Exhibit 10.1(a)
CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
XXXXXXX & YALE, INC.
AND
NORWEST BUSINESS CREDIT, INC.
FEBRUARY 11, 1999
CREDIT AND SECURITY AGREEMENT
Dated as of February 11, 1999
XXXXXXX & YALE, INC., a Massachusetts corporation (the
"BORROWER"), and NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the
"LENDER"), hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"ACCOUNTS" means all of the Borrower's accounts, as such term
is defined in the UCC, including without limitation the aggregate
unpaid obligations of customers and other account debtors to the
Borrower arising out of the sale or lease of goods or rendition of
services by the Borrower on an open account or deferred payment basis.
"ADVANCE(S)" means an advance(s) to the Borrower by the Lender
under the Discretionary Credit and includes a revolving advance and the
Term Loan.
"AFFILIATE" or "AFFILIATES" means Lasiris, Inc., Radiant
Asiatec Pte, Ltd, Xxxxxxx & Yale Foreign Sales Corp. and any other
Person controlled by, controlling or under common control with the
Borrower, including (without limitation) any Subsidiary of the
Borrower. For purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.
"BANKING DAY" means a day other than a Saturday, Sunday or
other day on which banks are generally open for business in
Minneapolis, Minnesota, or Boston, Massachusetts.
"BASE RATE" means the rate of interest publicly announced from
time to time by Norwest Bank Minnesota as its "base rate" or, if such
bank ceases to announce a rate so designated, any similar successor
rate designated by the Lender.
"BORROWING BASE" means, at any time and subject to change from
time to time in the Lender's sole discretion, the lesser of:
(a) Three Million Five Hundred Thousand ($3,500,000.00)
Dollars (the "MAXIMUM LINE"), less the outstanding
principal balance of the Term Loan;
or
(b) the sum of:
(i) the lesser of (A) eighty (80%) percent of
Eligible Accounts, plus
(ii) the lesser of (A) forty (40%) of Eligible
Inventory consisting of raw materials less
book reserves, or (B) One Million Two
Hundred Thousand ($1,200,000.00) Dollars
(the "INVENTORY LIMIT").
"COLLATERAL" means all of the Borrower's Equipment, General
Intangibles, Investment Property, Inventory, Receivables, all sums on
deposit in any Collateral Account, and any items in any Lockbox;
together with (i) all substitutions and replacements for and products
of any of the foregoing; (ii) proceeds of any and all of the foregoing;
(iii) in the case of all tangible goods, all accessions; (iv) all
accessories, attachments, parts, equipment and repairs now or hereafter
attached or affixed to or used in connection with any tangible goods;
(v) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering such goods; and (vi) the Life Insurance
Policy.
"COLLATERAL ACCOUNT" has the meaning given in the Collateral
Account Agreement.
"COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account
Agreements of even date herewith by and among (i) the Borrower,
Comerica Bank and the Lender; and (ii) the Borrower, Fleet National
Bank and the Lender.
"CREDIT FACILITY" means the discretionary credit facility
being made available to the Borrower by the Lender pursuant to Article
II.
"DEBT" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined. For purposes of determining a Person's aggregate Debt at
any time, "Debt" shall also include the aggregate payments required to
be made by such Person at any time under any lease that is considered a
capitalized lease under GAAP.
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"DEFAULT" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"DEFAULT PERIOD" means any period of time beginning on the
first day of any month during which a Default or Event of Default has
occurred and ending on the date the Lender notifies the Borrower in
writing that such Default or Event of Default has been cured or waived.
"DEFAULT RATE" means an annual rate equal to three (3%)
percent over the Floating Rate, which rate shall change when and as the
Floating Rate changes.
"DEMAND NOTE" means the Borrower's promissory note, payable to
the order of the Lender in substantially the form of Exhibit A hereto,
as the same may hereafter be amended, supplemented or restated from
time to time and any note or notes issued in substitution therefor. The
Demand Note shall be dated as of the Funding Date and Borrower hereby
authorizes the Lender to complete the Demand Note by dating the same as
of the Funding Date.
"DISCRETIONARY CREDIT FACILITY" means the discretionary credit
facility being made available to the Borrower by the Lender pursuant to
Article II hereof.
"ELIGIBLE ACCOUNTS" means all unpaid Accounts, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
(i) That portion of Accounts over ninety (90) days
past invoice date;
(ii) That portion of Accounts that is disputed or
subject to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as
applicable, by the Borrower to the customer;
(iv) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be
included in Eligible Accounts that portion of Accounts owed by
such units of government for which the Borrower has provided
evidence satisfactory to the Lender that (A) the Lender has a
first priority perfected security interest and (B) such
Accounts may be enforced by the Lender directly against such
unit of government under all applicable laws);
(v) Accounts owed by an account debtor located
outside the United States which are not (A) backed by a bank
letter of credit naming the Lender as beneficiary or assigned
to the Lender, in the Lender's possession and acceptable to
the Lender in
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all respects, in its sole discretion, or (B) covered by a
foreign receivables insurance policy acceptable to the Lender
in its sole discretion;
(vi) Accounts owed by an account debtor that is
insolvent, the subject of bankruptcy proceedings or has gone
out of business;
(vii) Accounts owed by a shareholder, subsidiary,
Affiliate, officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected
security interest in the Lender's favor or which are subject
to any lien, security interest or claim in favor of any Person
other than the Lender including without limitation any payment
or performance bond;
(ix) That portion of Accounts that has been
restructured, extended, amended or modified;
(x) That portion of Accounts that constitutes
advertising, finance charges, service charges or sales or
excise taxes;
(xi) Accounts owed by an account debtor, regardless
of whether otherwise eligible, if twenty-five (25%) percent or
more of the total amount due under Accounts from such debtor
is ineligible under clauses (i), (ii) or (ix) above;
(xii) That portion of Accounts which, when aggregated
with all of the accounts of that account debtor, exceeds
twenty-five (25%) percent of the then aggregate of Eligible
Accounts; and
(xiii) Accounts, or portions thereof, otherwise
deemed ineligible by the Lender in its sole discretion.
"ELIGIBLE INVENTORY" means all Inventory of the Borrower, at
the lower of cost or market value as determined in accordance with
GAAP; provided, however, that the following shall not in any event be
deemed Eligible Inventory:
(i) Inventory that is: in-transit; located at any
warehouse, job site or other premises not approved by the
Lender in writing; located outside of the states, or
localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security
interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, xxxx of lading or other
document of title; on consignment from any Person; on
consignment to any Person or subject to any bailment unless
such consignee or bailee has executed an agreement with the
Lender;
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(ii) Supplies, packaging, parts or sample Inventory;
(iii) Work-in-process Inventory;
(iv) Inventory that is damaged, obsolete, slow moving
or not currently saleable in the normal course of the
Borrower's operations;
(v) Inventory that the Borrower has returned, has
attempted to return, is in the process of returning or intends
to return to the vendor thereof;
(vi) Inventory that is perishable or live;
(vii) Inventory manufactured by the Borrower pursuant
to a license unless the applicable licensor has agreed in
writing to permit the Lender to exercise its rights and
remedies against such Inventory;
(viii) Inventory that is subject to a security
interest in favor of any Person other than the Lender; and
(ix) Inventory otherwise deemed ineligible by the
Lender in its sole discretion.
"ENVIRONMENTAL LAWS" has the meaning specified in Section
5.12.
"EQUIPMENT" means all of the Borrower's equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
office and record keeping equipment, parts, tools, supplies, and
including specifically (without limitation) the goods described in any
equipment schedule or list herewith or hereafter furnished to the
Lender by the Borrower.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EVENT OF DEFAULT" has the meaning specified in Section 8.1.
"FLOATING RATE" means an annual rate equal to the sum of the
Base Rate plus two and one-half (2.50%) percent, which annual rate
shall change when and as the Base Rate changes.
"FUNDING DATE" has the meaning given in Section 2.1.
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"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.5, except for any change
in accounting practices to the extent that, due to a promulgation of
the Financial Accounting Standards Board changing or implementing any
new accounting standard, the Borrower either (i) is required to
implement such change, or (ii) for future periods will be required to
and for the current period may in accordance with generally accepted
accounting principles implement such change, for its financial
statements to be in conformity with generally accepted accounting
principles (any such change is hereinafter referred to as a "Required
GAAP Change"), provided that the Borrower shall fully disclose in such
financial statements any such Required GAAP Change and the effects of
the Required GAAP Change on the Borrower's income, retained earnings or
other accounts, as applicable.
"GENERAL INTANGIBLES" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and
future patents, patent applications, copyrights, trademarks, trade
names, trade secrets, customer or supplier lists and contracts,
manuals, operating instructions, permits, franchises, the right to use
the Borrower's name, and the goodwill of the Borrower's business.
"GUARANTOR(S)" means Xxxx X. Xxxxxxxx.
"HAZARDOUS SUBSTANCE" has the meaning given in Section 5.12.
"INVENTORY" means all of the Borrower's inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired,
whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease
or under service contracts or for manufacture or processing, and
wherever located.
"INVESTMENT PROPERTY" means investment property as that term
is defined in Section 9-115 of the UCC.
"LIFE INSURANCE ASSIGNMENT" means an Assignment of Life
Insurance Policy as Collateral to be executed by the owner and the
beneficiary thereof, in form and substance satisfactory to the Lender,
granting the Lender a lien on the Life Insurance Policy to secure
payment of the Obligations.
"LIFE INSURANCE POLICY" has the meaning given in Section 6.11.
"ISSUER" means the issuer of any Letter of Credit.
"L/C AMOUNT" means the sum of (i) the aggregate face amount of
any issued and outstanding Letters of Credit and (ii) the unpaid amount
of the Obligation of Reimbursement.
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"L/C APPLICATION" means an application and agreement for
letters of credit in a form acceptable to the Issuer and the Lender.
"LETTER OF CREDIT" has the meaning specified in Section 2.14
hereof.
"LOAN DOCUMENTS" means this Agreement, the Demand Note and the
Security Documents.
"LOCKBOX" has the meaning given in the Lockbox Agreement.
"LOCKBOX AGREEMENT" means the Lockbox Agreements of even date
herewith by and among (i) the Borrower, Comerica Bank and the Lender;
and (ii) the Borrower, Fleet National Bank and the Lender.
"MATURITY DATE" has the meaning given in Section 2.12.
"MAXIMUM LINE" means Three Million Five Hundred Thousand
($3,500,000.00) Dollars.
"NORWEST BANK MINNESOTA" means Norwest Bank Minnesota,
National Association.
"OBLIGATION OF REIMBURSEMENT" has the meaning specified in
Section 2.5 hereof.
"OBLIGATIONS" means the Demand Note and each and every other
debt, liability and obligation of every type and description which the
Borrower may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created
or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of the Borrower,
and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole,
joint, several or joint and several, and including specifically, but
not limited to, all indebtedness of the Borrower arising under this
Agreement, any Obligations of Reimbursement, the Demand Note or any
other loan or credit agreement or guaranty between the Borrower and the
Lender, whether now in effect or hereafter entered into.
"ORIGINAL MATURITY DATE" means March 1, 2002.
"PERMITTED LIEN" has the meaning given in Section 7.1.
"PERSON" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
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"PLAN" means an employee benefit plan or other plan maintained
for the Borrower's employees and covered by Title IV of ERISA.
"PREMISES" means all premises where the Borrower conducts its
business and has any rights of possession, including (without
limitation) the premises legally described in Exhibit C attached
hereto.
"RECEIVABLES" means each and every right of the Borrower to
the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other person who subsequently
transfers such person's interest to the Borrower, whether such right to
payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which the
Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against
any property of such account debtor or other obligor; all including but
not limited to all present and future accounts, contract rights, loans
and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"REPORTABLE EVENT" shall have the meaning assigned to that
term in Title IV of ERISA.
"SECURITY DOCUMENTS" means this Agreement, the Collateral
Account Agreement, the Lockbox Agreement, the Life Insurance
Assignment, and any other document delivered to the Lender from time to
time to secure the Obligations, as the same may hereafter be amended,
supplemented or restated from time to time.
"SECURITY INTEREST" has the meaning given in Section 3.1.
"SPECIAL ACCOUNT" means a specified cash collateral account
maintained by a financial institution acceptable to the Lender in
connection with Letters of Credit.
"SUBSIDIARY" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrower, by the Borrower and
one or more other Subsidiaries, or by one or more other Subsidiaries.
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"TERM LOAN" has the meaning specified in Section 2.2 hereof.
"TERMINATION DATE" means the earliest of (i) the Maturity
Date, (ii) the date the Borrower terminates the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.14 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
"UNITED STATES BANKRUPTCY CODE" means Title 11 of the United
States Code entitled "Bankruptcy", as amended, and any successor
statute.
Section 1.2 CROSS REFERENCES. All references in this Agreement
to Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 ADVANCES. The Lender may, in its sole discretion,
make advances to the Borrower from time to time from the date all of the
conditions set forth in Section 4.1 are satisfied (the "FUNDING DATE") to the
Termination Date, on the terms and subject to the conditions herein set forth.
The Lender shall not consider any request for an Advance if, after giving effect
to such requested Advance, the sum of the outstanding and unpaid Advances would
exceed the Borrowing Base, less the L/C Amount. The Borrower's obligation to pay
the Advances shall be evidenced by the Demand Note and shall be secured by the
Collateral as provided in Article III. Within the limits set forth in this
Section 2.1, the Borrower may request Advances, prepay pursuant to Section 2.13
and request additional Advances. The Borrower agrees to comply with the
following procedures in requesting Advances under this Section 2.1:
(a) The Borrower will not request any Advance under this
Section 2.1 if, after giving effect to such requested Advance, the sum
of the outstanding and unpaid Advances under this Section 2.1 and under
Section 2.2 or otherwise would exceed the Borrowing Base less the L/C
Amount.
(b) The Borrower shall make each request for an Advance to the
Lender before 11:00 a.m. (Boston time) of the day of the requested
Advance. Requests may be made in writing or by telephone, specifying
the date of the requested Advance and the amount thereof. Each request
shall be by (i) any officer of the Borrower; or (ii) any person
designated as the Borrower's agent by any officer of the Borrower in a
writing delivered to the Lender;
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or (iii) any person whom the Lender reasonably believes to be an
officer of the Borrower or such a designated agent.
(c) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Advance by crediting the same to the Borrower's demand deposit account
maintained with Fleet National Bank unless the Lender and the Borrower
shall agree in writing to another manner of disbursement. Upon the
Lender's request, the Borrower shall promptly confirm each telephonic
request for an Advance by executing and delivering an appropriate
confirmation certificate to the Lender. The Borrower shall be obligated
to repay all Advances even if the Lender does not receive such
confirmation and even if the person requesting an Advance was not in
fact authorized to do so. Any request for an Advance, whether written
or telephonic, shall be deemed to be a representation by the Borrower
that the conditions set forth in Section 4.2 have been satisfied as of
the time of the request.
Section 2.2 TERM LOAN. The Lender may, in its sole discretion,
make a term loan (the "TERM LOAN") in the aggregate principal amount of Five
Hundred Thousand ($500,000.00) Dollars, which Term Loan shall be secured by the
Collateral as provided in Article III hereof. Upon fulfillment of the applicable
conditions set forth in Article IV hereof and upon its determination to make the
Term Loan, the Lender shall disburse loan proceeds, if any, by crediting the
same to the Borrower's demand deposit account specified in Section 2.1(c) hereof
unless the Lender and the Borrower shall agree in writing to another manner of
disbursement.
Section 2.3 DEMAND NOTE. All Advances and the Term Loan, if
any, made by the Lender under this Article II shall be evidenced by and
repayable with interest in accordance with the Demand Note. The principal of the
Demand Note shall be due and payable as provided herein and on the earlier of
termination of the Discretionary Credit Facility or demand by the Lender and
shall bear interest as provided herein. The portion of the Demand Note which
evidences principal of the Term Loan, if any, shall be payable in sixty (60)
installments as follows: $8,334.00 on April 1, 1999, and the same amount (except
the last installment which shall be the unpaid balance) on the first day of each
month thereafter until the Term Loan is fully paid.
Section 2.4 ISSUANCE OF LETTERS OF CREDIT.
(a) The Lender may, in its sole discretion, issue or cause to
be issued by an Issuer one or more letters of credit for the account of
the Borrower (each a "LETTER OF CREDIT") from time to time during the
period from the date hereof until the Lender demands payment of the
Advances or the Discretionary Credit Facility has been terminated
pursuant to Section 2.12 or 2.13 in an aggregate amount at any time
outstanding not to exceed the Borrowing Base less the sum of (i) all
outstanding and unpaid Advances hereunder and (ii) the unpaid amount of
the Obligation of Reimbursement. Each Letter of Credit, if any, shall
be issued pursuant to a separate L/C Application entered into by the
Borrower and the Lender as co- applicants for the benefit of the
Issuer, completed in a manner satisfactory to the Lender and
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the Issuer. The terms and conditions set forth in each such L/C
Application shall supplement the terms and conditions hereof, but in
the event of inconsistency between the terms of any such L/C
Application and the terms hereof, the terms hereof shall control.
(b) The Borrower will not request the issuance of any Letter
of Credit under this Section 2.4, if, after the issuance of such
requested Letter of Credit, the sum of the face amounts of all issued
and outstanding Letters of Credit would exceed the Borrowing Base less
the sum of (i) all outstanding and unpaid Advances hereunder and (ii)
the unpaid amount of the Obligation of Reimbursement.
(c) No Letter of Credit shall be issued with an expiry date
later than the Termination Date in effect as of the date of issuance.
(d) Any request for the issuance of a Letter of Credit under
this Section 2.4 shall be deemed to be a representation by the Borrower
that (i) the condition set forth in Section 2.4(b) hereof has been met,
and (ii) the statements set forth in Section 4.2 hereof are correct as
of the time of the request.
Section 2.5 PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
The Borrower acknowledges that the Lender, as co-applicant, will be liable to
the Issuer of any Letter of Credit for reimbursement of any and all draws
thereunder and all other amounts required to be paid under the applicable L/C
Application. Accordingly, the Borrower agrees to pay to the Lender any and all
amounts required to be paid under the applicable L/C Application, when and as
required to be paid thereby, and the amounts designated below, when and as
designated:
(a) The Borrower hereby agrees to pay the Lender on the day a
draft is honored under any Letter of Credit a sum equal to all amounts
drawn under such Letter of Credit plus any and all reasonable charges
and expenses that the Issuer or the Lender may pay or incur relative to
such draw, plus interest on all such amounts, charges and expenses as
set forth below (all such amounts are hereinafter referred to,
collectively, as the "OBLIGATION OF REIMBURSEMENT").
(b) The Borrower hereby agrees to pay the Lender on demand
interest on all amounts, charges and expenses payable by the Borrower
to the Lender under this Section 2.5, accrued from the date any such
draft, charge or expense is paid by the Issuer until payment in full by
the Borrower at the Default Rate.
If the Borrower fails to pay to the Lender promptly the amount
of its Obligation of Reimbursement in accordance with the terms hereof
and the L/C Application pursuant to which such Letter of Credit was
issued, the Lender is hereby irrevocably authorized and directed, in
its sole discretion, to make an Advance in an amount sufficient to
discharge the Obligation of Reimbursement, including all interest
accrued thereon but unpaid at the time
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of such Advance, and such Advance shall be evidenced by the Demand Note
and shall bear interest as provided in Section 2.9 hereof.
Section 2.6 SPECIAL ACCOUNT. If the Lender terminates the
Discretionary Credit Facility pursuant to Section 2.12 or the Discretionary
Credit Facility is otherwise terminated for any reason whatsoever, while any
Letter of Credit is outstanding, the Borrower shall thereupon pay the Lender in
immediately available funds for deposit in the Special Account an amount equal
to the maximum aggregate amount available to be drawn under all Letters of
Credit then outstanding, assuming compliance with all conditions for drawing
thereunder. The Special Account shall be maintained for the Lender by any
financial institution acceptable to the Lender. Any interest earned on amounts
deposited in the Special Account shall be credited to the Special Account.
Amounts on deposit in the Special Account may be applied by the Lender at any
time or from time to time to the Borrower's Obligation of Reimbursement or any
other Obligations, in the Lender's sole discretion, and shall not be subject to
withdrawal by the Borrower so long as the Lender maintains a security interest
therein. The Lender agrees to transfer any balance in the Special Account to the
Borrower at such time as the Lender is required to release its security interest
in the Special Account under applicable law.
Section 2.7 INCREASED COSTS AND REDUCED RETURN.
(a) If the Lender shall determine that, after the date hereof,
the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by the Issuer or the Lender or its parent corporation with
any requirement or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(i) shall subject the Issuer or the Lender or its
parent corporation to any tax, duty or other similar charge
with respect to any Letter of Credit, the Advances or the
Demand Note or shall change the basis of taxation of payments
to the Issuer or the Lender or its parent corporation of the
Reimbursement Obligation, of the principal of or interest on
the Advances or of any other amounts due under this Agreement
in respect of any Letter of Credit, the Advances or the Demand
Note (except for any change in respect of any tax imposed on
the overall income of the Issuer or the Lender or its parent
corporation); or
(ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System) against assets of,
deposits with or for the account of, or credit extended by,
the Issuer or the Lender or its parent corporation or shall
impose on the Issuer or the Lender or its parent corporation
any other condition affecting any Letter of Credit, the
Advances or the Demand Note;
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and the result of any of the foregoing is to increase the cost to the
Issuer or the Lender or its parent corporation of issuing or
maintaining any Letter of Credit or of making or maintaining any
Advances, or to reduce the amount of any sum received or receivable by
the Issuer or the Lender or its parent corporation under the
application and agreement pursuant to which the Letter of Credit was
issued, this Agreement or the Demand Note with respect thereto, by an
amount deemed by the Lender or its parent corporation to be material,
then upon demand by the Lender, the Borrower shall pay to the Lender
such additional amount or amounts as will compensate the Issuer or the
Lender or its parent corporation for such increased cost or reduction.
(b) If the Lender shall determine that the adoption
after the date hereof of any applicable law, rule or regulation
regarding capital adequacy, or any change therein after the date
hereof, any change after the date hereof in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by the Lender or its parent corporation with any
guideline or request issued after the date hereof regarding capital
adequacy (whether nor not having the force of law) of any such
authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Lender's or the Lender's
parent corporation's capital as a consequence of any Letters of Credit,
Advances or the Lender's obligations hereunder to a level below that
which the Lender or its parent corporation could have achieved but for
such adoption, change or compliance (taking into consideration the
Lender's policies with respect to capital adequacy and those of the
Lender's parent corporation) by an amount deemed to the Lender or its
parent corporation to be material, then from time to time on demand by
the Lender, the Borrower shall pay to the Lender such additional amount
or amounts as will compensate the Lender or its parent corporation for
such reduction.
(c) Certificates of the Lender sent to the Borrower
from time to time claiming compensation under this Section, stating the
reason therefor and setting forth in reasonable detail the calculation
of the additional amount or amounts to be paid to the Lender hereunder
shall be conclusive absent manifest error. In determining such amounts,
the Lender or its parent corporation may use any reasonable averaging
and attribution methods.
Section 2.8 OBLIGATIONS ABSOLUTE. The obligations of the
Borrower arising under this Agreement shall be absolute, unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, under all circumstances whatsoever, including (without limitation)
the following circumstances:
(a) any lack of validity or enforceability of any Letter of
Credit or any other agreement or instrument relating to any Letter of
Credit (collectively the "RELATED DOCUMENTS");
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(b) any amendment or waiver of or any consent to departure
from all or any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time, against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom
any such beneficiary or any such transferee may be acting), or other
person or entity, whether in connection with this Agreement, the
transactions contemplated herein or in the Related Documents or any
unrelated transactions;
(d) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(e) payment by or on behalf of the Issuer or the Lender under
any Letter of Credit against presentation of a draft or certificate
which does not strictly comply with the terms of such Letter of Credit;
or
(f) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
Section 2.9 INTEREST; DEFAULT INTEREST; PARTICIPATIONS; USURY.
Interest accruing on the Demand Note shall be due and payable in arrears on the
first day of each month.
(a) DEMAND NOTE. Except as set forth in Sections 2.9(b) and
2.9(c), the outstanding principal balance of the Advances shall bear
interest at the Floating Rate.
(b) DEFAULT INTEREST RATE. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances outstanding
from time to time shall bear interest at the Default Rate, effective
for any periods designated by the Lender from time to time during that
Default Period.
(c) USURY. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law.
Section 2.10 FEES.
(a) ANNUAL LINE FEE. The Borrower hereby agrees to pay the
Lender a fully earned and non-refundable line fee equal to one (1%)
percent of the Maximum Line, due and payable upon the execution of this
Agreement and on each anniversary date of this Agreement. On the date
hereof, the Maximum Line is Three Million Five Hundred Thousand
($3,500,000.00) Dollars and the fee payable on the date hereof is
Thirty-Five Thousand ($35,000.00) Dollars.
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(b) AUDIT FEES. The Borrower hereby agrees to pay the Lender
audit fees in the amount of One Thousand Five Hundred ($1,500.00)
Dollars per audit, together with all actual out-of-pocket costs and
expenses incurred in conducting any audit or inspection.
(c) WIRE TRANSFER FEE. Borrower agrees to pay to the Lender a
fee in the amount of Fifteen ($15.00) Dollars for each wire transfer
initiated by or for the account of the Borrower.
(d) FIRST DATA CORPORATION FEE. Borrower agrees to pay to the
Lender all fees charged to the Lender by First Data Corporation in
connection with the transfer of funds in the Collateral Account and/or
the Lockbox. Such fees are currently in the amount of Seventy-Five
($75.00) Dollars per month.
(e) LETTER OF CREDIT FEE. The Borrower agrees to pay the
Lender a commission with respect to each Letter of Credit, if any,
accruing on a daily basis and computed at the annual rate of two (2%)
of the available amount of such Letter of Credit (as it may be changed
from time to time) from and including the date of issuance of such
Letter of Credit until such date as such Letter of Credit shall
terminate by its terms, payable annually in advance, and prorated for
any part of a full calendar year in which such Letter of Credit remains
outstanding. The foregoing commission shall be in addition to any and
all fees, commissions and charges of any Issuer of a Letter of Credit
with respect to or in connection with such Letter of Credit.
(f) LETTER OF CREDIT ADMINISTRATIVE FEE. The Borrower agrees
to pay the Lender, on written demand, the administrative fees charged
by the Issuer in connection with the honoring of drafts under any
Letter of Credit, amendments thereto, transfers thereof and all other
activity with respect to the Letters of Credit.
Section 2.11 COMPUTATION OF INTEREST AND FEES; WHEN INTEREST
DUE AND PAYABLE. Interest accruing on the outstanding principal balance of the
Advances and fees hereunder outstanding from time to time shall be computed on
the basis of actual number of days elapsed in a year of 360 days. Interest shall
be payable in arrears on the first day of each month and on the Termination
Date.
Section 2.12 DISCRETIONARY NATURE OF THIS FACILITY;
TERMINATION BY THE LENDER; AUTOMATIC RENEWAL. This Agreement contains the terms
and conditions upon which the Lender presently expects to make Advances and the
Term Loan to the Borrower or issue or cause to be issued Letters of Credit for
the account of the Borrower (in this section, collectively called an "ADVANCE").
Each Advance by the Lender to the Borrower shall be in the Lender's sole
discretion, and the Lender need not show that an adverse change has occurred in
the Borrower's condition, financial or otherwise, or that any of the conditions
of Article IV have not been met, in order to refuse to make any requested
Advance or to demand payment of the Obligations. The Lender may at any time
terminate the Credit Facility whereupon the Lender shall no longer consider
requests for
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Advances under this Agreement. Unless terminated by the Lender at any time or by
the Borrower pursuant to Section 2.13, the Credit Facility shall remain in
effect until the Original Maturity Date and, thereafter, shall automatically
renew for successive one year periods (the Original Maturity Date and each
anniversary date thereof to which the Credit Facility has been automatically
renewed, is herein referred to as a "MATURITY DATE").
Section 2.13 PREPAYMENT; TERMINATION OF CREDIT FACILITY BY THE
BORROWER; TERMINATION FEES. Except as otherwise provided herein, the Borrower
may terminate the Credit Facility or prepay the Advances in whole at any time or
from time to time in part and, subject to payment and performance of all
Obligations and termination of the Credit Facility, the Lender shall release or
terminate the Security Interest and the Security Documents to which the Borrower
is entitled by law.
(a) TERMINATION BY BORROWER. The Borrower may terminate the
Credit Facility as of a Maturity Date by giving at least ninety (90)
days' prior written notice to the Lender of the Borrower's intention to
terminate the Credit Facility as of the specified Maturity Date. The
Borrower may also terminate the Credit Facility at any time by (i)
giving at least thirty (30) days' prior written notice to the Lender of
the Borrower's intention to terminate the Credit Facility; and (ii)
paying the Lender termination fees in accordance with subsection (b) if
the Borrower terminates the Credit Facility effective as of any date
other than a Maturity Date.
(b) TERMINATION FEE. If the Borrower desires to terminate the
Credit Facility as of any date other than a Maturity Date, or as of a
Maturity Date but without giving at least ninety (90) days' prior
written notice thereof, it shall give at least thirty (30) days' prior
written notice to the Lender of the Borrower's intention to do so and
pay to the Lender a premium in an amount equal to a percentage of the
Maximum Line as follows:
(i) three (3%) percent if the termination occurs on
or before the first anniversary of the Funding Date;
(ii) two (2%) percent if the termination occurs after
the first anniversary of the Funding Date but on or before the
second anniversary of the Funding Date; and
(iii) one (1%) percent if the termination occurs
after the second anniversary of the Funding Date but on or
before the third anniversary of the Funding Date;
(iv) without a termination fee if the termination
occurs after the third anniversary of the Funding Date.
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(c) TERMINATION BY LENDER. In the event that the Credit
Facility is terminated as a result of: (i) a demand by Lender for the
payment of the Obligations, or (ii) the occurrence of an Event of
Default, Borrower shall pay to Lender on the effective day of such
termination, in addition to any other payments Borrower is required to
make hereunder, a termination premium in an amount equal to a
percentage of the Maximum Line as follows:
(i) three (3%) percent if the termination occurs on
or before the first anniversary of the Funding Date;
(ii) two (2%) percent if the termination occurs after
the first anniversary of the Funding Date but on or before the
second anniversary of the Funding Date; and
(iii) one (1%) percent if the termination occurs
after the second anniversary of the Funding Date but on or
before the third anniversary of the Funding Date;
(iv) without a termination fee if the termination
occurs after the third anniversary of the Funding Date.
Section 2.14 MANDATORY PREPAYMENT. The Borrower shall repay
the Advances and the Term Loan immediately upon demand of the Lender. Without
notice or demand, if the sum of the outstanding principal balance of the
Advances plus the L/C Amount shall at any time exceed the Borrowing Base, the
Borrower shall (i) first, immediately prepay the Advances to the extent
necessary to eliminate such excess; and (ii) if prepayment in full of the
Advances is insufficient to eliminate such excess, pay to the Lender in
immediately available funds for deposit in the Special Account an amount equal
to the remaining excess. Any payment received by the Lender under this Section
2.14 or under Section 2.13 may be applied to the Obligation of Reimbursement,
the Advances or the Term Loan, including interest thereon and any fees,
commissions, costs and expenses hereunder and under the Security Documents, in
such order and in such amounts as the Lender, in its discretion, may from time
to time determine; provided that any prepayment by the Borrower under Section
2.13 which is designated as a partial prepayment of the Term Loan shall be
applied to principal installments of the Term Loan in inverse order of maturity.
Section 2.15 PAYMENT. All payments to the Lender shall be made
in immediately available funds and shall be applied to the Obligations two (2)
Banking Days after receipt by the Lender. The Lender may hold all payments not
constituting immediately available funds for three (3) additional days before
applying them to the Obligations. Notwithstanding anything in Section 2.1, the
Borrower hereby authorizes the Lender, in its discretion at any time or from
time to time without the Borrower's request and even if the conditions set forth
in Section 4.2 would not be satisfied, to make an Advance in an amount equal to
the portion of the Obligations from time to time due and payable and amounts
required to be paid to the Lender for deposit in the Special Account.
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Section 2.16 PAYMENT ON NON-BANKING DAYS. Whenever any payment
to be made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of interest
on the Advances and the Term Loan or the fees hereunder, as the case may be.
Section 2.17 USE OF PROCEEDS. The Borrower shall use the
proceeds of Advances, the Term Loan and each Letter of Credit for ordinary
working capital purposes.
Section 2.18 LIABILITY RECORDS. The Lender may maintain from
time to time, at its discretion, liability records as to any and all Advances
and the Term Loan made or repaid, interest accrued or paid under this Agreement,
outstanding Letters of Credit and fees thereon and the Borrower's Obligation of
Reimbursement. All entries made on any such record shall be presumed correct
until the Borrower establishes the contrary. On demand by the Lender, the
Borrower will admit and certify in writing the exact principal balance that the
Borrower then asserts to be outstanding to the Lender for Advances and the Term
Loan under this Agreement and the amount of any Letters of Credit outstanding.
Any billing statement or accounting rendered by the Lender shall be conclusive
and fully binding on the Borrower unless specific written notice of exception is
given to the Lender by the Borrower within thirty (30) days after its receipt by
the Borrower.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 GRANT OF SECURITY INTEREST. The Borrower hereby
pledges, assigns and grants to the Lender a security interest (collectively
referred to as the "SECURITY INTEREST") in the Collateral, as security for the
payment and performance of the Obligations.
Section 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER
OBLIGORS. The Lender may at any time (whether or not a Default Period then
exists) notify any account debtor or other person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrower will join in
giving such notice if the Lender so requests. At any time after the Borrower or
the Lender gives such notice to an account debtor or other obligor, the Lender
may, but need not, in the Lender's name or in the Borrower's name, (a) demand,
xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.
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Section 3.3 ASSIGNMENT OF INSURANCE. As additional security
for the payment and performance of the Obligations, the Borrower hereby assigns
to the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrower with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral or any evidence thereof or
any business records or valuable papers pertaining thereto, and the Borrower
hereby directs the issuer of any such policy to pay all such monies directly to
the Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender's name or in the Borrower's name, execute and
deliver proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.4 OCCUPANCY.
(a) The Borrower hereby irrevocably grants to the Lender the
right to take possession of the Premises at any time during a Default
Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations, and (ii) final sale or disposition of all goods
constituting Collateral and delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrower shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrower will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
Section 3.5 SECURITY INTEREST IN SPECIAL ACCOUNT AND
COLLATERAL ACCOUNT. The Borrower hereby pledges, and grants to the Lender a
security interest in, all funds held in the Special Account and in the
Collateral Account from time to time and all proceeds thereof, as security for
the payment of all present and future Obligations of Reimbursement and all other
Obligations.
Section 3.6 LICENSE. Without limiting the generality of the
Patent Security Agreement, Copyright Security Agreement, Trademark Security
Agreement, the Borrower hereby grants to the Lender a non-exclusive, worldwide
and royalty-free license to use or otherwise exploit
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all trademarks, franchises, trade names, copyrights and patents of the Borrower
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral during any Default Period.
Section 3.7 FINANCING STATEMENT. A carbon, photographic or
other reproduction of this Agreement or of any financing statements signed by
the Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby. For this purpose, the following information is set forth:
Name and address of Borrower: Xxxxxxx & Yale, Inc.
00 Xxxxxxxxx Xxxx
Xxxxx, Xxx Xxxxxxxxx 00000
Federal Tax Identification No. 00-0000000
Name and address of Lender: Norwest Business Credit, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Federal Tax Identification No. 00-0000000
Section 3.8 SETOFF. The Borrower agrees that the Lender may at
any time or from time to time, at its sole discretion and without demand and
without notice to anyone, setoff any liability owed to the Borrower by the
Lender, whether or not due, against any Obligation, whether or not due. In
addition, each other Person holding a participating interest in any Obligations
shall have the right to appropriate or setoff any deposit or other liability
then owed by such Person to the Borrower, whether or not due, and apply the same
to the payment of said participating interest, as fully as if such Person had
lent directly to the Borrower the amount of such participating interest.
ARTICLE IV
CONDITIONS OF WILLINGNESS TO CONSIDER LENDING
Section 4.1 CONDITIONS PRECEDENT TO LENDER'S WILLINGNESS TO
CONSIDER MAKING THE INITIAL ADVANCE OR THE TERM LOAN. The Lender's willingness
to consider making the initial Advance or the Term Loan hereunder or issuing or
causing to be issued any Letter of Credit hereunder shall be subject to the
condition precedent that the Lender shall have received all of the following,
each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Demand Note, properly executed by the Borrower.
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(c) A true and correct copy of any and all leases pursuant to
which the Borrower is leasing the Premises, together with a landlord's
disclaimer and consent with respect to each such lease.
(d) A true and correct copy of any and all mortgages pursuant
to which the Borrower has mortgaged the Premises, together with a
mortgagee's disclaimer and consent with respect to each such mortgage.
(e) A true and correct copy of any and all agreements pursuant
to which the Borrower's property is in the possession of any Person
other than the Borrower, together with, in the case of any goods held
by such Person for resale, (i) a consignee's acknowledgment and waiver
of liens, (ii) UCC financing statements sufficient to protect the
Borrower's and the Lender's interests in such goods, and (iii) UCC
searches showing that no other secured party has filed a financing
statement against such Person and covering property similar to the
Borrower's other than the Borrower, or if there exists any such secured
party, evidence that each such secured party has received notice from
the Borrower and the Lender sufficient to protect the Borrower's and
the Lender's interests in the Borrower's goods from any claim by such
secured party.
(f) An acknowledgment and waiver of liens from each warehouse
in which the Borrower is storing Inventory.
(g) A true and correct copy of any and all agreements pursuant
to which the Borrower's property is in the possession of any Person
other than the Borrower, together with, (i) an acknowledgment and
waiver of liens from each subcontractor who has possession of the
Borrower's goods from time to time, (ii) UCC financing statements
sufficient to protect the Borrower's and the Lender's interests in such
goods, and (iii) UCC searches showing that no other secured party has
filed a financing statement covering such Person's property other than
the Borrower, or if there exists any such secured party, evidence that
each such secured party has received notice from the Borrower and the
Lender sufficient to protect the Borrower's and the Lender's interests
in the Borrower's goods from any claim by such secured party.
(h) The Life Insurance Assignment, properly executed by the
beneficiary and owner thereof, and the Life Insurance Policy, each in
form and substance satisfactory to the Lender, together with such
evidence as the Lender may request that the Life Insurance Policy is
subject to no assignments or encumbrances other than the Life Insurance
Assignment.
(i) The Collateral Account Agreement, properly executed by the
Borrower and a financial institution acceptable to the Lender.
(j) The Lockbox Agreement, properly executed by the Borrower
and a financial institution acceptable to the Lender.
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(k) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower, (ii) no financing statements or
assignments of patents, trademarks or copyrights have been filed and
remain in effect against the Borrower except those financing statements
and assignments of patents, trademarks or copyrights relating to
Permitted Liens or to liens held by Persons who have agreed in writing
that upon receipt of proceeds of the Advances, they will deliver UCC
releases and/or terminations and releases of such assignments of
patents, trademarks or copyrights satisfactory to the Lender, and (iii)
the Lender has duly filed all financing statements necessary to perfect
the Security Interest, to the extent the Security Interest is capable
of being perfected by filing.
(l) A certificate of the Borrower's Clerk or Assistant Clerk
certifying as to (i) the resolutions of the Borrower's directors and,
if required, shareholders, authorizing the execution, delivery and
performance of the Loan Documents, (ii) the Borrower's articles of
incorporation and bylaws, and (iii) the signatures of the Borrower's
officers or agents authorized to execute and deliver the Loan Documents
and other instruments, agreements and certificates, including Advance
requests, on the Borrower's behalf.
(m) A current certificate issued by the Secretary of State of
Massachusetts certifying that the Borrower is in compliance with all
applicable organizational requirements of the State of Massachusetts.
(n) Evidence that the Borrower is duly licensed or qualified
to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary.
(o) A certificate of an officer of the Borrower confirming, in
his personal capacity, the representations and warranties set forth in
Article V.
(p) An opinion of counsel to the Borrower, addressed to the
Lender.
(q) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(r) A separate guaranty, properly executed by each Guarantor,
pursuant to which each Guarantor unconditionally guarantees the full
and prompt payment of all Obligations.
(s) A standby letter of credit in the amount of Seven Hundred
Fifty Thousand ($750,000.00) Dollars naming the Lender as beneficiary
which contains terms and conditions satisfactory to the Lender (the
"SBLC").
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(t) Payment of the fees and commissions due through the date
of the initial Advance, Term Loan or Letter of Credit under Section
2.10 and expenses incurred by the Lender through such date and required
to be paid by the Borrower under Section 9.7, including all legal
expenses incurred through the date of this Agreement.
(u) Such other documents as the Lender in its sole discretion
may require.
Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The Lender
will not consider any request for an Advance or Term Loan or the issuance of any
Letter of Credit unless on such date:
(a) the representations and warranties contained in Article V
are correct on and as of the date of such Advance or Term Loan as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date;
(b) no event has occurred and is continuing, or would result
from such Advance or Term Loan or the issuance of such Letter of Credit
which constitutes a Default or an Event of Default; and
(c) the SBLC is in full force and effect and the Lender has
not received notice that the SBLC will not be renewed.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 5.1 CORPORATE EXISTENCE AND POWER; NAME; CHIEF
EXECUTIVE OFFICE; INVENTORY AND EQUIPMENT LOCATIONS; TAX IDENTIFICATION NUMBER.
The Borrower is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Massachusetts and is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary. The Borrower has all requisite power
and authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents. During its existence, the Borrower has done business
solely under the names set forth in Schedule 5.1 hereto. The Borrower's chief
executive office and principal place of business is located at the address set
forth in Schedule 5.1 hereto, and all of the Borrower's records relating to its
business or the Collateral are kept at that location. All Inventory and
Equipment is located at that location or at one of the other locations set forth
in Schedule 5.1 hereto. The Borrower's tax identification number is correctly
set forth in Section 3.7 hereto.
Section 5.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW
OR AGREEMENTS. The execution, delivery and performance by the Borrower of the
Loan Documents and the
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borrowings from time to time hereunder have been duly authorized by all
necessary corporate action and do not and will not (i) require any consent or
approval of the Borrower's stockholders; (ii) require any authorization, consent
or approval by, or registration, declaration or filing with, or notice to, any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or any third party, except such authorization, consent,
approval, registration, declaration, filing or notice as has been obtained,
accomplished or given prior to the date hereof; (iii) violate any provision of
any law, rule or regulation (including, without limitation, Regulation X of the
Board of Governors of the Federal Reserve System) or of any order, writ,
injunction or decree presently in effect having applicability to the Borrower or
of the Borrower's articles of incorporation or bylaws; (iv) result in a breach
of or constitute a default under any indenture or loan or credit agreement or
any other material agreement, lease or instrument to which the Borrower is a
party or by which it or its properties may be bound or affected; or (v) result
in, or require, the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance of any nature
(other than the Security Interest) upon or with respect to any of the properties
now owned or hereafter acquired by the Borrower.
Section 5.3 LEGAL AGREEMENTS. This Agreement constitutes and,
upon due execution by the Borrower, the other Loan Documents will constitute the
legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms.
Section 5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4
hereto, the Borrower has no Subsidiaries.
Section 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE. The
Borrower has heretofore furnished to the Lender drafts of audited financial
statements of the Borrower for its fiscal year ended December 31, 1997, and
unaudited financial statements of the Borrower for the fiscal year ended
December 31, 1998, and those statements fairly present the Borrower's financial
condition on the dates thereof and the results of its operations and cash flows
for the periods then ended and were prepared in accordance with generally
accepted accounting principles. Since the date of the most recent financial
statements, there has been no material adverse change in the Borrower's
business, properties or condition (financial or otherwise).
Section 5.6 LITIGATION. There are no actions, suits or
proceedings pending or, to the Borrower's knowledge, threatened against or
affecting the Borrower or any of its Affiliates or the properties of the
Borrower or any of its Affiliates before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Borrower or any of its Affiliates, would
have a material adverse effect on the financial condition, properties or
operations of the Borrower or any of its Affiliates.
Section 5.7 REGULATION U. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds
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of any Advance will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock.
Section 5.8 TAXES. The Borrower and its Affiliates have paid
or caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by each of them. The Borrower and its
Affiliates have filed all federal, state and local tax returns which to the
knowledge of the officers of the Borrower or any Affiliate, as the case may be,
are required to be filed, and the Borrower and its Affiliates have paid or
caused to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by any of them to the extent such
taxes have become due.
Section 5.9 TITLES AND LIENS. The Borrower has good and
absolute title to all Collateral described in the collateral reports provided to
the Lender and all other Collateral, properties and assets reflected in the
latest financial statements referred to in Section 5.5 and all proceeds thereof,
free and clear of all mortgages, security interests, liens and encumbrances,
except for Permitted Liens. No financing statement naming the Borrower as debtor
is on file in any office except to perfect only Permitted Liens.
Section 5.10 PLANS. Except as disclosed to the Lender in
writing prior to the date hereof, neither the Borrower nor any of its Affiliates
maintains or has maintained any Plan. Neither the Borrower nor any Affiliate has
received any notice or has any knowledge to the effect that it is not in full
compliance with any of the requirements of ERISA. No Reportable Event or other
fact or circumstance which may have an adverse effect on the Plan's tax
qualified status exists in connection with any Plan. Neither the Borrower nor
any of its Affiliates has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued
benefits which or which may become payable to participants or
beneficiaries of any such Plan).
Section 5.11 DEFAULT. The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on the Borrower's financial
condition, properties or operations.
Section 5.12 ENVIRONMENTAL MATTERS.
(a) DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
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(i) "Environmental Law" means any federal, state,
local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and the
environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not present
in, on or under the Premises any Hazardous Substances in such form or
quantity as to create any liability or obligation for either the
Borrower or the Lender under common law of any jurisdiction or under
any Environmental Law, and no Hazardous Substances have ever been
stored, buried, spilled, leaked, discharged, emitted or released in, on
or under the Premises in such a way as to create any such liability.
(c) To the Borrower's best knowledge, the Borrower has not
disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) There are not and there never have been any requests,
claims, notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Premises or the
Borrower, alleging liability under, violation of, or noncompliance with
any Environmental Law or any license, permit or other authorization
issued pursuant thereto. To the Borrower's best knowledge, no such
matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's
businesses are and have in the past always been conducted in accordance
with all Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary
for the lawful and efficient operation of such businesses are in the
Borrower's possession and are in full force and effect. No permit
required under any Environmental Law is scheduled to expire within 12
months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(f) To the Borrower's best knowledge, the Premises are not and
never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or Borrower's
businesses.
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Section 5.13 SUBMISSIONS TO LENDER. All financial and other
information provided to the Lender by or on behalf of the Borrower in connection
with the Borrower's request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections, valuations or
proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.
Section 5.14 FINANCING STATEMENTS. The Borrower has provided
to the Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral and all other collateral described in the Security Documents which is
capable of being perfected by filing financing statements. None of the
Collateral or other collateral covered by the Security Documents is or will
become a fixture on real estate, unless a sufficient fixture filing is in effect
with respect thereto.
Section 5.15 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
ARTICLE VI
BORROWER'S AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 REPORTING REQUIREMENTS. The Borrower will deliver,
or cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event within ninety (90)
days after the end of each fiscal year of the Borrower, the Borrower's
audited financial statements with the unqualified opinion of
independent certified public accountants selected by the Borrower and
acceptable to the Lender, which annual financial statements shall
include the Borrower's balance sheet as at the end of such fiscal year
and the related statements of the Borrower's income, retained earnings
and cash flows for the fiscal year then ended, prepared, if the Lender
so requests, on a consolidating and consolidated basis to include any
Affiliates, all in reasonable detail and prepared in accordance with
GAAP, together with (i) copies of all management letters prepared by
such accountants; (ii) a report signed by such accountants
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stating that in making the investigations necessary for said opinion
they obtained no knowledge, except as specifically stated, of any
Default or Event of Default hereunder; and (iii) a certificate of the
Borrower's chief financial officer stating that such financial
statements have been prepared in accordance with GAAP and whether or
not such officer has knowledge of the occurrence of any Default or
Event of Default hereunder and, if so, stating in reasonable detail the
facts with respect thereto;
(b) as soon as available and in any event within twenty (20)
days after the end of each month, an unaudited/internal balance sheet
and statements of income and retained earnings of the Borrower as at
the end of and for such month and for the year to date period then
ended, prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments; and accompanied by a certificate
of the Borrower's chief financial officer, substantially in the form of
Exhibit B hereto stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit
adjustments, and (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder not theretofore
reported and remedied and, if so, stating in reasonable detail the
facts with respect thereto;
(c) within fifteen (15) days after the end of each month or
more frequently if the Lender so requires, agings of the Borrower's
accounts receivable and its accounts payable, an inventory
certification report, and a calculation of the Borrower's Accounts,
Eligible Accounts, Inventory and Eligible Inventory as at the end of
such month or shorter time period;
(d) at least thirty (30) days before the beginning of each
fiscal year of the Borrower, the projected balance sheets and income
statements for each month of such year, each in reasonable detail,
representing the Borrower's good faith projections and certified by the
Borrower's chief financial officer as being the most accurate
projections available and identical to the projections used by the
Borrower for internal planning purposes, together with such supporting
schedules and information as the Lender may in its discretion require;
(e) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the type
described in Section 5.12 or which seek a monetary recovery against the
Borrower in excess of Twenty-Five Thousand ($25,000.00) Dollars.
(f) as promptly as practicable (but in any event not later
than five (5) business days) after an officer of the Borrower obtains
knowledge of the occurrence of any breach, default or event of default
under any Security Document or any event which constitutes a Default or
Event of Default hereunder, notice of such occurrence, together with a
detailed
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statement by a responsible officer of the Borrower of the steps being
taken by the Borrower to cure the effect of such breach, default or
event;
(g) as soon as possible and in any event within thirty (30)
days after the Borrower knows or has reason to know that any Reportable
Event with respect to any Plan has occurred, the statement of the
Borrower's chief financial officer setting forth details as to such
Reportable Event and the action which the Borrower proposes to take
with respect thereto, together with a copy of the notice of such
Reportable Event to the Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within ten (10) days
after the Borrower fails to make any quarterly contribution required
with respect to any Plan under Section 412(m) of the Internal Revenue
Code of 1986, as amended, the statement of the Borrower's chief
financial officer setting forth details as to such failure and the
action which the Borrower proposes to take with respect thereto,
together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;
(i) daily, (i) copies of all entries to the sales journal and
the cash receipt journal; (ii) copies of all credit memos; (iii) copies
of all invoices in excess of Five Thousand ($5,000.00) Dollars for
sales originating from the Borrower's place of business in Michigan,
together with proof of delivery; and (iv) copies of all invoices in
excess of Ten Thousand ($10,000.00) Dollars for sales originating from
the Borrower's place of business in New Hampshire, together with proof
of delivery;
(j) weekly, a certificate signed by the Borrower's President
or Treasurer regarding the Borrower's inventory in such form as the
Lender may specify from time to time;
(k) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request;
(l) promptly upon knowledge thereof, notice of (i) any
disputes or claims by the Borrower's customers exceeding Five Thousand
($5,000.00) Dollars individually or Ten Thousand ($10,000.00) Dollars
in the aggregate during any fiscal year; (ii) credit memos; (iii) any
goods returned to or recovered by the Borrower; and (iv) any change in
the persons constituting the Borrower's officers and directors;
(m) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any
Collateral or such other collateral or the prospect of payment thereof;
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(n) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have
sent to its stockholders; promptly after the sending or filing thereof,
copies of all regular and periodic reports which the Borrower shall
file with the Securities and Exchange Commission or any national
securities exchange;
(o) the Borrower will cause each Guarantor to provide the
Lender, annually, a personal financial statement as of December 31,
listing all assets, liabilities and net worth of each Guarantor; the
personal financial statement shall be signed and dated and will be
forwarded to the Lender no later than April 30 of the following year;
and
(p) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect the Borrower's business or its
financial condition.
Section 6.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. The
Borrower will keep accurate books of record and account for itself pertaining to
the Collateral and pertaining to the Borrower's business and financial condition
and such other matters as the Lender may from time to time request in which true
and complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all corporate and
financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its directors, officers, employees or agents. The
Borrower will permit the Lender, or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral, other collateral covered by the
Security Documents or any other property of the Borrower at any time during
ordinary business hours.
Section 6.3 ACCOUNT VERIFICATION. The Lender may at any time
and from time to time send or require the Borrower to send requests for
verification of accounts or notices of assignment to account debtors and other
obligors. The Lender may also at any time and from time to time telephone
account debtors and other obligors to verify accounts.
Section 6.4 COMPLIANCE WITH LAWS.
(a) The Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect its business or its financial condition
and (ii) use and keep the Collateral, and require that others use and
keep the Collateral, only for lawful purposes, without violation of any
federal, state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not
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generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any liability or obligation
under the common law of any jurisdiction or any Environmental Law.
Section 6.5 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower
will pay or discharge, when due, (a) all taxes, assessments and governmental
charges levied or imposed upon it or upon its income or profits, upon any
properties belonging to it (including, without limitation, the Collateral) or
upon or against the creation, perfection or continuance of the Security
Interest, prior to the date on which penalties attach thereto, (b) all federal,
state and local taxes required to be withheld by it, and (c) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
or charge upon any properties of the Borrower; provided, that the Borrower shall
not be required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
Section 6.6 MAINTENANCE OF PROPERTIES.
(a) The Borrower will keep and maintain the Collateral, the
other collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition,
repair and working order (normal wear and tear excepted) and will from
time to time replace or repair any worn, defective or broken parts;
provided, however, that nothing in this Section 6.6 shall prevent the
Borrower from discontinuing the operation and maintenance of any of its
properties if such discontinuance is, in the Lender's judgment,
desirable in the conduct of the Borrower's business and not
disadvantageous in any material respect to the Lender.
(b) The Borrower will defend the Collateral against all claims
or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other collateral
covered by the Security Documents free and clear of all security
interests, liens and encumbrances except Permitted Liens.
Section 6.7 INSURANCE. The Borrower will obtain and at all
times maintain insurance with insurers believed by the Borrower to be
responsible and reputable, in such amounts and against such risks as may from
time to time be required by the Lender, but in all events in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which the
Borrower operates. Without limiting the generality of the foregoing, the
Borrower will at all times keep all tangible Collateral insured against risks of
fire (including so-called extended coverage), theft, collision (for Collateral
consisting of motor vehicles) and such other risks and in such amounts as the
Lender may reasonably request, with any loss payable to the Lender to the extent
of its interest, and all policies of such
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insurance shall contain a lender's loss payable endorsement for the Lender's
benefit. All policies of liability insurance required hereunder shall name the
Lender as an additional insured.
Section 6.8 PRESERVATION OF EXISTENCE. The Borrower will
preserve and maintain its existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
Section 6.9 DELIVERY OF INSTRUMENTS, ETC. Upon request by the
Lender, the Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly endorsed
or assigned by the Borrower.
Section 6.10 LOCKBOX; COLLATERAL ACCOUNT.
(a) The Borrower will irrevocably direct all present and
future Account debtors and other Persons obligated to make payments
constituting Collateral to make such payments directly to the Lockbox.
All of the Borrower's invoices, account statements and other written or
oral communications directing, instructing, demanding or requesting
payment of any Account or any other amount constituting Collateral
shall conspicuously direct that all payments be made to the Lockbox and
shall include the Lockbox address. All payments received in the Lockbox
shall be processed to the Collateral Account. If, notwithstanding the
instructions to debtors to make payments to the Lockbox, the Borrower
receives any payments on Receivables, the Borrower shall deposit such
payments into the Collateral Account. Until so deposited, the Borrower
shall hold all such payments in trust for and as the property of the
Lender and shall not commingle such payments with any of its other
funds or property.
(b) Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except
after full payment and discharge of all Obligations.
(c) All deposits in the Collateral Account shall constitute
proceeds of Collateral and shall not constitute payment of the
Obligations. The Lender from time to time at its discretion may, after
allowing two (2) Banking Days, apply deposited funds in the Collateral
Account to the payment of the Obligations, in any order or manner of
application satisfactory to the Lender, by transferring such funds to
the Lender's general account.
(d) All items deposited in the Collateral Account shall be
subject to final payment. If any such item is returned uncollected, the
Borrower will immediately pay the Lender, or, for items deposited in
the Collateral Account, the bank maintaining such account, the amount
of that item, or such bank at its discretion may charge any uncollected
item to the Borrower's commercial account or other account. The
Borrower shall be liable as an endorser on all items deposited in the
Collateral Account, whether or not in fact endorsed by the Borrower.
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Section 6.11 KEY PERSON LIFE INSURANCE. The Borrower shall
maintain insurance upon the life of Xxxx X. Xxxxxxxx, its Chairman and Chief
Executive Officer with the death benefit thereunder in an amount not less than
Five Hundred Thousand ($500,000.00) Dollars (the "LIFE INSURANCE POLICY"). The
right to receive the proceeds of the Life Insurance Policy shall be assigned to
the Lender by the Life Insurance Assignment.
Section 6.12 PERFORMANCE BY THE LENDER. If the Borrower at any
time fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten (10) calendar days after the Lender gives the Borrower written
notice thereof (or in the case of the agreements contained in Sections 6.5 and
6.7, immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on behalf
and in the name, place and stead of the Borrower (or, at the Lender's option, in
the Lender's name) and may, but need not, take any and all other actions which
the Lender may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of
security interests, liens or encumbrances, the performance of obligations owed
to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
Floating Rate. To facilitate the Lender's performance or observance of such
covenants of the Borrower, the Borrower hereby irrevocably appoints the Lender,
or the Lender's delegate, acting alone, as the Borrower's attorney in fact
(which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by the Borrower under this Section 6.12.
Section 6.13 MINIMUM EARNINGS. The Borrower will achieve,
during each quarter of its fiscal year and on a year-to-date basis at the end of
each quarter, income of not less than seventy (70%) percent of its projected
pre-tax profitability set forth in the projected income statements required
pursuant to Section 6.1(d) hereof.
Section 6.14 MAXIMUM DILUTION. The Borrower will not permit
its Receivables to suffer a dilution at any time resulting from bad debts,
credit memos, returned merchandise or any other reason or any combination
thereof (other than payment) in an amount greater than five (5%) percent of the
Borrower's sales.
Section 6.15 FISCAL YEAR 1998. The Borrower will deliver or
cause to be delivered to the Lender, as soon as available, and in any event
within ninety (90) days from the date hereof,
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the Borrower's audited financial statements for the year ended December 31,
1998, together with the unqualified opinion of its independent certified public
accountants.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower agrees that, without the
Lender's prior written consent:
Section 7.1 LIENS. The Borrower will not create, incur or
suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; excluding, however, from the operation of
the foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrower's business or
operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed in
Schedule 7.1 hereto, securing indebtedness for borrowed money permitted
under Section 7.2;
(c) the Security Interest and liens and security interests
created by the Security Documents; and
(d) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower not exceeding
the lesser of cost or fair market value thereof, not exceeding
Twenty-Five Thousand ($25,000.00) Dollars for any one purchase or Fifty
Thousand ($50,000.00) Dollars in the aggregate during any fiscal year,
and so long as no Default Period is then in existence and none would
exist immediately after such acquisition.
Section 7.2 INDEBTEDNESS. The Borrower will not incur, create,
assume or permit to exist any indebtedness or liability on account of deposits
or advances or any indebtedness for borrowed money or letters of credit issued
on the Borrower's behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date
hereof and listed in Schedule 7.2 hereto; and
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(c) indebtedness relating to liens permitted in accordance
with Section 7.1.
Section 7.3 GUARANTIES. The Borrower will not assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower
for deposit or collection or similar transactions in the ordinary
course of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2 hereto.
Section 7.4 INVESTMENTS AND SUBSIDIARIES.
(a) The Borrower will not purchase or hold beneficially any
stock or other securities or evidences of indebtedness of, make or
permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including
specifically but without limitation its Affiliates or any partnership
or joint venture, except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations
of the United States of America having a maturity of one (1)
year or less, commercial paper issued by U.S. corporations
rated "A-1" or "A-2" by Standard & Poors Corporation or "P-1"
or "P-2" by Xxxxx'x Investors Service or certificates of
deposit or bankers' acceptances having a maturity of one year
or less issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation); and
(ii) travel advances or loans to the Borrower's
officers and employees not exceeding at any one time an
aggregate of Five Thousand ($5,000.00) Dollars; and
(iii) advances in the form of progress payments,
prepaid rent not exceeding one (1) month or security deposits.
(b) The Borrower will not create or permit to exist any
Subsidiary, other than any Subsidiary in existence on the date hereof
and listed in Schedule 5.4 hereto.
Section 7.5 DIVIDENDS. The Borrower will not declare or pay
any dividends (other than dividends payable solely in stock of the Borrower) on
any class of its stock or make any payment on account of the purchase,
redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.
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Section 7.6 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS
OPERATIONS. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrower will not in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
Section 7.7 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS. The
Borrower will not consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person.
Section 7.8 SALE AND LEASEBACK. The Borrower will not enter
into any arrangement, directly or indirectly, with any other Person whereby the
Borrower shall sell or transfer any real or personal property, whether now owned
or hereafter acquired, and then or thereafter rent or lease as lessee such
property or any part thereof or any other property which the Borrower intends to
use for substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.9 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower
will not engage in any line of business materially different from that presently
engaged in by the Borrower and will not purchase, lease or otherwise acquire
assets not related to its business.
Section 7.10 CAPITAL EXPENDITURES. The Borrower will not incur
or contract to incur Capital Expenditures of more than Fifty Thousand
($50,000.00) Dollars in the aggregate during any fiscal year, or more than
Twenty-Five Thousand ($25,000.00) Dollars in any one transaction.
Section 7.11 ACCOUNTING. The Borrower will not adopt any
material change in accounting principles other than as required by GAAP. The
Borrower will not adopt, permit or consent to any change in its fiscal year.
Section 7.12 DISCOUNTS, ETC. The Borrower will not, after
notice from the Lender, grant any discount, credit or allowance to any customer
of the Borrower or accept any return of goods sold, or at any time (whether
before or after notice from the Lender) modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the Borrower.
Section 7.13 DEFINED BENEFIT PENSION PLANS. The Borrower will
not adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
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Section 7.14 OTHER DEFAULTS. The Borrower will not permit any
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrower.
Section 7.15 PLACE OF BUSINESS; NAME. The Borrower will not
transfer its chief executive office or principal place of business, or move,
relocate, close or sell any business location. The Borrower will not permit any
tangible Collateral or any records pertaining to the Collateral to be located in
any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrower will not change
its name.
Section 7.16 ORGANIZATIONAL DOCUMENTS; S. CORPORATION STATUS.
The Borrower will not amend its certificate of incorporation, articles of
incorporation or bylaws. The Borrower will not become an S Corporation.
Section 7.17 SALARIES. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any director, officer or consultant, or any member of
their families, by more than ten (10%) percent in any one year, either
individually or for all such persons in the aggregate, or pay any such increase
from any source other than profits earned in the year of payment.
Section 7.18 7.5% CONVERTIBLE SUBORDINATED NOTES. The Borrower
will not make any payments of principal or interest on any of the 7.5%
Convertible Subordinated Notes due on May 1, 2000 (the "SUBORDINATED NOTES")
without (a) giving the Lender thirty (30) days prior written notice of the
Borrower's intention to make such payments of principal and/or interest; and (b)
obtaining the Lender's prior written consent; provided, however, unless an Event
of Default has occurred and is continuing hereunder or an event has occurred and
is continuing which, with notice or lapse of time or both, would constitute an
Event of Default hereunder, the Borrower shall be permitted to make regularly
scheduled payments of interest on the Subordinated Notes and cash payments not
to exceed One Hundred ($100.00) Dollars in lieu of the issuance of fractional
shares upon conversion of any of the Subordinated Notes.
ARTICLE VIII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 8.1 EVENTS OF DEFAULT. Notwithstanding that the Lender
may demand immediate payment of the Obligations at any time, whether or not a
Default Period then exists, AND WITHOUT WAIVING OR LIMITING IN ANY RESPECT THE
LENDER'S RIGHT TO SO DEMAND PAYMENT OF THE OBLIGATIONS AT ANY TIME, this
Agreement sets forth a non-exclusive list of certain critical events after the
occurrence of which the Lender expects that it
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would demand immediate payment of the Obligations and exercise its remedies.
"Event of Default", wherever used herein, means any one of the following events:
(a) Default in the payment of the Obligations on demand or on
any portion of the Obligations that otherwise becomes due and payable;
(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement;
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement;
(d) The Borrower or any Guarantor shall be or become
insolvent, or admit in writing its or his inability to pay its or his
debts as they mature, or make an assignment for the benefit of
creditors; or the Borrower or any Guarantor shall apply for or consent
to the appointment of any receiver, trustee, or similar officer for it
or him or for all or any substantial part of its or his property; or
such receiver, trustee or similar officer shall be appointed without
the application or consent of the Borrower or such Guarantor, as the
case may be; or the Borrower or any Guarantor shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it or him
under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against the Borrower
or any such Guarantor; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower or any Guarantor;
(e) A petition shall be filed by or against the Borrower or
any Guarantor under the United States Bankruptcy Code naming the
Borrower or such Guarantor as debtor;
(f) The Life Insurance Policy shall be terminated, by the
Borrower or otherwise; or the Life Insurance Policy shall be scheduled
to terminate within thirty (30) days and the Borrower shall not have
delivered a satisfactory renewal thereof to the Lender; or the Borrower
shall fail to pay any premium on the Life Insurance Policy when due; or
the Borrower shall take any other action that impairs the value of the
Life Insurance Policy.
(g) Any representation or warranty made by the Borrower in
this Agreement, by any Guarantor in any guaranty delivered to the
Lender, or by the Borrower (or any of its officers) or any Guarantor in
any agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement or any such guaranty shall prove to have
been incorrect in any material respect when deemed to be effective;
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(h) The rendering against the Borrower of a final judgment,
decree or order for the payment of money in excess of Twenty-Five
Thousand ($25,000.00) Dollars and the continuance of such judgment,
decree or order unsatisfied and in effect for any period of thirty (30)
consecutive days without a stay of execution;
(i) A default under any bond, debenture, note or other
evidence of indebtedness of the Borrower owed to any Person other than
the Lender, or under any indenture or other instrument under which any
such evidence of indebtedness has been issued or by which it is
governed, or under any lease of any of the Premises, and the expiration
of the applicable period of grace, if any, specified in such evidence
of indebtedness, indenture, other instrument or lease;
(j) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
thirty (30) days after written notice to such effect shall have been
given to the Borrower by the Lender; or a trustee shall have been
appointed by an appropriate United States District Court to administer
any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or the Borrower shall have filed for a distress
termination of any Plan under Title IV of ERISA; or the Borrower shall
have failed to make any quarterly contribution required with respect to
any Plan under Section 412(m) of the Internal Revenue Code of 1986, as
amended, which the Lender determines in good faith may by itself, or in
combination with any such failures that the Lender may determine are
likely to occur in the future, result in the imposition of a lien on
the Borrower's assets in favor of the Plan;
(k) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any
obligations of the Borrower hereunder or under any note;
(l) The Borrower shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of
its assets, without the Lender's prior written consent;
(m) The Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued;
(n) Default in the payment of any amount owed by the Borrower
to the Lender other than any indebtedness arising hereunder;
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(o) Any Guarantor shall repudiate, purport to revoke or fail
to perform any such Guarantor's obligations under such Guarantor's
guaranty in favor of the Lender, any individual Guarantor shall die or
any other Guarantor shall cease to exist;
(p) The Borrower shall take or participate in any action which
would be prohibited under the provisions of any Subordination Agreement
or make any payment on the Subordinated Indebtedness (as defined in the
Subordination Agreement) that any Person was not entitled to receive
under the provisions of the Subordination Agreement;
(q) Any event or circumstance with respect to the Borrower
shall occur such that the Lender shall believe in good faith that the
prospect of payment of all or any part of the Obligations or the
performance by the Borrower under the Loan Documents is impaired or any
material adverse change in the business or financial condition of the
Borrower shall occur; or
(r) Any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and the
Lender.
Section 8.2 RIGHTS AND REMEDIES. As provided in Section 2.12,
the Lender may, at any time, refuse to make any requested Advance or Term Loan,
refuse to issue or cause to be issued any Letter of Credit, demand payment of
the Advances and the Term Loan or terminate the Credit Facility, whether or not
a Default Period then exists. In addition, during any Default Period, the Lender
may exercise any or all of the following rights and remedies:
(a) The Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which
the Borrower hereby expressly waives;
(b) The Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the
Borrower to the payment of the Obligations;
(c) The Lender may make demand upon the Borrower and,
forthwith upon such demand, the Borrower will pay to the Lender in
immediately available funds for deposit in the Special Account pursuant
to Sections 2.11 and 3.6 hereof an amount equal to the maximum
aggregate amount available to be drawn under all Letters of Credit then
outstanding, assuming compliance with all conditions for drawing
thereunder;
(d) The Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which the Borrower
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hereby expressly waives) and the right to sell, lease or otherwise
dispose of any or all of the Collateral, and, in connection therewith,
the Borrower will on demand assemble the Collateral and make it
available to the Lender at a place to be designated by the Lender which
is reasonably convenient to both parties;
(e) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(f) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event
of Default described in subsections (d) or (e) of Section 8.1, the Obligations
shall be immediately due and payable automatically without presentment, demand,
protest or notice of any kind.
Section 8.3 CERTAIN NOTICES. If notice to the Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.3) at least ten (10)
calendar days before the date of intended disposition or other action.
ARTICLE IX
MISCELLANEOUS
Section 9.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or
delay by the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Section 9.2 AMENDMENTS, ETC. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom or any release of a Security Interest shall
be effective unless the same shall be in writing and signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in similar or other circumstances.
Section 9.3 ADDRESSES FOR NOTICES, ETC. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in
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each case addressed or telecopied to the party to whom notice is being given at
its address or telecopier number as set forth below:
If to the Borrower: Xxxxxxx & Yale, Inc.
00 Xxxxxxxxx Xxxx
Xxxxx, Xxx Xxxxxxxxx 00000
Telecopier: (000) 000-0000
Attn: Xxxx X. Xxxxxxxx, Chairman of the Board
and Chief Executive Officer
If to the Lender: Norwest Business Credit, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopier: (000) 000-0000
Attn: East Regional Manager
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
Section 9.4 FURTHER DOCUMENTS. The Borrower will from time to
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's rights
under the Loan Documents (but any failure to request or assure that the Borrower
executes, delivers or endorses any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents and the Security
Interest, regardless of whether any such item was or was not executed, delivered
or endorsed in a similar context or on a prior occasion).
Section 9.5 COLLATERAL. This Agreement does not contemplate a
sale of accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.
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Section 9.6 COSTS AND EXPENSES. The Borrower agrees to pay on
demand all costs and expenses, including (without limitation) attorneys' fees,
incurred by the Lender in connection with the Obligations, this Agreement, the
Loan Documents, and any other document or agreement related hereto or thereto,
and the transactions contemplated hereby, including without limitation all such
costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest and all reasonable costs (including search fees) of
examinations and inspections of the Collateral or records relating to the
Collateral conducted by third parties or the Lender.
Section 9.7 INDEMNITY. In addition to the payment of expenses
pursuant to Section 9.7, the Borrower agrees to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "INDEMNITEES") from and against any of the following
(collectively, "INDEMNIFIED LIABILITIES"):
(a) any and all transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the
execution and delivery of the Loan Documents or the making of the
Advances;
(b) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in Section 5.12
proves to be incorrect in any respect or as a result of any violation
of the covenant contained in Section 6.4(b); and
(c) any and all other liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel) in connection with the foregoing and any
other investigative, administrative or judicial proceedings, whether or
not such Indemnitee shall be designated a party thereto, which may be
imposed on, incurred by or asserted against any such Indemnitee, in any
manner related to or arising out of or in connection with the making of
the Advances and the Loan Documents or the use or intended use of the
proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the
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Indemnified Liabilities which is permissible under applicable law. The
Borrower's obligation under this Section 9.7 shall survive the termination of
this Agreement and the discharge of the Borrower's other obligations hereunder.
Section 9.8 PARTICIPANTS. The Lender and its participants, if
any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 9.9 YEAR 2000 COMPLIANCE PROGRAM. The Borrower agrees
to (a) conduct a detailed inventory and assessment of all of its computer
hardware and software systems and imbedded chip technology ("INFORMATION
SYSTEMS") and of its business and operations that could be adversely affected by
its failure to be Year 2000 Compliant on a timely basis; (b) develop, fund and
implement a project plan to make its Information Systems Year 2000 Compliant,
and complete implementation of the plan and the remediation and testing of its
Information Systems no later than June 30, 1999; and (c) initiate a process to
determine whether its material suppliers, vendors and customers have taken
meaningful steps to become Year 2000 Compliant on a timely basis, and develop
and implement a feasible contingency plan to ensure the uninterrupted and
unimpaired operation of its business in the event of the failure of the systems
of such third parties or of its own Information Systems no later than June 30,
1999. For purposes of this covenant, "YEAR 2000 COMPLIANT" means that the
Borrower's Information Systems that are material to its operations and financial
condition will be able to properly process date sensitive functions before, on
and after December 31, 1999.
The Borrower will also provide the Lender promptly
upon receipt, copies of any reports or management letters relating to its Year
2000 compliance project and contingency plans, either internally prepared or
prepared by outside consultants or its accountants, and will provide such other
information relating to its Year 2000 compliance efforts, and deliver such
certifications by its officers relating thereto as the Lender in its discretion
may deem appropriate.
Section 9.10 EXECUTION IN COUNTERPARTS. This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.11 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT;
EXCHANGING INFORMATION. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrower and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender, Norwest Corporation, and all direct and indirect
subsidiaries of Norwest
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Corporation, may exchange any and all information they may have in their
possession regarding the Borrower and its Affiliates, and the Borrower waives
any right of confidentiality it may have with respect to such exchange of such
information.
Section 9.12 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.13 HEADINGS. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 9.14 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF
JURY TRIAL. The Loan Documents shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the Commonwealth of
Massachusetts. This Agreement shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the Commonwealth of
Massachusetts. The parties hereto hereby (i) consent to the personal
jurisdiction of the state and federal courts located in the Commonwealth of
Massachusetts in connection with any controversy related to this Agreement; (ii)
waive any argument that venue in any such forum is not convenient, (iii) agree
that any litigation initiated by the Lender or the Borrower in connection with
this Agreement or the other Loan Documents shall be venued in either the
Superior Court of Suffolk or Middlesex County, Massachusetts, or the United
States District Court, District of Massachusetts, Eastern Division; and (iv)
agree that a final judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
XXXXXXX & YALE, INC.
/s/ XXXXXXX X. XXXXXXX By: /s/ XXXX X. XXXXXXXX
------------------------------ ---------------------------------------
Witness Xxxx X. Xxxxxxxx, Chairman of the Board
and Chief Executive Officer
NORWEST BUSINESS CREDIT, INC.
/s/ XXXXXXX X. XXXXXXX By: /s/ XXXXXXX X. XXXXXXX
------------------------------ ---------------------------------------
Witness Xxxxxxx X. Xxxxxxx, Vice President
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TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Demand Note
Exhibit B Compliance Certificate
Exhibit C Premises
---------------------------------------------------------------------------
Schedule 5.1 Trade Names, Chief Executive Office, Principal Place of
Business, and Locations of Collateral
Schedule 5.4 Subsidiaries
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
EXHIBIT A TO CREDIT AND SECURITY AGREEMENT
DEMAND NOTE
$3,500,000.00 Boston, Massachusetts
February , 1999
For value received, the undersigned, Xxxxxxx & Yale, Inc., a
Massachusetts corporation (the "BORROWER"), hereby promises to pay ON DEMAND,
and if demand is not sooner made, then as provided in the Credit Agreement
(defined below), to the order of NORWEST BUSINESS CREDIT, INC., a Minnesota
corporation (the "LENDER"), at its main office in Minneapolis, Minnesota, or at
any other place designated at any time by the holder hereof, in lawful money of
the United States of America and in immediately available funds, the principal
sum of Three Million Five Hundred Thousand ($3,500,000.00) Dollars or, if less,
the aggregate unpaid principal amount of all Advances made by the Lender to the
Borrower under the Credit Agreement (defined below) together with interest on
the principal amount hereunder remaining unpaid from time to time, computed on
the basis of the actual number of days elapsed and a 360-day year, from the date
hereof until this Note is fully paid at the rate from time to time in effect
under the Credit and Security Agreement of even date herewith (the "CREDIT
AGREEMENT") by and between the Lender and the Borrower. The principal hereof and
interest accruing thereon shall be due and payable as provided in the Credit
Agreement.
This Note may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Demand Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit
Agreement and the Security Documents as therein defined, and may now or
hereafter be secured by one or more other security agreements, mortgages, deeds
of trust, assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
XXXXXXX & YALE, INC.
By:
-----------------------------------------
Xxxx X. Xxxxxxxx, Chief Executive Officer
EXHIBIT B TO CREDIT AND SECURITY AGREEMENT
COMPLIANCE CERTIFICATE
To: Norwest Business Credit, Inc.
Date:
------------------------
Subject: Financial Statements
In accordance with our Credit and Security Agreement dated as of
February 11, 1999 (the "CREDIT AGREEMENT"), attached are the financial
statements of Xxxxxxx & Yale, Inc. (the "BORROWER") as of and for
____________________ (the "REPORTING DATE") and the year-to-date period then
ended (the "CURRENT FINANCIALS"). All terms used in this certificate have the
meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly present
the Borrower's financial condition as of the date thereof.
EVENTS OF DEFAULT. (Check one):
/ / The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement.
/ / The undersigned has knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement and attached hereto
is a statement of the facts with respect to thereto.
By:____________________________________
Its Chief Financial Officer
-B1-
EXHIBIT C TO CREDIT AND SECURITY AGREEMENT
PREMISES
The Premises referred to in the Credit and Security Agreement
are legally described as follows:
1. 00 Xxxxxxxxx Xxxx, Xxxxx, Xxx Xxxxxxxxx 00000
2. 00000 Xxxxxxxx Xxxx, Xxxxxx, Xxxxxxxx
SCHEDULE 5.1 TO CREDIT AND SECURITY AGREEMENT
Trade Names, Chief Executive Office, Principal Place of Business,
and Locations of Collateral
TRADE NAMES
Xxxxxxx and Die-Draulics
The name used by the division of the Borrower located in Fraser, Michigan
CHIEF EXECUTIVE OFFICE/PRINCIPAL PLACE OF BUSINESS
00 Xxxxxxxxx Xxxx, Xxxxx, Xxx Xxxxxxxxx 00000
OTHER INVENTORY AND EQUIPMENT LOCATIONS
00000 Xxxxxxxx Xxxx, Xxxxxx, Xxxxxxxx
SCHEDULE 5.4 TO CREDIT AND SECURITY AGREEMENT
SUBSIDIARIES
------------
1. Lasiris, Inc., Montreal, Canada
2. Radiant Asiatec Pte, Ltd., Singapore
3. Xxxxxxx & Yale Foreign Sales Corp., U.S. Virgin Islands
SCHEDULE 7.1 TO CREDIT AND SECURITY AGREEMENT
PERMITTED LIENS
Mortgage on Salem, New Hampshire facility in favor of Granite State
Bank as successor to Primary Bank.
Mortgage on Salem, New Hampshire facility in favor of Danvers Savings
Bank.
Mortgage on Fraser, Michigan facility in favor of Comerica Bank.
Miscellaneous leases and purchase money security interests securing
equipment acquisitions as reflected on attached UCC search reports of New
Hampshire and Michigan (financing statements in favor of Shawmut Bank and its
successor Fleet are being discharged in connection with this financing).
SCHEDULE 7.2 TO CREDIT AND SECURITY AGREEMENT
PERMITTED INDEBTEDNESS AND GUARANTEES
INDEBTEDNESS
CREDITOR PRINCIPAL MATURITY MONTHLY COLLATERAL
AMOUNT DATE PAYMENT
-------------------------------- ----------------------- --------------- ------------------ ------------------------
Fleet Bank (L/C) $1,807,907.51* 1/99 $16,000.00 INV/AR
-------------------------------- ----------------------- --------------- ------------------ ------------------------
Fleet Bank (Term) $188,065.00* 1/99 $17,000.00 INV/AR
-------------------------------- ----------------------- --------------- ------------------ ------------------------
Commerica $800,000.00 2/2004 $7,808.00 BLD
-------------------------------- ----------------------- --------------- ------------------ ------------------------
Granite Bank (Mort) $1,374,909.55 8/2011 $15,437.90 BLD
-------------------------------- ----------------------- --------------- ------------------ ------------------------
Danvers Bank $750,000.00 4/99 $7,000.00 BLD 2ND MORT
-------------------------------- ----------------------- --------------- ------------------ ------------------------
Convertible Sub Debt $1,350,000.00 5/2001 $8,223.00
-------------------------------- ----------------------- --------------- ------------------ ------------------------
Granite Bank (Lease) $309,221.05 8/2000 $2,400.00 MACHINERY
-------------------------------- ----------------------- --------------- ------------------ ------------------------
IBM $94,656.88 9/2000 $5,300.00 COMPUTER
-------------------------------- ----------------------- --------------- ------------------ ------------------------
NBD Bank (Hyundia) $42,695.27 9/2000 $2,218.09 MACHINERY
-------------------------------- ----------------------- --------------- ------------------ ------------------------
Commerica (Auto) $13,424.29 2/2002 $417.63 AUTO
-------------------------------- ----------------------- --------------- ------------------ ------------------------
CTI (Mazak) $314,068.71 11/2002 $8,313.79 MACHINERY
-------------------------------- ----------------------- --------------- ------------------ ------------------------
* All obligations to Fleet National Bank to be paid with the
first advance made by Lender to Borrower pursuant to the
within Agreement.
GUARANTEES
PRIMARY OBLIGOR AMOUNT AND DESCRIPTION OF BENEFICIARY OF GUARANTY
OBLIGATION GUARANTEED
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None None None
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