EXHIBIT 4(b)
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION (NEW ENGLAND)
AS LENDER
AND
RAYBESTOS PRODUCTS COMPANY
RAYTECH AUTOMOTIVE COMPONENTS COMPANY
AUTOMOTIVE COMPOSITES COMPANY
AS BORROWERS
DATED: SEPTEMBER 28, 2000
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TABLE OF CONTENTS
Page
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1. DEFINITIONS............................................................................................ 5
2. CREDIT FACILITIES...................................................................................... 14
2.1 Revolving Loans.................................................................................... 14
2.2 Intentionally Omitted.............................................................................. 14
2.3 Term Loan.......................................................................................... 15
2.4 Availability Reserves.............................................................................. 15
2.5 Appointment of RPC as Lead Borrower................................................................ 15
3. INTEREST AND FEES...................................................................................... 15
3.1 Interest........................................................................................... 15
3.2 Closing Fee........................................................................................ 17
3.3 Intentionally Omitted.............................................................................. 17
3.4 Servicing Fee...................................................................................... 17
3.5 Unused Line Fee.................................................................................... 17
3.6 Changes in Laws and Increased Costs of Loans....................................................... 17
4. CONDITIONS PRECEDENT................................................................................... 18
4.1 Conditions Precedent to Initial Loans.............................................................. 18
4.2 Conditions Precedent to All Loans.................................................................. 19
5. GRANT OF SECURITY INTEREST............................................................................. 20
6. COLLECTION AND ADMINISTRATION.......................................................................... 21
6.1 Borrowers' Loan Account(s)......................................................................... 21
6.2 Statements......................................................................................... 21
6.3 Collection of Accounts............................................................................. 21
6.4 Payments........................................................................................... 22
6.5 Authorization to Make Loans........................................................................ 22
6.6 Use of Proceeds.................................................................................... 23
7. COLLATERAL REPORTING AND COVENANTS..................................................................... 20
7.1 Collateral Reporting............................................................................... 20
7.2 Accounts Covenants................................................................................. 23
7.3 Inventory Covenants................................................................................ 22
7.4 Equipment Covenants................................................................................ 26
7.5 Power of Attorney.................................................................................. 23
7.6 Right to Cure...................................................................................... 27
7.7 Access to Premises................................................................................. 24
8. REPRESENTATIONS AND WARRANTIES......................................................................... 27
8.1 Corporate Existence, Power and Authority; Subsidiaries............................................. 27
8.2 Financial Statements; No Material Adverse Change................................................... 28
8.3 Chief Executive Office; Collateral Locations....................................................... 25
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8.4 Priority of Liens; Title to Properties............................................................. 25
8.5 Tax Returns........................................................................................ 28
8.6 Litigation......................................................................................... 29
8.7 Compliance with Other Agreements and Applicable Laws............................................... 26
8.8 Bank Accounts...................................................................................... 26
8.9 Accuracy and Completeness of Information........................................................... 26
8.10 Employee Benefits................................................................................. 29
8.11 Environmental Compliance.......................................................................... 27
8.12 Interdependant Businesses and Operations.......................................................... 31
8.13 Reorganization Plan .............................................................................. 28
8.14 Survival of Warranties; Cumulative................................................................ 28
9. AFFIRMATIVE AND NEGATIVE COVENANTS..................................................................... 31
9.1 Maintenance of Existence........................................................................... 31
9.2 New Collateral Locations........................................................................... 32
9.3 Compliance with Laws, Regulations, Etc............................................................. 29
9.4 Payment of Taxes and Claims........................................................................ 30
9.5 Insurance.......................................................................................... 30
9.6 Financial Statements and Other Information......................................................... 31
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc............................................ 32
9.8 Encumbrances....................................................................................... 32
9.9 Indebtedness....................................................................................... 33
9.10 Loans, Investments, Guarantees, Etc............................................................... 33
9.11 Dividends and Redemptions......................................................................... 37
9.12 Transactions with Affiliates...................................................................... 34
9.13 Additional Bank Accounts.......................................................................... 34
9.14 Minimum Availability.............................................................................. 34
9.15 Minimum EBIDTA.................................................................................... 34
9.16 Costs and Expenses................................................................................ 35
9.17 Compliance with ERISA............................................................................ 35
9.18 Further Assurances................................................................................ 36
10. EVENTS OF DEFAULT AND REMEDIES......................................................................... 36
10.1 Events of Default................................................................................. 36
10.2 Remedies.......................................................................................... 38
11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW........................................... 39
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver............................. 39
11.2 Waiver of Notices................................................................................. 41
11.3 Amendments and Waivers............................................................................ 41
11.4 Waiver of Counterclaims........................................................................... 41
11.5 Indemnification................................................................................... 41
11.6 Waiver of Right to Prejudgment Remedy Notice and Hearing.......................................... 42
12. TERM OF AGREEMENT; MISCELLANEOUS....................................................................... 42
12.1 Term.............................................................................................. 42
12.2 Notices........................................................................................... 44
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12.3 Partial Invalidity................................................................................ 44
12.4 Successors........................................................................................ 44
12.5 Joint and Several Liability....................................................................... 44
12.6 Suretyship Waivers and Consents................................................................... 44
12.7 Contribution Agreement............................................................................ 47
12.8 Entire Agreement.................................................................................. 47
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificates
Schedule 1.10 Account Debtors and Concentrations
Schedule 8.4 Existing Liens
Schedule 8.8 Bank Accounts
Schedule 8.11 Environmental Matters
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated September 28, 2000 is entered
into by and between Congress Financial Corporation (New England), a
Massachusetts corporation ("Lender") and Raybestos Products Company, a Delaware
corporation ("RPC"), Raytech Automotive Components Company, a Michigan
corporation ("RACC"), and Automotive Composites Company, a Delaware corporation
("ACC", and together with RPC and RACC, the "Borrowers", and each, individually,
a "Borrower").
W I T N E S S E T H:
WHEREAS, Borrowers have requested that Lender enter into certain
financing arrangements with Borrowers pursuant to which Lender may make loans
and provide other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context otherwise requires. All references to Borrowers and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of a
Borrower to payment for goods sold or leased or for services rendered,
which are not evidenced by instruments or chattel paper, and whether or
not earned by performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to
each Interest Period for any Eurodollar Rate Loan, the rate per annum
(rounded upwards, if necessary, to the next
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one-sixteenth (1/16) of one (1%) percent) determined by dividing (a)
the Eurodollar Rate for such Interest Period by (b) a percentage equal
to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority
for determining the reserve requirement which is or would be applicable
to deposits of United States dollars in a non-United States or an
international banking office of Reference Bank used to fund a
Eurodollar Rate Loan or any Eurodollar Rate Loan made with the proceeds
of such deposit, whether or not the Reference Bank actually holds or
has made any such deposits or loans. The Adjusted Eurodollar Rate shall
be adjusted on and as of the effective day of any change in the Reserve
Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set
forth below), on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to: (a) the difference between:
(i) the aggregate net book value of all assets of such Person and its
subsidiaries, calculating the book value of inventory for this purpose
on a first-in-first-out basis, after deducting from such book values
all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and
amortization) and (ii) the aggregate amount of the indebtedness and
other liabilities of such Person and its subsidiaries (including tax
and other proper accruals) plus (b) indebtedness of such Person and its
subsidiaries which is subordinated in right of payment to the full and
final payment of all of the Obligations on terms and conditions
acceptable to Lender.
1.4 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish
and revise in good faith reducing the amount of Revolving Loans which
would otherwise be available to Borrowers under the lending formula(s)
provided for herein: (a) to reflect events, conditions, contingencies
or risks which, as determined by Lender in good faith, do or may affect
either (i) the Collateral or any other property which is security for
the Obligations or its value, (ii) the assets, business or prospects of
any Borrower or any Obligor or (iii) the security interests and other
rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof) or (b) to reflect Lender's good faith
belief that any collateral report or financial information furnished by
or on behalf of any Borrower or any Obligor to Lender is or may have
been incomplete, inaccurate or misleading in any material respect or
(c) in respect of any state of facts which Lender determines in good
faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default.
1.5 "Blocked Accounts" shall have the meaning set forth in
Section 6.3 hereof.
1.6. "Business Day" shall mean any day other than a Saturday,
Sunday, or other day on which commercial banks are authorized or
required to close under the laws of the State of New York, the
Commonwealth of Pennsylvania or the State of North Carolina, and a day
on which the Reference Bank and Lender are open for the transaction of
business, except that if a determination of a Business Day shall relate
to any Eurodollar Rate Loans, the term Business Day shall also exclude
any day on which banks are closed for dealings on dollar deposits in
the London interbank market or other applicable Eurodollar Rate market.
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1.7 "Change in Control" shall mean, at any time, that any
Person, together with the affiliates and associates of such Person
within the meaning of Rule 12b-2 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), shall acquire beneficial
ownership within the meaning of Rule 13d of the Exchange Act of more
than thirty (30%) percent of the voting stock or total equity of such
Person, or if a change in the Board of Directors of such Person occurs
in which the individuals who constituted the Board of Directors at the
beginning of the two (2) year period immediately preceding such change
(together with any other director whose election by the Board of
Directors was approved by at least two-thirds of the directors then in
office at the beginning of such period) cease for any reason to
constitute a majority of the directors of such Person then in office;
provided, however, that the issuance of securities of the Parent to the
Raytech Corporation Asbestos Personal Injury Settlement Trust ( the
"Trust") pursuant to the Parent Reorganization Plan shall not be deemed
to be a Change of Control with respect to the Parent.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as
the same now exists or may from time to time hereafter be amended,
modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.9 "Collateral" shall have the meaning set forth in Section 5
hereof.
1.10 "EBIDTA" shall mean for a Person for any period earnings
(exclusive of extraordinary and nonrecurring items) before items of
interest, taxes, depreciation and amortization deducted in determining
earnings, as determined in accordance with GAAP.
1.11 "Eligible Accounts" shall mean Accounts created by a
Borrower which are and continue to be acceptable to Lender based on the
criteria set forth below. In general, Accounts shall be Eligible
Accounts if:
(a) such Accounts arise from the actual and bona
fide sale and delivery of goods by a Borrower or rendition of services
by such Borrower in the ordinary course of its business which
transactions are completed in accordance with the terms and provisions
contained in any documents related thereto;
(b) such Accounts are not unpaid more than sixty
(60) days after the original due date thereof, but in any event are not
unpaid more than ninety (90) days after the date of the original
invoice for them;
(c) such Accounts comply with the terms and
conditions contained in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on
consignment, guaranteed sale, sale and return, sale on approval, or
other terms under which payment by the account debtor may be
conditional or contingent;
(e) the chief executive office of the account debtor
with respect to such Accounts is located in the United States of
America, or, at Lender's option, if either: (i) the account debtor has
delivered to a Borrower an irrevocable letter of credit issued or
confirmed by
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a bank satisfactory to Lender and payable only in the United States of America
and in U.S. dollars, sufficient to cover such Account, in form and substance
satisfactory to Lender and, if required by Lender, the original of such letter
of credit has been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Lender,
or (ii) such Account is subject to credit insurance payable to Lender issued by
an insurer and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise acceptable in all respects to Lender (subject to such
lending formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress xxxxxxxx,
xxxx and hold invoices or retainage invoices, except as to xxxx and hold
invoices, if Lender shall have received an agreement in writing from the account
debtor, in form and substance satisfactory to Lender, confirming the
unconditional obligation of the account debtor to take the goods related thereto
and pay such invoice;
(g) the account debtor with respect to such Accounts has
not asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts (but the portion of the Accounts of such account debtor in excess of
the amount at any time and from time to time owed by a Borrower to such account
debtor or claimed owed by such account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would
impair the validity, enforceability or collectability of such Accounts or reduce
the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority,
valid and perfected security interest of Lender and any goods giving rise
thereto are not, and were not at the time of the sale thereof, subject to any
liens except those permitted in this Agreement;
(j) neither the account debtor nor any officer or
employee of the account debtor with respect to such Accounts is an officer,
employee or agent of or affiliated with a Borrower directly or indirectly by
virtue of family membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are
not any foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are
threatened or pending against the account debtors with respect to such Accounts
which might result in any material adverse change in any such account debtor's
financial condition;
(m) such Accounts of a single account debtor or its
affiliates to any Borrower do not constitute more than twenty (20%) percent of
all otherwise Eligible Accounts or, for the
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account debtors listed in Schedule 1.10 hereto, the percentages set forth on
Schedule 1.10 (but the portion of the Accounts not in excess of such percentage
may be deemed Eligible Accounts) due to such Borrower;
(n) such Accounts are not owed by an account debtor who
has Accounts unpaid more than ninety (90) days after the date of the original
invoice for them which constitute more than fifty (50%) percent of the total
Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to any Borrower does not exceed the credit limit with respect to
such account debtors as determined by Lender from time to time (but the portion
of the Accounts not in excess of such credit limit may be deemed Eligible
Accounts); and
(p) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.12 "Eligible Inventory" shall mean Inventory consisting of
finished goods held for resale in the ordinary course of the business of a
Borrower and raw materials for such finished goods which are acceptable to
Lender based on the criteria set forth below. In general, Eligible Inventory
shall not include (a) work-in-process; (b) components which are not part of
finished goods; (c) spare parts for equipment; (d) packaging and shipping
materials; (e) supplies used or consumed in any Borrower's business; (f)
Inventory at premises other than those owned and controlled by a Borrower,
except if Lender shall have received an agreement in writing from the person in
possession of such Inventory and/or the owner or operator of such premises in
form and substance satisfactory to Lender acknowledging Lender's first priority
security interest in the Inventory, waiving security interests and claims by
such person against the Inventory and permitting Lender access to, and the right
to remain on, the premises so as to exercise Lender's rights and remedies and
otherwise deal with the Collateral; (g) Inventory subject to a security interest
or lien in favor of any person other than Lender except those permitted in this
Agreement; (h) xxxx and hold goods; (i) unserviceable, obsolete or slow moving
Inventory; (j) Inventory which is not subject to the first priority, valid and
perfected security interest of Lender; (k) returned, damaged and/or defective
Inventory; (l) Inventory purchased or sold on consignment; and (m) Inventory of
ACC until such time as ACC has installed a fully operational perpetual Inventory
system satisfactory to Lender. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in good faith. Any Inventory
which is not Eligible Inventory shall nevertheless be part of the Collateral.
1.13 "Environmental Law" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower and any
governmental authority: relating to pollution and the protection, preservation
or restoration of the environment (including air, water vapor, surface water,
ground water, drinking water, drinking water supply, surface land, subsurface
land, plant and animal life
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or any other natural resource), or to human health or safety, (b) relating to
the exposure to, or the use, storage, recycling, treatment, generation,
manufacture, processing, distribution, transportation, handling, labeling,
production, release or disposal, or threatened release, of Hazardous Materials,
or (c) relating to all laws with regard to recordkeeping, notification,
disclosure and reporting requirements respecting Hazardous Materials. The term
"Environmental Laws" includes (i) the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Federal Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii)
applicable state counterparts to such laws, and (iii) any common law or
equitable doctrine that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Materials.
1.14 "Equipment" shall mean all of Borrowers' now owned and
hereafter acquired equipment, machinery, computers and computer hardware and
software (whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.15 "ERISA" shall mean the United States Employee Retirement
Income Security Act of 1974, as the same now exists or may hereafter from time
to time be amended, modified, recodified or supplemented, together with all
rules, regulations and interpretations thereunder or related thereto.
1.16 "ERISA Affiliate" shall mean any person required to be
aggregated with any Borrower or any of its subsidiaries under Sections 414(b),
414(c), 414(m) or 414(o) of the Code.
1.17 "Event of Default" shall mean the occurrence or existence of
any event or condition described in Section 10.1 hereof.
1.18 "Eurodollar Rate Loans" shall mean any Loans or portion
thereof on which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
1.19 "Eurodollar Rate" shall mean with respect to the Interest
Period for a Eurodollar Rate Loan, the interest rate per annum equal to the
arithmetic average of the rates of interest per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) at which
Reference Bank is offered deposits of United States dollars in the London
interbank market (or other Eurodollar Rate market selected by Borrower and
approved by Lender) on or about 9:00 a.m. (New York time) two (2) Business Days
prior to the commencement of such Interest Period in amounts substantially equal
to the principal amount of the Eurodollar Rate Loans requested by and available
to Borrowers in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by Lead Borrower.
1.20 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to the lesser of: (i) the amount of the
Revolving Loans available to Borrowers
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as of such time based on the applicable lending formulas multiplied by the Net
Amount of Eligible Accounts and the Value of Eligible Inventory, as determined
by Lender, and subject to the sublimits and Availability Reserves from time to
time established by Lender hereunder, and (ii) the Revolver Ceiling (less the
then outstanding principal amount of the Term Loan), minus the sum of: (i) the
amount of all then outstanding and unpaid Obligations (but not including for
this purpose the then outstanding principal amount of the Term Loan), plus (ii)
the aggregate amount of all then outstanding and unpaid trade payables of
Borrowers which are more than sixty (60) days past due as of such time, plus
(iii) the amount of checks issued by Borrowers to pay trade payables, but not
yet sent and the book overdraft of Borrowers.
1.21 "Financing Agreements" shall mean, collectively, this
Agreement and all notes, guarantees, security agreements and other agreements,
documents and instruments now or at any time hereafter executed and/or delivered
by any Borrower or any Obligor in connection with this Agreement, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.22 "GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.14 and 9.15 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
1.23 "Hazardous Materials" shall mean any hazardous, toxic or
dangerous substances, materials and wastes, including hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and any
other kind and/or type of pollutants or contaminants (including materials which
include hazardous constituents), sewage, sludge, industrial slag, solvents
and/or any other similar substances, materials, or wastes and including any
other substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.24 "Information Certificate" shall mean the Information
Certificates of Borrowers constituting Exhibit A hereto containing material
information with respect to Borrowers, their business and assets provided by or
on behalf of Borrowers to Lender in connection with the preparation of this
Agreement and the other Financing Agreements and the financing arrangements
provided for herein.
1.25 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as Lead
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
Lead Borrower may not elect an Interest Period which will end after the last day
of the then-current term of this Agreement.
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1.26 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of
zero (0%) percent per annum in excess of the Prime Rate and, as to Eurodollar
Rate Loans, a rate of two and one quarter (2.25%) percent per annum in excess of
the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period selected by Lead Borrower as in effect three (3) Business Days
after the date of receipt by Lender of the request of Lead Borrower for such
Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is
higher or lower than any rate previously quoted to Lead Borrower); provided,
that, the Interest Rate shall mean the rate of three (3%) percent per annum in
excess of the Prime Rate as to Prime Rate Loans and the rate of five and one
quarter (5.25%) percent per annum in excess of the Adjusted Eurodollar Rate as
to Eurodollar Rate Loans, at Lender's option, without notice, (a) for the period
(i) from and after the date of termination or non-renewal hereof until Lender
has received full and final payment of all obligations (notwithstanding entry of
a judgment against any Borrower) and (ii) from and after the date of the
occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender, and (b) on the Revolving Loans at any time
outstanding in excess of the amounts available to Borrowers under Section 2
(whether or not such excess(es), arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default).
1.27 "Inventory" shall mean all of Borrowers' now owned and
hereafter existing or acquired raw materials, work in process, finished goods
and all other inventory of whatsoever kind or nature, wherever located.
1.28 "Investment Property" shall mean all of Borrowers' now owned
and hereafter existing or acquired securities, financial assets, securities
accounts, securities entitlements and all other investment property of
whatsoever kind or nature, wherever located, including, without limitation,
securities issued by any subsidiary of any Borrower.
1.29 "Lead Borrower" shall mean RPC or such other Borrower as may
be appointed the Lead Borrower under Section 2.5 hereof.
1.30 "Loans" shall mean the Revolving Loans and the Term Loan.
1.31 "Maximum Credit" shall mean the amount of $30,000,000.00.
1.32 "Net Amount of Eligible Accounts" shall mean the gross amount
of Eligible Accounts less (a) sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of any
nature at any time issued, owing, granted, outstanding, available or claimed
with respect thereto.
1.33 "Obligations" shall mean any and all Revolving Loans, the Term
Loan, and all other obligations, liabilities and indebtedness of every kind,
nature and description owing by Borrowers to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to any Borrower under the United States Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are
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allowed or allowable in whole or in part in such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by Lender.
1.34 "Obligor" shall mean any guarantor, endorser, acceptor, surety
or other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations, other than a Borrower.
1.35 "Parent" shall mean Raytech Corporation.
1.36 "Payment Account" shall have the meaning set forth in Section
6.3 hereof.
1.37 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.
1.38 "Prime Rate" shall mean the rate announced by First Union
National Bank, or its successors, from time to time as its prime rate, whether
or not such announced rate is the best rate available at such bank.
1.39 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.40 "Records" shall mean all of Borrower's present and future
books of account of every kind or nature, purchase and sale agreements,
invoices, ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of Borrower with
respect to the foregoing maintained with or by any other person).
1.41 "Reference Bank" shall mean First Union National Bank, or such
other bank as Lender may from time to time designate.
1.42 "Revolver Ceiling" shall mean the amount of $25,000,000.00
1.43 "Revolving Loans" shall mean the loans now or hereafter made
by Lender to or for the benefit of Borrowers on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.44 "Term Loan" shall mean the term loan made by Lender to
Borrowers as provided for in Section 2.3 hereof.
1.45 "Value" shall mean, as determined by Lender in good faith,
with respect to Inventory, the lower of (a) cost computed on a
first-in-first-out basis in accordance with GAAP or (b) market value.
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2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions
contained herein, Lender agrees to make Revolving Loans to Borrowers from time
to time in amounts requested by Lead Borrower up to the amount equal to the
lesser of the Revolver Ceiling or the sum of:
(i) eighty-five (85%) percent of the Net Amount of
Eligible Accounts, plus
(ii) the lesser of: (A) the sum of fifty (50%) percent of
the Value of Eligible Inventory consisting of finished goods or (B)
$5,000,000.00, plus (2) the lesser of : (I) fifty (50%) percent of the
value of Eligible Inventory consisting of raw materials, or (II)
$5,000,000.00; or (B) $10,000,000.00 (provided, however, that until
such time as Lender has received an appraisal of Borrowers' Inventory
in form, scope and methodology and from an appraiser satisfactory to
Lender, the foregoing limit in this Section 2.1(a)(ii)(B) shall be $0),
less
(iii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time,
upon not less than five (5) days prior notice to Lead Borrower, (i) reduce the
lending formula with respect to Eligible Accounts to the extent that Lender
determines in good faith that: (A) the dilution with respect to the Accounts for
any period (based on the ratio of (1) the aggregate amount of reductions in
Accounts other than as a result of payments in cash to (2) the aggregate amount
of total sales) has increased in any material respect or may be reasonably
anticipated to increase in any material respect above historical levels, or (B)
the general creditworthiness of account debtors has declined or (ii) reduce the
lending formula(s) with respect to Eligible Inventory to the extent that Lender
determines that: (A) the number of days of the turnover of the Inventory for any
period has changed in any material respect or (B) the liquidation value of the
Eligible Inventory, or any category thereof, has decreased, or (C) the nature
and quality of the Inventory has deteriorated. In determining whether to reduce
the lending formula(s), Lender may consider events, conditions, contingencies or
risks which are also considered in determining Eligible Accounts, Eligible
Inventory or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount
of the Loans outstanding at any time shall not exceed the Maximum Credit and the
aggregate amount of the Revolving Loans outstanding at any time shall not exceed
the Revolver Ceiling. In the event that the outstanding amount of any component
of the Loans, or the aggregate amount of the outstanding Loans, exceed the
amounts available under the lending formulas, the Revolver Ceiling or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Lender in that circumstance or on any future occasions and
Borrowers shall, upon demand by Lender, which may be made at any time or from
time to time, immediately repay to Lender the entire amount of any such
excess(es) for which payment is demanded.
2.2 Intentionally Omitted.
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2.3 Term Loan. Lender is making a Term Loan to Borrowers in
the original principal amount of $5,000,000.00. The Term Loan is (a)
evidenced by a Term Promissory Note in such original principal amount
duly executed and delivered by Borrowers to Lender concurrently
herewith; (b) to be repaid, together with interest and other amounts,
in accordance with this Agreement, the Term Promissory Note, and the
other Financing Agreements and (c) secured by all of the Collateral.
2.4 Availability Reserves. All Revolving Loans otherwise
available to Borrowers pursuant to the lending formulas and subject to
the Maximum Credit and other applicable limits hereunder shall be
subject to Lender's continuing right to establish and revise
Availability Reserves.
2.5 Appointment of RPC as Lead Borrower. Each Borrower hereby
irrevocably appoints RPC, and RPC agrees to act under this Agreement,
as the "Lead Borrower" to act as agent and representative of the
Borrowers for all purposes under this Agreement, including requesting
Loans, receiving the proceeds of Loans, selecting whether any Loan or
portion thereof is to bear interest as a Prime Rate Loan or Eurodollar
Rate Loan, providing notices, reports and certificates from the
Borrowers, and receiving any notices and communications to the
Borrowers from the Lender. Lender may rely, and shall be fully
protected in relying, on any notice, reports, requests, information or
other communication made or given by RPC whether in its own name, or on
behalf of the Borrowers and Lender shall have no obligation to make any
inquiry or request any confirmation from or on behalf of RPC as to the
binding effect thereof on all of the Borrowers. This appointment of RPC
is irrevocable and shall continue in effect until the termination of
the Agreement and the repayment of all Obligations as required herein
except that Lender may terminate this appointment and select a
replacement Lead Borrower or elect to proceed without a Lead Borrower
at any time that an Event of Default or an event or condition which
with notice or the passage of time or both might become an Event of
Default has occurred and is continuing.
3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Lead Borrower may from time to time request that Prime
Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar
Rate Loans continue for an additional Interest Period. Such request from Lead
Borrower shall specify the amount of the Prime Rate Loans which will constitute
Eurodollar Rate Loans (subject to the limits set forth below) and the Interest
Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by Lender of
such a request from Lead Borrower, such Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, provided, that, (i) no Event of
15
Default, or event which with notice or passage of time or both would constitute
an Event of Default exists or has occurred and is continuing, (ii) no party
hereto shall have sent any notice of termination or non-renewal of this
Agreement, (iii) Lead Borrower shall have complied with such customary
procedures as are established by Lender and specified by Lender to Lead Borrower
from time to time for requests by Lead Borrower for Eurodollar Rate Loans, (iv)
no more than four (4) Interest Periods may be in effect at any one time, (v) the
aggregate amount of the Eurodollar Rate Loans must be in an amount not less than
$3,000,000 or an integral multiple of $1,000,000 in excess thereof, (vi) the
maximum amount of the Eurodollar Rate Loans at any time requested by Lead
Borrower shall not exceed the amount equal to (A) the principal amount of the
Term Loan which it is anticipated will be outstanding as of the last day of the
applicable Interest Period plus (B) eighty (80%) percent of the lowest principal
amount of the Revolving Loans which it is anticipated will be outstanding during
the applicable Interest Period, in each case as determined by Lender (but with
no obligation of Lender to make such Revolving Loans) and (vii) Lender shall
have determined that the Interest Period or Adjusted Eurodollar Rate is
available to Lender through the Reference Bank and can be readily determined as
of the date of the request for such Eurodollar Rate Loan by Borrowers. Any
request by Lead Borrower to convert Prime Rate Loans to Eurodollar Rate Loans or
to continue any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Lender and Reference
Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Lender and Reference Bank had purchased such deposits to fund the Eurodollar
Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert
to Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate Loan
at least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Lead Borrower, convert to Prime Rate Loans in the event that (i) an
Event of Default or event which, with the notice or passage of time, or both,
would constitute an Event of Default, shall exist, (ii) this Agreement shall
terminate or not be renewed, or (iii) the aggregate principal amount of the
Prime Rate Loans which have previously been converted to Eurodollar Rate Loans
or existing Eurodollar Rate Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time during such Interest Period
exceed either (A) the aggregate principal amount of the Loans then outstanding,
or (B) the sum of the then outstanding principal amount of the Term Loan plus
the Revolving Loans then available to Borrowers under Section 2 hereof.
Borrowers shall pay to Lender, upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrowers) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any loss
(including loss of anticipated profits), cost or expense incurred by such
person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate
Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Lender
monthly in arrears not later than the first day of each calendar month and shall
be calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed. The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the
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month after any change in such Prime Rate is announced based on the Prime Rate
in effect on the last day of the month in which any such change occurs. In no
event shall charges constituting interest payable by Borrowers to Lender exceed
the maximum amount or the rate permitted under any applicable law or regulation,
and if any such part or provision of this Agreement is in contravention of any
such law or regulation, such part or provision shall be deemed amended to
conform thereto.
3.2 Closing Fee. Borrowers shall pay to Lender as a closing
fee the amount of $150,000.00, which shall be fully earned as of and
payable on the date hereof.
3.3 Intentionally Omitted.
3.4 Servicing Fee. Borrowers shall pay to Lender monthly a
servicing fee in an amount equal to $2,000.00 in respect of Lender's
services for each month (or part thereof) while this Agreement remains
in effect and for so long thereafter as any of the Obligations are
outstanding, which fee shall be fully earned as of and payable in
advance on the date hereof and on the first day of each month
hereafter.
3.5 Unused Line Fee. Borrowers shall pay to Lender monthly an
unused line fee at a rate equal to three eighths (.375%) percent per
annum calculated upon the amount by which the Revolver Ceiling exceeds
the average daily principal balance of the outstanding Revolving Loans
during the immediately preceding month (or part thereof) while this
Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be payable on the first
day of each month in arrears.
3.6 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained
herein, all Eurodollar Rate Loans shall, upon notice by Lender to Lead Borrower,
convert to Prime Rate Loans in the event that (i) any change in applicable law
or regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the increase in the costs
to Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by Lender in respect thereof, by an
amount deemed by Lender to be material or (ii) the cost to Lender, Reference
Bank or any participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Lender to be material. Borrowers shall
pay to Lender, upon demand by Lender (or Lender may, at its option, charge any
loan accounts of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such person as a result of the
foregoing, including, without limitation, any such loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain the Eurodollar Rate Loans or any
portion thereof. A certificate of Lender setting forth the basis for the
determination of such amount necessary to compensate Lender as aforesaid shall
be delivered to Borrower and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the
17
application of collections under Section 6.3 or any other payments made with the
proceeds of Collateral, Borrowers shall pay to Lender upon demand by Lender (or
Lender may, at its option, charge any loan accounts of Borrowers) any amounts
required to compensate Lender, the Reference Bank or any participant with Lender
for any additional loss (including loss of anticipated profits), cost or expense
incurred by such person as a result of such prepayment or payment, including,
without limitation, any loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such person
to make or maintain such Eurodollar Rate Loans or any portion thereof.
4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans . Each of the
following is a condition precedent to Lender making the initial Loans
hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination by the existing
lender or lenders to Borrowers of their respective financing arrangements with
Borrowers and the termination and release by it or them, as the case may be, of
any interest in and to any assets and properties of each Borrower and each
Obligor, duly authorized, executed and delivered by it or each of them,
including, but not limited to, (i) UCC termination statements for all UCC
financing statements previously filed by it or any of them or their
predecessors, as secured party and any Borrower or any Obligor, as debtor and
(ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to
secure debt by any Borrower or any Obligor in favor of such existing lender or
lenders, in form acceptable for recording in the appropriate government office;
(b) Lender shall have received evidence, in form and
substance satisfactory to Lender, that Lender has valid perfected and first
priority security interests in and liens upon the Collateral and any other
property which is intended to be security for the Obligations or the liability
of any Obligor in respect thereof, subject only to the security interests and
liens permitted herein or in the other Financing Agreements;
(c) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or governmental authorities;
(d) no material adverse change shall have occurred in the
assets, business or prospects of any Borrower since the date of Lender's latest
field examination and no change or event shall have occurred which would impair
the ability of any Borrower or any Obligor to perform its obligations hereunder
or under any of the other Financing Agreements to which it is a party or of
Lender to enforce the Obligations or realize upon the Collateral;
(e) Lender shall have completed a field review of the
Records and such other information with respect to the Collateral as Lender may
require to determine the amount of
18
Revolving Loans available to Borrowers, the results of which shall be
satisfactory to Lender, not more than three (3) business days prior to the date
hereof;
(f) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including acknowledgments by lessors, mortgagees
and warehousemen of Lender's security interests in the Collateral, waivers by
such persons of any security interests, liens or other claims by such persons to
the Collateral and agreements permitting Lender access to, and the right to
remain on, the premises to exercise its rights and remedies and otherwise deal
with the Collateral;
(g) the Excess Availability as determined by Lender, as
of the date hereof, shall be not less than $1,000,000.00 after giving effect to
the initial Loans made or to be issued in connection with the initial
transactions hereunder;
(h) Lender shall have received evidence of insurance and
loss payee endorsements required hereunder and under the other Financing
Agreements, in form and substance satisfactory to Lender, and certificates of
insurance policies and/or endorsements naming Lender as loss payee;
(i) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrowers with
respect to the Financing Agreements and such other matters as Lender may
request; and
(j) the other Financing Agreements and all instruments
and documents hereunder and thereunder shall have been duly executed and
delivered to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans. Each of the
following is an additional condition precedent to Lender making Loans
to Borrowers, including the initial Loans and any future Loans:
(a) all representations and warranties contained herein
and in the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan and after giving
effect thereto; and
(b) no Event of Default and no event or condition which,
with notice or passage of time or both, would constitute an Event of Default,
shall exist or have occurred and be continuing on and as of the date of the
making of such Loan and after giving effect thereto.
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5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, each Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Lender as security, the
following property and interests in property of each Borrower, whether now owned
or hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
5.1 Accounts;
5.2 all present and future contract rights, general
intangibles (including tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade
names, applications for the foregoing, trade secrets, goodwill,
processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing
and future leasehold interests in equipment, real estate and fixtures),
chattel paper, documents, instruments, securities and other investment
property, letters of credit, bankers' acceptances and guaranties;
5.3 all present and future monies, securities, credit
balances, deposits, deposit accounts and other property of each
Borrower now or hereafter held or received by or in transit to Lender
or its affiliates or at any other depository or other institution from
or for the account of any Borrower, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all present and
future liens, security interests, rights, remedies, title and interest
in, to and in respect of Accounts and other Collateral, including (a)
rights and remedies under or relating to guaranties, contracts of
suretyship, letters of credit and credit and other insurance related to
the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party, (c) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Accounts or other Collateral, including
returned, repossessed and reclaimed goods, and (d) deposits by and
property of account debtors or other persons securing the obligations
of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Investment Property;
5.7 Records; and
5.8 all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
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6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Account(s). Lender shall maintain one or
more loan account(s) on its books in which shall be recorded (a) all
Loans, and other Obligations and the Collateral, (b) all payments made
by or on behalf of Borrowers and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs,
expenses and interest. All entries in the loan account(s) shall be made
in accordance with Lender's customary practices as in effect from time
to time.
6.2 Statements. Lender shall render to Lead Borrower each
month a statement setting forth the balance in the Borrowers' loan
account(s) maintained by Lender for Borrowers pursuant to the
provisions of this Agreement, including principal, interest, fees,
costs and expenses. Each such statement shall be subject to subsequent
adjustment by Lender but shall, absent manifest errors or omissions, be
considered correct and deemed accepted by Borrowers and conclusively
binding upon Borrowers as an account stated except to the extent that
Lender receives a written notice from Lead Borrower of any specific
exceptions thereto within thirty (30) days after the date such
statement has been mailed by Lender. Until such time as Lender shall
have rendered to Lead Borrower a written statement as provided above,
the balance in Borrowers' loan account(s) shall be presumptive evidence
of the amounts due and owing to Lender by Borrowers.
6.3 Collection of Accounts.
(a) Borrowers shall establish and maintain, at their
expense, blocked accounts or lockboxes and related blocked accounts (in either
case, "Blocked Accounts"), as Lender may specify, with such banks as are
acceptable to Lender into which Borrowers shall promptly deposit and direct
their account debtors to directly remit all payments on Accounts and all
payments constituting proceeds of Inventory or other Collateral in the identical
form in which such payments are made, whether by cash, check or other manner.
The banks at which the Blocked Accounts are established shall enter into an
agreement, in form and substance satisfactory to Lender, providing that all
items received or deposited in the Blocked Accounts are the property of Lender,
that the depository bank has no lien upon, or right to setoff against, the
Blocked Accounts, the items received for deposit therein, or the funds from time
to time on deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds received
or deposited into the Blocked Accounts to such bank account of Lender as Lender
may from time to time designate for such purpose ("Payment Account"). Borrowers
agree that all payments made to such Blocked Accounts or other funds received
and collected by Lender, whether on the Accounts or as proceeds of Inventory or
other Collateral or otherwise shall be the property of Lender.
(b) For purposes of calculating the amount of the Loans
available to Borrowers, such payments will be applied (conditional upon final
collection) to the Obligations on the business day of receipt by Lender of
immediately available funds in the Payment Account provided such payments and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrowers' loan account(s) on such day, and if not, then on the next business
day. For the purposes of
21
calculating interest on the Obligations, such payments or other funds received
will be applied (conditional upon final collection) to the Obligations one (1)
business day following the date of receipt of immediately available funds by
Lender in the Payment Account provided such payments or other funds and notice
thereof are received in accordance with Lender's usual and customary practices
as in effect from time to time and within sufficient time to credit Borrowers'
loan account(s) on such day, and if not, then on the next business day.
(c) Each Borrower and all of its affiliates,
subsidiaries, shareholders, directors, employees or agents shall, acting as
trustee for Lender, receive, as the property of Lender, any monies, checks,
notes, drafts or any other payment relating to and/or proceeds of Accounts or
other Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with any
Borrower's own funds. Each Borrower agrees to reimburse Lender on demand for any
amounts owed or paid to any bank at which a Blocked Account is established or
any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of Lender's payments to or indemnification of such
bank or person. The obligation of Borrowers to reimburse Lender for such amounts
pursuant to this Section 6.3 shall survive the termination or non-renewal of
this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment
Account as provided in Section 6.3 or such other place as Lender may
designate from time to time. Lender may apply payments received or
collected from Borrowers or for the account of Borrowers (including the
monetary proceeds of collections or of realization upon any Collateral)
to such of the Obligations, whether or not then due, in such order and
manner as Lender determines. At Lender's option, all principal,
interest, fees, costs, expenses and other charges provided for in this
Agreement or the other Financing Agreements may be charged directly to
the loan account(s) of Borrowers. Borrowers shall make all payments to
Lender on the Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense,
duties, taxes, levies, imposts, fees, deductions, withholding,
restrictions or conditions of any kind. If after receipt of any payment
of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or
proceeds to any Person for any reason, then the Obligations intended to
be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as
if such payment or proceeds had not been received by Lender. Borrowers
shall be liable to pay to Lender, and do hereby indemnify and hold
Lender harmless for the amount of any payments or proceeds surrendered
or returned. This Section 6.4 shall remain effective notwithstanding
any contrary action which may be taken by Lender in reliance upon such
payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make
the Loans based upon telephonic or other instructions received from
anyone purporting to be an officer of Lead Borrower or other authorized
person or, at the discretion of Lender, if such Loans are necessary to
satisfy any Obligations. All requests for Loans hereunder shall specify
the date on which the requested advance is to be made or (which day
shall be a business day)
22
and the amount of the requested Loan. Requests received after 11:00
a.m. Boston, Massachusetts time on any day shall be deemed to have been
made as of the opening of business on the immediately following
business day. All Loans under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the
benefit of, Borrowers when deposited to the credit of any Borrower or
otherwise disbursed or established in accordance with the instructions
of Lead Borrower or in accordance with the terms and conditions of this
Agreement.
6.6 Use of Proceeds. Borrowers shall use the initial proceeds
of the Loans provided by Lender to Borrowers hereunder only for: (a)
payments to each of the persons listed in the disbursement direction
letter furnished by Borrowers to Lender on or about the date hereof and
(b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other
Financing Agreements. All other Loans made by Lender to Borrowers
pursuant to the provisions hereof shall be used by Borrowers only for
general operating, working capital and other proper corporate purposes
of Borrowers not otherwise prohibited by the terms hereof. None of the
proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to
purchase or carry any margin security or for any other purpose which
might cause any of the Loans to be considered a "purpose credit" within
the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrowers shall provide Lender with
the following documents in a form satisfactory to Lender: (a) on a
regular basis as required by Lender, a schedule of Accounts, sales
made, credits issued and cash received; (b) on a monthly basis or more
frequently as Lender may request, (i) perpetual inventory reports, (ii)
inventory reports by category and (iii) agings of accounts payable, (c)
upon Lender's request, (i) copies of customer statements and credit
memos, remittance advices and reports, and copies of deposit slips and
bank statements, (ii) copies of shipping and delivery documents, and
(iii) copies of purchase orders, invoices and delivery documents for
Inventory and Equipment acquired by any Borrower; (d) agings of
accounts receivable on a weekly basis or more frequently as Lender may
request; and (e) such other reports as to the Collateral as Lender
shall request from time to time. If any Borrower's records or reports
of the Collateral are prepared or maintained by an accounting service,
contractor, shipper or other agent, Borrowers hereby irrevocably
authorize such service, contractor, shipper or agent to deliver such
records, reports, and related documents to Lender and to follow
Lender's instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrowers shall notify Lender promptly of: (i) any
material delay in any Borrower's performance of any of its obligations to any
account debtor or the assertion of any
23
claims, offsets, defenses or counterclaims by any account debtor, or any
disputes with account debtors, or any settlement, adjustment or compromise
thereof, (ii) all material adverse information relating to the financial
condition of any account debtor and (iii) any event or circumstance which, to
Borrowers' knowledge would cause Lender to consider any then existing Accounts
as no longer constituting Eligible Accounts. No credit, discount, allowance or
extension or agreement for any of the foregoing shall be granted to any account
debtor without Lender's consent, except in the ordinary course of a Borrower's
business in accordance with practices and policies previously disclosed in
writing to Lender. So long as no Event of Default exists or has occurred and is
continuing, Borrowers shall settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an Event of
Default exists or has occurred and is continuing, Lender shall, at its option,
have the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors or grant any credits, discounts or
allowances.
(b) Without limiting the obligation of Borrowers to
deliver any other information to Lender, Borrowers shall promptly report to
Lender any return of Inventory by any one account debtor if the inventory so
returned in such case has a value in excess of $50,000.00. At any time that
Inventory is returned, reclaimed or repossessed, the Account (or portion
thereof) which arose from the sale of such returned, reclaimed or repossessed
Inventory shall not be deemed an Eligible Account. In the event any account
debtor returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrowers shall, upon Lender's request, (i) hold the returned
Inventory in trust for Lender, (ii) segregate all returned Inventory from all of
its other property, (iii) dispose of the returned Inventory solely according to
Lender's instructions, and (iv) not issue any credits, discounts or allowances
with respect thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown
on any invoice delivered to Lender or schedule thereof delivered to Lender shall
be true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrowers' business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable State or Federal laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.
(d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrowers shall deliver or cause to be delivered to
Lender, with appropriate endorsement and assignment, with full recourse to
Borrowers, all chattel paper and
24
instruments which Borrowers now own or may at any time acquire immediately upon
any Borrower's receipt thereof, except as Lender may otherwise agree.
(f) Lender may, at any time or times that an Event of
Default exists or has occurred and is continuing, (i) notify any or all account
debtors that the Accounts have been assigned to Lender and that Lender has a
security interest therein and Lender may direct any or all accounts debtors to
make payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary or
desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrowers shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a)
Borrowers shall at all times maintain inventory records reasonably
satisfactory to Lender, keeping correct and accurate records itemizing
and describing the kind, type, quality and quantity of Inventory,
Borrowers' cost therefor and daily withdrawals therefrom and additions
thereto; (b) Borrowers shall conduct a physical count of the Inventory
at least once each year, but at any time or times as Lender may request
on or after an Event of Default, and promptly following such physical
inventory shall supply Lender with a report in the form and with such
specificity as may be reasonably satisfactory to Lender concerning such
physical count; (c) upon Lender's request, Borrowers shall, at
Borrowers' expense, obtain an appraisal of the Inventory once a year,
but at any time or times as Lender may request on or after an Event of
Default, from an appraiser acceptable to Lender and in form, scope and
methodology acceptable to Lender, (d) Borrowers shall not remove any
Inventory from the locations set forth or permitted herein, without the
prior written consent of Lender, except for sales of Inventory in the
ordinary course of a Borrower's business and except to move Inventory
directly from one location set forth or permitted herein to another
such location; (e) upon Lender's request, Borrowers shall, at their
expense, no more than once in any twelve (12) month period, but at any
time or times as Lender may request on or after an Event of Default,
deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender,
addressed to Lender or upon which Lender is expressly permitted to
rely; (f) Borrowers shall produce, use, store and maintain the
Inventory with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable
laws (including the requirements of the Federal Fair Labor Standards
Act of 1938, as amended and all rules, regulations and orders related
thereto); (g) Borrowers assume all responsibility and liability arising
from or relating to the production, use, sale or other disposition of
the
25
Inventory; (h) Borrowers shall not sell Inventory to any customer on
approval, or any other basis which entitles the customer to return or
may obligate any Borrower to repurchase such Inventory; (i) Borrowers
shall keep the Inventory in good and marketable condition; (j)
Borrowers shall not, without prior written notice to Lender, acquire or
accept any Inventory on consignment or approval, and (k) ACC shall,
within 120 s of the date hereof, have installed and made fully
operational a perpetual inventory system satisfactory to Lender.
7.4 Equipment Covenants. With respect to the Equipment: (a)
upon Lender's request, Borrowers shall, at their expense, once a year
but at any time or times as Lender may request on or after an Event of
Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Equipment in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender; (b)
Borrowers shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (c) Borrowers
shall use the Equipment with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity
with all applicable laws; (d) the Equipment is and shall be used in
Borrowers' business and not for personal, family, household or farming
use; (e) Borrowers shall not remove any Equipment from the locations
set forth or permitted herein, except to the extent necessary to have
any Equipment repaired or maintained in the ordinary course of the
business of Borrowers or to move Equipment directly from one location
set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of Borrowers
in the ordinary course of business; (f) the Equipment is now and shall
remain personal property and Borrowers shall not permit any of the
Equipment to be or become a part of or affixed to real property; and
(g) Borrowers assume all responsibility and liability arising from the
use of the Equipment.
7.5 Power of Attorney. Each Borrower hereby irrevocably
designates and appoints Lender (and all persons designated by Lender)
as such Borrower's true and lawful attorney-in-fact, and authorizes
Lender, in any Borrower's or Lender's name, to: (a) at any time an
Event of Default or event which with notice or passage of time or both
would constitute an Event of Default exists or has occurred and is
continuing (i) demand payment on Accounts or other proceeds of
Inventory or other Collateral, (ii) enforce payment of Accounts by
legal proceedings or otherwise, (iii) exercise all of Borrowers' rights
and remedies to collect any Account or other Collateral, (iv) sell or
assign any Account upon such terms, for such amount and at such time or
times as the Lender deems advisable, (v) settle, adjust, compromise,
extend or renew an Account, (vi) discharge and release any Account,
(vii) prepare, file and sign any Borrower's name on any proof of claim
in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for
delivery of Borrowers' mail to an address designated by Lender, and
open and dispose of all mail addressed to any Borrower, and (ix) do all
acts and things which are necessary, in Lender's determination, to
fulfill Borrowers' obligations under this Agreement and the other
Financing Agreements and (b) at any time to (i) take control in any
manner of any item of payment or proceeds thereof, (ii) have access to
any lockbox or postal box into which any Borrower's mail is deposited,
(iii) endorse
26
each Borrower's name upon any items of payment or proceeds thereof and
deposit the same in the Lender's account for application to the
Obligations, (iv) endorse each Borrower's name upon any chattel paper,
document, instrument, invoice, or similar document or agreement
relating to any Account or any goods pertaining thereto or any other
Collateral, (v) sign each Borrower's name on any verification of
Accounts and notices thereof to account debtors and (vi) execute in
each Borrower's name and file any UCC financing statements or
amendments thereto. Each Borrower hereby releases Lender and its
officers, employees and designees from any liabilities arising from any
act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of Lender's own
gross negligence or willful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) cure any
default by any Borrower under any agreement with a third party or pay
or bond on appeal any judgment entered against any Borrower, (b)
discharge taxes, liens, security interests or other encumbrances at any
time levied on or existing with respect to the Collateral and (c) pay
any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or
maintain the Collateral and the rights of Lender with respect thereto.
Lender may add any amounts so expended to the Obligations and charge
Borrowers' account therefor, such amounts to be repayable by Borrowers
on demand. Lender shall be under no obligation to effect such cure,
payment or bonding and shall not, by doing so, be deemed to have
assumed any obligation or liability of Borrowers. Any payment made or
other action taken by Lender under this Section shall be without
prejudice to any right to assert an Event of Default hereunder and to
proceed accordingly.
7.7 Access to Premises. From time to time as requested by
Lender, at the cost and expense of Borrowers, (a) Lender or its
designee shall have complete access to all of Borrowers' premises
during normal business hours and after notice to Lead Borrower, or at
any time and without notice to Lead Borrower if an Event of Default
exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrowers'
books and records, including the Records, and (b) Borrowers shall
promptly furnish to Lender such copies of such books and records or
extracts therefrom as Lender may request, and (c) use during normal
business hours such of Borrowers' personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing and if an
Event of Default exists or has occurred and is continuing for the
collection of Accounts and realization of other Collateral.
8. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to Lender the following
(which shall survive the execution and delivery of this Agreement), the truth
and accuracy of which are a continuing condition of the making of Loans by
Lender to Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries.
Each Borrower is a corporation duly organized and in good standing
under the laws of its state of incorporation and is duly qualified as a
foreign corporation and in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by
it or the ownership of assets makes such qualification necessary,
except for those jurisdictions
27
in which the failure to so qualify would not have a material adverse
effect on any Borrower's financial condition, results of operation or
business or the rights of Lender in or to any of the Collateral. The
execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and
thereunder are all within each Borrower's corporate powers, have been
duly authorized and are not in contravention of law or the terms of
each Borrower's certificate of incorporation, by-laws, or other
organizational documentation, or any indenture, agreement or
undertaking to which any Borrower is a party or by which any Borrower
or its property are bound. This Agreement and the other Financing
Agreements constitute legal, valid and binding obligations of each
Borrower enforceable in accordance with their respective terms.
Borrowers do not have any subsidiaries except as set forth on the
Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All
financial statements relating to Borrowers, Parent and each other
Person referenced therein which have been or may hereafter be delivered
by Borrowers to Lender have been prepared in accordance with GAAP and
fairly present the financial condition and the results of operation of
Borrowers, Parent and each other Person referenced therein as at the
dates and for the periods set forth therein. Except as disclosed in any
interim financial statements furnished by Borrowers to Lender prior to
the date of this Agreement, there has been no material adverse change
in the assets, liabilities, properties and condition, financial or
otherwise, of any Borrower, since the date of the most recent audited
financial statements furnished by Borrowers to Lender prior to the date
of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief
executive office of each Borrower and each Borrower's Records
concerning Accounts are located only at the addresses set forth below
and their only other places of business and the only other locations of
Collateral, if any, are the addresses set forth in the Information
Certificate, subject to the right of Borrowers to establish new
locations in accordance with Section 9.2 below. The Information
Certificate correctly identifies any of such locations which are not
owned by Borrowers and sets forth the owners and/or operators thereof
and to the best of Borrowers' knowledge, the holders of any mortgages
on such locations.
8.4 Priority of Liens; Title to Properties. The security
interests and liens granted to Lender under this Agreement and the
other Financing Agreements constitute valid and perfected first
priority liens and security interests in and upon the Collateral
subject only to the liens indicated on Schedule 8.4 hereto and the
other liens permitted under Section 9.8 hereof. Each Borrower has good
and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges
of any kind, except those granted to Lender and such others as are
specifically listed on Schedule 8.4 hereto or permitted under Section
9.8 hereof.
8.5 Tax Returns. Each Borrower has filed, or caused to be
filed, in a timely manner all tax returns, reports and declarations
which are required to be filed by it (without requests for extension
except as previously disclosed in writing to Lender). All information
in such tax returns, reports and declarations is complete and accurate
in all material respects. Each Borrower has paid or caused to be paid
all taxes due and payable
28
or claimed due and payable in any assessment received by it, except
taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrowers
and with respect to which adequate reserves have been set aside on its
books. Adequate provision has been made for the payment of all accrued
and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information
Certificate, there is no present investigation by any governmental
agency pending, or to the best of Borrowers' knowledge threatened,
against or affecting any Borrower, its assets or business and there is
no action, suit, proceeding or claim by any Person pending, or to the
best of Borrowers' knowledge threatened, against any Borrower or its
assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against
any Borrower would result in any material adverse change in the assets,
business or prospects of any Borrower or would impair the ability of
any Borrower to perform its obligations hereunder or under any of the
other Financing Agreements to which it is a party or of Lender to
enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. No
Borrower is in default in any material respect under, or in violation
in any material respect of any of the terms of, any agreement,
contract, instrument, lease or other commitment to which it is a party
or by which it or any of its assets are bound and Borrowers are in
compliance in all material respects with all applicable provisions of
laws, rules, regulations, licenses, permits, approvals and orders of
any foreign, Federal, State or local governmental authority.
8.8 Bank Accounts. All of the deposit accounts, investment
accounts or other accounts in the name of or used by any Borrower
maintained at any bank or other financial institution are set forth on
Schedule 8.8 hereto, subject to the right of Borrowers to establish new
accounts in accordance with Section 9.13 below.
8.9 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrowers in writing to Lender in
connection with this Agreement or any of the other Financing Agreements
or any transaction contemplated hereby or thereby, including all
information on the Information Certificate is true and correct in all
material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to
make such information not misleading. No event or circumstance has
occurred which has had or could reasonably be expected to have a
material adverse affect on the business, assets or prospects of any
Borrower, which has not been fully and accurately disclosed to Lender
in writing.
8.10 Employee Benefits.
(a) No Borrower has engaged in any transaction in
connection with which a Borrower or any of its ERISA Affiliates could be subject
to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code, including
29
any accumulated funding deficiency described in Section 8.10(c) hereof and any
deficiency with respect to vested accrued benefits described in Section 8.10(d)
hereof.
(b) No liability to the Pension Benefit Guaranty
Corporation has been or is expected by Borrowers to be incurred with respect to
any employee benefit plan of Borrowers or any of its ERISA Affiliates. There has
been no reportable event (within the meaning of Section 4043(b) of ERISA) or any
other event or condition with respect to any employee pension benefit plan of
Borrowers or any of its ERISA Affiliates which presents a risk of termination of
any such plan by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which
Borrowers or any of their ERISA Affiliates is required under Section 302 of
ERISA and Section 412 of the Code to have paid under the terms of each employee
benefit plan as contributions to such plan as of the last of the most recent
fiscal year of such plan ended prior to the date hereof, and no accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists with respect to any employee benefit plan,
including any penalty or tax described in Section 8.10(a) hereof and any
deficiency with respect to vested accrued benefits described in Section 8.10(d)
hereof.
(d) The current value of all vested accrued benefits
under all employee benefit plans maintained by Borrowers that are subject to
Title IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.10(a) hereof and any accumulated funding deficiency
described in Section 8.10(c) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) Neither Borrowers nor any of their ERISA Affiliates
is or has ever been obligated to contribute to any "multiemployer plan" (as such
term is defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of
ERISA.
8.11 Environmental Compliance.
(a) Except as set forth on Schedule 8.11 hereto, no
Borrower has generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates any
applicable Environmental Law or any license, permit, certificate, approval or
similar authorization thereunder and the operations of Borrowers comply in all
material respects with all Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.11 hereto, there
has been no investigation, proceeding, complaint, order, directive, claim,
citation or notice by any governmental authority or any other person nor is any
pending or to the best of Borrowers' knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
any Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects any Borrower or its
business, operations or
30
assets or any properties at which any Borrower has transported, stored or
disposed of any Hazardous Materials.
(c) No Borrower has any material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrowers have all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of Borrowers under any Environmental Law and all
of such licenses, permits, certificates, approvals or similar authorizations are
valid and in full force and effect.
8.12 Interdependant Businesses and Operations. Each of the
Borrowers acknowledges and agrees that it acts interdependently with
the other Borrower, relies upon the other Borrower in its operations
and business and will derive substantial direct and indirect economic
benefits from the Loans made and to be made hereunder by Lender.
8.13 Reorganization Plan. Parent has complied in all
material respects with the Reorganization Plan of Raytech Corporation
(the "Parent Reorganization Plan") in In re Raytech Corporation Chapter
11 Reorganization Case No. 0-00-00000 (AHWS) (the "Parent Case") and
neither the execution and the delivery or performance of this Agreement
and the Financing Agreements by the Borrowers require the approval of
the Bankruptcy Court under the Case or will violate or be in
contradiction of the Parent Reorganization Plan. An order confirming
the Parent Reorganization Plan was duly entered on August 31, 2000 (the
"Confirmation Order") and is valid, subsisting and continuing and there
are no appeals or motions to amend, vacate, stay or rescind the
Confirmation Order filed and the time to file such appeals has expired.
8.14 Survival of Warranties; Cumulative. All
representations and warranties contained in this Agreement or any of
the other Financing Agreements shall survive the execution and delivery
of this Agreement and shall be deemed to have been made again to Lender
on the date of each additional borrowing or other credit accommodation
hereunder and shall be conclusively presumed to have been relied on by
Lender regardless of any investigation made or information possessed by
Lender. The representations and warranties set forth herein shall be
cumulative and in addition to any other representations or warranties
which Borrowers shall now or hereafter give, or cause to be given, to
Lender.
9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Each Borrower shall at all times
preserve, renew and keep in full, force and effect its corporate
existence and rights and franchises with respect thereto and maintain
in full force and effect all permits, licenses, trademarks, tradenames,
approvals, authorizations, leases and contracts necessary to carry on
the business as presently or proposed to be conducted. Borrowers shall
give Lender thirty (30) days prior written notice of any proposed
change in its corporate name, which notice shall set forth the new name
and Borrowers shall deliver to Lender a copy of the amendment to
31
the Certificate of Incorporation of the Borrower changing its name
providing for the name change certified by the Secretary of State of
the jurisdiction of incorporation of such Borrower as soon as it is
available.
9.2 New Collateral Locations. Borrowers may open any new
location within the continental United States provided Borrowers (a)
give Lender thirty (30) days prior written notice of the intended
opening of any such new location and (b) execute and deliver, or cause
to be executed and delivered, to Lender such agreements, documents, and
instruments as Lender may deem reasonably necessary or desirable to
protect its interests in the Collateral at such location, including UCC
financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrowers shall, at all times, comply in all material
respects with all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all requirements of any Federal, State
or local governmental authority, including the Employee Retirement Security Act
of 1974, as amended, the Occupational Safety and Health Act of 1970, as amended,
the Fair Labor Standards Act of 1938, as amended, and all statutes, rules,
regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including all of the Environmental
Laws.
(b) Borrowers shall establish and maintain, at their
expense, a system to assure and monitor its continued compliance with all
Environmental Laws in all of their operations, which system shall include annual
reviews of such compliance by employees or agents of Borrowers who are familiar
with the requirements of the Environmental Laws. Copies of all environmental
surveys, audits, assessments, feasibility studies and results of remedial
investigations shall be promptly furnished, or caused to be furnished, by
Borrower to Lender. Borrowers shall take prompt and appropriate action to
respond to any non-compliance with any of the Environmental Laws and shall
regularly report to Lender on such response.
(c) Borrowers shall give both oral and written notice to
Lender immediately upon any Borrower's receipt of any notice of, or any
Borrower's otherwise obtaining knowledge of, (i) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of any
Hazardous Material or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by any Borrower or (B) the release,
spill or discharge, threatened or actual, of any Hazardous Material or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which affects any Borrower or its
business, operations or assets or any properties at which any Borrower
transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing,
whenever Lender reasonably determines that there is non-compliance, or any
condition which requires any action by or on behalf of Borrowers in order to
avoid any material non-compliance, with any Environmental Law, Borrowers shall,
at Lender's request and Borrowers' expense: (i) cause an independent
environmental engineer acceptable to Lender to conduct such tests of the site
where
32
Borrowers' non-compliance or alleged non-compliance with such Environmental Laws
has occurred as to such non-compliance and prepare and deliver to Lender a
report as to such non-compliance setting forth the results of such tests, a
proposed plan for responding to any environmental problems described therein,
and an estimate of the costs thereof and (ii) provide to Lender a supplemental
report of such engineer whenever the scope of such non-compliance, or Borrowers'
response thereto or the estimated costs thereof, shall change in any material
respect.
(e) Each Borrower shall indemnify and hold harmless
Lender, its directors, officers, employees, agents, invitees, representatives,
successors and assigns, from and against any and all losses, claims, damages,
liabilities, costs, and expenses (including attorneys' fees and legal expenses)
directly or indirectly arising out of or attributable to the use, generation,
manufacture, reproduction, storage, release, threatened release, spill,
discharge, disposal or presence of a Hazardous Material, including the costs of
any required or necessary repair, cleanup or other remedial work with respect to
any property of Borrowers and the preparation and implementation of any closure,
remedial or other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Each Borrower shall duly pay
and discharge all taxes, assessments, contributions and governmental
charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrowers
and with respect to which adequate reserves have been set aside on its
books. Borrowers shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein
and Borrowers agree to indemnify and hold Lender harmless with respect
to the foregoing, and to repay to Lender on demand the amount thereof,
and until paid by Borrowers such amount shall be added and deemed part
of the Loans, provided, that, nothing contained herein shall be
construed to require Borrowers to pay any income or franchise taxes
attributable to the income of Lender from any amounts charged or paid
hereunder to Lender. The foregoing indemnity shall survive the payment
of the Obligations and the termination or non-renewal of this
Agreement.
9.5 Insurance. Borrowers shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds
and in the amounts customarily insured against or carried by
corporations of established reputation engaged in the same or similar
businesses and similarly situated. Said policies of insurance shall be
satisfactory to Lender as to form, amount and insurer. Borrowers shall
furnish certificates, policies or endorsements to Lender as Lender
shall require as proof of such insurance, and, if Borrowers fail to do
so, Lender is authorized, but not required, to obtain such insurance at
the expense of Borrowers. All policies shall provide for at least
thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrowers
in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling
such insurance. Borrowers shall cause Lender to be named as a loss
payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrowers shall obtain
non-contributory lender's loss payable endorsements to all insurance
policies in form and
33
substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be
payable to Lender as its interests may appear and further specify that
Lender shall be paid regardless of any act or omission by any Borrower
or any of its affiliates. At its option, Lender may apply any insurance
proceeds received by Lender at any time to the cost of repairs or
replacement of Collateral and/or to payment of the Obligations, whether
or not then due, in any order and in such manner as Lender may
determine or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrowers shall keep proper books and records in
which true and complete entries shall be made of all dealings or transactions of
or in relation to the Collateral and the business of Borrower and its
subsidiaries (if any) in accordance with GAAP and Borrowers shall furnish or
cause to be furnished to Lender: (i) within thirty (30) days after the end of
each fiscal month, monthly unaudited consolidated financial statements and,
unaudited consolidating financial statements (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders' equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrowers and their
subsidiaries as of the end of and through such fiscal month and (ii) within
ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and audited consolidating financial statements of Parent
and its subsidiaries including each Borrower, (including in each case balance
sheets, statements of income and loss, statements of cash flow and statements of
shareholders' equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Parent and its subsidiaries including each Borrower as of the end
of and for such fiscal year, together with the unqualified opinion of
independent certified public accountants, which accountants shall be an
independent accounting firm selected by Parent and reasonably acceptable to
Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Parent and its subsidiaries including each Borrower as of the end of and for the
fiscal year then ended.
(b) Borrowers shall promptly notify Lender in writing of
the details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrowers'
business, properties, assets, goodwill or condition, financial or otherwise and
(ii) the occurrence of any Event of Default or event which, with the passage of
time or giving of notice or both, would constitute an Event of Default.
(c) Borrowers shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all reports which
any Borrower or Parent sends to its stockholders generally and copies of all
reports and registration statements which any Borrower or Parent files with the
Securities and Exchange Commission, any national securities exchange or the
National Association of Securities Dealers, Inc.
(d) Borrowers shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all notices,
filings, motions, orders, judgments and other documents relating to or arising
out of the Parent Case or the Parent Reorganization Plan.
34
(e) Borrowers shall furnish or cause to be furnished to
Lender such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrowers, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrowers to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Borrowers hereby irrevocably
authorize and direct all accountants or auditors to deliver to Lender, at
Borrowers' expense, copies of the financial statements of Borrowers and any
reports or management letters prepared by such accountants or auditors on behalf
of Borrowers and to disclose to Lender such information as they may have
regarding the business of Borrowers. Any documents, schedules, invoices or other
papers delivered to Lender may be destroyed or otherwise disposed of by Lender
one (1) year after the same are delivered to Lender, except as otherwise
designated by Lead Borrower to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
Borrowers shall not, directly or indirectly, (a) merge into or with or
consolidate with any other Person or permit any other Person to merge
into or with or consolidate with any Borrower, or (b) sell, assign,
lease, transfer, abandon or otherwise dispose of any stock or
indebtedness to any other Person or any of its assets to any other
Person (except for (i) sales of Inventory in the ordinary course of
business and (ii) the disposition of worn-out or obsolete Equipment or
Equipment no longer used in the business of Borrowers so long as (A)
any proceeds are paid to Lender and (B) such sales do not involve
Equipment having an aggregate fair market value in excess of $100,000
for all such Equipment disposed of in any fiscal year of Borrowers), or
(c) form or acquire any subsidiaries, or (d) wind up, liquidate or
dissolve or (e) agree to do any of the foregoing.
9.8 Encumbrances. Borrowers shall not create, incur, assume or
suffer to exist any security interest, mortgage, pledge, lien, charge
or other encumbrance of any nature whatsoever on any of its assets or
properties, including the Collateral, except: (a) liens and security
interests of Lender; (b) liens securing the payment of taxes, either
not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to
Borrowers and with respect to which adequate reserves have been set
aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrowers' business to the extent: (i) such liens secure indebtedness
which is not overdue or (ii) such liens secure indebtedness relating to
claims or liabilities which are fully insured and being defended at the
sole cost and expense and at the sole risk of the insurer or being
contested in good faith by appropriate proceedings diligently pursued
and available to Borrowers, in each case prior to the commencement of
foreclosure or other similar proceedings and with respect to which
adequate reserves have been set aside on its books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do not interfere in any
material respect with the use of such real property or ordinary conduct
of the business of Borrowers as presently conducted thereon or
materially impair the value of the real property which may be subject
thereto; (e) purchase money security interests in Equipment (including
capital leases) and purchase money mortgages on real estate not to
exceed $100,000 in the aggregate at any time outstanding so long as
such security interests and mortgages do not apply to any
35
property of Borrowers other than the Equipment or real estate so
acquired, and the indebtedness secured thereby does not exceed the cost
of the Equipment or real estate so acquired, as the case may be; and
(f) the security interests and liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrowers shall not incur, create, assume,
become or be liable in any manner with respect to, or permit to exist,
any obligations or indebtedness, except: (a) the Obligations; (b) trade
obligations and normal accruals in the ordinary course of business not
yet due and payable, or with respect to which the Borrowers are
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrowers, and with
respect to which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in
violation of any other provision of this Agreement; and (d) the
indebtedness set forth on Schedule 9.9 hereto; provided, that, (i)
Borrowers may only make regularly scheduled payments of principal and
interest in respect of such indebtedness in accordance with the terms
of the agreement or instrument evidencing or giving rise to such
indebtedness as in effect on the date hereof, (ii) Borrowers shall not,
directly or indirectly, (A) amend, modify, alter or change the terms of
such indebtedness or any agreement, document or instrument related
thereto as in effect on the date hereof, or (B) redeem, retire,
defease, purchase or otherwise acquire such indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose, and (iii)
Borrowers shall furnish to Lender all notices or demands in connection
with such indebtedness either received by any Borrower or on its
behalf, promptly after the receipt thereof, or sent by any Borrower or
on its behalf, concurrently with the sending thereof, as the case may
be.
9.10 Loans, Investments, Guarantees, Etc. Borrowers shall
not, directly or indirectly, make any loans or advance money or
property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the stock or indebtedness or
all or a substantial part of the assets or property of any person, or
guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business; (b) investments in: (i) short-term direct
obligations of the United States Government, (ii) negotiable
certificates of deposit issued by any bank satisfactory to Lender,
payable to the order of a Borrower or to bearer and delivered to
Lender, and (iii) commercial paper rated A1 or P1; provided, that, as
to any of the foregoing, unless waived in writing by Lender, Borrowers
shall take such actions as are deemed necessary by Lender to perfect
the security interest of Lender in such investments and (c) the loans,
advances and guarantees set forth on Schedule 9.10 hereto; provided,
that, as to such loans, advances and guarantees, (i) Borrowers shall
not, directly or indirectly, (A) amend, modify, alter or change the
terms of such loans, advances or guarantees or any agreement, document
or instrument related thereto, or (B) as to such guarantees, redeem,
retire, defease, purchase or otherwise acquire the obligations arising
pursuant to such guarantees, or set aside or otherwise deposit or
invest any sums for such purpose, and (ii) Borrowers shall furnish to
Lender all notices or demands in connection with such loans, advances
or guarantees or other indebtedness subject to such guarantees
36
either received by a Borrower or on its behalf, promptly after the
receipt thereof, or sent by a Borrower or on its behalf, concurrently
with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. Borrowers shall not,
directly or indirectly, declare or pay any dividends on account of any
shares of class of capital stock of any Borrower now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for
such purpose, or redeem, retire, defease, purchase or otherwise acquire
any shares of any class of capital stock (or set aside or otherwise
deposit or invest any sums for such purpose) for any consideration
other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of
any such shares or agree to do any of the foregoing: provided, however,
that Borrowers may pay dividends to Parent from time to time for costs
and expenses incurred by Parent in the ordinary course of business and
in connection with the Parent Reorganization Plan so long as no Event
of Default exists or has occurred and is continuing.
9.12 Transactions with Affiliates. Borrowers shall not,
directly or indirectly, (a) purchase, acquire or lease any property
from, or sell, transfer or lease any property to, any officer,
director, agent or other person affiliated with any Borrower, except in
the ordinary course of and pursuant to the reasonable requirements of
Borrowers' business and upon fair and reasonable terms no less
favorable to Borrower than such Borrower would obtain in a comparable
arm's length transaction with an unaffiliated person or (b) make any
payments of management, consulting or other fees for management or
similar services, or of any indebtedness owing to any officer,
employee, shareholder, director or other person affiliated with
Borrowers except reasonable compensation to officers, employees and
directors for services rendered to Borrower in the ordinary course of
business.
9.13 Additional Bank Accounts. Borrowers shall not,
directly or indirectly, open, establish or maintain any deposit
account, investment account or any other account with any bank or other
financial institution, other than the Blocked Accounts and the accounts
set forth in Schedule 8.8 hereto, except: (a) as to any new or
additional Blocked Accounts and other such new or additional accounts
which contain any Collateral or proceeds thereof, with the prior
written consent of Lender and subject to such conditions thereto as
Lender may establish and (b) as to any accounts used by Borrowers to
make payments of payroll, taxes or other obligations to third parties,
after prior written notice to Lender.
9.14 Minimum Availability. Borrowers shall, at all times,
maintain Excess Availability of not less than $3,000,000.00.
9.15 EBIDTA. Borrowers shall for each period set forth
below, maintain EBIDTA of not less than the amounts provided for such
periods:
Period Amount
------ ------
Fiscal quarter ended December 31, 2000 for the prior fiscal quarter $ 3,750,000
Fiscal quarter ended April 1, 2001 for the prior two fiscal quarters $ 7,500,000
37
Fiscal quarter ended July 1, 20011 for the prior three fiscal quarters $ 11,250,000
Fiscal quarter ended September 30, 2001, for the prior four fiscal quarters $ 15,000,000
Each fiscal quarter ending thereafter for the prior four fiscal quarters $ 15,000,000
9.16 Costs and Expenses. Borrowers shall pay to Lender on
demand all costs, expenses, filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery,
recording, administration, collection, liquidation, enforcement and
defense of the Obligations, Lender's rights in the Collateral, this
Agreement, the other Financing Agreements and all other documents
related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed)
or entered into in respect hereof and thereof, including: (a) all costs
and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes,
intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) costs and expenses and fees for insurance premiums,
environmental audits, surveys, assessments, engineering reports and
inspections, appraisal fees and search fees; (c) costs and expenses of
remitting loan proceeds, collecting checks and other items of payment,
and establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto; (d) charges,
fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (e) costs and expenses of preserving
and protecting the Collateral; (f) costs and expenses paid or incurred
in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing
upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims
made or threatened against Lender arising out of the transactions
contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (g) all out-of-pocket
expenses and costs heretofore and from time to time hereafter incurred
by Lender during the course of periodic field examinations of the
Collateral and Borrowers' operations, plus a per diem charge at the
rate of $750 per person per day for Lender's examiners in the field and
office; and (h) the fees and disbursements of counsel (including legal
assistants) to Lender in connection with any of the foregoing.
9.17 Compliance with ERISA.
(a) Borrowers shall not with respect to any "employee
benefit plans" maintained by any Borrower or any of its ERISA Affiliates: (i)
terminate any of such employee benefit plans so as to incur any liability to the
Pension Benefit Guaranty Corporation established pursuant to ERISA, (ii) allow
or suffer to exist any prohibited transaction involving any of such employee
benefit plans or any trust created thereunder which would subject Borrower or
such ERISA Affiliate to a tax or penalty or other liability on prohibited
transactions imposed under Section 4975 of the Code or ERISA, (iii) fail to pay
to any such employee benefit plan any contribution which it is obligated to pay
under Section 302 of ERISA, Section 412 of the Code or the terms of such plan,
(iv) allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee benefit plan, (v) allow or suffer to
exist any occurrence of a reportable event or any other event or condition which
presents a material risk of
38
termination by the Pension Benefit Guaranty Corporation of any such employee
benefit plan that is a single employer plan, which termination could result in
any liability to the Pension Benefit Guaranty Corporation or (vi) incur any
withdrawal liability with respect to any multiemployer pension plan.
(b) As used in this Section 9.17, the terms "employee
benefit plans", "accumulated funding deficiency" and "reportable event" shall
have the respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.
9.18 Further Assurances. At the request of Lender at any
time and from time to time, Borrowers shall, at their expense, duly
execute and deliver, or cause to be duly executed and delivered, such
further agreements, documents and instruments, and do or cause to be
done such further acts as may be necessary or proper to evidence,
perfect, maintain and enforce the security interests and the priority
thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements.
Lender may at any time and from time to time request a certificate from
an officer of Borrowers representing that all conditions precedent to
the making of contained herein are satisfied. In the event of such
request by Lender, Lender may, at its option, cease to make any further
Loans until Lender has received such certificate and, in addition,
Lender has determined that such conditions are satisfied. Where
permitted by law, Borrowers hereby authorize Lender to execute and file
one or more UCC financing statements signed only by Lender.
10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any
one or more of the following events are referred to herein individually
as an "Event of Default", and collectively as "Events of Default":
(a) (i) Borrowers fail to pay when due any of the
Obligations or (ii) Borrowers or any Obligor fail to perform any of the
covenants contained in Sections 9.2, 9.3, 9.6, 9.13 and 9.17 of this Agreement
and such failure shall continue for ten (10) days; provided, that, such ten (10)
day period shall not apply in the case of: (A) any failure to observe any such
covenant which is not capable of being cured at all or within such ten (10) day
period or which has been the subject of a prior failure within a six (6) month
period or (B) an intentional breach of any Borrower or any Obligor of any such
covenant or (iii) Borrowers fail to perform any of the terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements other than those described in Sections 10.1(a)(i) and
10.1(a)(ii) above;
(b) any representation, warranty or statement of fact
made by Borrowers to Lender in this Agreement, the other Financing Agreements or
any other agreement, schedule, confirmatory assignment or otherwise shall when
made or deemed made be false or misleading in any material respect;
39
(c) any Obligor revokes, terminates or fails to perform
any of the terms, covenants, conditions or provisions of any guarantee,
endorsement or other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered
against any Borrower or any Obligor in excess of $50,000 in any one case or in
excess of $100,000.00 in the aggregate and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
any Borrower or any Obligor or any of their assets;
(e) any Borrower or any Obligor, which is a partnership,
limited liability company, limited liability partnership or a corporation,
dissolves or suspends or discontinues doing business;
(f) any Borrower or any Obligor becomes insolvent
(however defined or evidenced), makes an assignment for the benefit of
creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors;
(g) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or any Borrower or any Obligor shall file
any answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding or
the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or any Obligor or for all or any part of its
property; or
(i) any default by any Borrower or any Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any person other
than Lender, in any case in an amount in excess of $100,000.00, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by any Borrower or any Obligor under any material
contract, lease, license or other obligation to any person other than Lender,
which default continues for more than the applicable cure period, if any, with
respect thereto;
(j) any Change in Control of Parent or any change in the
ownership of any Borrower or of any entity between Parent and Borrowers;
40
(k) the indictment or threatened indictment of any
Borrower or any Obligor under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against any Borrower or
any Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of any material property of any
Borrower or such Obligor;
(l) there shall be a material adverse change in the
business, assets or prospects of any Borrower or any Obligor after the date
hereof; or
(m) there shall be an event of default under any of the
other Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has
occurred and is continuing, Lender shall have all rights and remedies provided
in this Agreement, the other Financing Agreements, the Uniform Commercial Code
and other applicable law, all of which rights and remedies may be exercised
without notice to or consent by any Borrower or any Obligor, except as such
notice or consent is expressly provided for hereunder or required by applicable
law. All rights, remedies and powers granted to Lender hereunder, under any of
the other Financing Agreements, the Uniform Commercial Code or other applicable
law, are cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against any Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event
of Default exists or has occurred and is continuing, Lender may, in its
discretion and without limitation, (i) accelerate the payment of all Obligations
and demand immediate payment thereof to Lender (provided, that, upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h),
all Obligations shall automatically become immediately due and payable), (ii)
with or without judicial process or the aid or assistance of others, enter upon
any premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair of
all or any portion of the Collateral, (iii) require Borrowers, at Borrowers'
expense, to assemble and make available to Lender any part or all of the
Collateral at any place and time designated by Lender, (iv) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (v) remove
any or all of the Collateral from any premises on or in which the same may be
located for the purpose of effecting the sale, foreclosure or other disposition
thereof or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
any Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrowers and/or
41
(vii) terminate this Agreement. If any of the Collateral is sold or leased by
Lender upon credit terms or for future delivery, the Obligations shall not be
reduced as a result thereof until payment therefor is finally collected by
Lender. If notice of disposition of Collateral is required by law, five (5) days
prior notice by Lender to Borrowers designating the time and place of any public
sale or the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and
Borrowers waive any other notice. In the event Lender institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, Borrowers waive the posting of any bond which might otherwise be
required.
(c) Lender may apply the cash proceeds of Collateral
actually received by Lender from any sale, lease, foreclosure or other
disposition of the Collateral to payment of the Obligations, in whole or in part
and in such order as Lender may elect, whether or not then due. Borrowers shall
remain liable to Lender for the payment of any deficiency with interest at the
highest rate provided for herein and all costs and expenses of collection or
enforcement, including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence
of an Event of Default or an event which with notice or passage of time or both
would constitute an Event of Default, Lender may, at its option, without notice,
(i) cease making Loans or reduce the lending formulas or amounts of Revolving
Loans available to Borrowers and/or (ii) terminate any provision of this
Agreement providing for any future Loans to be made by Lender to Borrowers.
(e) Borrowers acknowledge and agree that each and every
Event of Default described above shall be of equal weight and significance, and
equally and fully shall allow Lender to exercise its rights and remedies
hereunder. Borrowers acknowledge and agree that each such Event of Default has
been a material inducement for Lender to enter into this Agreement and that
Lender would be irreparably harmed if Lender, in any way, were unable to
exercise its rights and remedies on the basis that certain Events of Default
(for example, Events of Default not relating to payment) were of less weight or
significance than certain other Events of Default (for example, Events of
Default relating to payment).
11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the Commonwealth of
Massachusetts (without giving effect to principles of conflicts of law).
(b) Each Borrower and Lender irrevocably consent and
submit to the non-exclusive jurisdiction of the Superior Court of Suffolk County
of the Commonwealth of Massachusetts and the United States District Court for
the District of Massachusetts and waive any objection based on venue or forum
non conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this
42
Agreement or any of the other Financing Agreements or the transactions related
hereto or thereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity or otherwise, and agree that any dispute with
respect to any such matters shall be heard only in the courts described above
(except that Lender shall have the right to bring any action or proceeding
against any Borrower or its property in the courts of any other jurisdiction
which Lender deems necessary or appropriate in order to realize on the
Collateral or to otherwise enforce its rights against any Borrower or its
property).
(c) Each Borrower hereby waives personal service of any
and all process upon it and consents that all such service of process may be
made by certified mail (return receipt requested) directed to its address set
forth on the signature pages hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the U.S.
mails, or, at Lender's option, by service upon Borrowers in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, Borrowers shall appear in answer to such process, failing which
Borrower shall be deemed in default and judgment may be entered by Lender
against Borrowers for the amount of the claim and other relief requested.
(d) EACH BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING
UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH
BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT BORROWERS OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrowers
(whether in tort, contract, equity or otherwise) for losses suffered by Borrower
in connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Each Borrower hereby expressly
waives demand, presentment, protest and notice of protest and notice of
dishonor with respect to any and all instruments and commercial paper,
included in or evidencing any of the Obligations or the Collateral, and
any and all other demands and notices of any kind or nature whatsoever
with respect to the Obligations, the Collateral and this Agreement,
except such as are expressly provided for herein. No notice to or
demand on Borrowers which Lender may
43
elect to give shall entitle Borrowers to any other or further notice or
demand in the same, similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor
any provision hereof shall be amended, modified, waived or discharged
orally or by course of conduct, but only by a written agreement signed
by an authorized officer of Lender, and as to amendments, as also
signed by an authorized officer of Lead Borrower. Lender shall not, by
any act, delay, omission or otherwise be deemed to have expressly or
impliedly waived any of its rights, powers and/or remedies unless such
waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Lender of any right, power
and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Lender would
otherwise have on any future occasion, whether similar in kind or
otherwise.
11.4 Waiver of Counterclaims. Each Borrower waives all
rights to interpose any claims, deductions, setoffs or counterclaims of
any nature (other then compulsory counterclaims) in any action or
proceeding with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating hereto or
thereto.
11.5 Indemnification. Each Borrower shall indemnify and
hold Lender, and its directors, agents, employees and counsel, harmless
from and against any and all losses, claims, damages, liabilities,
costs or expenses imposed on, incurred by or asserted against any of
them in connection with any litigation, investigation, claim or
proceeding commenced or threatened related to the negotiation,
preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or
any undertaking or proceeding related to any of the transactions
contemplated hereby or any act, omission, event or transaction related
or attendant thereto, including amounts paid in settlement, court
costs, and the fees and expenses of counsel. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this
Section may be unenforceable because it violates any law or public
policy, Borrowers shall pay the maximum portion which it is permitted
to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this
Agreement.
11.6 Waiver of Right to Prejudgment Remedy Notice and
Hearing. Each Borrower hereby waives such rights as it may have to
notice and/or hearing under any applicable federal or state laws
pertaining to the exercise by Lender of such rights as the Lender may
have regarding the right to seek prejudgment remedies and/or deprive
Borrowers of or affect the use of or possession or enjoyment of
Borrowers' property prior to the rendition of a final judgment against
any Borrower. Each Borrower further waives any right it may have to
require Lender to provide a bond or other security as a precondition to
or in connection with any prejudgment remedy sought by Lender, and
waives any objection to the issuance of such prejudgment remedy based
on any offsets, claims, defenses or counterclaims to any action brought
by the Lender.
44
12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements
shall become effective as of the date set forth on the first page hereof and
shall continue in full force and effect for a term ending on the date three (3)
years from the date hereof (the "Renewal Date"), and from year to year
thereafter, unless sooner terminated pursuant to the terms hereof; provided,
that, Lender may, at its option, extend the Renewal Date to the date four (4)
years from the date hereof by giving Borrower notice at least sixty (60) days
prior to the third anniversary of this Agreement. Lender or Borrowers (subject
to Lender's right to extend the Renewal Date as provided above) may terminate
this Agreement and the other Financing Agreements effective on the Renewal Date
or on the anniversary of the Renewal Date in any year by giving to the other
party at least sixty (60) days prior written notice; provided, that, this
Agreement and all other Financing Agreements must be terminated simultaneously.
Upon the effective date of termination or non-renewal of the Financing
Agreements, Borrowers shall pay to Lender, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Lender in such amounts as
Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including attorneys' fees and legal expenses, in connection
with any contingent Obligations, including checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. Such payments in respect of the
Obligations and cash collateral shall be remitted by wire transfer in Federal
funds to such bank account of Lender, as Lender may, in its discretion,
designate in writing to Lead Borrowers for such purpose. Interest shall be due
until and including the next business day, if the amounts so paid by Borrower to
the bank account designated by Lender are received in such bank account later
than 12:00 noon, Boston, Massachusetts time.
(b) No termination of this Agreement or the other
Financing Agreements shall relieve or discharge Borrowers of their respective
duties, obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Lender's continuing security interest in the Collateral and the rights
and remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior
to the end of the then current term or renewal term of this Agreement, in view
of the impracticality and extreme difficulty of ascertaining actual damages and
by mutual agreement of the parties as to a reasonable calculation of Lender's
lost profits as a result thereof and as a result of Lender's deferral of payment
of fees that would be payable at the inception and during the term of this
Agreement, Borrowers agree to pay to Lender, upon the effective date of such
termination, an early termination fee in the amount set forth below if such
termination is effective in the period indicated:
45
Amount Period
------ ------
(i) 3% of Maximum Credit From the date hereof to and including
the first anniversary of the date hereof;
(ii) 2% of Maximum Credit From the day after the first anniversary
of the date hereof to and including the
second anniversary of the date hereof;
and
(iii) 1% of Maximum Credit From the day after the second
anniversary of the date to and including
third anniversary of the date hereof or if
the term of this Agreement is extended
for an additional year as provided above,
then to and including the forth
anniversary of the date hereof.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrowers or permit the use of cash
collateral under the United States Bankruptcy Code. In the event that after the
first anniversary of the date hereof Borrowers refinance and repay all the
Obligations through loans from First Union National Bank, the early termination
fee will be waived. Further, in the event that during the first year following
the date hereof the Lender elects to terminate this Agreement solely as a result
of a Change in Control of Parent because Lender determines that the Person or
Persons acquiring the Parent are not acceptable to Lender and no other Event of
Default exists or has occurred and is continuing, the termination fee shall be
2% of the Maximum Credit. The early termination fee provided for in this Section
12.1 shall be deemed included in the Obligations.
12.2 Notices. All notices, requests and demands hereunder
shall be in writing and (a) made to Lender at its address set forth
below and to Borrowers at their chief executive offices set forth
below, or to such other address as either party may designate by
written notice to the other in accordance with this provision, and (b)
deemed to have been given or made: if delivered in person, immediately
upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to
deliver the next business day, one (1) business day after sending; and
if by certified mail, return receipt requested, five (5) days after
mailing.
12.3 Partial Invalidity. If any provision of this
Agreement is held to be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate this Agreement as a whole, but
this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable and the rights
and obligations of the parties shall be construed and enforced only to
such extent as shall be permitted by applicable law.
46
12.4 Successors. This Agreement, the other Financing
Agreements and any other document referred to herein or therein shall
be binding upon and inure to the benefit of and be enforceable by
Lender, Borrowers and their respective successors and assigns, except
that Borrowers may not assign their rights under this Agreement, the
other Financing Agreements and any other document referred to herein or
therein without the prior written consent of Lender. Lender may, after
notice to Borrowers, assign its rights and delegate its obligations
under this Agreement and the other Financing Agreements and further may
assign, or sell participations in, all or any part of the Loans, or any
other interest herein to another financial institution or other person,
in which event, the assignee or participant shall have, to the extent
of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise
provided by the terms of such assignment or participation.
12.5 Joint and Several Liability. All Loans made hereunder
are made to or for the benefit of each of the Borrowers. The Borrowers
are jointly and severally, directly and primarily, absolutely and
unconditionally liable for the full and indefeasible payment when due
and performance of all Obligations and for the prompt and full payment
and performance of all of the promises, covenants, representations, and
warranties made or undertaken by each Borrower under the Financing
Agreements and Borrowers agree that such liability is not merely as
surety but as a co-debtor and is independent of the duties,
obligations, and liabilities of each of the joint and several
Borrowers.
12.6 Suretyship Waivers and Consents.
(a) Each Borrower acknowledges that the obligations of
such Borrower undertaken herein might be construed to consist, at least in part,
of the guaranty of obligations of persons other than such Borrower (including
the other Borrowers) and, in full recognition of that fact, each Borrower
consents and agrees that Lender may, at any time and from time to time, without
notice or demand, (except as provided in and in accordance with the terms of
this Agreement), whether before or after any actual or purported termination,
repudiation or revocation of this Agreement by any Borrower, and without
affecting the enforceability or continuing effectiveness hereof as to each
Borrower: (i) increase, extend, or otherwise change the time for payment or the
terms of the Obligations or any part thereof; (ii) supplement, restate, modify,
amend, increase, decrease, or waive, or enter into or give any agreement,
approval or consent with respect to, the Obligations or any part thereof, or any
of the Financing Agreements or any additional security or guarantees, or any
condition, covenant, default, remedy, right, representation, or term thereof or
thereunder; (iii) accept new or additional instruments, documents, or agreements
in exchange for or relative to any of the Financing Agreements or the
Obligations or any part thereof; (iv) accept partial payments on the
Obligations; (v) receive and hold additional security or guarantees for the
Obligations or any part thereof; (vi) release, reconvey, terminate, waive,
abandon, fail to perfect, subordinate, exchange, substitute, transfer, or
enforce any Collateral, security or guarantees, and apply any Collateral or
security and direct the order or manner of sale thereof as Lender in its sole
and absolute discretion may determine; (vii) release any person from any
personal liability with respect to the Obligations or any part thereof; (viii)
settle, release on terms satisfactory to Lender or by operation of applicable
laws or otherwise liquidate or enforce any Obligations and any Collateral or
security therefor or guaranty thereof in any manner, consent to the transfer of
any Collateral or security and bid and purchase
47
at any sale; or (ix) consent to the merger, change, or any other restructuring
or termination of the corporate or partnership existence of any Borrower, and
any corresponding restructuring of the Obligations, and any such merger, change,
restructuring, or termination shall not affect the liability of any Borrower or
the continuing effectiveness hereof, or the enforceability hereof with respect
to all or any part of the Obligations.
(b) Lender may enforce this Agreement independently as to
each Borrower and independently of any other remedy or security Lender at any
time may have or hold in connection with the Obligations, and it shall not be
necessary for Lender to marshal assets in favor of any Borrower or any Obligor
or to proceed upon or against or exhaust any Collateral or security or remedy
before proceeding to enforce this Agreement. Each Borrower expressly waives any
right to require Lender to marshal assets in favor of any Borrower or any
guarantor of the Obligations or to proceed against any other Borrower, and
agrees that Lender may proceed against Borrowers or any Collateral in such order
as Lender shall determine in its sole an absolute discretion.
(c) Lender may file a separate action or actions against
any Borrower, whether such action is brought or prosecuted with respect to any
security or against any guarantor of the Obligations, or whether any other
person is joined in any such action or actions. Each Borrower agrees that Lender
and each Borrower and any affiliate of any Borrower may deal with each other in
connection with the Obligations or otherwise, or alter any contracts or
agreements now or hereafter existing between any of them, in any manner
whatsoever, all without in any way altering or affecting the continuing
enforceability of this Agreement. Each Borrower, as a joint and several Borrower
hereunder, expressly waives the benefit of any statute of limitations affecting
its joint and several liability hereunder (but not its primary liability) or the
enforcement of the Obligations or any rights of Lender created or granted
herein.
(d) Lender's rights hereunder shall be reinstated and
revived, and the enforceability of this Agreement shall continue, with respect
to any amount at any time paid on account of the Obligations which thereafter
shall be required to be restored or returned by Lender, all as though such
amount had not been paid. The rights of Lender created or granted herein and the
enforceability of this Agreement at all times shall remain effective to cover
the full amount of all the Obligations even though the Obligations, including
any part thereof or any Collateral, other security or guaranty therefor, may be
or hereafter may become invalid or otherwise unenforceable as against any
Borrower and whether or not any Borrower shall have any personal liability with
respect thereto.
(e) Each Borrower expressly waives any and all defenses
now or hereafter arising or asserted by reason of (i) any disability or other
defense of any other Borrower with respect to the Obligations; (ii) the
unenforceability or invalidity of any security or guaranty for the Obligations
or the lack of perfection or continuing perfection or failure of priority of any
security for the Obligations; (iii) the cessation for any cause whatsoever of
the liability of any Borrower (other than by reason of the full payment and
performance of all Obligations); (iv) any failure of Lender to marshal assets in
favor of any Borrower; (v) any failure of Lender to give notice to any Borrower
of sale or other disposition of Collateral of another Borrower or any defect in
any notice that may be given in connection with any such sale or disposition of
Collateral of any Borrower securing the Obligations; (vi) any failure of Lender
to comply with
48
applicable law in connection with the sale or other disposition of any
Collateral or other security of any Borrower, for any Obligation, including any
failure of Lender to conduct a commercially reasonable sale or other disposition
of any Collateral or other security of any Borrower for any Obligation; (vii)
any act or omission of Lender or others that directly or indirectly results in
or aids the discharge or release of any Borrower or the Obligations of any
Borrower or any security or guaranty therefor by operation of law or otherwise;
(viii) any law which provides that the obligation of a surety or guarantor must
neither be larger in amount nor in other respects more burdensome than that of
the principal or which reduces a surety's or guarantor's obligation in
proportion to the principal obligation; (ix) any failure of Lender to file or
enforce a claim in any bankruptcy or other proceeding with respect to any
Borrower; (x) the avoidance of any lien or security interest in assets of any
Borrower in favor of Lender for any reason; or (xi) any action taken by Lender
that is authorized by this section or any other provision of any Loan Document.
Until such time, if any, as all of the Obligations have been indefeasibly paid
and performed in full and no portion of any commitment of Lender to Borrowers
under any Financing Agreement remains in effect, each Borrowers' indebtedness,
claims and rights of subrogation, contribution, reimbursement, or indemnity
against the other Borrowers shall be fully and completely subordinated to the
indefeasible repayment in full of the Obligations, and each Borrower expressly
waives until such indefeasible payment any right to enforce any remedy that it
now has or hereafter may have against any other Person and waives the benefit
of, or any right to participate in, any Collateral now or hereafter held by
Lender.
(f) To the fullest extent permitted by applicable law,
each Borrower expressly waives and agrees not to assert, any and all defenses in
its favor based upon an election of remedies by Lender which destroys,
diminishes, or affects such Borrower's subrogation rights against the other
Borrowers, or against any Obligor, and/or (except as explicitly provided for
herein) any rights to proceed against each other Borrower, or any other party
liable to Lender, for reimbursement, contribution, indemnity, or otherwise.
(g) Borrowers and each of them warrant and agree that
each of the waivers and consents set forth herein are made after consultation
with legal counsel and with full knowledge of their significance and
consequences, with the understanding that events giving rise to any defense or
right waived may diminish, destroy, or otherwise adversely affect rights which
Borrowers otherwise may have against each other, Lender, or others, or against
Collateral, and that, under the circumstances, the waivers and consents herein
given are reasonable and not contrary to public policy or law. If any of the
waivers or consents herein are determined to be contrary to any applicable law
or public policy, such waivers and consents shall be effective to the maximum
extent permitted by law.
12.7 Contribution Agreement. As an inducement to Lender to
enter into the Financing Agreements and to make the loans and extend
credit to the Borrowers, each Borrower agrees to indemnify and hold the
other harmless from and each shall have a continuing right of
contribution against the other Borrowers, if and to the extent that a
Borrower makes or is caused to make disproportionate payments in excess
of that Borrower's Proportionate Share (as defined herein) of the Loans
or contributions (from dispositions of its assets or otherwise) to the
repayment and satisfaction of the Obligations. These indemnification
and contribution obligations shall be unconditional and continuing
obligations of the Borrowers and shall not be waived, rescinded,
modified, limited or
49
terminated in any way whatsoever without the prior written consent of
Lender, in its sole discretion. These indemnification and contribution
obligations are subordinated to the prior indefeasible payment in full
in cash of all Obligations. For purposes hereof, the Proportionate
Share of a Borrower shall be expressed as a fraction and shall be equal
to the Adjusted Net Worth of a Borrower on the date of this Agreement
over the aggregate Adjusted Net Worths of all the Borrowers on such
date.
12.8 Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or
documents delivered or to be delivered in connection herewith or
therewith represents the entire agreement and understanding concerning
the subject matter hereof and thereof between the parties hereto, and
supersede all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals,
offers and contracts concerning the subject matter hereof, whether oral
or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to
be duly executed as of the day and year first above written.
LENDER BORROWER
CONGRESS FINANCIAL CORPORATION RAYBESTOS PRODUCTS COMPANY
(NEW ENGLAND)
By: ________________________ By: _________________________
Name: __________________ Name: ___________________
Title: __________________ Title: ___________________
Address:
One Post Office Square Chief Executive Office:
Xxxxx 0000 0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000 Xxxxxxxxxxxxxx, XX 00000
50
RAYTECH AUTOMOTIVE COMPONENTS
COMPANY
By: _________________________
Name: ___________________
Title: ___________________
Chief Executive Office:
00000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
AUTOMOTIVE COMPOSITES COMPANY
By: _________________________
Name: _____________________
Title: _____________________
Chief Executive Office:
00000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
[Exhibits omitted]
51
Third Amendment to Loan and Security Agreement dated November 12, 2003
November 12, 2003
Raybestos Products Company
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxxxxxx, XX 00000
Raytech Automotive Components Company
00000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx,XX 00000
RE: Third Amendment to Loan and Security Agreement
Gentlemen:
Reference is made to the Loan and Security Agreement dated September
28, 2000 by and between Raybestos Products Company, Raytech Automotive
Components Company, and Automotive Composites Company (collectively the
"Borrowers") and Congress Financial Corporation (New England) (the "Lender"), as
amended by that certain Amendment to Loan and Security Agreement dated March 31,
2003 and that certain Second Amendment to Loan and Security Agreement dated
August 12, 2003 (the "Loan Agreement"). All capitalized terms used but not
otherwise defined herein shall have the meanings given such terms in the Loan
Agreement. This agreement is hereby referred to as the "Third Amendment".
(1) Background. Borrowers have requested that Lender waive certain
existing Events of Default, extend the term of the Loan Agreement and readvance
under the Term Loan. Lender has agreed to the foregoing subject to certain other
changes to the Loan Agreement set forth herein and to the terms and conditions
hereof.
(2) Waivers. Subject to the terms and conditions hereof, Lender
waives the Borrowers' noncompliance with the following: (a) Borrowers'
noncompliance with Section 9.15 of the Loan Agreement for the twelve-month
period ending September 28, 2003 and (b) Borrowers' noncompliance with Section
9.1 in connection with the merger of Automotive Composites Company into Raytech
Automotive Component Company in December, 2001. These waivers are limited to and
enforceable only to the extent specifically set forth herein and shall not be
construed as a bar to or waiver of any right, power and/or remedy which Lender
would have on any future occasion, whether similar in kind or otherwise.
(3) Amendments to the Loan Agreement. Subject to the terms and
conditions hereof, the Loan Agreement is hereby amended as follows:
52
(a) Section 1.26 is deleted in its entirety and replaced
with the following:
"1.26 `Interest Rate' shall mean, (a) as to Revolving Loans
that are Prime Rate Loans, a rate of one half of one (.50%) percent per annum in
excess of the Prime Rate, (b) as to the portion or portions of the Term Loan
that are Prime Rate Loans, a rate of three quarters of one (.75%) percent in
excess of the Prime Rate, (c) as to Revolving Loans that are Eurodollar Rate
Loans, a rate of two and three quarters (2.75%) percent per annum in excess of
the Adjusted Eurodollar Rate as in effect three (3) Business Days after the date
of receipt by Lender of the request of Lead Borrower for such Eurodollar Rate
Loans in accordance with the terms hereof, whether such rate is higher or lower
than any rate previously quoted to Lead Borrower, and (d) as to the portion or
portions of the Term Loan that are Eurodollar Rate Loans, a rate of three (3.0%)
percent per annum in excess of the Adjusted Eurodollar Rate as in effect three
(3) Business Days after the date of receipt by Lender of the request of Lead
Borrower for such Eurodollar Rate Loans in accordance with the terms hereof,
whether such rate is higher or lower than any rate previously quoted to Lead
Borrower; provided, that, the Interest Rate shall, at Lender's option, without
notice, mean a rate of three (3.0%) percent per annum in excess of the Interest
Rates in effect immediately prior to any of the following: (i) for the period
(A) from and after the date of termination or non-renewal hereof until Lender
has received full and final payment of all Obligations (notwithstanding any
entry of judgment against any Borrower) and (ii) from and after the date of the
occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender, and (b) or the Revolving Loans at any time
outstanding in excess of the amounts available to Borrowers under Section 2
(whether or with such excess (es) arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default. In
the event that the audited financial statements of the Borrowers delivered
pursuant to Section 9.6(a)(ii) demonstrate that Borrowers had net income
(exclusive of extraordinary and non-recurring items), determined in accordance
with GAAP, of $1.00 or more for any fiscal year of Borrowers ending after the
Third Amendment Effective Date, the foregoing Interest Rates will each be
decreased by .25% per annum but in no event shall the aggregate decrease in the
Interest Rates be more than .50% per annum; provided, however, that if such
audited financial statements demonstrate that Borrowers' net income was less
than $1.00 for any such fiscal year, the foregoing Interest Rates shall each be
increased by .25% per annum but in no event shall the aggregate increase in the
Interest Rates be more than .50% per annum (except as otherwise provided
herein); provided, further, that all such Interest Rate adjustments will be made
upon the first to occur of ten (10) business days after the receipt of such
audited financial statements by Lender or the date when such financial
statements are required to be delivered to Lender under this Agreement."
(b) Section 1.31 is deleted in its entirety and replaced with
the following:
"1.31 "Maximum Credit" shall mean the amount of
$25,276,122.00."
(c) Section 1.42 is deleted in its entirety and replaced
with the following:
53
"1.42 "Revolver Ceiling" shall mean the amount of
$20,000,000.00."
(d) Section 2.1(a)(ii) is deleted in its entirety and
replaced with the following:
"(ii) the sum of (A) the lesser of (1) sixty (60%) percent of
the Value of Eligible Inventory consisting of finished goods or (2) eighty-five
(85%) percent of the net orderly liquidation value ("NOLV") of Eligible
Inventory consisting of finished goods, with NOLV to be determined by an
appraisal satisfying the criteria set forth in Section 7.3(c) hereof, but in no
event in excess of $5,000,000, and (B) the lesser of (1) sixty (60%) percent of
the Value of Eligible Inventory consisting of raw materials or (2) eighty-five
(85%) percent of the NOLV of Eligible Inventory consisting of raw materials, but
in no event in excess of $5,000,000."
(e) Section 2.3 is deleted and replaced by the following:
"2.3 Term Loan. On the Third Amendment Effective Date, Lender
is making a Term Loan to Borrowers in the original principal amount of
$5,276,122.00. The Term Loan (a) amends, restates, and replaces the term loan
made at the time of the original closing under the Agreement, (b) is evidenced
by an Amended and Restated Term Promissory Note (the "Term Promissory Note"), in
such original principal amount duly executed and delivered by Borrowers to
Lender concurrently with the Third Amendment; (c) is to be repaid, together with
interest and other amounts, in accordance with this Agreement, the Term
Promissory Note, and the other Financing Agreements and (d) is secured by all
the Collateral."
(e) Section 9.14 is deleted in its entirety and replaced
with the following:
"9.14 Minimum Availability. Borrowers shall, at all times,
maintain Excess Availability of not less than $1,500,000.00."
(f) Section 9.15 is deleted in its entirety and replaced
with the following:
"9.15 Fixed Charge Coverage Ratio. Borrowers shall maintain a
ratio of (a) EBITDA to (b) the sum of mandatory and voluntary payments on all
indebtedness of the Borrowers (including, without limitation, capitalized
leases), plus the total interest expense with respect to all outstanding
indebtedness of the Borrowers, plus non-financed capital expenditures, for each
of the periods set forth below:
Period Fixed Charge Coverage Ratio
------ ---------------------------
Three months ended 3/28/04 0.60:1.00
Six months ended 6/27/04 0.70:1.00
Nine months ended 9/26/04 0.85:1.00
Twelve Months ended 1/2/05 1.00:1.00
Twelve months ended on each fiscal 1.00:1.00
quarter thereafter
54
(g) Section 12.1(a) is amended to delete the first
sentence thereof and to replace such sentence with
the following:
"This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on September 28, 2006 (the
"Renewal Date"), and from year to year thereafter unless sooner terminated
pursuant to the terms hereof."
(h) Section 12.1(c) is deleted in its entirety and
replaced with the following:
"(c) If for any reason this Agreement is terminated prior to
the end of the term of this Agreement, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Lender's lost profits as a result thereof and
as a result of Lender's deferral of the payment of fees that would otherwise be
payable at the inception and during the term of this Agreement, Borrowers agree
to pay to Lender, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is effective
in the period indicated:
Amount Period
------ ------
(i) 3% of Maximum Credit From the date hereof to and including
September 28, 2004;
(ii) 2% of Maximum Credit From September 29, 2004 to and including
September 28, 2005; and
(iii) 1% of Maximum Credit From September 29, 2005 to and including
September 28, 2006 and, if the term of this
Agreement is extended as provided above,
during each such extension.
Such early termination fee shall be presumed to be the amount of
damages sustained by Lender as a result of such early termination and Borrowers
agree that it is reasonable under the circumstances currently existing. In
addition, Lender shall be entitled to such early termination fee upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h)
hereof, even if Lender does not exercise its right to terminate this Agreement,
but elects, at its option, to provide financing to Borrowers or permit the use
of cash collateral under the United States Bankruptcy Code. In the event that
after September 28, 2004, Borrowers refinance and repay all the Obligations
through loans from Wachovia Bank, N.A., the early termination fee will be
waived."
(4) Extension/Waiver/Amendment Fee. Upon the execution of this
Third Amendment, Borrowers shall pay a $110,000 fee, in cash, to Lender. This
fee shall be fully
55
earned and non-refundable as of the execution date hereof.
(5) Representations and Warranties. Borrowers represent, warrant,
and covenant that (a) the representations and warranties of Borrowers in the
Financing Agreements, as modified by the updated and revised Schedules to the
Information Certificate attached to this Third Amendment, are and remain
accurate and complete in all material respects and (b) no Default or Event of
Default exists or has occurred and is continuing as of the date hereof (after
giving effect to this Third Amendment).
(6) Inventory Appraisal. Borrowers shall, at Borrowers' expense,
obtain an appraisal of the Inventory and deliver such appraisal to Lender within
45 days of the date hereof from an appraiser acceptable to Lender and in form,
scope, and methodology acceptable to Lender.
(7) Conditions Precedent. Lender's obligation to enter into this
Third Amendment and perform its obligations hereunder is subject to the
condition precedent that the Lender shall have received the following documents
and other items, satisfactory to Lender in Lender's sole discretion, duly
executed where appropriate by authorized representatives of Borrowers (subject
to Lender's right to waive any such conditions precedent in Lender's sole
discretion) (the "Third Amendment Effective Date") and, notwithstanding anything
herein to the contrary, upon execution of this Third Amendment by Borrowers,
Lender immediately shall be entitled to all of the rights, remedies, and
benefits of this Third Amendment:
(a) this Third Amendment;
(b) The $5,276,122 Amended and Restated Term Promissory
Note ("Term Promissory Note");
(c) evidence that the execution, delivery and performance
of this Third Amendment and the Term Promissory Note
by Borrowers have been duly authorized by all
necessary corporate action; and
(d) the fee required under Section 4 hereof.
(8) Post-Signing; Subordination Agreements; Lien Schedule. On or
before thirty (30) days after the date of this Third Amendment, (a) Parent and
Raytech Composite Inc. shall sign and deliver to Lender Subordination Agreements
in form and substance satisfactory to Lender subordinating to the Obligations
the payment and enforcement of all now existing and hereafter existing
liabilities and indebtedness owing by any Borrower to such entity and (b)
Borrowers shall furnish to Lender anpdated and revised Schedule 8.4 to the
Information Certificate, in form and substance satisfactory to Lender.
(9) Enforceability of Obligations; Waiver. Each Borrower agrees
that (i) the Financing Agreements are in full force and effect, and enforceable
against each Borrower in accordance with their respective terms, and (ii) each
Borrower has no offsets, claims or defenses to or in connection with the
Obligations, or the terms of the Financing Agreements, all of which offsets,
claims or defenses are hereby waived. Each Borrower hereby waives and
affirmatively agrees not to challenge or otherwise pursue any and all defenses,
affirmative defenses,
56
counterclaims, claims, cause of actions, setoffs or other rights that it may
have relating to the Obligations, the Financing Agreements, or the Collateral
therefor, including, but not limited to, any right to contest the Existing
Events of Default under the Financing Agreements or any other Defaults or Events
of Default, the liens and security interests in favor of Lender, or the conduct
of Lender in administering any such Obligations or agreements.
(10) Miscellaneous. Borrowers confirm that the Financing Agreements
remain in full force and effect without amendment or modification of any kind,
except for the amendments and modifications set forth herein. The execution and
delivery of this Third Amendment by Lender shall not be construed as a waiver by
Lender of any term, covenant, condition or agreement under the Financing
Agreements. This Third Amendment shall be deemed to be a Financing Agreement
and, together with the other Financing Agreements, constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior dealings, correspondence, conversations or communications
between the parties with respect to the subject matter hereof.
If you accept and agree to the foregoing please sign and return the
enclosed copy of this letter. Thank you.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
(NEW ENGLAND)
By: __________________________________
Name: _____________________________
Title: ____________________________
AGREED:
RAYBESTOS PRODUCTS COMPANY
By: __________________________________
Name:
Title:
RAYTECH AUTOMOTIVE COMPONENTS COMPANY
By: __________________________________
Name:
Title:
[Revised Exhibits omitted]
57
