EXHIBIT 4.1
SEVENTH AMENDED AND RESTATED
CREDIT AGREEMENT
ENTERED INTO AND EFFECTIVE AS OF MARCH 22, 2004
BY AND BETWEEN
THE OILGEAR COMPANY
AS THE COMPANY
AND
M&I XXXXXXXX AND XXXXXX BANK
AS THE BANK
SEVENTH AMENDED AND RESTATED CREDIT AGREEMENT
THIS SEVENTH AMENDED AND RESTATED CREDIT AGREEMENT is made and entered
into and effective as of this 22nd day of March, 2004, by and between THE
OILGEAR COMPANY, a Wisconsin corporation (the "Company"), and M&I XXXXXXXX &
ILSLEY BANK, a Wisconsin banking corporation (the "Bank").
RECITALS
WHEREAS, the Bank and the Company entered into that certain Loan
Agreement dated as of September 28, 1990, which was amended and restated by a
First Amendatory Loan Agreement dated March 1, 1994, which was amended and
restated by a Second Amendatory Loan Agreement dated as of July 15, 1994, which
was amended and restated by that certain Amended and Restated Loan Agreement
dated as of June 17, 1996, as amended which was amended and restated by that
certain Fourth Amended and Restated Credit Agreement dated as of February 11,
2003, as amended, which was amended and restated by that certain Fifth Amended
and Restated Credit Agreement dated as of March 31, 2003, as amended, which was
amended and restated by that certain Sixth Amended and Restated Credit Agreement
dated as of August 14, 2003 (the "Amended Loan Agreement").
WHEREAS, the Bank has agreed to amend and restate the Amended Loan
Agreement in its entirety and extend credit to the Company upon all of the terms
and conditions of this Agreement. This Agreement shall in all respects supercede
the Amended Loan Agreement, but shall not constitute a novation of the
indebtedness evidenced by the Amended Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements contained herein, the receipt and sufficiency of all such
consideration being hereby acknowledged, the parties agree as follows:
AGREEMENT
SECTION 1 DEFINITIONS AND TERMS
1.1 Definitions. As used in this Agreement, the following terms have
the following meanings:
"Accounts" shall mean and include all "accounts" (as such term is
defined in the UCC) now owned or hereafter acquired by the Company, and, in any
event, including (a) all accounts receivable, other receivables, book debts and
other forms of obligations (other than forms of obligations evidenced by chattel
paper, documents or instruments) now owned or hereafter received or acquired by,
or belonging or owing to, the Company, whether arising out of goods sold or
services rendered by it or from any other transaction (including any such
obligations which may be characterized as an account or contract right under the
UCC), (b) all of the Company's rights in, to and under all purchase orders or
receipts now owned or hereafter acquired by it for goods or services, (c) all of
the Company's rights to any goods represented by any of the foregoing (including
unpaid sellers' rights of rescission, replevin, reclamation and stoppage in
transit and rights to
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returned, reclaimed or repossessed goods), (d) all monies due or to become due
to the Company under all purchase orders and contracts for the sale of goods or
the performance of services or both by the Company, or in connection with any
other transaction (whether or not yet earned by performance on the part of the
Company, as appropriate) now or hereafter in existence, including the right to
receive the proceeds of said purchase orders and contracts, (e) any and all
other rights to the payment of money or other forms of consideration of any kind
now or hereafter owing or to be owing to Company (whether classified under the
UCC as accounts, chattel paper, General Intangibles, or otherwise) and all other
debts, obligations and liabilities in whatever form now or hereafter owing to
Company, (f) all collateral security, liens and guarantees of any kind, now or
hereafter in existence, given by any Person with respect to any of the foregoing
and (g) all proceeds of any of the foregoing.
"Adjusted Interbank Rate" shall have the meaning ascribed to such term
in each Note.
"Affiliate" shall mean any (a) director, officer or employee of the
Person, or (b) Person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, another Person. A Person shall be
deemed to control another Person if the controlling Person directly or
indirectly, either individually or together with (in the case of an individual)
his spouse, lineal descendants and ascendants and brothers or sisters by blood
or adoption or spouses of such descendants, ascendants, brothers and sisters,
owns five percent or more of any class of voting securities of the controlled
Person or possesses, directly or indirectly, the power to direct, or cause the
direction of, the management or policies of the controlled Person, whether
through the ownership of voting securities, through common directors, trustees
or officers, by contract or otherwise.
"Agreement" shall mean this Seventh Amended and Restated Credit
Agreement, as amended, supplemented, modified or extended from time to time.
"Applicable Margin" shall be defined and calculated as follows: The
Applicable Margin to be added to any interest rate provided or calculated by
this Agreement and the Related Documents shall be determined by the ratio of
Funded Debt to EBITDA as set forth in the chart below.
Funded Debt/EBITDA Applicable Margin
------------------ -----------------
Less than 1.50 1.25%
greater than or equal to 1.50 to less than 2.00 1.50%
greater than or equal to 2.00 to less than 2.50 2.00%
greater than or equal to 2.50 to less than 3.00 2.50%
greater than or equal to 2.00 to less than 3.50 3.00%
greater than or equal to 3.50 to less than 4.00 3.50%
4.00 or Greater 4.00%
All rates subject to a rate floor of 6.00% with respect to Term Loan A and 5.00%
with respect to the Revolving Loans. The ratio of Funded Debt to EBITDA shall be
calculated by the Company as of the end of each of its Fiscal Quarters
commencing December 31, 2003 and shall
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be reported to the Bank pursuant to a certificate delivered in accordance with
Section 5.3(i) hereof. The Applicable Margin shall be adjusted, if necessary, as
of the third Business Day following the date on which the Company is required to
deliver such certificate. Notwithstanding anything to the contrary contained
herein, until the delivery of the certificate required under Section 5.3(i)
hereof with respect to the Fiscal Quarter ended September 30, 2003, the
Applicable Margin shall be equal to 4.00%, regardless of the actual ratio of
Funded Debt to EBITDA. If at any given time EBITDA is negative or impossible to
calculate, the Applicable Margin to be added to the specified interest rate
shall be 4.00%.
"Bond Letter of Credit" shall mean the letter of credit issued by the
Bank in the face amount of $4,138,083.00 pursuant to the Reimbursement
Agreement.
"Borrowing Base" shall mean, as of any date, the sum of (a) 80% of
Qualified Accounts, plus (b) 50% of Qualified Inventory (up to a maximum of
Qualified Inventory of $7,250,000).
"Borrowing Base Certificate" shall mean a schedule of the Bank's
collateral in the form attached hereto as Exhibit A, separately setting forth
Accounts, Qualified Accounts, inventory and Qualified Inventory.
"Borrowing Date" shall have the meaning assigned in Section 2.1(c).
"Business Day" shall mean a day other than a Saturday, Sunday, public
holiday or other day when commercial banks in Wisconsin are authorized or
required by law to close; provided, however, that for purposes of determining
the interest rate on a Loan for which the base rate of interest is the Adjusted
Interbank Rate (as such term is defined in each Note), the term "Business Day"
shall mean only those days on which dealings in U.S. dollar deposits are carried
out by U.S. financial institutions in the London Interbank Eurodollar Market.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute, together with the regulations and published
interpretations thereunder, in each case as in effect from time to time.
"Collateral" shall mean all of the Company's Property granted to the
Bank as collateral under the Related Documents.
"Consolidated Net Income" shall mean the consolidated pre-tax and
pre-minority interest income or loss (excluding the effect of any extraordinary
gains not in the ordinary course of business) of the Company and its
Subsidiaries for the relevant time period calculated in accordance with GAAP
consistently applied, and further excluding the after-tax effect of the sum of
(a) any net earnings of any Subsidiary which are unavailable for the payment of
dividends; (b) interest in any net earnings of Persons in which the Company or
its Subsidiaries has an ownership interest (other than Subsidiaries) not
actually received; (c) gains arising from a write-up of assets; (d) gains
arising from the acquisition of any securities of the Company or any Subsidiary;
(e) gains resulting from the sale of any investments or capital assets; (f)
amortization of any deferred credit arising from the acquisition of any Person
or in the property or assets of any Person; (g) earnings of any Subsidiary
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prior to the date it became a Subsidiary; (h) earnings acquired by the Company
or any Subsidiary through purchase, merger or consolidation or otherwise for any
period prior to the date of such acquisition; (i) other non-operating and
extraordinary gains and losses; and (j) proceeds of any life insurance policies
payable to the Company or any Subsidiary.
"Default" shall mean an Event of Default or an event which with the
giving of notice or the passage of time or both would constitute an Event of
Default.
"EBITDA" shall mean, with respect to the Company for any period, the
Consolidated Net Income from the Company's operations before interest, taxes,
depreciation and amortization, all determined in accordance with GAAP and
applied in a manner consistent with the financial statements for such period and
prior periods.
"Employee Plan" shall mean any savings, profit sharing, or retirement
plan or any deferred compensation contract or other plan maintained for
employees of the Company or its Subsidiaries and covered by Title IV of ERISA,
including, without limitation, any "multiemployer plan" as defined in ERISA.
"Environmental Law" shall mean any local, state or federal law or other
statute, law, ordinance, rule, code, regulation, decree or order, presently in
effect or hereafter enacted, promulgated or implemented governing, regulating or
imposing liability or standards of conduct concerning the use, treatment,
generation, storage, disposal, discharge or other handling or release of any
Hazardous Substance.
"Environmental Liability" shall mean all liability arising under,
resulting from or imposed by any Environmental Law and all liability imposed
under common law with respect to the use, treatment, generation, storage,
disposal, discharge or other handling or release of any Hazardous Substance.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute, together with the regulations and
published interpretations thereunder, in each case as in effect from time to
time.
"Event of Default" shall have the meaning assigned in Section 7.1.
"Existing Defaults" shall mean all events of default under the Amended
Loan Agreement which are outstanding and known by the Bank on the date hereof.
"Fiscal Quarter" shall mean any of the quarterly accounting periods of
the Company, ending on the last day of March, June, September and December of
each calendar year.
"Fiscal Year" shall mean any of the annual accounting periods of the
Company ending on December 31 of each calendar year.
"Funded Debt" shall mean all liabilities or obligations of Company or
any Subsidiary, whether primary or secondary or absolute or contingent: (a) for
borrowed money or for the deferred purchase price of property or services
(excluding trade obligations incurred in the
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ordinary course of business, which are not the result of any borrowing); (b) as
lessee under any leases that have been or should be capitalized according to
GAAP; (c) evidenced by notes, bonds, debentures or similar obligations; (d)
under any guaranty or endorsement (other than in connection with the deposit and
collection of checks in the ordinary course of business), and other contingent
obligations to purchase, provide funds for payment, supply funds to invest in
any Person, or otherwise assure a creditor against loss; or (e) secured by any
liens on assets of Company or any Subsidiary, whether or not the obligations
secured have been assumed by Company or any Subsidiary.
"GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through appropriate boards or committees thereof and
which are consistently applied for all periods so as to properly reflect the
financial condition, results of operations and cash flows of the Company and its
Subsidiaries.
"Government Authority" shall mean any nation or government, any state
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Substance" shall mean any pollutant, contaminant, waste or
toxic or hazardous chemicals, wastes or substances, including, without
limitation, asbestos, urea formaldehyde insulation, petroleum, PCB's, air
pollutants, water pollutants, and other substances defined as hazardous or toxic
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. ss. 9061 et seq., Hazardous Materials Transportation
Act, 49 U.S.C. ss. 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. ss. 6901 et seq., the Toxic Substance Control Act of 1976, as amended, 15
U.S.C. ss. 2601 et seq., the Solid Waste Disposal Act, 42 U.S.C. ss. 3251 et
seq., the Clean Air Act, 42 U.S.C. ss. 1857 et seq., the Clean Water Act, 33
U.S.C. ss. 1251 et seq., Emergency Planning and Community Right to Know Act, 42
U.S.C. ss. 11001, et seq., Chapters 254, 281, 283, 285, 287, 289, 291, 292, 293,
295, and 299 of the Wisconsin Statutes, and similar statutes of any state where
Property of the Company is located, or any other statute, rule, regulation or
order of any Government Authority having jurisdiction over the control of such
wastes or substances, including without limitation the United States
Environmental Protection Agency, the United States Nuclear Regulatory Agency,
the State of Wisconsin, the Wisconsin Department of Natural Resources and the
Milwaukee County Department of Health.
"Indebtedness" shall mean all (a) indebtedness for borrowed money; (b)
indebtedness for the deferred purchase price of property or services for which
the Company or a Subsidiary is liable, contingently or otherwise, as obligor,
guarantor or otherwise; (c) commitments by which the Company or a Subsidiary
assures a creditor against loss, including, without limitation, contingent
reimbursement obligations with respect to letters of credit; (d) obligations
which are evidenced by notes, acceptances or other instruments; (e) indebtedness
guaranteed in any manner by the Company or a Subsidiary, including, without
limitation, guaranties in the form of an agreement to repurchase or reimburse;
(f) obligations under leases which are or should be, in accordance with GAAP,
recorded as capital leases for which obligations the Company or a Subsidiary is
liable,
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contingently or otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations the Company assures a creditor against loss; (g) unfunded
obligations of the Company or a Subsidiary to any Employee Plan; (h) liabilities
secured by any Lien on any Property owned by the Company or any Subsidiary even
though it has not assumed or otherwise become liable for the payment thereof;
and (i) other liabilities or obligations of the Company and its Subsidiaries
which would, in accordance with GAAP, be included on the liability portion of a
balance sheet.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
collateral deposit arrangement, encumbrance, lien (statutory or other), deed of
trust, charge, preference, priority, security interest or other security
agreement or preferential arrangement of any kind or nature whatsoever
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the UCC or
comparable law of any jurisdiction.
"Loan" or "Loans" shall mean the Revolving Loans, the Term Loan A and
any other loan(s) or obligation(s) made by the Bank from time to time pursuant
to this Agreement.
"Loan Account" shall mean an account on the books of the Bank in which
the Bank will record, pursuant to Section 2.4, Obligations of the Company to the
Bank, payments made upon such Obligations and other advances, debits and credits
pertaining to the Obligations or the Collateral.
"Material Adverse Effect" shall mean (a) a Default, (b) a material
adverse change in the business, Property, operations, prospects or condition
(financial or otherwise) of the Company or any of its Subsidiaries, (c) the
termination of any material agreement to which the Company or any Subsidiary is
a party, (d) any material impairment of the right to carry on the business as
now or proposed to be conducted by the Company or any Subsidiary, or (e) any
material impairment of the ability of the Company or its Subsidiaries, taken as
a whole, to perform the obligations under this Agreement or the Related
Documents. A Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of an individual event and all other then existing events
would result in a Material Adverse Effect.
"Maximum Available Commitment" shall mean an amount equal to the excess
(if any) of (a) the Revolving Loan Commitment or the Borrowing Base (whichever
is less), minus (b) the outstanding principal amount of all Revolving Loans made
by the Bank.
"Mortgage" or "Mortgages" shall mean the mortgage(s) in form and
substance satisfactory to the Bank granted by the Company to the Bank, as
amended, supplemented, modified or extended, from time to time, encumbering
certain real estate located in Milwaukee, Wisconsin, Longview, Texas and
Fremont, Nebraska.
"Note or Notes" shall mean the Revolving Credit Note, the Term Note A
and any note(s) or obligation(s) issued in substitution, replacement or renewal
thereof.
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"Obligations" shall mean the Revolving Loans, the Term Loan A, the Bond
Letter of Credit, all mandatory prepayments, all costs and expenses, all
liabilities and obligations of the Company to the Bank under this Agreement, the
Reimbursement Agreement and the Related Documents, and all other Indebtedness of
the Company to the Bank or any of its Affiliates, whether or not evidenced by
this Agreement or the Related Documents, and including all debts, obligations
and liabilities under interest rate swap, cap, collar, floor, option or other
derivative agreements (including, as applicable, any ISDA Master Agreement and
each schedule, transaction and confirmation relating to or entered into under
the ISDA Master Agreement or under any other such agreement), and all other
agreements designed to protect against fluctuations in interest rates or
currency exchange rates.
"Patent and Trademark Security Agreements" shall mean that certain
Patent Security Agreement and that certain Trademark Security Agreement each
dated as of February 11, 2003 by the Company in favor of the Bank.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Liens" shall mean: (a) Liens for taxes, assessments, or
governmental charges, carriers', warehousemen's, repairmen's, mechanics',
materialmen's and other like Liens, which are either not delinquent or are being
contested in good faith by appropriate proceedings which will prevent
foreclosure of such Liens, and against which adequate cash reserves have been
provided; (b) easements, restrictions, minor title irregularities and similar
matters which have no material adverse effect upon the ownership and use of the
affected Property; (c) Liens or deposits in connection with worker's
compensation, unemployment insurance, social security or other insurance or to
secure customs duties, public or statutory obligations in lieu of surety, stay
or appeal bonds, or to secure performance of contracts or bids, other than
contracts for the payment of money borrowed, or deposits required by law as a
condition to the transaction of business or other Liens or deposits of a like
nature made in the ordinary course of business; (d) Liens in favor of the Bank
pursuant to the Related Documents; (e) Liens evidenced by conditional sales,
purchase money mortgages or other title retention agreements on machinery and
equipment (acquired in the ordinary course of business and otherwise permitted
to be acquired hereunder) which are created at the time of the acquisition of
such property solely for the purposes of securing the Indebtedness incurred to
finance the cost of such property, provided no such Lien shall extend to any
property other than the property so acquired and identifiable proceeds; (f)
Liens described in SCHEDULE 1, provided that the Indebtedness secured thereby
shall not be renewed, extended or increased; and (g) Liens against a Subsidiary
in connection with letters of credit and foreign bank guarantees issued on
behalf of such Subsidiary.
"Person" shall mean an individual, partnership, corporation, limited
liability company or partnership, firm, enterprise, business trust, joint stock
company, trust, unincorporated association, joint venture, Government Authority
or other entity of whatever nature.
"Pledge Agreement" shall mean the Collateral Pledge Agreement pledging
the stock of the Subsidiaries of the Company to the Bank, in form and substance
satisfactory to the Bank, as amended, supplemented, modified or extended, from
time to time.
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"Property" shall mean any interest of the Company and its Subsidiaries
of any type or nature in property or assets, whether real, personal, mixed,
tangible or intangible, wherever located, and whether now owned or subsequently
acquired or arising and in the products, proceeds, additions and accessions
thereof or thereto.
"Qualified Account" shall mean an Account owing solely to the Company
which meets the following requirements at the time it comes into existence and
continues to meet the same until collected in full: (a) it arose from the
performance of services by the Company, or from a bona fide sale or lease of
goods, which have been delivered or shipped to an Account debtor in the United
States, to Volvo, or a foreign debtor which has issued a transferable letter of
credit acceptable to the Bank to secure payment, and for which the Company has
genuine invoices, shipping documents or receipts; (b) it is not more than 60
days past due; (c) it is not owed by an Account debtor which has 50% or more of
its aggregate dollar amount of Accounts owed to the Company unpaid more than 90
days past the earlier of performance of the services, delivery of goods or
date(s) of invoice; (d) it is owned by the Company and not subject to any
assignment, claim, lien, encumbrance or security interest whatsoever other than
those securing the Company's obligations to the Bank; (e) it is a valid and
legally enforceable obligation of an Account debtor which is (i) satisfactory to
the Bank, (ii) not an Affiliate of the Company and (iii) not the United States
of America or any department, agency or instrumentality thereof unless the
Company has complied with the Assignment of Claims Act of 1940, to the
satisfaction of the Bank; (f) it is not subject to setoff, counterclaim, credit
allowance, or adjustment by the Account debtor thereunder, except for discount
for prompt payment, or to any claim by such Account debtor denying liability
thereunder in whole or in part, and such Account debtor has not refused to
accept and has not returned or offered to return any of the goods which are
subject to such Account; (g) it arose in the ordinary course of the Company's
business and in compliance with all Requirements of Law; (h) the Company has no
notice or knowledge of the bankruptcy, insolvency, or similar proceeding of the
Account debtor thereunder, or of the inability of the Account debtor thereunder
to pay its debts as they become due, or of anything which might impair the
credit standing of the Account debtor; (i) it is assignable to the Bank and it
does not arise out of a contract or order which by its terms forbids or makes
void or unenforceable the assignment by the Company to the Bank of the Account
arising with respect thereto; (j) it is not evidenced by instruments or chattel
paper unless the same has been endorsed and delivered to the Bank; (k) it does
not arise from a sale on consignment, sale on return, xxxx and hold sale or any
other type of conditional sale except as permitted in writing by the Bank; and
(l) it is certified by the Company within fifteen days after the end of each
month (or at such more frequent intervals as the Bank shall request) as to the
amount thereof and all other matters set forth herein or reasonably required by
the Bank. A Qualified Account which subsequently fails to meet any of the
foregoing requirements, shall forthwith cease to be a Qualified Account.
"Qualified Inventory" shall mean inventory (as that term is defined in
the UCC) solely owned by the Company located in the United States which meets
the following requirements and continues to meet the same until sold or
otherwise disposed of as permitted by this Agreement: (a) it is subject to the
first priority Lien of the Bank and it is not subject to any other assignment,
claim, lien, or security interest whatsoever; (b) it is located at one of the
Company's facilities set forth on SCHEDULE 2, none of which is a public
warehouse or leased facility except as permitted in writing by the Bank (and
then only if consented to in writing by each such public warehouse and lessor,
in form acceptable to Agent); (c) it is not obsolete, is in good condition and
is either
9
currently usable or saleable; (d) it is raw materials, work-in-process, costs
and estimated earnings in excess of xxxxxxxx on uncompleted contracts as
reported on the Company's financial statements, or finished goods satisfactory
to the Bank; (e) it is valued at the lower of cost (on a FIFO basis) or
wholesale market value (exclusive of any transportation, processing or handling
charges); and (f) its existence, location, amount, and lower of cost (on a FIFO
basis) or wholesale market value (exclusive of any transportation, processing or
handling charges) have been certified by the Company within fifteen days after
the end of each month (or at such more frequent intervals as the Bank shall
request) as to the amount thereof and all other matters set forth herein or
reasonably required by the Bank. Qualified Inventory which subsequently fails to
meet any of the foregoing requirements, shall forthwith cease to be Qualified
Inventory.
"Regulatory Change" shall mean the adoption or amendment, after the
date of this Agreement, of any national, federal or state law, regulation,
interpretation, direction, policy, guideline or court decision applicable to the
Bank or the London Interbank Eurodollar Market which makes it unlawful for any
Bank to make, maintain or fund the Obligations based on the Adjusted Interbank
Rate, increases the cost to the Bank of making or maintaining the Obligations or
reduces the rate of return to the Bank (by reduction of principal, interest or
otherwise) on the Obligations by subjecting the Bank to any tax, duty or other
imposition or charge with respect to the Obligations, imposing any reserve
requirement (except any reserve requirement reflected in the Adjusted Interbank
Rate), affecting the treatment of any Obligation for purposes of calculating the
appropriate amount of capital to be maintained by the Bank or any Person
controlling the Bank, or imposing on the Bank any other condition affecting the
Obligations.
"Reimbursement Agreement" shall mean that certain Credit Agreement by
and between the Company and the Bank dated October 1, 1997 as amended,
supplemented, modified or extended from time to time, whereby the Bank issued
the Bond Letter of Credit.
"Related Documents" shall mean the Revolving Credit Note, the
Reimbursement Agreement, the Term Note A, the Security Agreement, the Patent and
Trademark Security Agreements, the Mortgages, the Pledge Agreement and all other
instruments, agreements, certificates, and other documents executed by or on
behalf of the Company, any Subsidiary or any guarantor in connection with any of
the Obligations or the transactions contemplated under this Agreement, all as
amended, supplemented, modified or extended from time to time.
"Requirements of Law" shall mean as to any matter or Person, the
Certificate or Articles of Incorporation and Bylaws or other organizational or
governing documents of such Person, and any law (including, without limitation,
any Environmental Law), ordinance, treaty, rule, regulation, order, decree,
judicial decision, determination or other requirement having the force of law
relating to such matter or Person and, where applicable, any interpretation
thereof by any Government Authority.
"Restricted Payments" shall mean (a) dividends or other distributions
by the Company or any Subsidiary based upon the stock of the Company or any
Subsidiary (except dividends payable to the Company and dividends payable solely
in stock of the Company), (b) purchases, redemptions or other acquisitions,
direct or indirect, by the Company or any Subsidiary, of stock of the Company or
any Subsidiary, whether now or hereafter outstanding, (c) any other
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distribution by the Company or any Subsidiary in respect of stock of the Company
or any Subsidiary, whether now or hereafter outstanding, either directly or
indirectly, whether in cash or property or otherwise, and (d) payment of
management fees by the Company or any Subsidiary to any Affiliate, either
directly or indirectly, whether in cash or property or otherwise.
"Revolving Credit Note" shall mean the promissory note from the Company
to the Bank dated as of February 11, 2003 evidencing the Revolving Loans, as
amended, supplemented, modified or extended from time to time.
"Revolving Loan Commitment" shall mean the lesser of $12,000,000 or the
Borrowing Base minus any permanent reductions in the Bank's commitment to make
Revolving Loans.
"Revolving Loans" shall mean the loans to the Company pursuant to
Section 2.1 evidenced by the Revolving Credit Note.
"Security Agreement" shall mean the Amended and Restated Security
Agreement of the Company in favor of the Bank dated as of February 11, 2003, as
amended on the date hereof and as amended, supplemented, modified or extended
from time to time.
"Subsidiary" shall mean as to any Person, a corporation, limited
liability company, partnership, association, joint venture or other entity of
which shares of stock, membership interests or other voting interests having
voting power (other than stock having such power only by reason of the happening
of a contingency that has not occurred) sufficient to elect a majority of the
board of directors or other managers of such entity are at the time owned, or
the management of which is otherwise controlled, directly, or indirectly through
one or more intermediaries, or both, by such Person.
"Term Loan A" shall mean the loan to the Company pursuant to Section
2.2 evidenced by the Term Note A.
"Term Note A" shall mean the First Amended and Restated Term Note A
from the Company to the Bank dated as of the date hereof evidencing the Term
Loan A, as amended, supplemented, modified or extended from time to time.
"Termination Date" shall mean, (a) as to the Revolving Loans, April 1,
2005, (b) as to the Term Loan A, April 1, 2005, or such earlier date on which
the Obligations shall terminate as provided in Section 7.2.
"UCC" shall mean the Uniform Commercial Code as the same may, from time
to time, be in effect and codified in the State of Wisconsin; provided, however,
in the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Bank's security interest in any Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of Wisconsin, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction solely for purposes of the
provisions hereof relating to such attachment, perfection or priority and for
purposes of definitions related to such provisions.
11
1.2 Accounting and Financial Determinations. Where the character or
amount of any asset or liability or item of income or expense is required to be
determined, or any accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall be made on a
consolidated basis so as to include the Company and its Subsidiaries, if any, in
each such calculation and, to the extent applicable and except as otherwise
specified in this Agreement, shall be made in accordance with GAAP; provided,
however, that if any change in GAAP from those applied in the preparation of the
financial statements referred to in Section 5.3 is occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the American Institute of Certified Public Accountants (or its boards or
committees or successors thereto or agencies with similar functions), the
initial announcement of which change is made after the date hereof, results in a
change in the method of calculation of financial covenants, standards or terms
found in Section 6, the parties hereto agree to enter into good faith
negotiations in order to amend such provisions so as to reflect such changes
with the desired result that the criteria for evaluating the Company's financial
condition shall be the same after such changes as if such changes had not been
made; and provided, further, that until such time as the parties hereto agree
upon such amendments, such financial covenants, standards and terms shall be
construed and calculated as though no change had taken place. When used herein,
the term "financial statement" shall include balance sheets, statements of
earnings, statements of stockholders' equity, statements of cash flows and the
notes and schedules thereto, and each reference herein to a balance sheet or
other financial statement of the Company shall be to a statement prepared on a
consolidated and consolidating basis, unless otherwise specified.
1.3 Interpretation. The words "hereof," "herein" and "hereunder" and
words of a similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Section, Schedule and Exhibit references contained in this Agreement are
references to sections, schedules and exhibits in or to this Agreement unless
otherwise specified. Any reference in any Section or definition to any clause
is, unless otherwise specified, to such clause of such Section or definition.
1.4 Other Terms. Except as otherwise specifically provided, each
accounting term used herein shall have the meaning given to it under GAAP, and
all other terms contained in this Agreement (and which are not otherwise
specifically defined herein) shall have the meanings provided in the UCC to the
extent the same are used or defined therein unless the context otherwise
requires. Terms defined in other Sections of this Agreement shall have the
meanings set forth therein.
1.5 Incorporation of Recitals. The Recitals to this Agreement are true,
correct and incorporated herein by reference.
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SECTION 2 AMOUNTS AND TERMS OF OBLIGATIONS
2.1 Revolving Loans.
(a) Prior to the Termination Date and so long as no Default
has occurred, the Bank agrees on the terms and conditions set forth in this
Agreement to extend to the Company Revolving Loans from time to time in amounts
not to exceed the Revolving Loan Commitment. Subject to the terms of this
Agreement, the Company may borrow, repay (in whole or in part) and reborrow the
Revolving Loans prior to the Termination Date. The Revolving Loans made by the
Bank shall be evidenced by the Revolving Credit Note.
(b) From the date of the first Revolving Loan and until all
Revolving Loans are paid in full, the Company shall pay all accrued and unpaid
interest on the Revolving Loans on the first day of each month. Prior to an
Event of Default, interest shall accrue and be computed on the aggregate unpaid
principal amount from time to time outstanding under the Revolving Credit Note
as determined in the Revolving Credit Note. All outstanding unpaid principal and
accrued interest on the Revolving Loans shall be due and payable on the
Termination Date for the Revolving Loans. The Company shall pay to the Bank such
other charges, costs, expenses or premiums as the Bank may incur pursuant to the
Revolving Credit Note.
(c) The Company may obtain Revolving Loans by making a request
therefor to the Bank, orally or in writing. Such request shall specify a
Business Day prior to the Termination Date on which such Revolving Loans are to
be made (the "Borrowing Date"), shall be received by the Bank by 12:00 Noon
(Milwaukee time) one Business Day before the Borrowing Date and shall specify
the amount of the Revolving Loans requested and the requested Loan Period;
provided, however, that within three days after any oral request for a Revolving
Loan, the Bank shall receive from the Company a written confirmation in form
acceptable to the Bank confirming the Company's Revolving Loan request, and the
Bank's obligation to make further Revolving Loans hereunder shall be suspended
until such confirmation has been received by the Bank. In the event of any
inconsistency between the telephonic notice and the written confirmation
thereof, the telephonic notice shall control. The Company shall be obligated to
repay all Revolving Loans notwithstanding the failure of the Bank to receive
written confirmation, and notwithstanding the fact that the person requesting
the Revolving Loan was not in fact authorized to do so. No Revolving Loan
request shall be modified, altered or amended without the prior written consent
of the Bank. Each Revolving Loan shall be in a minimum aggregate amount of
$100,000 or an integral multiple thereof. Upon fulfillment of the conditions
specified in Section 4.2, the Bank shall promptly deposit the amount of such
Revolving Loan in the general deposit account of the Company maintained at the
Bank.
(d) The Company may, upon one Business Day's prior written
notice to the Bank, permanently reduce the aggregate amount of the Revolving
Loan Commitment; provided that no such reduction shall reduce the aggregate
amount of the Revolving Loan Commitment to an amount less than the aggregate
unpaid principal balance of the Revolving Credit Note on the effective date of
such reduction. Each reduction in the Revolving Loan Commitment shall be in a
minimum amount of $500,000 or an integral multiple thereof.
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2.2 Term Loan A. On February 11, 2003, the Bank extended to the Company
the Term Loan A in an aggregate principal amount of $10,000,000 and on the date
hereof, the aggregate outstanding principal amount on such term loan is
$7,608,330.00. The Term Loan A is and shall be subject to all of the terms and
conditions set forth in this Agreement. The Term Loan A made by the Bank
pursuant hereto is evidenced by the Term Note A. Prior to an Event of Default,
interest shall accrue and be computed on the aggregate unpaid principal amount
from time to time outstanding under the Term Note A as determined in the Term
Note A. All outstanding unpaid principal and accrued interest on the Term Loan A
shall be due and payable on the Termination Date for Term Loan A. The Company
shall pay to the Bank such other charges, costs, expenses or premiums as the
Bank may incur pursuant to the terms of the Term Note A.
2.3 Interest After Default. After an Event of Default, each of the
Notes shall bear interest at the rate of 3% per annum in excess of the interest
rate specified in such Notes. In no event shall the interest rate under the
Notes exceed the highest rate permitted by law.
2.4 Loan Account. The Bank will enter as a debit to the Loan Account
the aggregate principal amount of each Obligation as disbursed or issued from
time to time by the Bank. The Bank shall also record in the Loan Account, in
accordance with the Bank's customary accounting practices: accrued interest and
all other charges, expenses and other items properly chargeable to the Company
hereunder or under the Related Documents; all payments made by the Company with
respect to the Obligations, if any; and all other appropriate debits and
credits. The debit balance of the Loan Account shall reflect the amount of the
Obligations and other appropriate charges hereunder. Not more frequently than
once each month, the Bank shall render a statement of account of the Loan
Account including, with respect to Revolving Loans, a statement of the
outstanding principal balance and the applicable interest rate, which statement
shall be considered correct and accepted by the Company and conclusively binding
upon the Company unless it notifies the Bank to the contrary within 30 days of
the mailing of such statement by the Bank to the Company; provided, however,
that the failure of the Bank to record any of the foregoing items in the Loan
Account shall not limit or otherwise affect the Company's obligation to repay
the Obligations.
2.5 Lockbox.
(a) The Company agrees that, upon the request of the Bank, it
shall immediately direct each of its Account debtors and other obligors to make
payments due under their Accounts, instruments and/or chattel paper directly to
a special lockbox to be under the exclusive control of the Bank. If the Company
does not issue such notice within one day after being requested to do so by the
Bank, the Bank is authorized to do so on behalf, and in the name, of the
Company.
(b) Upon the establishment of the special lockbox referred to
in Section 2.5(a), the Company authorizes and directs the Bank to deposit into a
special collateral account to be established and maintained by the Bank all
drafts, checks and cash payments received in said lockbox or otherwise received
by the Bank. All deposits in said collateral account shall constitute proceeds
of Collateral. The Bank shall apply finally collected funds on deposit in said
collateral account immediately to the Loan Account as payment of the
Obligations, in such order of application as the Bank may determine. The Company
agrees that it shall promptly deliver to the
14
Bank for deposit in said collateral account all payments received by it,
including without limitation all payments on Accounts, instruments and chattel
paper, all cash received by the Company and all other proceeds of Collateral.
All such payments, cash and proceeds shall immediately be delivered to the Bank
in the form received (except for the Company's endorsement where necessary) and
the Company agrees, until so deposited, such payments, cash and proceeds shall
be held in an express trust by the Company for, and as the exclusive property
of, the Bank and shall not be commingled with any funds or property of the
Company.
2.6 Payments. Whenever any payment to be made hereunder shall be stated
to be due on a day which is not a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest on the Notes. The Bank may
debit to the depository accounts maintained by the Company with the Bank all
payments on the Obligations when due without prior notice to or consent of the
Company.
2.7 Prepayments.
(a) Optional Prepayments. The Company may at its option prepay
the Obligations, in whole or in part. Except as set forth in Section 2.5(b) or
in any cash management agreements entered into from time to time between the
Company and the Bank, partial prepayments shall be in the minimum aggregate
principal amount of $100,000 or a multiple thereof, together with accrued
interest to the date of prepayment on the amount prepaid. There shall be no
prepayment premium except as provided in the Notes. Any prepayments of Term Loan
A or Term Loan B shall be applied in inverse order of the principal installments
due thereon and the Company shall pay the accrued interest to the date of
prepayment on the principal amount of the Term Loan A or Term Loan B being
repaid, as the case may be.
(b) Mandatory Prepayment. At any time that the aggregate
principal amount of Revolving Loans outstanding hereunder exceeds the lesser of
the Revolving Loan Commitment or the Borrowing Base, the Company shall
immediately pay the amount of such excess in immediately available funds,
together with interest accrued on the amount of the payment. Ten (10) days after
receipt of the Company's unaudited financial statements for measurement periods
ending on the last day of each Fiscal Quarter of the Company, the Company shall
make a mandatory prepayment of the Term Loan A in an amount equal to fifty
percent (50%) of the Company's "Excess Cash Flow" (as defined below) for the
Fiscal Quarter just ended, such mandatory prepayment to be applied against the
remaining installments of principal in the inverse order of their maturities,
and to continue until the date on which the Term Loan A shall be repaid in full.
For purposes hereof, "Excess Cash Flow" shall mean for each of the Company's
Fiscal Quarters, the dollar amount equal to the Company's Consolidated Net
Income for such period, plus actual interest expense payable during such period
plus depreciation during such period plus amortization during such period minus
un-financed capital expenditures payable during such period minus actual
principal payments on long term debt payable and cash interest paid during such
period minus actual capital lease payments payable during such period.
2.8 Effect of Regulatory Change. In the event of a Regulatory Change
deemed by the Bank in good faith to be material, the Company shall pay to the
Bank (within ten days after notice
15
by the Bank to the Company of such Regulatory Change) such amounts as the Bank
deems reasonably necessary to compensate the Bank for the increase in the cost
of making or maintaining the Obligations or the reduction in the rate of return
to the Bank on the Obligations resulting from the Regulatory Change.
2.9 Security. Payment of all Obligations shall be secured, subject only
to Permitted Liens, by a first priority security interest or Lien on all of the
Property in accordance with this Agreement and the Related Documents.
2.10 No Obligation to Extend or Forbear. The Company acknowledges and
agrees that the Bank: (a) has no duty or obligation of any kind to, and has made
no representations of any kind or nature that the Bank will (i) extend credit or
any other kind of financial accommodations to the Company after the applicable
Termination Date, or (ii) forbear at any time from the exercise of any of its
rights or remedies under this Agreement, the Related Documents and applicable
law; and (b) may at any time, in its sole and absolute discretion, exercise
whatever rights and remedies the Bank may have under this Agreement, the Related
Documents and applicable law. The Company acknowledges and agrees that the
applicable Obligations shall be due in full on the applicable Termination Date
without further demand.
SECTION 3 REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and
make and incur the Obligations as herein provided, the Company hereby represents
and warrants to the Bank as follows:
3.1 Organization, Qualification and Subsidiaries. The Company is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Wisconsin. Each Subsidiary of the Company is an entity of
the type listed on SCHEDULE 3.1 and is validly existing and in good standing
under the laws of the jurisdiction listed on SCHEDULE 3.1. The Company has the
corporate power and authority and all necessary licenses, permits and franchises
to borrow hereunder and to grant the Liens provided for in the Related Documents
and to own its assets and conduct its business as presently conducted. The
Company and each of its Subsidiaries is duly licensed or qualified to do
business and is in good standing in all jurisdictions where the same are
required to be qualified and where the failure to so qualify would have a
Material Adverse Effect. All of the issued and outstanding capital stock of the
Company has been validly issued and is fully paid and non-assessable, except as
provided in Section 180.0622(2)(b) of the Wisconsin Statutes. Except as set
forth on SCHEDULE 3.1, (a) the Company has no Subsidiaries, (b) the Company does
not own, directly or indirectly, more than 1% of the total outstanding shares of
any class of capital stock of any other Person, and (c) there are no outstanding
options, warrants or other rights to subscribe for or purchase from any
Subsidiary any capital stock of such Subsidiary or securities convertible into
or exchangeable for capital stock of such Subsidiary.
16
3.2 Financial Statements. All of the financial statements heretofore
furnished to the Bank are accurate and complete, were prepared in accordance
with GAAP consistently applied throughout all periods and fairly present the
financial condition and the results of operation of the relevant Person for the
periods and as of the relevant dates thereof, subject to audit and normal
year-end adjustments. There has been no Material Adverse Effect on the business,
properties or condition, financial or otherwise, of the Company and the
Subsidiaries, taken as a whole, since the date of the latest such financial
statements.
3.3 Authorization. The making, execution, delivery and performance of
this Agreement and the Related Documents by the Company and its Subsidiaries
have each been duly authorized by all necessary corporate action. The valid
execution, delivery and performance of this Agreement, the Related Documents and
the transactions contemplated hereby and thereby, are not and will not be
subject to any approval, consent or authorization of any Government Authority.
This Agreement and the Related Documents are the valid and binding obligations
of the Company and its Subsidiaries enforceable against the Company and its
Subsidiaries in accordance with their respective terms, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting the rights of
creditors and subject to general equity principles.
3.4 Absence of Conflicting Obligations. The making, execution, delivery
and performance of this Agreement and the Related Documents and compliance with
their respective terms do not violate or constitute a default, breach or
violation under any Requirements of Law or any covenant, indenture, deed, lease,
contract, agreement, mortgage, deed of trust, note or instrument to which the
Company or any of its Subsidiaries is a party or by which it is bound.
3.5 Taxes. The Company has and its Subsidiaries have filed all federal,
state, foreign and local tax returns which were required to be filed, except
those returns for which the due date has been validly extended. The Company has
and its Subsidiaries have paid or made provisions for the payment of all taxes,
assessments, fees and other governmental charges owed, and no tax deficiencies
have been proposed, threatened or assessed against the Company or its
Subsidiaries. There is no pending or, to the best of the Company's knowledge,
threatened tax controversy or dispute as of the date hereof.
3.6 Absence of Litigation. There is no pending or, to the knowledge of
the Company, threatened litigation or administrative proceeding at law or in
equity which would, if adversely determined, result in a Material Adverse
Effect, and, to the best of the Company's knowledge after diligent inquiry,
there are no presently existing facts or circumstances likely to give rise to
any such litigation or administrative proceeding.
3.7 Accuracy of Information. All information, certificates or
statements given or made by the Company and its Subsidiaries to the Bank under
this Agreement and the Related Documents were accurate, true and complete in all
material respects when given, continue to be accurate, true and complete as of
the date hereof, and do not contain any untrue statement or omission of a
material fact necessary to make the statements herein or therein not misleading.
There is no fact known to the Company which is not set forth in this Agreement,
the Related Documents or other documents, certificates or statements furnished
to the Bank by or on behalf of the Company or its
17
Subsidiaries in connection with the transactions contemplated hereby and which
will, or which in the future may (so far as the Company can reasonably foresee),
cause a Material Adverse Effect.
3.8 Ownership of Property. The Company has good and marketable title to
all of its Property, including, without limitation, the Property reflected in
the balance sheets referred to in Section 3.2 and fee simple title to the
Property subject to the Mortgages. There are no Liens of any nature on any of
the Property except Permitted Liens. All Property useful or necessary in the
Company's and its Subsidiaries' business, whether leased or owned, is in good
condition, repair (ordinary wear and tear excepted) and working order and, to
the best of the Company's knowledge after diligent inquiry, conforms to all
applicable Requirements of Law. The Company and its Subsidiaries own (or are
licensed to use) and possess all such patents, trademarks, trade names, service
marks, copyrights and rights with respect to the foregoing as are reasonably
necessary for the conduct of the businesses of the Company and its Subsidiaries
as now conducted and proposed to be conducted without, individually or in the
aggregate, any infringement upon rights of other Persons. SCHEDULE 3.8 contains
a true, correct and complete list of all patents, trademarks, service marks,
trade names and copyrights owned by the Company.
3.9 Federal Reserve Regulations. The Company will not, directly or
indirectly use any proceeds of the Obligations to: (a) purchase or carry any
"margin stock" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System (12 C.F.R. 221, as amended); (b) extend credit to
other Persons for any such purpose or refund indebtedness originally incurred
for any such purpose; or (c) otherwise take or permit any action which would
involve a violation of Section 7 of the Securities Exchange Act of 1934, as
amended, or any regulation of the Board of Governors of the Federal Reserve
System.
3.10 ERISA. The Company and each of its Subsidiaries and anyone under
common control with the Company under Section 4001(b) of ERISA is in compliance
in all material respects with the applicable provisions of ERISA and: (a) no
"prohibited transaction" as defined in Section 406 of ERISA or Section 4975 of
the Code has occurred; (b) no "reportable event" as defined in Section 4043 of
ERISA has occurred; (c) no "accumulated funding deficiency" as defined in
Section 302 of ERISA (whether or not waived) has occurred; (d) there are no
unfunded vested liabilities of any Employee Plan administered by the Company or
its Subsidiaries; and (e) the Company and its Subsidiaries or the plan sponsor
has timely filed all returns and reports required to be filed for each Employee
Plan.
3.11 Security Interests. The Bank has a legal, valid, perfected and,
except for Permitted Liens, first priority security interest or Lien in the
Collateral, and the Collateral is and at all times shall be free and clear of
all other Liens whatsoever.
3.12 Places of Business. The principal place of business and chief
executive office of the Company is located at the address specified in Section
8.6 for the Company, and the books and records of the Company and all records of
account are located and hereafter shall continue to be located at such principal
place of business and chief executive office.
3.13 Other Names. The business conducted by the Company has not been
conducted under any corporate, trade or fictitious name other than the name The
Oilgear Company, and
18
following the date hereof the Company will not conduct its business under any
corporate, trade or fictitious name unless the Company shall have delivered at
least 30 days' prior written notice to the Bank of such name change.
3.14 Not an Investment Company. The Company is not (a) an "investment
company" or a company "controlled by an investment company" within the meaning
of the Investment Company Act of 1940, as amended, or (b) a "holding company" or
a "subsidiary" of a "holding company" or an "affiliate of a "holding company" or
a "subsidiary" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
3.15 No Defaults. Neither the Company nor any Subsidiary is in default
under or in violation of (a) any Requirements of Law, (b) any covenant,
indenture, deed, lease, agreement, mortgage, deed of trust, note or other
instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound, or to which any of its Property is subject,
or (c) any Indebtedness; or if any default or violation under Sections 3.15(a),
(b) or (c) exists, it is an immaterial default or violation and the failure to
cure such default or violation would not result in a Material Adverse Effect.
3.16 Environmental Laws. The business of the Company and each of its
Subsidiaries has been operated in full compliance with all Environmental Laws
noncompliance with which would result in a Default or a Material Adverse Effect
and neither the Company nor any Subsidiary is subject to any Environmental
Liability relating to the conduct of its business or the ownership of its
Property and except as disclosed in the environmental assessment reports
referenced in Section 4.1(q), no facts or circumstances exist which could give
rise to such Environmental Liabilities. No notice has been served on the Company
or any Subsidiary claiming any violation of Environmental Laws, asserting
Environmental Liability or demanding payment or contribution for Environmental
Liability or violation of Environmental Laws.
3.17 Labor Matters. There are no labor disputes between the Company or
any Subsidiary and any of its employees which individually or in the aggregate,
if resolved in a manner adverse to the Company or a Subsidiary, would result in
a Material Adverse Effect.
3.18 Restricted Payments. The Company has not, since the date of the
most recent financial statements referred to in Section 3.2, made any Restricted
Payments.
3.19 Solvency. The Company is not "insolvent," nor will the Company's
incurrence of the Obligations or repayment of the Obligations render the Company
"insolvent." For purposes of this Section 3.19, a corporation is "insolvent" if
(i) the "present fair salable value" (as defined below) of its assets is less
than the amount that will be required to pay its probable liability on its
existing debts and other liabilities (including contingent liabilities) as they
become absolute and matured; (ii) its property constitutes unreasonably small
capital for it to carry out its business as now conducted and as proposed to be
conducted including its capital needs; (iii) it intends to, or believes that it
will, incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by it and amounts to
be payable on or in respect of debt of it), or the cash available to it after
taking into account all of its other anticipated uses of the cash is anticipated
to be insufficient to pay all such amounts on or in respect of its debt
19
when such amounts are required to be paid; or (iv) it believes that final
judgments against it in actions for money damages will be rendered at a time
when, or in an amount such that, it will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum
reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered), or the cash
available to it after taking into account all other anticipated uses of its
cash, is anticipated to be insufficient to pay all such judgments promptly in
accordance with their terms. For purposes of this Section 3.19, the following
terms have the following meanings: (x) the term "debts" includes any legal
liability, whether matured or unmatured, liquidated, absolute, fixed or
contingent, (y) the term "present fair salable value" of assets means the amount
which may be realized, within a reasonable time, either through collection or
sale of such assets at their regular market value and (z) the term "regular
market value" means the amount which a capable and diligent businessman could
obtain for the property in question within a reasonable time from an interested
buyer who is willing to purchase under ordinary conditions.
3.20 Brokerage. If any broker, agent or finder acted on behalf of the
Company, the fees and expenses of such broker, agent or finder are the
responsibility of and will be paid by the Company and not the Bank.
3.21 Bank Accounts. SCHEDULE 3.21 lists all banks and other financial
institutions at which the Company and each of its Subsidiaries maintains
deposit, operating or other accounts and such SCHEDULE 3.21 correctly identifies
the name, address and telephone number of each depository, the name in which the
account is held, a description of the purpose of the account, the account
balance, the average monthly balance for the previous Fiscal Year, and the
complete account number therefor.
SECTION 4 CONDITIONS PRECEDENT TO OBLIGATIONS
4.1 Initial Obligations. In addition to the terms and conditions
otherwise contained herein, the obligation of the Bank to extend any Loans or
make or incur any Obligation is conditioned on the Bank (i) receiving, prior to
or on the date of the Bank's first extension of credit, each of the following
items in form, detail and content satisfactory to the Bank or (ii) the Company
having taken the actions specified herein:
(a) a certificate of the secretary of the Company dated the
date hereof certifying: (A) the adoption and continuing effect
of resolutions of the Board of Directors of the Company
authorizing the execution and delivery of this Amendment and
the Credit Agreement, and the documents to be executed and
delivered in connection with this Amendment; (B) that its
bylaws have not been amended since the date of the last
delivery of the bylaws to the Bank on February 11, 2003; and
(C) that its Articles of Incorporation have not been amended
since the date of the last delivery of the Articles of
Incorporation to the Bank on February 11, 2003; and
(b) updated UCC searches from the offices of the Wisconsin
Department of Financial Institutions and the Milwaukee County
Register of Deeds);
20
(c) an executed Borrowing Base Certificate; and
(d) such additional supporting documents and materials as the
Bank may request.
4.2 Subsequent Obligations. In addition to the terms and conditions
otherwise contained herein, the obligation of the Bank to extend any Loans or
make or incur subsequent Obligations is subject to the satisfaction, on the date
of making or incurring each such Obligation, of the following conditions prior
to any such extension of credit or making or incurring any such Obligations:
(a) All of the representations, warranties and acknowledgments
of the Company contained in this Agreement and the Related Documents shall be
true and accurate as if made on such date, and each request by the Company for
credit shall constitute an affirmation by the Company that such representations,
warranties and acknowledgements are then true and accurate, other than those
which, by their terms, specifically are made as of a certain date prior thereto
and other than as expressly permitted by this Agreement or as otherwise
consented to in writing by the Bank;
(b) There shall not exist on such date any Default and no
Default shall occur as the result of the making or incurring of such Obligation
(except the Existing Defaults);
(c) The aggregate principal amount of all Revolving Loans
outstanding, together with the amount of any Revolving Loan requested shall not
exceed the Revolving Loan Commitment;
(d) The Bank shall have received executed loan requests for
all Revolving Loans previously requested by the Company and the matters
certified therein and herein shall have been true, correct and complete on the
date thereof and shall continue to be true and correct on the date of the
requested Revolving Loans or other Obligations; and
(e) Each of the Related Documents shall remain in full force
and effect and all security, mortgage and pledge agreements shall continue to
secure the Obligations; and
(f) The Bank has received weekly or monthly certifications in
the form set forth at Schedule 4.2(f) hereof.
(g) A financial advisor of recognized professional standing
and ability is currently retained by the Company, or in the event of such
advisor's (i) resignation, or (ii) discharge, then, within 20 days thereof, a
new financial advisor with similar capabilities and recognized professional
standing and ability shall be retained by the Company (the "Advisor").
21
SECTION 5 AFFIRMATIVE COVENANTS
The Company covenants and agrees that, from and after the date of this
Agreement and until the Termination Date and until the entire amount of all
Obligations to the Bank are paid in full, it shall and shall cause each
Subsidiary to:
5.1 Corporate Existence; Compliance With Laws; Maintenance of Business;
Taxes. (a) Maintain its corporate existence, and all required licenses, permits,
rights and franchises; (b) comply in all material respects with all Requirements
of Law; (c) conduct its business substantially as now conducted and proposed to
be conducted; (d) pay before the same become delinquent and before penalties
accrue thereon, all taxes, assessments and other government charges against it
and its Property, and all other liabilities except to the extent and so long as
the same are being contested in good faith by appropriate proceedings, with
adequate reserves having been provided.
5.2 Maintenance of Property; Insurance.
(a) Keep all Property useful and necessary in its business,
whether leased or owned, in good condition, repair and working order (ordinary
wear and tear excepted) and from time to time make or cause to be made all
needed and proper repairs, renewals, replacements, additions and improvements so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
(b) Maintain with good, reputable and financially sound
insurance underwriters insurance of such nature and in such amounts as is
customarily maintained by companies engaged in the same or similar business and
such other insurance as may be required by law or as may be reasonably required
in writing by the Bank. Each policy providing liability coverage to the Company
or a Subsidiary shall name the Bank as an additional insured, and each policy
insuring the Property shall name the Bank as lender loss payee and/or mortgagee,
as its interest appears, and all policies shall require the insurer to give the
Bank 30 days prior written notice of the modification, cancellation or
nonrenewal of the policy; the Company shall furnish copies of all such insurance
policies or a certificate evidencing that the Company has complied with the
requirements of this paragraph on the date hereof and on each renewal date of
such policies; and within 90 days after the end of each Fiscal Year, the Company
shall deliver to the Bank a schedule showing all insurance policies in force as
of the end of such year, signed by an authorized officer of the Company.
5.3 Financial Statements. (a) Maintain a standard and modern system of
accounting in accordance with sound accounting practice, (b) furnish to the Bank
such information respecting the business, assets and financial condition of the
Company and its Subsidiaries as the Bank may reasonably request and (c) furnish
to the Bank, without request:
(i) as soon as available, and in any event within 45 days after the end
of each quarter of the Company's Fiscal Year, financial statements including the
balance sheet for the Company and its Subsidiaries as of the end of each such
quarter and statements of income, retained earnings and cash flows of the
Company and its Subsidiaries for each such quarter and for that part of the
Fiscal Year ending with such quarter, setting forth in each case, in comparative
form, figures for the corresponding periods in the preceding Fiscal Year and a
comparison of actual cash flow, income
22
and capital expenditures with amounts budgeted for such period, all in
reasonable detail and certified as true, correct and complete, subject to review
and normal year-end adjustments, by the chief financial officer of the Company;
(ii) as soon as available, and in any event within 90 days after the
close of each Fiscal Year, a copy of the detailed annual audit report for such
year and accompanying financial statements for the Company and its Subsidiaries
as of the end of such year, containing balance sheets and statements of income,
retained earnings and cash flows for such year and for the previous Fiscal Year,
as audited by independent certified public accountants of recognized standing
selected by the Company and satisfactory to the Bank, which report shall be
accompanied by the unqualified opinion of such accountants to the effect that
the statements present fairly, in all material respects, the financial position
of the Company as of the end of such year and the results of its operations and
its cash flows for the year then ended in conformity with GAAP, a certificate of
such accountants showing their calculation of the financial covenants contained
herein and stating that their audit disclosed no Default or that their audit
disclosed a Default and specifying the same and the action taken or proposed to
be taken with respect thereto, and any supplementary comments and reports
submitted by such accountants to the Company including the management letter, if
any;
(iii) as soon as available, and in any event within 25 days after the
end of each month, financial statements (including a balance sheet, statement of
income, and statement of cash flow) which are certified by the Company's Chief
Financial Officer to be true, correct and complete;
(iv) with the financial statements described in Section 5.3(a)(iii),
the certificate of the president or chief financial officer of the Company to
the effect that a review of the activities of the Company during such period has
been made under his supervision to determine whether the Company has observed,
performed and fulfilled each and every covenant and condition in this Agreement
and the Related Documents, and no Default has occurred (or if such Default has
occurred, specifying the nature thereof and the period of existence thereof and
the steps, if any, being undertaken to correct the same);
(v) every Friday, for the week just ending on that Friday, or more
frequently as the Bank may from time to time request, a Borrowing Base
Certificate; and
(vi) promptly upon learning of the occurrence of any of the following,
written notice thereof, describing the same and the steps being taken with
respect thereto: the occurrence of any Default, the institution of, or any
materially adverse determination or development in, any litigation, arbitration
proceeding or governmental proceeding, the occurrence of a "reportable event"
under, or the institution of steps by the Company or any Subsidiary to withdraw
from, or the institution of any steps to terminate, any Employee Plan as to
which the Company or any Subsidiary may have liability, the commencement of any
dispute which might lead to the modification, transfer, revocation, suspension
or termination of this Agreement or any Related Document, or any event which
would have a Material Adverse Effect.
All financial statements referred to herein shall be complete and correct in all
material respects and shall be prepared in reasonable detail and on a
consolidated and consolidating basis in accordance with GAAP, applied
consistently throughout all accounting periods.
23
5.4 Inspection of Property and Records. At any reasonable time
following reasonable notice, as often as may be reasonably desired and at the
Company's expense, permit representatives of the Bank to visit its Property,
examine its books and records and discuss its affairs, finances and accounts
with its officers and independent certified public accountants (who shall be
instructed by the Company to make available to the Bank or its agents the work
papers of such accountants) and the Company shall facilitate such inspection and
examination.
5.5 Use of Proceeds. Use the entire proceeds of the Obligations for
general corporate purposes of the Company only.
5.6 Bank Accounts. Except as set forth in Section 3.21, maintain all of
its deposit and operating accounts of any kind with the Bank.
5.7 Comply With, Pay and Discharge All Notes, Mortgages, Deeds of Trust
and Leases. Comply with, pay and discharge all existing notes, mortgages, deeds
of trust, leases, indentures and any other contractual arrangements to which the
Company or any Subsidiary is a party (including, without limitation, all
Indebtedness) in accordance with the respective terms of such instruments so as
to prevent any default thereunder.
5.8 Environmental Compliance.
(a) Maintain at all times all permits, licenses and other
authorizations required under Environmental Laws, and comply in all respects
with all terms and conditions of the required permits, licenses and
authorizations and all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws.
(b) Notify the Bank promptly upon obtaining knowledge that (i)
any Property previously or presently owned or operated is the subject of an
environmental investigation by any Government Authority having jurisdiction over
the enforcement of Environmental Laws, (ii) the Company or any of its
Subsidiaries has been or may be named as a responsible party subject to
Environmental Liability, or (iii) the Company obtains knowledge of any Hazardous
Substance located on any Property except in compliance with all Requirements of
Law.
(c) At any reasonable time following reasonable notice and as
often as may be reasonably desired, permit the Bank or an independent consultant
selected by the Bank to conduct an environmental investigation satisfactory to
the Bank for the purpose of determining whether the Company, each Subsidiary and
its Property comply with Environmental Laws and whether there exists any
condition or circumstance which may require a cleanup, removal or other remedial
action by the Company or a Subsidiary with respect to any Hazardous Substance.
The Company and its Subsidiaries shall facilitate such environmental audit. The
Bank shall provide the Company, at the Company's request, with all reports and
findings but the Company may not rely on such environmental investigation for
any purpose. Any such environmental investigation of Property shall be at the
Company's expense at any time following an Event of Default or upon the
occurrence of an event described in Section 5.8(b) or at any time the Property
is the subject of an environmental investigation by a Government Authority
having jurisdiction over the enforcement
24
of Environmental Laws; provided, however, that the Bank's environmental
investigation shall not be at the Company's expense if (i) a Government
Authority or a firm or firms of geotechnical engineers and/or environmental
consultants hired by the Company and reasonably acceptable to the Bank shall
undertake to make an environmental audit, and (ii) the Company shall provide the
Bank at the Company's expense with, and the Bank shall be entitled to rely on,
all reports and findings of such Government Authority or geotechnical engineers
as soon as such reports and findings are made available to the Company.
Notwithstanding the foregoing, nothing contained in this Agreement, or in the
Related Documents, or in the enforcement of this Agreement or the Related
Documents, shall constitute or be construed as granting or providing the right,
power or capacity to the Bank to exercise (a) decision making control of the
Company's or any Subsidiary's compliance with any environmental law, or (b) day
to day decision making of the Company or any Subsidiary with respect to (i)
compliance with environmental laws or (ii) all or substantially all of the
operational aspects of the Company or any Subsidiary.
5.9 Fees and Costs.
(a) Pay the Bank on the first day of each month, the accrued
and unpaid commitment fee for the Revolving Loan Commitment. The commitment fee
shall accrue at a rate per annum equal to 3/8% of the difference between (i) the
Revolving Loan Commitment and (ii) the outstanding principal balance of the
Revolving Loans. The commitment fee shall be computed and adjusted daily based
on the actual number of days elapsed in a year of 360 days. All unpaid
commitment fees shall be due and payable on the Termination Date. The Bank may
debit to the Company's Loan Account all commitment fees when due without prior
notice to or consent of the Company.
(b) Pay the Bank all additional costs including, without
limitation, wire transfer or other charges pertaining to the transfer of funds,
lockbox fees and charges arising from returned or dishonored checks of any
Account debtor.
(c) Pay immediately upon receipt of an invoice the reasonable
fees and expenses incurred by the Bank in connection with any inspection
pursuant to Section 5.4, including, without limitation, travel and
administration expenses incurred by representatives of the Bank.
(d) Pay immediately upon receipt of an invoice all reasonable
fees and expenses incurred by the Bank with respect to this Agreement, the
Related Documents and the Obligations, and any amendments thereof and
supplements thereto, including, without limitation, appraisal fees,
environmental inspection fees (including fees and expenses as provided in
Section 5.8(c)) and the reasonable fees of in-house and outside counsel in
connection with the preparation and negotiation of this Agreement, the Related
Documents and all amendments thereto and any waivers of the terms and provisions
thereof and the consummation of the transactions contemplated herein.
(e) Pay immediately upon receipt of an invoice all reasonable
fees and expenses (including attorneys fees) incurred by the Bank in seeking
advice under this Agreement and the Related Documents with respect to protection
or enforcement (including collection and disposition
25
of Collateral) of the Bank's rights and remedies under this Agreement and the
Related Documents and with respect to the Obligations (including collection
thereof) and all costs and expenses which may be incurred by the Bank as a
consequence of a Default as provided in Section 7.2(d) and all reasonable fees
and expenses incurred by the Banks in connection with any bankruptcy or other
debtor relief proceeding involving the Company.
(f) Pay the Bank a fee of $100,000 on May 3, 2004 if the
Company has not received the commitment required under Section 5.16 hereof.
5.10 Indemnity. Indemnify the Bank and its employees, officers,
directors, shareholders, agents, attorneys, successors and assigns against any
and all losses, claims, damages, liabilities, obligations, penalties, actions,
judgments, suits, costs and expenses of any kind or nature whatsoever,
including, without limitation, attorneys' fees and expenses, incurred by them
arising out of, in any way connected with, or as a result of (a) this Agreement
or the Related Documents or the transactions contemplated hereby or protection
or enforcement (including collection or disposition of Collateral) of the Bank's
rights under this Agreement or the Related Documents, (b) the execution and
delivery of this Agreement by the Company and the performance of the
Obligations, (c) any violation of Environmental Laws or any other Requirements
of Law by the Company or any Subsidiary or any of its Property as well as any
cost or expense incurred in remedying such violation, and (d) any claim,
litigation, investigation or proceedings relating to any of the foregoing or the
transactions contemplated by this Agreement, whether or not the Bank is a party
thereto; provided, however, that such indemnity shall not apply to any such
losses, claims, damages, liabilities or related expenses to the extent caused by
any willful misconduct of the Bank. The foregoing indemnities shall survive the
Termination Date, the consummation of the transactions contemplated by this
Agreement, the repayment of the Obligations and the invalidity or
unenforceability of any term or provision of this Agreement or of the Related
Documents and shall remain in effect regardless of any investigation made by or
on behalf of the Bank or the Company and the content or accuracy of any
representation or warranty made under this Agreement.
5.11 [Intentionally Omitted].
5.12 Appraisals. If and to the extent required at any time of the Bank
by any Government Authority or Requirements of Law, permit an independent
appraiser selected by the Bank to conduct appraisals at any reasonable time
following reasonable notice, at the Company's expense, of the Property. The
Company shall facilitate such appraisals and may obtain copies of, but may not
rely, on such appraisals for any purpose.
5.13 Commercial Tort Claims. Promptly upon knowledge thereof, the
Company will deliver to the Bank notice of any commercial tort claims it may
bring against any person, including the name and address of each defendant, a
summary of the facts, an estimate of the Company's damages, copies of any
complaint or demand letter submitted by the Company, and such other information
as the Bank may request.
5.14 Acceptable Operating/Variance Reports Budget. (a) The Company
will, on the effective date of this Agreement, provide to the Bank an operating
budget for the Company and its Subsidiaries projecting, for each month for a
minimum of the next six months, its expected
26
revenues and profitability, as well as the projected EBITDA, such projections to
be prepared in a manner consistent with GAAP (the "Six Month Budget").
Thereafter, the Company shall furnish to the Bank a Six Month Budget every six
months for the subsequent six month period. Such Six Month Budget shall be in
form and substance satisfactory to the Bank, in its sole discretion.
(b) On the first Business Day of each week commencing May 5,
2003, the Company shall deliver to the Bank a cash-oriented projection of cash
receipts and disbursements in the form of an eight week cash flow projection
(including borrowing and borrowing base calculations), an updated report of
anticipated cash receipts supporting the cash projection, and a
reconciliation/variance report for the prior week's cash activity as monitored
against the prior week's cash projections.
(c) Notwithstanding any other provisions of this Agreement,
the Bank shall not be obligated to make any Revolving Loans to the Company if
the Bank, in its sole discretion, determines that the Company is not in
compliance with any requirement of this Section 5.14.
5.15 Financial Advisor. The Company shall continue to retain and
utilize the services of an Advisor of recognized standing and ability on an as
needed basis and the Company will furnish the Advisors as soon as available, and
in any event within 25 days after the end of each month, financial statements
(including a balance sheet, statement of income, and statement of cash flow) of
the Company. The Bank is hereby granted the right to communicate with the
Advisor and pose such questions to the Advisor as the Bank shall find necessary
from time to time. The Company will meet with the Bank after all regularly
scheduled Board of Directors meetings to present and discuss all the information
distributed at the Board meeting.
5.16 Lending Commitment. Use its best efforts to obtain a firm
commitment for the financing of the Obligations from another financial
institution by April 30, 2004.
SECTION 6 NEGATIVE COVENANTS
The Company covenants and agrees that, from and after the date of this
Agreement and until the Termination Date and until all Obligations to the Bank
are paid in full, the Company and its Subsidiaries shall not directly or
indirectly:
6.1 Sale of Assets, Consolidation, Merger, Acquisitions, Etc. (a)
Except for sales of inventory in the ordinary course of business, in any Fiscal
Year of the Company sell, lease, transfer, liquidate or otherwise dispose of
Property having an aggregate net book value in excess of $100,000, whether in
one or in a series of transactions; (b) consolidate or merge with or into any
other Person; (c) directly or indirectly, sell or transfer any Property, real or
personal, used or useful in its business, and thereafter lease such property or
other property which it intends to use for substantially the same purposes; (d)
sell, issue or otherwise distribute any security or other interest in the
Company, including any shares of the capital stock of the Company; (e) create or
permit any Subsidiary to create a new Subsidiary; (f) directly or indirectly
sell or transfer any shares of stock or assets of any Subsidiary or joint
venture in which the Company has an ownership interest, or permit
27
the same to occur; (g) purchase or otherwise acquire all or substantially all of
the assets or stock of any Person; or (h) except as disclosed on Schedule 6.1
hereto, enter into any joint venture.
6.2 Indebtedness. Issue, create, incur, assume or otherwise become
liable with respect to (or agree to issue, create, incur, assume or otherwise
become liable with respect to), or permit to remain outstanding, any
Indebtedness except (a) the Obligations; (b) Indebtedness which has been
subordinated to the Bank in form and substance satisfactory to the Bank; (c)
current liabilities (other than for borrowed money) of the Company and its
Subsidiaries incurred in the ordinary course of business which are not more than
90 days overdue, unless being contested in good faith and with due diligence;
(d) Indebtedness secured by Permitted Liens; (e) Indebtedness disclosed on the
Company's most recent financial statements described in Section 3.2(a), provided
that such Indebtedness shall not be renewed, extended or increased without the
Bank's written consent; (f) Indebtedness of the Subsidiaries disclosed on
Schedule 6.2 hereto, provided that such Indebtedness shall not be increased
without the Bank's prior written consent; (g) Indebtedness in an aggregate
amount of not more than $100,000 in excess of the amounts permitted by Sections
6.2(a), (b), (c), (d) and (e); and (h) Indebtedness in an aggregate amount of
not more than $2,000,000 incurred by Oilgear Xxxxxx, Ltd., a United Kingdom
Subsidiary of the Company, on the Leeds, United Kingdom real estate owned by
such Subsidiary.
6.3 Liens. Create or permit to be created or allow to exist any Lien
upon or interest in any Property except Permitted Liens.
6.4 Guaranty. Guaranty or otherwise in any way become or be responsible
for obligations of any other Person, directly or indirectly, whether by an
agreement to purchase the indebtedness of any other Person, or agreement for the
furnishing of funds to any other Person through the purchase of goods, supplies
or services (or by way of stock purchase, capital contribution advanced or
loaned) for the purpose of paying or discharging the indebtedness of any Person,
or otherwise, except for the endorsement of negotiable instruments by the
Company or a Subsidiary for deposit or collection or similar transactions in the
ordinary course of business.
6.5 Restricted Payments. Make any Restricted Payments.
6.6 Loans, Investments. Make or commit to make advances, loans,
extensions of credit or capital contributions to, or purchases of any stock,
bonds, notes, debentures or other securities of, or make any other investment
in, any Person except: (a) Accounts, chattel paper, and notes receivable created
by the Company or its Subsidiaries in the ordinary course of business; (b)
advances in the ordinary course of business to suppliers, employees and officers
of the Company and its Subsidiaries consistent with past practices in an
aggregate amount at any time outstanding of not more than $250,000.00; (c)
investments in bank certificates of deposit (but only with FDIC-insured
commercial banks having a combined capital and surplus in excess of
$200,000,000), open market commercial paper maturing within one year having the
highest rating of either Standard & Poors Corporation or Xxxxx'x Investors
Services, Inc., U.S. Treasury Bills subject to repurchase agreements and
short-term obligations issued or guaranteed by the U.S. Government or any agency
thereof; and (d) investments in open-end diversified investment companies of
recognized financial standing investing solely in short-term money market
instruments consisting of securities issued or guaranteed by the United States
government, its agencies or instrumentalities,
28
time deposits and certificates of deposit issued by domestic banks or London
branches of domestic banks, bankers acceptances, repurchase agreements, high
grade commercial paper and the like; provided, that for Sections 6.6(a) through
(d), each such investment has a maturity date not later than 180 days after the
date of purchase or making thereof and, except for advances under Section
6.6(b), is pledged and delivered to the Bank as additional security for the
Obligations.
6.7 Compliance with ERISA. (a) Terminate any Employee Plan so as to
result in any material liability to PBGC; (b) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code) involving any Employee
Plan which would result in a material liability for an excise tax or civil
penalty in connection therewith; or (c) incur or suffer to exist any material
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, involving any condition, which presents a risk of incurring a
material liability to PBGC by reason of termination of any such Employee Plan.
6.8 Fixed Asset Expenditures. Purchase, become obligated for, invest
in, acquire or otherwise expend for the acquisition of real estate, machinery,
equipment or other fixed assets (including capitalized lease obligations) during
each Fiscal Year an amount exceeding $1,200,000 for such Fiscal Year.
6.9 Operating Leases. Incur, or permit to be outstanding as lessee,
operating lease or rental obligations during any Fiscal Year in an aggregate
amount exceeding $2,500,000.00.
6.10 Affiliates. Permit any transaction with any Affiliate, except on
terms not less favorable to the Company than would be usual and customary in
similar transactions with Persons who are not Affiliates.
6.11 Net Income. The Company's Consolidated Net Income (loss) (as
determined on a Fiscal Year to date basis) shall not be greater/less (as
provided below) than the amount provided in the table below at the end of the
month as provided below:
January, 2004 ($218,157)
February, 2004 ($463,740)
March, 2004 ($347,886)
April, 2004 ($463,179)
May, 2004 ($410,384)
June, 2004 $(204,421)
July, 2004 ($273,133)
August, 2004 ($194,040)
September, 2004 $39,843
October, 2004 $66,942
November, 2004 $217,320
December, 2004 $532,070
January, 2005 ($87,959)
February, 2005 ($50,451)
March, 2005 $167,161
29
6.12 EBITDA. Permit EBITDA, measured on the last day of each Fiscal
Quarter, to be less than: (a) $750,000 on March 31, 2004, for the Fiscal Year to
date period then ended; (b) $1,608,014 on June 30, 2004, for the Fiscal Year to
date period then ended; (c) $2,465,909 on September 30, 2004, for the Fiscal
Year to date period then ended; (d) $3,802,603 on December 31, 2004 for the
Fiscal Year then ended; and (e) $867,837 on March 31, 2005, for the Fiscal Year
to date period then ended.
SECTION 7 DEFAULT AND REMEDIES
7.1 Events of Default Defined. Any one or more of the following shall
constitute an "Event of Default":
(a) the Company shall fail to pay any Obligation (including,
without limitation, the Notes and the payments required by Sections 2.10(b) and
5.9) when and as the same shall become due and payable, whether upon demand, at
maturity, by acceleration or otherwise, which default shall remain uncured for a
period of two days;
(b) the Company shall fail to observe or perform any of the
covenants, agreements or conditions contained in this Agreement or the Related
Documents and such failure continues for three (3) days after the Company
receives written notice;
(c) the Company or any Subsidiary shall default (as principal
or guarantor or otherwise) in the payment of any other Indebtedness aggregating
$100,000 or more, or with respect to any of the provisions of any agreement
evidencing such Indebtedness, and such default shall continue beyond any period
of grace, if any, specified in such agreement.
(d) any representation or warranty made by the Company herein
or in any of the Related Documents or in any certificate, document or financial
statement delivered to the Bank shall prove to have been incorrect in any
material adverse respect as of the time when made or given;
(e) a final judgment (or judgments) for the payment of amounts
aggregating in excess of $25,000.00 shall be entered against the Company or any
Subsidiary, and such judgment (or judgments) shall remain outstanding and
unsatisfied, unbonded or unstayed after thirty days from the date of entry
thereof;
(f) the Company or any Subsidiary shall (i) become insolvent
or take or fail to take any action which constitutes an admission of inability
to pay its debts as they mature; (ii) make an assignment for the benefit of
creditors; (iii) petition or apply to any tribunal for the appointment of a
custodian, receiver or any trustee for the Company or any Subsidiary or a
substantial part of its respective assets; (vi) suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of thirty days
or more; (iv) commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; (v) by any act or omission
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for
30
relief or the appointment of a custodian, receiver or any trustee for it or any
substantial part of any of its properties; or adopts a plan of liquidation of
its assets;
(g) if any Person shall: (i) petition or apply to any tribunal
for the appointment of a custodian, receiver or any trustee for the Company or
any Subsidiary or a substantial part of its respective assets which continues
undischarged for a period of thirty days or more; (ii) commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect, in which an order for relief is entered or which remains
undismissed for a period of thirty days or more;
(h) any Government Authority or any geotechnical engineer or
environmental consultant hired by the Company, the Bank or any Government
Authority shall determine that the potential uninsured or unrecoverable
liability of the Company or a Subsidiary for damages caused by the discharge of
any Hazardous Substance, including liability for real property damage or
remedial action related thereto or liability for personal injury claims, exceeds
$25,000.00 and the Company is unable to provide for such liability in a manner
reasonably acceptable to the Bank; or
(i) this Agreement or any of the Related Documents shall at
any time cease to be in full force and effect, or the Company shall contest or
deny any liability or obligation under, or attempt to revoke or terminate, this
Agreement or any Related Document.
7.2 Remedies Upon Event of Default. Upon the occurrence of an Event of
Default:
(a) specified in clauses (f) or (g) of Section 7.1, then,
without presentment, notice, demand or action of any kind by the Bank, all of
which are hereby waived: (i) the Revolving Loan Commitment and the obligations
of the Bank to make or incur any Obligations shall automatically and immediately
terminate; and (ii) the entire amount of the Obligations shall be automatically
accelerated and immediately due and payable.
(b) specified in clauses (a), (b), (c), (d), (e), (h), or (i)
of Section 7.1, the Bank may, without presentment, notice, demand or action of
any kind, all of which are hereby waived: (i) immediately terminate the Bank's
obligation to make or incur any Obligations, and the same shall immediately
terminate; and (ii) declare the entire amount of the Obligations immediately
accelerated, due and payable.
(c) the Bank may at any time without prior notice or demand
set off against any credit balance or other money now or hereafter owed it by
the Bank all or any part of the Company's Obligations hereunder. The Company
hereby grants to the Bank a security interest in and lien on any such credit
balance or other money.
(d) the Bank shall have all of the rights and remedies
provided to the Bank by this Agreement and the other Related Documents, and all
rights and remedies provided by law and in equity, by
31
statute or otherwise, and no remedy herein conferred upon the Bank is intended
to be exclusive of any other right and remedy and each right and remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law, in equity, by statute or otherwise. In addition to
and not in lieu of any other right or remedy the Bank might have, the Bank at
any time and from time to time at its election may (but shall not be required
to) do or perform or comply with or cause to be done or performed or complied
with anything which the Company may be required to do, perform or comply with
and the Company shall reimburse the Bank upon demand for any cost or expense
which the Bank may incur in such respect, together with interest thereon at the
rate equal to the rate payable under the Revolving Credit Note following an
Event of Default from the date of such demand until paid. No failure or delay on
the part of the Bank in exercising any right or remedy hereunder shall operate
as a waiver thereof nor shall any single or partial exercise of any right
hereunder preclude any further exercise thereof or the exercise of any other
right or remedy.
SECTION 8 MISCELLANEOUS
8.1 Assignability; Successors. Except as provided herein, the
provisions of this Agreement shall inure to the benefit of and be binding upon
the permitted successors and assigns of the parties hereto. The Company's rights
and liabilities under this Agreement and the Related Documents are not
assignable in whole or in part without the prior written consent of the Bank.
The Bank may at any time sell, assign or transfer to one or more banks or other
entities other than any competitor of the Company ("Participants") interests in
this Agreement and in any Note held by the Bank or any other interest of the
Bank in the Obligations. The Company authorizes the Bank to disclose to any
Participant or prospective Participant any and all financial information in the
Bank's possession concerning the Company and its Affiliates which has been
delivered to the Bank by or on behalf of the Company; provided, however, that
such Participant or prospective Participant shall agree to treat all information
and documents received with the same degree of care as it gives its own
confidential information and shall take all reasonable steps to assure that
confidential information is not disclosed to third parties. The Company agrees
that upon the occurrence of any Event of Default each Participant shall be
deemed to have the right of setoff in respect of its participating interest in
the Obligations to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement.
8.2 Survival. All agreements, covenants, representations and warranties
made herein and in the Related Documents shall survive the execution and
delivery of this Agreement and the Related Documents, the making of the
Obligations and the termination of this Agreement.
8.3 Governing Law. This Agreement and the Related Documents shall be
governed by the internal laws of the State of Wisconsin. The parties hereto
acknowledge that this Agreement and the Related Documents were all negotiated
with the assistance of their respective counsel and, accordingly, such laws
shall be applied without reference to any rules of construction regarding the
draftsman hereof.
8.4 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same agreement. The descriptive
headings in this Agreement are inserted for convenience of reference only and
shall not affect the construction of this Agreement. All pronouns and any
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variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural as the identity of the person or persons may require.
8.5 Entire Agreement; Amendments. This Agreement, the Exhibits and
Schedules attached hereto, and the Related Documents contain the entire
understanding of the parties with respect to the subject matter hereof, and
supersede all other understandings, oral or written, with respect to the subject
matter hereof. No amendment, modification, alteration, or waiver of the terms of
this Agreement or consent required under the terms of this Agreement shall be
effective unless made in a writing, which makes specific reference to this
Agreement and which has been signed by the party against which enforcement
thereof is sought. Any such amendment, modification, alteration, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
8.6 Notices. All communications or notices required or permitted by
this Agreement shall be in writing and shall be deemed to have been given or
made when delivered in hand, deposited in the mail, or sent by facsimile.
Communications or notices shall be delivered personally or by certified or
registered mail, postage prepaid, or by facsimile and addressed as follows,
unless and until either of such parties notifies the other in accordance with
this section of a change of address:
if to the Company: THE OILGEAR COMPANY
0000 Xxxxx 00xx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx,
Vice President, Chief Financial Officer & Secretary
FAX: (000) 000-0000
if to the Bank: M&I XXXXXXXX & ILSLEY BANK
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxx X. Xxxxxxxxx, Xx.,
Vice President-Commercial Banking
FAX: (000) 000-0000
with copies to: XXXXXXX XXXX & FRIEDRICH LLP
000 Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000-0000
Attn: K. Xxxx Xxxxxxxx, Esq.
FAX: (000) 000-0000
8.7 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
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8.8 Further Assurances. The Company agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements and instruments, as the Bank may at any time request in connection
with the administration or enforcement of this Agreement or the Related
Documents or in order better to assure and confirm unto the Bank its rights,
powers and remedies hereunder.
8.9 Conflicts and Ambiguities. In the event of any ambiguity or
conflict as between the terms of this Agreement, the Related Documents or any
other document executed and delivered pursuant to this Agreement, the terms of
this Agreement shall control.
8.10 Submission to Jurisdiction. THE BANK MAY ENFORCE ANY CLAIM ARISING
OUT OF THIS AGREEMENT OR THE RELATED DOCUMENTS IN ANY STATE OR FEDERAL COURT
HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN MILWAUKEE, WISCONSIN. FOR THE
PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT TO ANY SUCH CLAIM,
THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS. THE
COMPANY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF SAID COURTS BY
MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO THE COMPANY AND
AGREES THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW (A) SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY SUCH SUIT,
ACTION OR PROCEEDING, AND (B) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL
SERVICE UPON PERSONAL DELIVERY TO IT. NOTHING HEREIN CONTAINED SHALL AFFECT THE
RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
PRECLUDE THE BANK FROM BRINGING AN ACTION OR PROCEEDING IN RESPECT HEREOF IN ANY
OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER SUCH ACTION. THE COMPANY
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY COURT LOCATED IN MILWAUKEE, WISCONSIN AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
8.11 Waiver Of Jury Trial. AFTER OBTAINING THE ADVICE OF COUNSEL, EACH
PARTY HERETO KNOWINGLY, VOLUNTARILY AND WITHOUT COERCION, WAIVES ALL RIGHTS TO A
TRIAL BY JURY OF ALL DISPUTES ARISING OUT OF OR IN RELATION TO (A) THIS
AGREEMENT OR ANY RELATED DOCUMENT TO WHICH IT IS A PARTY, OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION THEREWITH, (B) ARISING FROM ANY RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT OR AND ANY RELATED DOCUMENT, OR (C)
ANY ACT, CONDUCT OR OMISSION IN CONNECTION WITH THIS AGREEMENT, THE RELATED
DOCUMENTS OR ANY RELATIONSHIP CREATED THEREBY, REGARDLESS OF THE TIME WHEN THE
34
SAME MAY OCCUR, AND AGREES THAT ALL MATTERS RELATING THERETO AND ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
8.12 Inducements. All statements, promises or inducements made to any
party hereto in connection with this Agreement and the Related Documents are set
forth herein or therein.
[Signature page to follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
THE OILGEAR COMPANY
By: /s/ Xxxxx X. Xxxxx
-----------------------------
Xxxxx X. Xxxxx, President and CEO
M&I XXXXXXXX AND XXXXXX BANK
By: /s/ Xxx X. Xxxxxxxxx
------------------------------
Xxx X. Xxxxxxxxx, Vice President
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxx X. Xxxxxx, Vice President
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