LOAN AGREEMENT
Dated as of March 18, 1999
MEDICAL ACTION INDUSTRIES INC., a Delaware corporation, having its principal
place of business at 000 Xxxxx Xxxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 (the
"Borrower") and EUROPEAN AMERICAN BANK, a New York banking corporation, having
an office at 000 Xxxxxxxx Xxxxxxxx Xxxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 (the
"Bank") hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Accounts" shall mean those accounts arising out of the sale or lease of goods
or the rendition of services by the Borrower.
"Account Debtor" shall mean the Person who is obligated on or under an Account.
"Adjusted Borrowing Base" means (i) the Borrowing Base minus (ii) the L/C
Exposure minus (iii) the B/A Exposure.
"Affiliate" means, as to any Person (i) a Person which directly or indirectly
controls, or is controlled by, or is under common control with, such Person;
(ii) a Person which directly or indirectly beneficially owns or holds ten (10%)
percent or more of any class of voting stock of, or ten (10%) percent or more of
the equity interest in, such Person; or (iii) a Person ten (10%) percent or more
of the voting stock of which, or ten (10%) or more of the equity interest of
which, is directly or indirectly beneficially owned or held by such Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"Aggregate Outstandings" means, at any time, the aggregate of (i) the principal
amount of outstanding Revolving Credit Loans, (ii) the outstanding principal
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balance of the Term Loan Note, (iii) L/C Exposure, and (iv) the B/A Exposure.
"Agreement" means this Loan Agreement, as amended, supplemented or modified from
time to time.
"Bankers Acceptance" means presigned drafts received by the Bank for the
Borrower's account drawn on the Bank by or on behalf of the Borrower but shall
be blank as to amount, date of issue, maturity date and details of the
underlying transaction.
"B/A Documents" means all documents required to be executed and delivered by the
Borrower in connection with Bankers Acceptances in accordance with the usual and
customary practices of the Bank.
"B/A Exposure" means, at any time, the aggregate amount of all outstanding
Bankers Acceptances.
"Board of Governors" means the Board of Governors of the Federal Reserve System
of the United States of America.
"Borrowing Base" means the sum of eighty (80%) of the Borrower's Eligible
Accounts Receivable, plus (ii) the lesser of (x) fifty five (55%) percent of the
Borrower's Eligible Inventory or (y) $9,000,000.00.
"Borrowing Base Certificate" means a certificate evidencing the Borrowing Base,
with appropriate calculations therefor in form and substance satisfactory to the
Bank.
"Business Day" means a day of the year on which banks are not required or
authorized to close in New York City, provided that, if the relevant day relates
to a Eurodollar Loan, a Eurodollar Interest Period, or notice with respect to a
Eurodollar Loan, the term "Business Day" shall mean a day on which dealings in
dollar deposits are also carried on in the London Interbank Market and banks are
open for business in London.
"Capital Base" means sum of the Borrower's (i) capital surplus plus (ii) earned
surplus, plus (iii) capital stock, minus (iv) intangible assets, minus (v)
goodwill, minus (vi) treasury stock, minus (vii) officer and employee loan
receivables, minus, (viii) joint venture investments, minus (ix) advances and
assets held for disposition.
"Capital Expenditures" means, as to any Person, the aggregate amount of any
expenditures (including purchase money Liens) by such Person for assets
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(including fixed assets acquired under Capital Leases) which it is contemplated
will be used or usable in fiscal years subsequent to the year of acquisition.
"Capital Lease" means a lease which has been or should be, in accordance with
GAAP, capitalized on the books of the lessee.
"Cash Flow Leverage Ratio" means the ratio of Senior Debt to EBITDA.
"Cash Flow Recapture" means the obligation of the Borrower to make a Cash Flow
Recapture Payment based on the existence of Excess Cash Flow, beginning with
Excess Cash Flow for the fiscal year ending March 31, 2000."
"Cash Flow Recapture Payment" means, for any fiscal year of the Borrower, one
hundred (100%) percent of the Excess Cash Flow for any fiscal year.
"Collateral" means all property which is subject or is to be subject to the Lien
granted by the Security Agreement.
"Commitment" means the Bank's obligation to make Revolving Credit Loans to the
Borrower pursuant to the terms and conditions of this Agreement and to convert
the outstanding balance of such Revolving Credit Loans to the Converted Term
Loan on the Conversion Date.
"Debt" means, as to any Person, (i) all indebtedness or liability of such Person
for borrowed money; (ii) indebtedness of such Person for the deferred purchase
price of property or services (including trade obligations); (iii) obligations
of such Person as a lessee under Capital Leases; (iv) current liabilities of
such Person in respect of unfunded vested benefits under any Plan; (v)
obligations of such Person under letters of credit issued for the account of
such Person; (vi) obligations of such Person arising under acceptance
facilities; (vii) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any other
Person, or otherwise to assure a creditor against loss; (viii) obligations
secured by any Lien on property owned by such Person whether or not the
obligations have been assumed; and (ix) all other liabilities recorded as such,
or which should be recorded as such, on such Person's financial statements in
accordance with GAAP.
"Default" means any of the events specified in Section 6.01 of this Agreement,
whether or not any requirement for notice or lapse of time or any other
condition has been satisfied.
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"Dollars" and the sign "$" mean lawful money of the United States of America.
"EBITDA" means, as to the Borrower for any period, the sum of (i) net income
(excluding extraordinary gains and losses), plus (ii) interest expense, plus
(iii) depreciation expense, plus (iv) amortization of intangible assets plus (v)
federal, state and local income taxes deducted in calculating net income, plus
(vi) deferred compensation, computed in accordance with GAAP.
"Eligible Accounts Receivable" means (i) Accounts which are due and payable
within ninety (90) days from the original date of invoice (120 days in the case
of Accounts due from hospitals); (ii) Accounts due from Xxxxxxx & Xxxxxxx,
whether domestic or foreign; (iii) the proceeds of Accounts consisting of
deposits awaiting collection; (iv) Accounts with respect to which the Account
Debtor is not domiciled in the United States of America (other than Accounts due
from Xxxxxxx & Xxxxxxx) of less than $500,000.00 in the aggregate, each of which
have been validly assigned to the Bank and comply with all of the terms,
conditions, warranties and representations made to the Bank under this Agreement
and the other Loan Documents; but Eligible Accounts Receivable shall not include
the following: (a) Accounts with respect to which the Account Debtor is an
officer, director, employee, or agent of the Borrower or an Affiliate; (b)
Accounts with respect to which goods are placed on consignment, guaranteed sale,
xxxx-and-hold, repurchase or return, or other terms by reason of which the
payment of the Account Debtor may be conditional; (c) Accounts arising from
progress xxxxxxxx, invoices for deposits, and rebills of amounts previously
credited to the extent of credits issued more than fifteen (15) days prior to
such rebill; (d) Accounts with respect to which the Account Debtor is not
domiciled in the United States of America (other than Accounts due from Xxxxxxx
& Xxxxxxx) in excess of $500,000.00 in the aggregate unless such excess is fully
secured by an irrevocable letter of credit acceptable to the Bank and assigned
to the Bank; (e) Accounts with respect to which the sale is on an installment
sale, lease or other extended payment basis; (f) Accounts with respect to which
the Account Debtor is a federal governmental authority unless such governmental
authority is the United States of America or any department, agency or
instrumentality of the United States, and the Borrower complies with the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 203 et seq.);
(g) Accounts with respect to which the Account Debtor is a Subsidiary of,
Affiliate of, or has common officers or directors with the Borrower; (h)
Accounts with respect to which the Bank does not for any reason have a perfected
first priority Lien; (i) Accounts with respect to which the Borrower is or may
become liable to the Account Debtor for goods sold or services rendered by the
Account Debtor for goods sold
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or services rendered by the Account Debtor to the Borrower, to the extent of the
Borrower's existing or potential liability to such Account Debtor; (j) Accounts
with respect to which the Account Debtor has disputed any liability, or the
Account Debtor has made any claim with respect to any other Account due to the
Borrower, or the Account is otherwise subject to any right of setoff, deduction,
breach of warranty or other defense, dispute or counterclaim by the Account
Debtor; (k) that portion of any Accounts representing late fees, service charges
or interest, but only to the extent of such portion; (l) Accounts owed by any
Account Debtor which is insolvent or is the subject of an insolvency proceeding;
(m) that portion or any Accounts represented by contract rights, documents,
instruments, chattel paper or general intangibles; and (n) Accounts due from an
Account Debtor which is more than ninety (90) days past due (120 days in the
case of Accounts due from hospitals) on twenty five (25%) percent or more of its
total Accounts to the Borrower. References to percentages of all Accounts are
based on dollar amount of Accounts, and not number of Accounts.
"Eligible Inventory" shall mean all unencumbered inventory of raw materials,
inventory in transit, all finished goods and shall not include work in process,
packaging material and inventory held outside of the territorial jurisdiction of
the United States of America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, the regulations promulgated thereunder and the published
interpretations thereof as in effect from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which together with any other Person would be treated, with such Person, as a
single employer under Section 4001 of ERISA.
"Eurocurrency Reserve Requirement" means, with respect to the Reserve Adjusted
LIBOR Rate for an Interest Period, the aggregate (without duplication) daily
average of the rates (expressed as a decimal fraction) of reserve requirements
in effect on such day (including, without limitation, basic, marginal,
supplemental or emergency reserves) under any regulation (including, but without
limitation, Regulation D) promulgated by the Board of Governors (or any
successor thereto or other governmental authority having jurisdiction over the
Bank) by the Agent against "Eurocurrency liabilities" (as such term is used in
Regulation D), but without benefit or credit for proration, exemptions or
offsets that might otherwise be available to the Bank from time to time under
Regulation D. Without limiting the effect of the foregoing, the Eurocurrency
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Reserve Requirement shall reflect any other reserves required to be maintained
by the Bank against (1) any category of liabilities that includes deposits by
reference to which the Reserve Adjusted LIBOR Rate is to be determined; or (2)
any category of extension of credit or other assets that include loans bearing a
Reserve Adjusted LIBOR Rate. As of the date of this Agreement there are no
Eurocurrency Reserve Requirements in effect.
"Eurodollar Loan" means a Loan bearing interest at an interest rate determined
with reference to the Reserve Adjusted LIBOR Rate in accordance with the
provisions of Article II hereof.
"Event of Default" means any of the events specified in Section 6.01 of this
Agreement, provided that any requirement for notice or lapse of time or any
other condition has been satisfied.
"Excess Cash Flow" means (i) one hundred (100%) percent of the proceeds of all
equity issues, subordinated debt and asset sales (other than sale of assets in
the ordinary course of business) of the Borrower plus (ii) fifty (50%) percent
of the Borrower's EBITDA minus the current portion of long term Debt, cash
interest, cash taxes and unfunded Capital Expenditures.
"Field Examination" means an examination of the accounts receivable and
inventory of the Borrower and all other Collateral subject to the Lien of the
Security Agreement, and all books and records and other information relating
thereto, financial or otherwise, to be performed by employees or other
representatives of the Bank.
"Fixed Charge Coverage Ratio" means, as to the Borrower for any period, the
ratio of (i) EBITDA for such period to (ii) the sum of (x) interest expense for
such period plus, (y) the principal amount of long term Debt (excluding the
Revolving Credit Loans) scheduled to be paid during such period.
"GAAP" means Generally Accepted Accounting Principles.
"Generally Accepted Accounting Principles" means those generally accepted
accounting principles and practices which are recognized as such by the American
Institute of Certified Public Accountants acting through the Financial
Accounting Standards Board ("FASB") or through other appropriate boards or
committees thereof and which are consistently applied for all periods so as to
properly reflect the financial condition, operations and cash flows of a Person,
except that any accounting principle or practice required to be changed by the
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FASB (or other appropriate board or committee of the FASB) in order to continue
as a generally accepted accounting principle or practice may be so changed. Any
dispute or disagreement between the Borrower and the Bank relating to the
determination of Generally Accepted Accounting Principles shall, in the absence
of manifest error, be conclusively resolved for all purposes hereof by the
written opinion with respect thereto, delivered to the Bank, of the independent
accountants selected by the Borrower and approved by the Bank for the purpose of
auditing the periodic financial statements of the Borrower.
"Guarantor" or Guarantors" means one or more of the Persons required to
guarantee the obligations of the Borrower in accordance with Section 5.01(l) of
this Agreement.
"Guaranty" or "Guaranties" means the guaranty or guaranties executed and
delivered by the Guarantors pursuant to Section 5.01 (l) of this Agreement.
"Hazardous Materials" includes, without limit, any flammable explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or related materials defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C.
Sections 9601, et seq.), the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 9601 et. seq.), and in the regulations adopted and
publications promulgated pursuant thereto, or any other federal, state or local
environmental law, ordinance, rule or regulation.
"Interest Determination Date" means the date on which a Prime Rate Loan is
converted to a Eurodollar Loan and, in the case of a Eurodollar Loan, the last
day of the applicable Interest Period.
"Interest Payment Date" means (i) as to each Eurodollar Loan, the first Business
Day of each month during the applicable Interest Period and the last day of each
Interest Period, and (ii) as to each Prime Rate Loan, the first Business Day of
each month.
"Interest Period" means, as to any Eurodollar Loan, the period commencing on the
date of such Eurodollar Loan and ending on the numerically corresponding day in
the calendar month that is one, two or three months thereafter, as the Borrower
may elect (or, if there is no numerically corresponding day, on the last
Business Day of such month); provided, however, (i) with respect to a Revolving
Credit Loan, no Interest Period shall end later than the Revolving Credit
Maturity
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Date, (ii) with respect to the Term Loan, no Interest Period shall end later
than the Term Loan Maturity Date, (iii) if any Interest Period would end on a
day which shall not be a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless such next succeeding Business Day would
fall in the next calendar month, in which case such Interest Period shall end on
the next preceding Business Day, (iv) no Interest Period in respect of a
Eurodollar Loan representing a portion of the principal required to be paid in
accordance with Section 2.04 may be selected unless the outstanding Prime Rate
Loans and Eurodollar Loans for which the relevant Interest Periods end on or
prior to the date of such payment are in an aggregate amount which will be
sufficient to make such payment, (v) interest shall accrue from and including
the first day of such Interest Period to but excluding the date of payment of
such interest pursuant to Section 2.05 or 2.11, and (vi) no Interest Period of
particular duration with respect to a Eurodollar Loan may be selected by the
Borrower if the Bank determines, in its sole discretion, that Eurodollar Loans
with such maturities are not generally available.
"Investment" means any stock, evidence of Debt or other security of any Person,
any loan, advance, contribution of capital, extension of credit or commitment
therefor, including without limitation the guaranty of loans made to others
(except for current trade and customer accounts receivable for services rendered
in the ordinary course of business and payable in accordance with customary
trade terms in the ordinary course of business) and any purchase of (i) any
security of another Person or (ii) any business or undertaking of any Person or
any commitment or option to make any such purchase, or any other investment.
"Letters of Credit" means documentary letters of credit and standby letters of
credit issued by the Bank for the account of the Borrower pursuant to the terms
and conditions of this Agreement.
"L/C Documents" means all documents required to be executed and delivered by the
Borrower in connection with the issuance of Letters of Credit in accordance with
the usual and customary practices of the Bank.
"L/C Exposure" means, at any time, the aggregate of (i) the amount available to
be drawn on all outstanding Letters of Credit, and (ii) the amount of any
payments made by the Issuing Bank under any Letters of Credit that has not been
reimbursed by the Borrower.
"Leverage Ratio" means, as to the Borrower, the ratio of (i) Total
Unsubordinated Liabilities to (ii) Capital Base.
8
"LIBOR Applicable Margin" shall have the meaning set forth in Sections 2.16 of
this Agreement.
"LIBOR Rate" means the rate per annum identified as the LIBOR Rate for a
requested Interest Period as published on page 3750 of the Dow Xxxxx Telerate
service.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing.
"Loan" or Loans" means the Revolving Credit Loans and the Term Loan.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the Security
Agreements, the L/C Documents, the B/A Documents and any other document executed
or delivered pursuant to this Agreement.
"Material Adverse Change" means, as to any Person, (i) a material adverse change
in the financial condition, business, operations, properties or results of
operations of such Person or (ii) any event or occurrence which could have a
material adverse effect on the ability of such Person to perform its obligations
under the Loan Documents.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of ERISA which
covers employees of the Borrower or any ERISA Affiliate.
"Note" or "Notes" means the Term Loan Note, the Revolving Credit Note or any or
all of the same as the context may require.
"Overadvance" means one or more Revolving Credit Loans made during the
Overadvance Period.
"Overadvance Period" means the period commencing on the date hereof and ending
on June 30, 1999 during which the aggregate of all Revolving Credit
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Loans, B/A Exposure and L/C Exposure exceeds the Borrowing Base by a sum not
greater than $1,200,000.00.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
"Permitted Acquisition" means an acquisition by the Borrower by merger,
consolidation or by purchase of a voting majority of the stock of another Person
or the purchase of all or substantially all of the assets of another Person (or
of a division or other operating component of another Person) (an "Acquisition")
if all of the following conditions are met:
(i) The Acquisition is identified as a "Permitted Acquisition" by the Borrower
in writing to the Bank;
(ii) The Person to be acquired is domiciled in, and generates the majority of
its revenues from sources within, the United States;
(iii) The majority of such Person's revenue is derived from the manufacturing,
marketing and distribution of medical related products;
(iv) The Bank shall have received a certificate signed by the principal
accounting officer of the Borrower to the effect that (and including
calculations indicating that) on a pro forma basis after giving effect to the
Acquisition: (a) all representations and warranties contained in the Loan
Documents will remain true and correct, (b) the Borrower will remain in
compliance with all covenants contained in the Loan Documents, and (c) no
Default or Event of Default has occurred and is continuing or will occur as a
result of the consummation of the Acquisition; and
(v) The Bank shall have received a set of projections setting forth in
reasonable detail (with those stated assumptions set forth below) the pro forma
effect of the Acquisition and showing compliance by the Borrower with all
covenants set forth in Section 5.03 of this Agreement for the next succeeding
quarter. The projections to be delivered hereunder shall include and specify the
assumptions used to prepare such projections regarding growth of sales, margins
on sales and cost savings resulting from the Acquisition.
"Permitted Investments" means, (i) direct obligations of the United States of
America or any governmental agency thereof, or obligations guaranteed by the
United States of America, provided that such obligations mature within one year
from the date of acquisition thereof; (ii) time certificates of deposit having a
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maturity of one year or less issued by any commercial bank organized and
existing under the laws of the United States or any state thereof and having
aggregate capital and surplus in excess of $1,000,000,000.00; (iii) money market
mutual funds having assets in excess of $2,500,000,000; (iv) commercial paper
rated not less than P-1 or A-1 or their equivalent by Xxxxx'x Investor Services,
Inc. or Standard & Poor's Corporation, respectively; or (v) tax exempt
securities rated Prime 2 or better by Xxxxx'x Investor Services, Inc. or A-1 or
better by Standard & Poor's Corporation.
"Person" means an individual, partnership, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture or
other entity or a federal, state or local government, or a political subdivision
thereof or any agency of such government or subdivision.
"Plan" means any employee benefit plan established, maintained, or to which
contributions have been made by the Borrower or any ERISA Affiliate.
"Prime Applicable Margin" shall have the meaning set forth in Sections 2.16 of
this Agreement.
"Prime Rate" means the fluctuating rate per annum equal to the rate of interest
publicly announced by the Bank at its principal office from time to time as its
Prime Rate, each change in the Prime Rate to be effective on the date such
change is announced to be effective.
"Prohibited Transaction" means any transaction set forth in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986, as amended from time to
time.
"Regulation D" means Regulation D of the Board of Governors, as the same may be
amended and in effect from time to time.
"Regulation G" means Regulation G of the Board of Governors, as the same may be
amended and in effect from time to time.
"Regulation T" means Regulation T of the Board of Governors, as the same may be
amended and in effect from time to time.
"Regulation U" means Regulation U of the Board of Governors, as the same may be
amended and in effect from time to time.
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"Regulation X" means Regulation X of the Board of Governors, as the same may be
amended and in effect from time to time.
"Reportable Event" means any of the events set forth in Section 4043 of ERISA.
"Reserve Adjusted LIBOR Rate" means, with respect to any Eurodollar Loan for any
Interest Period, an interest rate per annum determined by the Bank to be equal
to the quotient of (a) the LIBOR Rate divided by (b) a number equal to 1.00
minus the Eurocurrency Reserve Requirement as determined by the Bank on the date
the Reserve Adjusted LIBOR Rate is determined.
"Revolving Credit Loans" shall have the meaning assigned to such term in Section
2.08 of this Agreement.
"Revolving Credit Maturity Date" means March 31, 2003.
"Revolving Credit Note" means a promissory note of the Borrower payable to the
order of the Bank, in substantially the form of Exhibit A annexed hereto,
evidencing the aggregate indebtedness of the Borrower to the Bank resulting from
Revolving Credit Loans made by the Bank to the Borrower pursuant to this
Agreement.
"Security Agreement" means the security agreement to be executed and delivered
pursuant to Section 3.01(f) of this Agreement.
"Senior Debt" means Debt for borrowed money and the deferred purchase price of
property or services, Debt evidenced by bonds, debentures, notes or other
similar instruments, obligations and liabilities secured by a Lien on property
owned, guaranteed obligations, obligations arising from conditional sales
contracts, obligations under Capital Leases, and obligations in respect to
Bankers Acceptances. Senior Debt shall not include accounts payable or accrued
liabilities.
"Subordinated Debt" means Debt of any Person, the repayment of which the obligee
has agreed in writing, on terms which have been approved by the Bank in advance
in writing, shall be subordinate and junior to the rights of the Bank with
respect to Debt owing from such Person to the Bank.
"Subsidiary" means, as to any Person, any corporation, partnership or joint
venture whether now existing or hereafter organized or acquired (i) in the case
of a corporation, of which a majority of the securities having ordinary voting
power for the election of directors (other than securities having such power
only by
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reason of the happening of a contingency) are at the time owned by such Person
and/or one or more Subsidiaries of such Person or (ii) in the case of a
partnership or joint venture, of which a majority of the partnership or other
ownership interests are at the time owned by such Person and/or one or more
Subsidiaries of such Person.
"Tangible Net Worth" means, as to any Person, the excess of (i) such Person's
Total Assets, less all intangible assets properly classified as such in
accordance with GAAP, including, but without limitation, patents, patent rights,
trademarks, trade names, franchises, copyrights, licenses, permits and goodwill,
over (ii) such Person's Total Liabilities.
"Term Loan" shall have the meaning assigned in Section 2.01 hereof.
"Term Loan Note" means a promissory note of the Borrower payable to the order of
the Bank, in substantially the form of Exhibit B annexed hereto, evidencing the
indebtedness of the Borrower to the Bank resulting from the Term Loan made by
the Bank to the Borrower pursuant to the Agreement.
"Total Assets" means, as to any Person, the aggregate net book value of the
assets of such Person after all appropriate adjustments in accordance with GAAP
(including without limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization and excluding the amount of any write-up or
revaluation of any asset), computed in accordance with GAAP.
"Total Liabilities" means, as to any Person, all of the liabilities of such
Person, including all items which, in accordance with GAAP would be included on
the liability side of the balance sheet (other than capital stock, treasury
stock, capital surplus and retained earnings) computed and consolidated in
accordance with GAAP.
"Total Unsubordinated Liabilities" means, as to any Person, the excess of (i)
such Person's Total Liabilities over (ii) such Person's Subordinated Debt.
SECTION 1.02. Computation of Time Periods. In this Agreement in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each means "to
and including".
SECTION 1.03. Accounting Terms. Except as otherwise herein specifically
provided, each accounting term used herein shall have the meaning given to it
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under GAAP.
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ARTICLE II
AMOUNT AND TERMS OF THE LOANS
SECTION 2.01. The Term Loan. The Bank agrees, on the date of this Agreement, on
the terms and conditions of this Agreement and in reliance upon the
representations and warranties set forth in this Agreement, to lend to the
Borrower the principal amount of Six Million ($6,000,000.00) Dollars, and the
Borrower agrees to borrow such amount from the Bank by executing and delivering
to the Bank the Term Loan Note. The Term Loan, or portions thereof, shall be a
Prime Rate Loan or a Eurodollar Loan (or a combination thereof) as the Borrower
may request subject to and in accordance with Section 2.02 hereof. The Bank may
at its option make any Eurodollar Loan by causing a foreign branch or affiliate
to make such Loan, provided that any exercise of such option shall not affect
the obligation of the Borrower to repay such Loan in accordance with the terms
of the Term Loan Note.
SECTION 2.02. Notice of Term Loan Designations. (a) The Borrower may elect to
designate the Term Loan (or a portion thereof) as a Prime Rate Loan or a
Eurodollar Loan by so specifying in the irrevocable notice given pursuant to
this Section 2.02; provided, however, that each Eurodollar Loan for any specific
Interest Period shall be in the minimum principal amount of $1,000,000.00 and in
minimum increased multiples of $100,000.00.
(b) The Borrower shall give the Bank irrevocable written, telex, telephonic
(immediately confirmed in writing) or facsimile notice (i) at least three (3)
Business Days prior to each election to designate the Term Loan (or a portion
thereof) as a Eurodollar Loan (subject to availability), and (ii) prior to 11:00
a.m. on the day of such Loan of each election to designate the Term Loan (or a
portion thereof) as a Prime Rate Loan, in each case specifying the date (which
shall be a Business Day) and the aggregate principal amount of such Loan and, if
any portion thereof is to consist of one or more Eurodollar Loans, the
respective principal amounts and Interest Periods for each such Eurodollar Loan;
provided that:
(i) if the Borrower shall fail to specify the duration of an Interest Period
with regard to any Eurodollar Loan in its notice, the Interest Period shall be
for a period of one month; and
(ii) if the Borrower shall request a Eurodollar Loan when such Loans are not
available, the request shall be deemed to be a request for a Prime Rate Loan.
15
(c) There shall be no more than five (5) Eurodollar Loans (whether the Term Loan
or Revolving Credit Loans) outstanding at any one time. If the Borrower shall
request a Eurodollar Loan when there are already five (5) Eurodollar Loans
outstanding, the request shall be deemed to be a request for a Prime Rate Loan.
SECTION 2.03. Term Loan Note. The Term Loan shall be evidenced by the Term Loan
Note of the Borrower. The Term Loan Note shall be dated the date hereof and
shall mature on the Maturity Date at which time the entire outstanding principal
balance and all interest thereon shall be due and payable. The Term Loan Note
shall be entitled to the benefits and subject to the provisions of this
Agreement.
SECTION 2.04. Repayment of Term Loan Note. The principal balance of the Term
Loan Note shall be payable in twenty four (24) quarterly installments, each due
on the last Business Day of each calendar quarter beginning on the July 1, 2000
and continuing on the first Business Day of each calendar quarter thereafter.
Each of the first twenty three (23) such quarterly principal installments shall
be in the amount of Two Hundred Fifty Thousand ($250,000.00) Dollars and the
final such quarterly principal installment shall be in an amount equal to the
then outstanding principal balance of the Term Loan Note.
SECTION 2.05. Payment of Interest on the Term Loan Note.
(a) In the case of a Prime Rate Loan, interest shall be payable at a rate per
annum equal to the Prime Rate plus the Prime Applicable Margin, if any. Such
interest shall be payable on each Interest Payment Date, commencing with the
first Interest Payment Date after the date of such Prime Rate Loan and on the
Term Loan Maturity Date. Any change in the rate of interest on the Revolving
Credit Note due to a change in the Prime Rate or a change in the Prime
Applicable Margin shall take effect as of the date of such change in the Prime
Rate or Prime Applicable Margin, as applicable.
(b) In the case of a Eurodollar Loan, interest shall be payable at a rate per
annum (computed on the basis of the actual number of days elapsed over a year of
360 days) equal to the Adjusted LIBOR Rate plus the LIBOR Applicable Margin.
Such interest shall be payable on each Interest Payment Date, commencing with
the first Interest Payment Date after the date of such Eurodollar Loan, on each
Interest Determination Date and on the Maturity Date. In the event Eurodollar
Loans are available, the Bank shall determine the rate of
16
interest applicable to each requested Eurodollar Loan for the applicable
Interest Period at 11:00 a.m., New York City time, or as soon as practicable
thereafter, two (2) Business Days prior to the commencement of such Interest
Period and shall notify the Borrower of the rate of interest so determined. Such
determination shall be conclusive absent manifest error.
SECTION 2.06. Conversion and Continuation of Loans. The Borrower shall have the
right, at any time, on such notice to the Bank as is required pursuant to
Sections 2.02 and 2.09, (i) to continue any Eurodollar Loan or portion thereof
into a subsequent Interest Period (subject to availability) or (ii) to convert a
Prime Rate Loan into a Eurodollar Loan (subject to availability), subject to the
following:
(a) if an Event of Default shall have occurred and be continuing at the time of
any proposed conversion or continuation only Prime Rate Loans shall be
available;
(b) in the case of a continuation or conversion of fewer than all Loans, the
aggregate principal amount of each Eurodollar Loan continued or into which a
Loan is converted shall be in the minimum principal amount of $1,000,000.00 and
in minimum increased multiples of $100,000.00;
(c) each continuation or conversion shall be effected by the Bank applying the
proceeds of the new Loan to the Loan (or portion thereof) being continued or
converted;
(d) if the new Loan made as a result of a continuation or conversion shall be a
Eurodollar Loan, the first Interest Period with respect thereto shall commence
on the date of continuation or conversion;
(e) each request for a Eurodollar Loan which shall fail to state an applicable
Interest Period shall be deemed to be a request for an Interest Period of one
month and each request for a Eurodollar Loan made when such Loans are not
available shall be deemed to be a request for a Prime Rate Loan;
(f) unless sufficient Prime Rate Loans are outstanding or other Eurodollar Loans
are outstanding with Interest Periods expiring prior to the next scheduled
installment payment of the Term Loan Note, and are sufficient to enable the
Borrower to make such installment payment, any Eurodollar Loan, a portion of
which is required to be repaid on any such installment payment date shall be
17
automatically converted at the end of such Interest Period into an Prime Rate
Loan;
(g) in the event that the Borrower shall not give notice to continue a
Eurodollar Loan as provided above, such Loan shall automatically be converted
into a Prime Rate Loan at the expiration of the then current Interest Period.
SECTION 2.07. Use of Proceeds. The proceeds of the Term Loan shall be used by
the Borrower to fund the acquisition of certain assets of the medical products
division of Acme United Corp. No part of the proceeds of the Term Loan may be
used for any purpose that directly or indirectly violates or is inconsistent
with, the provisions of Regulation G, T, U or X.
SECTION 2.08. The Revolving Credit Loans. The Bank agrees, on the date of this
Agreement, on the terms and conditions of this Agreement and in reliance upon
the representations and warranties set forth in this Agreement, to lend to the
Borrower prior to the Revolving Credit Maturity Date such amounts as the
Borrower may request from time to time (individually, a "Revolving Credit Loan"
or collectively, the "Revolving Credit Loans"), which amounts may be borrowed,
repaid and reborrowed; provided, however, that the aggregate amount of such
Revolving Credit Loans plus L/C Exposure plus B/A Exposure outstanding at any
one time shall not exceed:
(a) during the Overadvance Period, the lesser of (i) Fourteen Million
($14,000,000.00) Dollars (the "Commitment"), or (ii) the Adjusted Borrowing Base
plus $1,200,000.00,
(b) for the period commencing July 1, 1999 through March 31, 2002, the lesser of
(i) Fourteen Million ($14,000,000.00) Dollars, or (ii) the Adjusted Borrowing
Base, and
(c) for the period commencing April 1, 2002 and thereafter, the lesser of (i)
Fourteen Million ($14,000,000.00) Dollars, or (ii) the Adjusted Borrowing Base
minus the outstanding principal balance of the Term Loan
in each case such lesser amount to be the maximum amount of the Bank's
Commitment, or such lesser amount of the Commitment as may be reduced pursuant
to Section 2.14 hereof.
Each Revolving Credit Loan shall be a Prime Rate Loan or a Eurodollar Loan (or a
combination thereof) as the Borrower may request subject to and in
18
accordance with Section 2.09. The Bank may at its option make any Eurodollar
Loan by causing a foreign branch or affiliate to make such Loan, provided that
any exercise of such option shall not affect the obligation of the Borrower to
repay such Loan in accordance with the terms of the Revolving Credit Note.
Subject to the other provisions of this Agreement, Revolving Credit Loans of
more than one type may be outstanding at the same time.
SECTION 2.09. Notice of Revolving Credit Loans.
(a) The Borrower shall give the Bank irrevocable written, telex, telephonic
(immediately confirmed in writing) or facsimile notice (i) at least three (3)
Business Days prior to each Revolving Credit Loan comprised in whole or in part
of one or more Eurodollar Loans (subject to availability), and (ii) prior to
11:00 a.m. on the day of each Revolving Credit Loan consisting solely of a Prime
Rate Loan. Such notice shall specify the date of such borrowing, the amount
thereof and whether such Loan is to be (or what portion or portions thereof are
to be) a Prime Rate Loan or a Eurodollar Loan and, if such Loan or any portion
thereof is to consist of one or more Eurodollar Loans, the principal amounts
thereof and Interest Period or Interest Periods with respect thereto. If no
election as to a type of Loan is specified in such notice, such Loan (or portion
thereof as to which no election is specified) shall be a Prime Rate Loan. If no
election as to the Interest Period is specified in such notice with respect to
any Eurodollar Loan, the Borrower shall be deemed to have selected an Interest
Period of one month's duration and if a Eurodollar Loan is requested when such
Loans are not available, the Borrower shall be deemed to have requested a Prime
Rate Loan.
(b) The Borrower shall have the right, on such notice to the Bank as is required
pursuant to (a) above, (i) to continue any Eurodollar Loan or a portion thereof
into a subsequent Interest Period (subject to availability), and (ii) to convert
a Prime Rate Loan into a Eurodollar Loan (subject to availability) subject to
the following:
(a) if an Event of Default shall have occurred and be continuing at the time of
any proposed conversion or continuation only Prime Rate Loans shall be
available;
(b) in the case of a continuation or conversion of fewer than all Loans, the
aggregate principal amount of each Eurodollar Loan continued or into which a
Loan is converted shall be in the minimum principal amount of $1,000,000.00 and
in minimum increased multiples of $100,000.00;
19
(c) each continuation or conversion shall be effected by the Bank applying the
proceeds of the new Loan to the Loan (or portion thereof) being continued or
converted;
(d) if the new Loan made as a result of a continuation or conversion shall be a
Eurodollar Loan, the first Interest Period with respect thereto shall commence
on the date of continuation or conversion;
(e) each request for a Eurodollar Loan which shall fail to state an applicable
Interest Period shall be deemed to be a request for an Interest Period of one
month and each request for a Eurodollar Loan made when such Loans are not
available shall be deemed to be a request for an Prime Rate Loan; and
(f) in the event that the Borrower shall not give notice to continue a
Eurodollar Loan as provided above, such Loan shall automatically be converted
into a Prime Base Rate Loan at the expiration of the then current Interest
Period.
(g) There shall be no more than five (5) Eurodollar Loans (whether the Term Loan
or Revolving Credit Loans) outstanding at any one time. If the Borrower shall
request a Eurodollar Loan when there are already five (5) Eurodollar Loans
outstanding, the request shall be deemed to be a request for a Prime Rate Loan.
SECTION 2.10. Revolving Credit Note. Each Revolving Credit Loan shall be (i) in
the case of each Prime Rate Loan, in the minimum principal amount of
$100,000.00, and in minimum increased multiples of $50,000.00, and (ii) in the
case of each Eurodollar Loan, in the minimum principal amount of $1,000,000.00
and in minimum increased multiples of $100,000.00 (except that, if any such
Prime Rate Loan so requested shall exhaust the remaining available Commitment,
such Prime Rate Loan may be in an amount equal to the amount of the remaining
available Commitment). Each Revolving Credit Loan shall be evidenced by the
Revolving Credit Note of the Borrower. The Revolving Credit Note shall be dated
the date hereof and be in the principal amount of Fourteen Million
($14,000,000.00) Dollars, and shall mature on the Revolving Credit Maturity
Date, at which time the entire outstanding principal balance and all interest
thereon shall be due and payable. The Revolving Credit Note shall be entitled to
the benefits and subject to the provisions of this Agreement.
At the time of the making of each Revolving Credit Loan and at the time of each
payment of principal thereon, the holder of the Revolving Credit Note is hereby
authorized by the Borrower to make a notation on the schedule annexed to the
20
Revolving Credit Note of the date and amount, and the type and Interest Period
of the Revolving Credit Loan or payment, as the case may be. Failure to make a
notation with respect to any Revolving Credit Loan shall not limit or otherwise
affect the obligation of the Borrower hereunder or under the Revolving Credit
Note with respect to such Revolving Credit Loan, and any payment of principal on
the Revolving Credit Note by the Borrower shall not be affected by the failure
to make a notation thereof on said schedule.
SECTION 2.11. Payment of Interest on the Revolving Credit Notes. (a) In the case
of a Prime Rate Loan, interest shall be payable at a rate per annum equal to the
Prime Rate. Such interest shall be payable on each Interest Payment Date,
commencing with the first Interest Payment Date after the date of such Prime
Rate Loan and on the Revolving Credit Maturity Date. Any change in the rate of
interest on the Revolving Credit Note due to a change in the Prime Rate shall
take effect as of the date of such change in the Prime Rate.
(b) In the case of a Eurodollar Loan, interest shall be payable at a rate per
annum equal to the Reserve Adjusted LIBOR Rate plus the LIBOR Applicable Margin.
Such interest shall be payable on each Interest Payment Date, commencing with
the first Interest Payment Date after the date of such Eurodollar Loan and on
the Revolving Credit Maturity Date. In the event Eurodollar Loans are available,
the Bank shall determine the rate of interest applicable to each requested
Eurodollar Loan for each Interest Period at 11:00 a.m., New York City time, or
as soon as practicable thereafter, two (2) Business Days prior to the
commencement of such Interest Period and shall use its best efforts to notify
the Borrower of the rate of interest so determined. Such determination shall be
conclusive absent manifest error.
SECTION 2.12. Use of Proceeds. The proceeds of the Revolving Credit Loans shall
be used by the Borrower to support its inventory needs and to finance accounts
receivable. No part of the proceeds of any Loan may be used for any purpose that
directly or indirectly violates or is inconsistent with, the provisions of
Regulations G, T, U or X.
SECTION 2.13. Commitment Fee. The Borrower agrees to pay to the Bank from the
date of this Agreement and for so long as the Commitment remains outstanding, on
the first Business Day of each month a commitment fee computed at the rate of
one quarter (3%) percent per annum (computed on the basis of the actual number
of days elapsed over 360 days) on the average daily unused amount of the
Commitment, such commitment fee being payable for the calendar month, or part
thereof, preceding the payment date.
21
SECTION 2.14. Reduction of Commitment. Upon at least three (3) Business Days'
written notice, the Borrower may irrevocably elect to have the unused Commitment
terminated in whole or reduced in part provided, however, that any such partial
reduction shall be in a minimum amount of Five Hundred Thousand ($500,000.00)
Dollars, or whole multiples thereof. The Commitment, once terminated or reduced,
shall not be reinstated without the express written approval of the Bank.
SECTION 2.15. Prepayment. (a) The Borrower shall have the right at any time and
from time to time to prepay any Prime Rate Loan, in whole or in part, without
premium or penalty on the same day on which telephonic notice is given to the
Bank (immediately confirmed in writing) of such prepayment provided, however,
that each such prepayment shall be on a Business Day and shall be in an
aggregate principal amount which is an integral multiple of $100,000.00.
(b) The Borrower shall have the right at any time and from time to time, subject
to the provisions of this Agreement, to prepay any Eurodollar Loan, in whole or
in part, on three (3) Business Days' prior irrevocable written notice to the
Bank, provided, however, that such prepayment may only be made on an Interest
Determination Date.
(c) The notice of prepayment under this Section 2.15 shall set forth the
prepayment date and the principal amount of the Loan being prepaid and shall be
irrevocable and shall commit the Borrower to prepay such Loan by the amount and
on the date stated therein. All prepayments shall be accompanied by accrued
interest on the principal amount being prepaid to the date of prepayment. Each
prepayment under this Section 2.15 shall be applied first towards unpaid
interest on the amount being prepaid and then towards the principal in whole or
partial prepayment of Loans by the Borrower. In the absence of such
specification, amounts being prepaid shall be applied first to any Prime Rate
Loan. Eurodollar Loans may be prepaid only in accordance with the provisions of
paragraph (b) above. In the case of the Term Loan, all partial prepayments of
Loans shall be applied to installments of principal of the Term Loan, in the
inverse order of maturity.
(d) The Borrower shall make a Cash Flow Recapture Payment of the Term Loan Note
not later than 120 days after the end of each fiscal year equal to its Excess
Cash Flow for such fiscal year, commencing with the fiscal year ending March 31,
2000. Notwithstanding the foregoing, a Cash Flow Recapture Payment will not be
required at the Borrower's option if the Aggregate Outstandings as of the
22
fiscal year ending March 31, 2000 do not exceed the Borrowing Base. In the event
that the Borrower elects not to make the Cash Flow Recapture Payment on this
basis, at all times after the fiscal year ending March 31, 2000, the Aggregate
Outstandings shall not exceed the Borrowing Base, and in the event that the
Aggregate Outstandings exceed the Borrowing Base, the Borrower shall make an
immediate prepayment of the Term Loan Note or principal payment under the
Revolving Credit Note, as the Borrower may elect, in an amount sufficient to
cure such deficiency.
SECTION 2.16. Applicable Margin. The Prime Applicable Margin and the LIBOR
Applicable Margin shall each be determined on the basis of the Borrower's Cash
Flow Leverage Ratio, as calculated based on the Borrower's financial statements
for its most recent fiscal year or quarter. The Prime Applicable Margin and the
LIBOR Applicable Margin shall be determined as follows:
(a) The Revolving Credit Loans:
The initial Prime Applicable Margin shall be -0- basis points and the initial
LIBOR Applicable Margin shall be 150 basis points, and each shall be applicable
until delivery of the Borrower's financial statements for its fiscal quarter
ending June 30, 1999 pursuant to Section 5.01(b) hereof.
Beginning with delivery of the Borrower's financial statements for the fiscal
quarter ending June 30, 1999, and for each fiscal quarter thereafter:
(i) if the Borrower's Cash Flow Leverage Ratio as of the end of such fiscal year
or quarter (calculated on an annualized basis during the fiscal year ending
March 31, 2000) is less than or equal to 3.00 to 1.00, the Prime Applicable
Margin shall be -0- basis points and the LIBOR Applicable Margin shall be 150
basis points.
(ii) if the Borrower's Cash Flow Leverage Ratio as of the end of such fiscal
year or quarter (calculated on an annualized basis during the fiscal year ending
March 31, 2000) is greater than 3.00 to 1.00 but less than or equal to 3.50 to
1.00, the Prime Applicable Margin shall be -0- basis points and the LIBOR
Applicable Margin shall be 175 basis points.
(iii) if the Borrower's Cash Flow Leverage Ratio as of the end of such fiscal
year or quarter (calculated on an annualized basis during the fiscal year ending
March 31, 2000) is equal to or greater than 3.50 to 1.00, the Prime Applicable
Margin shall be -0- basis points and the LIBOR Applicable Margin shall be 225
basis
23
points.
(b) The Term Loan.
The initial Prime Applicable Margin shall be -0- basis points and the initial
LIBOR Applicable Margin shall be 150 basis points, and each shall be applicable
until delivery of the Borrower's consolidated financial statements for its
fiscal quarter ending June 30, 1999 pursuant to Section 5.01(b) hereof.
Beginning with delivery of the Borrower's financial statements for the fiscal
quarter ending June 30, 1999, and for each fiscal quarter thereafter:
(i) if the Borrower's Cash Flow Leverage Ratio as of the end of such fiscal year
or quarter (calculated on an annualized basis during the fiscal year ending
March 31, 2000) is less than or equal to 3.00 to 1.00, the Prime Applicable
Margin shall be -0- basis points and the LIBOR Applicable Margin shall be 150
basis points.
(ii) if the Borrower's Cash Flow Leverage Ratio as of the end of such fiscal
year or quarter (calculated on an annualized basis during the fiscal year ending
March 31, 2000) is greater than 3.00 to 1.00 but less than or equal to 3.25 to
1.00, the Prime Applicable Margin shall be -0- basis points and the LIBOR
Applicable Margin shall be 175 basis points.
(iii) if the Borrower's Cash Flow Leverage Ratio as of the end of such fiscal
year or quarter (calculated on an annualized basis during the fiscal year ending
March 31, 2000) is greater than 3.25 to 1.00 but less than or equal to 3.50 to
1.00, the Prime Applicable Margin shall be -0- basis points and the LIBOR
Applicable Margin shall be 200 basis points.
(iv) if the Borrower's Cash Flow Leverage Ratio as of the end of such fiscal
year or quarter (calculated on an annualized basis during the fiscal year ending
March 31, 2000) is greater than 3.50 to 1.00 but less than or equal to 3.75 to
1.00, the Prime Applicable Margin shall be 125 basis points and the LIBOR
Applicable Margin shall be 225 basis points.
(v) if the Borrower's Cash Flow Leverage Ratio as of the end of such fiscal year
or quarter (calculated on an annualized basis during the fiscal year ending
March 31, 2000) is greater than 3.75, the Prime Applicable Margin shall be 250
basis points and the LIBOR Applicable Margin shall be 250 basis points.
The Bank shall determine the Applicable Margins within five (5) Business Days
24
of its receipt of all required financial statements and certificates.
In the event that the Borrower's financial statements for the fiscal quarter
ending June 30, 1999 indicate that the Libor Applicable Margin or the Prime
Applicable Margin should have been higher for such period, such Applicable
Margin shall be adjusted for both the Term Loan and the Revolving Credit Loans
retroactively based upon the average amounts owing under the Notes for such
period, with such adjustment amount to be payable on September 1, 1999.
Upon the occurrence and during the continuance of a Default or an Event of
Default the Prime Applicable Margin and the LIBOR Applicable Margin may, as a
result of changes in the Borrower's Senior Debt to EBITDA Ratio, increase but
will not decrease.
SECTION 2.17. Eurocurrency Reserve Requirement. It is understood that the cost
to the Bank of making or maintaining Eurodollar Loans may fluctuate as a result
of the applicability of, or change in, the Eurocurrency Reserve Requirement. The
Borrower agrees to pay to the Bank from time to time, as provided in Section
2.18 below, such amounts as shall be necessary to compensate the Bank for the
portion of the cost of making or maintaining any Eurodollar Loans made by it
resulting from any change in the Eurocurrency Reserve Requirement, it being
understood that the rates of interest applicable to Eurodollar Loans hereunder
have been determined on the basis of the Eurocurrency Reserve Requirement in
effect at the time of determination of the Reserve Adjusted LIBOR Rate and that
such rates do not reflect costs imposed on the Bank in connection with any
change to the Eurocurrency Reserve Requirement. It is agreed that for purposes
of this paragraph the Eurodollar Loans made hereunder shall be deemed to
constitute Eurocurrency Liabilities as defined in Regulation D and to be subject
to the reserve requirements of Regulation D without benefit or credit of
proration, exemptions or offsets which might otherwise be available to the Bank
from time to time under Regulation D.
SECTION 2.18. Increased Costs. If, after the date of this Agreement, the
adoption of, or any change in, any applicable law, regulation, rule or
directive, or any interpretation thereof by any authority charged with the
administration or interpretation thereof:
(i) subjects the Bank to any tax with respect to its Commitment, the Loans, the
Notes or on any amount paid or to be paid under or pursuant to this Agreement,
the Loans or the Notes (other than any tax measured by or based
25
upon the overall net income of the Bank);
(ii) changes the basis of taxation of payments to the Bank of any amounts
payable hereunder (other than any tax measured by or based upon the overall net
income of the Bank);
(iii) imposes, modifies or deems applicable any reserve, capital adequacy or
deposit requirements against any assets held by, deposits with or for the
account of, or loans made by, the Bank; or
(iv) imposes on the Bank any other condition affecting its Commitment, the
Loans, the Notes or this Agreement; and the result of any of the foregoing is to
increase the cost to the Bank of maintaining this Agreement or the Commitment or
making the Loans, or to reduce the amount of any payment (whether of principal,
interest or otherwise) receivable by the Bank or to require the Bank to make any
payment on or calculated by reference to the gross amount of any sum received by
it, in each case by an amount which the Bank in its sole judgment deems
material, then and in any such case:
(a) the Bank shall promptly advise the Borrower of such event, together with the
date thereof, the amount of such increased cost or reduction or payment and the
way in which such amount has been calculated; and
(b) the Borrower shall pay to the Bank, within ten (10) days after the advice
referred to in subsection (a) hereinabove, such an amount or amounts as will
compensate the Bank for such additional cost, reduction or payment for so long
as the same shall remain in effect.
The determination of the Bank as to additional amounts payable pursuant to this
Section 2.18 shall be conclusive evidence of such amounts absent manifest error.
SECTION 2.19. Capital Adequacy. If the Bank shall have determined that the
applicability of any law, rule, regulation or guideline, or the adoption after
the date hereof of any other law, rule, regulation or guideline regarding
capital adequacy, or any change in any of the foregoing or in the interpretation
or administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank (or any lending office of the Bank) or the
Bank's holding company with any request or directive regarding capital
26
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on the Bank's capital or on the capital of the Bank's holding company, if
any, as a consequence of its obligations hereunder to a level below that which
the Bank or the Bank's holding company could have achieved but for such
adoption, change or compliance (taking into consideration the Bank's policies
and the policies of the Bank's holding company with respect to capital adequacy)
by an amount deemed by the Bank to be material, then from time to time the
Borrower shall pay to the Bank such additional amount or amounts as will
compensate the Bank or the Bank's holding company for any such reduction
suffered.
SECTION 2.20. Change in Legality. (a) Notwithstanding anything to the contrary
contained elsewhere in this Agreement, if any change after the date hereof in
law, rule, regulation, guideline or order, or in the interpretation thereof by
any governmental authority charged with the administration thereof, shall make
it unlawful for the Bank to make or maintain any Eurodollar Loan or to give
effect to its obligations as contemplated hereby with respect to a Eurodollar
Loan, then, by written notice to the Borrower, the Bank may:
(i) declare that Eurodollar Loans will not thereafter be made hereunder,
whereupon the Borrower shall be prohibited from requesting such Eurodollar Loans
hereunder unless such declaration is subsequently withdrawn; and
(ii) require that, subject to the provisions of Section 2.06, all outstanding
Eurodollar Loans made by it be converted to a Prime Rate Loan, whereupon all of
such Eurodollar Loans shall be automatically converted to an Alternate Base Rate
Loan as of the effective date of such notice as provided in paragraph (b) below.
(b) For purposes of this Section 2.20, a notice to the Borrower by the Bank
pursuant to paragraph (a) above shall be effective, for the purposes of
paragraph (a) above, if lawful, and if any Eurodollar Loans shall then be
outstanding, on the last day of the then current Interest Period; otherwise,
such notice shall be effective on the date of receipt by the Borrower.
SECTION 2.21. Indemnity. The Borrower will indemnify the Bank against any loss
or expense which the Bank may sustain or incur as a consequence of any default
in payment or prepayment of the principal amount of any Loan or any part thereof
or interest accrued thereon, as and when due and payable (at the due date
thereof, by notice of prepayment or otherwise), or the occurrence of any
27
Event of Default, including but not limited to any loss or expense sustained or
incurred in liquidating or employing deposits from third parties acquired to
affect or maintain such Loan or any part thereof. When claiming under this
Section 2.26, the Bank shall provide to the Borrower a statement, signed by an
officer of the Bank, explaining the amount of any such loss or expense
(including the calculation of such amount), which statement shall, in the
absence of manifest error, be conclusive with respect to the parties hereto.
SECTION 2.22. Change in LIBOR; Availability of Rates. In the event, and on each
occasion, that, on the day the interest rate for any Eurodollar Loan is to be
determined, for a requested Eurodollar Loan, the Bank shall have determined
(which determination, absent manifest error, shall be conclusive and binding
upon the Borrower) that dollar deposits in the amount of the principal amount of
the requested Eurodollar Loan are not generally available in the London
Interbank Market, or that the rate at which such dollar deposits are being
offered will not adequately and fairly reflect the cost to the Bank of making or
maintaining the principal amount of such Eurodollar Loan during such Interest
Period, such Eurodollar Loan shall be unavailable. The Bank shall, as soon as
practicable thereafter, given written, telex or telephonic notice of such
determination of unavailability to the Borrower. Any request by the Borrower for
an unavailable Eurodollar Loan shall be deemed to have been a request for a
Prime Rate Loan. After such notice shall have been given and until the Bank
shall have notified the Borrower that the circumstances giving rise to such
notice no longer exist, each subsequent request for an unavailable Eurodollar
Loan shall be deemed to be a request for a Prime Rate Loan.
SECTION 2.23. Authorization to Debit Borrower's Account. The Bank is hereby
authorized to debit the Borrower's account maintained with the Bank for (i) all
scheduled payments of principal and/or interest under the Notes, and (ii) the
commitment fee and all other amounts due hereunder; all such debits to be made
on the days such payments are due in accordance with the terms hereof.
SECTION 2.24. Late Charges, Default Interest. (a) If the Borrower shall default
in the payment of any principal installment of or interest on any Loan or any
other amount becoming due hereunder, the Borrower shall pay interest, to the
extent permitted by law, on such defaulted amount up to the date of actual
payment (after as well as before judgment) at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) equal to
three (3%) percent in excess of the interest rate otherwise in effect with
respect to the type of Loan in connection with which the required payments have
not been made.
28
(b) Upon the occurrence and during the continuation of an Event of Default, the
Borrower shall pay interest on all amounts owing under the Notes and this
Agreement (after as well as before judgment) at a rate per annum (computed on
the basis of the actual number of days elapsed over a year of 360 days) equal to
three (3%) percent in excess of the interest rate otherwise in effect hereunder.
SECTION 2.25. Payments. All payments by the Borrower hereunder or under the
Notes shall be made in Dollars in immediately available funds at the office of
the Bank by 12:00 noon, New York City time on the date on which such payment
shall be due. Interest on the Notes shall accrue from and including the date of
each Loan to but excluding the date on which such Loan is paid in full or
refinanced with a Loan of a different type.
SECTION 2.26. Interest Adjustments. (a) If the provisions of this Agreement or
the Notes would at any time otherwise require payment by the Borrower to the
Bank of any amount of interest in excess of the maximum amount then permitted by
applicable law the interest payments shall be reduced to the extent necessary so
that the Bank shall not receive interest in excess of such maximum amount. To
the extent that, pursuant to the foregoing sentence, the Bank shall receive
interest payments hereunder or under the Notes in an amount less than the amount
otherwise provided, such deficit (hereinafter called the "Interest Deficit")
will cumulate and will be carried forward (without interest) until the
termination of this Agreement. Interest otherwise payable to the Bank hereunder
and under the Notes for any subsequent period shall be increased by such maximum
amount of the Interest Deficit that may be so added without causing the Bank to
receive interest in excess of the maximum amount then permitted by applicable
law.
(b) The amount of the Interest Deficit shall be treated as a prepayment penalty
and paid in full at the time of any optional prepayment by the Borrower to the
Bank of all outstanding Loans. The amount of the Interest Deficit relating to
the Notes at the time of any complete payment of the Notes at that time
outstanding (other than an optional prepayment thereof) shall be cancelled and
not paid.
SECTION 2.27. Participations, Etc. The Bank shall have the right at any time,
with or without notice to the Borrower, (i) to sell, assign, transfer or
negotiate all or any part of the Term Loan Note, the Revolving Credit Note or
the Commitment to any Affiliate of the Bank (whether foreign or domestic), or
(ii) to grant participations therein to one or more banks, insurance companies
or other financial institutions, pension funds or mutual funds. The Borrower
agrees and
29
consents to the Bank providing financial and other information regarding its
business and operations to prospective purchasers or participants and further
agrees that to the extent that the Bank should sell, assign, transfer or
negotiate all or any part of the Notes or the Commitment, the Bank shall be
forever released and discharged from its obligations under the Notes, the
Commitment and this Agreement to the extent same is sold, assigned, transferred
or negotiated. Nothing herein shall be read or construed as prohibiting or
otherwise limiting the ability or right of the Bank to pledge any Note to a
Federal Reserve Bank.
30
ARTICLE IIA
THE LETTERS OF CREDIT AND BANKERS ACCEPTANCES
SECTION 2A.01. Letters of Credit. (a) On the terms and conditions set forth
herein, the Bank agrees, from time to time on any Business Day during the period
from the date of this Agreement to the Maturity Date to issue Letters of Credit
for the account of the Borrower. Within the foregoing limits, and subject to the
other terms and conditions hereof, the Borrower's ability to obtain Letters of
Credit shall be fully revolving, and, accordingly, the Borrower may, during the
foregoing period, obtain Letters of Credit to replace Letters of Credit which
have expired or which have been drawn upon and reimbursed.
(b) The Bank has no obligation to issue any Letter of Credit if:
(i) any order, judgment or decree of any governmental authority or arbitrator
purports by its terms to enjoin or restrain the Bank from issuing such Letter of
Credit or any requirement of law applicable to the Bank or any request or
directive (whether or not having the force of law) from any governmental
authority with jurisdiction over the Bank prohibits, or requests that the Bank
refrain from, the issuance of documentary or standby letters of credit generally
or such Letter of Credit in particular or imposes upon the Bank with respect to
such Letter of Credit any restriction, reserve or capital requirement (for which
the Bank is not otherwise compensated hereunder) not in effect on the date of
this Agreement, or imposes upon the Bank any unreimbursed loss, cost or expense
which was not applicable on the date of this Agreement and which the Bank in
good xxxxx xxxxx material to it;
(ii) the Bank has received written notice from the Borrower, on or prior to the
Business Day prior to the requested date of issuance of such Letter of Credit,
that one or more of the applicable conditions contained in Article III is not
then satisfied;
(iii) the expiry date of any requested documentary Letter of Credit is (x) more
than one (1) year from its date of issuance or (y) later than five (5) Business
Days prior to the Maturity Date;
(iv) the expiry date of any requested standby Letter of Credit is (x) more than
one hundred eighty (180) days from its date of issuance or (y) later than five
(5) Business Days prior to the Maturity Date;
31
(v) the aggregate L/C Exposure for standby Letters of Credit, after giving
effect to the requested Letter of Credit, shall exceed $500,000.00;
(vi) the aggregate L/C Exposure for documentary Letters of Credit, after giving
effect to the requested Letter of Credit, shall exceed $4,000,000.00; or
(vii) any requested Letter of Credit is not in form and substance acceptable to
the Bank, or the issuance of a Letter of Credit violates any applicable policies
of the Bank.
SECTION 2A.02. Issuance of Letters of Credit. Each Letter of Credit shall be
issued upon the request of the Borrower (which request shall be irrevocable),
received by the Bank in accordance with arrangements between the Bank and the
Borrower to provide the Bank electronically with the information necessary to
issue, amend or renew Letters of Credit. The arrangements between the Borrower
and the Bank are set forth in the L/C Documents (other than the Letters of
Credit) between the Bank and the Borrower. To the extent any term in any such
L/C Documents (other than a Letter of Credit) conflicts with or is inconsistent
with the terms of this Agreement, the term most favorable to the Bank shall
apply, and the Bank may exercise its rights under either such L/C Document or
this Agreement vis-a-vis the Borrower, but subject in any event to the
provisions herein with respect to sharing and notification. If any such
inconsistency exists, the Bank shall not be deemed to have waived any rights
hereunder, nor shall the Bank be deemed to have waived any rights under such L/C
Document, by reason of such inconsistency.
SECTION 2A.03 Role of the Bank. (a) The Bank shall not have any responsibility
to obtain any document in connection with paying any draw under a Letter of
Credit (other than any required sight or time draft, certificate and other
documents expressly required by the Letter of Credit) or to ascertain or inquire
as to the validity or accuracy of any such document or the authority of the
Person executing or delivering any such document.
(b) The Borrower hereby assumes all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit;
provided, however, that this assumption is not intended to, and shall not,
preclude the Borrower's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. Neither the
Bank, nor any of its officers, directors or employees, nor any of the respective
correspondents, participants or assignees of the Bank, shall be liable or
32
responsible for any of the matters described in clauses (i) through (vii) of
Section 2A.04; provided, however, that the Borrower may have a claim against the
Bank, and the Bank may be liable to the Borrower, to the extent of any direct,
as opposed to consequential or exemplary, damages suffered by the Borrower which
the Borrower proves were caused by the Bank's willful misconduct or gross
negligence or the Bank's willful failure to pay under any Letter of Credit after
the presentation to it by the beneficiary of a required sight or time draft and
certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the foregoing: (i) the Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Bank shall not be responsible for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reasons.
SECTION 2A.04. Obligations Absolute. The obligations of the Borrower under this
Agreement and any L/C Documents to reimburse the Bank for a drawing under a
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement and the L/C Documents
under all circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement or any L/C
Document;
(ii) any change in the time, manner or place of payment of, or in any other term
of, all or any of the obligations of the Borrower in respect of any Letter of
Credit or any other amendment or waiver of or any consent to departure from all
or any of the L/C Documents;
(iii) the existence of any claim, setoff, defense or other right that the
Borrower may have at any time against any beneficiary or any transferee of any
Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the Bank or any other Person, whether in connection
with this Agreement, the transactions contemplated hereby or by the L/C
Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect; or
any loss or delay in the transmission or otherwise of any document required in
order to make a drawing under any Letter of Credit;
33
(v) any payment by the Bank under a Letter of Credit against presentation of a
draft or certificate that does not strictly comply with the terms of any Letter
of Credit; or any payment made by the Bank under any Letter of Credit to any
Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee
for the benefit of creditors, liquidator, receiver or other representative of or
successor to any beneficiary or any transferee of any Letter of Credit,
including any arising in connection with any insolvency proceeding;
(vi) any exchange, release or non-perfection of any collateral, or any release
or amendment or waiver of or consent to departure from any other guarantee, for
all or any of the obligations of the Borrower in respect of any Letter of
Credit; or
(vii) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the Borrower.
SECTION 2A.05. Uniform Customs and Practices. The Uniform Customs and Practices
for Documentary Credits as published by the International Chamber of Commerce
most recently at the time of issuance of any Letter of Credit shall (unless
otherwise expressly provided in the Letters of Credit) apply to the Letters of
Credit.
SECTION 2A.06. Letter of Credit Fees and Commissions. (a) In the case of
documentary Letters of Credit, the Borrower shall pay to the Bank (i) a fee
equal to 0.125% of the face amount of such Letter of Credit, payable upon its
issuance, and (ii) a payment commission equal to 0.25% of the amount drawn,
payable on the date of presentment of the required documents under the Letter of
Credit.
(b) In the case of standby Letters of Credit, the Borrower shall pay to the Bank
a per annum commission equal to 1.25% of the face amount of such Letter of
Credit, payable semi-annually in advance.
SECTION 2A.07. Bankers Acceptances. (a) On the terms and conditions set forth
herein and in the B/A Documents, the Bank agrees, from time to time on any
Business Day during the period from the date of this Agreement to the Maturity
Date to create Bankers Acceptances for the account of the Borrower.
(b) The Bank has no obligation to create any Bankers Acceptance if:
(i) any order, judgment or decree of any governmental authority or arbitrator
34
purports by its terms to enjoin or restrain the Bank from creating such Bankers
Acceptance or any requirement of law applicable to the Bank or any request or
directive (whether or not having the force of law) from any governmental
authority with jurisdiction over the Bank prohibits, or requests that the Bank
refrain from, the creation of Bankers Acceptances generally or such Bankers
Acceptance in particular or imposes upon the Bank with respect to such Bankers
Acceptance any restriction, reserve or capital requirement (for which the Bank
is not otherwise compensated hereunder) not in effect on the date of this
Agreement, or imposes upon the Bank any unreimbursed loss, cost or expense which
was not applicable on the date of this Agreement and which the Bank in good
xxxxx xxxxx material to it;
(ii) the Bank has received written notice from the Borrower, on or prior to the
Business Day prior to the requested date of creation of such Bankers Acceptance,
that one or more of the applicable conditions contained in Article III is not
then satisfied;
(iii) the expiry date of any requested Bankers Acceptance is (x) more than one
hundred eighty (180) days from its date of issuance or (y) later than five (5)
Business Days prior to the Maturity Date;
(iv) the aggregate B/A Exposure, after giving effect to the requested Bankers
Acceptance, shall exceed $8,500,000.00; or
(v) any Bankers Acceptance is not in form and substance acceptable to the Bank,
or violates any applicable policies of the Bank.
SECTION 2A.08. Bankers Acceptance Fees and Commissions. The Borrower shall pay
to the Bank a per annum commission equal to 1.25% of the face amount of each
Bankers Acceptance created, payable in advance.
35
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to the Making of the Term Loan and the
Initial Revolving Credit Loan. The obligation of the Bank to make the Term Loan
and the initial Revolving Credit Loan contemplated by this Agreement is subject
to the condition precedent that the Bank shall have received from the Borrower
the following, in form and substance satisfactory to the Bank and its counsel:
(a) The Term Loan Note and the Revolving Credit Note duly executed and payable
to the order of the Bank.
(b) Certified (as of the date of this Agreement) copies of the resolutions of
the Board of Directors of the Borrower authorizing the Loans and authorizing and
approving this Agreement and the other Loan Documents and the execution,
delivery and performance thereof and certified copies of all documents
evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Agreement and the other Loan Documents.
(c) A certificate of the Secretary or an Assistant Secretary (attested to by
another officer) of the Borrower certifying: (i) the names and true signatures
of the officer or officers of the Borrower authorized to sign this Agreement,
the Term Loan Note, the Revolving Credit Note and the other Loan Documents to be
delivered hereunder on behalf of the Borrower; and (ii) a copy of the Borrower's
by-laws as complete and correct on the date of this Agreement.
(d) Copies of the certificate of incorporation and all amendments thereto of the
Borrower, certified by the Secretary of State (or equivalent officer) of the
state of incorporation of the Borrower and a certificate of existence and good
standing with respect to the Borrower from the Secretary of State (or equivalent
officer) of the state of incorporation of the Borrower and from the Secretary of
State (or equivalent officer) of any state in which the Borrower is authorized
to do business.
(e) An opinion of Xxxxxxx X. Satin, Esq., counsel for the Borrower as to certain
matters referred to in Article IV hereof and as to such other matters as the
Bank or its counsel may reasonably request.
(f) From the Borrower, an executed Security Agreement giving to the Bank a first
36
priority security interest in all assets of the Borrower including, but not
limited to, all personal property, equipment, fixtures, inventory, accounts,
chattel paper and general intangibles all whether now owned or hereafter
acquired (the "Collateral").
(g) From the Borrower, UCC-1 filings perfecting the Bank's security interests in
the Collateral.
(h) A property damage insurance policy for the Collateral in the amount of the
greater of (1) the replacement value of the Collateral or (2) the principal
amount outstanding under the Loans, naming the Bank as lender loss payee with an
insurance company acceptable to the Bank. The policy shall provide for thirty
(30) days notice to the Bank of cancellation or change.
(i) All schedules, documents, certificates and other information provided to the
Bank pursuant to or in connection with this Agreement shall be satisfactory to
the Bank in all respects.
(k) The following statements shall be true and the Bank shall have received a
certificate signed by the President or principal accounting officer of the
Borrower dated the date hereof, stating that:
(i) The representations and warranties contained in Article IV of this Agreement
and in the Loan Documents are true and correct on and as of such date; and
(ii) No Default or Event of Default has occurred and is continuing, or would
result from the making of the Term Loan or the initial Revolving Credit Loan.
(l) All legal matters incident to this Agreement and the Loan transactions
contemplated hereby shall be satisfactory to Cullen and Xxxxxx, counsel to the
Bank.
(m) The Borrower shall have paid to the Bank an up-front fee of $27,500.00 for
the Revolving Credit Loans and $40,000.00 for the Term Loan.
(n) The Bank shall have received evidence that the Borrower has closed the
acquisition of certain assets of the medical products division of Acme United
Corp.
(o) Receipt by the Bank of such other approvals, opinions or documents as the
Bank or its counsel may reasonably request.
37
SECTION 3.02. Conditions Precedent to All Revolving Credit Loans, all Letters of
Credit and all Bankers Acceptances. The obligations of the Bank to make each
Revolving Credit Loan (including the initial Revolving Credit Loan), issue each
Letter of Credit (including the initial Letter of Credit) and to create each
Bankers Acceptance (including the initial Bankers Acceptance) shall be subject
to the further condition precedent that on the date of such Revolving Credit
Loan, Letter of Credit or Bankers Acceptance, as the case may be:
(a) The following statements shall be true and the Bank shall have received a
certificate signed by the President or the principal accounting officer of the
Borrower dated the date of such Revolving Credit Loan, stating that:
(i) The representations and warranties contained in Article IV of this Agreement
and in the Loan Documents are true and correct on and as of such date as though
made on and as of such date; and
(ii) No Default or Event of Default has occurred and is continuing, or would
result from such Revolving Credit Loan, Letter of Credit or Bankers Acceptance.
(b) The Bank shall have received such other approvals, opinions or documents as
the Bank may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties. On the date hereof, on each date
that the Borrower requests a Revolving Credit Loan, Letter of Credit or Bankers
Acceptance, the Borrower represents and warrants as follows:
(a) On the date hereof, the only Subsidiaries of the Borrower are those set
forth on Schedule 4.01(a) annexed hereto, which Schedule accurately sets forth
with respect to each such Subsidiary, its name and address, any other addresses
at which it conducts business, its state of incorporation and each other
jurisdiction in which it is qualified to do business and the identity and share
holdings of its stockholders. Except as set forth on Schedule 4.01(a), all of
the issued and outstanding shares of each Subsidiary which are owned by the
Borrower are owned by the Borrower free and clear of any mortgage, pledge, lien
or encumbrance. Except as set forth on Schedule 4.01(a), there are not
outstanding
38
any warrants, options, contracts or commitments of any kind entitling any Person
to purchase or otherwise acquire any shares of common or capital stock or other
equity interest of the Borrower or any Subsidiary of the Borrower, nor are there
outstanding any securities which are convertible into or exchangeable for any
shares of the common or capital stock of the Borrower or any Subsidiary of the
Borrower.
(b) The Borrower is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has the
corporate power to own its assets and to transact the business in which it is
presently engaged and is duly qualified and is in good standing in all other
jurisdictions where the character or nature of its business requires such
qualification.
(c) The execution, delivery and performance by the Borrower of the Loan
Documents to which it is a party are within the Borrower's corporate power and
have been duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of the stockholders of the Borrower;
(ii) do not contravene the Borrower's certificate of incorporation, charter or
by-laws; (iii) violate any provision of or any law, rule, regulation,
contractual restriction, order, writ, judgment, injunction, or decree,
determination or award binding on or affecting the Borrower; (iv) result in a
breach of or constitute a default under any indenture or loan or credit
agreement, or any other agreement, lease or instrument to which the Borrower is
a party or by which it or its properties may be bound or affected; and (v)
result in, or require, the creation or imposition of any Lien (other than the
Lien of the Loan Documents) upon or with respect to any of the properties now
owned or hereafter acquired by the Borrower.
(d) No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for the due
execution, delivery and performance by the Borrower of any Loan Document to
which it is a party, except authorizations, approvals, actions, notices or
filings which have been obtained, taken or made, as the case may be.
(e) The Loan Documents when delivered hereunder will have been duly executed and
delivered on behalf of the Borrower and will be legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms.
(f) The financial statements of the Borrower for the fiscal year ended March 31,
1998 and the fiscal quarter ended December 31, 1998, copies of which have been
furnished to the Bank, fairly present the financial condition of the Borrower
39
as at such date and the results of operations of the Borrower for the period
ended on such date, all in accordance with GAAP, and since such date there has
been (i) no material increase in the liabilities of the Borrower and (ii) no
Material Adverse Change in the Borrower.
(g) There is no pending or threatened action, proceeding or investigation
affecting the Borrower or any Subsidiary of the Borrower before any court,
governmental agency or arbitrator, which may either in one case or in the
aggregate, result in a Material Adverse Change in the Borrower or any such
Subsidiary.
(h) The Borrower and each Subsidiary of the Borrower have filed all federal,
state and local tax returns required to be filed and have paid all taxes,
assessments and governmental charges and levies thereon to be due, including
interest and penalties.
(i) The Borrower and each Subsidiary of the Borrower possess all licenses,
permits, franchises, patents, copyrights, trademarks and trade names, or rights
thereto, to conduct their respective businesses substantially as now conducted
and as presently proposed to be conducted, and neither the Borrower nor any such
Subsidiary are in violation of any similar rights of others.
(j) The Borrower is not a party to any indenture, loan or credit agreement or
any other agreement, lease or instrument or subject to any charter or corporate
restriction which could result in a Material Adverse Change in the Borrower.
(k) The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
G, T, U or X), and no proceeds of any Loan will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock or in any other way which will cause the Borrower to
violate the provisions of Regulations G, T, U or X.
(l) No proceeds of any Loan will be used to acquire any security in any
transaction which is subject to Sections 13 or 14 of the Securities Exchange Act
of 1934.
(m) The Borrower and each Subsidiary of the Borrower are in all material
respects in compliance with all federal and state laws and regulations in all
jurisdictions where the failure to comply with such laws or regulations could
result in a Material Adverse Change in the Borrower or any such Subsidiary.
40
(n) The Borrower, each Subsidiary of the Borrower and each ERISA Affiliate are
in compliance in all material respects with all applicable provisions of ERISA.
Neither a Reportable Event nor a Prohibited Transaction has occurred and is
continuing with respect to any Plan; no notice of intent to terminate a Plan has
been filed nor has any Plan been terminated; no circumstances exist which
constitute grounds under Section 4042 of ERISA entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administrate, a Plan, nor has
the PBGC instituted any such proceedings; neither the Borrower, any Subsidiary
of the Borrower, nor any ERISA Affiliate has completely or partially withdrawn
under Sections 4201 or 4204 of ERISA from a Multiemployer Plan; the Borrower,
each Subsidiary of the Borrower and each ERISA Affiliate have met their minimum
funding requirements under ERISA with respect to all of their Plans and the
present fair market value of all Plan assets exceeds the present value of all
vested benefits under each Plan, as determined on the most recent valuation date
of the Plan in accordance with the provisions of ERISA for calculating the
potential liability of the Borrower, any such Subsidiary or any ERISA Affiliate
to PBGC or the Plan under Title IV of ERISA; and neither the Borrower, any such
Subsidiary nor any ERISA Affiliate has incurred any liability to the PBGC under
ERISA.
(o) The Borrower and each Subsidiary of the Borrower are in compliance with all
federal, state or local laws, ordinances, rules, regulations or policies
governing Hazardous Materials and neither the Borrower nor any such Subsidiary
has used Hazardous Materials on, from, or affecting any property now owned or
occupied or hereafter owned or occupied by the Borrower or any such Subsidiary
in any manner which violates federal, state or local laws, ordinances, rules,
regulations or policies governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials, and that to the best of the Borrower's and such Subsidiaries'
knowledge, no prior owner of any such property or any tenant, subtenant, prior
tenant or prior subtenant have used Hazardous Materials on, from or affecting
such property in any manner which violates federal, state or local laws,
ordinances, rules, regulations, or policies governing the use, storage,
treatment, transportation, manufacture, refinement, handling, production or
disposal of Hazardous Materials.
(p) The proceeds of the Term Loan and the Revolving Credit Loans shall be used
exclusively for the purposes set forth in Sections 2.07 and 2.12 hereof.
(q) The properties and assets of the Borrower are not subject to any Lien other
than those described in Section 5.02(a) hereof.
41
(r) Neither the business nor the properties of the Borrower or any Subsidiary of
the Borrower are affected by any fire, explosion, accident, strike, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance), which could result in a Material Adverse
Change in the Borrower or any such Subsidiary.
(s) The Lien on the Collateral created by the Security Agreements constitute
valid first priority perfected security interests in favor of the Bank.
(t) The Borrower has disclosed to the Bank all credit agreements, indentures,
purchase agreements, guaranties, Capital Leases, and other investments,
agreements and arrangements presently in effect providing for or relating to
extensions of credit (including agreements and arrangements for the issuance of
letters of credit or for acceptance financing) in respect of which the Borrower
is in any manner directly or contingently obligated.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any amount shall remain
outstanding under the Term Loan Note or the Revolving Credit Note, or so long as
the Commitment shall remain in effect, the Borrower will, unless the Bank shall
otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each Subsidiary of the Borrower
to comply, in all material respects with all applicable laws, rules, regulations
and orders, where the failure to so comply could result in a Material Adverse
Change in the Borrower or any such Subsidiary.
(b) Reporting Requirements. Furnish to the Bank: (i) Annual Financial
Statements. (x) As soon as available and in any event within one hundred twenty
(120) days after the end of each fiscal year of the Borrower, a copy of the
audited financial statements of the Borrower for such year, including balance
sheets with related statements of income and retained earnings and statements of
cash flows, all in reasonable detail and setting forth in comparative form the
figures for the previous fiscal year, together with an unqualified opinion,
prepared by independent certified public accountants selected by the Borrower
and satisfactory to the Bank, all such financial statements to be prepared in
accordance with GAAP, and (y) as soon as available and in any event not later
42
than the date it is required to be filed with the Securities and Exchange
Commission, a copy of Form 10-K for each fiscal year of the Borrower.
(ii) Quarterly Financial Statements. As soon as available and in any event
within sixty (60) days after the end of each fiscal quarter, a copy of Form 10-Q
for each fiscal quarter of the Borrower, including the financial statements of
the Borrower for such quarter and for year to date, including a balance sheet
with a related statement of income and retained earnings and a statement of cash
flows, all in reasonable detail and setting forth in comparative form the
figures for the comparable quarter and comparable year to date period for the
previous fiscal year, all such financial statements to be prepared by management
of the Borrower in accordance with GAAP.
(iii) Management Letters. Promptly upon receipt thereof, copies of any reports
submitted to the Borrower by independent certified public accountants in
connection with the examination of the financial statements of the Borrower made
by such accountants;
(iv) Certificate of No Default. Simultaneously with the delivery of the
financial statements referred to in Section 5.01(b)(i) and (ii), a certificate
of the President or the principal accounting officer of the Borrower (1)
certifying that no Default or Event of Default has occurred and is continuing,
or if a Default or Event of Default has occurred and is continuing, a statement
as to the nature thereof and the action which is proposed to be taken with
respect thereto; and (2) with computations demonstrating compliance with the
covenants contained in Section 5.03.
(v) Intentionally omitted.
(vi) Notice of Litigation. Promptly after the commencement thereof, notice of
all actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign,
affecting the Borrower or any Subsidiary of the Borrower which, if determined
adversely to the Borrower or any such Subsidiary could result in a Material
Adverse Change in the Borrower or any such Subsidiary.
(vii) Notice of Defaults and Events of Default. As soon as possible and in any
event within five (5) days after the occurrence of each Default or Event of
Default, a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Borrower with
respect thereto.
43
(viii) ERISA Reports. Promptly after the filing or receiving thereof, copies of
all reports, including annual reports, and notices which the Borrower or any
Subsidiary of the Borrower files with or receives from the PBGC, the Internal
Revenue Service or the U.S. Department of Labor under ERISA; and as soon as
possible after the Borrower or any such Subsidiary knows or has reason to know
that any Reportable Event or Prohibited Transaction has occurred with respect to
any Plan or that the PBGC or the Borrower or any such Subsidiary has instituted
or will institute proceedings under Title IV of ERISA to terminate any Plan, the
Borrower will deliver to the Bank a certificate of the President or the
principal accounting officer of the Borrower setting forth details as to such
Reportable Event or Prohibited Transaction or Plan termination and the action
the Borrower proposes to take with respect thereto;
(ix) Reports to Other Creditors. Promptly after the furnishing thereof, copies
of any statement or report furnished to any other party pursuant to the terms of
any indenture, loan, or credit or similar agreement and not otherwise required
to be furnished to the Bank pursuant to any other clause of this Section
5.01(b).
(x) Proxy Statements, Etc. Promptly after the sending or filing thereof, copies
of all proxy statements, financial statements and reports which the Borrower
sends to its stockholders, and copies of all regular, periodic, and special
reports, and all registration statements which the Borrower files with the
Securities and Exchange Commission or any governmental authority which may be
substituted therefor, or with any national securities exchange.
(xi) Notice of Affiliates. Promptly after any Person becomes an Affiliate of the
Borrower, notice to the Bank of such Affiliate.
(xii) Borrowing Base Certificate. As soon as available and in any event within
fifteen (15) days after the end of each month, a Borrowing Base Certificate in
form and substance satisfactory to the Bank.
(xiii) Accounts Receivable Aging. As soon as available and in any event within
fifteen (15) days after the end of each month, an accounts receivable aging in
form and substance satisfactory to the Bank.
(xiv) General Information. Such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any Subsidiary of the
Borrower as the Bank may from time to time reasonably request.
(c) Taxes. Pay and discharge, and cause its Subsidiaries to pay and discharge,
44
all taxes, assessments and governmental charges upon it or them, its or their
income and its or their properties prior to the dates on which penalties are
attached thereto, unless and only to the extent that (i) such taxes shall be
contested in good faith and by appropriate proceedings by the Borrower or any
such Subsidiary, as the case may be; (ii) there be adequate reserves therefor in
accordance with GAAP entered on the books of the Borrower or any such
Subsidiary; and (iii) no enforcement proceedings against the Borrower or any
such Subsidiary have been commenced.
(d) Corporate Existence. Preserve and maintain, and cause its Subsidiaries to
preserve and maintain, their corporate existence and good standing in the
jurisdiction of their incorporation and the rights, privileges and franchises of
the Borrower and each such Subsidiary in each case where failure to so preserve
or maintain could result in a Material Adverse Change in the Borrower or such
Subsidiary.
(e) Maintenance of Properties and Insurance. (i) Keep, and cause any
Subsidiaries to keep, the respective properties and assets (tangible or
intangible) that are useful and necessary in its business, in good working order
and condition, reasonable wear and tear excepted; (ii) maintain, and cause any
Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks as
are usually carried by companies engaged in similar businesses and owning
properties doing business in the same general areas in which the Borrower and
any such Subsidiaries operate; and (iii) cause the Bank to be named as lender
loss payee on any such insurance policies.
(f) Books of Record and Account. Keep, and cause any Subsidiaries to keep,
adequate records and proper books of record and account in which complete
entries will be made in a manner to enable the preparation of financial
statements in accordance with GAAP, reflecting all financial transactions of the
Borrower and any such Subsidiaries.
(g) Visitation; Field Examination. (i) At any reasonable time, and from time to
time, permit the Bank or any agents or representatives thereof, to examine and
make copies of and abstracts from the books and records of, and visit the
properties of, the Borrower and to discuss the affairs, finances and accounts of
the Borrower with any of the officers or directors of the Borrower or the
Borrower's independent accountants.
(ii) From time to time, upon reasonable notice under the circumstances and
45
during business hours, allow the Bank to conduct, and cooperate with the Bank in
connection therewith, a Field Examination. The fees and expenses of one such
Field Examination in each calendar year shall be for the account of the
Borrower, unless a Default or Event of Default should occur and be continuing,
in which event the Borrower shall be responsible for the costs of all Field
Examinations.
(h) Performance and Compliance with Other Agreements. Perform and comply and
cause any Subsidiaries to perform and comply, with each of the provisions of
each and every agreement the failure to perform or comply with which could
result in a Material Adverse Change in the Borrower or any Subsidiary.
(i) Continued Perfection of Liens and Security Interest. Record or file or
rerecord or refile the Loan Documents or a financing statement or any other
filing or recording or refiling or rerecording in each and every office where
and when necessary to preserve and perfect the security interests of the Loan
Documents.
(j) Pension Funding. Comply with the following and cause each ERISA Affiliate of
the Borrower or any Subsidiary of the Borrower to comply with the following:
(i) engage solely in transactions which would not subject any of such entities
to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Internal Revenue Code in either case in an amount
in excess of $25,000.00;
(ii) make full payment when due of all amounts which, under the provisions of
any Plan or ERISA, the Borrower, any such Subsidiary or any ERISA Affiliate of
any of same is required to pay as contributions thereto;
(iii) all applicable provisions of the Internal Revenue Code and the regulations
promulgated thereunder, including but not limited to Section 412 thereof, and
all applicable rules, regulations and interpretations of the Accounting
Principles Board and the Financial Accounting Standards Board;
(iv) not fail to make any payments in an aggregate amount greater than
$25,000.00 to any Multiemployer Plan that the Borrower, any such Subsidiary or
any ERISA Affiliate may be required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto; or
(v) not take any action regarding any Plan which could result in the occurrence
of a Prohibited Transaction.
46
(k) Licenses. Maintain at all times, and cause each Subsidiary to maintain at
all times, all licenses or permits necessary to the conduct of its business or
as may be required by any governmental agency or instrumentality thereof.
(l) New Affiliates. Cause any Affiliate of the Borrower formed after the date of
this Agreement to become a Guarantor of all obligations of the Borrower to the
Bank, whether incurred under this Agreement or otherwise and to secure its
obligations as a Guarantor by granting to the Bank a first priority security
interest in all personal property of such Affiliate.
(m) Year 2000. The Borrower shall deliver to the Bank evidence that: (x) any
reprogramming or other corrective modifications required to permit the proper
functioning, in and following the year 2000, of (i) the Borrower's computer
systems, and (ii) equipment containing embedded microchips (including systems
and equipment supplied by others or with which the Borrower's computer systems
interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed by June 30, 1999, (y) the cost to the Borrower
of such reprogramming, modification and testing and of the reasonably
foreseeable consequences of year 2000 to the Borrower (including, without
limitation, reprogramming errors and the failure of others' systems or
equipment) will not result in a default under the Loan Documents or result in a
material adverse change in the financial condition, business, operations,
properties or results of operations of the Borrower. Except for such of the
reprogramming and modifications referred to in the preceding sentence as may be
necessary, the computer and management information systems of the Borrower are,
and with ordinary course upgrading and maintenance, will continue for the term
of this Agreement to be, sufficient to permit the Borrower to conduct its
business without causing a Material Adverse Change thereto.
SECTION 5.02. Negative Covenants. So long as any amount shall remain outstanding
under the Term Loan Note or the Revolving Credit Note, or so long as the
Commitment shall remain in effect, the Borrower will not, without the written
consent of the Bank:
(a) Liens, Etc. Create, incur, assume or suffer to exist, any Lien, upon or with
respect to any of its properties, now owned or hereafter acquired, except:
(i) Liens in favor of the Bank;
(ii) Liens for taxes or assessments or other government charges or levies if not
47
yet due and payable or if due and payable if they are being contested in good
faith by appropriate proceedings and for which appropriate reserves are
maintained;
(iii) Liens imposed by law, such as mechanics', materialmen's, landlords',
warehousemen's, and carriers' Liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which are not past due
or which are being contested in good faith by appropriate proceedings and for
which appropriate reserves have been established;
(iv) Liens under workers' compensation, unemployment insurance, Social Security,
or similar legislation;
(v) Liens, deposits, or pledges to secure the performance of bids, tenders,
contracts (other than contracts for the payment of money), leases (permitted
under the terms of this Agreement), public or statutory obligations, surety,
stay, appeal, indemnity, performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;
(vi) Liens described in Schedule 5.02(a), provided that no such Liens shall be
renewed, extended or refinanced;
(vii) Judgment and other similar Liens arising in connection with court
proceedings (other than those described in Section 6.01(f)), provided the
execution or other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith and by
appropriate proceedings;
(viii) Easements, rights-of-way, restrictions, and other similar encumbrances
which, in the aggregate, do not materially interfere with the Borrower's
occupation, use and enjoyment of the property or assets encumbered thereby in
the normal course of its business or materially impair the value of the property
subject thereto;
(ix) Purchase money Liens on any property hereafter acquired or the assumption
of any Lien on property existing at the time of such acquisition, or a Lien
incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease, provided that:
(1) Any property subject to any of the foregoing is acquired by the Borrower in
the ordinary course of its respective business and the Lien on any such property
48
is created contemporaneously with such acquisition;
(2) The obligation secured by any Lien so created, assumed, or existing shall
not exceed one hundred (100%) percent of lesser of cost or fair market value of
the property acquired as of the time of the Borrower acquiring the same;
(3) Each such Lien shall attach only to the property so acquired and fixed
improvements thereon; and
(4) The obligation secured by such Lien is permitted by the provisions of
Section 5.02(b) and the related expenditure is permitted by the provisions of
Section 5.03(c).
(b) Debt. Create, incur, assume, or suffer to exist, any Debt, except:
(i) Debt of the Borrower under this Agreement or the Notes or any other Debt of
the Borrower owing to the Bank;
(ii) Debt in connection with those certain $5,500,000.00 industrial development
revenue bonds issued by Buncombe County Industrial Facilities and Pollution
Control Financing Authorities, provided that no such Debt shall be renewed,
extended or refinanced;
(iii) Subordinated Debt;
(iv) Accounts payable to trade creditors for goods or services which are not
aged more than ninety (90) days from billing date and current operating
liabilities (other than for borrowed money) which are not more than ninety (90)
days past due, in each case incurred in the ordinary course of business and paid
within the specified time, unless contested in good faith and by appropriate
proceedings;
(v) Debt of the Borrower secured by purchase money Liens permitted by Section
5.02(a)(ix).
(c) Lease Obligations. Create, incur, assume, or suffer to exist any obligation
as lessee for the rental or hire of any real or personal property, except (i)
Capital Leases permitted by Section 5.02(a), or (ii) leases existing on the date
of this Agreement and any extensions or renewals thereof and other leases
entered into after the date of this Agreement (other than Capital Leases) which
do not in the aggregate require the Borrower to make payments (including taxes,
insurance,
49
maintenance, and similar expenses which the Borrower is required to pay under
the terms of any lease) in any fiscal year of the Borrower in excess of
$500,000.00.
(d) Merger. Merge into, or consolidate with or into, or have merged into it, any
Person; and, for the purpose of this subsection (d), the acquisition or sale by
the Borrower by lease, purchase or otherwise, of all, or substantially all, of
the common stock or the assets of any Person or of it shall be deemed a merger
of such Person with the Borrower other than in connection with Permitted
Acquisitions, provided that the total aggregate consideration (whether cash,
stock or assumed liabilities) for all Permitted Acquisitions (not including the
acquisition of the medical products division of Acme United Corp.) shall not
exceed $2,000,000.00 in any fiscal year or $5,000,000.00 in the aggregate during
the term of this Agreement.
(e) Sale of Assets, Etc. Sell, assign, transfer, lease or otherwise dispose of
any of its assets, (including a saleleaseback transaction) with or without
recourse, except for (i) inventory disposed of in the ordinary course of
business; and (ii) the sale or other disposition of assets no longer used or
useful in the conduct of its business.
(f) Investments, Etc. Make any Investment other than Permitted Investments.
(g) Transactions With Affiliates. Except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's or a Subsidiary's
business and upon fair and reasonable terms no less favorable to the Borrower or
the Subsidiary than would be obtained in a comparable arm's length transaction
with a Person not an Affiliate, enter into any transaction, including, without
limitation, the purchase, sale, or exchange of property or the rendering of any
service, with any Affiliate.
(h) Prepayment of Outstanding Debt. Pay, in whole or in part, any outstanding
Debt (other than Debt owing to the Bank) of the Borrower, which by its terms is
not then due and payable.
(i) Guarantees. Guaranty, or in any other way become directly or contingently
obligated for any Debt of any other Person (including any agreements relating to
working capital maintenance, take or pay contracts or similar arrangements)
other than (i) the endorsement of negotiable instruments for deposit in the
ordinary course of business; or (ii) guarantees existing on the date hereof and
set forth in Schedule 5.02(i) annexed hereto.
50
(j) Change of Business. Materially alter the nature of its business.
(k) Fiscal Year. Change the ending date of its fiscal year from March 31.
(l) Intentionally omitted.
(m) Accounting Policies. Change any accounting policies, except as permitted by
GAAP.
(n) Change of Tax Status. Change its tax reporting status as a sub-chapter C
corporation.
(o) Dividends, Etc. Declare or pay any dividends, purchase, redeem, retire or
otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such,
whether in cash, assets, or in obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of any shares of its capital
stock; or make any other distribution by reduction of capital or otherwise in
respect of any share of its capital stock.
(p) Intentionally omitted.
(q) Acquisitions. Make any Acquisition other than a Permitted Acquisition.
(r) Hazardous Material. The Borrower and each Subsidiary of the Borrower shall
not cause or permit any property owned or occupied by the Borrower or any such
Subsidiary to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials, except in
compliance with all applicable federal, state and local laws or regulations nor
shall the Borrower or any such Subsidiary cause or permit, as a result of any
intentional or unintentional act or omission on the part of the Borrower or any
such Subsidiary or any tenant or subtenant, a release of Hazardous Materials
onto any property owned or occupied by the Borrower or any such Subsidiary or
onto any other property. The Borrower and each such Subsidiary shall not fail to
comply with all applicable federal, state and local laws, ordinances, rules and
regulations, whenever and by whomever triggered, and shall not fail to obtain
and comply with, any and all approvals, registrations or permits required
thereunder. The Borrower shall execute any documentation required by the Bank in
connection with the representations, warranties and covenants contained in this
paragraph and Section 4.01 of this Agreement.
51
SECTION 5.03. Financial Requirements. So long as any amount shall remain
outstanding under the Term Loan Note, the Revolving Credit Note or the Converted
Term Loan Note or so long as the Commitment shall remain in effect:
(a) Minimum Capital Base. The Borrower will maintain at all times, to be tested
as of each fiscal quarter end, a minimum Capital Base of not less than the
following:
Period Minimum Capital Base
------ --------------------
3/31/99 to 3/30/00 $ 8,000,000.00
3/31/00 to 3/30/01 $ 9,000,000.00
3/31/01 to 3/30/02 $10,500,000.00
3/31/02 to 3/30/03 $12,500,000.00
3/31/03 and thereafter $14,500,000.00
(b) Minimum Cash Flow Leverage Ratio. The Borrower will maintain at all times a
minimum Cash Flow Leverage Ratio of not less than the following, to be tested
quarterly (i) on an annualized basis during the fiscal year ending March 31,
2000, and (ii) on a rolling four quarter basis for each fiscal year thereafter:
Period Minimum Cash Flow Leverage Ratio
------ --------------------------------
4/1/99 to 3/30/00 4.10 to 1.0
3/31/00 to 3/30/01 3.50 to 1.0
3/31/01 to 3/30/02 3.25 to 1.0
3/31/02 and thereafter 3.00 to 1.0
(c) Minimum Fixed Charge Coverage Ratio. The Borrower will maintain at all
times, to be tested as of each fiscal quarter end (i) on an annualized basis
during the fiscal year ending March 31, 2000, and (ii) on a rolling four quarter
basis for each fiscal year thereafter, a minimum Fixed Charge Coverage Ratio of
not less than 1.25 to 1.0.
(d) Leverage Ratio. The Borrower will maintain at all times, to be tested as of
each fiscal quarter end, a Leverage Ratio of not greater than the following:
Period Maximum Leverage Ratio
------ ----------------------
3/31/99 to 3/30/00 3.00 to 1.0
52
3/31/00 to 3/30/01 2.25 to 1.0
3/31/01 to 3/30/02 1.75 to 1.0
3/31/02 and thereafter 1.50 to 1.0
(e) Capital Expenditures. The Borrower will not make Capital Expenditures in
excess of the following during any fiscal year of the Borrower:
Fiscal Year Ending Maximum Capital Expenditures
------------------ ----------------------------
3/31/00 $2,500,000.00
Each fiscal year thereafter $1,500,000.00
In the event that the Borrower expends less than the maximum permitted amount
for Capital Expenditures during any fiscal year, such excess may carried over to
the next two (2) fiscal years.
53
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any installment of principal of, or interest
on, the Term Loan Note or the Revolving Credit Note when due or any fees or
other amounts owed in connection with this Agreement; or
(b) Any representation or warranty made by the Borrower herein or in the Loan
Documents or which is contained in any certificate, document, opinion, or
financial or other statement furnished at any time under or in connection with
any Loan Document shall prove to have been incorrect in any material respect
when made; or
(c) The Borrower shall fail to perform or observe any term, covenant, or
agreement contained in this Agreement in any other Loan Document (other than the
Notes) on its part to be performed or observed; or
(d) The Borrower or any Subsidiary of the Borrower shall fail to pay any Debt
(excluding Debt evidenced by the Term Loan Note and the Revolving Credit Note)
of the Borrower or any such Subsidiary (as the case may be), or any interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; or any other default under any agreement or instrument
relating to any such Debt, or any other event shall occur and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
(e) The Borrower or any Subsidiary of the Borrower shall generally not pay its
Debts as such Debts become due, or shall admit in writing its inability to pay
its Debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any such Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
54
relief, or composition of it or its Debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property and if instituted
against the Borrower or any such Subsidiary shall remain undismissed for a
period of 30 days; or the Borrower or any such Subsidiary shall take any action
to authorize any of the actions set forth above in this subsection (e); or
(f) Any judgment or order or combination of judgments or orders for the payment
of money, in excess of $250,000.00 in the aggregate, which sum shall not be
subject to full, complete and effective insurance coverage, shall be rendered
against the Borrower or any Subsidiary of the Borrower and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 60 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(g) Any Guarantor shall fail to perform or observe any term or provision of its
Guaranty or any representation or warranty made by any Guarantor (or any of its
officers or partners) in connection with such Guarantor's Guaranty shall prove
to have been incorrect in any material respect when made; or
(h) Any of the following events occur or exist with respect to the Borrower, any
Subsidiary of the Borrower, or any ERISA Affiliate: (i) any Prohibited
Transaction involving any Plan; (ii) any Reportable Event with respect to any
Plan; (iii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan; (iv) any event or
circumstance that might constitute grounds entitling the PBGC to institute
proceedings under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the institution of the PBGC
of any such proceedings; (v) complete or partial withdrawal under Section 4201
or 4204 of ERISA from a Multiemployer Plan or the reorganization insolvency, or
termination of any Multiemployer Plan; and in each case above, such event or
condition, together with all other events or conditions, if any, could in the
opinion of the Bank subject the Borrower, any such Subsidiary or any ERISA
Affiliate to any tax, penalty, or other liability to a Plan, a Multiemployer
Plan, the PBGC, or otherwise (or any combination thereof) which in the aggregate
exceeds or may exceed $50,000.00; or
(i) This Agreement or any other Loan Document, at any time after its execution
and delivery and for any reason, ceases to be in full force and effect or shall
be declared to be null and void, or the validity or enforceability of any
document or
55
instrument delivered pursuant to this Agreement shall be contested by the
Borrower or any party to such document or instrument or the Borrower or any
party to such document or instrument shall deny that it has any or further
liability or obligation under any such document or instrument; or
(j) An event of default specified in any Loan Document other than this Agreement
shall have occurred and be continuing.
SECTION 6.02. Remedies on Default. Upon the occurrence and continuance of an
Event of Default the Bank may by notice to the Borrower, (i) terminate the
Commitment, (ii) declare the Term Loan Note, the Revolving Credit Note, all
interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Commitment shall be terminated, the
Term Loan Note, the Revolving Credit Note, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower and (ii) proceed to enforce its rights whether by suit in
equity or by action at law, whether for specific performance of any covenant or
agreement contained in this Agreement or any Loan Document, or in aid of the
exercise of any power granted in either this Agreement or any Loan Document or
proceed to obtain judgment or any other relief whatsoever appropriate to the
enforcement of its rights, or proceed to enforce any other legal or equitable
right which the Bank may have by reason of the occurrence of any Event of
Default hereunder or under any Loan Document, provided, however, upon the
occurrence of an Event of Default referred to in Section 6.01(e), the Commitment
shall be immediately terminated, the Term Loan Note and the Revolving Credit
Note, all interest thereon and all other amounts payable under this Agreement
shall be immediately due and payable without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower. Any amounts collected pursuant to action taken under this Section 6.02
shall be applied to the payment of, first, any costs incurred by the Bank in
taking such action, including but without limitation attorneys fees and
expenses, second, to payment of the accrued interest on the Term Loan Note and
the Revolving Credit Note, and third, to payment of the unpaid principal of the
Term Loan Note and the Revolving Credit Note.
SECTION 6.03. Remedies Cumulative. No remedy conferred upon or reserved to the
Bank hereunder or in any Loan Document is intended to be exclusive of any other
available remedy, but each and every such remedy shall be cumulative and in
addition to every other remedy given under this Agreement or any Loan Document
or now or hereafter existing at law or in equity. No delay or omission
56
to exercise any right or power accruing upon any Event of Default shall impair
any such right or power or shall be construed to be a waiver thereof, but any
such right and power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Bank to exercise any remedy reserved
to it in this Article VI, it shall not be necessary to give any notice, other
than such notice as may be herein expressly required in this Agreement or in any
Loan Document.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc. No amendment, modification, termination or waiver
of any provision of any Loan Document to which the Borrower is a party, nor
consent to any departure by the Borrower from any provision of any Loan Document
to which it is a party, shall in any event be effective unless the same shall be
in writing and signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 7.02. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing (including telegraphic communication) and mailed,
telegraphed, sent by facsimile or delivered, if to the Borrower, at the address
of the Borrower set forth at the beginning of this Agreement and if to the Bank,
at the address of the Bank set forth at the beginning of this Agreement to the
attention of Xxxxxxx Xxxxxx, V.P., or, as to each party, at such other address
as shall be designated by such party in a written notice complying as to
delivery with the terms of this Section 7.02 to the other parties. All such
notices and communications shall be effective when mailed, telegraphed or
delivered, except that notices to the Bank shall not be effective until received
by the Bank.
SECTION 7.03. No Waiver, Remedies. No failure on the part of the Bank to
exercise, and no delay in exercising, any right, power or remedy under any Loan
Document, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by
law.
SECTION 7.04. Costs, Expenses and Taxes. The Borrower agrees to pay on demand
all costs and expenses of the Bank in connection with the preparation,
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execution, delivery and administration of this Agreement, the Term Loan Note,
the Revolving Credit Note, the Converted Term Loan Note and any other Loan
Documents, including, without limitation, the fees and expenses of counsel for
the Bank with respect thereto and with respect to advising the Bank as to its
rights and responsibilities under this Agreement, and all costs and expenses, if
any (including counsel fees and expenses), in connection with the enforcement of
this Agreement, the Term Loan Note, the Revolving Credit Note and any other Loan
Documents. The Borrower shall at all times protect, indemnify, defend and save
harmless the Bank from and against any and all claims, actions, suits and other
legal proceedings, and liabilities, obligations, losses, damages, penalties,
judgments, costs, expenses or disbursements which the Bank may, at any time,
sustain or incur by reason of or in consequence of or arising out of the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. The Borrower acknowledges that it is the
intention of the parties hereto that this Agreement shall be construed and
applied to protect and indemnify the Bank against any and all risks involved in
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, all of which risks are hereby assumed by the
Borrower, including, without limitation, any and all risks of the acts or
omissions, whether rightful or wrongful, of any present or future de jure or de
facto government or governmental authority, provided that the Borrower shall not
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Bank's gross negligence or willful misconduct. The provisions of this
Section 7.04 shall survive the payment of the Notes and the termination of this
Agreement.
SECTION 7.05. Right of Set-off. Upon the occurrence and during the continuance
of any Event of Default, the Bank is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Bank, Chemical
Securities, Inc., or any other affiliate of the Bank, to or for the credit or
the account of the Borrower or any Guarantor against any and all of the
obligations of the Borrower or any Guarantor now or hereafter existing under
this Agreement and the Term Loan Note and the Revolving Credit Note,
irrespective of whether or not the Bank shall have made any demand under this
Agreement or the Term Loan Note or the Revolving Credit Note and although such
obligations may be unmatured. The rights of the Bank under this Section are in
addition to all other rights and remedies (including, without limitation, other
rights of set-off) which the Bank may have.
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SECTION 7.06. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower and the Bank and thereafter it shall be
binding upon and inure to the benefit of the Borrower and the Bank and their
respective successors and assigns, except that the Borrower shall not have any
right to assign its rights hereunder or any interest herein without the prior
written consent of the Bank.
SECTION 7.07. Further Assurances. The Borrower agrees at any time and from time
to time at its expense, upon request of the Bank or its counsel, to promptly
execute, deliver, or obtain or cause to be executed, delivered or obtained any
and all further instruments and documents and to take or cause to be taken all
such other action the Bank may deem desirable in obtaining the full benefits of,
this Agreement or any other Loan Document.
SECTION 7.08. Guarantor and Subsidiary References. Any references in this
Agreement to Guarantors and/or Subsidiaries shall refer to any such Guarantors
and/or Subsidiaries if they are in existence. If no such Guarantors or
Subsidiaries exist, such references shall be of no effect.
SECTION 7.09. Section Headings, Severability, Entire Agreement. Section and
subsection headings have been inserted herein for convenience only and shall not
be construed as part of this Agreement. Every provision of this Agreement and
each Loan Document is intended to be severable; if any term or provision of this
Agreement, any Loan Document, or any other document delivered in connection
herewith shall be invalid, illegal or unenforceable for any reason whatsoever,
the validity, legality and enforceability of the remaining provisions hereof or
thereof shall not in any way be affected or impaired thereby. All exhibits and
schedules to this Agreement shall be annexed hereto and shall be deemed to be
part of this Agreement. This Agreement and the exhibits and schedules attached
hereto embody the entire Agreement and understanding between the Borrower and
the Bank and supersede all prior agreements and understandings relating to the
subject matter hereof.
SECTION 7.10. Governing Law. This Agreement, the Term Loan Note, the Revolving
Credit Note and the Converted Term Loan Note and all other Loan Documents shall
be governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 7.11. Waiver of Jury Trial. The Borrower and the Bank waive all rights
to trial by jury on any cause of action directly or indirectly involving the
terms, covenants or conditions of this Agreement or any Loan Document.
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SECTION 7.12. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
MEDICAL ACTION INDUSTRIES INC.
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------------
Xxxx X. Xxxxxxxxx
President
EUROPEAN AMERICAN BANK
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Xxxxxxx Xxxxxx
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