has or is
granted a security interest, to secure any of the Obligations.
"Commitment" shall mean (i) with respect to each
Lender listed on Schedule "A" hereto, the amount set forth opposite its
name on Schedule "A" attached hereto, and (ii) with respect to each
Eligible Assignee that becomes a Lender pursuant to Section 9.6(b), the
amount of the Commitment thereby assumed by it, in each case as such
amount may be
5
increased, reduced, or terminated from time to time pursuant to Section
9.6(a) or reduced or terminated from time to time pursuant to Section
2.1(c).
"Commitments" shall mean, collectively, the aggregate
amount of each Lender's Commitment.
"Commitment Percentage" shall mean, with respect to
each Lender, each Lender's percentage interest in each Advance to be
made hereunder as set forth on Schedule "A" attached hereto, as such
percentage may be increased or decreased as provided in Section 9.6(b).
"Compliance Certificate" shall mean a certificate in
the form of Exhibit "B" attached hereto and made a part hereof
certifying as to the matters therein described.
"Contamination" shall mean the presence of any
Hazardous Substance which may require Remedial Actions under applicable
law.
"Controlled Group Member" shall mean:
(a) any corporation included with the
Borrowers in a controlled group of corporations within the
meaning of Code ss.414(b);
(b) any trade or business (whether or
not incorporated) which is under common control with the
Borrowers within the meaning of Code ss.414(c); and
(c) any member of an affiliated service
group of which the Borrowers is a member within the meaning of
Code ss.414(m).
"CoreStates" shall mean CoreStates Bank, N.A., a
national banking association.
"CoreStates Term Loan" shall mean the term loan made
by CoreStates to Central Sprinkler on or about April 29, 1994 in the
original principal amount of Ten Million Dollars ($10,000,000), the
obligations of Central Sprinkler with respect to which are guaranteed
by CSC.
"CPVC" shall mean Central CPVC Corporation, an
Alabama corporation.
"CSC" shall mean Central Sprinkler Corporation, a
Pennsylvania corporation.
"Current Assets" shall mean, as at any applicable
time and for the Borrowers, the aggregate amount of current assets of
the Borrowers and any Subsidiaries on a consolidated basis, after
eliminating all intercompany items, as determined in accordance with
GAAP applied on a consistent basis.
"Current Liabilities" shall mean the aggregate amount
of current liabilities of the Borrowers and any Subsidiaries on a
consolidated basis, after eliminating all intercompany items, as
determined in accordance with GAAP applied on a consistent basis.
"Debt" shall mean, with respect to any Person at any
applicable time (without duplication), (i) all obligations of such
Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (iii) all
obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person to
6
the extent of the value of such property (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (iv) all obligations,
other than intercompany items, of such Person issued or assumed as the
deferred purchase price of property or services purchased by such
Person which would appear as liabilities on a balance sheet of such
Person, (v) all Debt of others secured by (or for which the holder of
such Debt has an existing right, contingent or otherwise, to be secured
by) any Lien on, or payable out of the proceeds of production from,
property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (vi) all Guaranty
Obligations of such Person, (vii) the principal portion of all Capital
Lease Obligations, (viii) amounts due and payable by such Person in
respect of letters of credit, bankers' acceptances or similar
obligations, (ix) all preferred stock issued by such Person and
required by the terms thereof to be redeemed, or for which mandatory
sinking fund payments are due, by a fixed date, and (x) any other item
of indebtedness that would be reflected on the liabilities side of a
balance sheet of such Person in accordance with GAAP. The Debt of any
Person shall also include the Debt of any partnership or unincorporated
joint venture in which and to the extent such Person is legally
obligated or has a reasonable expectation of being liable with respect
thereto.
"Default" shall mean any event specified in Section
7.1, whether or not any requirement for notice or lapse of time or any
other condition has been satisfied.
"Defaulting Lender" shall mean, as at any applicable
time, any Lender that, within one (1) Business Day of the date when due
(i) has failed to make an Advance required pursuant to the term of this
Agreement, (ii) other than as set forth in clause (i) above, has failed
to pay to the Agent or any Lender an amount owed by such Lender
pursuant to the terms of this Agreement unless such amount is subject
to a good faith dispute, or (iii) has been deemed insolvent or has
become subject to a bankruptcy or insolvency proceeding or to a
receiver, trustee or similar official.
"Default Rate" shall mean an annual rate per annum
equal to (i) two percent (2%), plus (ii) the Prime Rate (as in effect
from time to time).
"Deficiency Balance" shall have the meaning ascribed
to it in Section 2.10(a).
"Dollars" and "$" shall mean dollars in lawful
currency of the United States of America.
"Effective Date" shall mean the date as of which all
conditions set forth in Section 4.1(a) have been satisfied.
"Eligible Assignee" shall mean (i) any Lender or
Affiliate or Subsidiary of a Lender and (ii) any other commercial bank,
financial institution, or institutional lender.
"Employee Pension Plan" shall mean any pension plan
which (i) is maintained by any of the Borrowers or any Controlled Group
Member, and (ii) is qualified under ss.401 of the Code.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and any regulations issued thereunder
by the United States Department of Labor or the PBGC.
"Event of Default" shall mean any event specified in
Section 7.1, provided that any requirement for notice or lapse of time
or any other condition has been satisfied.
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"Excluded Subsidiaries" shall mean, collectively, the
following: (i) CSC Finance Company, a Delaware corporation and
wholly-owned Subsidiary of CSC; (ii) CSC Investment Company, a Delaware
corporation and wholly-owned Subsidiary of CSC Finance Company; (iii)
Spraysafe; and (iv) Subsidiaries of Spraysafe.
"Export" shall mean Central Sprinkler Export
Corporation, a Barbados corporation.
"Extension Request" shall have the meaning ascribed
to it in Section 2.1(d).
"Federal Funds Rate" shall mean, for any day, the
rate per annum (rounded upward, if necessary, to the nearest 1/100th of
one percent) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding
such day; provided, however, that (i) if such date is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day, and (ii) if no such
rate is so published on such next preceding Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Agent
on such day on such transactions as determined by the Agent.
"Fees" shall mean, collectively, those fees due and
payable by the Borrowers under Section 2.6.
"Financial Covenants" shall mean, collectively, the
affirmative covenants set forth at Sections 5.9 through 5.12.
"First Union" shall mean First Union National Bank, a
national banking association.
"First Union Term Loan" shall mean the term loan made
by First Union to Central Sprinkler on or about April 15, 1994 in the
original principal amount of Ten Million Dollars ($10,000,000), the
obligations of Central Sprinkler with respect to which are guaranteed
by CSC.
"Funded Debt" shall mean, as at any applicable time
and for the Borrowers (without duplication), the sum of (i) all Debt of
the Borrowers and their Subsidiaries for borrowed money, (ii) all
purchase money Debt of the Borrowers and their Subsidiaries, (iii) the
principal portion of all obligations of the Borrowers and their
Subsidiaries in respect of Capital Lease Obligations, (iv) amounts due
and payable by the Borrowers and their Subsidiaries in respect of
letters of credit, bankers' acceptances, or similar obligations, (v)
all Guaranty Obligations of the Borrowers and their Subsidiaries with
respect to Funded Debt of another Person, (vi) all Funded Debt of
another Person secured by a Lien on any property of the Borrowers and
their Subsidiaries whether or not such Funded Debt has been assumed by
any Borrower or any of its Subsidiaries, and (vii) all Funded Debt of
any partnership or unincorporated joint venture to the extent any
Borrower or any of its Subsidiaries is legally obligated or has a
reasonable expectation of being liable with respect thereto, net of any
assets of such partnership or joint venture; provided, however, that,
notwithstanding the foregoing, (A) trade indebtedness, tax and other
accruals, tax deferrals and deferred compensation incurred in the
ordinary course of the Borrowers' business shall not constitute Funded
Debt of the Borrowers for purposes hereof, and (B) the amount of Funded
Debt in respect of the Castings Bonds for purposes hereof shall be
equal to the greater of (x) the aggregate outstanding amount of Debt
under the Castings Bonds, and (y) the maximum aggregate liability
(fixed or contingent) of the issuer of the Castings LC under the
Castings LC.
8
"GAAP" shall mean, at any particular time, generally
accepted accounting principles as in effect at such time, provided,
however, that, if employment of more than one principle shall be
permissible at such time in respect of a particular accounting matter,
"GAAP" shall refer to the principle which is then employed by the
Borrowers with the agreement of their independent certified public
accountants.
"Government Receivables" shall have the meaning
ascribed to it in Section 5.21.
"Guaranty Obligations" shall mean, as at any
applicable time and for any Person, without duplication, any
obligations (other than endorsements in the ordinary course of business
of negotiable instruments for deposit or collection) guaranteeing or
intended to guarantee any Debt of any other Person in any manner,
whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any such Debt or
other obligation or any property constituting security therefor, (ii)
to advance or provide funds or other support for the payment or
purchase of such Debt or obligation or to maintain working capital,
solvency or other balance sheet condition of such other Person
(including, without limitation, maintenance agreements, comfort
letters, take or pay arrangements, put agreements or similar agreements
or arrangements) for the benefit of the holder of Debt of such other
Person, (iii) to lease or purchase property, securities or services
primarily for the purpose of assuring the owner of such Debt, or (iv)
to otherwise assure or hold harmless the owner of such Debt or
obligation against loss in respect thereof. The amount of any Guaranty
Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal
amount (or maximum principal amount, if larger) of the Debt in respect
of which such Guaranty Obligation is made.
"Hazardous Substances" shall mean, collectively, any
chemical, solid, liquid, gas, or other substance having the
characteristics identified in, listed under, or designated pursuant to:
(a) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended,
42 U.S.C. ss.9601(14), as a "hazardous substance;"
(b) the Clean Water Act, 33 U.S.C.
ss.1321(b)(2)(A), as a "hazardous substance;"
(c) the Clean Water Act, 33 U.S.C.
ss.ss.1317(a) and 1362(13), as a "toxic pollutant;"
(d) Table 1 of Committee Print Numbered
95-30 of the Committee on Public Works and Transportation of
the United States House of Representatives, as a "toxic
pollutant;"
(e) the Clean Air Act, 42 U.S.C.
ss.7412(a)(1), as a "hazardous air pollutant;"
(f) the Toxic Substances Control Act, 15
U.S.C. ss.2606(f), as an "imminently hazardous chemical
substance or mixture;"
(g) the Resource, Conservation and
Recovery Act, 42 U.S.C. ss.ss.6903(5) and 6921, as a
"hazardous waste;" or
(h) any other laws, regulations or
governmental publications, as presenting an imminent and
substantial danger to the public health or welfare or to the
environment, or as
9
otherwise requiring special handling, collection, storage,
treatment, disposal, or transportation.
The term "Hazardous Substances" shall also include: (x) petroleum,
crude oil, gasoline, natural gas, liquified natural gas, synthetic
fuel, and all other petroleum, oil, or gas based products; (y)
radioactive substances, mixtures, wastes, compounds, materials,
elements, products or matters; and (z) asbestos, asbestos-containing
materials, polychlorinated biphenyls.
"Inter-Company Debt" shall mean, collectively, any
and all Debt due and owing by any of the Borrowers to (i) any of the
other Borrowers or (ii) any Subsidiary.
"Intercreditor Agreement" shall mean the
Intercreditor Agreement entered into by and among the Agent,
CoreStates, First Union, and the Secured Borrowers pursuant to the
provisions of Section 4.1(k), and any future amendments, restatements,
modifications or supplements thereof or thereto.
"Investment" in any Person shall mean, collectively,
(i) the acquisition (whether for cash, property, services, assumption
of Indebtedness, securities or otherwise) of assets, shares of capital
stock, bonds, notes, debentures, partnership, joint ventures or other
ownership interests or other securities of such other Person, (ii) any
advance, loan or other extension of credit to, such Person, or (iii)
any other capital contribution to or investment in such Person,
including, without limitation, any Guaranty Obligation (including any
support for a letter of credit issued on behalf of such Person)
incurred for the benefit of such Person.
"Joinder" shall have the meaning ascribed to it in
Section 5.15.
"Lender" and "Lenders" shall mean, individually and
collectively, as appropriate, the Persons listed on Schedule "A"
attached hereto, as such Schedule "A" may be modified and amended from
time to time, and any Person which may become a Lender by way of
assignment in accordance with the provisions hereof, together with
their successors and permitted assigns.
"LIBOR" shall mean, for each LIBOR Loan and LIBOR
Period applicable thereto, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100th of 1%) determined by the Agent
according to the following formula:
X
R = -
1-Y
where R = LIBOR
X = London Interbank Offered Rate for
such LIBOR Loan for the applicable
LIBOR Period
Y = the average of the daily rates
(expressed as a decimal fraction)
of maximum reserve requirements
which are, at any time, applicable
during such LIBOR Period
(including, without limitation,
basic, special, supplemental,
marginal and emergency reserves)
under any regulations of the Board
of Governors of the Federal Reserve
System or other banking authority,
domestic or foreign, as now and
from time to time hereafter in
effect, prescribed for
10
eurocurrency funding (currently
referred to as Eurocurrency
Liabilities in Regulation D of such
Board) to which the Agent (including
any branch, Affiliate, or other
fronting office making or holding a
LIBOR Loan) is subject, as now and
from time to time hereafter in
effect.
"LIBOR Loan" and "LIBOR Loans" shall mean,
individually and collectively, as appropriate, any Advance and/or
Advances or portion thereof which bear interest at the Adjusted LIBOR
Rate pursuant hereto.
"LIBOR Period" shall mean, with respect to any
Advance or portion thereof bearing interest at the Adjusted LIBOR Rate
pursuant hereto, the period commencing on the date on which the Advance
or portion thereof begins to bear interest at the Adjusted LIBOR Rate
in accordance herewith and ending one (1) month, two (2) months, three
(3) months, or six (6) months thereafter, as appropriate, as selected
by Borrowers' Agent pursuant to Section 2.3, subject to the following:
(i) if the last day of the LIBOR Period
selected by the Borrowers' Agent pursuant to Section 2.3 does
not fall on a Business Day:
(A) the LIBOR Period shall be
automatically extended until the next succeeding
Business Day unless such Business Day falls in
another calendar month, in which case such LIBOR
Period shall end on the next preceding Business Day;
(B) interest shall, to the extent
applicable, continue to accrue at the Adjusted LIBOR
Rate then in effect; and
(C) the next LIBOR Period elected,
or deemed to have been elected, by such Borrower with
respect to the LIBOR Loan to which the LIBOR Period
relates, if any, shall commence on the Business Day
described in clause (i)(A) above; and
(ii) any LIBOR Period that begins on the
last Business Day of the calendar month (or on a date for
which there is no numerically corresponding day in the
calendar month in which such LIBOR Period ends) shall end on
the last Business Day of a calendar month and the next LIBOR
Period with respect to the LIBOR Loan to which the LIBOR
Period relates, if any, shall commence on such Business Day.
"Lien" shall mean, collectively, any mortgage,
pledge, hypothecation, assignment, security interest, encumbrance, lien
(statutory or otherwise), preference, priority or charge of any kind,
including, without limitation, any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, and
any lease in the nature thereof.
"Loan Account" shall mean, collectively, the account
or accounts of the Borrowers on the books of the Agent in which are
recorded the Advances and the payments of principal and interest made
by the Borrowers to Agent thereon.
"Loan Documents" shall mean, collectively, this
Agreement, the Revolving Credit Note, the Security Documents, the
Intercreditor Agreement, the Subordination Agreement, any Joinder
hereafter executed by a Subsidiary of any of the Borrowers pursuant
hereto, and all other documents executed and delivered to the Agent or
the Lenders by or on behalf of any of the Borrowers in connection
therewith and any
11
modifications, amendments, restatements, substitutions and replacements
of or for any of the foregoing.
"London Interbank Offered Rate" shall mean, for and
with respect to any LIBOR Loan and any LIBOR Period applicable thereto,
the rate (rounded upwards, if necessary, to the nearest 1/16th of 1%)
equal to the composite London Interbank Offered Rate for Dollar ($)
deposits approximately equal in principal amount to the amount of such
LIBOR Loan and for a maturity comparable to such LIBOR Period appearing
on the Telerate Screen Page 3750 at approximately 9:00 A.M.,
Philadelphia time, on the date that is two (2) Business Days prior to
the commencement of such LIBOR Period; provided, however, that if such
rate shall for any reason not be available on the Telerate Screen Page
3750 at such time, the London Interbank Offered Rate shall be the
arithmetic average of the rates at which Dollar ($) deposits
approximately equal in principal amount to the amount of such LIBOR
Loan and for a maturity comparable to such LIBOR Period are offered to
the principal London office of any bank designated by the Agent in
immediately available funds in the London interbank market at
approximately 11:00 A.M., London time, two (2) Business Days prior to
the commencement of such LIBOR Period. As used herein, the term
"Telerate Screen Page 3750" shall mean the display designated as the
page for LIBOR on the Dow Xxxxx Telerate Service (or such other page as
may replace the LIBOR page on that service for the purpose of
displaying London interbank offered rates of major banks). If, for any
reason, such rate is not available, the term "London Interbank Offered
Rate" shall mean, with respect to any LIBOR Loan and the LIBOR Period
applicable thereto, the rate of interest per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) appearing on the Reuters Screen
LIBO Page as the London interbank offered rate for deposits in Dollars
($) at approximately 11:00 A.M. (London time) two (2) Business Days
prior to the first day of such LIBOR Period for a maturity comparable
to such LIBOR Period; provided, however, if more than one rate is
specified on the Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates.
"Loss Contingency" shall have the meaning ascribed to
it in Section 3.10(a).
"Material Adverse Effect" shall mean, relative to any
occurrence of whatever nature, a material adverse effect on (i) the
assets, operations, profits, financial condition, or business of the
Borrowers taken as a whole, (ii) the ability of the Borrowers taken as
a whole to perform their respective obligations under this Agreement or
any of the other Loan Documents, or (iii) the validity or
enforceability of this Agreement, any of the other Loan Documents, or
any of the rights and remedies of the Lenders hereunder or thereunder.
"Minimum Tangible Net Worth Amount" shall mean, as at
any applicable time, (i) Forty-Eight Million Dollars ($48,000,000) plus
(ii) (A) seventy-five percent (75%) multiplied by (B) the Net Income of
the Borrowers for each fiscal year (on a cumulative basis) of the
Borrowers subsequent to the Closing Date (i.e. commencing with the
fiscal year ending October 31, 1997); provided, however, no change
shall be made to the Minimum Tangible Net Worth Amount by reason of
clause (ii) if the Borrowers' Net Income is negative for any fiscal
year.
"Multiemployer Plan" shall mean a multiemployer
pension plan as defined in ss.3(37) of ERISA to which any of the
Borrowers or any Controlled Group Member is or has been required to
contribute subsequent to September 25, 1980.
"Net Income" shall mean, for any relevant period, the
net income after taxes for such period of the Borrowers and their
Subsidiaries on a consolidated basis, as determined in accordance with
GAAP.
12
"Obligations" shall mean, collectively, all
liabilities, duties and obligations of the Borrowers to the Lenders or
the Agent with respect to any covenants, representations or warranties
herein or in the Loan Documents, with respect to the principal of and
interest on the Advances, and all other present and future fixed and/or
contingent obligations of the Borrowers to the Lenders or the Agent
hereunder and under the Loan Documents, including, without limitation,
obligations with respect to interest accruing (or which would accrue
but for ss.502 of the Bankruptcy Code) after the date of any filing by
any Borrower of any petition in bankruptcy or the commencement of any
bankruptcy, insolvency or similar proceedings with respect to any of
the Borrowers.
"Other Taxes" shall have the meaning ascribed to it
in Section 2.15.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
"Permitted Encumbrances" shall mean, collectively,
those Liens listed on Schedule 3.6 or expressly permitted under Section
6.2.
"Permitted Debt" shall mean, collectively, any and
all Debt expressly permitted under Section 6.1.
"Person" shall mean an individual, a corporation, a
partnership, a joint venture, a trust or unincorporated organization, a
limited liability company, a joint stock company or other similar
organization, a government or any political subdivision thereof, or any
other legal entity.
"Premises" shall mean, collectively, any and all real
properties, improvements thereon and fixtures attached thereto in which
any Borrower has any right, title, or interest (whether as owner,
lessee, occupant, or otherwise).
"Prevailing Rate" shall mean, with respect to any
Advance or portion thereof, the annual rate of interest applicable
thereto, as determined pursuant to and in accordance with the
provisions of Section 2.3.
"Prime Rate" shall mean the floating annual rate of
interest that is designated from time to time by the Agent as its
"Prime Rate" and is used by the Agent as a reference base with respect
to different interest rates charged to borrowers generally. Such rate
of interest shall change simultaneously and automatically upon the
Agent's designation of any change in such reference rate, and the
Agent's determination and designation from time to time of the
reference rate shall not in any way preclude CoreStates from making
loans to other borrowers at rates which are higher or lower than or
different from the referenced rate.
"Register" shall have the meaning ascribed to it in
Section 9.6(d).
"Regulatory Change" shall mean, collectively, (i) any
change on or after the date of this Agreement in United States federal,
state, or any foreign, laws or regulations (including Regulation D of
the Board of Governors of the Federal Reserve System) applying to the
class of banks including any Lender (or the direct or indirect parent
corporation thereof), or (ii) the adoption or making on or after such
date of any interpretations, directives or requests applying to a class
of banks including any Lender (or the direct or indirect parent
corporation thereof), or under any United States federal or state, or
any foreign, laws or regulations (whether or not having the force of
law) by any court or governmental or monetary authority charged with
the interpretation or administration thereof.
13
"Release" shall mean, collectively, any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, or dumping.
"Remedial Actions" shall mean:
(a) clean-up or removal of Hazardous
Substances;
(b) such actions as may be necessary to
monitor, assess, or evaluate the Release or threatened Release
of Hazardous Substances;
(c) proper disposal or removal of
Hazardous Substances;
(d) the taking of such other actions as
may be necessary to prevent, minimize, or mitigate the damages
caused by a Release or threatened Release of Hazardous
Substances to the public health or welfare or to the
environment; and
(e) the providing of emergency
assistance after a Release.
Remedial Actions include, but are not limited to, such actions at the
location of a Release as: storage; confinement; perimeter protection
using dikes, trenches, or ditches; clay cover; neutralization; clean-up
of Hazardous Substances or contaminated materials; recycling or reuse;
diversion; destruction; segregation of reactive wastes; dredging or
excavations; repair or replacement of leaking containers; collection of
leachate and runoff; onsite treatment or incineration; providing
alternative water supplies; and any monitoring reasonably required to
assure that such actions protect the public health and welfare and the
environment.
"Reorganization" shall mean a reorganization as
defined in ss.4241(a) of ERISA.
"Reportable Event" shall mean with respect to any
Employee Pension Plan, an event described in ss.4043(b) of ERISA, other
than such a described event for which the notice requirement under
ss.4043 of ERISA is waived by regulation or by any other guidance
issued by the PBGC or any government agency or body having
jurisdiction.
"Required Lenders" shall mean, as at any applicable
time, Lenders that own, in the aggregate, at least sixty-six and
two-thirds percent (66 2/3%) of the Commitments; provided, however, (i)
at any time after the Commitments have been terminated, the Commitment
of each Lender shall, for purposes hereof, be determined by reference
to each Lender's share of the Advances then outstanding, and (ii) if
any Lender shall be a Defaulting Lender at such time, then there shall
be excluded from the determination of Required Lenders the Commitment
of such Defaulting Lender or (in the case of clause(i) above) the
Defaulting Lender's share of the Advances then outstanding.
"Revolving Credit Commitment" shall mean the sum of
Fifty-Five Million Dollars ($55,000,000), which sum shall be the
Borrowers' maximum credit availability under the Revolving Credit
Facility, subject to reduction in accordance with the provisions of
Section 2.1(c).
"Revolving Credit Facility" shall mean the revolving
credit facility in the maximum principal amount of the Revolving Credit
Commitment described in Section 2.1(a).
14
"Revolving Credit Note" shall mean the promissory
note described in Section 2.2 and any future amendments, restatements,
modifications or supplements thereof or thereto.
"Revolving Credit Period" shall have the meaning
ascribed to it in Section 2.1(b).
"SEC" shall mean the Securities and Exchange
Commission or any successor thereto.
"Secured Borrowers" shall mean, collectively, CSC,
Central Sprinkler, and Export, and any other Subsidiaries that are
required to become parties to the Security Agreement pursuant to the
provisions of Section 5.15.
"Security Agreement" shall mean the Security
Agreement dated the date hereof by and among the Secured Borrowers and
the Agent, pursuant to which the Secured Borrowers, as security for the
Obligations, have granted to the Lender a perfected first-priority
security interest in all of their accounts (including, without
limitation, inter-company accounts among the Borrowers as provided
therein), equipment, and inventory, now owned or hereafter acquired,
and the products and proceeds thereof, and any future amendments,
restatements, modifications or supplements thereof or thereto.
"Security Documents" shall mean, collectively, (i)
the Security Agreement, and (ii) any other agreement, document, or
instrument now or hereafter executed and delivered to the Agent to
secure, or to assure, the payment or performance of any of the
Obligations, and any future amendments, restatements, modifications or
supplements thereof or thereto.
"Solvent" shall mean, as at any applicable time and
for any Person, that at such time (i) such Person is able to pay its
debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (ii) such
Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts
and liabilities mature in their ordinary course, (iii) such Person is
not engaged in a business or a transaction, and is not about to engage
in a business or a transaction, for which such Person's assets would
constitute unreasonably small capital after giving due consideration to
the prevailing practice in the industry in which such Person is engaged
or is to engage, (iv) the fair value of the assets of such Person is
greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, and (v) the present
fair saleable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured. In computing
the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount which, in light of all
the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
"Spraysafe" shall mean Spraysafe Automatic
Sprinklers, Ltd., a private company organized under the laws of
England.
"Subordination Agreement" shall mean the
Subordination Agreement dated the date hereof by and among Central
Sprinkler, CSC Finance Company, and the Agent, pursuant to which, among
other things, the Inter-Company Debt therein described has been
subordinated to the prior payment and satisfaction of the Obligations,
on the terms and conditions set forth therein, and any future
amendments, restatements, modifications or supplements thereof or
thereto.
15
"Subordinated Debt" shall mean, collectively, all
indebtedness of the Borrowers and their Subsidiaries, if any, for money
borrowed, whether now existing or hereafter incurred, and which is
subordinated in right of payment of principal and interest to the
Obligations, either absolutely or upon the occurrence of and during the
continuance of a Default or an Event of Default pursuant to a
subordination agreement with the Agent which is satisfactory, in form
and substance, to the Required Lenders.
"Subsidiary" shall mean any corporation more than
fifty percent (50%) of the outstanding shares of capital stock of which
(except for directors' qualifying shares, if required by law) are at
the time owned, directly or indirectly, by any of the Borrowers and/or
one or more Subsidiaries. Except as otherwise expressly provided
herein, the term "Subsidiary" shall include all of the Excluded
Subsidiaries.
"Tangible Net Worth" shall mean, at any time, the
amount by which (a) the book value of all tangible assets of the
Borrowers and any Subsidiaries on a consolidated basis, exceeds (b) the
consolidated liabilities of the Borrowers and any Subsidiaries, all as
determined in accordance with GAAP applied on a consistent basis.
"Taxes" shall have the meaning ascribed to it in
Section 2.15.
"Termination Date" shall mean November 1, 2000, and
any extension thereof granted pursuant to and in accordance with
Section 2.1(d).
"Term Loans" shall mean, collectively, the CoreState
Term Loan and the First Union Term Loan.
"Total Capitalization" shall mean, as at any
applicable time and for the Borrowers, (i) Funded Debt plus (ii)
Tangible Net Worth.
"Unused Facility Fee" shall mean the fee due and
payable by the Borrowers pursuant to Section 2.6(a).
"Withdrawal Liability" shall mean any withdrawal
liability as defined in ss.4201 of ERISA.
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT FACILITY.
2.1 Revolving Credit Facility; Reduction in Revolving
Credit Commitment; Extension of Termination Date.
(a) Subject to and in accordance with the terms
and conditions of this Agreement, each Lender severally (but not jointly) agrees
to extend credit to the Borrowers by making Advances to them, in Dollars ($),
from time to time during the period commencing on the Effective Date and ending
on the Business Day preceding the Termination Date, in an aggregate outstanding
amount that shall not exceed, at any one time outstanding, such Lender's
Commitment Percentage of the Revolving Credit Commitment. No Lender shall be
required to extend Advances to the Borrowers under this Section 2.1(a) in excess
of such Lender's Commitment.
(b) During the period in which the Revolving
Credit Facility is available under Section 2.1(a) (the "Revolving Credit
Period"), the Borrowers may use the Revolving Credit Facility by borrowing,
repaying and reborrowing. Subject to the provisions of Section 2.3(b), the
Borrowers shall notify the Agent pursuant to a Borrowing Notice of each request
for an Advance not later than 12:00 Noon Philadelphia, Pennsylvania, on the
Business Day on which the Borrowers desire the Advance to be made. Each Advance
shall be in minimum amounts of (i) One Million Dollars ($1,000,000) for LIBOR
Loans, and (ii) Two Hundred Fifty Thousand ($250,000) for Base Rate Loans. The
Borrowers
16
authorize and direct the Lenders to disburse each such Advance by direct deposit
to the Borrowers' demand deposit account(s) maintained with the Agent.
(c) Upon at least two (2) Business Days' notice, the
Borrowers shall have the right to permanently terminate or reduce the aggregate
unused amount of the Revolving Credit Commitment at any time or from time to
time; provided that each partial reduction shall be in an aggregate amount at
least equal to One Million Dollars ($1,000,000) and in integral multiples of One
Million Dollars ($1,000,000) above such amount. Any reduction in (or termination
of) the Revolving Credit Commitment pursuant to this Section 2.1(c) shall be
permanent and may not be reinstated. Upon any reduction in or termination of the
Revolving Credit Commitment pursuant to this Section 2.1(c), (i) the Borrowers
shall pay to the Agent, simultaneously with such reduction or termination, the
amount (if any) by which (A) the outstanding balance of the Revolving Credit
Facility exceeds (B) the reduced amount of the Revolving Credit Commitment (or
zero (0) in the case of a termination), together with interest thereon at the
rates provided herein, and (ii) each Lender's Commitment shall be reduced on a
pro rata basis in accordance with each Lender's Commitment Percentage, in which
event the Agent shall modify Schedule "A" accordingly and distribute to the
Lenders a modified Schedule "A" which shall supersede and replace the Schedule
"A" then in effect.
(d) The Borrowers shall be permitted to request an
extension of the then scheduled Termination Date by providing written notice
thereof to the Agent at least ninety (90) days prior to the commencement of the
final twelve (12) months of the Revolving Credit Period (an "Extension
Request"). An Extension Request shall set forth in detail: (i) the length of the
desired extension of the Termination Date; and (ii) any terms and conditions
with respect thereto which are different from the terms and conditions of this
Agreement and the related Loan Documents. In connection with any Extension
Request, the Borrowers shall furnish to the Agent any and all financial and
other information which may be requested by the Agent. Within forty-five (45)
days following the Agent's receipt of an Extension Request, the Agent shall
notify the Borrowers whether any such Extension Request has been granted by the
Lenders and any terms and conditions applicable thereto; provided, however,
failure by the Agent to notify the Borrowers in accordance with the foregoing
shall constitute a rejection of the Extension Request. Notwithstanding anything
contained herein to the contrary, the Lenders shall have no duty or obligation,
express or implied, to grant any Extension Request.
(e) The proceeds of the Revolving Credit Facility
shall be used solely for the purpose of (i) financing the Borrowers' working
capital, and (ii) general corporate purposes, including, at the Borrowers'
election, (A) refinancing short-term Debt, and (B) (1) refinancing the Xxxxx
Brothers Loan or (2) providing cash collateral to Xxxxx Brothers as security for
the Xxxxx Brothers Loan.
2.2 Revolving Credit Note. On the Closing Date, the Borrowers
shall execute and deliver their promissory note to the Agent (for the pro rata
benefit of the Lenders), which promissory note shall evidence the Borrowers'
obligations to repay the principal of, interest on, and other amounts due in
connection with the Revolving Credit Facility, and which shall:
(a) be dated the Closing Date and be payable to the
order of the Agent (for the pro rata benefit of the Lenders) in the principal
amount of Fifty-Five Million Dollars ($55,000,000);
(b) bear interest on the unpaid principal amount of
any outstanding Advances from the dates of such Advances at the Prevailing Rate;
(c) be payable as to interest with respect to Base
Rate Loans monthly commencing on November 1, 1997, and continuing on the first
day
17
of each month thereafter until payment in full of the unpaid principal amount
of, and all accrued but unpaid interest thereon;
(d) be payable as to interest with respect to LIBOR
Loans at the expiration of the LIBOR Period applicable thereto; provided,
however, for LIBOR Loans having a LIBOR Period in excess of three (3) months,
interest shall be payable at the expiration of each three (3) month period
during the LIBOR Period and at the expiration of the LIBOR Period;
(e) be payable in full as to the entire unpaid
principal balance, all accrued interest and other sums due thereunder (i) on the
sooner of: (A) the Termination Date; or (B) upon written demand by the Agent
pursuant hereto after the occurrence of an Event of Default; or (ii) immediately
and automatically upon the occurrence of any Event of Default described in
Sections 7.1(e) or 7.1(f); and
(f) be secured by the Security Documents.
2.3 Interest Rate Elections.
(a) The Borrowers' Agent, subject to any prior
continuing interest rate elections made pursuant to Section 2.3(b), at any time
and from time to time, may notify the Agent in a Borrowing Notice that it is
electing, for and on behalf of the Borrowers, to have interest accrue at the
Base Rate on a specific portion (up to and including 100%) of the aggregate
unpaid amount of any Advance. All Advances for which an interest rate option is
not specifically designated by the Borrowers' Agent pursuant to the terms hereof
or not requested in conformity with the terms hereof shall constitute Base Rate
Loans.
(b) Subject to the notice provisions set forth in
this Section 2.3(b), at any time and from time to time, the Borrowers' Agent may
notify (which notice shall be contained in a Borrowing Notice and be
irrevocable) the Agent that it is electing, for and on behalf of the Borrowers,
to have interest accrue for a LIBOR Period specified in writing by the
Borrowers' Agent at the Adjusted LIBOR Rate on a specific portion (up to and
including 100%) of the aggregate unpaid amount of any Advance (including any
Advance to be made by the Lenders to the Borrower on the date of election) equal
to the amount specified in the Borrowing Notice by the Borrowers' Agent. The
Borrowers' Agent shall notify the Agent in the manner provided herein not later
than 12:00 Noon three (3) Business Days before the date on which the Borrowers'
Agent desires any Advance to bear interest at the Adjusted LIBOR Rate.
Notwithstanding anything contained herein to the contrary, any LIBOR Loan shall
be in minimum denominations of One Million Dollars ($1,000,000) and in multiples
thereof if in excess thereof.
(c) Following an interest rate election made by the
Borrowers' Agent with respect to any Advance pursuant to Sections 2.3(a) or
2.3(b), but subject to all other conditions of this Agreement, the Borrowers'
Agent may elect, for and on behalf of the Borrowers and in accordance with the
provisions of Sections 2.3(a) and 2.3(b), from time to time to convert or
continue the type of interest rate borne by such Advance. Any such notice of
conversion or continuance shall be made in writing by the Borrowers' Agent and
on forms prescribed by the Agent. In the event that the Borrowers' Agent fails
to provide the Agent with any notice of conversion or continuance, as described
herein, such Advance shall immediately and automatically become a Base Rate Loan
and shall commence bearing interest at the Base Rate. Notwithstanding anything
contained herein to the contrary, the Borrowers' Agent shall not convert, or
permit the conversion of, any LIBOR Loan to a Base Rate Loan until the
expiration of the LIBOR Period then in effect with respect thereto, unless such
conversion is accompanied by those amounts payable by the Borrowers to the Agent
pursuant to the provisions of Section 2.3(f).
(d) The Agent shall determine the Prevailing Rate in
accordance with the Borrowers' Agent's election made pursuant to and in
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accordance with this Section 2.3. Such determination of the Prevailing Rate by
the Agent in response to such election shall be conclusive in the absence of
manifest error.
(e) All LIBOR Periods shall end prior to the
Termination Date and the Borrowers' Agent shall not select a LIBOR Period the
expiration of which extends beyond the Termination Date.
(f) The Borrowers shall not prepay, in whole or in
part, any LIBOR Loans prior to the expiration of the LIBOR Period applicable
thereto. The Borrowers shall indemnify each Lender and hold each Lender harmless
from and against any loss or expense that each Lender may sustain or incur as a
result of (i) any prepayment of a LIBOR Loan, (ii) the conversion of a LIBOR
Loan to a Base Rate Loan prior to the expiration of the LIBOR Period applicable
thereto, (iii) an Advance being converted from a LIBOR Loan to a Base Rate Loan
by reason of the circumstances described in Sections 2.4(a) or 2.4(b) prior to
the expiration of the LIBOR Period applicable thereto, or (iv) a LIBOR Loan not
being made or converted upon instruction by the Borrowers after a request with
respect thereto has been made to the Agent pursuant hereto. Such agreement to
indemnify shall include, without limitation, any interest payable by any Lender
to lenders of funds obtained by the Lenders in order to make or maintain LIBOR
Loans pursuant hereto and any loss incurred in obtaining, liquidating, or
employing deposits from third parties.
(g) Following the occurrence of a Default or an Event
of Default, the Borrowers' Agent may not elect to have any Advance made or
maintained as, or converted into, a LIBOR Loan after the expiration of any LIBOR
Period then in effect with respect thereto.
2.4 Inability to Determine LIBOR; Illegality.
(a) In the event that the Agent shall determine
(which determination shall be conclusive and binding upon the Borrowers) that,
by reason of circumstances affecting the interbank eurodollar market or
otherwise, adequate and reasonable means do not exist for ascertaining LIBOR,
the Borrowers' right, by and through the Borrowers' Agent, to elect to have
interest accrue on any Advance at the Adjusted LIBOR Rate shall be suspended
until such time that the Agent determines that adequate and reasonable means
exist for ascertaining LIBOR, in which event all LIBOR Loans then in effect
shall automatically become Base Rate Loans at the expiration of the LIBOR Period
applicable thereto.
(b) Notwithstanding anything contained herein to the
contrary, if any applicable law, treaty, regulation or directive, or any change
in or in the application or interpretation of such law, treaty, regulation or
directive, or any other event shall make it unlawful for any Lender to make or
maintain LIBOR Loans and such Lender shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Lenders and the Borrowers, whereupon
until such Lender notifies the Borrowers and the Agent that such Lender is
permitted to make or maintain LIBOR Loans:
(i) the obligation of such Lender to make
or maintain LIBOR Loans shall be cancelled automatically and immediately; and
(ii) such Lender's share of LIBOR Loans then
in existence shall convert automatically and immediately to Base Rate Loans and
such Lender's share of LIBOR Loans thereafter shallconstitute Base Rate Loans
notwithstanding any election by the Borrowers' Agent hereunder.
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2.5 Funding of Advances; Reduction in Revolving Credit
Commitment; Pro Rata Treatment.
(a) Upon receipt of a Notice of Borrowing, the Agent
shall promptly inform the Lenders as to the terms thereof. Each such Lender
shall make its Commitment Percentage of the requested Advance available to the
Agent by 2:00 P.M. on the date specified in the Notice of Borrowing by deposit,
in Dollars ($), of immediately available funds at the offices of the Agent at
its principal office in Philadelphia, Pennsylvania or at such other address as
the Agent may designate in writing. The amount of the requested Advance will
then be made available to the Borrowers by the Agent by crediting the account of
the Borrowers on the books of such office of the Agent, to the extent the amount
of such Advance is made available to the Agent.
(b) No Lender shall be responsible for the failure or
delay by any other Lender in its obligation to make an Advance hereunder;
provided, however, the failure of any Lender to fulfill its obligations
hereunder shall not relieve any other Lender of its obligations hereunder.
Unless the Agent shall have been notified by any Lender prior to the date of any
such Advance that such Lender does not intend to make available to the Agent its
pro rata portion of the Advance to be made on such date, the Agent may assume
that such Lender has made such amount available to the Agent on the date of such
Advance, and the Agent, in reliance upon such assumption, may (in its sole
discretion but without any obligation to do so) make available to the Borrowers
a corresponding amount. If such corresponding amount is not in fact made
available to the Agent, the Agent shall be able to recover such corresponding
amount from such Lender. If such Lender does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent will promptly notify the
Borrowers, and the Borrowers shall immediately pay such corresponding amount to
the Agent. The Agent shall also be entitled to recover from the Lender or the
Borrowers, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Agent to the Borrowers to the date such corresponding amount is recovered by the
Agent at a per annum rate equal to (i) from the Borrowers, at the Prevailing
Rate for the Advance in question, and (ii) from a Lender, at the Federal Funds
Rate.
(c) Except to the extent otherwise provided herein,
each Advance, each payment or prepayment of principal of any Advance, each
payment of Fees (other than the Agent's Fee), each reduction of the Revolving
Credit Commitment, and each conversion or continuation of any Advance, shall be
allocated pro rata among the Lenders in accordance with their respective
Commitment Percentages (or, if the Commitments of such Lenders have expired or
been terminated, in accordance with the respective principal amounts of the
outstanding Advances); provided that, if any Lender shall have failed to pay its
applicable pro rata share of any Advance, then any amount to which such Lender
would otherwise be entitled pursuant to this Section 2.5(c) shall instead be
payable to the Agent; provided further, that in the event any amount paid to any
Lender pursuant to this Section 2.5(c) is rescinded or must otherwise be
returned by the Agent, each Lender shall, upon the request of the Agent, repay
to the Agent the amount so paid to such Lender, with interest for the period
commencing on the date such payment is returned by the Agent until the date the
Agent receives such repayment at a rate per annum equal to, during the period to
but excluding the date two (2) Business Days after such request, the Federal
Funds Rate, and thereafter, the Base Rate plus two percent (2%) per annum.
2.6 Fees. In connection with and as a condition to the
continuation of the Revolving Credit Facility, the Borrowers shall pay the
following fees to the Agent, all of which shall be non-refundable:
(a) An unused facility fee payable within fifteen
(15) days after the close of each calendar quarter, commencing on January 15,
1998, and on the Termination Date, in an amount equal to the product of (i) (A)
the maximum amount of the Revolving Credit Commitment during the calendar
quarter
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(or portion thereof) upon which such unused facility fee is being calculated
minus (B) the daily average outstanding principal balance of all outstanding
Advances during such calendar quarter (or portion thereof, as appropriate), and
(ii) one-quarter of one percent (.25%) per annum, which fee shall be payable in
arrears and shall be calculated based on the actual number of days elapsed over
a three hundred sixty (360)-day year. The Unused Facility Fee payable pursuant
to this Section 2.6(a) shall be for the pro rata benefit of the Lenders (based
upon each Lender's Commitment Percentage).
(b) A closing fee of Eighty-Two Thousand Five Hundred
Dollars ($82,500), which shall be due and payable on the Closing Date. The
Closing Fee payable pursuant to this Section 2.6(b) shall be for the pro rata
benefit of the Lenders (based upon each Lender's Commitment Percentage).
(c) An agency and administration fee in the amount
set forth in that certain letter agreement dated the date hereof between the
Agent and the Borrowers. No portion of the Agent's Fee shall be rebated or
refunded to the Borrowers notwithstanding the subsequent reduction in or
termination of the Revolving Credit Commitment pursuant hereto. The Agent's Fee
shall be paid for the sole and exclusive benefit of the Agent and shall not be
shared with the Lenders.
2.7 Loan Account. The Agent shall record in one or more Loan
Accounts, the Advances and all payments made by the Borrowers on account of the
Advances, and all other appropriate debits and credits. Each month the Agent
shall render to the Borrowers and the Lenders a statement setting forth the
debit balance of the Loan Account as of the close of the preceding month,
together with a statement of the amount of interest and other charges due to the
Lenders as of that time. Each statement shall be considered correct and accepted
by the Borrowers and the Lenders and conclusively binding upon the Borrowers and
the Lenders unless the Borrowers or the Lenders notify the Agent to the contrary
in writing within thirty (30) days from their receipt of such statement absent
manifest error.
2.8 Computation of Interest. Interest shall be calculated on
the basis of three hundred sixty (360) day year for actual days elapsed for Base
Rate Loans and LIBOR Loans. Any change in the interest rate on the Revolving
Credit Note resulting from a change in the Base Rate shall become effective as
of the opening of business on the day on which such change in the Base Rate
shall occur.
2.9 Maximum Legal Rate. The Borrowers shall not be obligated
to pay and the Agent and the Lenders shall not collect interest on any
Obligation at a rate in excess of the maximum permitted by law or the maximum
that will not subject the Agent or the Lenders to any civil or criminal
penalties. If, because of the acceleration of maturity, the payment of interest
in advance or any other reason, the Borrowers are required, under the provisions
of any Loan Document or otherwise, to pay interest at a rate in excess of such
maximum rate, the rate of interest under such provisions shall immediately and
automatically be reduced to such maximum rate, and any payment made in excess of
such maximum rate, together with interest thereon at the rate provided herein
from the date of such payment, shall be immediately and automatically applied to
the reduction of the unpaid principal balance of the Revolving Credit Note as of
the date on which such excess payment was made. If the amount to be so applied
to reduction of the unpaid principal balance exceeds the unpaid principal
balance, each Lender's pro rata share of such excess amount shall be refunded by
such Lender to the Borrowers.
2.10 Payments.
(a) Except as otherwise provided under Section
2.10(b), all payments (including prepayments) by the Borrowers hereunder shall
be made in Dollars ($) to the Agent at Agent's office identified in Section 9.2,
or such other place or places as the Agent may direct, prior to 12:00 Noon on
the date of payment, in lawful money of the United States of America, and in
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immediately available funds; provided, however, unless the Required Lenders
otherwise agree in writing, any and all payments due and owing by the Borrowers
to the Lenders under the Loan Documents shall be immediately and automatically
deducted by the Agent from the Borrowers' deposit account(s) maintained with the
Agent on the due dates thereof and the Borrowers expressly and irrevocably
authorize the Agent to make the deductions herein described from such account(s)
in order to make such payments as and when they become due. In the event that
funds of the Borrower on deposit with the Agent are insufficient to timely
satisfy any such payment obligation (other than a payment of principal) (the
amount of such insufficiency being referred to herein as a "Deficiency Balance")
and no Default or Event of Default has occurred, the Borrower's Agent shall be
deemed to have requested a Base Rate Loan in an amount equal to the Deficiency
Balance in conformity with the provisions of Section 2.3 and the Lenders shall
be deemed to have been made a Base Rate Loan to the Borrowers pursuant to this
Agreement in an amount equal to the Deficiency Balance, which Base Rate Loan
shall be deemed to have been made on the date on which the payment obligation
was due and the Deficiency Balance existed notwithstanding anything contained
herein to the contrary.
(b) The Agent will distribute payments received by it
from the Borrowers to the Lenders if any such payment is received prior to 2:00
P.M.; otherwise, the Agent will distribute such payment to the Lenders on the
next succeeding Business Day. Whenever any payment hereunder shall be stated to
be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (subject to accrual of interest and
fees for the period of such extension).
2.11 Application of Payments. Subject to the provisions of
Section 7.7, all payments made hereunder by the Borrowers and received by the
Agent shall be applied by the Agent first to the payment in full of any costs
incurred in the collection of any Obligation, including (without limitation)
reasonable attorneys' fees, then to the payment in full of any late charges,
then to the payment in full of any Fees then due, then to the payment of
accrued, unpaid interest and finally to the reduction of the unpaid principal
balance thereof.
2.12 Late Charges. If the Borrowers shall fail to pay any
installment of interest or principal due under the Revolving Credit Facility or
any other sum due to the Lenders under any of the Loan Documents within fifteen
(15) days after the date it is due, the Borrowers shall immediately pay to the
order of the Agent (for the pro rata benefit of the Lenders), without notice or
demand, a late charge equal to two percent (2%) of the amount overdue to defray
part of the additional expense incurred by the Agent and the Lenders in
connection with the delinquency and collection of the overdue amount. The
provision for such late charge shall not be construed to permit the Borrowers to
make any payment after its due date, obligate the Lenders to accept any overdue
installment, or affect the Lenders' rights and remedies upon the occurrence of a
Default or an Event of Default.
2.13 Voluntary Prepayments.
(a) Except as otherwise provided herein, the
Borrowers at any time and from time to time may voluntarily prepay any Base Rate
Loans, in whole or in part, upon (1) one Business Day prior written notice to
the Agent of such prepayment.
(b) The Borrowers shall not prepay, in whole or in
part, any LIBOR Loan prior to the expiration of the appropriate LIBOR Period
applicable thereto, unless such prepayment is accompanied by any payment
required pursuant to the provisions of Section 2.3(f).
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2.14 Yield Protection; Capital Adequacy.
(a) The Borrowers shall pay to each Lender from time
to time such amounts as such Lender may determine to be necessary to compensate
it for any costs incurred by such Lender or any reduction in any amount
receivable by such Lender hereunder (such increases in costs and reductions in
amounts receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to any Lender under this Agreement or the Revolving Credit Note (other
than taxes imposed on the overall net income of such Lender by the jurisdiction
in which such Lender has its principal office); or (ii) imposes or modifies any
reserve, special deposit or similar requirements relating to any extensions of
credit, or other assets of, or any deposits with or other liabilities of, any
Lender (but excluding any such requirement to the extent reflected in an
applicable reserve requirement); or (iii) imposes any other condition affecting
this Agreement (or any of such extensions of credit or liabilities). Each Lender
will notify the Borrowers of any event occurring after the Closing Date that
will entitle such Lender to compensation pursuant to this Section 2.14 as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. Any Lender making a request pursuant to this Section
2.14 shall furnish the Borrowers with a statement setting forth the basis and
amount of each such request.
(b) If after the Closing Date, any Lender shall have
determined that the adoption of any applicable law, rule, regulation or treaty
regarding capital adequacy, or any Regulatory Change, has or would have the
effect of reducing the rate of return on such Lender's capital as a consequence
of its obligations hereunder to a level below that which the Lender could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by an amount such
Lender deems material, the Borrowers shall pay to such Lender such additional
amount or amounts as will compensate the Lender for such reduction.
(c) In determining the amounts due under this Section
2.14, the Lenders may use any reasonable averaging and attribution methods.
Determination by any Lender for purposes of this Section 2.14 of the effect of
any Regulatory Change on its costs of making or maintaining Advances hereunder
or on amounts receivable by it hereunder and of the additional amounts required
to compensate such Lender shall be conclusive, absent manifest error.
2.15 Taxes.
(a) For the purposes of this Section 2.15, the
following terms have the following meanings:
"Taxes" shall mean any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings with
respect to any payment by any Borrower pursuant to this Agreement or under the
Revolving Credit Note, and all liabilities with respect thereto, excluding (i)
in the case of each Lender and the Agent, taxes imposed on its income, and
franchise or similar taxes imposed on it, by a jurisdiction under the laws of
which such Lender or the Agent (as the case may be) is organized, in which its
principal executive office is located or, in the case of each Lender, in which
its applicable lending office is located, and (ii) in the case of each Lender,
any United States withholding tax imposed on such payments but only to the
extent that such Lender is subject to United States withholding tax at the time
such Lender first becomes a party to this Agreement.
"Other Taxes" shall mean any present or
future stamp or documentary taxes and any other excise or property taxes, or
similar charges or levies, which arise from any payment made pursuant to this
Agreement or under the Revolving Credit Note or from the execution or delivery
of, or otherwise with respect to, this Agreement or the Revolving Credit Note.
23
(b) Any and all payments by the Borrowers to or for
the account of any Lender or the Agent hereunder or under the Revolving Credit
Note shall be made without deduction for any Taxes or Other Taxes; provided
that, if the Borrowers shall be required by law to deduct any Taxes or Other
Taxes from any such payments, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.15) such Lender or
the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrowers shall make such
deductions, (iii) the Borrowers shall pay the full amount deducted to the
relevant taxing authority or other governmental authority in accordance with
applicable law, and (iv) the Borrowers shall furnish to the Agent, at its
address referred to in Section 9.2, the original or a certified copy of a
receipt evidencing payment thereof.
(c) The Borrowers agree to indemnify each Lender and
the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 2.15) paid by such Lender or the Agent (as
the case may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. The indemnification provided for in
this Section 2.15 shall be paid within fifteen (15) days after any Lender or the
Agent (as the case may be) makes demand therefor.
(d) Each Lender organized under the laws of a
jurisdiction outside the United States, on or prior to the date of its execution
and delivery of this Agreement in the case of each Lender listed on Schedule "A"
and on or prior to the date on which it becomes a Lender in the case of each
other Lender, and from time to time thereafter if requested in writing by the
Borrowers (but only so long as such Lender remains lawfully able to do so),
shall provide the Borrowers and the Agent with Internal Revenue Service Form
1001 or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which exempts such
Lender from United States withholding tax or reduces the rate of withholding tax
on payments of interest for the account of such Lender or certifying that the
income receivable pursuant to this Agreement is effectively connected with the
conduct of a trade or business in the United States.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
To induce Lenders and Agent to enter into this Agreement and
to make the Advances, the Borrowers jointly and severally represent and warrant
to Lenders and Agent that:
3.1 Organization and Qualification.
(a) Each of the Borrowers and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction in which
the conduct of its business or the ownership of its assets requires such
qualification and in which the failure to so qualify could reasonably be
expected to have a Material Adverse Effect.
(b) Schedule 3.1 sets forth all Subsidiaries of each
of the Borrowers and all Subsidiaries of each Excluded Subsidiary.
(c) Each Subsidiary of each of the Borrowers is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all power and authority and
all governmental licenses, authorizations, consents and approvals required to
carry on its business as currently conducted.
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3.2 Power and Authority. Each of the Borrowers has the
corporate power to execute, deliver and perform under the Loan Documents and to
borrow under this Agreement, and to create the collateral security interests for
which the Security Documents provide, and has taken all necessary corporate
action to authorize the borrowings hereunder on the terms and conditions of this
Agreement and the execution and delivery of, and performance under, the Loan
Documents. No consent of any other party (including stockholders of the
Borrower) and no consent, license, approval or authorization of, or registration
or declaration with, any governmental authority, bureau or agency is required in
connection with the execution, delivery, performance, validity or enforceability
of the Loan Documents.
3.3 Enforceability. The Loan Documents, when executed and
delivered to the Agent pursuant to the provisions of this Agreement, will
constitute valid obligations of the Borrowers legally binding upon them and
enforceable in accordance with their respective terms, except as enforceability
of the foregoing may be limited by bankruptcy, insolvency or other laws of
general application relating to or affecting the enforcement of creditors'
rights.
3.4 Conflict with Other Instruments. The execution and
delivery of, and performance under, the Loan Documents will not violate or
contravene any provision of any existing law or regulation or decree of any
court, governmental authority, bureau or agency having jurisdiction in the
premises or of the Articles of Incorporation or of the By-Laws of any of the
Borrowers or of any mortgage, indenture, security agreement, contract,
undertaking or other agreement to which any of the Borrowers is a party or which
purports to be binding upon it or any of its properties or assets, and will not
result in the creation or imposition of any lien, charge, encumbrance on, or
security interest in, any of its properties or assets pursuant to the provisions
of any such mortgage, indenture, security agreement, contract, undertaking or
other agreement.
3.5 Litigation. Except as set forth in the footnotes to the
latest financial statements provided to Lenders or on Schedule 3.5, no actions,
suits or proceedings before any court or governmental department or agency
(whether or not purportedly on behalf of any of the Borrowers or any Subsidiary)
are pending or, to the knowledge of any of the Borrowers, threatened (a) with
respect to any of the transactions contemplated by this Agreement or (b) against
or affecting any of the Borrowers or any Subsidiary or any of its properties
that, if adversely determined, could reasonably be expected to have a Material
Adverse Effect. Based upon the Borrowers' review of all available data,
information and documentation and discussions with their professional advisors,
the Borrowers do not in good faith believe that any of the actions, suits or
proceedings described in Schedule 3.5 could reasonably be expected to have,
either singly or in the aggregate, a Material Adverse Effect.
3.6 Title to Assets. Each of the Borrowers has good and
marketable title in fee to, or valid, enforceable leases of, all property owned,
leased, or otherwise used by the Borrowers, and good and marketable title to all
of its other assets now carried on its books, or used by it, including those
reflected in the most recent consolidated balance sheet of the Borrowers
delivered to the Lenders or acquired since the date of such balance sheet
(except personal property disposed of since said date in the ordinary course of
business), free of any mortgages, pledges, charges, liens, security interests or
other encumbrances except those indicated in the footnotes to the latest
financial statements of Borrowers provided to the Lenders or on Schedule 3.6.
Each of the Borrowers enjoys peaceful and undisturbed possession under all
material leases under which it is operating, and all said leases are valid,
subsisting and in full force and effect.
3.7 Licenses; Intellectual Property. Each of the
Borrowers owns or has a valid right to use the patents, patent rights, permits,
licenses, trade secrets, trademarks, trademark rights, trade names or trade name
rights
25
or franchises, copyrights, inventions, and intellectual property rights being
used to conduct its business as now operated and as now contemplated to be
operated; and the conduct of the business of each of the Borrowers as now
operated and as now proposed to be operated does not and will not conflict with
valid patents, patent rights, permits, licenses, trade secrets, trademarks,
trademark rights, trade names or trade name rights or franchises, copyrights,
inventions, and intellectual property rights of others. No claim is pending or
threatened to the effect that any such intellectual property owned or licensed
by any of the Borrowers or which any of the Borrowers otherwise has the right to
use, is invalid or unenforceable by the Borrowers, as the case may be. Except as
set forth on Schedule 3.7, no one of the Borrowers has any obligation to
compensate any Person for the use of any such patents or rights, and no Person
has been granted any license or other rights to use in any manner any of the
patents or rights of the Borrowers or any Subsidiary, whether requiring the
payment of royalties or not.
3.8 Default. None of the Borrowers is in default under any
material existing agreement, and no Default or Event of Default hereunder has
occurred and is continuing.
3.9 Taxes. The Borrowers have filed or caused to be filed all
tax returns (including, without limitation, those relating to federal and state
income taxes) required to be filed and have paid all taxes shown to be due and
payable on said returns or on any assessments made against them (other than
those being contested in good faith by appropriate proceedings for which
adequate reserves have been provided on its books). No tax liens have been filed
against any assets of any of the Borrowers or any Subsidiary, and no claims are
being asserted with respect to such taxes which could reasonably be expected to
have a Material Adverse Effect.
3.10 Financial Condition.
(a) All consolidated balance sheets, profit and loss
statements, and other financial statements of the Borrowers, dated as of July
31, 1997, all of which have heretofore been delivered to the Lenders, and all
financial statements and data of the Borrowers which will hereafter be furnished
to the Lenders, are or will be (when furnished) true and correct and do or will
(when furnished) present fairly, accurately and completely the consolidated
financial position of the Borrowers and the results of their operations as of
the dates and for the periods for which the same are furnished. All such
consolidated financial statements have been or will be, as appropriate, prepared
in accordance with GAAP applied on a consistent basis and, in the case of
interim financial statements only, subject to normal year-end adjustments and
the absence of footnotes thereon. Except as set forth on Schedule 3.10(a), the
Borrowers 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") (a "Loss Contingency") which is not accrued,
reflected, or reserved against in its balance sheet or disclosed in the
footnotes to such balance sheet. There has been no event, circumstance, or
occurrence which could reasonably be expected to have a Material Adverse Effect
since the date of the financial statements which were most recently furnished by
the Borrowers to Agent.
(b) Each of the Borrowers is and, after completion of
the transactions described herein, will be Solvent.
3.11 ERISA.
(a) Except as set forth on Schedule 3.11, none of the
following events has occurred which, either singly or in the aggregate, has
resulted or could reasonably be expected to result in liability to any of the
26
Borrowers involving an amount which, either singly or in the aggregate, exceeds
One Hundred Thousand Dollars ($100,000):
(i) there is no Accumulated Funding
Deficiency with respect to any Employee Pension Plan;
(ii) no Reportable Event has occurred with
respect to any Employee Pension Plan;
(iii) no violations of the Code have
occurred that could potentially cause the loss of the tax qualified status of
any Employee Pension Plan;
(iv) neither any of the Borrowers nor any
Controlled Group Member has incurred Withdrawal Liability with respect to any
Multiemployer Plan; and
(v) no Multiemployer Plan is in
Reorganization.
(b) No liability (whether or not such liability is
being litigated) has been asserted against any of the Borrowers or any
Controlled Group Member in connection with any Employee Pension Plan or any
Multiemployer Plan by the PBGC, by the trustee of a trust established pursuant
to ERISA ss.4049, by a trustee appointed pursuant to ERISA ss.4042(b) or (c), or
by a sponsor or an agent of a sponsor of a Multiemployer Plan, and no lien has
been attached and no Person has threatened to attach a lien on the property of
any of the Borrowers or any Controlled Group Member as a result of failure to
comply with ERISA or as a result of the termination of any Employee Pension Plan
and which liability or lien (as appropriate), either singly or in the aggregate,
could reasonably be expected to exceed One Hundred Thousand Dollars ($100,000).
(c) Each Employee Pension Plan, as most recently
amended, including amendments to any trust agreement, group annuity or insurance
contract, or other governing instrument, is or will be (with respect to the
recently formed Employee Pension Plans of Castings and CPVC) the subject of a
favorable determination letter by the Internal Revenue Service with respect to
its qualifications under Code ss.401(a) and such Employee Pension Plan's related
trusts are exempt from taxation under Code ss.501(a). Neither the Borrowers nor
any Controlled Group Member has an unfulfilled obligation to contribute to any
Multiemployer Plan.
3.12 Use of Proceeds. The proceeds of the Revolving Credit
Facility shall be used for the purposes set forth in Section 2.1(e).
3.13 Regulation U. Neither any of the Borrowers nor any
Subsidiary is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System), and no Advance or any portion
thereof will be used to purchase or carry any margin stock or to reduce or
retire any indebtedness incurred for such purpose or to extend credit to others
for such purpose.
3.14 No Notices; No Violations. Neither any of the Borrowers
nor any Subsidiary has received any notice from any federal, state or local
authority or any insurance or inspection body to the effect that any of its
properties, facilities, equipment or business procedures or practices fail to
comply with any applicable law, ordinance, regulation, building or zoning law,
judicial or administrative determination, or any other requirements of any such
authority or body, and the Borrowers and all Subsidiaries, and all such
properties, facilities, equipment, procedures and practices, are in compliance
in all material respects with all such laws, ordinances, determinations,
regulations and requirements.
27
3.15 Labor. Neither any of the Borrowers nor any Subsidiary is
involved in any strike, lock-out, boycott or any other material labor trouble,
nor is it involved in labor negotiations, other than in the ordinary course of
business of each of the Borrowers' or their Subsidiaries' business as heretofore
conducted.
3.16 Group Health Plans. The Borrowers and each Subsidiary (a)
provide COBRA Continuation Coverage under group health plans for separating
employees in accordance with the provisions of Code ss.4980B(f) and (b) are in
compliance with the provisions of ss.1862(b)(1) of the Social Security Act.
3.17 Material Transactions with Affiliates. Except as set
forth in Schedule 3.17, there are no loans, leases, royalty agreements or other
agreements, arrangements or other transactions, which are material to the
business, operations, or financial condition of any of the Borrowers, between
(a) any of the Borrowers, and (b)(i) any of its respective customers or
suppliers, or (ii) any Affiliate. All transactions described in Schedule 3.17
between any of the Borrowers and an Affiliate which is not one of the Borrowers
comply with the proviso set forth in Section 6.10.
3.18 Environmental Matters. Except as disclosed in the annual
audit report of the Borrowers for the fiscal year ended October 30, 1996, in the
quarterly financial statements of the Borrowers for the fiscal quarter ended
July 31, 1997 on Form 10-Q filed with the Securities Exchange Commission, and on
Schedule 3.18:
(a) To the best of the Borrowers' knowledge, the
Premises have never been and are not being used to make, store, handle, treat,
dispose of, generate, or transport Hazardous Substances in violation of any
applicable law. To the best of the Borrowers' knowledge, there has never been a
Release of Hazardous Substances on or from the Premises or any other property
owned or used by any of the Borrowers in violation of any applicable law or that
caused Contamination, and no Contamination exists on any such property.
(b) None of the Borrowers or any Subsidiary has
received any notification, citation, complaint, violation, or notice of any kind
from any governmental authority relating or pertaining to the making, storing,
handling, treating, disposing, generating, transporting, or Release of any
Hazardous Substances, and neither the Borrowers nor any Subsidiary nor any
property owned or used by any of the Borrowers or any Subsidiary is under any
investigation with respect to any such matters.
(c) There are no underground storage tanks on the
Premises or any other property owned or used by any of the Borrowers or any
Subsidiary.
3.19 Fees. Except for the Agent's Fee and the other Fees, no
brokerage commission or similar compensation is due or will become due to any
Person by reason of the granting of the Revolving Credit Facility.
3.20 Location of Collateral. The Collateral is situated at the
locations identified on Schedule 3.20 and the places of business of the Secured
Borrowers, together with their "chief executive office" (as defined in the
Pennsylvania Uniform Commercial Code) and principal place of business are all
listed thereon.
3.21 Fictitious Names. The Secured Borrowers do not operate or
do business, and have not operated or done business within the five (5) year
period preceding the Closing Date, under any assumed, trade or fictitious names,
other than as set forth in Schedule 3.21.
3.22 Accuracy of Information. All information, reports and
other papers and data (including, without limitation, copies of all filings made
with governmental authorities) furnished heretofore or contemporaneously
herewith by or on behalf of any of the Borrowers to the Agent, the Lenders or
28
any Person furnishing an opinion required to be delivered hereunder for purposes
of or in connection with this Agreement and the other Loan Documents and the
transactions contemplated hereby and thereby, is, and all other such information
hereafter furnished by or on behalf of the Borrowers to the Agent, the Lenders,
or any Person furnishing an opinion required to be delivered hereunder will be,
true and accurate in every material respect on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading and the
Borrowers have notified the Lenders of all events that have occurred since such
date that would render such information incomplete or misleading.
3.23 No Omissions. Neither this Agreement, any Schedules to
this Agreement, nor any Loan Documents required to be delivered pursuant to this
Agreement contain or will contain any untrue statement of material fact or omit
or will omit to state a material fact required to be stated in order to make
such statement, document or other instrument not misleading.
SECTION 4. CONDITIONS OF BORROWING.
4.1 Initial Advance. As a condition precedent to the Lenders'
obligation to make the initial Advance, the following conditions shall all be
satisfied:
(a) Loan Documents. The Borrowers shall have
delivered or caused to be delivered to the Agent duly executed copies of each of
the Loan Documents.
(b) Financing Statements. The Secured Borrowers shall
have executed and delivered to the Agent UCC-1 financing statements describing
the Collateral in sufficient number for the filing thereof in each filing office
as shall have been required by the Agent or the Lenders, which financing
statements shall be satisfactory, in form and substance, to the Agent.
(c) Borrowers' Authorizations. Each of the Borrowers
shall have delivered to the Agent:
(i) a copy, certified by its Secretary, of
the resolutions of its Board of Directors authorizing and approving
the execution and delivery of and performance under this Agreement and
the other Loan Documents, the borrowings provided for hereunder;
(ii) its articles of incorporation,
certified by its Secretary;
(iii) a good standing or subsistence
certificate certified by the Secretary of State of the state of its
jurisdiction of incorporation as of a date within twenty (20) days of
the Closing Date;
(iv) a copy of its By-Laws, as currently in
effect, certified by its Secretary; and
(v) an incumbency certificate reflecting
that the officers of the Borrowers who have executed the Loan
Documents on their behalf are duly authorized and empowered to do so.
(d) Legal Opinions. The law firm of Xxxxxx, Xxxxx &
Xxxxxxx LLP, as legal counsel for the Borrowers, shall have delivered to the
Agent a favorable opinion, dated the Closing Date, addressed to the Agent and
the Lenders, and satisfactory in form and substance to Agent. The legal opinion
furnished to the Agent and the Lenders pursuant to this Section 4.1(d) shall
expressly state that the opinions therein set forth may be relied upon by the
successors and assigns of the addressees thereof.
29
(e) Representations. The representations and
warranties contained in Section 3 hereof shall be true and correct in all
material respects on and as of the Closing Date, and no Event of Default or
Default shall be in existence on the Closing Date or shall occur as a result of
making any Advance on the Closing Date.
(f) Financial Projections. CSC shall have delivered
to the Lenders financial projections on a consolidated basis covering the three
(3) year period subsequent to the Closing Date, which projections shall (i)
include the assumptions upon which such projections were prepared, (ii) be in a
format which is satisfactory to the Lenders, and (iii) include such supporting
documentation and information as the Lenders may request, and (iv) be subject to
the review and approval by the Agent and the Lenders.
(g) No Material Adverse Change. No event,
circumstance, or occurrence shall have occurred since July 31, 1997 which could
reasonably be expected to have a Material Adverse Effect.
(h) Required Modifications to Existing Financial
Covenants. The Borrowers shall have furnished to the Agent satisfactory evidence
that any and all financial covenants to which any of the Borrowers or Subsidiary
is subject under any agreement, document, or instrument relating to pertaining
to any of the Permitted Debt in existence as of the Closing Date shall be no
more restrictive upon the Borrowers or Subsidiary than the Financial Covenants
and, in connection therewith, the Borrowers shall cause any amendments to or
modifications of such agreements, documents, and instruments, to be executed and
delivered to satisfy the provisions of this Section 4.1(h) (which amendments and
modifications shall be satisfactory to the Agent).
(i) No Litigation. 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
Borrowers and their Subsidiaries, threatened against the Borrowers or their
Subsidiaries, the outcome of which could reasonably be expected to have, either
singly or in the aggregate, a Material Adverse Effect.
(j) No Violation. The completion of the transactions
contemplated hereby and by the Loan Documents shall not contravene, violate or
conflict with, nor involve the Agent or any Lender in violation of, any law,
rule, or regulation applicable to any of them.
(k) Intercreditor Agreement. The Agent, CoreStates,
First Union, and the Secured Borrowers shall have entered into an Intercreditor
Agreement, pursuant to which, among other things, the Agent (on behalf of the
Lenders), CoreStates, and First Union shall agree, among other things, that (i)
the Collateral shall also secure the Term Loans, and (ii) the security interests
of CoreStates and First Union with respect to the Term Loans shall be on a pari
passu basis with the security interest of the Agent with respect to the
Obligations, which Intercreditor Agreement shall be satisfactory to the Agent
and the Lenders.
(l) Legal Matters. All legal matters incident to the
transactions contemplated by this Agreement shall be satisfactory to Xxxxxxx &
Xxx, counsel for the Agent.
4.2 Subsequent Advances. As a condition precedent to the
Lenders' obligation to make any Advance after the Closing Date, the following
conditions shall all be satisfied on the date of such Advance:
(a) Material Adverse Change. No material adverse
change shall have occurred in the financial condition, assets, or results of
operations of the Borrowers since the date of the most recent financial
statements of the Borrowers furnished to the Agent pursuant to Sections 5.1(a)
and 5.1(b).
30
(b) No Default. No Default or Event of Default shall
exist on the date of such Advance or shall occur as the result of making such
Advance.
(c) Representations. Without limiting the generality
of Section 4.2(b), the representations and warranties contained in Section 3
shall be true and correct in all material respects on and as of the date of the
making of such Advance with the same effect as if made on and as of such date.
(d) No litigation. 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
Borrowers and their Subsidiaries, threatened against the Borrowers or their
Subsidiaries, the outcome of which could reasonably be expected to have, either
singly or in the aggregate, a Material Adverse Effect.
4.3 Satisfaction of Conditions. The Agent's determination with
respect to whether an Advance is required to be made pursuant to the provisions
hereof and whether any condition herein described has been satisfied shall be
binding upon the Borrowers and the Lenders.
SECTION 5. AFFIRMATIVE COVENANTS.
The Borrowers covenant and agree that from and after the
Closing Date and so long as any of the Obligations remain outstanding and
unpaid, in whole or in part, or the Revolving Credit Facility remains available,
the Borrowers will observe the following covenants, unless the Required Lenders
shall otherwise consent in writing:
5.1 Financial Statements; Reports. The Borrowers will furnish
to the Agent:
(a) Annual Reports: as soon as available, but in any
event not later than one hundred twenty (120) days after the close of each
fiscal year of the Borrowers, the annual audit report of the Borrowers
containing consolidated balance sheets of the Borrowers and any Subsidiaries, as
at the end of such fiscal year, and related consolidated statements of income,
shareholders' equity and cash flows of the Borrowers and any Subsidiaries, for
such fiscal year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, all in reasonable detail,
prepared in accordance with GAAP applied on a consistent basis and accompanied
by an opinion from independent certified public accountants selected by the
Borrowers and satisfactory to the Lenders without material exception or
qualification and in all respects reasonably satisfactory to the Lenders;
(b) Quarterly Reports: as soon as available, but in
any event not later than sixty (60) days after the close of each of the first
three (3) fiscal quarters of each fiscal year of the Borrowers, consolidated
balance sheets of the Borrowers and any Subsidiaries, as at the end of such
quarterly period, and related consolidated statements of income for such
quarterly period and statements of cash flows for the period from the end of the
preceding fiscal year to the end of such quarterly period, setting forth in each
case in comparative form the corresponding figures for the corresponding period
of the preceding fiscal year, all in reasonable detail and prepared in
accordance with GAAP applied on a consistent basis (subject to normal year-end
adjustments and the absence of footnotes thereon);
(c) Quarterly Consolidating Work Sheets: Concurrently
with the delivery of those quarterly financial statements required pursuant to
Section 5.1(b), consolidating work sheets of the Borrowers and any Subsidiaries,
as at the end of the quarterly period for which financial statements are being
furnished under Section 5.1(b), and related consolidating
31
work sheets containing a balance sheet and indicating the income and cash flows
of Borrowers and any Subsidiaries for such quarterly period, all in reasonable
detail and in a format reasonably acceptable to the Agent;
(d) Compliance Certificates: Within sixty (60) days
after the close of each of the first three (3) fiscal quarters of each fiscal
year of the Borrowers and within one hundred twenty (120) days after the close
of the final fiscal quarter of each fiscal year of the Borrowers, a Compliance
Certificate duly executed and completed by the Executive Vice President of
Finance and Administration of the Borrowers;
(e) Securities Filings: promptly upon sending, making
available, or filing the same, such reports and financial statements as the
Borrowers or any Subsidiary shall send or make available to the shareholders of
the Borrowers or file with the SEC;
(f) Other Reports: promptly after the furnishing
thereof, copies of any statement or report furnished to any other lender to any
of the Borrowers or any Subsidiary pursuant to the terms of any indenture, loan,
credit, or similar agreement and not otherwise required to be furnished to the
Lenders pursuant to any other clause of this Section 5.1; and
(g) Other Information: from time to time with
reasonable promptness, such additional financial and other information as the
Lenders may reasonably request.
The Borrowers shall furnish the Agent with three (3) copies of all statements
and reports furnished to the Agent pursuant to this Section 5.1 in order to
expedite the Agent's delivery thereof to the Lenders. As soon as practicable
after the Agent's receipt of all statements and reports furnished to the Agent
pursuant to this Section 5.1, the Agent shall furnish copies thereof to the
Lenders. In addition, although the Borrowers are not required to furnish monthly
financial statements to the Agent pursuant to this Section 5.1, if such monthly
financial statements are provided to the Agent, the Agent shall, as soon as
practicable following its receipt thereof, also furnish copies thereof to the
Lenders.
5.2 Liabilities. The Borrowers and any Subsidiaries will pay
and discharge, at or before their maturity or before they become delinquent, as
the case may be, all of their respective obligations and liabilities (including,
without limitation, tax liabilities and all employee wages as provided in the
Fair Labor Standards Act, 29 U.S.C. ss.ss.206-207 and any successor statute),
except (i) those obligations and liabilities which may be contested in good
faith, and for which adequate reserves are maintained in accordance with GAAP,
(ii) trade payables which, in the ordinary course of the Borrowers' business and
in accordance with industry practice, are repaid after the stated due date
thereof but prior to the commencement of any enforcement action against the
Borrowers as a result of such failure to pay on the due date and for which a
reserve is not required to be maintained in accordance with GAAP.
5.3 ERISA.
(a) Each of the Borrowers will furnish to the Lenders
(i) within thirty (30) days after it has reason to know that it or any
Controlled Group Member has incurred any Withdrawal Liability in excess of One
Hundred Thousand Dollars ($100,000) (either singly or in the aggregate), or that
any Multiemployer Plan is in Reorganization or that any Reportable Event has
occurred with respect to any Employee Pension Plan or that the PBGC has
instituted or will institute proceedings under Title IV of ERISA to terminate
any Employee Pension Plan or to appoint a trustee to administer any Employee
Pension Plan, a statement setting forth the details as to such Withdrawal
Liability, Reorganization, Reportable Event, termination or appointment
proceedings and the action which it (or the Multiemployer Plan sponsor or
Employee Pension Plan sponsor other than the Borrower) proposes to take with
32
respect thereto, together with a copy of any notice of Withdrawal Liability or
Reorganization given to any of the Borrowers or any Controlled Group Member and
a copy of the notice of such Reportable Event given to PBGC if a copy of such
notice is available to any of the Borrowers or any of its Controlled Group
Members; and (ii) promptly after receipt thereof, a copy of any notice to any of
the Borrowers or any of its Controlled Group Members or the sponsor of any
Employee Pension Plan received from PBGC or the Internal Revenue Service which
sets forth or proposes any action or determination with respect to such Employee
Pension Plan.
(b) Each of the Borrowers will also notify Lenders of
(i) any excise taxes which have been assessed or which any of the Borrowers or
any of its Controlled Group Members have reason to believe may be assessed
against any of the Borrowers or any of its Controlled Group Members by the
Internal Revenue Service with respect to any Employee Pension Plan or
Multiemployer Plan or (ii) any revocation of qualification under Code ss.401
which has occurred or which any of the Borrowers or any of its Controlled Group
Members have reason to believe may occur with respect to any Employee Pension
Plan or Multiemployer Plan, which in the case of either of clauses (i) or (ii)
of this Section 5.3(b), either singly or in the aggregate, could reasonably be
expected to result in liability to any of the Borrowers in excess of One Hundred
Thousand Dollars ($100,000).
5.4 Notices. The Borrowers will give notice in writing to the
Agent as soon as possible, but in any event within five (5) days, after the
occurrence of any of the following:
(a) any Event of Default or Default;
(b) any event of default or similar occurrence under
any instrument or other agreement of any of the Borrowers or any Subsidiary
entitling any Person to accelerate the maturity of any obligation of any of the
Borrowers or any Subsidiary or to exercise any other remedy against any of the
Borrowers or such Subsidiary, which could reasonably be expected to result in
the occurrence of an Event of Default or have a Material Adverse Effect;
(c) any strike, lock-out, boycott or any other
material labor trouble, which could reasonably be expected to have a Material
Adverse Effect;
(d) the commencement of any litigation, proceeding or
dispute affecting any of the Borrowers or any Subsidiary, or any dispute between
any of the Borrowers or any Subsidiary, and any Person, if such litigation,
proceeding or dispute could reasonably be expected to materially interfere with
the normal business operations of any of the Borrowers or any Subsidiary, or, if
resolved other than in the favor of the Borrowers or any Subsidiary, such
litigation, proceeding or dispute could reasonably be expected to have a
Material Adverse Effect;
(e) any event, circumstance, or occurrence which
could reasonably be expected to have a Material Adverse Effect; or
(f) any change in the Chief Executive Officer or the
Chief Financial Officer of CSC.
5.5 Environmental Matters; Compliance with Laws.
(a) The Borrowers shall:
(i) immediately notify the Lenders (and any
other person that any Borrower or any Subsidiary is required to notify
pursuant to any applicable laws) once any of the Borrowers or
Subsidiary is aware of a Release or threatened Release of Hazardous
Substances on or from any of the Premises owned or used by any of the
Borrowers or any Subsidiary which might cause Contamination;
33
(ii) immediately notify the Lenders once any
of them become aware that an environmental investigation or clean-up
proceeding is instituted by any Person in connection with any such
Premises;
(iii) to the extent required by applicable
law, comply with and assist any such environmental investigation and
clean-up proceeding;
(iv) promptly execute and complete any
Remedial Actions necessary to ensure that such Premises are in
compliance, in all material respects, with all applicable laws and
free from Contamination, and to ensure that no environmental liens or
encumbrances are levied against or exist with respect to such
Premises, and provide the Lenders with a certification from each
agency having jurisdiction with respect thereto that such Remedial
Actions have been completed to all such agencies' satisfaction;
(v) immediately notify the Lenders of any
citation, notification, complaint, or violation which any of the
Borrowers or any Subsidiary receives from any Person which relates to
or pertains to the making, storing, handling, treating, disposing,
generating, transporting or Release of any Hazardous Substances and
which, either singly or in the aggregate, could reasonably be expected
to (A) result in liability to any of the Borrowers in excess of One
Hundred Thousand Dollars ($100,000) or (B) have a Material Adverse
Effect; and
(vi) comply, and cause all properties,
assets, and operations owned or used by any of the Borrowers or any
Subsidiary to comply, in all material respects, with all applicable
federal, state, local and other environmental, zoning, occupational
safety, health, employment, discrimination, labor and other laws and
regulations.
(b) If the Borrowers shall fail to fully execute and
complete any requisite Remedial Action, the Lenders may, but shall not be
obligated to, make Advances toward performance or satisfaction of such Remedial
Actions.
(c) If the Agent or any Lender acquires equitable or
legal title to any of the Premises hereunder or under the Loan Documents, the
Agent and the Lenders do not accept and shall not bear (nor shall any assignee
or transferee of the Agent or any Lender accept or bear) any responsibility for
any Hazardous Substances in or about the Premises or for the actual or
threatened Release thereof from the Premises. No provisions of the Loan
Documents shall be interpreted to absolve or release the Borrowers or any
Subsidiary from any liability or responsibility which they may have to any
Person, under any local, state or federal statute or regulation, for Remedial
Actions with respect to any such Hazardous Substances or for the actual or
threatened Release of any such Hazardous Substances.
(d) The Borrowers shall defend, indemnify the Agent
and Lenders, and hold the Agent and Lenders harmless from and against all loss,
liability, damage, cost, and expense, including without limitation, reasonable
attorneys' fees, fines, or other civil and criminal penalties or payments, for
failure of the Premises, or any other operations, assets or property owned or
used by the Borrowers or their Subsidiaries to comply in all respects with all
environmental and other laws, caused, in whole or in part, regardless of fault,
by the Borrowers, by any Subsidiary, or by any past, present or future owner,
occupier, tenant, subtenant, licensee, guest or other person (except the Agent
or any Lender). The provisions of this Section 5.5(d) shall survive repayment of
the Obligations, termination of the Revolving Credit Facility, and foreclosure
on and sale of such properties hereunder or otherwise. The Borrowers shall
remain liable hereunder regardless of any other provisions hereof which may
limit the Borrowers' liability.
34
(e) All sums advanced or paid by the Agent or the
Lenders under this Section 5.5, including sums so advanced or paid in connection
with any judicial or administrative investigation or proceeding relating
thereto, and including, without limitation, reasonable attorneys' fees, fines,
or other penalties or payments, and all of the Borrowers' obligations to defend,
indemnify and hold harmless the Agent and the Lenders, shall be deemed to be
Advances under the Revolving Credit Facility and shall be at once repayable. The
Borrowers' obligations with respect thereto shall be evidenced by the Revolving
Credit Note, and shall bear interest at the Default Rate.
5.6 Corporate Existence; Properties. The Borrowers will notify
the Agent and the Lenders prior to any change of name of any of the Borrowers or
any Subsidiary (provided that at least thirty (30) days' advance notice shall be
required if the name change involves any of the Secured Borrowers) and will
maintain, and cause each Subsidiary to maintain:
(a) their corporate existence and their qualification
to do business and good standing in each jurisdiction where the failure to be so
qualified or in good standing could reasonably be expected to materially and
adversely affect the business, operations, or financial condition of any of the
Borrowers;
(b) all licenses, permits and other authorizations
necessary for the ownership and operation of their properties and businesses;
and
(c) their assets and properties (including all of the
Collateral) in good repair, working order and condition and make all necessary
or appropriate repairs, renewals, replacements and substitutions, so that the
value and efficiency of all such assets and properties shall at all times be
properly preserved and maintained.
5.7 Insurance.
(a) The Borrowers and each Subsidiary shall carry at
all times, in coverage, form and amount reasonably satisfactory to the Agent,
hazard insurance (with fire, extended and vandalism and malicious mischief
coverage and coverage against such other hazards as are customarily insured
against by companies in the same or similar business), commercial general
liability insurance, worker's compensation insurance, comprehensive automobile
liability insurance, and such other insurance as the Agent or the Required
Lenders may from time to time reasonably require, and pay all premiums on the
policies for such insurance when and as they become due and do all other things
necessary to maintain such policies in full force and effect. The Borrowers
shall from time to time, upon request by the Agent or any Lender, promptly
furnish or cause to be furnished to the Agent or such Lender evidence, in form
and substance satisfactory to the Agent, of the maintenance of all insurance
required to be maintained by this Section 5.7 including, but not limited to,
such originals or copies, as the Agent or such Lender may request, of policies,
certificates of insurance, riders and endorsements relating to such insurance
and proof of premium payments.
(b) The Secured Borrowers shall cause all hazard
insurance policies and any policies insuring the inventory and equipment covered
by the Security Agreement to provide, and the insurers issuing such policies to
certify to the Agent, that:
(i) the interest of the Agent shall be
insured regardless of any breach or violation by the Secured Borrowers
or the holder or owner of the policies of any warranties, declarations
or conditions contained in such policies;
(ii) if such insurance be proposed to be
cancelled or materially changed for any reason whatsoever, such
insurer will promptly notify the Agent and such cancellation or change
shall not be effective,
35
as to the Agent, until thirty (30) days after Agent's receipt of such
notice, unless the effect of such change is to extend or increase
coverage under the policy;
(iii) the Agent will have the right, at its
election, to remedy any default in the payment of premiums within
thirty (30) days of notice from the insurer of such default; and
(iv) loss payments in each instance will be
payable to the Agent as lender loss payee.
5.8 Books and Records. The Borrowers will maintain, and will
cause each Subsidiary to maintain, accurate and complete records and books of
account with respect to all of their operations in accordance with GAAP, and
will permit, and will cause each Subsidiary to permit, officers or
representatives of the Agent and the Lenders to examine and make excerpts from
such books and records and to visit and inspect their properties, both real and
personal (including, without limitation, the Collateral), at all reasonable
times.
5.9 Adjusted Current Ratio. The Borrowers and their
Subsidiaries will maintain, on a consolidated basis, an Adjusted Current Ratio
of not less than 1.00:1.00 as at the close of each fiscal quarter.
5.10 Funded Debt To Total Capitalization. The Borrowers and
their Subsidiaries will maintain, on a consolidated basis, a ratio of Funded
Debt to Total Capitalization of not greater than .65:1.00 as at the close of
each fiscal quarter.
5.11 Minimum Cash and Investments. The Borrowers and their
Subsidiaries will maintain, on a consolidated basis, cash and Investments of the
type described in Sections 6.3(b) and 6.3(c) of not less than Ten Million
Dollars ($10,000,000) in the aggregate at all times.
5.12 Tangible Net Worth. The Borrowers and their Subsidiaries
will maintain, on a consolidated basis, Tangible Net Worth of not less than the
Minimum Tangible Net Worth Amount.
5.13 Group Health Plans. The Borrowers will comply, and cause
each Subsidiary to comply, in all material respects with the group health plan
COBRA Continuation Coverage requirements of Code ss.4980B(f) and with all
provisions of ss.1862(b)(1) of the Social Security Act. The Borrowers will
furnish to Lenders, as soon as possible and in any event within thirty (30) days
after any of the Borrowers knows or has reason to know, notice that the
Borrowers or any Subsidiary is not in compliance with any provision of Code
ss.4980B(f) or ss.1862(b)(1) of the Social Security Act.
5.14 Lender's Lien. The Secured Borrowers grant to each
Lender, as additional collateral security for the prompt payment and
satisfaction of the Obligations, a lien upon and security interest in any and
all deposit and other accounts of the Secured Borrowers with the Lenders and any
other debts or obligations that the Lenders may owe to the Borrowers from time
to time.
5.15 Joinder by Future Subsidiaries. The Borrowers jointly and
severally covenant and agree to cause any Subsidiary of any Borrower (other than
the Excluded Subsidiaries) to execute and deliver a joinder or similar document
(a "Joinder"), in the form of Exhibit "C" attached hereto, pursuant to which
such Subsidiary shall (i) join in and become a party (as a Borrower) to this
Agreement and the other Loan Documents for the purpose of making the
representations, warranties, covenants, and agreements of the Borrowers
hereunder and thereunder as if it were an original party hereto and thereto, and
(ii) join in and become a party (as a Secured Borrower) to the Security
Agreement, pursuant to which such Subsidiary shall, as security for Obligations,
grant to the Agent a perfected security interest in the types of Collateral
covered thereby in accordance with the lien priority provisions
36
thereof. In connection with the provisions of this Section 5.15, the Borrowers
shall cause each such Subsidiary which is required to execute and deliver a
Joinder to execute and deliver any and all additional agreements, documents, and
instruments (including, without limitation, a separate joinder to the Security
Agreement and UCC-1 financing statements) which the Lender may reasonably
request in order to effectuate the intent and purposes of this Section 5.15.
5.16 Cross-Guaranty by Borrowers. Without limiting the effect
of the Borrowers' joint and several responsibility for the repayment and
satisfaction of the Obligations, each of the Borrowers also hereby jointly and
severally unconditionally guarantees and becomes surety for the prompt payment
of all principal, interest, and other sums due and owing with respect to or in
connection with the Obligations, when and as the same shall become due and
payable, whether at maturity, by acceleration or otherwise, and the due and
punctual performance of all duties, obligations, and liabilities of each
Borrower Loan Documents. Each of the Borrowers covenants and agrees that its
duties and obligations under this Section 5.16 shall be absolute and
unconditional, irrespective of, and shall be unaffected by, any invalidity ,
irregularity, or unenforceability of any provision of any Loan Document.
5.17 Satisfactory Management. The Borrowers acknowledge that
the Lender is relying upon the abilities of the Borrowers' senior executive
management as a material inducement for the Lender to enter into this Agreement.
Therefore, the Borrowers shall not cause or permit either of Xxxxxx X. Xxxxx or
Xxxxxx X. Xxxxx to cease to be active in the Borrowers' senior executive
management for any reason.
5.18 Location of Business. The Borrowers will provide thirty
(30) days' advance written notice to the Agent and the Lenders of any change in
the location of any place of business of any of the Secured Borrowers, whether
the establishment of a new place of business or the discontinuance of a present
place of business.
5.19 Location of Collateral. All of the Collateral will at all
times be situated at the locations identified in Schedule 3.20, and the
Borrowers will provide the Agent and the Lenders with at least thirty (30) days'
advance written notice prior to any change in such locations, except for (i) the
temporary movement of equipment of the Secured Borrowers in the ordinary course
of their business in connection with the repair and maintenance thereof so long
as (A) no Event of Default has occurred and (B) the aggregate fair market value
of any such equipment which is not situated at the locations identified in
Schedule 3.20 by reason of the foregoing does not, at any time, exceed One
Hundred Thousand Dollars ($100,000), (ii) the temporary movement of inventory of
the Secured Borrowers which is necessary for the storage of excess inventory in
the ordinary course of their business so long as (A) concurrent written notice
is provided to the Agent, except in cases involving the movement of inventory
which, either individually or in the aggregate, has a value in excess of Five
Hundred Thousand Dollars ($500,000), in which latter event at least three (3)
Business Days' advance written notice thereof shall be required, and (B) no
Event of Default has occurred, and (iii) establishment by the Secured Borrowers
of new locations of Collateral in which case notice thereof shall be required
concurrently therewith.
5.20 Landlord's Waivers. The Borrowers shall use their best
efforts to cause all landlords, warehousemen, and operators of facilities at
which any of the Collateral is located to execute and deliver a waiver to the
Agent, pursuant to which such Person subordinates and waives, in favor of the
Agent, any and all right such Person may at any time have or acquire in and to
the Collateral, which waiver shall be satisfactory, in form and substance, to
the Agent.
5.21 The Federal Assignment of Claims Act. The Borrower shall
notify the Lender if any accounts receivable of the Secured Borrowers in excess
of One Hundred Thousand Dollars ($100,000) arise out of contracts with the
United States of America, or any department, agency or instrumentality
37
thereof (collectively, the "Government Receivables"), and shall execute any and
all documents or instruments and shall take any and all steps or actions
required by the Agent or any Lender so that all monies due or to become due
under such contract will be assigned to the Agent in accordance with the
Security Agreement and notice given thereof to the United States in accordance
with the requirements of the Federal Assignment of Claims Act, as amended.
Notwithstanding the foregoing, upon and after the occurrence of any Event of
Default, the Borrowers shall notify the Agent of all Government Receivables
regardless of the amount thereof in addition to complying with the other
provisions of this Section 5.21.
SECTION 6. NEGATIVE COVENANTS.
The Borrowers covenant and agree that from and after the
Closing Date and so long as any of the Obligations remain outstanding and
unpaid, in whole or in part, or the Revolving Credit Facility remains available,
the Borrowers will observe the following covenants unless the Required Lenders
shall otherwise consent in writing:
6.1 Debt. The Borrowers will not, nor will they permit any
Subsidiary (other than Spraysafe) to, create, incur, assume or suffer or permit
to exist any Debt, including indebtedness for borrowed money or any indebtedness
constituting the deferred portion of the purchase price of any property, except:
(a) the Obligations;
(b) Debt to suppliers and other trade creditors
incurred in the ordinary course of business by a Borrower or any Subsidiary;
(c) Debt constituting the deferred purchase price of
equipment purchased or acquired as permitted by Section 6.2(b) so long as no
Default or Event of Default has occurred or would be caused by the incurrence
thereof;
(d) Debt in existence on the Closing Date and
described on Schedule 6.1(d), and so long as no Default or Event of Default has
occurred or be caused thereby, any renewals, extensions, or refinancings
thereof, provided that, (i) advance written notice thereon is furnished to the
Agent, and (ii) the unpaid principal balance thereof is not increased in
connection with any such renewal, extension, or refinancing and any such
renewal, extension or refinancing;
(e) so long as no Default or Event of Default has
occurred or would be caused thereby, (i) Inter-Company Debt in existence as of
the Closing Date (and described on Schedule 6.1(e)) and subject to the terms,
conditions, and restrictions of the Subordination Agreement, and (ii)
InterCompany Debt incurred after the Closing Date so long as the parties
involved in connection with the transaction whereby such Inter-Company Debt is
issued shall execute and deliver a joinder to the Subordination Agreement (in
form and substance satisfactory to the Agent), pursuant to which such
Inter-Company Debt shall be subject to the terms, conditions, and restrictions
of the Subordination Agreement;
(f) Subordinated Debt so long as no Default or Event
of Default has occurred or would be caused the incurrence thereof;
(g) Debt in the form of unsecured revolving lines of
credit under which (i) trade letters of credit and bankers' acceptance may be
issued, and (ii) the maximum credit availability thereunder does not exceed Ten
Million Dollars ($10,000,000) in the aggregate; and
(h) in the event that the Xxxxx Brothers Loan is
repaid in full after the Closing Date, and so long as no Default or Event of
Default has occurred or would be caused by the incurrence thereof, term Debt in
a
38
principal amount of up to Seven Million Five Hundred Thousand Dollars
($7,500,000) incurred by CPVC to repay or replace the Xxxxx Brothers Loan (the
"Xxxxx Brothers Replacement Loan"); provided, however, CPVC and the other
Borrowers shall have first provided the Lenders with a reasonable opportunity to
provide the Xxxxx Brothers Replacement Loan through a term loan facility to be
made available to the Borrowers pursuant to a modification hereto and on terms
and conditions which are mutually satisfactory to the Lenders, the Agent, and
the Borrowers.
6.2 Liens. The Borrowers (other than Spraysafe and its
Subsidiaries) will not, nor will they permit any Subsidiary to, create, assume,
or suffer to exist, any Lien of any kind upon any of its assets (real or
personal, tangible or intangible), whether now owned or hereafter acquired,
except:
(a) the liens and security interests created or
permitted by the Security Documents;
(b) purchase money Liens on and security interests in
equipment acquired after the Closing Date securing Debt incurred in the ordinary
course of business in an aggregate amount which does not exceed Five Million
Dollars ($5,000,000) at any one time outstanding, provided that such Liens and
security interests attach only to the equipment so acquired and do not encumber
any other property of any Borrower or any Subsidiary;
(c) those Liens in existence on the Closing Date and
described in Schedule 6.2(c);
(d) (i) cash collateral provided by CPVC to Xxxxx
Brothers as security for the Xxxxx Brothers Loan, as contemplated by Section
2.1(e)(ii)(2), and (ii) Liens identical to the Xxxxx Brothers Liens and Liens
encumbering any other assets of CPVC, as security for the Xxxxx Brothers
Replacement Loan;
(e) Liens for taxes not yet payable or being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided on the books of the Borrowers or a Subsidiary;
(f) mechanics', materialmen's, warehousemen's,
carriers' or other like Liens arising in the ordinary course of business of the
Borrowers or any Subsidiary, arising with respect to obligations which are not
overdue for a period longer than thirty (30) days or which are being contested
in good faith by appropriate proceedings, and for which adequate reserves have
been provided on the books of the Borrowers or a Subsidiary;
(g) deposits or pledges to secure the performance of
bids, tenders, contracts, leases, public or statutory obligations, surety or
appeal bonds or other deposits or pledges for purposes of a like general nature
or given in the ordinary course of business by the Borrowers or any Subsidiary;
(h) other encumbrances consisting of zoning
restrictions, easements, restrictions on the use of real property or minor
irregularities in the title thereto, which do not arise in connection with the
borrowing of, or any obligation for the payment of, money and which, in the
aggregate, do not materially detract from the value of the business, properties
or assets of the Borrowers or any Subsidiary; and
(i) judgment and other similar Liens arising in
connection with court proceedings, provided the execution or other enforcement
of such Lien 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 adequate reserves have been established
with respect thereto and which do not adversely affect the priority of the
Agent's security interest in any of the Collateral.
39
6.3 Investments and Advances. The Borrowers will not, nor will
they permit any Subsidiary (other than Spraysafe) to, make or suffer to exist
any Investment (by way of transfer of property, contribution to capital,
purchase of stock, securities, partnership or other ownership interests or
evidence of indebtedness, acquisition of the business or assets or otherwise)
in, or make or suffer to exist any advances or loans to, any Person (including a
Borrower or any Subsidiary), except that:
(a) the Borrowers and the Subsidiaries (other than
CSC Finance Company and CSC Investment Company) may extend trade credit under
usual and customary arm's length terms in the ordinary course of business;
(b) the Borrowers and the Subsidiaries may purchase
and own marketable direct obligations of the United States of America or any
agency thereof, marketable obligations directly and fully guaranteed by the
United States of America and certificates of deposit issued by the Lenders or by
any other bank with a shareholders' equity of at least $50,000,000 organized
under the laws of the United States of America or any state thereof, provided
that such obligations and certificates of deposit have a maturity of two (2)
years or less;
(c) the Borrowers and the Subsidiaries may purchase
and own any marketable security that is rated (i) BBB or better by Standard &
Poor's, a Division of McGraw Hill Companies, or (ii) bbb or better by Xxxxx'x
Investors Service;
(d) the Borrowers may incur Inter-Company Debt on the
terms and subject to the conditions of Section 6.1(e);
(e) capital contributions may be made by any
Subsidiary to a Borrower;
(f) capital contributions may be made by a Borrower
to a Subsidiary in accordance with the provisions of Schedule 6.3(f) so long as
no Default or Event of Default has occurred or would be caused thereby; and
(g) The Borrowers and their Subsidiaries may dispose
of assets to the extent permitted pursuant to the provisions of Section 6.5.
6.4 Mergers, Consolidations. The Borrowers will not, nor will
they permit any Subsidiary to, enter into any transaction of merger or
consolidation, except that:
(a) any Subsidiary may be merged into any of the
Borrowers if the Borrower or any Co-Borrower, as appropriate, shall be the
surviving corporation; and
(b) any Subsidiary which is not one of the Borrowers
may be merged into or consolidated with any other Subsidiary which is not one of
the Borrowers;
provided that at least ten (10) days' advance written notice of such transaction
is provided to the Agent and the Lenders (together with copies of all
documentation relating thereto) and, after giving effect thereto, the Borrowers
and the Subsidiaries shall be in compliance with all the terms of this Agreement
and no Default or Event of Default hereunder shall have occurred and be
continuing.
6.5 Disposition of Assets. The Borrowers will not, nor will
they permit any Subsidiary to, liquidate or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, pledge, or otherwise
transfer or dispose of all or substantially all of its properties, assets or
business except that (i) any Subsidiary may be liquidated or dissolved in
connection with a merger or consolidation permitted by Section 6.4, and
40
(ii) the Borrowers and their Subsidiaries may sell inventory in the ordinary
course of their respective business.
6.6 Disposition of Accounts. The Borrowers will not, nor will
they permit any Subsidiary to, sell, discount or otherwise dispose of its notes,
accounts, chattel paper, documents, general intangibles or instruments except to
or with the Agent or the Lenders hereunder.
6.7 Guaranty Obligations; Letters of Credit/Bankers'
Acceptances.
(a) Except as set disclosed in the annual report of
the Borrowers for the fiscal year ended October 31, 1996, in the quarterly
financial statements of the Borrowers for the fiscal quarter ended July 31, 1997
on Form 10-Q filed with the Securities Exchange Commission, and on Schedule
6.7(a), the Borrowers will not, nor will they permit any Subsidiary to, become
or remain liable, directly or indirectly, in connection with any Guaranty
Obligations, letters of credit, bankers' acceptances, or similar obligations,
except for trade letters of credit and bankers' acceptances issued after the
Closing Date for the account of any Borrower or Subsidiary in the ordinary
course of their business under the Permitted Debt described in Section 6.1(g).
(b) Except for those liabilities of the type set
forth in the consolidating balance sheets of the Borrower and their Subsidiaries
for the fiscal quarter ending July 31, 1997, the Borrowers will not permit CSC
Finance Company or CSC Investment Company to create, incur, assume, or suffer or
permit to exist any liability (fixed or contingent).
6.8 Sales and Lease-Backs. The Borrowers will not, nor will
they permit any Subsidiary to, enter into any arrangement, directly or
indirectly, with any Person, whereby the Borrowers or any Subsidiary shall sell
or transfer any property, real or personal, whether now owned or hereafter
acquired, and thereafter rent or lease such property or other property which the
Borrowers or such Subsidiary intends to use for substantially the same purpose
or purposes as the property being sold or transferred.
6.9 Continuance of Business. The Borrowers will not, nor will
they permit any Subsidiary to, engage in any line of business other than those
in which the Borrowers or any such Subsidiary is actively engaged on the Closing
Date and in the manufacture and distribution of products involving or relating
to fire protection.
6.10 Transactions with Affiliates. Except as expressly
permitted by this Agreement, the Borrowers will not, nor will they permit any
Subsidiary to, directly or indirectly:
(a) make any investment in, or loan or advance to, an
Affiliate;
(b) transfer, sell, lease, assign or otherwise
dispose of any assets to an Affiliate;
(c) merge into or consolidate with or purchase or
acquire assets from an Affiliate; or
(d) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate (including, without
limitation, any guarantees or assumptions of obligations of an Affiliate);
provided that (i) Borrowers and any Subsidiary may enter into any transaction
with an Affiliate for the leasing of property, the rendering or receipt of
services or the purchase or sale of assets in the ordinary course of business
for a consideration which is substantially as advantageous to Borrowers or
41
such Subsidiary as the consideration which it would obtain in a comparable arm's
length transaction with a Person not an Affiliate, and (ii) royalty payments due
and owing under the trademark license agreement between Central Sprinkler and
CSC Finance Company referred on Schedule 3.7 are permitted.
6.11 Handling of Hazardous Substances. The Borrowers will not
permit, nor will they permit any Subsidiary to, use in its business or
operations, or produce as a result or as a by-product of its business or
operations, or store or hold at any site or location at which it conducts its
business or operations, or at any other property, any Hazardous Substance unless
the Borrower or Subsidiary strictly and fully complies with all requirements of
any applicable law, regulation, decision or edict relating to the special
handling, collection, storage, treatment, disposal, or transportation of such
Hazardous Substance. The Borrowers will not, nor will they permit any Subsidiary
to, permit the Release or threatened Release of any Hazardous Substance on or
from their respective properties which might cause Contamination.
6.12 Use of Proceeds. The Borrowers will not, nor will they
permit any Subsidiary to, directly or indirectly, apply any part of the proceeds
of the Advances to the purchasing or carrying of any "margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
or any regulations, interpretations or rulings thereunder.
6.13 Removal and Protection of Collateral. Except as otherwise
permitted under Section 5.19, the Borrowers will not, nor will they permit any
Subsidiary to, remove (other than in the ordinary course of business as
permitted hereunder) any of the Collateral from the place of business where
presently located, nor permit the value of any Collateral to be impaired or any
equipment of the Secured Borrowers to become a fixture or an accession to other
goods.
SECTION 7. EVENTS OF DEFAULT, REMEDIES.
7.1 Events of Default. The following shall constitute Events
of Default:
(a) Non-Payment. (i) Failure by the Borrowers to pay
the principal of or accrued interest on the Revolving Credit Note or any other
instrument evidencing any Obligation within one (1) day following written notice
from the Agent or any Lender (provided that such notice shall only be required
if payments of principal and interest are being automatically charged to the
Borrowers' deposit account(s) maintained with the Agent), or (ii) the failure of
the Borrowers or any Subsidiary to pay any other amount payable to Agent or the
Lenders, whether under this Agreement or otherwise, within three (3) days after
written notice from the Agent or any Lender.
(b) Falsity of Representations and Warranties. Any
representation or warranty made by the Borrowers in this Agreement or in any
other Loan Document or in any certificate, financial or other written statement
furnished at any time under or in connection with this Agreement or any other
Loan Document shall be false or misleading in any material respect on the date
when made or deemed so made on the date when made.
(c) Failure to Perform Certain Covenants. Failure by
the Borrowers to observe or perform any other covenants, conditions or
provisions contained in this Agreement or in any other Loan Document, provided
that, except with respect to a violation of any of the Financial Covenants or
Section 6, such failure shall continue for a period of fifteen (15) days after
the earlier of (i) written notice thereof from the Agent to the Borrowers, or
(ii) the date on which an executive officer of any of the Borrowers knew, or
should have known, of such failure or if such failure could not be cured by the
Borrowers due to circumstances beyond the Borrowers' control within such fifteen
(15) day period, such longer period necessary for the Borrowers to cure such
failure (in no event to exceed a total of thirty (30) days from the
42
earlier of the dates referred to in the foregoing clauses (i) or (ii)) so long
as the Borrowers are diligently and in good faith taking all necessary steps to
cure such failure.
(d) Default Under Other Obligations. The Borrowers or
any Subsidiary:
(i) defaults in any payment of principal of
or interest on any Funded Debt; or
(ii) defaults in the performance of any
other agreement, term or condition contained in any other obligation or
in any agreement relating thereto involving, either singly or in the
aggregate, an amount or having a value in excess of One Million Dollars
($1,000,000),
if the effect, with respect to either of clauses (i) or (ii), of such default is
to cause, or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to then cause, such obligation to become due
prior to its stated maturity.
(e) Voluntary Bankruptcy, Etc. The commencement by
any of the Borrowers or any Subsidiary of a voluntary case under the Bankruptcy
Code, as now constituted or hereafter amended, or any other applicable federal
or state bankruptcy, insolvency, reorganization, rehabilitation or other similar
law, or the consent by it to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of any of the Borrowers or any Subsidiary or for any
substantial part of its property, or the making by it of any assignment for the
benefit of creditors, or the failure of any of the Borrowers or any Subsidiary
generally to pay its debts as such debts become due, or the taking of corporate
action by any of the Borrowers or any Subsidiary in furtherance of any of the
foregoing.
(f) Involuntary Bankruptcy, Etc. The entry of a
decree or order for relief by a court having jurisdiction in the premises in
respect of any of the Borrowers or any Subsidiary in an involuntary case under
the Bankruptcy Code, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of any of the Borrowers or any Subsidiary or for any substantial part
of its property, or ordering the winding-up or liquidation of its affairs and
the continuance of any such decree or order unstayed and in effect for a period
of thirty (30) days.
(g) ERISA.
(i) (A)(1) Any Employee Pension Plan is
terminated within the meaning of Title IV of ERISA, or (2) a trustee is
appointed by the appropriate United States District Court to administer
any Employee Pension Plan, or (3) the PBGC institutes proceedings to
terminate any Employee Pension Plan, or (4) any Reportable Event occurs
which the Required Lenders determine in good faith indicates a
substantial likelihood that an event described in (1), (2), or (3)
above will occur, or (5) any Borrower or any of its Controlled Group
Members incur any Withdrawal Liability with respect to any
Multiemployer Plan or (6) any Multiemployer Plan enters Reorganization,
and (B) with respect to events described in (1)-(5) above, only, the
benefit commitments (within the meaning of ERISA ss.4001(a)(16)),
exceed the market value of the assets in the fund under the Employee
Pension Plan by, five percent (5%) or more of the Borrowers' or its
Controlled Group Members' tangible net worth;
(ii) there occurs any Accumulated Funding
Deficiency with respect to any Employee Pension Plan and the Borrowers
or any of
43
its Controlled Group Members fails to correct such Accumulated Funding
Deficiency prior to the end of the taxable period within the meaning of
Code ss.4971(c)(3); or
(iii) any Employee Pension Plan loses its
tax-qualified status; provided that, in the case of clauses (i), (ii),
and/or (iii) of this Section 7.1(g), no Event of Default shall be
deemed to have occurred under this Section 7.1(g) unless the Borrowers
have incurred or could reasonably be expected to incur liability
involving an amount which exceeds One Hundred Thousand Dollars
($100,000) in the aggregate.
(h) Default Under Other Documents. An "Event of
Default" or similar event shall have occurred and be continuing under any other
Loan Document.
(i) Material Adverse Change. The Lenders in good
faith believe that the prospect of timely repayment of the Obligations to be
materially impaired by reason of any event, condition, fact, law change, or
circumstance which could reasonably be expected to have a Material Adverse
Effect.
(j) Unenforceability. (i) Any material provision of
any of the Loan Documents shall at any time for any reason cease to be a valid
and binding obligation of any of the Borrowers, or shall be declared to be null
and void and, in either such event, of the Borrowers cannot or will not enter
into substantially identical documents which in the judgment of the Agent will
constitute binding obligations of the Borrowers, or (ii) the validity or
enforceability thereof shall be contested by any of the Borrowers or any
governmental agency or authority, or any of the Borrowers shall deny that it has
any further liability or obligation under any Loan Document to which it is a
party.
(k) Security Interests. Any Security Document shall,
for any reason, fail or cease to create a valid and perfected and, except to the
extent permitted by the terms hereof or thereof, a first-priority Lien on or
security interest in any of the Collateral purported to be covered thereby.
(l) Judgments. A final judgment or judgments in
excess of Five Hundred Thousand Dollars ($500,000) (other than judgments, the
Borrowers' liability with respect to which has been acknowledged in writing by
the Borrowers' insurance company as being unconditionally covered by insurance),
either singly or in the aggregate, for the payment of money shall be rendered by
a court of record against any of the Borrowers and the Borrowers shall not
discharge such judgment or provide its discharge in accordance with its terms,
or procure a stay of execution thereof, within thirty (30) days from the date of
the entry of the judgment and within such period of thirty (30) days, the
execution of such judgment shall have been stayed, appeal therefrom shall have
been made by the Borrowers and the execution thereof shall have been stayed
during such appeal period.
(m) Change in Executive Officers. Without limiting
the generality of Section 5.17, the Agent shall have the right to declare an
Event of Default under this Section 7.1(m) in the event that (i) Xxxxxx X. Xxxxx
is no longer the Chief Executive Officer of CSC, or (ii) Xxxxxx X. Xxxxx is no
longer the Chief Financial Officer of CSC.
(n) Reserves; Loss Contingencies. The Borrowers are
required, at any time, to accrue, reflect, or reserve, as a liability, expense,
and/or charge on their financial statements, an amount in excess of Five Million
Dollars ($5,000,000), whether individually or in the aggregate, as a result of
any event, circumstance, occurrence, or Loss Contingency (including, without
limitation, litigation involving any of the Borrowers), whether such event,
circumstance, occurrence, or Loss Contingency existed or arose prior to or after
the Closing Date.
44
7.2 Acceleration.
(a) Upon the occurrence of an Event of Default
specified in Sections 7.1(a) through 7.1(d), and 7.1(g) through 7.1(n), the
Agent shall, upon the request and direction of the Required Lenders, by written
notice to Borrowers, terminate immediately and irrevocably the Revolving Credit
Facility, the Revolving Credit Commitment, and any other obligation of the
Lenders to make any Advances to or for the account of the Borrowers or any of
their Affiliates, and declare the Revolving Credit Note, and all other
instruments evidencing the Obligations to be due and payable, whereupon the
principal amount of the Revolving Credit Note and all outstanding Obligations,
together with accrued interest thereon and all other amounts payable thereunder,
shall become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the documents evidencing the same to the contrary
notwithstanding.
(b) Upon the occurrence of an Event of Default
specified in Sections 7.1(e) or 7.1(f), the Revolving Credit Facility and the
Revolving Credit Commitment, and any other obligation of the Lenders to make any
advances to or for the account of the Borrowers or any of their Affiliates,
shall automatically and immediately terminate and the unpaid principal balances
of, all accrued, unpaid interest on, and all other sums payable with regard to,
the Revolving Credit Note and all instruments evidencing the Obligations shall
automatically and immediately become due and payable, in all cases without any
action on the part of the Lenders.
7.3 Exercise of Rights and Remedies by Agent. Subject in all
respects to the provisions of Section 8, the Agent shall take such action with
respect to any Default or Event of Default as shall be reasonably directed in
writing by the Required Lenders provided that, unless and until the Agent shall
have received such directions, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall reasonably deem advisable in the best
interest of the Lenders.
7.4 Right of Setoff. Upon the occurrence of a Default or an
Event of Default, the Lenders shall have the right, in addition to all other
rights and remedies available to them, to set off against the unpaid balance of
the Obligations, any debt owing to the Borrowers by the Lenders and any funds in
any deposit account maintained by the Borrowers with the Lenders.
7.5 No Marshalling, Etc., Required. If an Event of Default
shall have occurred and be continuing, neither the Agent nor the Lenders shall
be required to marshal any present or future security for, or guarantees of, the
Obligations or to resort to any such security or guarantee in any particular
order and the Borrowers waive, to the fullest extent that they lawfully can, (a)
any right they might have to require the Lenders to pursue any particular remedy
before proceeding against them, and (b) any right to the benefit of, or to
direct the application of the proceeds of any of the Collateral until the
Obligations have been paid in full.
7.6 Remedies Cumulative. The Agent and the Lenders may
exercise any of their rights and remedies set forth in this Agreement and the
other Loan Documents. The remedies of the Agent and the Lenders shall be
cumulative and concurrent, and may be pursued singly, successively, or together,
at their sole discretion, and may be exercised as often as the occasion
therefore shall occur; and the failure to exercise any such right or remedy
shall in no event be construed as a waiver or release thereof.
7.7 Allocation of Payments After Event of Default.
Notwithstanding any other provision of this Agreement, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent or any Lender on account of amounts outstanding under any of the
Loan Documents shall be paid over or delivered as follows:
45
FIRST, to the payment of all out-of-pocket costs and
expenses (including without limitation reasonable attorneys' fees) of
the Agent in connection with enforcing the rights of the Agent and the
Lenders under the Loan Documents and any protective advances made by
the Agent with respect to the Collateral under or pursuant to the
Security Documents or this Agreement;
SECOND, to the payment of all reasonable
out-of-pocket costs and expenses (including, without limitation,
reasonable attorneys' fees) of each of the Lenders in connection with
enforcing its rights under the Loan Documents;
THIRD, to payment of any unpaid Agent's Fees;
FOURTH, to the payment of all other accrued Fees and
interest payable, pro rata to the Lenders in accordance with each
Lender's Commitment;
FIFTH, to the payment of the outstanding principal
amount of the Revolving Credit Facility, pro rata to the Lenders in
accordance with each Lender's Commitment;
SIXTH, to all other Obligations which shall have
become due and payable under the Loan Documents and not repaid pursuant
to clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to
whoever may be lawfully entitled to receive such surplus.
7.8 Sharing of Payments. The Lenders agree among themselves
that, except to the extent otherwise provided herein, in the event that any
Lender shall obtain payment in respect of any of the Obligations through the
exercise of a right of setoff, banker's lien or counterclaim, or otherwise under
any applicable bankruptcy, insolvency or other law, or by any other means, in
excess of its pro rata share of such payment as provided for in this Agreement,
such Lender shall promptly pay in cash or purchase from the other Lenders a
participation in such Obligations in such amounts, and make such other
adjustments from time to time, as shall be equitable to ensure that all Lenders
share such payment in accordance with their respective ratable shares as
provided for in this Agreement. The Lenders further agree among themselves that
if payment to a Lender obtained by such Lender through the exercise of a right
of setoff, banker's lien, counterclaim or other event, as aforesaid, shall be
rescinded or must otherwise be restored, each Lender which shall have shared the
benefit of such payment shall, by payment in cash or a repurchase of a
participation theretofore sold, return its share of that benefit (together with
its share of any accrued interest payable with respect thereto) to each Lender
whose payment shall have been rescinded or otherwise restored. The Borrowers
agree that any Lender so purchasing such a participation may, to the fullest
extent permitted by law, exercise all rights of payment, including setoff,
banker's lien or counterclaim, with respect to such participation as fully as if
such Lender were a holder of such Obligation in the amount of such
participation.
7.9 Interest on Overdue Amounts. Except as otherwise provided
in this Agreement, any amounts due from any Lender to the Agent or from one
Lender to another Lender which are not paid when due shall, until paid, bear
interest at the Federal Funds Rate.
SECTION 8. AGENCY PROVISIONS.
8.1 Appointment. Each Lender hereby designates and appoints
CoreStates Bank, N.A. as the Agent of such Lender to act as specified herein and
the other Loan Documents, and each such Lender hereby authorizes the Agent, as
the administrative agent for such Lender, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and
46
to exercise such powers and perform such duties as are expressly delegated by
the terms hereof and of the other Loan Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere herein and in the other Loan Documents, the Agent shall
not have any duties or responsibilities, except those expressly set forth herein
and therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be implied from any provision of or read into this Agreement or any of the other
Loan Documents, or shall otherwise exist against the Agent. The provisions of
this Section 8.1 (other than Section 8.9) are solely for the benefit of the
Agent and neither the Lenders and nor any of the Borrowers shall have any rights
as a third party beneficiary of the provisions hereof (other than Section 8.9).
In performing its functions and duties under this Agreement and the other Loan
Documents, Agent shall act solely as an agent of the Lenders and does not assume
and shall not be deemed to have assumed any obligation or relationship of agency
or trust with or for any Borrower. The use of the term "agent" in this Agreement
with reference to the Agent is not, in any manner or respect, intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom and is intended to create or reflect only an
administrative relationship between independent contracting parties.
8.2 Delegation of Duties. Agent may discharge any of its
duties hereunder or under the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
8.3 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(a) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection herewith or in connection with any of the other
Loan Documents (except for its or such Person's own gross negligence or willful
misconduct), or (b) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any of the Borrowers
contained herein or in any of the other Loan Documents or in any certificate,
report, document, financial statement or other written or oral statement
referred to or provided for in, or received by Agent under or in connection
herewith or in connection with the other Loan Documents, or enforceability or
sufficiency therefor of any of the other Loan Documents, or for any failure of
any of the Borrowers to perform or satisfy any of the Obligations hereunder or
thereunder. The Agent shall not be responsible to any Lender for the
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement, or any of the other Loan Documents or for any
representations, warranties, recitals or statements made herein or therein or
made by any of the Borrowers in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by Agent to the
Lenders or by or on behalf of any of the Borrowers to the Agent or any Lender or
be required to ascertain or inquire as to the performance or observance of any
of the terms, conditions, provisions, covenants or agreements contained herein
or therein or as to the use of the proceeds of the Advances or of the existence
or possible existence of any Default or Event of Default or to inspect the
properties, books or records of the Borrowers. The Agent is not a trustee for
the Lenders and owes no fiduciary duty to the Lenders.
8.4 Reliance on Communications. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
47
statements of legal counsel (including, without limitation, counsel to any of
the Borrowers, independent accountants and other experts selected by the Agent
with reasonable care). The Agent may deem and treat the Lenders as the owner of
its interests hereunder for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent in
accordance with Section 9.6. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or under any of the other Loan
Documents unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred, by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or under any of the other Loan Documents in accordance with a
request of the Required Lenders (or to the extent specifically provided in
Section 9.7(b), all of the Lenders) and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders (including
their successors and assigns).
8.5 Notice of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless Agent has received notice from a Lender or a Borrower referring
to the Loan Document, describing such Default or Event of Default and stating
that such notice is a "notice of default." In the event that the Agent receives
such a notice of default, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Lenders.
8.6 Non-Reliance on Agents and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent or any
Affiliate thereof hereinafter taken, including any review of the affairs of any
of the Borrowers, shall be deemed to constitute any representation or warranty,
express or implied, by the Agent to any Lender. Each Lender represents to the
Agent that it has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrowers and made its own decision to make its
Commitment hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analyses, appraisals and decisions
in taking or not taking action under this Agreement, and to make such
investigation as it deems necessary to inform itself as to the business, assets,
operations, property, financial and other conditions, prospects and
creditworthiness of the Borrowers. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility, express or
implied, to provide any Lender with any credit or other information concerning
the business, operations, assets, property, financial or other conditions,
prospects or creditworthiness of the Borrowers which may come into the
possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
8.7 Indemnification. The Lenders agree to indemnify Agent in
its capacity as such (to the extent not promptly reimbursed by the Borrowers and
without limiting the obligation of the Borrowers to do so), ratably according to
their respective Commitment Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time (including, without limitation, at any time following payment in full
of the Obligations) be imposed on, incurred by or asserted against Agent in its
capacity as such in any way relating to or arising out of this
48
Agreement or the other Loan Documents or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or any action taken or omitted by Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements, if and to the extent any of
the foregoing results from the gross negligence or willful misconduct of the
Agent. If any indemnity furnished to the Agent for any purpose shall, in the
opinion of the Agent, be insufficient or become impaired, the Agent may require
that it be furnished with additional indemnity satisfactory to it and cease, or
not commence, to do the acts indemnified against it until such additional
indemnity is furnished; provided that, notwithstanding the foregoing proviso,
Agent shall not be indemnified for any event caused by its gross negligence or
willful misconduct. The agreements in this Section 8.7 shall survive the
repayment and satisfaction of the Obligations and all other amounts payable
hereunder and under the other Documents.
8.8 Agent in Its Individual Capacity. Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with any of the Borrowers as though the Agent were not the Agent
hereunder. With respect to Advances made and all obligations owing to it, Agent
shall have the same rights and powers under this Agreement as any Lender and may
exercise the same as though it was not the Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
8.9 Successor Agent. Agent may, at any time, resign upon thirty (30)
days written notice to the Lenders. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Required Lenders, and shall have accepted
such appointment, within forty-five (45) days after the notice of resignation,
then the retiring Agent shall select a successor Agent provided such successor
is a Lender hereunder or a commercial bank organized under the laws of the
United States of America or of any State thereof and has a combined capital and
surplus of at least $100,000,000. Upon the acceptance of any appointment as an
Agent hereunder by a successor, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations as an Agent, as appropriate, under this Agreement and the other Loan
Documents and the provisions of this Section 8.9 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was an Agent under
this Agreement. So long as no Default or Event of Default has occurred, any
successor Agent shall be subject to the prior approval of the Borrowers' Agent,
which approval shall not be unreasonably withheld, conditioned, or delayed.
There shall at all times be a Person servicing as Agent hereunder.
SECTION 9. MISCELLANEOUS.
9.1 No Waiver; Cumulative Remedies. No failure or delay on the
part of the Agent of the Lenders in exercising any right, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege
hereunder or thereunder preclude or require any other or further exercise
thereof or the exercise of any other right, power or privilege. The Agent and
the Lenders shall not be deemed, by any act of omission or commission, to have
waived any of their rights or remedies hereunder unless such waiver is in
writing and signed by the Agent, and then only to the extent specifically set
forth in writing. A waiver with respect to one event shall not be construed as
continuing or as a bar to or a waiver of any right or remedy with respect to a
subsequent event. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
9.2 Notices. Except as otherwise expressly provided herein,
all notices and other communications shall have been duly given and shall be
49
effective (a) when delivered, (b) when transmitted via telecopy (or other
facsimile device) to the number set forth below, (c) the Business Day following
the day on which the same has been delivered prepaid to a reputable national
overnight air courier service, or (d) the third Business Day following the day
on which the same is sent by certified or registered mail, postage prepaid, in
each case to the respective parties at the address or telecopy numbers set forth
below or on Schedule "A" (with respect to the Lenders), or at such other address
as such party may specify by written notice to the other parties hereto.
The Borrowers: Central Sprinkler Corporation
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xx. Xxxxxx X. Xxxxx,
Executive Vice President of
Finance and Administration
with a copy to: Xxxxxx, Xxxxx & Xxxxxxx LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx,
Esquire
The Agent: CoreStates Bank, N.A.
0000 Xxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Attention: Mr. Xxxxxxx Xxxxxxxx,
Vice President
with a copy to: Xxxxxxx & Xxx, P.C.
One Glenhardie Corporate Center
0000 Xxxxxxxx Xxxx
X.X. Xxx 000
Xxxxx, XX 00000
Telecopy No: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx,
Esquire
The Lenders: See Schedule "A"
9.3 Payment of Expenses; Indemnification. The Borrowers agree
to: (a) pay all reasonable out-of-pocket costs and expenses of (i) the Agent in
connection with (A) the negotiation, preparation, execution and delivery and
administration of this Agreement and the other Loan Documents and the documents
and instruments referred to therein (including, without limitation, the
reasonable fees and expenses of Xxxxxxx & Xxx, P.C., special counsel to the
Agent but not the fees and expenses of any other Lender's counsel), (B)
recording, filing, and related fees and costs in connection with perfecting
Liens granted to the Agent under the Security Documents, and (C) any amendment,
waiver or consent relating hereto and thereto including, but not limited to, any
such amendments, waivers or consents resulting from or related to any work-out,
renegotiation or restructure relating to the performance by the Borrowers under
this Agreement and (ii) the Agent and the Lenders in connection with (A)
enforcement of the Loan Documents and the documents and instruments referred to
therein, including, without limitation, in connection with any such enforcement,
the reasonable fees and disbursements of counsel for the Agent and each of the
Lenders, and (B) any bankruptcy or insolvency proceeding of any of the Borrowers
of any of its Subsidiaries and (b) indemnify Agent and each Lender, its
officers, directors, employees,
50
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses incurred by any of them as
a result of, or arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not Agent or any
Lender is a party thereto) related to (i) the entering into and/or performance
of any Loan Document or the use of proceeds of any Advance (including other
extensions of credit) hereunder or the consummation of any other transactions
contemplated in any Loan Document, including, without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of
gross negligence or willful misconduct on the part of the Person to be
indemnified), and (ii) any claims for Taxes.
9.4 Payment of Expenses and Taxes. In addition to payment of
the expenses and counsel fees provided for in Section 9.3, the Borrowers agree
to pay, and to save the Agent and the Lenders harmless from any delay in paying,
stamp and other similar taxes, if any, including, without limitation, all
levies, impositions, duties, charges or withholdings, together with any
penalties, fines or interest thereon or other additions thereto, which may be
payable or determined to be payable in connection with the execution and
delivery of this Agreement and the Loan Documents or any modification of any
thereof or any waiver or consent under or in respect of any thereof.
9.5 Survival of Indemnification and Representations and
Warranties. All indemnities set forth herein and all representations and
warranties made herein shall survive the execution and delivery of this
Agreement, the making of the Advances, and the repayment of the Obligations and
the termination of the Commitments hereunder.
9.6 Benefit of Agreement.
(a) Generally. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that none of the Borrowers may
assign and transfer any of their interests hereunder without the prior written
consent of all of the Lenders; and provided further that the rights of each
Lender to transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth below in Sections 9.6(b) and
9.6(c).
(b) Assignments. Each Lender may, with the prior
written consent of the Borrowers and the Agent (provided that no consent of the
Borrowers shall be required during the existence and continuation of a Default
or Event of Default), which consent shall not be unreasonably withheld,
conditioned, or delayed, assign all or a portion of its rights and obligations
hereunder pursuant to an Assignment Agreement to one or more Eligible Assignees;
provided that (i) any such assignment shall be in a minimum aggregate amount of
Five Million Dollars ($5,000,000) of the Revolving Credit Commitment and in
integral multiples of One Million Dollars ($1,000,000) if in excess thereof (or
the remaining amount of such Lender's Commitment), (ii) each such assignment
shall be of a constant, not varying, percentage of all of the assigning Lender's
rights and obligations under the Revolving Credit Commitment being assigned. Any
assignment hereunder shall be effective upon satisfaction of the conditions set
forth above and delivery, to the Agent of a duly executed Assignment Agreement
together with a non-refundable transfer fee of Three Thousand Five Hundred
Dollars ($3,500) payable to the Agent for its own account; and (iii) if an
Eligible Assignee is not incorporated under the laws of the United States or a
State thereof, such Eligible Assignee shall deliver to the Borrowers and the
Agent the documentation required pursuant to the provisions of Section 2.15 as a
condition to any assignment hereunder. Notwithstanding the foregoing, it is
understood and agreed that (i) the prior written consent of the Borrowers and
the Agent and (ii) the payment of a transfer fee shall not be required in
connection with any assignment which otherwise complies with this
51
Section 9.6(b) and is made by a Lender to another member of the consolidated
group of corporations of which such Lender is a member provided at least fifteen
(15) days' prior written notice thereof is furnished to the Agent and Borrowers.
Upon the effectiveness of any such assignment, the Eligible Assignee shall
become a "Lender" for all purposes of this Agreement and the other Loan
Documents and, to the extent of such assignment, the assigning Lender shall be
relieved of its obligations hereunder to the extent of the Commitment being
assigned. By executing and delivering an Assignment Agreement in accordance with
this Section 9.6(b), the assigning Lender thereunder and the assignee thereunder
shall be deemed to confirm to and agree with each other and the other parties
hereto as follows: (i) such assigning Lender warrants that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of any
adverse claim and the assignee warrants that it is an Eligible Assignee; (ii)
except as set forth in clause (i) above, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement, any of the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, any of the
other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto or the financial condition of any Borrower or the performance
or observance by any of the Borrowers of any of its obligations under this
Agreement, any of the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (iii) such assignee represents and
warrants that it is legally authorized to enter into such Assignment Agreement;
(iv) such assignee confirms that it has received a copy of this Agreement, the
other Loan Documents and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment Agreement; (v) such assignee will independently and without reliance
upon the Agent, such assigning Lender or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents; (vi) such assignee appoints and
authorizes the Agent to take such action on its behalf and to exercise such
powers under this Agreement, or any other Loan Document as are delegated to the
Agent by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all the obligations which by the terms of
this Agreement and the other Loan Documents are required to be performed by it
as a Lender.
(c) Participations. Each Lender may sell, transfer,
grant or assign participations in all or any part of such Lender's interests and
obligations hereunder; provided that (i) such selling Lender shall remain a
"Lender" for all purposes under this Agreement (such selling Lender's
obligations under the Loan Documents remaining unchanged) and the participant
shall not constitute a Lender hereunder, and (ii) no such participant shall
have, or be granted, rights to approve any amendment or waiver relating to this
Agreement or the other Credit Documents except to the extent any such amendment
or waiver would (A) reduce the principal of or rate of interest on or Fees in
respect of any Advances in which the participant is participating or increase
any Commitment with respect thereto, or (B) extend, renew, or postpone the
Termination Date, or (C) postpone the date fixed for any payment of interest or
Fees in which the participant is participating. In the case of any such
participation, the participant shall not have any rights under this Agreement or
the other Loan Documents (the participant's rights against the selling Lender in
respect of such participation to be those set forth in the participation
agreement with such Lender creating such participation) and all amounts payable
by the Borrowers hereunder shall be determined as if such Lender had not sold
such participation.
(d) Registration. The Agent, acting for this purpose
solely on behalf of the Borrowers, shall maintain a register (the "Register")
for the recordation of the names and addresses of the Lenders and the principal
amount of the Advances owing to each Lender from time to time. The
52
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrowers, the Agent and the Lenders shall treat each Person whose name
is recorded in the Register as the owner of a Commitment or other obligation
hereunder for all purposes of this Agreement and the other Loan Documents,
notwithstanding notice to the contrary. Any assignment of any part of the
Revolving Credit Commitment or other obligation hereunder shall be effective
only upon appropriate entries with respect thereto being made in the Register.
The Register shall be available for inspection by the Borrowers or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
9.7 Amendments, Waivers and Consents.
(a) Except as provided under Sections 9.7(b) and
9.7(c), neither this Agreement nor any other Loan Document nor any of the terms
hereof or thereof may be amended, changed, waived, discharged or terminated
unless such amendment, change, waiver, discharge or termination is in writing
and signed by the Required Lenders and the Borrowers.
(b) Notwithstanding the provisions of Section 9.7(a),
no amendment, change, waiver, discharge, or termination of this Agreement or any
other Loan Document shall, without the consent of all of the Lenders:
(i) extend or renew the Termination Date
(including, without limitation, any extension pursuant to Section 2.1
(d) hereof);
(ii) reduce the rate of interest or extend
or postpone the time for the payment of interest, principal, or Fees
hereunder;
(iii) subject to Section 2.1(c), increase or
reduce the Commitment of a Lender;
(iv) (A) release any of the Borrowers from
any of its obligations under the Loan Documents, or (B) release any of
the Collateral;
(v) amend, modify or waive any provision of
(A) the provisions of this Section 9.7(b), or (B) the Financial
Covenants;
(vi) reduce any percentage specified in, or
otherwise modify, the definition of Required Lenders; or
(vii) consent to the assignment or transfer
by any of the Borrowers of any of its rights and obligations under (or
in respect of) the Loan Documents.
(c) Notwithstanding the provisions of
Section 9.7(a), no amendment, change, or waiver of or to any provision
of Section 8 may be made without the written consent of the Agent.
9.8 Construction. This Agreement, all Loan Documents, and the
rights and obligations of the parties hereunder and thereunder, shall be
governed by and construed and interpreted in accordance with, the domestic
internal laws of the Commonwealth of Pennsylvania without regard to its rules
pertaining to conflict of laws. The Section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.9 Severability. Any provision contained in this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
53
9.10 Confidentiality. Each Lender agrees that it will use its
reasonable efforts to keep confidential any non-public information from time to
time furnished or made available to it under any Loan Document; provided,
however, that nothing herein shall affect the disclosure of any such information
to (i) the extent such Lender in good faith believes is required by statute,
rule, regulation or judicial process, (ii) counsel for such Lender or to its
accountants, (iii) bank examiners or auditors or comparable Persons, (iv) any
Affiliate of such Lender, (v) any other Lender, or any assignee, transferee or
participant, or any potential assignee, transferee or participant, of all or any
portion of any Lender's rights under this Agreement who is notified of the
confidential nature of the information and agrees to be bound by this provision
or provisions reasonably comparable hereto, or (vi) any other Person in
connection with any litigation to which any one or more of the Lenders is a
party; and provided further that no Lender shall have any obligation under this
Section 9.10 to the extent any such information becomes available on a
non-confidential basis from a source other than the Borrowers or its
Subsidiaries or that any information becomes publicly available other than by a
breach of this Section 9.10. Each Lender agrees it will use all confidential
information exclusively for the purpose of evaluating, monitoring, selling,
protecting or enforcing the Obligations and other rights under the Loan
Documents.
9.11 Defaulting Lender. Each Lender understands and agrees
that if such Lender is a Defaulting Lender then notwithstanding the provisions
of Section 9.7 it shall not be entitled to vote on any matter requiring the
consent of the Required Lenders or to object to any matter requiring the consent
of all of the Lenders adversely affected thereby; provided, however, that all
other benefits and obligations under the Loan Documents shall apply to such
Defaulting Lender.
9.12 Waiver of Trial by Jury; Jurisdiction.
(a) Each party to this Agreement agrees that any
suit, action, or proceeding, whether claim or counterclaim, brought or
instituted by either party hereto or any successor or assign of any party on or
with respect to this Agreement or any other Loan Document or which in any way
relates, directly or indirectly, to the Advances or any event, transaction, or
occurrence arising out of or in any way connection with the Advances, or the
dealings of the parties with respect thereto, shall be tried only by a court and
not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY SUCH SUIT, ACTION, OR PROCEEDING. THE PARTIES HERETO ACKNOWLEDGE AND
AGREE THAT THIS SECTION 9.12 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT
AMONG THE PARTIES AND THAT THE LENDERS WOULD NOT EXTEND THE ADVANCES TO THE
BORROWERS IF THIS WAIVER OF JURY TRIAL SECTION WERE NOT A PART OF THIS
AGREEMENT.
(b) For the purpose of any suit, action or proceeding
arising out of or relating to this Agreement, the Revolving Credit Note or the
Advances, the Borrowers hereby irrevocably consent and submit to the
jurisdiction and venue of any of the Courts of the Commonwealth of Pennsylvania
including, without limitation, the Court of Common Pleas of Xxxxxxx County and
the Federal District Court for the Eastern District of Pennsylvania. The
Borrowers irrevocably waive any objection which they may now or hereinafter have
to the laying of the venue of any suit, action or proceeding brought in such
court and any claim that such suit, action or proceeding brought in such a court
has been brought in an inconvenient forum. The provisions of this Section 9.12
shall not limit or otherwise affect the right of the Agent or the Lenders to
institute and conduct action in any other appropriate manner, jurisdiction or
court.
9.13 Actions Against Lenders; Release.
(a) Any action brought by the Borrowers or any
Subsidiary against the Agent or the Lenders which is based, directly or
indirectly, or on this Agreement or any other Loan Document or any matter in or
related to this
54
Agreement or any other Loan Document, including but not limited to the making of
the Advances or the administration or collection thereof, shall be brought only
in the courts of the Commonwealth of Pennsylvania. The Borrowers may not file a
counterclaim against the Agent or the Lenders in a suit brought by the Agent or
the Lenders against the Borrowers in a state other than the Commonwealth of
Pennsylvania unless under the rules of procedure of the court in which the Agent
or the Lenders brought the action the counterclaim is mandatory and will be
considered waived unless filed as a counterclaim in the action instituted by the
Agent or the Lenders.
(b) Upon full payment and satisfaction of the
Advances and the interest thereon, as provided in Section 2 hereof, and the
termination of the Revolving Credit Facility, the parties shall thereupon
automatically each be fully, finally, and forever released and discharged from
any further claim, liability or obligation in connection with the Advances
except as expressly set forth herein, except to the extent any payment received
by the Agent or the Lenders is determined to be a preference or similar voidable
transfer.
9.14 Performance by Lenders. If the Borrowers shall fail to
observe or perform any of the terms, agreements or covenants contained in this
Agreement or in any other Loan Document, the Agent may (with the consent of the
Required Lenders), in its discretion, but without any obligation or duty to do
so, and without waiving any Default, or Event of Default, perform any of such
terms, agreements or covenants, in part or in whole, and any money advanced or
expended by the Agent in or toward the fulfillment of such terms, agreements or
covenants, shall be due on demand and become a part of and be added to the
indebtedness due under the Revolving Credit Note with interest thereon at the
Default Rate from the date of the respective advance or expenditure.
9.15 Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument, but all of such counterparts taken
together shall be deemed to constitute one and the same instrument.
9.16 Further Actions. The Borrowers shall execute and deliver
such documents and instruments, and take such other actions, as the Agent deems
necessary to consummate the transactions described in this Agreement.
9.17 Entire Agreement. This Agreement and the Loan
Documents represent the entire agreement between the Lenders, the Agent, and the
Borrowers with respect to the financing transactions to which they relate, and
55
cannot be changed or amended except by an agreement in writing signed by the
party against whom enforcement of the change or amendment is sought.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CENTRAL SPRINKLER CORPORATION
By /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx,
Vice President of Finance
and Administration
Attest: /s/ Xxxxxxxx Xxxxxx
----------------------------------
Xxxxxxxx Xxxxxx,
Secretary
CENTRAL SPRINKLER COMPANY
By /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx,
Vice President of Finance
and Administration
Attest: /s/ Xxxxxxxx Xxxxxx
----------------------------------
Xxxxxxxx Xxxxxx,
Secretary
CENTRAL CASTINGS CORPORATION
By /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx,
Vice President of Finance
and Administration
Attest: /s/ Xxxxxxxx Xxxxxx
----------------------------------
Xxxxxxxx Xxxxxx,
Secretary
CENTRAL CPVC CORPORATION
By /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx,
Vice President of Finance
and Administration
Attest: /s/ Xxxxxxxx Xxxxxx
----------------------------------
Xxxxxxxx Xxxxxx,
Secretary
56
CENTRAL SPRINKLER EXPORT CORPORATION
By /s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx,
Vice President of Finance
and Administration
Attest: /s/ Xxxxxxxx Xxxxxx
----------------------------------
Xxxxxxxx Xxxxxx,
Secretary
("Borrowers")
CORESTATES BANK, N.A., in its capacity as
Agent
By /s/ Xxxxxxx Xxxxxxxx
---------------------------------------
Xxxxxxx Xxxxxxxx,
Vice President
("Agent")
57
CORESTATES BANK, N.A., individually in its
capacity as a Lender
By /s/ Xxxxxxx Xxxxxxxx
---------------------------------------
Xxxxxxx Xxxxxxxx,
Vice President
58
LaSALLE NATIONAL BANK, as a Lender
By /s/ Xxxxx Xxxxx
---------------------------------------
Xxxxx Xxxxx, First
Vice President
00
XXXXXXXX XXXX XXXX XX XXXXXXXXXXXX, as a
Lender
By /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx,
Vice President
60
SCHEDULES:
----------
3.1 Subsidiaries
3.5 Litigation
3.6 Title to Assets
3.7 Licenses; Intellectual Property
3.10(a) Loss Contingencies
3.11 ERISA Matters
3.17 Transactions With Affiliates
3.20 Collateral Locations
3.21 Fictitious Names
6.1(d) Permitted Debt
6.1(e) Existing Inter-Company Debt
6.2(c) Permitted Liens
6.7(a) Guaranty Obligations
EXHIBITS:
=========
A - Form of Notice of Borrowing
B - Compliance Certificate Form
C - Form of Joinder
61
Dated: October 28, 1997
SCHEDULE A
LENDERS' COMMITMENTS
Percentage Interest
Lender and Address Commitment in Advances
------------------ ---------- -------------------
CoreStates Bank, N.A. $25,000,000 45.45454%
0000 Xxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000-0000
Attention: Mr. Xxxxxxx
Xxxxxxxx, Vice President
Telecopy No. 000-000-0000
LaSalle National Bank $15,000,000 27.27272%
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Mr. Xxxxx Xxxxx,
First Vice President
Telecopy No. 000-000-0000
National City Bank of $15,000,000 27.27272%
Pennsylvania
National City Center
00 Xxxxxxx Xxxxxx
Xxxxxxx #00-000
Xxxxxxxxxx, XX 00000-0000
Attention: Xx. Xxxxxxx X.
Xxxxxx, Vice President
Telecopy No. 000-000-0000
62
EXHIBIT "A"
FORM OF BORROWING NOTICE
CoreStates Bank, N.A.
0000 Xxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000-0000
Attention: Mr. Xxxxxxx Xxxxxxxx, Vice President
Ladies and Gentlemen:
The undersigned, Central Sprinkler Company ("Central Sprinkler"),
refers to the Credit Agreement dated October 28, 1997 (as it may be amended,
modified, extended or restated from time to time, the "Credit Agreement"), among
Central Sprinkler Corporation and its Subsidiaries (including Central
Sprinkler), the Lenders party thereto, and CoreStates Bank, N.A., as Agent.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement. The undersigned, as
Borrowers' Agent, hereby gives you notice that it requests an Advance in
accordance with the provisions of Section 2.1 and Section 2.3 of the Credit
Agreement, and in that connection sets forth below the terms on which such
Advance is requested to be made:
REQUEST FOR REVOLVING CREDIT ADVANCE
(A) Date of Borrowing
(which is a Business Day) ______________________
(B) Principal Amount of
Advance(1) ______________________
(C) Interest rate basis(2) ______________________
(D) Interest Period and the last
day thereof if a LIBOR Loan(3) _____________________
Upon acceptance of any or all of the Advances made by the Lenders in
response to this request, the Borrowers shall be deemed to have represented and
warranted that the conditions to lending specified in Section 4.2 of the Credit
Agreement have all been satisfied.
Very truly yours,
CENTRAL SPRINKLER COMPANY, on behalf of
all Borrowers
By_______________________________________
Title:___________________________________
________________
(1) A minimum of $1,000,000 for LIBOR Loans and $250,000 for Base
Rate Loans (or the remaining amount available under the
Revolving Credit Facility, if less).
(2) LIBOR Loan or Base Rate Loan.
(3) Subject to the provisions and definitions of the Credit
Agreement, but generally one, two, three, or six months'
duration.
63
EXHIBIT "B"
FORM OF COMPLIANCE CERTIFICATE
In accordance with the provisions of Section 5.1(c) of the
Credit Agreement (the "Credit Agreement") dated October 28, 1997, by and among
Central Sprinkler Corporation, Central Sprinkler Company, Central Castings
Corporation, Central CPVC Corporation, and Central Sprinkler Export Corporation
(together with any other Borrowers identified therein from time to time, the
"Borrowers"), CoreStates Bank, N.A. (in its capacity as Agent for the Lenders),
and the Lenders identified therein, the undersigned, ___________________, being
the Executive Vice President of Finance and Administration and authorized
officer of Borrowers, does hereby certify to the Agent and Lenders that, to best
of the undersigned's knowledge, information, and belief (based upon all
financial and related information available to the undersigned):
a. The representations and warranties made by the Borrowers in
Section 3 of the Credit Agreement are true and complete in all material respects
as on and as of the date hereof as if made on and as of this date;
b. The Borrowers have, as of the date hereof, performed all
covenants and agreements required to be performed by them under the Credit
Agreement and related Loan Documents;
c. No Default or Event of Default has occurred, [except
and to the extent specifically set forth on Exhibit "A" attached hereto and made
a part hereof]; and
d. The Borrowers are in compliance with the Financial
Covenants set forth below.
Actual Required
--------- ---------
o Adjusted Current Ratio ____:1.00 1.00:1.00
(Section 5.09)
o Funded Debt to Total ____:1.00 .65:1.00
Capitalization
(Section 5.10)
o Minimum Cash and $______ $10 million
Investments
(Section 5.11)
o Tangible Net Worth $______ $______
(Section 5.12)
e. By reason of the ratio of the Borrowers' Funded Debt to
Total Capitalization, the Applicable Margin for LIBOR Loans is in Pricing
Category ___ and shall be ___ basis points.
f. Borrowers are in compliance with the provisions of
Section 6.1(c) and 6.1(g).
64
g. The following information is herewith submitted with
respect to Collateral value (in accordance with GAAP consistently applied), as
at the close of the fiscal quarter ending __________:
Amount
------
i) Qualified Accounts(1) x 80% $__________
ii) Qualified Inventory(2) x 50% $__________
iii) Net Fixed Assets of Secured $__________
Borrowers x 50%(3)
iv) Collateral Value (the sum of (i), $
(ii), and (iii) above) ==========
Any capitalized terms which are used in this Certificate and
which are not defined herein, but which are defined in the Credit Agreement,
shall have the meanings given to those terms in the Credit Agreement.
IN WITNESS WHEREOF, I have executed this Certificate the ____
day of _______________.
By__________________________(SEAL)
Executive Vice President of Finance and
Administration of the Borrowers
-----------
(1) Domestic accounts receivable of the Secured Borrowers less
than 90 days past due.
(2) Raw materials and finished goods inventory of the Secured
Borrowers.
(3) As reflected on the balance sheet of Secured Borrowers.
65
EXHIBIT "C"
FORM OF JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the "Joinder"), dated as of ______________,
199_, is entered into between _____________________, a _______________ (the "New
Subsidiary") and CORESTATES BANK, N.A., in its capacity as administrative agent
(the "Agent") under that certain Credit Agreement dated October 28, 1997 by and
among CENTRAL SPRINKLER CORPORATION, CENTRAL SPRINKLER COMPANY, CENTRAL CASTINGS
CORPORATION, CENTRAL CPVC CORPORATION, and CENTRAL SPRINKLER EXPORT CORPORATION
(collectively, the "Borrowers"), the Lenders which are a party thereto, and the
Agent (as modified and amended from time to time, the "Credit Agreement"). Any
capitalized terms used in this Joinder which are not so defined, but which are
defined in the Credit Agreement, shall have the meanings ascribed to them in the
Credit Agreement.
The New Subsidiary and the Agent, for the benefit of the Lenders,
hereby covenant and agree as follows:
1. The New Subsidiary hereby acknowledges, agrees and confirms that, by
its execution of this Joinder, the New Subsidiary will be deemed to be a
Borrower under the Credit Agreement, the Revolving Credit Note, the
Subordination Agreement, and related Loan Documents as if it had executed and
been an original party to the Credit Agreement, the Revolving Credit Note, and
such related Loan Documents. The New Subsidiary hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions, and conditions
contained in the Credit Agreement, including, without limitation, (a) all of the
representations and warranties of the Borrowers set forth in Section 3 of the
Credit Agreement, and (b) all of the affirmative and negative covenants set
forth in Sections 5 and 6 of the Credit Agreement.
2. Concurrently with the execution hereof and as contemplated by
Section 5.15 of the Credit Agreement, the New Subsidiary shall execute and
deliver to the Agent a joinder to the Security Agreement, in form and substance
satisfactory to the Agent, pursuant to which the New Subsidiary shall join in
and become a party as debtor to the Security Agreement for the purposes therein
set forth as if it had been an original party thereto.
3. The address of the New Subsidiary for purposes of Section 9.2 of the
Credit Agreement is as follows:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
4. This Joinder may be executed in any number of counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument.
5. THIS JOINDER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.
IN WITNESS WHEREOF, the New Subsidiary has caused this Joinder to be
duly executed by its authorized officer(s), and the Agent, for the benefit of
the Lenders, has caused the same to be accepted by its authorized officer, as of
the day and year first above written.
[NEW SUBSIDIARY]
By________________________________
Name:
Title:
66
ACKNOWLEDGED AND ACCEPTED:
CORESTATES BANK, N.A., as Agent
By________________________________
Name:
Title:
67
CENTRAL SPRINKLER DISCLOSURE SCHEDULES
TO
CREDIT AGREEMENT BETWEEN AND AMONG
CENTRAL SPRINKLER CORPORATION, CENTRAL SPRINKLER COMPANY,
CENTRAL CASTINGS CORPORATION, CENTRAL CPVC CORPORATION,
CENTRAL SPRINKLER EXPORT CORPORATION AND THE LENDERS
IDENTIFIED THEREIN,
DATED __________, 1997
The following are the disclosure schedules to the Credit Agreement, dated as of
______________, 1997 (the "Credit Agreement") between and among Central
Sprinkler Corporation ("CSC"), Central Sprinkler Company, Central Castings
Corporation ("Central Castings Corp."), Central CPVC Corporation ("Central CPVC
Corp." or "CPVC"), Central Sprinkler Export Corporation ("Central Sprinkler
Export Corp.") and the Lenders identified therein. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in the
Credit Agreement. The inclusion of any information in any of the schedules shall
not be deemed to be an admission or acknowledgment, in and of itself, that such
information is material or outside the ordinary course of business, as
applicable, for the purpose of this Credit Agreement. Any disclosure contained
in these Schedules which refer to a document are qualified in their entirety by
the reference to the text of such document.
CORPORATE STRUCTURE
SCHEDULE 3.1
-----------------------
| |
| CENTRAL SPRINKLER |
| CORPORATION |
| |
-----------------------
|
|
----------------------------------------|---------------------------------------
| | |
| | |
--------------------- ----------------------- -----------------------
| | | | | |
| CENTRAL SPRINKLER | | CSC FINANCE COMPANY | | SPRAYSAFE AUTOMATIC |
| COMPANY | | | | SPRINKLERS LTD. |
| | | | | |
--------------------- ----------------------- -----------------------
| | |
| | |
----------------------------- | |
| | | | |
| | | | |
---------------- | -------------------- ------------------ --------------------- | -----------------------
| | | | | | | | | | | |
| CENTRAL CPVC | | | CENTRAL CASTINGS | | CSC INVESTMENT | | CENTRAL SPRAYSAFE | | | SPRAYSAFE AUTOMATIC |
| | | | | | | | COMPANY PTE LTD | | | SPRINKLERS LIMITED |
| CORPORATION | | | CORPORATION | | COMPANY | | SINGAPORE | | | CHINA |
| | | | | | | | | | | |
---------------- | -------------------- ------------------ --------------------- | -----------------------
| |
| |
| |
----------------------- -------------------------------
| | | |
| CENTRAL SPRINKLER | | CENTRAL SPRAYSAFE COMPANY |
| | | LMITED (H.K.) |
| EXPORT CORPORATION | | HONG KONG |
| | | |
----------------------- -------------------------------
SCHEDULE 3.5
Litigation
As disclosed in the SEC Form 10-Q for the period ended July 31, 1997, in August
1997, a lawsuit was filed against CSC in the State of California regarding the
Omega(TM) sprinkler heads. Although the suit has been brought by owners of two
homes, the plaintiffs seek to represent a class of building owners who have
Omega(TM) sprinkler heads installed in their buildings. The court has not
determined whether it will permit the action to go forward as a class action and
the complaint does not specify a dollar amount the plaintiffs are seeking.
Although CSC believes that it has meritorious defenses with respect to the
foregoing matter which it will vigorously pursue, there can be no assurance that
the ultimate outcome of such actions will be resolved favorably to CSC or that
such litigation, or any additional litigation, will not have a Material Adverse
Effect.
SCHEDULE 3.6
Title to Assets
Existing mortgages and liens are listed on Schedule 6.1(d) Permitted Debt and
Schedule 6.2(c) Permitted Liens.
SCHEDULE 3.7
Licenses: Intellectual Property
Central Sprinkler is a party to patent licensing agreements, copies of which
agreements are attached hereto.
Central Sprinkler also is party to a license agreement with CSC Finance Company,
a copy of which is attached hereto.
ASSIGNMENT
THIS ASSIGNMENT is made by Central Sprinkler Corporation as of the 1st
day of November 1988 pursuant to the terms set forth below:
Background
The Assignor has certain rights to the tradenames and trademarks shown
on Exhibit A hereto, and the Assignor desires to assign all of such rights (the
"Rights") to CSC Finance Company (the "Assignee") in connection with a proposed
Trademark License Agreement (the Agreement").
NOW, THEREFORE, the Assignor, intending to be legally bound hereby and
in consideration of the Agreement and other good and valuable consideration, the
receipt of which is hereby acknowledged, hereby assigns to the Assignee all of
its right, title and interest in and to the Rights.
The Assignor agrees to take such further action and execute such
additional documents as the Assignee may deem necessary in order to carry out
the actions contemplated by this Assignment.
IN WITNESS WHEREOF, this Assignment is executed and delivered by the
undersigned as of the date first written above.
CENTRAL SPRINKLER CORPORATION
By:
--------------------------
TRADEMARK LICENSE AGREEMENT
Trademark License Agreement made as of the 16th day of May, 1984
between CSC Holding Corporation, a corporation organized under the laws of the
State of Pennsylvania, U.S.A. ("Licensor") and Central Sprinkler Corporation, a
corporation organized under the laws of the State of Pennsylvania, U.S.A.
("Licensee").
WHEREAS, Licensor has acquired Licensee and the trademarks and trade
names (and applications and registrations therefor) set forth in Schedule A
hereto, together with the goodwill of the business associated therewith (the
"Trademarks"); and
WHEREAS, Licensor desires to promote the manufacture, distribution,
sale and use of goods and services bearing such Trademarks ("Products") by
licensing the continued use of the Trademarks to Licensee; and
WHEREAS, the Trademarks are significant to the manufacture,
distribution, sale and use of Products and to the conduct of the business
contemplated by the Licensee in the Territory (as hereinafter defined) and,
therefore, Licensee desires to obtain such license;
NOW THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree:
1. Exclusive Rights. Licensor hereby grants Licensee the exclusive
right. to use the Trademarks in connection with Products in the United States
(the "Territory.")
2. Royalty. Licensee shall pay Licensor, as a royalty for the right to
use the Trademarks, three percent (3%) of Licensee's Sales Receipts,
excluding taxes, from sales of any and all Products sold by Licensee. For
purposes of this Section 2, "Sales Receipts" shall mean the amount actually
billed by Licensee on sales of Products after deducting sales returns. The
noyalty shall be paid in arrears on a calendar quarter basis within thirty days
after the end of each calendar quarter or at such time as the parties otherwise
agree in writing. The royalty shall be paid in United States Dollars. A detailed
computation of the basis for and amount of the royalty paid shall accompany each
payment. Licensor shall have the right at any time to inspect the books and
records of Licensee to verify proper computation and payment of the royalty.
-1-
3. Manufacture and Sale. Licensee shall use its best efforts to further
the production and sale of Products under the Trademarks in the Territory and to
maintain an efficient organization for the production and sale of high quality
Products under the Trademarks. Subject to the provisions of Section 4 hereof,
the manufacture, pricing, sale and promotion of Products under the Trademarks
shall be controlled by the Licensee.
4. Supervision of Licensee. For the purpose of protecting and
maintaining the standards of quality established by Licensor for Products sold
under the Trademarks:
A. Licensor shall have the right to supervise the production
and packaging of Products and to inspect and test all Products produced and
offered for sale by Licensee on which, or in connection with which, the
Trademarks are used.
B. Licensee agrees to permit Licensor's authorized personnel
to enter Licensee's premises at all reasonable times, with or without advance
notice, to inspect Licensee's production and packaging facilities and
operations, and to inspect and test all Products produced for sale under the
Trademarks for the purpose of determining the quality of such Products.
C. Licensee agrees to furnish samples of Products and of all
related literature, packaging and labels, to Licensor not less than yearly, and
at more frequent intervals at the request of Licensor, for inspection, testing
and review.
5. Maintenance of Trademarks; No Sublicense. Licensor will use its best
efforts to register and maintain, or cause to be registered and maintained, the
Trademarks in the Territory to enable Products to be distributed and sold in the
Territory under the Trademarks as provided herein. Licensor will not permit any
other person to use Trademarks in the Territory in connection with Products.
Licensee shall not, directly or indirectly, license or attempt to license,
whether orally or in writing, any other person to use the Trademarks without the
prior approval in writing of the Licensor.
6. Indemnity. Licensor assumes no liability to Licensee or third
parties with respect to the efficacy, safety or performance characteristics of
Products manufactured or sold by Licensee under the Trademarks, and Licensee
will indemnify Licensor against all costs, losses and expenses arising as a
result of claims of third persons against Licensor involving the manufacture or
sale of Products under the Trademarks.
7. Ownership of Trademarks. Licensee acknowledges Licensor's exclusive
right, title, and interest in and to the Trademarks and will
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not at any time do or cause to be done any act or thing contesting or in any way
impairing or tending to impair any part of such right, title and interest. In
connection with the use of the Trademarks, Licensee shall not in any manner
represent that it has any ownership in the Trademarks, and Licensee acknowledges
that use of the Trademarks shall not create in Licensee's favor any right, title
or interest in or to the Trademarks. Upon termination of this Agreement in any
manner provided herein, Licensee will cease and desist from all use of the
Trademarks in any way (and will deliver up to the Licensor, or its duly
authorized represenatives, all material and papers upon which the Trademarks
appear) and furthermore the Licensee will at no time adopt or use, without the
Licensor's prior written consent, any word or xxxx which is likely to be similar
to or confusing with the Trademarks.
8. Termination. This Agreement shall be subject to termination by the
mutual consent of the parties or by either party upon default by the other party
in the performance of any of the terms, conditions and covenants of this
Agreement and failure to remedy such default within 30 days after notice or
demand. If Licensee makes any assignment of assets or business for the benefit
of creditors, or if a trustee or receiver is appointed to administer or conduct
its business or affairs, or if it is adjudged in any legal proceeding to be
either a voluntary or involuntary bankrupt, then the rights granted herein shall
forthwith cease and terminate without prior notice or legal action by Licensor.
9. Term of License. This Agreement shall, unless otherwise terminated,
exist,for a term of ten years from the date hereof, but shall be renewable for
additional ten-year terms at the option of the Licensee by giving Licensor
written notice of such intent on or before six months prior to the expiration of
each and every ten-year term.
10. Governing Law. This Agreement shall be construed in accordance with
the laws of the United States of America and the State of Pennsylvania.
11. Amendments. The provisions of this Agreement may be amended,
modified, supplemented or changed, but only upon the written consent of both
parties hereto.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Trademark License
Agreement as of the date first above written.
Central Sprinkler Corporation Central Sprinkler Company
(Formerly (Formerly
CSC Holding Corporation) Central Sprinkler Corporation)
By /s/ Xxxxxxx X. Xxxxx By /s/ Xxxxxx X. Xxxxx
------------------------------- --------------------------------
Xxxxxxx X. Xxxxx, President Xxxxxx X. Xxxxx, President
ATS/bsd249
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Exhibit A
Trademark License Agreement
Listing of Trade Names and Trademarks
"Central"
"Central Sprinkler"
"CSC"
"Omega"
"Flow Control"
"Protector"
"Prohibitor"
"Ident-A-Fire"
"GB"
"Mini"
"SprinkCad"
AMENDMENT TO EXCLUSIVE PATENT LICENSING AGREEMENT
This Amendment entered into this 5TH day of April, 1982, by and between
U. S. FIRE CONTROL CORP., a corporation of the Commonwealth of Massachusetts,
with its principal office at Rochdale, Massachusetts, (hereinafter called the
"Licensor") and CENTRAL SPRINKLER CORP. a Pennsylvania corporation, with its
principal office at 0xx Xxxxxx xxx Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxxx, 00000,
(hereinafter called the "Licensee").
W I T N E S S E T H:
WHEREAS, Licensor And Licensee entered into an Exclusive Patent
Licensing Agreement (hereinafter called the "Agreement") dated November 28,
1977; and,
WHEREAS, the parties since that time have continually operated
underneath the Agreement and by duplicate certified letters #P234489311 and
#P234489312 Licensee gave Licensor notice, in accordance with the Agreement, of
Licensee's election to exercise its option with respect to the "Other Product"
presented by Licensor to Licensee which Licensor refers to as its "Straight-On"
sprinkler (hereinafter called the "Straight-On Sprinkler"); and,
WHEREAS, Licensor has filed a patent application in the United States
Patent Office with respect to said Straight-On Sprinkler which patent
application bears Serial No. 06/310,897 and was filed in the United States
Patent Office by Licensor on October 13, 1981; and,
WHEREAS, it has been Licensor's interpretation of Paragraphs 4a and 4b
of the Agreement that on the Straight-On Sprinkler Licensee had to pay Licensor
Five Thousand Dollars ($5,000.00) a month for each month from the date Licensee
exercised its option under Paragraph 5a with respect to such Straiqht-On
Sprinkler until Licensee had initially sold and shipped such Straight-On
Sprinkler at which time Licensee was obligated to pay Licensor Three Thousand
Dollars ($3,000.00) a month or five percent (5%) of the net sales price of each
such Straight-On Sprinkler, whichever is greater; and,
WHEREAS, Paragraph 4a specifically spoke only in terms of Licensed
Products and Licensee has interpreted the Agreement to mean that the Five
thousand Dollars ($5,000.00) under Paragraph 4a applied only to the initial
Licensed Product and not to the Straight-On Sprinkler or any "Other Products"
and that the Three Thousand Dollars ($3,000.00) a month minimum royalty called
for in Paragraph 3b was an aggregate minimum royalty which covered both the
"Licensed Products" and "Other Products" including the Straiqht-On Sprinkler;
and,
WHEREAS, the Licensor and Licensee have settled their disagreement and
difference's in interpretation and desire to set forth the basis of that
settlement.
NOW THEREFORE IN CONSIDERATION OF THE PREMISES, Licensor and Licensee
hereby agree as follows:
1. The obligation of Licensee to pay a license fee on the Straight-On
Sprinkder under Paragraph 4 of the Agreement Is fully satisfied by Licensee
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paying to Licensor commencing the 1st day of January, 1982, and on the lst day
of each month thereafter (until Licensee elects to cease paying or the
obligation of Licensee to Pay ceases in accordance with the terms of the
Agreement or this Amendment) the sum of Two Thousand Dollars ($2,000.00) or five
percent (5%) of the Net Sales Price of each Straight-On Sprinkler sold the
previous month, whichever is greater. Notwithstanding the provisions in
Paragraph 4 of the Agreement and Licensor's interpretation thereof, no other or
further payment will be due Licensor from Licensee in connection with the
Straight-On Sprinkler except as Set forth in the immediately preceding sentence.
However, the Straight-On Sprinkler will be governed independently by all other
applicable terms, conditions and provisions of the Agreement as provided in
Paragraph 5a thereof.
2. On any "Other Product" unrelated to the on-off concept, Licensee
agrees to pay Licensor Five Thousand Dollars ($5,000.00) a month for each month
from the date Licensee exercises its option under Paragraph 5a with respect to
such "Other Product" until such time as Licensee has initially sold and shipped
such "Other Product" at which time Licensee shall pay the Licensor a minimum
royalty each month of Three Thousand Dollars ($3,000.00) or a sum equal to five
percent (5%) of the Net Sales Price of such "Other Products" sold the previous
month, whichever is greater. the five (5) months' period of time specified in
Paragraph 5a of the Agreement within which Licensee has a right to exercise its
option with respect to such "Other Product" shall not commence running until
Licensor has made a full and prompt disclosure to Licensee of
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such "Other Product" and Licensor has furnished Licensee its patent application
and any working models, drawings and specifications.
3. At such time, if ever, that Licensee ceases making the payments
called for under Paragraph 1 or Paragraph 2 hereof, then Licensee shall lose its
exclusive right with respect to the Straight-On Sprinkler or "Other Product"
upon which one Licensee elects to cease making the royalty payment and in such
event this Agreement shall not terminate and Licensee shall continue to have its
exclusive rights with respect to the "Licensed Products" and to any other
product on which Licensee is paying the royalties as called for by the Agreement
or this Amendment.
4. As long as Licensee is making the minimum royalty payment called for
by this Amendment or the Agreement, then the Agreement and the rights of the
Licensee, under the Agreement, shall not terminate and this Agreement can only
be terminated by Licensor if Licensee is not paying any minimum royalties on any
Licensed Products or Other Products, including the Straight-On Sprinkler. If
Licensee ceases making payment of the minimum royalty on some but not all
Licensed Products or Other Products, including the Straight-On Sprinkler, then
Licensee shall only lose its exclusive arrangement with respect to any such
Licensed Product or Other Product on which Licensee has ceased paying the
minimum royalty with the overriding proviso that Licensee can continue a
non-exclusive basis to manufacture, sell and distribute each Licensed Product
and Other Product, on which a minimum royalty has not been paid, so long as
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Licensee pays the five percent (5%) royalty on the Net Sales Price of each such
Licensed Product or Other Product after they have been sold and shipped.
Notwithstanding any of the provisions of this Amendment, Licensor shall maintain
the right to terminate the Agreement in accordance with Paragraph 11b, thereof
in the event that Licensee fails to make the royalty payments for On-Off
sprinkler heads and valves as provided by the Agreement.
6. Except as amended and modified hereby, the terms, provisions and
conditions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 5TH day of April, 1982.
U. S. FIRE CONTROL CORP.
By /s/ Xxxxxxx X. Xxxx
------------------------
Xxxxxxx X. Xxxx, President
ATTEST:
------------------------
By
------------------------
CENTRAL SPRINKLER CORP.
ATTEST:
------------------------
EXCLUSIVE PATENT LICENSING AGREEMENT
This Agreement entered into this 28th day of November, 1977, effective
as of November 28, 1977, by and between U.S. FIRE CONTROL CORP., a corporation
of the Commonwealth of Massachusetts, with its principal office at 00 Xxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx (hereinafter called the "Licensor") and CENTRAL
SPRINKLER CORP., a Pennsylvania corporation, with its principal office at 0xx
Xxxxxx xxx Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxxx, 00000 (hereinafter called the
"Licensee").
WITNESSETH:
WHEREAS, the Licensor is the owner of U.S. Patent Nos. Des. 231,529,
issued April 30, 1974; 3,734,191, issued May 22, 1973; 3,802,510, issued April
9, 1974; 3,877,527, issued April 15, 1975; 3,911,940, issued October 14, 1975;
and 3,991,829, issued November 16, 1976 and of the inventions and improvements
disclosed and claimed therein and owner of the foreign patents and applications
and of the inventions and improvements disclosed and claimed therein which are
listed on Exhibit A attached hereto and made a part hereof.
WHEREAS, the Licensor possesses technical information, know-how and
expertness useful in the manufacture and use of fire protection equipment;
WHEREAS, the Licensee desires, to obtain exclusive rights to the
Licensor's technical information and know-how in the field of fire protection
equipment;
WHEREAS, the Licensee desires to obtain exclusive licenses throughout
the world under the patents owned by the Licensor.
Now, THEREFORE, in consideration of the premises and the faithful
performunce of the mutual covenants herein contained, the parties hereto agree
as follows:
1. DEFINITION OF TERMS. Whenever in this Agreement the following words
and phrases appear they shall be defined and construed as follows:
a. The words "Licensed Products" shall mean any sprinkler head
or valve covered by the Licensed Patents or patent applications coming
within the scope of this Agreement which has the ability to alternately
change between an On-Off condition in response to the increase and
decrease of environmental temperature.
b. The words "Net Sales Price" shall mean the gross selling
price of all Licensed Products sold by Licensee less transportation
charges, all excise and sales taxes, trade-ins and cash discounts,
allowances, returns, credits, commissions, refunds, rebates and
accounts written off, allowed, paid or absorbed by the Licensee.
c. The words "Other Products" shall mean any product or device
for which patents have already been issued to Licensor or are hereafter
issued to Licensor during the term of this Agreement or on which patent
applications are now filed or hereafter filed by Licensor.
d. The words "Licensed Patents" shall mean U.S. Patents Nos.
Des. 231,529, issued April 30, 1974; 3,734,191, issued May 22, 1973;
3,802,510, issued April 9, 1974; 3,877,527, issued April 15, 1975;
3,911,940, issued October 14, 1975; 3,991,829 issued November 16, 1976
and the foreign patents and applications listed on Exhibit A attached
hereto and all other patents now or hereafter owned by or issued to
Licensor used in connection with the Licensed Products.
e. For the purposes of computing royalties in this Agreement,
all Licensed Products shall be considered sold when they have been
billed out. If the full amount of any such item is not collected within
twelve (12) months from the date of initial billing, then Licensee
shall receive a credit on the royalty previously paid based on the
amount uncollected at the end of said twelve (12) months.
2. GRANT.
a. Licensor hereby grants to Licensee the sole and exclusive
right and license, to the exclusion of Licensor and all others, to
manufacture, cause to be manufactured, use, market or sell or cause to
be marketed or sold on behalf of the Licensee, any and all Licensed
Products which are the subject matter of this Agreement, throughout the
world.
b. The Licensor hereby grants to the Licensee the right and
option, on payment of the five percent (5%) royalty hereinafter
provided, to acquire exclusively throughout the world all of the
Licensor's patent rights relating to Other Products and to have all
rights thereto as set forth in paragraph 2(a) hereof as though they
were Licensed Products.
c. The Licensor hereby grants to Licensee the exclusive right
to receive and use all of the technical information and know-how of
Licensor relating to said Licensed Products as developed and to said
Other Products after patent applications have been filed and Licensee
has exercised its option under paragraph 2(b) hereof.
3. PRODUCT APPROVAL. The Licensee agrees to attempt to obtain at its
expense Underwriters Laboratories or Factory Mutual aproval of a Licensed
Product for the sole manufacture and sale thereof by Licensee.
4. LICENSE FEE.
a. The Licensee agrees to pay to the Licensor a monthly fee of
five thousand dollars ($5,000.00) each month of this Agreement until
the month in which the Licensee first sells and ships a Licensed
Product for which approval has been obtained in accordance with
paragraph 3, said monthly fee to be payable on the last day of the
month in which it is due.
b. After the first sale and shipment by the Licensee of a
Licensed Product for which approval has been obtained in accordance
with paragraph 3 (hereinafter called "First Sale Date"), the Licensee
agrees to pay to the Licensor a royalty of five percent (5%) of the
Net Sales Price of Licensed Products, or thirty-six thousand dollars
($36,000.00) per year, whichever is greater, payable as follows:
(i) Three thousand dollars ($3,000.00) minimum
royalty payable on the 15th day of each month.
(ii) The five percent (5%) royalties due on sales of
Licensed Products will be computed each month and any such
amount due in excess of the three thousand dollar ($3,000.00)
minimum royalty for that month will be payable on the last day
of the month following the month in which the sales were made.
(iii) If for any year preceding a yearly anniversary
of this Agreement, royalties are due to the Licensor in excess
of thirty-six thousand dollars ($36,000.00), then any
portion of such excess either may be retained by the Licensee
to offset any minimum royalties paid in previous years and not
based on sales of Licensed Products, or may be applied as a
credit against any minimum royalties payable in subsequent
years.
c. If two (2) years after the First Sale Date, the payments
made by Licensee under subparagraph b hereof for the preceding twelve
(12) months do not reach seventy-two thousand dollars ($72,000.00),
then in order to retain the exclusive rights to sell outside the United
States and its territories Licensee shall pay Licensor an additional
twelve thousand dollars ($12,000.00) royalty or the difference between
all sums paid by Licensee during said twelve (12) months and
seventy-two thousand dollars ($72,000.00), whichever is less.
d. The parties recognize that the entry into the field of
On-Off sprinkler heads and valves is due to the Licensed Products of
Licensor. In recognition of this, Licensee (subject to paragraph 20
hereof) agrees to pay to Licensor the five percent (5%) royalty of net
sales on all On-Off sprinkler heads and valves (irrespective of whether
they are Licensed Products covered by the Licensed Patents) which are
manufactured and sold by Licensee.
e. Whether or not this Agreement continues in force such
royalty payments called for by immediately preceding subparagraph d
hereof shall continue for the life of the last to expire patent owned
by Licensor and licensed herein with respect thereto as long as said
patent has not been determined invalid by any court of competent
jurisdiction, provided, however, that should any such invalidation be
reversed on appeal, royalty payments shall be resumed retroactive to
the date of the original invalidation.
f. Improvements made by Licensee on or with respect to such
Licensed Products shall not extend the obligation of Licensee to pay
royalties thereon beyond the time set forth in the immediately
preceding subparagraph e. Improvements made by Licensor shall not
extend the obligation of Licensee to pay royalties beyond the time set
forth in the immediately preceding subparagraph e hereof except that if
Licensee uses improvements made by Licensor in such products then the
royalty payments made thereon shall continue for the last to expire
patent owned by Licensor covering an improvement used by Licensee which
is licensed herein as long as said patent has not been determined
invalid by any court of competent jurisdiction, provided, however, that
should any such invalidation be reversed on appeal, royalty payments
shall be resumed retroactive to the date of the original invalidation.
5. OPTION ON OTHER DEVICES.
a. Should Licensor during the time that this agreement is in
full force and effect invent, improve, modify or acquire any Other
Product on which Licensor has obtained and owns the patent or on which
Licensor has filed a patent application, then the exclusive right to
manufacture, use, market and sell such Other Product must first
be offered by Licensor to Licensee on the same five percent (5%)
royalty basis as set forth in this present agreement with the right in
Licensee within a period of five (5) months following receipt of each
such offer or offers to accept or reject such offers or either of them.
If any such offer is accepted, then the five percent (5%) royalty and
the other terms, conditions and provisions of this Agremeent will
govern said Other Product, but, if any such offer is rejected, then
Licensor shall thereupon be at liberty to make any other desired
arrangements with relation to and promotion of the Other Product which
is the subject matter of such rejected offer or offers with the sole
exception that Licensor must reoffer said Other Product to Licensee on
the same terms for which a bona fide offer has been received from an
offeree who was offered and accepted said rejected Other Product for
license at more favorable terms than Licensor offered to Licensee and
Licensee has twenty (20) days thereafter to accept or reject said
reoffer. Licensor shall be obligated promptly to make a full and prompt
disclosure to Licensee of any such Other Product, together with its
patent application, working model and drawings and specifications, if
available. Furthermore, should any such Other Product be rejected by
Licensee and should Licensor thereafter improve said Other Product,
then Licensor shall be further obligated to reoffer the same, if not
licensed to another, to Licensee as hereinabove provided. No disclosure
shall be made by Licensor to Licensee or to anyone else until a patent
application shall have been filed therefor and Licensor aqrees to file
promptly each such patent application. The Licensor shall, at its own
expense, obtain patent protection on the Other Products.
b. It is acknowledged and recognized by the parties that
Licensee will only be capable of doing a proper job of manufacturing,
marketing and selling, as contemplated herein, if Licensee concentrates
on certain products, instead of all products presented and offered to
Licensor by
Licensee. Since Licensee can only assimilate in its operation certain
limited new products during any period of time, Licensor acknowledges
that it would not be proper or equitable to require Licensee to forego
its rights with respect to certain Other Products merely because
Licensee did not exercise its option with respect thereto within the
five (5) month period allotted by the immediately preceding paragraph
a. Licensor also recognizes that Licensor probably will (but is not
obligated to) submit a number of Other Products to Licensee for its
consideration during any five (5) month period of this agreement.
Notwithstanding anything herein which might be construed to the
contrary, it is understood and agreed that a) no Other Products will be
submitted to Licensee until the approvals called for by paragraph 3
hereof have been obtained and b) if Licensee exercises its option with
respect to one or more Other Products within the time allotted, then
Licensee does not and shall not (except by Licensee's own written
rejection) lose any rights or options that Licensee has with respect to
such Other Products submitted within said five (5) month period on
which the option has not been exercised and all rights and options of
Licensee will respect thereto shall be preserved and Licensee at its
election shall have the right at any time to exercise its option with
respect to such Other Products.
6. TECHNICAL ASSISTANCE. The Licensor agrees to provide know-how and
technical assistance to the Licensee as follows:
a. The Licensor shall furnish at no cost to the Licensee all
of the Licensor's know-how, engineering information, designs, drawings,
technical data, and all other information and data relative to the
manufacture
and use of the Licensed Products and Other Products as may be from time
to time reasonably requested by Licensee.
b. During the first two (2) years of the Agreement the
Licensor shall provide to the Licensee as requestid in writing thereby
the services of any of the Licensor's personnel. The services provided
by the Licensor in any one (1) year shall be limited to a maximum of
six hundred (600) hours and will be paid for by the Licensee at a rate
of twenty dollars ($20.00) per hour and all reasonable out-of-pocket
expenses incurred by the Licensor in the performance of the services
shall be reimbursed by the Licensee.
7. IMPROVEMENTS. Licensor shall make full and prompt disclosure to
Licensee of any invention, improvement or modification made or acquired by
Licensor with respect to any Licensed Products and shall notify Licensee of the
filing of any patent application thereon. The parties agree that any
improvements on the Licensed Products or Other Products made during the term of
this Agreement by the Licensor and Licensee will be handled as follows:
a. The improvements made by Licensor shall be added to the
Agreement as Licensed Products, if Licensee elects to use such
improvements and the Licensor shall have title thereto and the Licensee
shall have all exclusive rights thereto as set forth in paragraph 2
hereof.
b. The Licensor shall whenever possible obtain patent
protection on the improvements and all costs incident thetreto shall be
borne by the Licensor.
c. If the Licensor should elect not to assume the costs of
paragraph 7b, the Licensee may elect to assume the payment of the
full costs and thereby acquire Licensor's rights in the improvement.
d. In the event the Licensor shall fail or refuse to prepare
and file promptly any patent application, the Licensee shall have the
right to prepare and file the patent application, and said application
and patent shall become the property of Licensee.
e. Licensee in its own discretion and at its own expense may
determine to file patent applications in foreign countries in its own
name, and the Licensor shall execute the necessary papers and documents
therefor.
f. The improvements made by Licensee to the Licensed Products
or Other Products shall be owned by Licensee and Licensee shall have
the exclusive rights with respect thereto including the right to use
such improvements in manufacturing, marketing, selling or using the
Licensed Products, Other Products and the On-Off sprinkler heads and
valves. Royalty payments therein shall be made in accordance with
paragraph 4 hereof and on cessation of royalty payments as provided in
the last sentence of paragraph 4c hereof, Licensee shall continue to
have the right to manufacture, market, sell and use such improvements
without the paymeny of any royalty to Licensor.
8. SUB-LICENSES. During the life of this Agreement, the Licensee may
grant sub-licenses upon the following terms and conditions:
a. No such sub-license shall be granted by the Licensee for a
term beyond or longer than that during which the Licensee continues to
enjoy an exclusive license hereunder.
b. The Licensor shall be entitled to receive royalties at the
same rate of Net Sales Price as provided herein on all sales by
sub-licensees, as and when the Licensee receives its royalty payment
from any sub-licensee.
9. WARRANTY. Licensor warrants that the Licensed Patents cover all of
Licensor's patents with respect to the Licensed Products and it is the
understanding of this Agreement and the license(s) granted hereby that Licensor
by this Agreement is placing the Licensee in the sole and exclusive position to
manufacture, market and sell all Licensed Products, and Other Products which are
the subject matter of this Agreement free from any outstanding rights or claims
by others, but it is understood the Licensor is not by this proviso warranting
the validity and enforceability of the Licensed Patents.
10. INFRINGEMENT. The parties agree that patent infringement matters
will be handled as follows:
a. The Licensor shall indemify and hold Licensee and its
customers harmless against any and all charges of patent infringement
brought by a third party involving the Licensed Products, or Other
Products unless such patent infringement results from modifications of
the Licensed Products or Other Products made by Licensee during the
term of this Agreement which modifications have not been approved in
writing by Licensor. Beginning with the time such suit for infringement
or declaratory judgment is first filed with respect to a particular
Licensed Product, or Other Product, the Licensee shall thereafter place
all royalties due to the Licensor with respect to such particular
Licensed Products thereafter in an escrow account, and the sums placed
in the escrow account shall be used at the conclusion thereof to pay
the costs of defending or prosecuting the suit in the event Licensor is
successful in such suit and declared to be the rightful owner who can
and
has granted an exclusive license only to Licensee. Once such suit has
been finally settled or disposed of on the basis that Licensee is and
has the only exclusive license, the remaining balance of the escrow
account shall be paid over to the Licensor. If the suit is finally
settled or disposed of on the basis that Licensee has a non-exclusive
license or the Licensed Product infringes on another patent owned by a
third party, then all sums paid into escrow shall be refunded to
Licensee. Licensee shall have the right to approve counsel selected by
Licensor to represent it in any such suit and to approve any proposed
settlement of such suit.
b. Should the patent rights to the Licensed Products or Other
Products be infringed by a third party, Licensor may attempt to stop
such infringement and if necessary, institute suit for patent
infringement at its own cost. If the Licensor should fail to initiate
action to terminate any such infringement within sixty (60) days after
the alleged infringement shall have been called to its attention by
written notice of Licensee to Licensor or if the Licensor should give
the Licensee written notice of its intention not to so act, thereafter
Licensee may, at its own cost, but in the name of the Licensor, act to
protect its license rights under this Agreement and to select competent
counsel to so act. During the period of such litigation the Licensee
may deduct the amount of its attorneys' fees and all other costs
incurred by Licensee in prosecuting such suit from all royalties which
otherwise would be paid to Licensor and such sums so deducted will be
considered as a royalty payment. Each party agrees to cooperate with
the other in any actions which may be instituted.
If settlement for infringement is effected with or without suit, the
recovery, if any, shall be distributed, so far as available, as
follows: First, to reimburse either party, pro rata the expenses
incurred in negotiations or in prosecuting legal action; and secondly
to divide and pay over the balance, if any, equally between the
parties hereto. Furthermore, if an improvement is not eventually
patented or a patent application is rejected or a patent suit concerns
any Licensed Product or Other Product or improvement thereof is not
won, the Licensee automatically shall have no further obligation to
Licensor to pay further royalties (i) on the Licensed Product unless
there is another Licensed Patent then outstanding which has not expired
and (ii) on any Other Product unless there is a patent then outstanding
which has not expired and covers said Other Product.
11. TERMINATION. The parties agree that the term of this Agreement
will be as follows:
a. Unless terminated as otherwise provided, this Agreement
shall continue with respect to each Licensed Product or Other Product
for the life of the last to expire patent licensed herein with respect
thereto as long as said patent has not been determined invalid by any
court of competent jurisdiction, provided, however, that should any
such invalidation be reversed on appeal, royalty payments shall be
resumed retroactive to the date of the original invalidation.
b. If the Licensee fails to pay the Licensor the royalties as
herein provided, or fails to submit a monthly statement of Net Sales
Price of Licensed Products or fails to keep accurate records of all
sales of the Licensed Products or refuses to permit Licensor, or its
duly authorized
representatives, to inspect such records at a reasonable time at
Licensee's principal place of business and Licensee does not cure such
default within thirty (30) days after written notice from Licensor,
Licensor shall have the right to terminate this Agreement on thirty
(30) days' written notice.
c. Licensee shall have the right to terminate this Agrement
upon giving the Licensor written notice of its intention to do so on
any anniversary date of this Agreement.
d. If this Agreement is terminated prior to the termination
date as provided in paragraph lla, Licensee shall at the written
request of Licensor return to Licensor all books, notes, drawings,
writings and other documents, samples and models received by Licensee
from Licensor relating to the Licensed Products and which Licensee has
at the time of the termination and request for such data. Under no
circumstances will Licensee be required to turn over to Licensor trade
secrets, inventions and improvements of Licensee including data
submitted by Licensee to any and all regulatory and approval agencies.
e. In the event that this Agreement is cancelled or terminated
by expiry or otherwise, Licensee may continue to manufacture, use,
market and sell Licensed Products and Other Products which are the
subject matter of this Agreement, upon payment by Licensee to Licensor
of said five percent (5%) royalty thereon for any such then patented
items at the monthly payment dates specified herein, which royalty
payment shall be required to be made by Licensee only for the life of
the last to
expire patent licensed herein with respect thereto and then only as
long as said patent has not been determined invalid by any court of
competent jurisdiction, provided however, that should any invalidation
be reversed on appeal, royalty payments shall be resumed retroactive to
the date of the original invalidation.
12. PRODUCT MARKING. The parties agree the Licensed Products will be
marked as follows:
a. The Licensee shall apply to all Licensed Products sold such
notice of the patents licensed herein as may be required by law to
establish notice.
b. The Licensee shall have the right to stamp, designate and
advertise the Licensed Products under such names, designs or
appellations as Licensee may determine, which such names, designs or
appellations shall be the property of the Licensee and may not be used
by the Licensor upon termination of this Agreement without the prior
written consent of the Licensee.
13. RECORDS. The Licensee agrees to keep full and accurate records of
all sales of the Licensed Products, and all trade and cash discounts, returns,
refunds, rebates and accounts written off, which records shall be open to
inspection by the Licensor and its duly authorized representatives not more than
once each quarter for the purpose of verifying the Net Sales Price of the
Licensed Products during reasonable business hours.
14. RIGHTS AND REMEDIES. The rights and remedies of Licensor and
Licensee hereunder, and those provided by law, shall be construed as cumulative
and no one of them as exclusive of any other right or remedy hereunder or
allowed by law, and shall be continuing rights, none of which shall be exhausted
by being exercised on one or more occasions. A waiver by Licensor and Licensee
of any default, breach or failure of the other shall not be construed as a
continuing waiver, or as a waiver of any subsequent or different default, breach
or failure.
15. LICENSOR'S REPRESENTATIONS. The Licensor hereby represents to
Licensee and Licensee hereby relies on such representations that Licensor is the
exclusive owner of all the Licensed Patents and that to the knowledge and best
belief of Licensor none of the Licensed Products infringe any patents owned by
others and Licensor is not aware of any potential infringements by others of the
Licensed Products.
16. FUTURE IMPROVEMENTS. Licensor acknowledges that Licensee not only
manufactures and sells sprinkler devices, but that Licensee is now and has been
for years engaged in the research and development of various products for use
in the fire prevention-sprinkler industry and that Licensee intends to pursue
such research and development in an effort to develop additional products and
improvements for use in the fire protection-sprinkler industry. It is understood
and agreed that any inventions or improvements made by Licensee in or related to
the Licensed Products or Other Products shall be owned by Licensee. Licensor
shall disclose all its data concerning improvements to Licensee with the
understanding that Licensee may unbeknownst to Licensor also be working on the
same or similar improvements. After presentation by Licensor and sufficient
examination thereof by Licensee, Licensee shall advise Licensor if the data
presented by Licensor concerns inventions, ideas, trade secrets or inprovements
which Licensee already had in its possession at the time of disclosure and
which were not acquired, directly or indirectly, from Licensor and, in such
event, Licensee shall have the right to continue its research and development
in the area of the data concerning such inventions, ideas, trade secrets or
improvements which Licensee may manufacture, sell and patent as its own.
17. ARBITRATICN. Any controversy or claim arising out of or relating to
this Agreement or breach thereof shall be settled by arbitration by arbitrators
to be selected by the American Arbitration Association, and said arbitration
shall be conducted in accordance with the rules of said Association and shall be
final and binding on the parties hereto.
18. PAYMENT OF FEES ON FOREIGN PATENTS. Licensee shall pay all costs
and expenses to those foreign countries for that period of time in which
Licensee desires that foreign payments be maintained. If Licensee elects not to
pay such maintenance costs on any foreign patents, then the rights to such
foreign patents revert back to Licensor, on which the maintenance costs have not
been satisfied by Licensee.
19. NO CONTEST BY LICENSEE. Licensee acknowledges that it has no reason
to believe that the Licensed Patents are not fully valid and enforceable and
Licensee agrees that it will not contest the validity of the Licensed Patents.
20. ROYALTY FEES PAID TO OTHERS. If it is necessary to, and essential
for, the use and operation of the Licensed Products to utilize an item or
product on which a royalty has to be paid by Licensee to a third party (other
than Licensor or an employee or a subsidiary of Licensee) then notwithstanding
the provisions of paragraph 4 hereof, the amount(s) of the royalty so paid to
the third party a) will be deducted from the payment(s) otherwise due Licensor
hereunder and b) shall be credited in favor of Licensee with respect to Licensee
achieving the Minimum royalty as provided in paragraph 4 hereof to the same
extent as though such royalty payment(s) made to such third party had been made
directly to Licensor.
21. APPLICABLE LAW. This Agreement shall be construed and the legal
relations between the parties determined in accordance with the laws of the
Commonwealth of Massachusetts.
22. SUCCESSORS. This Agreement shall be binding upon the Parties
hereto and their respective successors and assigns.
23. NOTICES. The parties agree that all notices required or permitted
under this Agreement shall be given as follows or as may be changed by written
notice to the other party:
a. Notices to the Licensor shall be addressed to Licensor at
the address for it shown on page 1 hereof unless Licensee has been
notified by it in writing of a different address.
b. Notices to the Licensee shall be addressed to Licensee at
the address for it shown on page 1 hereof unless Licensor has been
notified by it in writing of a different address.
c. All notices hereunder shall be by certified mail, return
receipt requested.
24. MODIFICATION. No modification of this Agreement shall be valid or
binding unless in writing and signed by Licensee and Licensor.
IN WITNESS WHEREOF, the parties hereunto signed and sealed this
Agreement consisting of eighteen (18) pages the day and year first above
written.
U.S. FIRE CONTROL CORP.
BY /s/ Xxxxxxx X. Xxxx
--------------------------
ATTEST: Xxxxxxx X. Xxxx, President
--------------------------------
CENTRAL SPRINKLER CORP.
BY /s/ XXXXXXXXXXX
ATTEST: --------------------------
U.S. Fire Control Corporation
Australia:
Patent No. 474,658
Belgium:
Patent No. 788,653
Canada:
Patent No. 977239
Patent No. 1,013,231
France:
Application Xx. 00 00 000
Xxxxxxx:
Application No. P-22-46-496.6
Great Britain:
Patent No. 1,396,603
Patent No. 1,409,256
Holland:
Application No. 7210081
SCHEDULE 3.10(a)
Loss Contingencies
In October 1996, CSC recorded an unusual non-recurring charge to the income
statement. Discussion is presented in footnote #15 of the Annual Report to
Shareholders (a copy of which is attached) and was updated by the following
disclosure made in the SEC Form 10-Q dated July 31, 1997.
(5) Unusual Non-Recurring Omega(TM) Charge
In the fourth quarter of 1996, the Company recorded an unusual
non-recurring charge to 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 in connection with
Omega(TM) problems. In fiscal 1996, the Company became aware of potential
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 affect 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, if 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. The Company continues to be an
active participant with building owners in testing sprinklers and remediating
the problem. The Company provides kits to test installed sprinklers and
continues to monitor the results of the tests and costs incurred. As of July 31,
1997, the Company is involved in several governmental and other regulatory
authority inquiries into the Omega(TM) situation. The Company is providing the
authorities with requested information regarding the Omega(TM) sprinklers and
the Company's actions and action plan.
Note: As a result of the Omega(TM) situation, the following have occurred:
(a) Consumer Product Safety Commission (CPSC) Investigation.
(b) Lawsuit as disclosed in the Company's 10-Q for the period ended July
31, 1997 and on Schedule 3.5 of this Credit Agreement.
SCHEDULE 3.17
Transactions with Affiliates
o Central Sprinkler Company purchases all the CPVC production from
Central CPVC Corporation.
o Central Castings Corporation sells most of their production to Central
Sprinkler Company.
o Central Sprinkler Company pays a royalty to CSC Finance Company,
pursuant to trademark license agreement between Central Sprinkler
Company and CSC Finance Company, attached to Schedule 3.7.
o Central Sprinkler Company pays a commission to Central Sprinkler Export
Corporation on sales made outside the United States.
o Spraysafe purchases some finished goods and raw material from Central
Sprinkler Company for use in their production and resale in the foreign
market.
o Some companies pay management fees to Central Sprinkler Company.
o Various dividends and capital contributions are made between and among
the parent company and subsidiaries as described in Schedule 6.3(f).
There are intercompany receivable and payables and intercompany loans between
the companies (reference Schedule 6.1(e)).
SCHEDULE 3.18
Environmental Matters
CSC's environmental matters are disclosed in CSC's SEC Form 10-Q for the period
ended July 31, 1997, SEC Form 10-K for the year ended October 31, 1996 and the
Annual Report, footnote 15.
SCHEDULE 3.20
Collateral Locations
Chief Executive Offices of Central Sprinkler Company, CSC and Export:
---------------------------------------------------------------------
000 X. Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Central Sprinkler Company Locations:
------------------------------------
000 X. Xxxxxx Xxxxxx 0xx Xxxxxx
Xxxxxxxx, XX 00000 Xxxxxxxx, XX 00000
W. 2nd & Towamencin Avenue 0000 Xxx Xxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000 Xxxxxxxx, XX 00000
000 Xxxxxxxx Xx.
Xxxxxxx, XX 00000
Regional Distribution Centers:
------------------------------
Atlanta Los Angeles
0000 X. Xxxxxx Xxxxxxx 0000 Xxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxx, XX 00000
Baltimore/Washington D.C. Miami
0000-X Xxxxxxx Xxxxx 0000 X.X. 0xx Xx., Xxxxx X
Xxxxxx, XX 00000 Xxxxxxx Xxxxx, XX 00000
Xxxxxx Xxxxxxxxxxxx
00X Xxxxxxx Xxxxxx 000 Xxxx Xxxxx Xxxx
Xxxx, XX 00000 King of Prussia, PA 19406
Chicago Xxxxxxxx
00 X'Xxxxx Xxxxx 0000 X.X. Xxxx Xxxxxx Xx. Xxx. 000
Xxxxxxxxxxx, XX 00000 Xxxxxx, XX 00000
Cleveland Salt Lake City
00000 Xxxxx Xxxxx 0000 X. Xxxx Xxxxxx
Xxxxx, XX 00000 Xxxx Xxxx Xxxx, XX 00000
Dallas San Francisco
1780 Xxxx Drive 0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000 Xxxxxxx, XX 00000
Regional Distribution Centers (continued):
------------------------------------------
Greensboro Seattle
000 Xxxxxxxxxx Xxxxxx 00000 00xx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000 Xxxx, XX 00000
Glass Bulb Manufacturing:
Glinecke Glass Company
00 Xxxxxx Xxxx
Xxxxxxx, XX 00000
Contract Manufacturing (Steel Pipe):
Youngstown Tube
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Consignment of Inventory:
Atlantic American Fire Equipment Co.
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
SCHEDULE 3.21
Fictitious Names of Secured Borrowers
The following are fictitious names of Central Sprinkler Company:
Sprink Cad
Glinecke Glass Company
CSC Bulb Company
SCHEDULE 6.1(d)
Permitted Debt
All items disclosed in the July 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 9-24-97 Maturity
Limit Description Lender Balance Date
1. $30,000,000 Line of Credit CoreStates $27,471,000 on going(l)
2. 10,000,000 Line of Credit First Union 10,000,000 on going(l)(2)
3. 7,275,000 Term Note Central ESOP 6,782,000 10-31-07
4. 1,100,000 Mortgage Loan CoreStates 329,878 02-01-02
5. 10,000,000 Term Loan First Union 6,500,000 04-01-04
6. 10,000,000 Term Loan CoreStates 6,500,000 03-01-04
7. 688,000 Mortgage Loan CoreStates 619,200 08-01-96
8. 11,000,000 L/C - IRB First 10,450,000 11-01-15
Union/CoreStates
Central CPVC Corp.
1. 7,500,000 Term Note Xxxxx Brothers $7,500,000 on going
Spraysafe Ltd.
1. 4,223,700 Line of Credit National Westminster 2,140,700 on going
2. 1,110,000 Term Note National Westminster 932,000 7 years
Other:
------
Miscellaneous secured obligations for various autos, trucks, equipment, etc.
that in the aggregate are not above permitted levels of the existing loan
covenants of $3 million.
(1) To be repaid with proceeds from Revolving Credit Facility at closing.
(2) As permitted under Section 6.1(g) of the Revolving Credit Facility.
SCHEDULE 6.1(e)
Existing Inter-Company Debt
Central Sprinkler Corporation Employee Stock Ownership Plan has a promissory
note payable to CSC. At September 30, 1997, the balance on the promissory note
will be $6,726,000. Refer to footnote #13 of the October 31, 1996 Annual Report
to Shareholders for discussion.
Central Sprinkler Company, a Pennsylvania Corporation (maker) promised to pay to
the order of CSC Finance Company, a Delaware Corporation (payee) the amount of
$11,750,000 with interest per annum equal to prime rate charged by CoreStates
Bank, N.A. principal and interest to be paid as the holder of note may direct
entered into December 21, 1994.
Other balances payable to or receivable from Central Sprinkler Company as of
9/24/97(1) are:
Receivable From Amount Payable To Amount
Central Castings Corp. $4,899,600 Central CPVC Corp. $10,486,200
CSC $85,000
Central Sprinkler Export Corp. $369,500
CSC Finance Co $3,658,100
----------
(1) These accounts arise because Central Sprinkler Company pays all payables on
behalf of its Subsidiaries and CSC and retains all collections, transacts all
intercompany transactions, as more fully described on Schedule 3.17, including
but not included to: royalty payments, dividends and contributions of capitals,
management fees, commissions and sales of inventory, raw material and
production. The net amount of these transactions give rise to the above
described intercompany receivables and payables.
SCHEDULE 6.2(c)
Permitted Liens
Central Sprinkler Company:
1. Mortgage Lien - CoreStates Security Interest on
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxx, XX
2. All Equipment and Warehouse Leases - contractually obliged to grant
security interest to Landlord upon equipment and property held at warehouse
if rents are unpaid.
3. All Auto and Truck Leases - lien upon autos and trucks under lease.
4. All Auto and Truck Loans - lien upon autos and trucks subject to loan.
5. Lien of First Union National Bank ("First Union") in and to any property,
credits, securities or monies of Central Sprinkler Company in the
possession of First Union from time to time, as provided in Section 6.02 of
the First Union Term Loan Agreement, upon event of default.
6. Mortgage Lien - CoreStates Security Interest on
00 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX
7. Xxxxxx Financial Services - lien upon copiers under lease.
8. AT&T Capital Corporation - lien upon one copier under lease.
9. Pitney Xxxxx Credit Corp.- lien upon Pitney Xxxxx equipment under lease.
10. Deere Credit, Inc. - lien upon Manlift under lease.
11. Crown Credit Co.- lien upon Crown Lift trucks.
12. Orix Credit Alliance - lien upon equipment under lease.
13. Judgement Lien related to case #92-07079 and filed April 3, 1992 in the
amount of $80,799.65.
CSC
---
1. Lien of First Union in and to any property, credits, securities or monies
of CSC in the possession of First Union from time to time, as provided in
Section 5 of the Guaranty, dated April 5, 1994 of the First Union Term Loan
Agreement, upon event of default
Central CPVC Corporation:
-------------------------
1. Mortgage Xxxx - Xxxxx Bros. Security Interest on property and equipment
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX
2. Lien given in connection with All assets
Term Loan - Xxxxx Brothers
Central Castings Corporation:
1. Mortgage Lien - First Union Security interest on property and equipment
and CoreStates 0000 Xxx Xxxxxx Xxxxxxx
Xxxxxxxx, XX
2. Lien given in connection with All assets
the Internal Revenue Bond - Letter
of Credit - First Union
3. Chemical Bank Furniture, furnishings, machinery and equipment
(assignee of Xxxxxxx County
Economic Development Council)
4. All Auto and Truck Leases Lien upon autos and trucks under lease or loan
5. Xxxxxxx Company Lien upon leased equipment
SCHEDULE 6.3(f)
Capital Contributions
At CSC's fiscal year end, capital contributions may be made to Subsidiaries of
CSC, which Subsidiaries are also Borrowers, to the extent that such Borrower has
an intercompany payable to Central Sprinkler Company. Accordingly, for each
capital contribution made from a Borrower, there will be a corresponding capital
contribution made to a different Borrower. As a whole, the total equity of the
consolidated Borrowers will not decrease due to any such capital contribution.
SCHEDULE 6.7(a)
Guarantees
All items disclosed in the July 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. $98,644 Yong An Valve 98,644 Letter of Credit 9-30-97
2. 19,288 Bldrs United Corp. 19,288 Letter of Credit 9-30-97
3. 44,482 FuSan Machinery 44,482 Letter of Credit 9-30-97
CSC and Central Sprinkler Company guarantee all debt of Spraysafe, Central
Castings Corp. and Central CPVC Corp., as well as warehouse leases, auto and
truck and various equipment leases of these entities.
Additionally, Export guarantees all debt of Central Castings Corp., Central CPVC
Corp, as well as warehouse leases, auto and truck and various equipment leases
of these entities.
Castings guarantees the obligations of Central Sprinkler under both the First
Union Term Loan and the CoreStates Term Loan.
