EXHIBIT 10.7.1
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of April 11, 1997 (this "AGREEMENT"), is
entered into by and between QUAD SYSTEMS CORPORATION, HITECH FINANCE COMPANY,
TRIMARK INVESTMENT CORPORATION, QUAD LEASING CORPORATION AND QUAD FOREIGN SALES
CORPORATION ("QFSC"), (each of which may be referred to individually by name or
as "BORROWER" and collectively, as the "BORROWERS") and CoreStates Bank, N.A.,
("BANK").
W I T N E S S E T H :
WHEREAS, the Bank, another lender and the Borrowers are parties to a
certain revolving credit agreement dated as of December 4, 1995 and a certain
term loan agreement dated as of January 24, 1995 as amended ("PRIOR LOAN
AGREEMENTS") pursuant to which the lenders therein agreed to provide loans and
other financial accommodations to the Borrowers in an aggregate principal amount
of up to $11,500,000; and
WHEREAS, Borrowers desire to refinance certain of their outstanding
indebtedness including the indebtedness outstanding under the Prior Loan
Agreements and to obtain additional credit facilities; and
WHEREAS, the Bank is willing to provide a credit facility to the Borrowers
on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS.
1.1 DEFINITIONS. As used in this Agreement, the following terms shall have
these meanings (and other capitalized terms shall have the meanings set forth in
Article VIII):
"ACCEPTANCE AGREEMENT" shall mean any Acceptance Agreement executed by the
Bank and the Borrowers with respect to Bankers' Acceptances to be created by the
Bank.
"ACCOMMODATION" shall have the meaning set forth in Section 2.5.
"ADDITIONAL AMOUNT" shall have the meaning set forth in Section 2.8.
"AFFILIATE" shall mean any Person (1) which directly or indirectly
controls, or is controlled by, or is under common control with Borrower or a
Subsidiary; (2) which directly or indirectly beneficially owns or holds ten
percent (10.0%) or more of any class of voting stock of the Borrower or any
Subsidiary; or (3) ten percent (10.0%) or more of the voting stock is directly
or indirectly beneficially owned or held by the Borrower or a Subsidiary. 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.
"AGREEMENT" shall mean this Credit Agreement, as amended, supplemented, or
modified from time to time and all exhibits and schedules attached hereto.
"APPLICABLE LENDING OFFICE" shall mean the office of the Bank at the
address set forth next to the name of the Bank in the signature pages hereof.
"AUTHORIZED FINANCIAL OFFICER" shall mean the director of financial
services, controller, treasurer or chief financial officer of the Borrower and
such other officers of the Borrower as to which Quad Systems Corporation and the
Bank may agree in writing.
"BANK" shall have the meaning set forth in the introductory clauses hereof.
"BANKERS' ACCEPTANCE" shall mean each acceptance created by the Bank
pursuant to Section 2.14 of this Agreement.
"BASE RATE" shall mean, for any day, the per annum rate of interest quoted
by the Bank on each Business Day as its overnight base rate for such day, as
said rate shall change from time to time with such changes to be immediately
effective, (it being understood that said rate is determined by the Bank in its
sole discretion on the basis of its assessment of money market conditions)
calculated on the basis of the actual number of days elapsed in a year of 360
days.
"BASE RATE LOANS" shall mean Revolving Credit Loans accruing interest based
on the Base Rate.
"BORROWERS" shall have the meaning set forth in the introductory clauses
hereof but, for purposes of Xxxxxx XX or Section 5.2(c), shall not include QFSC.
"BUSINESS DAY" shall mean (a) any day other than a Saturday, Sunday, or
other day on which commercial banks in Philadelphia are authorized or required
to close under the laws of the Commonwealth of Pennsylvania and, (b) if the
applicable day relates to a LIBO Rate Loan, or notice with respect to a LIBO
Rate Loan, a day on which dealings in Dollar deposits are also carried on the
London interbank market and banks are open for business in London ("LONDON
BUSINESS Day").
"CAPITAL EXPENDITURES" shall mean expenditures for any fixed assets or
improvements replacements, substitutions or additions thereto which have a
useful life of more than one year, including expenditures within the meaning of
Section 263 of the Code and assets acquired pursuant to Capitalized Lease;
"CAPITALIZED LEASE" shall mean all lease obligations of any Person or
Subsidiary for any property (whether real, personal or mixed) which have been or
should be capital on the books of the lessee in accordance with General Accepted
Accounting Principles.
"CERCLA" shall mean the Comprehensive Environmental Response Compensation
and Liability Act, 33 U.S.C. ss. 1251 ET SEQ, as amended from time to time, and
all and regulations with respect thereto in effect from time to time.
"CLOSING DATE" shall mean April 11, 1997.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and all and regulations with respect thereto in effect from time to
time.
"COLLATERAL" shall mean all property, tangible or intangible, which is
subject or to be subject to the Liens granted hereunder and under the Collateral
Documents pursuant to Article 3 hereof.
"COLLATERAL DOCUMENTS" shall mean the Stock Pledge Agreement and all other
agreements, consents, and/or instruments creating, assigning, confirming or
otherwise relating to the lien and/or security interest granted to the Bank in
any of the Collateral, all as more fully described in Article 3 hereof.
"COVENANT COMPLIANCE CERTIFICATE" shall mean a certificate completed by an
Authorized Financial Officer of the Borrower on behalf of the Borrower and
submitted to Bank under Section 6.1 (g) and containing a computation of, and
showing compliance with, each of the financial covenants set forth in Article
VIII.
"DEBT" shall mean as to any Person, without duplication, (i) all items
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a consolidated balance sheet of such Person
and its Subsidiaries as of the date on which Debt is to be determined including
trade debt and accruals, (ii) all indebtedness secured by any Lien on any
property or asset owned or held by such Person and any Subsidiary whether or not
the indebtedness secured thereby shall have been assumed, (iii) all indebtedness
of others with respect to which such Person or any Subsidiary has become liable
by way of a guarantee or endorsement (other than for collection or deposit in
the ordinary course of business), (iv) all contingent liabilities of such Person
or any Subsidiary, includIng but not limited to contingent liabilities in
connection with outstanding letters of credit, and (v) lease obligations that,
in conformity with GAAP, have been or should be capitalized on such entity's
balance sheet.
"DEFAULT RATE" on any Loan shall mean the rate of interest determined under
Section 2.2(e).
"DOLLARS" shall mean the lawful currency of the United States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
"ERISA AFFILIATE" shall mean any corporation which is a member of the same
controlled group of corporations as Borrower within the meaning of Section
414(b) of the Code, or any trade or business which is under common control with
Borrower within the meaning of Section 414(c) of the Code.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 9.1.
"ENVIRONMENTAL CONTROL STATUTES" shall mean any federal, state, county,
regional or local statute, law, ordinance, rule, regulation, order, directive or
requirement, together with all successor statutes, ordinances, rules,
regulations, orders, directives or regulations governing the control, storage,
removal, spill, release or discharge of Hazardous Substances, including without
limitation CERCLA, the Solid Waste Disposal Act, as
3
amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous
and Solid Waste Amendments of 1984, the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1976, the Hazardous Materials Transportation
Act, the Emergency Planning and Community Right to Know Act of 1986, the
National Environmental Policy Act of 1975, the Oil Pollution Act of 1990, any
similar or implementing state law, and in each case, as amended from time to
time and in effect from time to time.
"FIXED RATE LOANS" shall mean any Loan bearing interest at a fixed rate.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" OR "GAAP" shall mean generally
accepted accounting principles as in effect from time to time in the United
States, consistently applied.
"HAZARDOUS SUBSTANCES" shall mean without limitation, any regulated
substance, toxic substance, hazardous substance, hazardous waste, pollution,
pollutant or contaminant, under, and which may give rise to liability pursuant
to, any Environmental Control Statutes as well as words of similar purport or
meaning referred to in any other federal, state, county or municipal
environmental statute, ordinance, rule or regulation.
"INDEBTEDNESS FOR BORROWED MONEY" shall mean as to any Person (i) all
indebtedness, liabilities, and obligations, now existing or hereafter arising,
for money borrowed by such Person, or any Subsidiary, whether or not evidenced
by any note, indenture, or agreement (including, without limitation, the Note
and any indebtedness for money borrowed from an Affiliate) and (ii) all
indebtedness of others for money borrowed (including indebtedness of an
Affiliate) with respect to which such Person or any Subsidiary has become liable
by way of a guarantee or indemnity.
"INTEREST PERIOD" shall mean with respect to any LIBO Rate Loan, each
period commencing on the date any such Loan is made, or, with respect to a Loan
being renewed, the last day of the next preceding Interest Period with respect
to a Loan, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day of the calendar month) in the
first, second or third calendar month thereafter as selected under the
procedures specified in Section 2.3, if the Bank is then offering LIBO Rate
Loans for such period; provided that each LIBO Rate Loan Interest Period which
would otherwise end on a day which is not a Business Day (or, for purposes of
Loans to be repaid on a London Business Day, such day not a London Business Day)
shall end on the next succeeding Business Day (or London Business Day, as
appropriate) unless such next succeeding Business Day (or London Business Day,
as appropriate) falls in the next succeeding calendar month, in which case the
Interest Period shall end on the next preceding Business Day (or London Business
Day, as appropriate).
"INVESTMENT" in any Person shall mean:
(a) the acquisition (whether for cash, property, services or
securities or otherwise) of capital stock, bonds, notes, debentures,
partnership or other ownership interests or other securities of such
Person; and
(b) any deposit with, or advance, loan or other extension of credit
to, such Person (other than any such deposit, advance, loan or extension of
credit having a term not exceeding 120 days in the case of unaffiliated
Persons and one year in the case of Affiliates representing the purchase
price of inventory or supplies purchased in the
4
ordinary course of business) or guarantee or assumption of, or other
contingent obligation with respect to, Indebtedness for Borrowed Money or
other liability of such Person; and
(c) (without duplication of the amounts included in (a) and (b) above)
any amount that may, pursuant to the terms of such investment, be required
to be paid, deposited, advanced, lent or extended to or guaranteed or
assumed on behalf of such Person.
"LETTER OF CREDIT" shall mean individually and collectively any commercial
letter of credit or standby letter of credit issued by the Bank for the account
of the Borrowers.
"LETTER OF CREDIT SUBLIMIT" shall mean the sum of $3,000,000.
"LIBO RATE" shall mean, for the applicable Interest Period, (i) the rate,
rounded upwards to the next one-sixteenth of one percent, determined by the Bank
two London Business Days prior to the date of the corresponding LIBO Rate Loan,
at which the Bank is offered deposits in dollars at approximately 11:00 A.M.,
London time, by leading banks in the interbank Eurodollar or Eurocurrency market
for delivery on the date of such Loan in an amount and for a period comparable
to the amount and Interest Period of such Loan and in like funds, DIVIDED BY
(ii) a number equal to one (1.0) minus the LIBO Rate Reserve Percentage. The
LIBO Rate shall be Adjusted automatically with respect to any LIBO Rate Loan
outstanding on the effective date of any change in the LIBO Rate Reserve
Percentage, as of such effective date. LIBO Rate shall be calculated on the
basis of the number of days elapsed in a year of 360 days.
"LIBO RATE RESERVE PERCENTAGE" shall mean, for any LIBO Rate Loan for any
Interest Period therefor, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves (including any marginal,
supplemental, or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by the Bank against "Eurocurrency
Liabilities" (as such term is used in Regulation D) but without benefit or
credit 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 LIBO Rate Reserve Percentage shall reflect any other reserves
required to be maintained by the Bank against (1) any category of liabilities
which includes deposits by reference to which the rate for LIBO Rate Loans is to
be determined; or (2) any category of extension of credit or other assets which
include LIBO Rate Loans.
"LIBO RATE LOANS" shall mean Revolving Credit Loans accruing interest based
on the LIBO Rate.
"LIEN" shall mean any lien, mortgage, security interest, chattel mortgage,
pledge or other encumbrance (statutory or otherwise) of any kind securing
satisfaction of an obligation, including any agreement to give any of the
foregoing, any conditional sales or other title retention agreement or any lease
in the nature thereof, and the filing of or the agreement to give any financing
statement under the Uniform Commercial Code (intended to perfect any of the
foregoing) of any jurisdiction or similar evidence of any encumbrance.
"LOAN" or "LOANS" shall mean a Revolving Credit Loan or the Term Loan.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Stock Pledge
Agreement, the Collateral Documents, and all filings under the UCC as the same
may be replaced, amended or modified from time-to-time.
5
"MATERIAL ADVERSE EFFECT" shall mean the existence of any fact,
circumstance or occurrence which would reasonably be expected to have a material
and adverse effect on the business, properties, operations or condition
(financial or otherwise) of the Borrowers and their respective subsidiaries,
taken as a whole.
"MATURITY DATE" shall mean April 1, 2002.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined in ERISA
Section 4001(a)(3), which covers employees of Borrowers or any ERISA Affiliate.
"NET AVAILABILITY" shall mean at any time of determination an amount equal
to the Revolving Loan Commitment, MINUS (i) the aggregate principal amount of
all Revolving Credit Loans outstanding and (ii) the face amount of all
Accommodations outstanding provided, HOWEVER, that for purposes of determining
Net Availability, Loans and Accommodations for which a request is already
pending shall be deemed to be outstanding at that time.
"NOTES" shall mean the Revolving Credit Note and the Term Note.
"OBLIGATIONS" shall mean all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every kind,
matured or unmatured, direct or contingent, owing, arising, due, or payable to
the Bank by or from the Borrowers or any Subsidiary arising out of this
Agreement or any other Loan Document, including, without limitation, all
obligations to repay principal of and interest on all the Revolving Credit Loans
and the Term Loan, and to pay interest, fees, costs, charges, expenses,
professional fees, and all sums chargeable to the Borrowers and any Subsidiary
or for which any Borrower or any Subsidiary is liable as indemnitors under the
Loan Documents, whether or not evidenced by any note or other instrument.
"OPERATING LEASE" shall mean an operating lease as defined by Generally
Accepted accounting Principles, excluding all leases the expenses for which may
be charged to a customer of a Borrower pursuant to the written terms of the
contract with such customer.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENSION PLAN" shall mean, at any time, any Plan (including a Multiemployer
Plan), the funding requirements of which (under ERISA Section 302 or Code
Section 412) are, or at any time within the six years immediately preceding the
time in question, were in whole or in part, the responsibility of the Borrowers
or any ERISA Affiliate.
"PERMITTED ACQUISITIONS shall mean any and all acquisitions of the assets
of, or stock (or similar interest) in, another Person, which either individually
or in the aggregate, during any Fiscal Year, have a cost to Borrowers of, or are
valued at, not more than $2,000,000 (in each case after giving effect to all
liabilities assumed in connection therewith) PROVIDED, HOWEVER, that the
Borrowers shall give the Bank ten (10) Business Days prior written notice of
each such transaction together with a pro-forma financial statement and Covenant
Compliance Certificate with respect to the proposed transaction, and the
consummation of each such transaction would not cause the Borrowers to be in
violation or default of any other term, condition, covenant or agreement
contained herein.
6
"PERMITTED LIENS" shall mean as to any Person:
(a) any Liens for current taxes, assessments and other governmental
charges not yet due and payable or being contested in good faith by such
Person [or Subsidiary] by appropriate proceedings and for which adequate
reserves have been established by such Person [or Subsidiary] as reflected
in such Person's [or Subsidiary's] financial statements;
(b) any Liens imposed by law such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are
not past due for more than thirty (30) days or which are being contested in
good faith by appropriate proceedings promptly initiated and diligently
conducted and for which appropriate reserves have been established and so
long as no foreclosure, distraint, sale or other similar proceedings shall
have been commenced with respect thereto;
(c) easements, rights-of-way, restrictions and other similar
encumbrances on the real property or fixtures of such Person incurred in
the ordinary course of business which individually or in the aggregate are
not substantial in amount and which do not in any case materially detract
from the value or marketability of the property subject thereto or
interfere with the ordinary conduct of the business of such Person [or
Subsidiary];
(d) Liens (other than Liens imposed on any property of such Person or
any ERISA Affiliate pursuant to ERISA or section 412 of the Code) incurred
or deposits made in the ordinary course of business, including Liens in
connection with workers' compensation, unemployment insurance and other
types of social security and Liens to secure performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases that are not
Capitalized Leases, performance bonds, sales contracts and other similar
obligations, in each case, not incurred in connection with the obtaining of
credit or the payment of a deferred purchase price, and which do not, in
the aggregate, result in a material adverse effect on the business,
operations, assets or condition (financial or otherwise) of such Person or
any Subsidiary;
(e) Liens securing Indebtedness of a Subsidiary to such Person or to
another Subsidiary;
(f) Liens existing on the date hereof as set forth in Schedule 4.13
hereto including existing purchase money Liens on equipment, hereof so long
as each such Lien (x) exists upon the same terms as those existing on the
date hereof and (y) does not secure indebtedness in greater principal
amount than that outstanding on the date hereof and no additional assets
are furnished as collateral; and
(g) purchase money Liens on any property hereafter acquired; provided
that (i) such property is acquired in the ordinary course of business and
the Lien on such property is created contemporaneously with such
acquisition; (ii) the obligation secured by a Lien so created shall not
exceed 100% of the lesser of cost or fair market value of the property
covered thereby; (iii) each such Lien shall attach only to the property so
acquired and not to any other property or asset of the Borrower; (iv) the
Debt secured by all such Liens in the aggregate shall not exceed $1,000,000
at any one time outstanding; and (v) the obligation secured by such Lien is
permitted by the provisions of Section 7.2(c).
7
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, company, trust, business trust,
entity, any other entity of whatever nature, government, agency or political
subdivision thereof.
"PLAN" or "PENSION PLAN" shall mean an employee benefit plan as defined in
Section 3(3) of ERISA, other an a Multiemployer Plan, whether formal or informal
and whether legally binding or not.
"POTENTIAL DEFAULT" shall mean an event, condition or circumstance that
with the giving of notice or lapse of time or both would become an Event of
Default.
"PRIME RATE" shall mean the rate of interest publicly announced by the Bank
from time to time as its "prime rate" (it being acknowledged that such announced
rate is not tied to any external rate of interest or index and does not
necessarily reflect the lowest rate charged by the Bank to any particular class
or category of customers), which Prime Rate shall change simultaneously with any
change in such announced rate.
"PRIME RATE LOANS" shall mean Revolving Credit Loans accruing interest
based on the Prime Rate.
"PRIOR LOAN AGREEMENTS" shall have the meaning set forth in the
introductory clauses hereof.
"PROHIBITED TRANSACTION" shall mean a transaction that is prohibited under
Code Section 75 or ERISA Section 406 and not exempt under Code Section 4975 or
ERISA Section 408.
"REGULATION" shall mean any statute, law, ordinance, regulation, order or
rule of any United States or foreign, federal, state, local or other government
or governmental body, including, without limitation, those covering or related
to banking, financial transactions, public utilities, environmental control,
energy, safety, health, transportation, bribery, record keeping, zoning,
antidiscrimination, antitrust, wages and hours, employee benefits, and price and
wage control matters.
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as it may be amended from time to time.
"REGULATORY CHANGE" shall mean any change after the date of this Agreement
in regulations (including Regulation D) or the adoption or making after such
date of any interpretations, directives or requests of or under any Regulation
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof
applying to a class of banks including the Bank.
"REPORTABLE EVENT" shall mean, with respect to a Plan: (a) any of the
events set forth in ERISA Sections 4043(b) (other than a reportable event as to
which the provision of 30 days notice to the PBGC is waived under applicable
regulations) or 4063(a) or the regulations hereunder, (b) an event requiring any
Borrower or any ERISA Affiliate to provide security to a Pension Plan under Code
Section 401(a)(29) and (c) any failure by any Borrower or any ERISA Affiliate to
make payments required by Code Section 412(m).
"REVOLVER TERMINATION DATE" shall mean the EARLIER TO OCCUR of (a) April 1,
2000, or (b) the date on which this Agreement and/or the Revolving Loan
Commitment shall be terminated pursuant to Sections 2.7 or 9.2.
8
"REVOLVING LOAN COMMITMENT" shall mean the sum of $10,000,000.
"REVOLVING CREDIT LOAN" shall have the meaning set forth in Section 2.1.
"REVOLVING CREDIT NOTE" shall have the meaning set forth in Section 2.10.
"STOCK PLEDGE AGREEMENT" shall mean the Pledge Agreement between the
Borrowers and the Bank.
"SOLVENT" shall mean, with respect to any Person that the aggregate present
fair saleable value of such Person's assets is in excess of the total amount of
its probable liability on its existing debts as they become absolute and
matured, such Person has not incurred debts beyond its foreseeable ability to
pay such debts as they mature, and such Person has capital adequate to conduct
the business it is presently engaged in or is about to engage in.
"SUBSIDIARY" shall mean a corporation or other entity the shares of stock
or other equity interests of which having ordinary voting power (other than
stock having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such corporation
are at the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries or both, by a
Borrower.
"TAXES" shall have the meaning set forth in Section 2.9.
"TERMINATION EVENT" shall mean, with respect to a Pension Plan: (a) a
Reportable Event, (b) the termination of a Pension Plan, or the filing of a
notice of intent to terminate a Pension Plan, or the treatment of a Pension Plan
amendment as a termination under ERISA Section 4041(c), (c) the institution of
proceedings to terminate a Pension Plan under ERISA Section 4042 (d) the
appointment of a trustee to administer any Pension Plan under ERISA Section
4042.
"TERM NOTE" shall have the meaning set forth in Section 2.10.
"TYPE" when used with respect to any Loan or advance, means the
designation of whether such Loan or advance is a Base Rate Loan, a Prime Rate
Loan or a LIBO Rate Loan and when used with respect to any accommodation means
whether such accommodation is a letter of credit or a banker's acceptance.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with Generally Accepted Accounting Principles
consistent with those applied in the preparation of the financial statements
referred to in Section 4.5, and all financial data submitted pursuant to this
Agreement shall be prepared in accordance with such principles.
9
ARTICLE II
THE LOANS
Subject to the terms and conditions of this Agreement and in reliance upon
all of the representations and warranties, covenants and agreements of the
Borrowers set forth herein, the Bank agrees to make the following Loans to, and
to issue Accommodations for, the Borrowers.
2.1 REVOLVING CREDIT LOANS.
(a) The Bank agrees to make advances (collectively called the "REVOLVING
CREDIT LOANS" and individually a "REVOLVING CREDIT LOAN") to the Borrowers from
time to time during the period commencing on the Closing Date and ending on, but
not including, the Revolver Termination Date, in a principal amount not to
exceed at any one time outstanding (after giving effect to any then pending
request for Loan), the Revolving Loan Commitment; PROVIDED, HOWEVER, that
notwithstanding the foregoing, the Bank will not make a Revolving Credit Loan
if, after giving effect to such Revolving Credit Loan, the SUM OF: (i) the
unpaid principal amount of the Revolving Credit Loans to the Borrowers, PLUS
(ii) the face amount of all outstanding Accommodations, exceeds or would exceed
the Revolving Loan Commitment.
(b) The Borrowers may request Revolving Credit Loans at any one of the
following interest rate options further described in Section 2.2: (1) Base Rate
(2) Prime Rate or (3) LIBO Rate. The Revolving Credit Loans outstanding at any
one time may involve any combination of such interest rate options in such
amounts as the Borrowers may determine, subject to the terms and conditions
hereof, including the requirement concerning minimum amounts for Loan requests
and the further requirements that:
(i) no request may be made which would require more than one interest
rate option or more than one Interest Period to apply to a single Revolving
Credit Loan, and
(ii) Revolving Credit Loans made automatically in connection with the
payment of an Accommodation, shall be deemed to be Prime Rate Loans, and
(iii) in the case of LIBO Rate Loans, (x) not more than five (5) such
Loans may be outstanding at any one time, (y) no LIBO Rate Loan may have an
Interest Period extending beyond the Revolver Termination Date and the
Interest Periods available for LIBO Rate Loans shall be limited to periods
of one, two or three months,
(c) Except for Revolving Credit Loans which exhaust the full remaining
amount of the Revolving Loan Commitment and conversions which result in the
conversion of all Revolving Credit Loans subject to a particular interest rate
option, each of which may be in lesser amounts, each Revolving Credit Loan when
made and each conversion of Revolving Credit Loans of one type into Loans of
another type hereunder shall be in an amount at least equal to: (i) $500,000 or,
if greater, then in such minimum amount plus $100,000 multiples for LIBO Rate
Loans; and (ii) $100,000 or, if greater than in such
10
minimum amount plus $25,000 multiples for all other Revolving Credit Loans.
(d) Within the limits of the Revolving Loan Commitment, the Borrowers may
borrow, prepay (in accordance with Section 2.8) and reborrow Revolving Credit
Loans. All Revolving Credit Loans shall, in any event, be repaid by the
Borrowers on the Revolver Termination Date.
2.2 INTEREST ON THE REVOLVING CREDIT LOANS.
(a) BASE RATE. Each Revolving Credit Loan designated to be a Base Rate Loan
shall bear interest on the principal amount thereof from the date made until
such Loan is paid in full or converted, at a rate per annum equal to the SUM OF:
the Base Rate determined from time to time; PLUS a margin (expressed in basis
points) as may be negotiated by Borrower and the Bank from time to time. Accrued
interest on all Base Rate Loans shall be due and payable in arrears on the first
Business Day of each calendar month until paid in full and upon the Revolver
Termination Date.
(b) PRIME RATE. Each Revolving Credit Loan designated to be a Prime Rate
Loan shall bear interest on the principal amount thereof from the date made
until such Loan is paid in full or converted, at a rate per annum equal to the
Prime Rate determined from time to time. Accrued interest on all Prime Rate
Loans shall be due and payable in arrears on the first Business Day of each
calendar month until paid in full and upon the Revolver Termination Date.
(c) LIBO RATE. Each Revolving Credit Loan designated to be a LIBO Rate Loan
shall bear interest on the principal amount thereof from the date made until
such Loan is paid in full, renewed, or converted, at a rate per annum equal to
the SUM OF the LIBO Rate determined by the Bank from time to time (for the one,
two or three month period selected by Borrowers) PLUS a margin of 130 basis
points. Accrued interest on LIBO Loans with Interest Periods of one, two or
three months shall be due and payable on the last day of such Interest Period.
(i) After receipt of a request for a LIBO Rate Loan, the Bank shall
proceed to determine the LIBO Rate to be applicable thereto. The Bank shall
give prompt notice by telephone or facsimile to Borrowers of the LIBO Rate
thus determined in respect of each LIBO Rate Loan or any change therein.
(ii) In the event the Borrowers fail or are not permitted to select an
Interest Period for any LIBO Rate Loan within the time period and otherwise
as provided herein, such Loan shall be automatically converted into a Prime
Rate Loan on the last day of the Interest Period for such Loan.
(d) RENEWALS AND CONVERSIONS OF LOANS. The Borrowers shall have the right
to convert Base Rate Loans or Prime Rate Loans into LIBO Rate Loans, and vice
versa, and to renew LIBO Rate Loans; from time to time, provided that: (i)
Borrowers shall give the Bank notice of each permitted conversion or renewal as
provided in Section 2.3 hereof; (ii) LIBO Rate Loans may be converted or renewed
only as of the last day of the applicable Interest Period for such Loans; (iii)
without the consent of the Bank, no Loan may be converted into a LIBO Rate Loan,
and no Interest Period may be renewed if on the proposed
11
date of conversion an Event of Default, or Potential Default exists or would
thereby occur. The Bank shall use its best efforts to notify the Borrowers of
the effectiveness of such conversion or renewal, and the new interest rate to
which the converted or renewed Loan is subject, as soon as practicable after the
conversion; provided, however, that any failure to give such notice shall not
affect the Borrowers' obligations or the Bank's rights and remedies hereunder in
any way whatsoever.
(e) INTEREST RATES; DEFAULT RATE. Interest under this Agreement shall
accrue for each day from the date a Loan is made until paid in full (both before
and after maturity, default and or judgment) at the rates set forth in this
Agreement. If an Event of Default shall have occurred and be continuing
hereunder (without giving effect to any grace period provided hereunder), the
Borrowers shall, on demand, from time to time pay interest, to the extent
permitted by law, on the Loans (after as well as before judgment) at a rate
equal to the SUM OF (i) the rate which would have been applicable to such Loans
in the absence of such default PLUS (ii) 2.50%.
2.3 FUNDING PROCEDURES.
(a) Each request for a Revolving Credit Loan or the conversion or renewal
of an interest rate with respect to a Revolving Credit Loan shall be made not
later than 1:00 p.m. on a Business Day by delivery to the Bank of a written
request signed by the Borrowers or in the alternative a telephone request
followed promptly by written confirmation of the request, specifying the date
and amount of the Loan to be made, converted or renewed, selecting the interest
rate option applicable thereto, and in the case of LIBO Rate Loans, specifying
the Interest Period applicable to such Loans. The form of request attached
hereto as Exhibit "A" shall be used to request the making, conversion or renewal
of Loans unless otherwise agreed. Each request shall be received not less than
three London Business Days prior to the date of the proposed borrowing,
conversion or renewal in the case of Loans which will be LIBO Rate Loans. No
request shall be effective until actually received in writing by the Bank, and
upon receipt by the Bank, the request for a Loan shall not be revocable by the
Borrowers.
(b) Not later than 5:00 p.m. on the date of each Loan, unless any
applicable condition specified herein has not been satisfied, the Bank will make
funds immediately available to the Borrowers on the date of each Loan by a
credit to the account of Borrowers at the Bank's Applicable Lending Office.
(c) If the Bank makes a Loan on a day on which all or any part of an
outstanding Loan from the Bank is to be repaid, the Bank shall apply the
proceeds of its new loan to make such repayment and only an amount equal to the
difference (if any) between the amount being borrowed and the amount being
repaid shall be made available by the Bank as provided in clause (b).
2.4 TERM LOAN; INTEREST ON THE TERM LOAN.
(a) The Bank agrees to make a term loan to the Borrowers on the date hereof
in the principal amount of Three Million One Hundred Thousand Dollars
($3,100,000). The Term Loan shall be payable in twenty (20) consecutive,
quarterly installments of principal, each in the amount of One Hundred
Fifty-Five Thousand Dollars ($155,000), commencing on July 1, 1997 and
continuing on the first day of each calendar quarter thereafter to and including
April 1, 2002; the entire remaining unpaid balance of the
12
Term Loan together with all accrued interest shall be due and payable in full on
the Maturity Date.
(b) The Term Loan shall bear interest on the unpaid principal amount
thereof from time to time outstanding at the fixed rate of 7.95% per annum.
Interest on the Term Loan shall be computed on the basis of the actual number of
days elapsed over a year of 360 days, and such interest shall be payable in
arrears (i) on the first business day of each calendar month occurring after the
date hereof until the Term Loan is paid in full, (ii) at maturity, and (iii)
upon final payment.
2.5 ACCOMMODATIONS. The Bank may issue or cause to be issued, from
time to time at Borrowers' request and on terms and conditions satisfactory to
the Bank, credit accommodations consisting of Letters of Credit in accordance
with Section 2.13 or Bankers' Acceptances in accordance with Section 2.14 for
Borrowers' account ("ACCOMMODATIONS"). Borrowers shall execute such additional
agreements relating to the Accommodations, in form and substance acceptable to
Bank, as Bank may require. Any payments made by Bank in connection with the
Accommodations shall constitute additional Revolving Credit Loans hereunder. No
Accommodation will be issued unless the full amount of the Accommodation
requested, plus fees and costs for issuance, is less than the Net Availability
existing immediately prior to the issuance of the requested Accommodation, or if
the requested Accommodation would cause the outstanding Obligations to exceed
the Revolving Loan Commitment, or cause the open amount of any type of
Accommodation to exceed any sublimit applicable thereto.
2.6 FEES.
(a) CLOSING FEE. The Borrowers shall pay to the Bank a one-time fee (the
"CLOSING FEE") equal to the SUM OF: (i) 0.125% of the Revolving Loan Commitment;
PLUS (ii) 0.25% of the amount of the Term Loan; the unpaid balance (I.E., 50%)
of the Closing Fee shall be due and payable on the Closing Date.
(b) COMMITMENT FEE. From and after the Closing Date, Borrowers shall pay to
the Bank quarterly, in arrears, on the first day of each Fiscal Quarter
beginning with April 1, 1997, a Commitment Fee in the amount of 1/4 of one
percent (0.25%) per annum of the "unused portion of the Revolving Loan
Commitment", computed on a daily basis for the actual number of days elapsed
over a year of 360 days. For purposes of this provision, the "unused portion of
the Revolving Loan Commitment" shall mean the dollar amount of the Revolving
Loan Commitment REDUCED BY the aggregate principal amount of the Revolving
Credit Loans outstanding and the face amount of Accommodations outstanding.
(c) EXPENSES. The Borrowers shall pay to the Bank for its own account, the
fees and expenses agreed to between the Borrowers and Bank in the Outline of
Terms and Conditions signed by the Borrowers on March 6, 1997.
(d) NONREFUNDABLE. No portion of any of the above fees or expenses shall be
refundable under any circumstances, including prepayment, repayment or
acceleration of the Loans with respect to which such fees are due or have been
paid.
2.7 REDUCTION OR TERMINATION OF REVOLVING LOAN COMMITMENT; DATE.
(a) VOLUNTARY. The Borrowers may at any time, on not less than three
13
Business days' written notice, terminate or permanently reduce the Revolving
Loan Commitment, provided that any reduction shall be in the amount of
$1,000,000 or a multiple thereof and that no such reduction shall cause the
principal amount of Revolving Credit Loans outstanding to exceed the Revolving
Loan Commitment as reduced.
(b) TERMINATION. In the event the Revolving Loan Commitment is terminated
by the Borrowers, the Revolver Termination Date shall accelerate and the
Borrowers shall, simultaneously with such termination, repay the Revolving
Credit Loans in full.
2.8 PREPAYMENTS.
(a) BASE RATE LOANS. On one Business Day's notice to the Bank, the Borrower
may prepay the Base Rate Loans and/or the Prime Rate Loans in whole at any time
or in part from time to time, provided that each partial prepayment shall be in
the principal amount of $100,000 or, if greater, then in such minimum amount
plus $25,000 multiples.
(b) LIBO RATE LOANS. If any principal of a LIBO Rate Loan shall be repaid
(whether upon repayment, reduction of the Revolving Loan Commitment, after
acceleration or for any other reason) or converted to a Base Rate Loan prior to
the last day of the Interest Period applicable to such LIBO Rate Loan or if the
Borrowers fail for any reason to borrow a LIBO Rate Loan after giving
irrevocable notice pursuant to Section 2.3, the Borrowers shall pay to the Bank,
in addition to the principal and interest then to be paid, such additional
amounts as may be necessary to compensate the Bank for all direct and indirect
costs and losses (including losses resulting from redeployment of prepaid or
unborrowed funds at rates lower than the cost of such funds to the Bank, and
including lost profits incurred or sustained by the Bank) incurred as a result
of such repayment or failure to borrow (the "ADDITIONAL AMOUNT"). The Additional
Amount (which the Bank shall take reasonable measures to minimize) shall be
specified in a written notice or certificate delivered to Borrowers by the Bank.
Such notice or certificate shall contain a calculation in reasonable detail of
the Additional Amount to be compensated and shall be conclusive as to the acts
and the amounts stated therein, absent manifest error.
(c) FIXED RATE LOANS. Borrowers may prepay the outstanding principal amount
of the Term Loan, in whole or in part, from time to time, subject to the
following conditions: (i) each partial prepayment shall be in a minimum amount
of $50,000 and in integral multiples of $50,000; (ii) each prepayment shall be
preceded by one (1) Business Days' prior written notice specifying the amount of
the prepayment and the prepayment date; (iii) each partial prepayment shall be
applied in the inverse order of maturity on the unpaid principal balance of the
Term Loan; and (iv) each such prepayment shall be accompanied by a prepayment
premium determined as follows: such premium shall be equal to the amount, if
any, by which the aggregate present value of scheduled principal and interest
payments eliminated by the prepayment exceeds the principal amount being
prepaid. Said present value shall be calculated by application of a discount
rate determined by the Bank in its reasonable judgment to be the
yield-to-maturity at the time of prepayment on U.S. Treasury securities having a
maturity which most closely approximates the final maturity date of the
principal balance then outstanding and proposed to be pre-paid.
14
2.9 PAYMENTS - GENERAL.
(a) FORM OF PAYMENTS, APPLICATION OF PAYMENTS, PAYMENT ADMINISTRATION, ETC.
Provided that no Event of Default has occurred and is continuing, all payments
and prepayments shall be applied to the Loans in such order and to such extent
as shall be specified by the Borrowers, by written notice to the Bank at the
time of such payment or prepayment. Except as otherwise provided herein, all
payments of principal, interest, fees, or other amounts payable by the Borrowers
hereunder shall be remitted to the Bank at its Applicable Lending Office in
immediately available funds not later than 2:00 p.m. on the day when due.
Whenever any payment is stated as due on a day which is not a Business Day, the
maturity of such payment shall, except as otherwise provided in the definition
of "Interest Period" in Section 1.1, be extended to the next succeeding Business
Day and interest and commitment fees shall continue to accrue during such
extension. The Borrowers authorize the Bank to deduct from any account of any
Borrower maintained at the Bank or over which the Bank has control any amount
payable under this Agreement, the Notes or any other Loan Document as and when
such amounts become due. The Bank's failure to deliver any xxxx, statement or
invoice with respect to amounts due under this Section or under any Loan
Document shall not affect the Borrowers' obligation to pay any installment of
principal, interest or any other amount under this Agreement when due and
payable.
(b) NET PAYMENTS. All payments made to the Bank by the Borrowers hereunder,
under any Note or under any other Loan Document will be made without set off,
counterclaim or other defense. All such payments will be made free and clear of,
and without deduction or withholding for, any present or future taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or any political subdivision or taxing
authority thereof or therein (but excluding, except as provided below, any tax
imposed on or measured by the gross or net income of the Bank (including all
interest, penalties or similar liabilities related thereto) pursuant to the laws
of the United States of America or any political subdivision thereof, or taxing
authority of the United States of America or any political subdivision thereof,
in which the principal office or applicable lending office of the Bank is
located), and all interest, penalties or similar liabilities with respect
thereto (collectively, together with any amounts payable pursuant to the next
sentence, "TAXES"). The Borrowers shall also reimburse the Bank, upon the
written request of the Bank, for Taxes imposed on or measured by the gross or
net income of the Bank pursuant to the laws of the United States of America (or
any State or political subdivision thereof), or the jurisdiction (or any
political subdivision or taxing authority thereof in which the principal office
or applicable lending office of the Bank is located as the Bank shall determine
are payable by the Bank due to the amount of Taxes paid to or on behalf of the
Bank pursuant to this or the preceding sentence. If any Taxes are so levied or
imposed, the Borrowers agree to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due
hereunder, under any Note or under any other Loan Document, after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein or in such Note. The Borrowers will furnish to the Bank upon
request certified copies of tax receipts evidencing such payment by Borrowers.
The Borrowers will indemnify and hold harmless the Bank, and reimburse the Bank
upon its written request, for the amount of any Taxes so levied or imposed and
paid or withheld by the Bank.
2.10 NOTES.
(a) REVOLVING LOAN NOTE. Together herewith, the Borrowers shall issue
15
and deliver to the Bank a promissory note, substantially in the form of Exhibit
"B" hereto, payable to the order of the Bank, duly executed on behalf of the
Borrowers, dated as of the Closing Date, and in a maximum principal amount equal
to the Revolving Loan Commitment (the "REVOLVING LOAN NOTE"). Subject to the
terms of this Agreement, the principal balance outstanding under the Revolving
Loan Note together with all accrued interest shall be due and payable on the
Revolver Termination Date. All Revolving Credit Loans made by the Bank to the
Borrowers pursuant to this Agreement and all payments of principal thereon shall
be evidenced by the Bank in its records or, at its option, on a schedule
attached to the Revolving Loan Note, which records or schedule, as the case may
be, shall be conclusive and binding for all purposes absent error in
computation.
(b) TERM NOTE. Together herewith, the Borrowers shall issue and deliver to
the Bank a promissory note, substantially in the form of Exhibit "C" hereto,
payable to the order of the Bank, duly executed on behalf of the Borrowers,
dated as of the Closing Date, and in a principal amount of $3,100,000 (the "TERM
NOTE"). The Term Note shall be due and payable in accordance with the provisions
of Section 2.4. All payments of the Term Loan shall be evidenced by the Bank in
its records or, at its option, on a schedule attached to the Term Note, which
records or schedule shall be conclusive and binding for all purposes absent
error in computation.
(c) ADDITIONAL NOTES. In addition thereto, Borrowers shall, from time to
time at the reasonable request of the Bank execute and deliver such replacement
promissory notes to the Bank as the Bank deems necessary to evidence any of the
Loans.
2.11 DEPOSIT ACCOUNTS. To induce the Bank to make and to better secure the
Loans provided for hereunder, the Borrowers agrees, to establish and maintain
with the Bank at all times until all of the Obligations have been satisfied and
discharged, all of its principal deposit and cash management accounts. All
balances of the Borrowers maintained with the Bank in any deposit account or
otherwise shall be additional security for, and shall be subject to the Bank's
lien and security interest for, all Obligations of the Borrowers to the Bank.
The Bank is authorized to charge each Borrower's deposit account(s) for all of
the Obligations as they become due from time to time, including, without
limitation, principal, interest, fees and other charges and reimbursement of the
Bank's costs of collection in relation to the Obligations. The Borrowers shall
be permitted to maintain accounts with other banks or financial institutions
(acceptable to the Bank in its reasonable discretion) but only to the extent
necessary to meet Borrowers' payroll requirements and to service Borrowers'
office locations (i) in areas where the Bank does not maintain banking offices
and (ii) outside of the United States. Following the occurrence of an Event of
Default hereunder, Borrower will, immediately upon receipt of notice from the
Bank, assign to the Bank, all of Borrower's right, title and interest in and to
any and all accounts (other than those maintained for payroll purposes as
described above) maintained by Borrower at any bank, other than the Bank, to the
effect that following such assignment, the Bank shall have sole dominion and
control over such account(s).
2.12 JOINT AND SEVERAL LIABILITY. The business operations of the Borrowers
are interrelated and compliment one another, they have a common business
purpose, with intercompany bookkeeping and accounting adjustments used to
separate their respective properties, assets, liabilities and transactions. To
permit their uninterrupted and continuous operations, the Borrowers will require
funds for working capital and other corporate business purposes, and the making
of Loans hereunder by the Bank will directly or indirectly benefit each Borrower
severally and jointly whether or not certain of the
16
Borrowers receive part or all of the proceeds of any particular Loan. The
Borrowers hereby agree and acknowledge that each is jointly and severally liable
for the repayment of all of the Obligations, and each Borrower hereby guarantees
the Obligations incurred by the other Borrowers.
2.13 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement and to the Letter
of Credit Sublimit, the Bank will issue Letters of Credit for Borrower's
account, as soon as reasonably practicable but within three (3) Business Days
following the date Borrower's request for a Letter of Credit (including a fully
completed Letter of Credit Application and a Master Letter of Credit Agreement
in the customary form of the Bank) is received by the Bank. Notwithstanding
anything herein to the contrary, the Bank may decline to issue any requested
Letter of Credit on the basis that the terms or the conditions of drawing are
unacceptable to it in its reasonable discretion. Each Letter of Credit shall
provide that drafts drawn on it shall be payable on sight (or as otherwise
specified in the letter of credit). Each standby Letter of Credit issued by the
Bank shall have a maturity date of 364 days or less from the date issued and
each commercial Letter of Credit issued by the Bank shall have a maturity date
of 180 days or less from the date issued PROVIDED, HOWEVER, that no Letter of
Credit issued by the Bank shall have a maturity date extending beyond the
Revolver Termination Date. All Letter of Credit Borrowings made under this
Section shall be due and payable as provided below. No Letter of Credit shall be
issued unless the face amount of the Letter of Credit is less than the Net
Availability existing immediately prior to its issuance and such issuance would
not cause the Loans and Accommodations outstanding to exceed the Revolving Loan
Commitment.
(b) The Borrowers shall pay to the Bank, on each date on which the Bank
shall honor a draft or other demand for payment presented or made under any
Letter of Credit, an amount equal to the amount paid by the Bank in respect of
such draft or other demand under such Letter of Credit. If the Borrowers shall
fail to pay the full amount due on each such date, any amount due but unpaid
shall automatically be paid through the making of a Revolving Credit Loan in the
amount due but unpaid as of such date. Upon the making of such an automatic
Loan, the obligation of the Borrowers to repay amounts drawn under such Letter
of Credit shall be deemed satisfied. The automatic Loan under subsection (a)
above shall be deemed to be a Prime Rate Loan made under the Revolving Loan
Commitment and the parties shall be entitled to treat such Loan, for all
purposes under this Agreement, as if it were made under Section 2.1.
2.14 BANKERS ACCEPTANCES.
(a) Upon receiving an appropriate request from the Borrowers, the Bank
shall create a Bankers' Acceptance in the manner set forth in the Acceptance
Agreement, using drafts signed by Borrower and provided to Bank. Each Bankers'
Acceptance shall (i) be of a type of eligible for discounting and purchase under
12 U.S.C. ss.372 and the rules of the Board of Governors of the Federal Reserve
System then in effect, and (ii) have a maturity of 30, 60 or 90 days. On the
date of the requested Bankers' Acceptance, the Bank shall notify Borrowers as to
the rate applicable for discounting the Bankers' Acceptance to be created, which
rate shall be the Discount Rate. The obligations and rights of the Borrowers and
the Bank with respect to the Bankers' Acceptances shall be governed by the terms
of this Agreement as well as the terms of the Acceptance Agreement which is
incorporated herein by reference and made a part hereof.
17
(b) The Borrowers shall pay to the Bank the face amount of the Bankers'
Acceptance created by the Bank under above, on the stated maturity date of such
Bankers' Acceptance. If the Borrowers shall fail to pay the full amount on each
such date, any amount due but unpaid shall automatically be paid through the
making of a Revolving Credit Loan in the amount due but unpaid as of such date.
Upon the making of such an automatic Revolving Credit Loan, the Obligation of
the Borrowers to pay the Bankers' Acceptances on such date shall be deemed
satisfied. Upon being made, such automatic Revolving Credit Loan shall be deemed
to be a Prime Rate Loan made under the Revolving Loan Commitment and the Bank
shall be entitled to exercise all of its rights and remedies with respect to
such automatic Revolving Credit Loan as if it were made pursuant to Section 2.1
hereof.
2.15 CHANGES IN CIRCUMSTANCES; YIELD PROTECTION.
(a) If any Regulatory Change or compliance by the Bank with any request
made after the date of this Agreement by the Board of Governors of the Federal
Reserve System or by any Federal Reserve Bank or other central bank or fiscal,
monetary or similar authority (in each case whether or not having the force of
law) shall:
(i) impose, modify or make applicable any reserve, special deposit,
Federal Deposit Insurance Corporation premium or similar requirement or
imposition against assets held by, or deposits in or for the account of, or
loans or accommodations made by, or any other acquisition of funds for
loans or advances by, the Bank;
(ii) impose on the Bank any other condition regarding the Notes;
(iii) subject the Bank to, or cause the withdrawal or termination of
any previously granted exemption with respect to, any tax (including any
withholding tax but not including any income tax not currently causing the
Bank to be subject to withholding) or any other levy, impost, duty, charge,
fee or deduction on or from any payments due from the Borrowers; or
(iv) change the basis of taxation of payments from the Borrowers to
the Bank (other than by reason of a change in the method of taxation of the
Bank's net income);
and the result of any of the foregoing events is to increase the cost to the
Bank of making or maintaining any Loan or Accommodation or to reduce the amount
of principal, interest or fees to be received by the Bank hereunder in respect
of any Loan or Accommodation, the Bank will so notify the Borrowers. If the Bank
determines in good faith that the effects of the change resulting in such
increased cost or reduced amount cannot reasonably be avoided or the cost
thereof mitigated, then upon notice by the Bank to the Borrowers, the Borrowers
shall pay to the Bank on each interest payment date of or applicable to the Loan
or Accommodation, such additional amount as shall be necessary to compensate the
Bank for such increased cost or reduced amount.
(b) If the Bank shall determine that any Regulation regarding capital
adequacy or the adoption of any Regulation regarding capital adequacy, which
Regulation is
18
applicable to banks (or their holding companies) generally and not the Bank (or
its holding company) specifically, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank (or its holding company) with any such
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has the effect
of reducing the rate of return on the Bank's capital as a consequence of its
obligations hereunder to a level below that which the Bank could have achieved
but for such adoption, change or compliance (taking into consideration the
Bank's policies with respect to capital adequacy) by an amount deemed by the
Bank to be material, the Borrowers shall promptly pay to the Bank, upon demand,
such additional amount or amounts as will compensate the Bank for such
reduction.
(c) If the Bank shall determine (which determination shall be, in the
absence of fraud or manifest error, conclusive and binding upon all parties
hereto) that by reason of abnormal circumstances affecting the interbank
eurodollar or applicable eurocurrency market adequate and reasonable means do
not exist for ascertaining the LIBO Rate to be applicable to the requested LIBO
Rate Loan or that eurodollar or eurocurrency funds in amounts sufficient to fund
all the LIBO Rate Loans are not obtainable on reasonable terms, the Bank shall
give notice of such inability or determination by telephone to the Borrowers at
least two Business Days prior to the date of the proposed Loan and thereupon the
obligations of the Bank to make, convert other Loans to, or renew such LIBO Rate
Loan shall be excused, subject, however, to the right of the Borrowers at any
time thereafter to submit another request.
(d) Determination by the Bank for purposes of this Section of the effect of
any Regulatory Change or other change or circumstance referred to above on its
costs of making or maintaining Loans or Accommodations or on amounts receivable
by it in respect of the Loans and of the additional amounts required to
compensate the Bank in respect of any additional costs, shall be made in good
faith and shall be evidenced by a certificate, signed by an officer of the Bank
and delivered to the Borrowers, as to the fact and amount of the increased cost
incurred by or the reduced amount accruing to the Bank owing to such event or
events. Such certificate shall be prepared in reasonable detail and shall be
conclusive as to the facts and amounts stated therein, absent manifest error.
(e) The Bank will notify the Borrowers of any event occurring after the
date of this Agreement that will entitle the Bank to compensation pursuant to
this Section as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation. Said notice shall be in writing, shall
specify the applicable Section or Sections of this Agreement to which it relates
and shall set forth the amount of amounts then payable pursuant to this Section.
The Borrowers shall pay the Bank the amount shown as due on such notice within
10 days after its receipt of the same.
2.16 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
monies, securities and other property of any Borrower and the proceeds thereof,
now or hereafter held or received by, or in transit to, the Bank from or for any
Borrower, whether for safekeeping, custody, pledge, transmission, collection or
otherwise 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 to
or for the credit or the account of any Borrower against any and all of the
19
obligations of the Borrowers now or hereafter existing under this Agreement and
the Notes, irrespective of whether or not the Bank shall have made any demand
under this Agreement or the Notes and although such obligations may be
unmatured.
2.17 ILLEGALITY. Notwithstanding any other provision in this Agreement, if
the adoption of any applicable Regulation, or any change therein, or any change
in the interpretation or administration thereof by any governmental authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any request or directive
(whether or not having the force of law) of any such authority, central bank, or
comparable agency shall make it unlawful or impossible for the Bank to (1)
maintain its Revolving Loan Commitment, then upon notice to the Borrowers by the
Bank, the Revolving Loan Commitment shall terminate; or (2) maintain or fund
LIBO Rate Loans, then upon notice to the Borrowers of such event, the
outstanding LIBO Rate Loans shall be converted into Base Rate Loans.
2.18 EXTENSION OF REVOLVER TERMINATION DATE. The Revolver Termination Date
may be extended for an additional period (to be agreed upon by Bank and the
Borrowers) at the request of Borrowers and with the written consent of the Bank
(which consent may be withheld in the sole discretion of Bank). Within the 45
day period beginning 90 days prior to the Revolver Termination Date then in
effect, Borrowers may deliver to the Bank a written request for an extension of
the Revolver Termination Date. If the Bank has consented, then, so long as the
representations and warranties contained in Article IV (other than
representations and warranties which expressly speak as of a particular date or
are no longer true and correct as a result of a change which is permitted by
this Agreement) shall be true and correct on and as of the Revolver Termination
Date then in effect, the Revolver Termination Date shall be extended for the
additional period agreed upon by Borrowers and the Bank (effective as of the
Revolver Termination Date then in effect.
20
ARTICLE III
SECURITY FOR LIABILITIES
3.1 GRANT OF SECURITY INTEREST. As security for the due and punctual
payment of the Obligations, including, without limitation, all of each
Borrower's obligations under this Agreement and the Notes, and whether the
Obligations are from time to time reduced and thereafter increased or entirely
extinguished and thereafter reincurred, the Borrowers hereby pledge, grant and
assign to the Bank a first priority lien on and security interest in all of the
Collateral, as described on Schedule 3.1 hereto and as to be evidenced by the
following Collateral Documents:
(a) A Stock Pledge Agreement which provides the Bank with a first
priority lien upon and security interest in sixty-five (65%) percent of the
issued and outstanding shares of capital stock of the Subsidiaries of
Borrowers identified on Schedule 3.1.
(b) Form UCC-1 financing statements relating to all Collateral, to be
filed in all jurisdictions in which filings are deemed appropriate by the
Bank.
Borrowers shall have sixty (60) days following the Closing Date in which to
deliver to the Bank the agreements, certificates, instruments and other
documents necessary to satisfy the requirements of this Section 3.1 (including
without limitation delivery to the Bank of an opinion of counsel to Borrowers
regarding the validity, perfection and enforceability in favor of the Bank of
all of the foregoing).
3.2 FURTHER ASSURANCES. The Borrowers further agree to execute and deliver
to the Bank, at any time and from time to time, at Borrowers' sole cost and
expense, all assignments, financing statements pursuant to the Uniform
Commercial Code ("UCC"), including continuation statements thereof, and other
documents requested by the Bank, at its reasonable discretion, and to take all
other actions reasonably requested of the Borrowers from time to time by the
Bank to protect all Collateral now or hereafter granted to secure payment of the
Obligations and to create and perfect the security interest granted herein and
in the Collateral Documents. If Borrowers shall fail to execute any UCC
statement following a request reasonably made by the Bank, the Bank is
authorized to sign such financing statement on behalf of the Borrowers as their
attorney in fact with the same authority given to the Bank under Section 9.3 as
if there had occurred an Event of Default.
21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants to the Bank that:
4.1 ORGANIZATION, STANDING. The Borrower and each Subsidiary (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, (ii) has the corporate power and
authority necessary to own its assets, carry on its business and enter into and
perform its obligations hereunder, under each Loan Document to which it is a
party and (iii) is qualified to do business and is in good standing in each
jurisdiction where the nature of its business or the ownership of its properties
requires such qualification except where the failure to be so qualified would
not have a material adverse effect on the business, operations, assets or
condition (financial or otherwise) of the Borrower and its Subsidiaries taken as
a whole. All of Borrower's places of business, offices or other locations owned,
leased, or used in any manner by Borrower or any Subsidiary are accurately and
completely listed on Schedule 4.1 hereto, which schedule shall be amended, from
time to time, to reflect any of Borrower's or any Subsidiaries' future places of
business, offices or locations.
4.2 CORPORATE AUTHORITY. VALIDITY ETC. The making and performance of the
Loan Documents to which it is a party are within the power and authority of the
Borrower and have been duly authorized by all necessary corporate action. The
making and performance of the Loan Documents do not and under present law will
not require any consent or approval of any of the Borrower's shareholders or any
other person, do not and under present law will not violate any law, rule,
regulation order, writ, judgment, injunction, decree, determination or award
then in effect and binding on Borrower, do not violate any provision of its
charter or by-laws, do not and will not result in any breach of any material
agreement, lease or instrument to which it is a party, by which it is bound or
to which any of its assets are or may be subject, and do not and will not give
rise to any Lien upon any of its assets (other than those created in connection
with the Loans hereunder in favor of the Bank). Further, the Borrower is not in
default under any such agreement, lease or instrument except to the extent such
default reasonably would not have a material adverse effect on the business,
operations, assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole. No authorizations, approvals or consents of, and
no filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by any Borrower
of any Loan Document to which the Borrower is a party or for the validity or
enforceability thereof. Each Loan Document, when executed and delivered, will be
the legal, valid and binding obligation of Borrower, the enforceable against it
in accordance with its terms except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency, and other similar laws affecting
creditors' rights generally.
4.3 LITIGATION. Except as disclosed herein, there are no actions, suits or
proceedings pending or, to the Borrower's knowledge, threatened against or
affecting the Borrower or any assets of the Borrower before any court,
government agency or other tribunal which if adversely determined reasonably
could have a material adverse effect on the financial condition, operations or
assets of the Borrower and its Subsidiaries taken as a whole or upon the ability
of the Borrower to perform under the Loan Documents. The status (including the
tribunal, the nature of the claim and the amount in controversy) of
22
each such litigation matter as of the date of this Agreement is set forth in
Schedule 4.3.
4.4 ERISA. The Borrower and each Subsidiary and ERISA Affiliate are in
compliance in all material respects with all applicable provisions of ERISA and
the regulations promulgated thereunder; and, (a) Neither the Borrower, any
Subsidiary, nor any ERISA Affiliate maintains or contributes to or has
maintained or contributed to any multiemployer plan (as defined in section 4001
of ERISA) under which the Borrower, any Subsidiary or any ERISA Affiliate could
have any withdrawal liability; (b) Neither the Borrower, any Subsidiary, nor any
ERISA Affiliate, sponsors or maintains any Plan under which there is an
accumulated funding deficiency within the meaning of ss.412 of the Code, whether
or not waived; (c) The aggregate liability for accrued benefits and other
ancillary benefits under each Plan that is or will be sponsored or maintained by
the Borrower, any Subsidiary or any ERISA Affiliate (determined on the basis of
the actuarial assumptions prescribed for valuing benefits under terminating
single-employer defined benefit plans under Title IV of ERISA) does not exceed
the aggregate fair market value of the assets under each such defined benefit
pension Plan; (d) The aggregate liability of the Borrower and each Subsidiary
and each ERISA Affiliate arising out of or relating to a failure of any Plan to
comply with the provisions of ERISA or the Code, will not have a material
adverse effect on the Borrower or any Subsidiary; and (e) There does not exist
any unfunded liability (determined on the basis of actuarial assumptions
utilized by the actuary for the plan in preparing the most recent Annual Report)
of the Borrower, any Subsidiary or ERISA Affiliate under any plan, program or
arrangement providing post-retirement life or health benefits.
4.5 FINANCIAL STATEMENTS. The consolidated financial statements of the
Borrower and its Subsidiaries as of and for the fiscal year ending September 30,
1996 consisting of a balance sheet, income statement, a statement of
shareholders' equity, a statement of cash flows and accompanying footnotes, and
the interim consolidated financial statements of the Borrower and its
Subsidiaries as of December 31, 1996 furnished to the Bank in connection
herewith, present fairly, in all material respects, the financial position,
results of operations and cash flows of the Borrower and its Subsidiaries as of
the dates and for the periods referred to, in conformity with Generally Accepted
Accounting Principles. Except as set forth on Schedule 4.5, there are no
liabilities, fixed or contingent, which are not reflected in such financial
statements, other than liabilities which are not required to be reflected in
such balance sheets. Except as otherwise previously or contemporaneously with
the execution of this Agreement communicated to the Bank in writing by an
Authorized Financial Officer of Quad Systems Corporation, there has been no
material adverse change in the business, operations or assets or condition
(financial or otherwise) of any of the Borrower or its Subsidiaries since
December 31, 1996.
4.6 NOT IN DEFAULT; JUDGMENTS, ETC. No Event of Default under any Loan
Document has occurred and is continuing. The Borrower and its Subsidiaries have
satisfied all judgments and neither the Borrower nor any Subsidiary is in
default with respect to any judgment, writ, injunction, decree, rule, or
regulation of any court, arbitrator, or federal, state, municipal, or other
governmental authority, commission, board bureau, agency, or instrumentality,
domestic or foreign.
4.7 TAXES. The Borrower and each Subsidiary has filed all federal, state,
local and foreign tax returns and reports which it is required by law to file
and has paid all taxes, including wage taxes, assessments, withholdings and
other governmental charges which are presently due and payable (other than those
being contested in good faith by
23
appropriate proceedings and disclosed on Schedule 4.7). The tax charges,
accruals and reserves on the books of the Borrower and each Subsidiary are
adequate to pay all such taxes that have accrued but are not presently due and
payable.
4.8 PERMITS, LICENSES, ETC. The Borrower and each Subsidiary possess all
permits, licenses, franchises, trademarks, trade names, copyrights and patents
necessary to the conduct of its business as presently conducted or as presently
proposed to be conducted, except where the failure to possess the same would not
have a Material Adverse Effect.
4.9 COMPLIANCE WITH LAWS.
(a) COMPLIANCE. The Borrower and each Subsidiary is in compliance in all
material respects with all Regulations applicable to its business (including
obtaining all authorizations, consents, approvals, orders, licenses, exemptions
from, and making all filings or registrations or qualifications with, any court
or governmental department, public body or authority, commission, board, bureau,
agency, or instrumentality), the noncompliance with which reasonably would not
have a Material Adverse Effect.
(b) HAZARDOUS WASTES, SUBSTANCES AND PETROLEUM PRODUCTS.
(i) The Borrower and each Subsidiary: (i) have received all permits
and filed all notifications necessary to carry on their respective
business(es); and (ii) are in compliance in all respects with all
Environmental Control Statutes.
(ii) Neither the Borrower nor any Subsidiary has given any written or
oral notice, nor has it failed to give required notice, to the
Environmental Protection Agency ("EPA") or any state or local agency with
regard to any actual or imminently threatened Release of Hazardous
Substances on properties owned, leased or operated by the Borrower or any
Subsidiary or used in connection with the conduct of its business and
operations.
(iii) Neither the Borrower nor any Subsidiary has received notice that
it is potentially responsible for costs of clean-up or remediation of any
actual or imminently threatened Release of Hazardous Substances pursuant to
any Environmental Control Statute.
(iv) No real property owned or leased by the Borrower or any
Subsidiary is in violation of any Environmental Laws, no Hazardous
Materials are present on said real property and neither the Borrower nor
any Subsidiary has been identified in any litigation, administrative
proceedings or investigation as a responsible party for any liability under
any Environmental Laws.
4.10 SOLVENCY. The Borrower and each Subsidiary are, and after giving
effect to the transactions contemplated hereby, will be on and as of the date
hereof, Solvent.
4.11 NO BURDENSOME AGREEMENTS. Neither the Borrower nor any Subsidiary is a
party to or bound by any agreement or instrument or subject to any corporate or
other restriction, the performance or observance of which now has or, as far as
the Borrower or any Subsidiary can reasonably foresee, may have a materially
adverse effect on the financial condition, operations or assets of the Borrower
or of the Borrower and its Subsidiaries taken as a whole.
24
4.12 SUBSIDIARIES, INVESTMENTS, ETC. Set forth in Schedule 4.12 hereto is a
complete and correct list, as of the date of this Agreement, of all Subsidiaries
(and the respective jurisdiction of incorporation of each such Subsidiary), and
of all Investments held by the Borrower in any joint venture or other Person.
Except as disclosed in Schedule 4.12 hereto, as of the date hereof, the Borrower
owns, directly or through a Subsidiary, free and clear of Liens, all outstanding
shares of each Subsidiary and all such shares are validly issued, fully paid and
non-assessable, and the Borrower (or the respective Subsidiary) also owns, free
and clear of Liens, all such Investments. Schedule 4.12 also sets forth as to
each Subsidiary the authorized capital stock, the number of shares of each class
of such capital stock issued and outstanding and held in treasury and the record
and beneficial owners of all such issued and outstanding shares. Except as set
forth on Schedule 4.12, all of the issued and outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable and held free and clear of all Liens whatsoever,
and there are no outstanding subscriptions, options, warrants, calls, conversion
or exchange rights, commitments or agreements of any character obligating any
Subsidiary to issue, deliver or sell additional shares of its capital stock of
any class or any securities convertible into or exchangeable for any such
capital stock.
4.13 TITLE; LIENS. Except as otherwise disclosed in Schedule 4.13, Borrower
and its Subsidiaries have good and marketable title to and indefeasible
ownership interests in, all of their respective properties and assets, free and
clear of any Lien. Schedule 4.13 sets forth and describes in reasonable detail
each Lien in existence with regard to the property and assets of the Borrower
and any Subsidiary.
4.14 COLLATERAL DOCUMENTS. The provisions of the Collateral Documents are
effective to create in favor of the Bank, a legal, valid and enforceable
security interest in all of the Borrower's right, title and interest in the
Collateral, which security interest will be and constitute fully perfected first
priority Lien on and security interest in all right, title and interest of the
Borrower in such Collateral, superior in right to any Liens, existing or future,
which any third-party may have against such Collateral or interests therein.
4.15 LABOR MATTERS. The Borrower has not experienced any strike, labor
dispute, slowdown or work stoppage due to labor disagreements which would have a
Material Adverse Effect and, to the best knowledge of the Borrower, there is no
such strike, dispute, slowdown or work stoppage threatened.
4.16 DISCLOSURE GENERALLY. The representations and statements made by or on
behalf of the Borrower or any Subsidiary in connection with this credit facility
and each Loan, hereunder, including representations and statements in each of
the Loan Documents, do not contain any untrue statement of a material fact or
omit to state a material fact or any fact necessary to make the representations
made not materially misleading. No written information, exhibit, report or
financial statement furnished by the Borrower to the Bank in connection with
this Agreement, the Loans, or any Loan Document, contains any material
misstatement of fact or omits to state a material fact or any fact necessary to
make the statements contained therein not materially misleading.
25
ARTICLE V
CONDITIONS PRECEDENT
5.1 ALL LOANS. The obligation of the Bank to make any Loan is conditioned
upon satisfaction of the following by each Borrower:
(a) DOCUMENTS. The Borrower shall have delivered and the Bank shall
have received a request for a Loan, in the form attached hereto as Exhibit
"A".
(b) COVENANTS; REPRESENTATIONS. The Borrower shall be in compliance
with all covenants, agreements and conditions in each Loan Document and
each representation and warranty contained in each Loan Document (other
than representations and warranties which expressly speak as of a
particular date or are no longer true and correct as a result of a change
which is permitted by this Agreement) shall be true with the same effect as
if such representation or warranty had been made on the date such Loan is
made or issued.
(c) DEFAULTS. After giving effect to such transaction, no Event of
Default or Potential Default shall exist.
(d) CHANGE. No material, adverse change shall have occurred in the
business or condition (financial or otherwise) of the Borrowers taken as a
whole.
5.2 CONDITIONS TO FIRST LOAN. The obligation of the Bank to make the first
Loan hereunder is conditioned upon satisfaction of the following by each
Borrower:
(a) ARTICLES, BYLAWS. The Bank shall have received copies of the
Articles or Certificates of Incorporation and Bylaws of the Borrower,
certified by the Secretary or Assistant Secretary of the Borrower; together
with Certificate of Good Standing from any jurisdiction where the nature of
its business or the ownership of its properties requires such qualification
except where the failure to be so qualified would not have a material
adverse effect on the business, operations, assets or condition (financial
or otherwise) of the Borrower and its Subsidiaries taken as a whole;
(b) EVIDENCE OF AUTHORIZATION. The Bank shall have received copies
certified by the Secretary or Assistant Secretary of the Borrower of all
corporate or other action taken by each Person who is a party to any Loan
Document to authorize its execution and delivery and performance of the
Loan Documents and to authorize the Revolving Credit Loans, together with
such other related papers as the Bank shall reasonably require;
(c) LEGAL OPINIONS. The Bank shall have received a favorable written
opinion of XXXXXXX XXXXX XXXXXXX & XXXXXXXXX, Counsel for the Borrower,
which shall be addressed to the Bank and be dated the date of the first
Loan, in substantially the form attached as Exhibit 5.2(c);
(d) INCUMBENCY. The Bank shall have received a certificate signed by
the secretary or assistant secretary of each corporate signatory to the
Loan Documents other than the Bank, together with the true signature of the
officer or officers authorized to execute and deliver the Loan Documents,
upon which the Bank shall be entitled to rely conclusively;
26
(e) NOTES. The Bank shall have received an executed Revolving Loan
Note and an executed Term Note, each payable to the order of the Bank and
otherwise in the form of Exhibits "B" and "C" hereto. In addition, the Bank
shall have received all certificates, instruments and other documents then
required to be delivered pursuant to any Loan Documents, in each instance
in form and substance reasonably satisfactory to the Bank;
(f) CONSENTS. The Borrower shall have provided to the Bank evidence
satisfactory to the Bank that all governmental, shareholder and third party
consents and approvals necessary in connection with the transactions
contemplated hereby have been obtained and remain in effect;
(g) CHANGE. No material adverse change shall have occurred in the
financial condition or prospects of the Borrowers since the date of the
most recent annual Financial Statements of the Borrowers;
(h) OTHER AGREEMENTS. The Borrower shall have executed and delivered
each other Loan Document required hereunder including without limitation
the documents required under Section 3.1;
(i) LOAN REQUEST. A completed Loan Request Form required under
Paragraph 2.3(a), hereof, and any other documents or information reasonably
required by the Bank in connection therewith.
(j) FEE. Payment of the fees required by Section 2.6 hereof.
(k) FINANCIAL STATEMENTS. The Bank shall have received and reviewed a
true and complete copy of the Financial Statements of the Borrower for its
fiscal year ended September 30, 1996, audited by Ernst & Young, LLP,
Certified Public Accountants.
(l) DUE DILIGENCE. The Bank shall have completed and been satisfied
with the results of its due diligence review and audit of the Borrower, its
financial condition, assets, operations and property.
(m) INSURANCE. Evidence satisfactory to the Bank that the Borrower has
obtained the policies of insurance required by Section 6.6 of this
Agreement, that the policies provide that they cannot be cancelled or
amended without at least 30 days prior notice to the Bank and that all of
the requirements of such documents and sections relating to insurance have
been duly complied with.
(n) PRIOR INDEBTEDNESS. Evidence satisfactory to the Bank that all
previously existing Debt of Borrower including but not limited to the term
loans and revolving loans under the Prior Loan Agreements (but expressly
excluding the Indebtedness for Borrowed Money identified on Schedule 4.5 by
an asterisk [*]) have been paid in full and that any and all Liens existing
in connection therewith have been satisfied and released.
27
ARTICLE VI
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that, without the prior written consent
of the Bank, from and after the date hereof and so long as the Revolving Loan
Commitments are in effect or any Obligations remain unpaid or outstanding, the
Borrower will, and will cause each Subsidiary to:
6.1 FINANCIAL STATEMENTS AND REPORTS. Furnish to the Bank the following
financial information:
(a) ANNUAL STATEMENTS. As soon as available but no later than ninety
(90) days after the end of each fiscal year, a balance sheet of the
Borrower and its Subsidiaries as of the end of such year and the prior year
in comparative form, and related statements of operations, shareholders'
equity, and cash flows for the Borrower for the fiscal year and the prior
fiscal year in comparative form. The financial statements shall be on a
consolidated basis and shall include consolidating information. The
financial statements shall be in reasonable detail with appropriate notes
and be prepared in accordance with Generally Accepted Accounting
Principles. The annual financial statements (other than the consolidating
information) shall be certified by independent public accountants of
nationally recognized standing acceptable to the Bank and such
consolidating information shall be certified by the chief financial
officer, treasurer or controller of Borrower. Such Financial statements
shall be accompanied by a report of such independent certified public
accountants, and such consolidating information shall be accompanied by a
report of such chief financial officer, treasurer or controller, in each
case stating that, in the opinion of such accountants or officer,
respectively, such financial statements or consolidating information
present fairly, in all material respects, the financial position, and the
results of operations and the cash flows of the Borrower and its
Subsidiaries for the period then ended in conformity with Generally
Accepted Accounting Principles, except for inconsistencies resulting from
changes in accounting principles and methods agreed to by such accountants
or officer and specified in such report, and that, in the case of such
financial statements, the examination by such accountants of such financial
statements has been made in accordance with generally accepted auditing
standards and accordingly included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and
assessing the accounting principles used and significant estimates made, as
well as evaluating the overall financial statement presentation. In
addition to the annual financial statements, Borrower shall, promptly upon
receipt thereof, furnish to the Bank a copy of each other report submitted
to the board of directors of Borrower by its independent accountants in
connection with any annual, interim or special audit made by them of the
financial records of the Borrower.
(b) QUARTERLY STATEMENTS. As soon as available but no later than fifty
(50) calendar days after the end of each fiscal quarter of each fiscal
year, a consolidated balance sheet of the Borrower and its Subsidiaries and
related consolidated statements of operations (which includes shareholders'
equity) and cash flows for such quarterly period and for the period from
the beginning of such fiscal year to the end of such fiscal quarter and a
corresponding financial statement for the same periods in the preceding
fiscal year certified by the Authorized Financial Officer of Borrower as
having been prepared in accordance with Generally Accepted Accounting
Principles (subject to changes resulting from audits and year-end
adjustments).
28
(c) NO DEFAULT. Within sixty (60) calendar days after the end of each
of the first three fiscal quarters of each fiscal year and within one
hundred five (105) calendar days after the end of each fiscal year, a
certificate signed by the Authorized Financial Officer of Borrower
certifying that, to the best of such officer's knowledge, after due
inquiry, (i) the Borrower has complied with all covenants, agreements and
conditions in each Loan Document and that each representation and warranty
contained in each Loan Document is true and correct with the same effect as
though each such representation and warranty had been made on the date of
such certificate (except to the extent such representation or warranty
related to a specific prior date), and (ii) no event has occurred and is
continuing which constitutes an Event of Default or Potential Default, or
describing each such event and the remedial steps being taken by the
Borrower.
(d) ERISA. All reports and forms filed with respect to all Plans,
except as filed in the normal course of business and that would not result
in an adverse action to be taken under ERISA, and details of related
information of a Reportable Event.
(e) MATERIAL CHANGES. The Borrower shall promptly notify the Bank of
any litigation, administrative proceeding, investigation, business
development, or change in financial condition which would reasonably be
expected to have a Material Adverse Effect.
(f) OTHER INFORMATION. The Borrower will provide to the Bank all
shareholder and Securities and Exchange Commission notices, reports and
filings and any material press releases promptly after filing with the
Securities and Exchange Commission or release, respectively including
without limitation, all Annual Reports, Forms 10-K and 10-Q. In addition,
promptly upon request by the Bank from time to time (which may be on a
monthly or other basis), the Borrower shall provide such other information
and reports regarding the operations, business affairs, prospects and
financial condition of the Borrower as the Bank may reasonably request.
(g) COVENANT COMPLIANCE CERTIFICATE. Together with each required
Annual and Quarterly Statement described in (a) and (b) above, a Covenant
Compliance Certificate in the form of Exhibit "D", certified by an
Authorized Financial Officer of Quad Systems Corporation, as agent for the
Borrowers.
6.2 CORPORATE EXISTENCE. Except where failure to do so would not have a
Material Adverse Effect, Borrower will preserve its corporate existence and
material franchises, licenses, patents, copyrights, trademarks and trade names
consistent with good business practice and maintain, keep, and preserve, and
cause each Subsidiary to maintain, keep, and preserve, all of its properties
(tangible and intangible) necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted.
6.3 ERISA. (a) Comply in all material respects with the provisions of ERISA
to the extent applicable to any Plan maintained for the employees of Borrower,
any Subsidiary or any ERISA Affiliate; (b) do or cause to be done all such acts
and things that are required to maintain the qualified status of each Plan and
tax exempt status of each trust forming part of such Plan; (c) not incur any
material accumulated funding deficiency (within the meaning of ERISA and the
regulations promulgated thereunder), or any material liability to the PBGC (as
established by ERISA); (d) permit any event to occur (i) as
29
described in Section 4042 of ERISA or (ii) which may result in the imposition of
a lien on its properties or assets; and (e) notify Bank in writing promptly
after it has come to the attention of senior management of Borrower of the
assertion or threat of any "reportable event" or other event described in
Section 4042 of ERISA (relating to the soundness of a Plan) or the PBGC's
ability to assert a material liability against it or impose a lien on
Borrower's, any Subsidiary's, or any ERISA Affiliates' properties or assets; and
(f) refrain from engaging in any Prohibited Transactions or actions causing
possible liability under Section 5.02 of ERISA.
6.4 COMPLIANCE WITH RELATIONS. Comply in all material respects with all
Regulations applicable to its business, the noncompliance with which reasonably
could have a Material Adverse Effect.
6.5 CONDUCT OF BUSINESS; PERMITS AND APPROVALS; COMPLIANCE WITH LAWS.
Maintain, and cause each Subsidiary to maintain, in full force and effect, its
franchises, and all licenses, patents, trademarks, trade names, contracts,
permits, approvals and other rights necessary to the profitable conduct of its
business; and comply, in all respects with all applicable laws, rules,
regulations, and orders, except where failure to do so would not have a Material
Adverse Effect.
6.6 MAINTENANCE OF INSURANCE. Keep and maintain its properties and assets
insured against loss or damage by fire, theft, explosion, sprinklers and all
other hazards and risks ordinarily insured against by other owners who use such
properties in similar businesses for the full replacement value thereof. The
Borrower shall also maintain business interruption and public liability
insurance in amounts and with companies satisfactory to the Bank. The Bank shall
be named as lender loss payee on all such policies of insurance. All such
policies of insurance shall be in such form, with such companies and in such
amounts as may be satisfactory to the Bank. The Borrower shall deliver
certificates of insurance which shall indicate that (i) cancellation or material
amendment of any such policy is prohibited without thirty (30) days prior
written notice to the Agent and (ii) losses payable to the Bank as a lender loss
payee. The receipt by the Bank, of any such insurance proceeds shall be applied
on the account of Borrower's obligations in accordance with Section 10.7.
6.7 PAYMENT OF DEBT; PAYMENT OF TAXES; ETC. Promptly pay and discharge.
(a) all of its material Debt (including specifically all Indebtedness
for Borrowed Money and all indebtedness owed to the Bank) in accordance
with the terms thereof;
(b) all taxes, assessments, and governmental charges or levies imposed
upon it or upon its income and profits, upon any of its property, real,
personal or mixed, or upon any part thereof, before the same shall become
in default;
(c) all lawful claims for labor, materials and supplies or otherwise,
which, if unpaid, might become a lien or charge upon such property or any
part thereof;
provided, however, that so long as the Borrower first notifies the Bank of its
intention to do so, the Borrower shall not be required to pay and discharge (or
to cause such Subsidiary to pay and discharge) any such Debt, tax, assessment,
charge, levy or claim so long as the failure to so pay or discharge does not
constitute or result in a Event of Default or Potential
30
Default hereunder and so long as no foreclosure or other similar proceedings
shall have been commenced against such property or any part thereof and so long
as the validity thereof shall be contested in good faith by appropriate
proceedings diligently pursued and it shall have set aside on its books adequate
reserves with respect thereto.
6.8 NOTICE OF EVENTS. Promptly upon discovery by the Borrower of any of
the events described in (a) through (d) hereof, the Borrower shall give notice
to the Bank by telephone followed by a written notice, which describes the event
and all action the Borrower proposes to take with respect thereto:
(a) an Event of Default (determined without regard to any grace
period) under this Agreement;
(b) any default or event of default under a contract or contracts or
with respect to any evidence of or agreements for Indebtedness or Borrowed
Money and the default or event of default involves payments by one or more
of the Borrowers in an aggregate amount equal to or in excess of $250,000;
(c) the institution of, any material adverse determination in, or the
entry of any default judgment or order or stipulated judgment or order in,
any suit, action, arbitration, administrative proceeding, criminal
prosecution or governmental investigation against one or more of the
Borrowers or any Subsidiary in which the amount in controversy is at least
$500,000 singularly or in the aggregate; or
(d) any change in any Regulation, including, without limitation,
changes in tax laws and regulations, which could reasonably have a material
adverse impact on the ability of any Borrower to perform its obligations
under the Loan Documents or otherwise have a Material Adverse Effect.
6.9 INSPECTION RIGHTS. At any time during regular business hours and as
often as reasonably requested of the Borrower by the Bank, permit the Bank or
any authorized officer, employee, agent, or representative of the Bank, to
examine and make abstracts from the records and books of account of the
Borrower, wherever located, and to visit the properties of the Borrower; and to
discuss the affairs, finances, and accounts of the Borrower with any Borrower's
officers, directors or independent accountants, which activities shall be at the
expense of the Bank.
6.10 REPAIR. Maintain, preserve and keep its properties and assets in good
repair, working order and condition and from time to time make all necessary and
proper repairs, renewals, replacements, additions, betterments and improvements
thereto so that at all times such properties are maintained consistent with good
business practices except where failure to do so would not have a Material
Adverse Effect.
6.11 MAINTENANCE OF LIENS AND THE COLLATERAL DOCUMENTS. Observe and comply
with all the terms, conditions and covenants contained in the Collateral
Documents, and at the Borrower's expense, execute, acknowledge and deliver, or
cause the execution, acknowledgement and delivery of, and thereafter register,
file or record in an appropriate governmental office, any document or instrument
supplemental to or confirmatory of the Collateral Documents or otherwise
necessary or reasonably desirable for the creation, preservation and/or
perfection of the Liens purported to be created by the Collateral Documents.
31
6.12 LENDER EXPENDITURES. If the Borrower fails at any time to obtain and
maintain insurance required under Section 6.6, maintain or preserve the
Collateral, discharge taxes or liens at any time placed upon the Collateral or
pay or perform any of its obligations hereunder, the Bank, after fifteen (15)
days written notice to the Borrower, shall have the right, in its sole
discretion and without liability to the Borrower or any other Person, to do or
provide for any or all of the foregoing at the Borrower's sole cost and expense.
Notwithstanding the foregoing, if the Bank determines that the occurrence of any
of the conditions set forth in the preceding sentence requires immediate remedy,
then the Bank shall have the right, without notice to the Borrower, to take all
such actions as the Bank deems necessary to preserve the Collateral or any other
rights of the Bank provided for hereunder. Any such expenditures by the Bank
shall be added to the balance of the Revolving Credit Loans, bear interest at
the interest rate applicable to Revolving Credit Loans and shall be secured by
all of the Collateral. The Bank shall not be obligated to take any such action
contemplated in this subsection 6.12 nor shall it be liable to the Borrower for
failure to take or delay in taking any such action.
6.13 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Maintain its books and
records at all times in accordance with Generally Accepted Accounting
Principles.
6.14 USE OF PROCEEDS. The proceeds of the Revolving Credit Loans and the
Term Loan hereunder shall be used by the Borrowers, respectively, for general,
corporate working capital purposes, to purchase equipment for the Borrower's
headquarters facility, to acquire intangible assets, and for Permitted
Acquisitions and to: (i) refinance the revolving loans under the Prior Loan
Agreements, finance accounts and inventory and provide letters of credit and
other financial accommodations; and (ii) refinance the term loan under the Prior
Loan Agreements and finance equipment, furnishings and leasehold improvements
for the Borrowers' facility in Willow Grove, Pennsylvania.
6.15 FURTHER ASSURANCES. Do such further acts and things and execute and
deliver to the Bank such additional assignments, agreements, powers and
instruments, as the Bank may reasonably require or reasonably deem advisable to
carry into effect the purposes of this Agreement or to better assure and confirm
unto the Bank its rights, powers and remedies hereunder.
ARTICLE VII
NEGATIVE COVENANTS
Each Borrower covenants and agrees that, without the prior written consent
of the Bank, from and after the date hereof and so long as the Revolving Loan
Commitments are in effect or any Obligations remain unpaid or outstanding, it
will not, and will not permit any Subsidiary to:
7.1 MERGER, CONSOLIDATION. Merge or consolidate with or into any
corporation except, if no Event of Default (determined without regard to any
applicable grace period) shall have occurred and be continuing either
immediately prior to or upon the consummation of such transaction, any
Subsidiary may be merged into another Subsidiary or into Quad Systems
Corporation as long as Quad Systems Corporation is the surviving entity.
32
7.2 INDEBTEDNESS FOR BORROWED MONEY. Incur, create, or permit to exist any
Indebtedness for Borrowed Money except:
(a) Indebtedness for Borrowed Money of Quad Systems Corporation and
its Subsidiaries under this Agreement or the Notes;
(b) Indebtedness for Borrowed Money existing on the date hereof and
disclosed in the Borrower's financial statements referred to in Section 4.5
or otherwise disclosed to the Bank on Schedule 4.5, but no renewals,
extensions, or refinancings thereof;
(c) Indebtedness for Borrowed Money (other than to the Bank) of Quad
Systems Corporation and its Subsidiaries of up to Two Million Dollars
($2,000,000) in the aggregate including Debt in respect of letters of
credit or bankers acceptances issued for the account of Quad Systems
Corporation or any Subsidiary and Debt secured by purchase-money Liens
permitted under Section 7.3;
(d) Indebtedness for Borrowed Money of Quad Systems Corporation to a
Borrower or Subsidiary (which is not a Borrower hereunder) or of any
Subsidiary to Quad Systems Corporation or another Subsidiary.
7.3 LIENS. Create, assume or permit to exist any Lien on any of the
property or assets of the Borrower or any Subsidiary whether now owned or
hereafter acquired, or upon any income or profits therefrom, except Permitted
Liens, determined with respect to all Borrowers and Subsidiaries taken as a
whole.
7.4 GUARANTEES. Guarantee or otherwise in any way become or be responsible
for indebtedness or obligations (including working capital maintenance,
take-or-pay contracts, etc.) of any other person, contingently or otherwise,
except: (a) the endorsement of negotiable instruments of deposit in the normal
course of business; (b) guarantees by the Borrower or by any Subsidiary issued
to secure the indebtedness or obligation which underlying indebtedness or
obligation is permitted hereunder; and (c) guarantees (other than those
described in subsection (a) and (b)) made in the ordinary course of business by
Quad Systems Corporation with respect to obligations of Subsidiaries and in an
aggregate amount not greater than $1,000,000.
7.5 MARGIN STOCK. Use or permit any proceeds of the Loans to be used,
either directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock within the meaning of Regulation U
of The Board of Governors of the Federal Reserve System, as amended from time to
time.
7.6 ACQUISITIONS AND INVESTMENTS. Purchase or otherwise acquire (including
without limitation by way of share exchange) any part or amount of the capital
stock or assets of, or make any Investments in any other Person; or enter into
any new business activities or ventures not directly related to its present
business; or create any Subsidiary, except:
(a) Quad Systems Corporation may maintain its ownership interest in
each of the Subsidiaries listed on Schedule 4.12 at the percentage of
ownership disclosed on said Schedule.
33
(b) Quad Systems Corporation or any Subsidiary may acquire and hold
stock, obligations or securities received in settlement of debts (created
in the ordinary course of business) owing to Quad Systems Corporation or
such Subsidiary.
(c) Quad Systems Corporation or any Subsidiary may make and own:
(i) Investments in certificates of deposit or time deposits
having maturities in each case not exceeding one year from the date of
issuance thereof and issued by the Bank, or any FDIC-insured
commercial bank incorporated in the United States or any state thereof
having a combined capital and surplus of not less than $100,000,000;
(ii) Investments in marketable direct obligations issued or
unconditionally guaranteed by the United States of America any agency
thereof, or backed by the full faith and credit of the United States
of America, in each case maturing within one year from the date of
issuance or acquisition thereof including those acquired under
standard repurchase agreements;
(iii) Investments in commercial paper issued by a corporation
incorporated in the United States or any State thereof maturing no
more than one year from the date of issuance thereof and, at the time
of acquisition, having a rating of A-1 (or better) by Standard &
Poor's Corporation or P-1 (or better) by Xxxxx'x Investors Service,
Inc.; and
(iv) Investments in money market mutual funds all of the assets
of which are invested in cash or investments described in clauses (i),
(ii) and (iii) of this paragraph (c).
(v) Stock obligations, or securities received in settlement of
debts (created in the ordinary course of business) owing to any
Borrower or Subsidiary.
(d) Quad Systems Corporation may make Permitted Acquisitions.
7.7 TRANSFER OF ASSETS; NATURE OF BUSINESS. Sell, transfer, pledge, assign
or otherwise dispose of any assets or capital stock of the Borrower or any
Subsidiary unless such sale or disposition shall be in the ordinary course of
Borrower's or such Subsidiary's business for value received; or discontinue,
liquidate or change in any material respect any substantial part of its
operations or business unless the same would not have a Material Adverse Effect.
7.8 RESTRICTED PAYMENTS. Declare or pay any dividends; or 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 shareholders as
such whether in cash, assets, or obligations of any of the Borrowers; 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 shares of its capital stock; or permit any of the
Subsidiaries to purchase or otherwise acquire for value any stock of any
Borrower or any other Subsidiary, EXCEPT THAT: (i) a Borrower may declare and
deliver dividends and make distributions
34
payable solely in common stock of such Borrower; (ii) a Borrower may purchase or
otherwise acquire shares of its capital stock by exchange for or out of the
proceeds from a substantially concurrent issue of new shares of its capital
stock; and (iii) so long as no Event of Default or Potential Default has
occurred and is continuing or would be caused or created thereby, the Borrowers
may declare and pay dividends on an annual basis in amounts which do not in the
aggregate exceed 50% of the pre-tax Net Income of the Borrowers for such year
and which would not cause a breach of any of the Financial Covenants set forth
in Article VIII.
7.9 ACCOUNTING CHANGE. Make or permit any material change in financial
accounting policies or financial reporting practices, except as required by
Generally Accepted Accounting Principles or regulations of the Securities and
Exchange Commission, and in any event without having first given written notice
to the Bank of such proposed, required change.
7.10 LOCATION OF OFFICES. Change its principal place of business or chief
executive office unless Borrower has given the Bank thirty (30) days prior
written notice.
7.11 CAPITAL EXPENDITURES. Make Capital Expenditures (including (i)
indebtedness incurred under Section 7.2(c) in connection with purchase money
liens permitted under Section 7.3 and (ii) commitments to make any Capital
Expenditure in any such fiscal year) which exceed the amounts set forth below
(determined in the aggregate for all Borrowers) for the corresponding fiscal
year:
FISCAL YEAR ENDING MAXIMUM CAPITAL EXPENDITURES
------------------ ----------------------------
September 30, 1997 $3,000,000
September 30, 1998,
and thereafter 2,000,000
7.12 TRANSACTION WITH AFFILIATES. Enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate, or permit any non-borrower Subsidiary to
enter into any transaction, including, without limitation, the purchase, sale,
or exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
such Borrower's or non-borrower Subsidiary's business.
35
ARTICLE VIII
FINANCIAL COVENANTS.
The Borrowers covenant and agree that from and after the date hereof and so
long as the Revolving Loan Commitment is in effect or any Obligations remain
unpaid or outstanding, the Borrowers will keep and maintain the following
financial covenants, each of which shall, unless otherwise indicated, be (1)
tested quarterly at and as of the end of each fiscal quarter; and (2) prepared
on the basis of Consolidated results of the Borrowers and Subsidiaries as
reported on Forms 10-K and 10-Q:
8.1 LEVERAGE RATIO. Borrowers will maintain at all times a ratio of Total
Liabilities TO Tangible Net Worth, not greater than 1.00 to 1.00.
8.2 CURRENT RATIO. Borrowers will maintain at all times a ratio of Current
Assets TO the SUM OF Current Liabilities, PLUS, without duplication, the amount
of Revolving Credit Loans outstanding, of no less than 2.00 to 1.00.
8.3 CASH FLOW COVERAGE RATIO. Borrowers will maintain at all times a ratio
of (a) the SUM OF net income before taxes, PLUS, depreciation, amortization and
interest expense TO (b) the SUM OF all current maturities of Indebtedness for
Borrowed Money (including Capitalized Leases) PLUS, interest expense PLUS, all
taxes and dividends paid in cash, of not less than 1.50 to 1.00 for the period
then ended consisting of the fiscal quarter then ended and the immediately
proceeding three fiscal quarters.
8.4 MINIMUM TANGIBLE NET WORTH. Borrowers will maintain a minimum Tangible
Net Worth of not less than the sum of (i) $23,000,000 PLUS (ii) on a cumulative
basis 50% of the Borrowers' Net Income (but not less than zero for any year) for
each subsequent fiscal year during the term of this Agreement beginning with the
fiscal year ending on September 30, 1997, PLUS (iii) an amount equal to the net
proceeds received by any Borrower (during the relevant period) from any equity
offering, stock sale or contribution of capital.
8.5 DEFINITIONS. The terms "Current Assets", "Current Liabilities", "Net
Income" and "Total Liabilities" shall have the meanings attributed to such terms
under GAAP. In addition, the following definitions shall apply in calculating
the foregoing covenants:
"CONSOLIDATED" refers to the consolidation of the accounts of Borrowers and
their Subsidiaries in accordance with GAAP, including principles of
consolidation.
"TANGIBLE NET WORTH" means (a) the aggregate amount of all assets as may be
properly classified as such, OTHER THAN (i) all assets which are properly
classified as intangible assets including, without limiting the generality of
the foregoing, franchises, licenses, permits, patents, patent applications,
copyrights, trademarks, trade names, goodwill, experimental or organizational
expense and other like intangibles, including the excess paid for assets
acquired over their respective book values on the books of the corporation from
which acquired, AND (ii) all loans to shareholders, officers and employees, LESS
(b) Total Liabilities (other than contingent liabilities corresponding to the
face amount of outstanding, standby Letters of Credit), all determined in
accordance with GAAP, consistently applied.
36
ARTICLE IX
DEFAULT
9.1 EVENTS OF DEFAULT. The Borrowers shall be in default if any one or more
of the following events ("Event of Default") occurs with respect to any
Borrower:
(a) PAYMENTS. Borrower fails to pay any principal of or interest
on any Note when due and payable (whether at maturity, by notice of
intention to prepay, or otherwise) or fails to pay when it is due and
payable any other amount payable under any Loan Document;
(b) COVENANTS. The Borrower fails to observe or perform as and
when required any of the terms, conditions or covenants contained in
any Loan Document;
(c) REPRESENTATIONS, WARRANTIES. Any representation or warranty
made or deemed to be made by the Borrower herein or in any Loan
Document or in any exhibit, schedule, report or certificate delivered
pursuant hereto or thereto shall prove to have been false, misleading
or incorrect in any material respect when made or deemed to have been
made;
(d) BANKRUPTCY. The Borrower or any Subsidiary is dissolved or
liquidated, makes an assignment for the benefit of creditors, files a
petition in bankruptcy, is adjudicated insolvent or bankrupt,
petitions or applies to any tribunal for any receiver or trustee,
commences any proceeding relating to itself under any bankruptcy,
reorganization, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction, has commenced against it any such
proceeding which remains undismissed for a period of sixty (60) days,
or indicates its consent to, approval of or acquiescence in any such
proceeding, or any receiver of or trustee for the Borrower or any
Subsidiary or any substantial part of the property of the Borrower or
any Subsidiary is appointed, or if any such receivership or
trusteeship to continues undischarged for a period of sixty (60) days
(provided, that the voluntary liquidation or dissolution by Quad
Systems Corporation of any of its Subsidiaries, after written notice
to the Bank, shall not constitute an Event of Default unless the Bank,
acting in its reasonable discretion, shall determine that such action
has a Material Adverse Effect;
(e) CERTAIN OTHER DEFAULTS. If the Borrower or any Subsidiary
shall fail to pay when due any Indebtedness for Borrowed Money which
singularly or in the aggregate as to all Borrowers exceeds $250,000,
and such failure shall continue beyond any applicable cure period, or
the Borrower or any Subsidiary shall suffer to exist any default or
event of default in the performance or observance, subject to any
applicable grace period, of any agreement, term, condition or covenant
with respect to any agreement or document, relating to Indebtedness
for Borrowed Money, if the effect of such default is to permit, with
the giving of notice or passage of time or both, the holders thereof,
or any trustee or agent for said holders, to terminate or suspend any
commitment (which is equal to or in excess of $250,000) to lend money
or to cause or declare any portion of any borrowings thereunder to
become due and payable prior to the date on which it would otherwise
be due and payable, provided that during any applicable cure period
the Bank's obligations hereunder to make further Loans shall be
suspended;
(f) JUDGMENTS. Any judgments against the Borrower or any
Subsidiary or against its assets or property for amounts in excess of
$1,000,000 in the aggregate as to
37
all Borrowers remain unpaid, unstayed on appeal, undischarged,
unbonded and undismissed for a period of sixty (60) days;
(g) ATTACHMENTS. Any assets of the Borrowers or any Subsidiary
shall be subject to attachments, levies, or garnishments for amounts
in excess of $250,000 in the aggregate as to all Borrowers which have
not been disclosed or satisfied within twenty (20) days after service
of notice thereof to the Borrowers or such Subsidiary.
(h) CESSATION OF COLLATERAL DOCUMENTS. Any Collateral Documents
shall at any time and for any reason cease to be in full force and
effect.
(i) USE OF PROCEEDS OF LOANS. The Borrowers use any of the funds
borrowed hereunder for purposes other than those specifically
authorized hereunder.
(j) ANNUAL STATEMENTS. The existence of any qualification or
exception in the report of the independent public accountants
accompanying the Borrowers' annual Financial Statements.
9.2 REMEDIES.
(a) The Bank, following the occurrence and the continuance of an Event of
Default or as otherwise permitted under this Agreement, shall, at its option,
declare the Revolving Loan Commitment to be terminated and all principal and
interest owed under the Notes and all other Obligations to be immediately due
and payable, whereupon the Revolving Loan Commitment shall immediately terminate
and all principal and interest owed under the Notes and other Obligations shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by Borrowers.
(b) In addition to the remedies provided herein, the Bank may exercise and
enforce any and all other rights and remedies available to it whether arising
under this Agreement, the Notes or the Collateral Documents or under applicable
law, in any manner deemed appropriate by the Bank, including a suit in equity,
action at law, or other appropriate proceedings, whether for the specific
performance (to the extent permitted by law) of any covenant or agreement
contained in this Agreement or in the Notes or any of the Collateral Documents
or in aid of the exercise of any power granted in this Agreement, the Notes or
any of the Collateral Documents.
(c) Upon the occurrence and during the continuance of any Event of Default,
the Bank may at any time and from time to time, without notice to the Borrowers
(any requirement for such notice being expressly waived by the Borrowers) set
off and apply against any and all of the Obligations of any Borrower now or
hereafter existing any amounts held in deposit accounts at the Bank or other
indebtedness at any time owing by the Bank to or for the credit or the account
of any Borrower or any property of any Borrower from time to time in possession
of the Bank.
(d) All moneys received by the Bank from its exercise of remedies under
this Agreement, the Notes, or the Collateral Document or applicable law, shall,
unless otherwise required by law, be applied by the Bank as follows:
First, to the Bank for any fees, costs or expenses incurred by the
38
Bank under any of the Loan Documents or this Agreement, then due and
payable and not reimbursed by the Borrowers to the Bank until such fees,
costs and expenses are paid in full;
Second, to the Bank for the Commitment Fee or any other fees then due
and payable under this Agreement until such fee is paid in full;
Third, to the Bank for all interest then due and payable from the
Borrowers until such interest is paid in full;
Fourth, to the Bank for the principal amount of the Loans then due and
payable from the Borrowers until such principal is paid in full.
(e) IN ADDITION TO ALL OTHER REMEDIES PROVIDED FOR HEREIN, EACH BORROWER
HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR CLERK OR ANY
ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND CONFESS JUDGMENT THEREIN
AGAINST THE BORROWER AFTER AN EVENT OF DEFAULT HEREUNDER WHICH IS CONTINUING FOR
THE AMOUNT WHICH MAY BE DUE THEREON AS EVIDENCED BY AN AFFIDAVIT SIGNED BY AN
OFFICER OF THE BANK SETTING FORTH THE AMOUNT THEN DUE, INCLUDING ACCRUED
INTEREST, PLUS ATTORNEY'S FEES AND COSTS OF SUIT AND RELEASE OF ERRORS. IF A
COPY HEREOF, VERIFIED BY AN AFFIDAVIT, SHALL HAVE BEEN FILED IN SAID PROCEEDING,
IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL AS A WARRANT OF ATTORNEY. EACH
BORROWER WAIVES THE RIGHT TO ANY STAY OF EXECUTION AND THE BENEFIT OF ALL
EXEMPTION LAWS NOW OR HEREAFTER IN EFFECT. NO SINGLE EXERCISE OF THE FOREGOING
WARRANT AND POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST THE POWER,
WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID,
VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND MAY BE
EXERCISED FROM TIME TO TIME AS OFTEN AS THE HOLDER HEREOF SHALL ELECT, UNTIL ALL
LIABILITIES PAYABLE OR THAT MAY BECOME PAYABLE HEREUNDER BY THE BORROWERS HAVE
BEEN PAID IN FULL.
9.3 POWER OF ATTORNEY. Each Borrower does hereby make, constitute and
appoint the Bank its true and lawful attorney-in-fact with power: (a) to execute
all UCC-1 statements and other UCC statements on behalf of the Borrower with
respect to the Collateral given for the Obligations and in such Borrower's name
or otherwise, to demand, xxx for, collect and give releases for, any and all
moneys due or to become due upon the Collateral and to compromise, prosecute or
defend any action, claim or proceeding with respect thereto; and to do any and
all other things necessary or desirable to carry out the purposes herein
contemplated. The foregoing powers of attorney are hereby acknowledged by the
Borrowers to be coupled with an interest and irrevocable. Each Borrower further
grants to Bank full power and authority to substitute or add any of their
employees or agents as attorneys-in-fact to act pursuant to such power.
ARTICLE X
MISCELLANEOUS
10.1 WAIVER. No failure or delay on the part of the Bank or any holder of
any Note 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
such right, power or remedy
39
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy under any Loan Document. The remedies provided under the
Loan Documents are cumulative and not exclusive of any remedies provided by law.
10.2 AMENDMENTS. No amendment, modification, termination or waiver of any
Loan Document or any provision thereof nor any consent to any departure by any
Borrower therefrom shall be effective unless the same shall have been approved
in writing by the Bank, be in writing and be signed by the Bank and the
Borrowers and then any such waiver or consent shall be effective only in the
instance and for the specific purpose for which given. No notice to or demand on
the Borrowers shall entitle the Borrowers to any other or further notice or
demand in similar or other circumstances.
10.3 GOVERNING LAW. The Loan Documents and all rights and obligations of
the parties thereunder shall be governed by and be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
any principles of conflict of laws.
10.4 PARTICIPATIONS AND ASSIGNMENTS. Borrowers hereby acknowledge and agree
that the Bank may at any time: (a) grant participations in all or any portion of
its Revolving Loan Commitment, any Note or of its right, title and interest
therein or in or to this Agreement (collectively, "Participations") to any other
lending office or to any other bank, lending institution or other entity which
has the requisite sophistication to evaluate the merits and risks of investments
in Participations ("Participants"); provided, however, that: (i) all amounts
payable by the Borrowers hereunder shall be determined as if the Bank had not
granted such Participation; and (ii) any agreement pursuant to which the Bank
may grant a Participation (x) shall provide that the Bank shall retain the sole
right and responsibility to enforce the obligations of the Borrowers hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provisions of this Agreement; (y) such participation agreement
may provide that the Bank will not agree to any modification, amendment or
waiver of this Agreement without the consent of the Participant if such
modification, amendment or waiver would reduce the principal of or rate of
interest on the Loan or postpone the date fixed for and payment of principal of
or interest on the Loan; and (z) shall not relieve the Bank from its
obligations, which shall remain absolute, to make Loans hereunder; and (b) the
Bank may assign any of its Loans and its Revolving Loan Commitment (but only
with the consent of Borrowers, which consent shall be unreasonably withheld,
provided that: each such assignment shall be in an amount of at least $1,000,000
(unless, after giving effect to such assignment and all other such assignments
by the Bank occurring simultaneously or substantially simultaneously therewith,
the Bank shall hold no Revolving Loan Commitment or Loan hereunder); and (ii)
each such assignment by the Bank of its Loans, or Revolving Loan Commitment
shall be made in such manner so that the same portion of its Loans, Note and
Revolving Loan Commitment is assigned to the respective assignee. Upon execution
and delivery by the assignee to the Borrowers and the Bank of an instrument in
writing pursuant to which such assignee agrees to become a "Bank" hereunder (if
not already the Bank) having the Commitment(s) and Loans specified in such
instrument, and upon consent thereto by the Borrowers and the Bank, to the
extent required above, the assignee shall have, to the extent of such assignment
(unless otherwise provided in such assignment with the consent of the Borrowers
and the Bank), the obligations, rights and benefits of the Bank hereunder
holding the Revolving Loan Commitment(s) and Loans (or portions thereof)
assigned to it (in addition to the Revolving Loan Commitment(s) and Loans, if
any, theretofore held by such assignee) and the assigning Bank shall, to the
extent of such assignment, be released from the Commitment(s) (or portion(s)
thereof) so assigned.
40
10.5 CAPTIONS. Captions in the Loan Documents are included for convenience
of reference only and shall not constitute a part of any Loan Document for any
other purpose.
10.6 NOTICES. All notices, requests, demands, directions, declarations and
other communications between the Bank and the Borrowers provided for in any Loan
Document shall, except as otherwise expressly provided, be mailed by registered
or certified mail, return receipt requested, or telegraphed, or telefaxed, or
delivered in hand to the applicable party at its address indicated opposite its
name on the signature pages hereto. The foregoing shall be effective and deemed
received three days after being deposited in the mails, postage prepaid,
addressed as aforesaid and shall whenever sent by telegram, telegraph or telefax
or delivered in hand be effective when received. Any party may change its
address by a communication in accordance herewith.
10.7 EXPENSES OF THE BANK; INDEMNIFICATION OF THE BANK.
(a) The Borrowers will from time to time reimburse the Bank promptly
following demand for all out-of-pocket expenses (including the reasonable fees
and expenses of legal counsel) in connection with (i) the preparation of the
Loan Documents, (ii) the making of any Loans, and (iii) the enforcement of the
Loan Documents; and reimburse the Bank for all out-of-pocket expenses (including
reasonable fees and expenses of legal counsel) in connection with the
enforcement of the Loan Documents.
(b) In addition to the payment of the foregoing expenses, the Borrowers
hereby agree to indemnify, protect and hold the Bank and any holder of the Note
and the officers, directors, employees, agents, affiliates and attorneys of the
Bank and such holder (collectively, the "INDEMNITEES") harmless from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature,
including reasonable fees and expenses of legal counsel, which may be imposed
on, incurred by, or asserted against such Indemnitee by any Borrower or other
third parties and arise out of or relate to this Agreement or the other Loan
Documents or any other matter whatsoever related to the transactions
contemplated by or referred to in this Agreement or the other Loan Documents;
provided, however, that the Borrowers shall have no obligation to an Indemnitee
hereunder to the extent that the liability incurred by such Indemnitee has been
determined by a court of competent jurisdiction to be the result of gross
negligence or willful misconduct of such Indemnitee.
10.8 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties (other than representations and warranties which
expressly speak as of a particular date or are no longer true and correct as a
result of a change which is permitted by this Agreement) made or deemed made
herein shall survive the execution and delivery of this Agreement, the making of
the Loans hereunder and the execution and delivery of the Note. Notwithstanding
anything in this Agreement or implied by law to the contrary, the agreements of
the Borrowers set forth in Sections 2.6, 2.8(b), 2.8(c), 2.9, 2.15 and 10.7,
shall survive the payment of the Loans and the termination of this Agreement.
This Agreement shall remain in full force and effect until the latest to occur
of the termination of the Revolving Loan Commitment or the repayment in full of
all amounts owed by the Borrowers under any Loan Document.
41
10.9 SEVERABILITY. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement, the Note or
other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
the Note or other Loan Documents or of such provision or obligation in any other
jurisdiction.
10.10 NO FIDUCIARY RELATIONSHIP. No provision in this Agreement or in any
of the other Loan Documents and no course of dealing between the parties shall
be deemed to create any fiduciary duty by the Bank to any Borrower.
10.11 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH OF THE
BORROWERS AND THE BANK HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE EASTERN DISTRICT OF PENNSYLVANIA AND
IRREVOCABLY AGREES THAT, ANY ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING
TO THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAYBE LITIGATED IN SUCH
COURTS. EACH PARTY TO THIS AGREEMENT ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENT, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT, SUCH NOTE, OR SUCH OTHER LOAN DOCUMENT.
10.12 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND THE BANK HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE
LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS, AND THE BANK
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE TRANSACTION, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH
OF THE BORROWERS AND THE BANK FURTHER WARRANTS AND REPRESENTS THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
10.13 COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendment hereto
or waiver hereof may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement and any amendments hereto
or waivers hereof shall become effective when the Bank shall have received
signed counterparts or notice by telecopy of
42
the signature page that the counterpart has been signed and is being delivered
to the Bank or facsimile that such counterparts have been signed by all the
parties hereto or thereto.
10.14 USE OF DEFINED TERMS. All words used herein in the singular or plural
shall be deemed to have been used in the plural or singular where the context or
construction so requires. Any defined term used in the singular preceded by
"any" shall be taken to indicate any number of the members of the relevant
class.
10.15 APPOINTMENT OF QUAD AS AGENT FOR BORROWERS. Each Borrower hereby
irrevocably appoints and authorizes Quad Systems Corporation to act as its agent
hereunder and under any and all other Loan Document with the powers to take any
and all actions that may be taken by Borrowers, including without limitation,
the power to request Loans or the issuance of Accommodations and to give and
receive notice and accept service on behalf of all Borrowers, together with such
other powers as are reasonably incidental thereto; notice by Bank to Quad
Systems Corporation shall be deemed notice to all Borrowers.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the Borrowers
and the Bank have caused this Agreement to be executed by their proper corporate
officers thereunto duly authorized as of the day and year first above written.
Applicable Lending Office: CORESTATES BANK, N.A.,
0000 Xxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
By:_______________________________
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
QUAD SYSTEMS CORPORATION
By:______________________________
HITECH FINANCE COMPANY
By:_______________________________
TRIMARK INVESTMENT CORP.
By:_______________________________
QUAD LEASING CORPORATION
By:_______________________________
QUAD FOREIGN SALES CORPORATION
By:_______________________________
43
