$10,000,000
CREDIT AGREEMENT
February 26, 1997
between
DISC GRAPHICS, INC.
and
KEYBANK NATIONAL ASSOCIATION
CREDIT AGREEMENT (the "Agreement") dated February 26, 1997 between Disc
Graphics, Inc., 00 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000, a Delaware
corporation ("Borrower") and KeyBank National Association, 0000 Xxxxx Xxxxxxx,
Xxxxxxxx, Xxx Xxxx 00000, a national banking association (the "Bank").
Borrower desires that the Bank extend credit to it as provided herein, and
the Bank is willing to do so. Accordingly, Borrower and the Bank agree as
follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS.
Section 1.01. Definitions. As used in this Agreement, the following terms
have the following meanings:
"Acquisition" means any transaction pursuant to which Borrower or any of
its Subsidiaries (a) acquires equity securities (or warrants, options or other
rights to acquire such securities) of any corporation, partnership, limited
liability company or other business organization, or any entity which is not
then a Subsidiary of Borrower, pursuant to a solicitation of tenders therefor,
or in one or more negotiated block, market or other transactions not involving a
tender offer, or a combination of any of the foregoing, or (b) makes any entity
not then a Subsidiary of Borrower a Subsidiary of Borrower, or causes any such
entity to be merged into or purchased by Borrower or any of its Subsidiaries, in
any case pursuant to a merger, purchase of assets or any reorganization
providing for the delivery or issuance to the holders of such entity's then
outstanding securities, in exchange for such securities, of cash or securities
of Borrower or any of its Subsidiaries, or a combination thereof, or (c)
purchases all or substantially all of the business or assets of any entity.
"Additional Costs" shall have the meaning given to that term in Section
4.01 hereof.
"Affiliate" means, with respect to any Person, any Person (a) that directly
or indirectly controls, or is controlled by, or is under common control with,
such Person, (b) that directly or indirectly beneficially owns or holds 5% or
more of any class of voting stock of such Person, (c) 5% or more of the voting
stock of which is directly or indirectly beneficially owned or held by such
Person, (d) which is a partnership or limited liability company in which such
Person is respectively a general partner or manager or (e) who is among such
Person's officers, directors joint venturers, managers or partners. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Aggregate Acquisition Outstandings" means, at a particular time, the
aggregate maximum amount then outstanding to be drawn to finance Acquisitions.
"Aggregate Outstandings" means, at a particular time, the sum of the
Aggregate Acquisition Outstandings at such time plus the aggregate outstanding
principal balance of all other Revolving Credit Loans.
"Agreement" means this Credit Agreement, as amended or supplemented from
time to time.
"Amortization" means amortization as determined in accordance with GAAP.
"Bank" means KeyBank National Association and its successors and assigns.
"Banking Day" means any day on which commercial banks are not authorized or
required to close in New York State, and whenever such day relates to a LIBOR
Loan or notice with respect to any LIBOR Loan, a day on which dealings in dollar
deposits are also carried out in the London interbank market.
"Base Rate" means that rate of interest from time to time determined or
announced by the Bank at its Principal Office from time to time as its base
lending rate. The Base Rate is not necessarily the lowest rate of interest
charged by the Bank on loans or other credit relationships.
"Base Rate Loans" mean any Revolving Credit Loan when and to the extent the
interest rate for such Revolving Credit Loan is determined in relation to the
Base Rate.
"Borrowing Base" means at any time an amount equal to the sum of (i) 85% of
Borrower's Eligible Receivables and (ii), subject to the limitation described in
the definition of Eligible Inventory, up to 70% of Borrower's Eligible
Inventory.
"Borrowing Base Certificate" means a certificate signed by an officer of
Borrower in the form of Exhibit D annexed with such changes as the Bank may
require from time to time.
"Capital Lease" means any lease which is required to be capitalized on the
balance sheet of the lessee in accordance with GAAP.
"Closing Date" means the date this Agreement has been executed by Borrower
and the Bank.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all personal property of Borrower and its Subsidiaries,
whether now existing or hereafter arising, which is subject or which is to be
subject to the Liens granted by the Security Agreement.
"Commitment Fee" means the fee described in Section 3.01.
"Current Assets" means, at a particular date, all amounts which would, in
accordance with GAAP, be included under current assets on a consolidated balance
sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, at a particular date, all amounts which would,
in accordance with GAAP, be included under current liabilities on a consolidated
balance sheet of Borrower and its Subsidiaries as at such date including,
without limitation, (a) all obligations payable on demand or within one year
after the date in which the determination is made, and (b) installment and
sinking fund payments required to be made within one year after the date on
which determination is made, but excluding all such liabilities or obligations
which are renewable or extendable at the option of Borrower to a date more than
one year from the date of determination.
"Current Debt" means, on the date of determination with respect to any
entity, (a) that portion of such entity's long term Debt (including Capital
Leases) that is due and payable within the next 12 months, including the
outstanding principal balance of all Loans and (b) all Debt of such entity that
is due within 12 months of the date of determination.
"Current Ratio" means the ratio of (a) Current Assets of Borrower and its
Subsidiaries, on a consolidated basis to (b) Current Liabilities of Borrower and
its Subsidiaries on a consolidated basis.
"Debt" means, with respect to any Person (a) indebtedness of such Person
for borrowed money, (b) indebtedness for the deferred purchase price of property
or services, (c) the face amount of any outstanding letters of credit issued for
the account of such Person, (d) obligations arising under acceptance facilities,
(e) guaranties, endorsements (other than for collection in the ordinary course
of business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person, or otherwise to assure a
creditor against loss, (f) obligations secured by any Lien on property of such
Person, (g) obligations of such Person as lessee under Capital Leases and (h)
indebtedness of such Person evidenced by a note, bond, indenture or similar
instrument.
"Debt Coverage Ratio" means (a) the consolidated EBITDA of Borrower and its
Subsidiaries, minus any cash Dividends paid or declared to be paid to
shareholders of Borrower during such period, (b) divided by the sum of the
Current Debt and Interest Expense of Borrower and its Subsidiaries all on a
consolidated basis, as determined at the end of each fiscal quarter, based upon
Borrower's financial statements delivered in accordance with Section 8.08 for
the period of 12 months preceding the date of determination.
"Default" means any event which with the giving of notice or lapse of time,
or both, would become an Event of Default.
"Default Rate" means, with respect to the principal of any Loan and, to the
extent permitted by law, any other amount payable by Borrower under this
Agreement or the Note a rate per annum equal to 2% above the rate of interest
otherwise applicable to such Loan or other amount.
"Depreciation" means depreciation as determined in accordance with GAAP.
"Dividends" means, for any period, dividends paid by Borrower or any
Subsidiary during such period.
"EBITDA" means, for any period, the sum of (a) Net Income, (b) income taxes
paid or payable to any government or government instrumentality, (c) all
Interest Expense paid or accrued on any Debt, (d) Depreciation and (e)
Amortization during such period.
"Eligible Inventory" shall mean the gross amount of Borrower's "rolled
inventory" located in the United States of America, consisting of unopened
paper, card stock and other paper stock, with all original packaging and
wrappings intact, less any (a) damaged obsolete or unsalable goods, (b) goods to
be returned to Borrower's suppliers, (c) goods in transit to Borrower, (d)
rental or consigned inventory, (e) inventory located at facilities where the
Bank has not been granted a perfected security interest and (f) inventory
subject to Borrower's obsolescence reserve in accordance with GAAP. If any
inventory is moved to a location where, under applicable law, the Bank's
security interest therein becomes unperfected as a result, provided it meets the
other requirements set forth in this definition, such inventory shall become
Eligible Inventory 91 days after the date on which the Bank's security interests
are perfected under applicable law. The maximum value of Eligible Inventory
included in the Borrowing Base shall be $2,142,850.
"Eligible Receivables" shall mean the gross amount of Borrower's accounts
receivable, arising out of sales in the ordinary course of Borrower's business,
which are not in dispute or subject to credit, allowance, defense, offset,
counterclaim or adjustment (other than any discount allowed for prompt payment)
and for which records are maintained at a location of Borrower in the United
States, excluding (a) intercompany accounts or other amounts due from any
Affiliate of Borrower, (b) credit balances over 120 days from invoice date, (c)
notes receivable, from customers, (d) sales tax and any separately billed or
invoiced freight charges, (e) government accounts, (f) deposits or prepayments,
(g) foreign accounts and (h) amounts billed for goods not yet shipped to
customers. Any receivables shall be ineligible if the account debtor for such
receivables has filed and there is pending a case for bankruptcy, reorganization
or other relief under the federal bankruptcy code or any similar state or other
laws, if any such case has been filed and is pending against such account
debtor, or if such account debtor has made and there is pending a general
assignment for the benefit of creditors, or if the account debtor suspended
business operation, becomes insolvent or has suffered or is suffering a receiver
or a trustee to be appointed for all or a significant portion of its assets or
affairs.
"Environmental Laws" means (i) the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), (ii) the Resource Conservation and
Recovery Act ("RCRA"), (iii) the Federal Water Pollution Control Act, (iv) the
Clean Air Act, (v) the Toxic Substances Control Act, (vi) the Safe Drinking
Water Act, (vii) the Occupational Safety and Health Act of 1970, and (viii) the
New York State Environmental Conservation Law ("ECL"), Articles 1 through 71,
(ix) the Hazardous Material Transportation Act, and (x) any so-called federal,
state or local "Superfund" or "Superlien" laws and (b) any and all other laws,
rules or regulations, relating to or imposing liability, including without
limitation (i) strict liability, (ii) standards of conduct concerning hazardous
materials, (iii) protection of the environment (including, without limitation,
air, surface water, ground water, or soil), including, without limitation, any
of the same relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as Borrower or is under common control (within the
meaning of Section 414(c) of the Code) with Borrower.
"Event of Default" has the meaning given such term in Section 11.01.
"Facility Fee" means the fee described in Section 2.09 hereof.
"Forfeiture Proceeding" means the commencement of any prejudgment action or
proceeding affecting Borrower or any of its Subsidiaries pursuant to any
statute, rule or regulation which permits any governmental agency or
instrumentality to obtain a prejudgment seizure or forfeiture of any of their
property.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, applied on a basis consistent with
those used in the preparation of the financial statements referred to in Section
7.05.
"Guaranty" means the Guaranty in the form of Exhibit B to be executed by
each of the Guarantors, secured by a Security Agreement.
"Guarantors" means Four Seasons Litho, Inc. and Disc Graphics Label, Inc.,
both Subsidiaries of Borrower and each a party to the Guaranty. Guarantors shall
include each future Subsidiary which is required to become a party to the
Guaranty in accordance with Section 9.10 hereof.
"Hazardous Substance" means any substance, waste or material regulated
under by any Environmental Law, and any substance which, due to its toxicity or
reactivity (as determined by any court, governmental or regulatory authority or
agency having jurisdiction or interpretative power thereon), poses a threat to
human health or the environment, including, but not limited to, all materials,
wastes, substances, pollutants and contaminants from time to time defined or
classified as such under any Environmental Law.
"Interest Expense" means interest expense of Borrower and its Subsidiaries
on a consolidated basis for a particular period as reflected in its financial
statements and calculated in accordance with GAAP.
"Interest Period" means the period commencing on the date a LIBOR Loan is
made (or, with respect to a LIBOR Loan that represents the continuation of a
previous LIBOR Loan, the day immediately following the last day of the Interest
Period of such previous LIBOR Loan), and ending, as Borrower may select on the
30th, 60th or 90th day thereafter, provided that no Interest Period shall extend
beyond the Revolving Credit Termination Date.
"LIBOR" means, for any LIBOR Loan, the rate per annum (rounded upwards if
necessary to the nearest 1/16 of 1%) quoted by the Bank two Banking Days prior
to the first day of the Interest Period for such Revolving Credit Loan for the
offering to leading banks in the London interbank market of U.S. dollar deposits
in immediately available funds, for a period, and in an amount, comparable to
such Interest Period and principal amount of the LIBOR Loan which shall be
outstanding during such Interest Period.
"LIBOR Loan" means any Revolving Credit Loan when and to the extent the
interest rate therefor is determined on the basis of LIBOR.
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, Capital Lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
"Loan" means any loan made by the Bank pursuant to Section 2.01 or 3.01
hereof.
"Loan Documents" means this Agreement, the Notes, the Guaranty, the
Security Agreements, the Borrowing Base Certificate, the Notice of Borrowing and
all other documents or instruments executed in connection herewith or therewith.
"Margin" means (a) if Borrower's Debt Coverage Ratio is equal to or less
than 1.30:1.0, 175 basis points per annum, (b) if Borrower's Debt Coverage Ratio
is greater than 1.30:1.0 but less than or equal to 2.25:1.0, 150 basis points
per annum, and (c) if Borrower's Debt Coverage Ratio is greater than 2.25:1.0,
125 basis points per annum.
"Multiemployer Plan" means a Plan defined as such in Section 4001(a)(3) of
ERISA to which contributions have been made by Borrower or any ERISA affiliate
and which is covered by Title IV of ERISA.
"Net Income" means, with respect to any entity for any period, such
entity's net income after taxes for such period as reflected on such entity's
financial statements.
"Notes" mean the Revolving Credit Note and the Term Note.
"Notice of Borrowing" means the document signed by an officer of Borrower
in the form annexed as Exhibit F.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, limited liability company, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Plan" means any employee benefit or other plan established or maintained,
or to which contributions have been made, by Borrower or any ERISA Affiliate and
which is covered by Title IV of ERISA or to which Section 412 of the Code
applies provided that such term shall not include plans terminated prior to the
date hereof.
"Principal Office" means the principal office of the Bank, presently
located at 00 Xxxxx Xxxxx Xxxxxx, Xxxxxx, Xxx Xxxx.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented from time to time.
"Regulatory Change" means any change after the date of this Agreement in
federal, state, municipal or foreign laws or regulations (including Regulation
D) or the adoption or making after such date of any interpretations, directives
or requests applying to a class of banks including the Bank of any federal,
state, municipal or foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA as to which events the PBGC by regulation has not waived the requirement
of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event, provided that a failure to meet the minimum funding standard of
Section 412 of the Code or Section 302 of ERISA shall be a Reportable Event
regardless of any waivers given under Section 412(d) of the Code.
"Revolving Credit Commitment" means the obligation of the Bank to extend
revolving credit to Borrower in accordance with the terms hereof in the
aggregate principal amount not to exceed the lesser of (a) $10,000,000, as such
amount may be reduced or otherwise modified from time to time in accordance with
the terms hereof or (b) the Borrowing Base.
"Revolving Credit Facility" means the Revolving Credit Facility provided
for in Article II hereof.
"Revolving Credit Loans" mean any Loan made by the Bank pursuant to Section
2.01 hereof.
"Revolving Credit Note" means a promissory note of Borrower in the form of
Exhibit A-1 hereto evidencing the Revolving Credit Loans made by the Bank
hereunder.
"Revolving Credit Termination Date" means the earlier of (i) the date on
which the Revolving Credit Loan is paid in full and the Revolving Credit
Commitments shall terminate hereunder and the obligations of Borrower in
connection therewith have been satisfied or (ii) the date three years from the
date hereof unless such date is not a Banking Day, then the next succeeding
Banking Day.
"Security Agreement" means, with respect to Borrower, the Security
Agreement in substantially the form of Exhibit C-I, and with respect to each
Subsidiary, in the form of Exhibit C-2, to be delivered by Borrower under the
terms of this Agreement.
"Solvent" means, when used with respect to any Person on a particular date,
that on such date (a) the fair saleable value of its assets is in excess of the
total amount of its liabilities, including, without limitation, the reasonably
expected amount of such Person's obligations with respect to contingent
liabilities, (b) the present fair saleable value of the assets of such Person is
not less than the amount that will be required to pay the probable liability of
such Person on its Debts as they become absolute and matured, (c) such Person
does not intend to and does not believe that it will incur Debts or liabilities
beyond such Person's ability to pay as such Debts and liabilities mature and (d)
such Person is not engaged in business or a transaction, for which such Person's
property, would constitute an unreasonably small capital.
"Subsidiary" means, as to any Person, any corporation, partnership, limited
liability company or other business organization or entity of which at least a
majority of the securities or other ownership interests having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by such Person.
"Tangible Net Worth" means, at any particular date, the amount of excess of
Total Assets over Total Liabilities which would, in accordance with GAAP, be
included under shareholders' equity on a consolidated balance sheet of Borrower
and its Subsidiaries as at such date, excluding, however, from the determination
of Total Assets all intangible assets, including, without limitation,
organizational expenses, patents, trademarks, copyrights, goodwill, covenants
not to compete, research and developmental costs, training costs, treasury
stock, deferred charges and any loans receivable from officers or Affiliates.
"Term Loan" means the Loan to Borrower pursuant to Section 3.01.
"Term Loan Maturity Date" means February 25, 2004.
"Term Loan Note" means the promissory note of Borrower in the form of
Exhibit A-2 hereto evidencing a Term Loan made by the Bank hereunder.
"Total Assets" means, at a particular date, all amounts which would, in
accordance with GAAP, be included under assets on a consolidated balance sheet
of Borrower and its Subsidiaries as at such date.
"Total Liabilities" means, at a particular date, all amounts which would,
in accordance with GAAP, be included under liabilities on a consolidated balance
sheet of Borrower and its Subsidiaries as at such date.
"Unfunded Vested Liabilities" means, with respect to any Plan, the amount
(if any) by which the present value of all vested benefits under the Plan
exceeds the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of Borrower or
any ERISA Affiliate to the PBGC or the Plan under Title IV of ERISA.
Section 1.02. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
ARTICLE 2. REVOLVING CREDIT FACILITY
Section 2.01. Revolving Credit Loans.
(a) Subject to the terms and conditions of this Agreement, the Bank agrees
to make Revolving Credit Loans to Borrower from time to time from and including
the date hereof to but excluding the Revolving Credit Termination Date up to but
not exceeding at any one time outstanding the amount of its Revolving Credit
Commitment; provided, that no Revolving Credit Loan shall be made if, after
giving effect to such Revolving Credit Loan, the Aggregate Outstandings at the
time would exceed the Revolving Credit Commitment in effect on such date. The
Revolving Credit Loans may be Base Rate Loans or LIBOR Loans; provided, however,
that during the occurrence and continuance of an Event of Default, the Bank
shall have no obligation to make any Revolving Credit Loans. Subject to the
foregoing limits, Borrower may borrow, repay and reborrow, on or after the date
hereof and prior to the Revolving Credit Termination Date, all or a portion of
the Revolving Credit Commitment hereunder.
(b) If at any time for any reason the Aggregate Outstandings exceed the
amount of the Revolving Credit Commitment, Borrower shall pay the amount of such
excess to the Bank immediately on demand.
Section 2.02. The Revolving Credit Note. The Revolving Credit Loans shall
be evidenced by a single Revolving Credit Note in favor of the Bank
substantially in the form of Exhibit A-1 with appropriate insertions, duly
executed and completed by Borrower. The Bank is authorized to record the date,
type and amount of each Revolving Credit Loan, the date and amount of each
payment or prepayment of principal thereof, the date of each interest rate
conversion pursuant to Section 2.05 and the principal amount subject thereto and
the Interest Period and interest rate with respect thereto in its records or on
the schedules annexed to and constituting a part of the Revolving Credit Note,
and, absent manifest error, any such recordation shall constitute conclusive
evidence of the information so recorded; provided that the failure to make any
such recordation shall not in any way affect Borrower's obligation to repay the
Revolving Credit Loans. The Revolving Credit Note shall (a) be dated the date
hereof, (b) mature on the Revolving Credit Termination Date and (c) bear
interest from and including the date hereof on the unpaid principal amount
thereof from time to time outstanding as provided herein.
Section 2.03. Use of Proceeds.
(a) Borrower shall use the proceeds of the Revolving Credit Loans to repay
existing bank indebtedness, for general working capital purposes, and subject to
the sublimit described in Section 2.08, to finance Acquisitions. No part of the
proceeds of any of the Loans will be used for any purpose which violates the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System as in effect on the date of making such Loans.
(b) Borrower shall indemnify the Bank and hold it harmless from and against
any and all liabilities, losses, damages, costs and expenses (including, without
limitation, the reasonable fees and disbursements of counsel for the Bank in
connection with any investigative, administrative or judicial proceeding,
whether or not the Bank is designated a party thereto) which may be incurred by
the Bank, relating to or arising out of this Agreement or any actual or proposed
use of proceeds of Loans hereunder; provided, that the Bank shall not have the
right to be indemnified hereunder for its own gross negligence or willful
misconduct.
Section 2.04. Borrowing Procedures for Revolving Credit Loans. Borrower may
request a borrowing under the Revolving Credit Commitment as provided in Section
4.01. Not later than 2:00 p.m. New York City time on the date of such borrowing
as stated in the Notice of Borrowing, subject to the conditions of this
Agreement, the Bank shall make available to Borrower, in immediately available
funds, the amount of such Revolving Credit Loan by crediting a designated
account of Borrower maintained with the Bank.
Section 2.05. Interest on Revolving Credit Loans.
(a) Base Rate Loans. Borrower shall pay interest on the outstanding and
unpaid principal amount of each Base Rate Loan made under this Agreement at a
fluctuating rate per annum equal to the Base Rate from time to time in effect.
Each change in the interest rate shall take effect simultaneously with the
corresponding change in the Base Rate. Borrower shall pay interest on Base Rate
Loans in arrears on the first day of each month and on the Revolving Credit
Termination Date, calculated on the basis of the actual number of days elapsed
divided by a 360 day year. Any principal amount not paid when due (at maturity,
on acceleration, or otherwise) shall bear interest thereafter until paid at the
Default Rate.
(b) LIBOR Loans. Borrower shall pay interest on the outstanding principal
amount of each LIBOR Loan made under this Agreement at a fixed rate equal to
LIBOR plus the applicable Margin. Borrower shall pay interest on LIBOR Loans
calculated on the basis of the actual number of days elapsed divided by a 360
day year. Any principal amount not paid when due (at maturity or acceleration or
otherwise) shall bear interest thereafter until paid at the Default Rate.
Accrued interest on LIBOR Loans shall be due and payable in arrears upon any
payment of principal and on the last day of the Interest Period with respect
thereto; provided that, after an Event of Default, interest shall accrue at the
Default Rate and shall be due and payable from time to time on demand of the
Bank. Any principal amount of LIBOR Loans not paid when due (at maturity, on
acceleration, or otherwise) shall bear interest thereafter until paid at such
Default Rate.
(c) Adjustments to Margin. The applicable Margin shall be adjusted for all
LIBOR Loans based upon Borrower's Debt Coverage Ratio as reflected in its
financial statements delivered to the Bank from time to time as required
hereunder. Once determined, the Margin shall remain in effect until the fifth
Banking Day after the Bank's receipt on or before the dates set forth in Section
8.08 of the relevant financial statements, whereupon if appropriate based upon
the then existing Debt Coverage Ratio, the Margin shall adjust for all new LIBOR
Loans and for any continuation of an existing LIBOR Loan at the end of an
Interest Period. If Borrower delivers its annual audited statements more than 90
days after the end of its fiscal year and if the Debt Coverage Ratio as reported
in such financial statements is lower than the Debt Coverage Ratio as reported
in Borrower's quarterly financial statements for the third quarter of such
fiscal year with the result that a higher Margin would apply, Borrower shall pay
the Bank, within ten Banking Days of demand, an amount equal to the excess of
the interest that would have been paid at such higher rate over the interest
actually paid during the relevant period between March 30th and the date the
annual statements are delivered. In no event shall Borrower receive a refund of
interest paid to the Bank under the provision of this Section.
(d) Interest Periods for LIBOR Loans. In the case of each LIBOR Loan, Xxxx-
xxxx shall select an Interest Period of any duration in accordance with the
definition of Interest Period in Section 1.01, subject to the following
limitations: (a) no Interest Period shall have a duration less than one month,
and if any such proposed Interest Period would otherwise be for a shorter
period, such Interest Period shall not be available and (b) if an Interest
Period would end on a day which is not a Banking Day, such Interest Period shall
be extended to the next Banking Day, unless such Banking Day would fall in the
next calendar month in which event such Interest Period shall end on the
immediately preceding Banking Day. Any Interest Period which would otherwise
extend beyond the Revolving Credit Termination Date shall end on the Revolving
Credit Termination Date.
(e) Conversions. Upon the expiration of an Interest Period for any LIBOR
Loan, or any portion thereof, such LIBOR Loan or portion thereof shall be
automatically converted to a Base Rate Loan except to the extent that such
Revolving Credit Loan shall be repaid hereunder or shall be required to be paid
hereunder or unless Borrower shall have notified the Bank, as provided in
Section 4.01 hereof, of its intention to continue such LIBOR Loan or any portion
thereof as a LIBOR Loan. Subject to the following conditions and to the terms
and conditions of this Agreement, Borrower may convert any Revolving Credit Loan
or portion thereof to a different type of Revolving Credit Loan:
(i) if less than all Revolving Credit Loans at the time outstanding
shall be converted, the notice given by Borrower to the Bank shall specify
the aggregate amount of Revolving Credit Loans in each case to be converted;
(ii) in the case of a conversion of less than all outstanding
Revolving Credit Loans, the aggregate principal amount of Revolving Credit
Loans to be converted shall not be less than $50,000 (and if greater in
integral multiples of $10,000);
(iii) no Revolving Credit Loan may be converted to a LIBOR Loan less
than one month before the Revolving Credit Termination Date;
(iv) a LIBOR Loan may be converted to a Base Rate Loan only on the
last day of an Interest Period; and
(v) no Revolving Credit Loan or portion thereof may be converted to
a LIBOR Loan during the occurrence and continuance of an Event of Default.
Section 2.06. Changes of Commitment. Borrower may reduce or terminate the
amount of unused Revolving Credit Commitment from time to time but not more than
four times during the term of this Agreement or more than once during any
calendar year by giving notice to the Bank of each such reduction or termination
to the Bank as provided in Section 4.01. Any partial reduction shall be in a
minimum aggregate amount of $1,000,000 or, if greater, in integral multiples of
$250,000. Once reduced or terminated, the Revolving Credit Commitment may not be
reinstated.
Section 2.07. Minimum Amounts. Except for borrowings which exhaust the full
remaining amount of the Revolving Credit Commitment, and prepayments (in the
case of Base Rate Loans only) which result in the prepayment of all Loans, each
borrowing and each prepayment of principal shall be at least $50,000, and if
greater, in integral multiples of $10,000.
Section 2.08. The Sublimit. Subject to the terms and conditions hereof, the
Bank agrees to make one or more Revolving Credit Loans to finance Borrower's
Acquisitions, provided that, (a) the Aggregate Acquisition Outstandings shall
not exceed at any time the lesser of (i) $3,000,000 or (ii) 25% of Borrower's
Tangible Net Worth and (b) no Revolving Credit Loan for Acquisitions shall be
permitted if (i) an Event of Default has occurred which continues at such time,
(ii) after giving effect to such Loan, the Aggregate Outstandings at the time of
such issuance would exceed the Revolving Credit Commitment in effect on such
date or (iii) as a result of such Acquisition or the making of such Loan, an
Event of Default would occur.
Section 2.09. Facility Fee. Borrower shall pay to the Bank a Facility Fee
equal to $5,000 at the Closing Date and on each anniversary of the Closing Date
until the Revolving Credit Termination Date.
Section 2.10. Conversion to Term Loan. On the Revolving Credit Termination
Date, provided there has been no Default or Event of Default, Borrower may
convert all or a part, but not less than $2,000,000 of the outstanding principal
balance of the Revolving Credit Loans to the Term Loan, having the terms and
conditions specified in Article 3.
ARTICLE 3. TERM LOAN.
Section 3.01. Term Loan. If Borrower exercises the option described in
Section 2.10, Borrower shall give the Bank notice three Banking Days prior to
the Revolving Credit Termination Date, and together with such notice, pay the
Bank a Commitment Fee equal to 0.5% of the amount of the Revolving Credit Loans
to be converted to a Term Loan. Subject to the terms and conditions hereof, the
Bank shall make a four year Term Loan to Borrower in the amount of the Aggregate
Outstandings or such lesser amount permitted under Section 2.10 at and effective
as of the Revolving Credit Termination Date.
Section 3.02. The Term Note. The Term Loan shall be evidenced by a single
promissory note of Borrower substantially in the form of Exhibit A-2 hereto,
with appropriate insertions, payable to the order of the Bank and representing
the obligation of Borrower to pay the unpaid principal amount of the Term Loan,
with interest thereon as described herein. The Term Loan Note shall (a) be dated
the Revolving Credit Termination Date, mature in 48 equal consecutive monthly
installments, be payable on the first day of each month commencing on the first
day of the month following the Revolving Credit Termination Date and ending on
the Term Loan Maturity Date, and (c) bear interest for a period from the date
hereof until the Term Maturity Loan Date on the unpaid principal amount thereof
at the applicable rates per annum specified herein. All accrued and unpaid
interest and fees shall be due and payable on the Term Loan Maturity Date.
Section 3.03. Interest on the Term Loans. Borrower shall pay interest on
the outstanding and unpaid principal balance of the Term Loan a fluctuating rate
per annum equal to the Base Rate plus a margin of 0.5%. Each change in the
interest rate shall take effect simultaneously with the corresponding change in
the Base Rate. Interest on the Term Loan shall be calculated on the basis of a
360 day year and shall be paid in arrears on the first day of each month and on
the Term Loan Maturity Date. Any principal amount not paid when due (at
maturity, on acceleration or otherwise) shall bear interest thereafter until
paid at the Default Rate. At Borrower's election made during the period
beginning on the Revolving Credit Termination Date through two years thereafter,
provided no Default or Event of Default then exists, Borrower may effect a
change in the interest rate on the Term Loan to a fixed rate from the Base Rate
by entering into a Swap Agreement between the Borrower and the Bank, at the rate
established by exchange, through Key Capital Markets, Inc., of the obligation
evidenced by the Term Loan Note for an obligation bearing interest at a fixed
rate having a term that is equivalent to the term of the Term Loan. The rights
and obligations of Borrower and the Bank respecting such exchange shall be set
forth in a Swap Agreement to be executed between them.
ARTICLE 4. GENERAL CREDIT PROVISIONS; FEES AND PAYMENTS.
Section 4.01. Certain Notices. Borrower shall give Notice of Borrowing to
the Bank of each borrowing pursuant to Section 2.04, each prepayment pursuant to
Section 4.02, each conversion or continuation of LIBOR Loans pursuant to Section
2.05 and each reduction or termination of Revolving Credit Commitment pursuant
to Section 2.06. Each such notice shall be irrevocable, and shall be effective
on the date of receipt only if received by the Bank not later than 11:00 a.m.,
New York City time as follows:
(a) In the case of borrowings and prepayments of Base Rate Loans, at least
one Banking Day prior thereto;
(b) In the case of LIBOR Loans, at least three Banking Days prior thereto;
(c) In the case of reductions or termination of the Revolving Credit
Commitment, ten days prior thereto; and
(d) In the case of conversions or continuations of Loans pursuant to
Section 2.05, three Banking Days prior thereto.
Each such notice relating to the borrowing, conversion or prepayment of a
Loan shall specify the Loans to be borrowed, converted or prepaid and the amount
and type of the Loans to be borrowed or prepaid and the date of borrowing,
conversion or prepayment (which shall be a Banking Day). Each such notice of
reduction or termination of the Revolving Credit Commitment shall specify the
amount of the Revolving Credit Commitment to be reduced or terminated.
Section 4.02. Prepayments.
(a) Borrower shall have the right at any time and from time to time to
prepay any Base Rate Loan, in whole or in part, upon at least one Banking Day's
prior written notice to the Bank; provided, however, that each such partial
prepayment of Base Rate Loans shall not be less than $50,000 or if greater, in
amounts which are integral multiples of $10,000. Except as required by paragraph
(b) below or on the last day of an Interest Period with respect thereto,
Borrower shall not be permitted to prepay LIBOR Loans.
(b) On the date of any reduction of the Revolving Credit Commitment as
provided in Section 2.06, Borrower shall pay or prepay so much of the Loans as
shall be necessary in order that the Aggregate Outstandings will not exceed the
Revolving Credit Commitment after giving effect to such reduction. All
prepayments of LIBOR Loans due to a reduction of the Revolving Credit Commitment
shall be subject to Section 5.05.
(c) All prepayments of principal required by paragraph (b) above shall be
applied first to Base Rate Loans outstanding, and then to LIBOR Loans
outstanding.
(d) All prepayments of principal shall be accompanied by the payment of all
accrued interest on the amount so prepaid and, in the case of LIBOR Loans, by
all amounts required to be paid pursuant to Section 5.05.
Section 4.03. Default Interest. Notwithstanding any other provision of this
Agreement, upon the occurrence and continuance of an Event of Default, each Loan
outstanding hereunder shall bear interest at a rate per annum equal to the
Default Rate.
Section 4.04. Payments Generally. All payments under this Agreement or the
Notes shall be made in immediately available funds not later than 1:00 p.m. New
York City time on the relevant dates specified above at the Bank's office at
0000 Xxxxx Xxxxxxx, Xxxxxxxx, Xxx Xxxx 00000.
(a) Any payment made after such time on such due date shall be deemed to
have been made on the next succeeding Banking Day.
(b) Whenever a new Loan is to be made on a date Borrower repays any
principal of an outstanding Loan, the Bank shall apply the proceeds of such new
Loan to the payment of the principal to be repaid and only an amount equal to
the difference between the principal to be borrowed and the principal to be
repaid shall be made available by the Bank to Borrower as provided in Section
2.04 or paid by Borrower to the Bank pursuant to this Section 4.04, as the case
may be.
(c) The Bank may (but shall not be obligated to) debit the amount of any
such payment which is not made by the time specified in Section 4.04(a) to any
ordinary deposit account of Borrower with the Bank. Borrower shall, at the time
of making each payment under this Agreement or the Note, specify to the Bank the
principal or other amount payable by Borrower under this Agreement. If Borrower
fails to so specify, the payment will be applied first to interest and then to
principal, unless a Default or Event of Default has occurred and is continuing,
in which case the Bank may apply such payment as it may elect in its sole
discretion. If the due date of any payment under this Agreement or the Note
would otherwise fall on a day which is not a Banking Day, such date shall be
extended to the next succeeding Banking Day and interest shall be payable for
any principal so extended for the period of such extension.
ARTICLE 5. YIELD PROTECTION; ETC.
Section 5.01. Additional Costs.
(a) Borrower shall pay directly to the Bank from time to time on demand
such amounts as the Bank may determine (in the manner set forth in Section
5.01(d)) to be necessary to compensate it for any increases in costs
attributable to its making or maintaining any LIBOR Loans under this Agreement
or its Note or its obligation to make any LIBOR Loans hereunder or any reduction
in any amount receivable by the Bank hereunder in respect of any LIBOR Loans or
such obligation or capital in respect of this Agreement (such increases in costs
and reductions in amounts receivable being herein called "Additional Costs"),
resulting from any Regulatory Change which: (i) changes the basis of taxation of
any amounts payable to the Bank under this Agreement or the Revolving Credit
Note in respect of any of such LIBOR Loans (other than taxes imposed on the
overall net income of the Bank for any LIBOR Loans by the jurisdiction in which
the Bank has its principal office); or (ii) imposes or modifies any reserve,
special deposit, deposit insurance or assessment, minimum capital, capital ratio
or similar requirements relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of, the Bank; or (iii) imposes any
other condition affecting this Agreement or the Note (or any of such extensions
of credit or liabilities). The Bank will notify Borrower of any event occurring
after the date of this Agreement which will entitle the Bank to compensation
pursuant to this Section as promptly as practicable after it obtains knowledge
thereof by furnishing Borrower a written statement describing the Additional
Costs entitling it to compensation hereunder and the Bank's method of allocating
to Borrower such Additional Costs. If the Bank requests compensation from
Borrower under this Section or under Section 5.01(c), Borrower may suspend the
obligation of the Bank to make Loans of the type with respect to which such
compensation is requested.
(b) Without limiting the effect of the foregoing provisions of this Section
if by reason of any Regulatory Change, the Bank either (i) incurs Additional
Costs based on or measured by the excess above a specified level of a category
of deposits or other liabilities of the Bank which includes deposits by
reference to which the interest rate on LIBOR Loans is determined as provided in
this Agreement or a category of extensions of credit or other assets of the Bank
which includes LIBOR Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold, then, if the Bank
so elects by notice to Borrower, the obligation of the Bank to make Loans of
such type hereunder shall be suspended until the date such Regulatory Change
ceases to be in effect.
(c) Without limiting the effect of the foregoing provisions of this
Section, Borrower shall pay directly to the Bank from time to time on request
such amounts as the Bank may determine (in the manner set forth in Section
5.01(d)) to be necessary to compensate the Bank for any Additional Costs which
are attributable to the maintenance by it or any of its affiliates (pursuant to
any Regulatory Change) of capital in respect of its Loans hereunder or its
obligation to make Loans hereunder (such compensation to include, without
limitation, an amount equal to any reduction in return on assets or equity of
the Bank to a level below that which it would have achieved but for such
Regulatory Change). The Bank will notify Borrower if it is entitled to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof by furnishing Borrower with a written statement
describing the Additional Costs entitling it to compensation hereunder and the
Bank's method of allocating to Borrower such Additional Costs.
(d) Reasonable determinations and allocations by the Bank for purposes of
the effect of any Regulatory Change pursuant to Sections 5.01(a), (b) or (c) on
its costs of making or maintaining Loans or its obligation to make Loans, or on
amounts receivable by, or the rate of return to, it in respect of Loans or such
obligation, and of the additional amounts required to compensate the Bank, shall
be conclusive absent demonstrated error.
(e) Any amounts the Bank receives pursuant to the foregoing provisions of
this Section 5.01 shall not be duplicative of compensation payable to the Bank
under Section 5.05.
Section 5.02. Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if:
(a) the Bank determines (which determination shall be conclusive absent
demonstrated error) that quotations of interest rates for the relevant deposits
referred to in the definition of "LIBOR" in Section 1.01 are not being provided
in the relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for any type of LIBOR Loans as provided in this
Agreement; or
(b) the Bank determines (which determination shall be conclusive absent
demonstrated error) that the relevant rates of interest referred to in the
definition of LIBOR in Section 1.01 upon the basis of which the rate of interest
for any type of LIBOR Loans is to be determined do not adequately cover the cost
to the Bank of making or maintaining such Loans; then the Bank shall give
Borrower prompt notice thereof, and so long as such condition remains in effect,
the obligations of the Bank to make LIBOR Loans shall be suspended (in which
case the provisions of Section 5.04 shall be applicable).
Section 5.03. Illegality. Notwithstanding any other provision in this
Agreement, if it becomes unlawful for the Bank to honor its obligation to make
or maintain LIBOR Loans hereunder, the Bank shall promptly notify Borrower and
the Bank's obligation to make or maintain LIBOR Loans hereunder shall be
suspended until such time as the Bank may again make and maintain such affected
Loans (in which case the provisions of Section 5.04 shall be applicable).
Section 5.04. Conversion to Base Rate Loans. If the obligations of the Bank
to make LIBOR Loans shall be suspended pursuant to any of the foregoing Sections
all Loans which would otherwise be made by the Bank as LIBOR Loans shall be made
instead as Base Rate Loans and, if an event referred to in Section 5.01(b) or
5.03 has occurred and the Bank so requests by notice to Borrower, all LIBOR
Loans of the Bank then outstanding shall be automatically converted into Base
Rate Loans on the date specified by the Bank in such notice, and, to the extent
that LIBOR Loans are so made as (or converted into) Base Rate Loans, all
payments of principal which would otherwise be applied to the Bank's LIBOR Loans
shall be applied instead to its Base Rate Loans. If any LIBOR Loan is converted
to a Base Rate Loan pursuant to this Section prior to the last day of the
Interest Period with respect to such LIBOR Loan, Borrower shall pay to the Bank
all amounts required to be paid pursuant to Section 5.05 hereof.
Section 5.05. Certain Compensation.
(a) Borrower shall pay to the Bank such reasonable amount or amounts as
shall be sufficient (in the reasonable opinion of the Bank) to compensate it for
any loss, cost or expense which the Bank determines is attributable to:
(i) Borrower's prepayment of a LIBOR Loan (whether by reason
of the mandatory or voluntary prepayment provisions of this Agreement or
otherwise) or failure to pay principal or interest on a LIBOR Loan when due; or
(ii) Borrower's failure to borrow, convert into or continue a LIBOR
Loan on the date specified therefor in the relevant notice given under Section
4.01; or
(iii) Borrower's failure to prepay a LIBOR Loan on the date
specified therefor in the relevant notice under Section 4.02.
(b) A reasonable determination by the Bank of amounts payable pursuant to
this Section shall be conclusive absent manifest error. In the case of
prepayments of LIBOR Loans, Borrower shall pay to the Bank a prepayment premium
equal to any costs, loss or expense that it may sustain or incur as a result of
Borrower's prepaying the LIBOR Loan, including (but not limited to) the Bank's
loss of anticipated interest on such LIBOR Loan at the applicable interest rate,
or any interest or other charge payable by the Bank to others who provided funds
to the Bank to enable it to make or maintain such LIBOR Loan. In addition,
Borrower shall reimburse the Bank for all administrative costs incurred by the
Bank as a result of such prepayment.
ARTICLE 6. CONDITIONS PRECEDENT.
Section 6.01. Conditions to the Initial Borrowings Hereunder. The
obligations of the Bank to make the Loans constituting the initial borrowing
under 3.01, or the Term Loan under 3.01, are subject to the conditions precedent
that:
(a) the Bank shall have received on or before the date of such Loans each
of the following, in form and substance satisfactory to the Bank and its
counsel:
(i) the Revolving Credit Note or the Term Loan Note, as
applicable, duly executed by Borrower;
(ii) a certificate of the Secretary or Assistant Secretary of
Borrower and of each Guarantor, dated the Closing Date or the Revolving
Credit Termination Date, as applicable, attesting to all corporate action taken
by Borrower or such Guarantor, including resolutions of its Board of Directors
authorizing the execution, delivery and performance of the Loan Documents and
each other document to be delivered pursuant to this Agreement and certifying
the names and true signatures of the officers of Borrower or each Guarantor
executing the Loan Documents and the other documents to be delivered by Borrower
or such Guarantor under this Agreement;
(iii) certified copies of the certificate or articles of
incorporation and the by-laws of Borrower or such Guarantor, as the case
may be; and such certificate shall state that the resolutions and corporate
documents thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
(iv) a certificate of a duly authorized officer of Borrower,
dated the Closing Date or the Revolving Credit Termination Date, as
applicable, stating that the representations and warranties in Article 7 are
true and correct on such date as though made on and as of such date (unless made
as of a specific date earlier than the date hereof, in which case they shall be
true and correct as of such earlier date) and that no event has occurred and is
continuing which constitutes a Default or Event of Default;
(v) the Guaranty duly executed by each of the Guarantors;
(vi) the Security Agreement, duly executed by Borrower, together
with such UCC-1 financing statements as are required by the Bank;
(vii) such duly executed UCC-3 Revolving Credit Termination
Statements as are necessary to terminate existing liens on the assets of
Borrower;
(viii) a favorable opinion of counsel for Borrower, dated the
Closing Date or the Revolving Credit Termination Date, as applicable, in
substantially the form of Exhibit E and as to such other matters as the Bank
may reasonably request;
(ix) satisfactory evidence that Borrower and each of the
Guarantors is duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation; and
(x) such other documents, instruments, approvals, opinions and
evidence of compliance with the terms hereof as the Bank may require.;
(b) Borrower shall have paid or caused to be paid all fees required to be
paid hereunder or in connection herewith and all accrued fees and expenses of
the Bank in connection with the preparation, execution and delivery of this
Agreement, and the other Loan Documents and the consummation of the transactions
contemplated thereby;
(c) Borrower and the Guarantors shall have obtained all consents, permits
and approvals required in connection with the execution, delivery and
performance by Borrower and the Guarantors of their respective obligations
hereunder and under the other Loan Documents and such consents, permits and
approvals shall continue in full force and effect; and
(d) all legal matters in connection with this financing shall be
satisfactory to the Bank and its counsel.
Section 6.02. Conditions to All Borrowings. The obligations of the Bank to
make any Loan (including the initial Revolving Credit Loan) hereunder shall be
subject to the further conditions precedent that on the date of such Loan:
(a) the following statements shall be true:
(i) the representations and warranties contained in Article 7 are
true and correct on and as of the date of such Loan as though made on and
as of such date (unless such representations and warranties are made as of a
specific earlier date in which case they shall be true and correct as at such
date);
(ii) no Default or Event of Default has occurred and is continuing,
or would result from such Loan; and
(iii) no material adverse change shall have occurred in the
business, financial condition or operations of Borrower since the date of the
most recent financial statements of Borrower delivered to the Bank
hereunder or in connection herewith; and
(b) the Bank shall have received such approvals, opinions, documents or
instruments as the Bank may have reasonably requested.
Section 6.03. Deemed Representations. Unless Borrower otherwise notifies
the Bank prior to any borrowing hereunder, the acceptance by Borrower of the
proceeds of any Loan shall constitute a representation and warranty that the
statements contained in Section 6.02(a) are true and correct as of the date of
such Loan.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants that:
Section 7.01. Incorporation, Good Standing and Due Qualification;
Compliance with Law. Each of Borrower and the Guarantors is duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged, and
is duly qualified as a foreign corporation and in good standing under the laws
of each other jurisdiction in which such qualification is required except where
the failure to so qualify and/or be in good standing could not in any case or in
the aggregate, have a material adverse effect on the operations, business,
property or financial condition of any of Borrower or any Guarantor or on its
respective ability to perform its respective obligations hereunder. In addition,
each of Borrower and the Guarantors is in compliance with all laws, treaties,
rules or regulations, or determination of an arbitration or a court or other
governmental authority, in each case applicable to or binding upon it or any of
its property or to which it or any of its property is subject, except to the
extent that the failure to so comply could not, in any case or in the aggregate,
have a material adverse effect on the operations, business, property or
financial condition of Borrower and the Guarantors, taken as a whole, or on
their ability to perform their obligations under the Loan Documents.
Section 7.02. Corporate Power and Authority; No Conflicts. The execution,
delivery and performance by each of Borrower and each of the Guarantors of the
Loan Documents have been duly authorized by all necessary corporate action and
do not and will not (a) require any consent or approval of its stockholders that
has not been obtained, (b) contravene its charter or by-laws, (c) violate any
provision of, or require any filing (other than filings contemplated hereby
and/or by the other Loan Documents), registration, consent or approval under,
any law, rule, regulation (including, without limitation, the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
as in effect from time to time), order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to Borrower or
such Guarantor, (d) result in a breach of or constitute a default or require any
consent under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Borrower or such Guarantor is a party or by which
any of its properties may be bound or affected, (e) result in, or require, the
creation or imposition of any Lien, upon or with respect to any of the
properties now owned or hereafter acquired by Borrower or such Guarantor other
than Liens created by this Agreement and/or the other Loan Documents, or (f)
cause Borrower or such Guarantor to be in default under any such rule,
regulation, order, writ, judgment, injunction, decree, determination or award or
any such indenture, agreement, lease or instrument.
Section 7.03. Legally Enforceable Agreements. Each Loan Document is, or
when delivered under this Agreement will be, a legal, valid and binding
obligation of Borrower or each Guarantor party thereto, enforceable against
Borrower or such Guarantor in accordance with its terms.
Section 7.04. Litigation. There are no actions, suits or proceedings
pending or to Borrower's knowledge, threatened against or affecting Borrower or
any of the Guarantors or any of their respective Subsidiaries before any court,
governmental agency or arbitrator, which could, in any one case or in the
aggregate, adversely affect the financial condition, operations, properties or
business of Borrower and the Guarantors, taken as a whole, or their ability to
perform their respective obligations under the Loan Documents.
Section 7.05. Financial Statements. The consolidated balance sheet of
Borrower and its Subsidiaries as at December 31, 1995 and the related
consolidated income statement and statement of cash flow of Borrower and its
Subsidiaries for the fiscal year then ended, and the accompanying notes,
together with the opinion thereon, of KPMG Peat Marwick LLP, independent
certified public accountants (the "Auditor"), and the consolidated financial
statements for the nine month period ended September 30, 1996, copies of which
were delivered to the Bank, fairly present the consolidated financial condition
of Borrower and its Subsidiaries as at such dates and the consolidated results
of the operations of Borrower and its Subsidiaries for the periods covered by
such statements, all in accordance with GAAP consistently applied. As of the
date hereof, there are no liabilities of Borrower and its Subsidiaries, fixed or
contingent, which are material but are not reflected in such financial
statements or in the notes thereto, other than liabilities arising in the
ordinary course of business since September 30, 1996 and the liabilities created
by this Agreement. Since the date of the most recent financial statements
delivered to the Bank and the Closing Date, there has been no material adverse
change in the condition (financial or otherwise), business, operations or, to
the knowledge of Borrower, prospects of any of Borrower or the Guarantors. With
respect to any Loans made after the Closing Date, since the date of the most
recent financial statements delivered to the Bank hereunder and the date of such
Loan, there has been no material adverse change in the condition (financial or
otherwise), business, operations or, to the knowledge of Borrower, prospects of
Borrower and the Guarantors, taken as a whole.
Section 7.06. Ownership and Liens. Each of Borrower and the Guarantors has
title to, or valid leasehold interests in, all of its properties and assets,
real and personal, reflected in the financial statements referred to in Section
7.05 (other than any properties or assets disposed of since the date of such
financial statements as no longer used or useful in the conduct of their
respective business or as have been disposed of in the ordinary course of
business), and none of the properties and assets owned by Borrower or the
Guarantors, or any of them, and none of their leasehold interests, is subject to
any Lien, except as disclosed in Schedule I or as may be permitted hereunder.
Section 7.07. Taxes. Each of Borrower and the Guarantors has filed all tax
returns (federal, state and local) required to be filed except where the failure
to file could not, in any case or in the aggregate, have an adverse effect upon
the operations, business, property or financial condition of any of Borrower or
the Guarantors or on their ability to perform their obligations under the Loan
Documents. Each of Borrower and the Guarantors has paid when due all taxes,
assessments and governmental charges and levies shown thereon to be due,
including interest and penalties, other than taxes, assessments and governmental
charges and levies being contested in good faith by appropriate proceedings and
with respect to which adequate reserves in conformity with GAAP shall have been
provided on the books of Borrower or the Guarantors, as the case may be.
Section 7.08. ERISA. Each of Borrower and the Guarantors is in compliance
in all material respects with all applicable provisions of ERISA. No Reportable
Event has occurred with respect to any Plan, no notice of intent to terminate a
Plan has been filed nor has any Plan been terminated, no circumstance exists
which constitutes grounds under Section 4042 of ERISA entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to administer, a Plan,
nor has the PBGC instituted any such proceedings, none of Borrower nor its ERISA
Affiliates has completely or partially withdrawn under Sections 4201 or 4204 of
ERISA from a Multiemployer Plan and each of Borrower and each of its ERISA
Affiliates has met its minimum funding requirements under ERISA with respect to
all of its Plans and there are no Unfunded Vested Liabilities. None of Borrower
nor its ERISA Affiliates has incurred any liability to the PBGC under ERISA,
other than to make contributions in the ordinary course and other than
contingent liabilities that would arise on the termination of any Plan (no such
termination being reasonably foreseen by Borrower).
Section 7.09. Subsidiaries and Ownership of Stock. Schedule II is a
complete and accurate list of the Subsidiaries of Borrower, showing the
jurisdiction of incorporation or organization of each Subsidiary and the
percentage of Borrower's ownership of the outstanding stock or other interest of
each such Subsidiary.
Section 7.10. Credit Arrangements. Schedule III is a complete and correct
list of all credit agreements, indentures, purchase agreements outside the
ordinary course of Borrower's business, guaranties, Capital Leases and other
investments, agreements and arrangements in effect on the date of this Agreement
providing for or relating to extensions of credit to Borrower or to the
Guarantors or to any of them (including agreements and arrangements for the
issuance of letters of credit or for acceptance financing) in respect of which
Borrower, the Guarantors or any of them is in any manner directly or
contingently obligated. Schedule III shows the maximum principal or face amounts
of the credit in question, outstanding and which can be outstanding, are
correctly stated, and all Liens of any nature given or agreed to be given as
security therefor are correctly described or indicated in such Schedule and
Schedule I.
Section 7.11. Operation of Business. Each of Borrower and each Guarantor
possesses all material licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct their business as now
conducted and as presently proposed to be conducted and to Borrower's best
knowledge, none of Borrower nor any of the Guarantors is in violation of any
valid rights of others with respect to any of the foregoing.
Section 7.12. Hazardous Substances. Each of Borrower and the Guarantors is
in compliance with all Environmental Laws, and has obtained all necessary
licenses and permits required to be issued pursuant to any Environmental Law.
None of Borrower nor any of the Guarantors has received any written notice or
communication from any governmental agency with respect to any Hazardous
Substance relative to its operations, property or acts or any investigation,
demand or request pursuant to or enforcing any Environmental Law relating to it
or its operations, and no such investigation is pending or, to the knowledge of
Borrower, threatened.
Section 7.13. Compliance with Loans and Judgments. Borrower and each
Subsidiary are in compliance, in all material respects, with all laws, rules,
regulations, orders and decrees which are applicable to Borrower or its
Subsidiaries, or to any of their respective properties. Each of Borrower and the
Guarantors has satisfied all judgments and none of Borrower nor any of the
Guarantors is in default with respect to any judgment, writ, injunction, decree,
rule or regulation of any court, arbitrator or federal, state, municipal or
other governmental authority, commission, board, bureau, agency or
instrumentality, domestic or foreign.
Section 7.14. No Defaults on Other Agreements. Except as disclosed on
Schedule IV, none of Borrower nor any of the Guarantors is a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction which would in any
case or in the aggregate have an adverse effect on its ability to carry out its
obligations under the Loan Documents. None of Borrower nor any of the Guarantors
is in default in any respect in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any agreement or
instrument material to its business to which it is a party except where such
default would not, in any case or in the aggregate, have a material and adverse
effect on the business, properties, assets, operations or condition, financial
or otherwise, of Borrower and the Guarantors, taken as a whole, or on their
ability to perform their obligations under the Loan Documents.
Section 7.15. Labor Disputes and Force Xxxxxx. Neither the business nor the
properties of Borrower or any of the Guarantors is affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought, storm,
hail, earthquake, embargo, force xxxxxx or of the public enemy or other casualty
(whether or not covered by insurance), materially and adversely affecting such
business or properties or the operations of Borrower and the Guarantors, taken
as a whole, or their ability to perform their obligations under the Loan
Documents.
Section 7.16. Governmental Regulation. None of Borrower or the Guarantors
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Investment Company Act of 1940 or any other statute or regulation limiting
its ability to incur indebtedness for money borrowed as contemplated hereby.
Section 7.17. Partnerships. None of Borrower or the Guarantors is a partner
in any partnership or a member of any joint venture or limited liability
company.
Section 7.18. No Forfeiture. None of Borrower nor any of the Guarantors is
engaged in or proposes to be engaged in any unlawful activity which is
reasonably likely to result in a Forfeiture Proceeding and no Forfeiture
Proceeding against any of them is pending or, to the best of Borrower's
knowledge, threatened.
Section 7.19. Security Agreement. The provisions of the Security Agreements
are effective to create in favor of the Bank legal, valid and enforceable
security interests in all right, title and interest of Borrower in all the
Collateral described therein, assuming the same has been duly executed by the
Bank and the Bank has filed the forms UCC-1 referred to therein.
Section 7.20. Disclosure. This Agreement, each Loan Document and, except as
set forth in Section 7.21, each other document, certificate, exhibit, report or
written statement furnished to the Bank by or on behalf of Borrower or for use
in connection with the Loans, do not contain any untrue statement of material
fact or omit to state a material fact necessary to make the statement contained
herein or therein not misleading under the circumstances in which they were
made.
Section 7.21. Projections and Forecasts. Any financial projection or
forecast furnished by Borrower or any Guarantor shall be prepared in accordance
with GAAP to the extent applicable, based on the good faith judgment of
Borrower's management of present circumstances, expected conditions and expected
courses of action, and with respect to projections, based on the occurrence of
the hypothetical events described therein. The underlying assumptions in such
forecasts and projections shall be appropriate and reasonable under the
circumstances and, if the forecast or projection presents a range, such range
shall not be selected in a misleading manner.
ARTICLE 8. AFFIRMATIVE COVENANTS.
So long as the Note shall remain unpaid or the Bank shall have any
obligations under this Agreement, Borrower shall and shall cause the Guarantors
to:
Section 8.01. Maintenance of Existence. Except as otherwise provided in
this Agreement, preserve and maintain its corporate existence and good standing
in the jurisdiction of its incorporation, and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is
required.
Section 8.02. Conduct of Business. Continue to engage in its current
business or related businesses.
Section 8.03. Maintenance of Properties. Maintain, keep and preserve all of
its properties (tangible and intangible) necessary to the conduct of its
business in good working order and condition, ordinary wear and tear excepted.
Section 8.04. Maintenance of Records. Keep records and books of account, in
which complete entries will be made in accordance with GAAP.
Section 8.05. Maintenance of Insurance. Maintain insurance with financially
sound and reputable insurance companies or associations in such amounts and
covering such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated.
Section 8.06. Compliance with Laws. Comply in all respects with all
applicable laws, rules, regulations and orders.
Section 8.07. Right of Inspection. At any reasonable time and from time to
time, upon reasonable notice during normal business hours, permit the Bank or
any agent or representative thereof, to examine and make copies and abstracts
from the records and books of account of, and visit the properties of, such
entity, to discuss the affairs, finances and accounts of such entity with any of
their respective officers and directors and such entity's independent
accountants, and from time to time at Borrower's expense to conduct such
collateral and other audits as the Bank deems necessary.
Section 8.08. Reporting Requirements. Furnish directly to each of the Bank:
(a) as soon as available and in any event within 120 days after the end of
each fiscal year of Borrower, consolidated financial statements of Borrower and
its Consolidated Subsidiaries which shall include a consolidated balance sheet
of Borrower and its Subsidiaries as of the end of such fiscal year and a
consolidated income statement and statement of cash flows of such entities for
such fiscal year, stating in comparative form the respective consolidated
figures for the corresponding date and period in the prior fiscal year and all
prepared in accordance with GAAP, accompanied by an opinion thereon acceptable
to the Bank by the Auditor, which opinion neither includes an exception as to
adherence with GAAP nor contains a disclaimer;
(b) as soon as available and in any event within 45 days after the end of
each of the first three quarters of each fiscal year of Borrower, a consolidated
balance sheet of Borrower and its Subsidiaries as of the end of such quarter and
a consolidated income statement and statements of cash flows of such entities
for the period commencing at the end of the previous fiscal year and ending with
the end of such quarter, all in reasonable detail and stating in comparative
form the respective consolidated figures for the corresponding date and period
in the previous fiscal year and all prepared in accordance with GAAP and
attested to by the president or chief financial officer of Borrower (subject to
year-end adjustments);
(c) simultaneously with the delivery of the financial statements referred
to in (a) and (b) above, a certificate of the president or chief financial
officer of Borrower (i) certifying that to the best of his knowledge no Default
or Event of Default has occurred and is continuing or, if a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof and
the action which is proposed to be taken with respect thereto, and (ii) with
computations demonstrating compliance with the covenants contained in Article
10;
(d) within 30 days after the delivery of the financial statements referred
to in (a) above, annual forecasts and Borrower's budget for the upcoming fiscal
year, with a comparison of actual results to budget for the fiscal year then
ended;
(e) promptly upon receipt thereof, a copy of the management letter, if any,
prepared by the Auditor;
(f) on or prior to the fifteenth day of each calendar month, a schedule of
accounts receivable of the Company and its Subsidiaries certified by the
President or Chief Financial Officer and current as of the last Banking Day of
the preceding month, which shall include accounts receivable summary agings, all
in form and in such detail satisfactory to the Bank;
(g) on or prior to the fifteenth day of each calendar month, a schedule of
inventory of the Company and its Subsidiaries certified by the President or
Chief Financial Officer and current as of the last Banking Day of the preceding
month, which shall contain a breakdown of the inventory by type, amount and
location and such other information reasonably requested by the Bank;
(h) on or prior to the fifteenth day of each calendar month, a Borrowing
Base Certificate in the form annexed as Exhibit D, current as of the last
Banking Day of the preceding month;
(i) promptly after Borrower becomes aware of the commencement thereof,
notice of all actions, suits, and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, involving claims of $25,000 or more affecting Borrower, or any of its
Subsidiaries, including, without limitation, any such proceeding relating to any
alleged violation of any Environmental Law;
(j) as soon as possible and in any event within five days after the
occurrence of each Default or Event of Default, a written notice specifying and
describing in reasonable detail such Default or Event of Default and describing
in reasonable detail the action which is proposed to be taken by Borrower with
respect thereto;
(k) promptly after the commencement thereof or promptly after Borrower
knows of the commencement or threat thereof, notice of any Forfeiture
Proceeding;
(l) promptly after submission to any government or regulatory agency, all
documents and information furnished to such government or regulatory agency
other than such documents and information prepared in the normal course of
business and which would not result in any adverse action to be taken by such
agency;
(m) as soon as possible and in any event within five Banking Days after
Borrower knows that any of the events or conditions specified below with respect
to any Plan or Multiemployer Plan have occurred or exist, a statement signed by
a chief financial officer of Borrower setting forth details respecting such
event or condition and the action, if any, which Borrower or the ERISA Affiliate
propose to take with respect thereto (and a copy of any report or notice
required to be filed with or given to PBGC by Borrower or an ERISA Affiliate
with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has not
by regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event (provided that a failure
to meet the minimum funding standard of Section 412 of the Code or Section 302
of ERISA shall be a reportable event regardless of the issuance of any waivers
in accordance with Section 412(d) of the Code);
(ii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan,
or the receipt by Borrower or any ERISA Affiliate, of a notice from a
Multiemployer Plan that such action has been taken by PBGC with respect to such
Multiemployer Plan;
(iv) the complete or partial withdrawal by Borrower or any ERISA Affiliate
under Section 4201 or 4204 of ERISA from a Multiemployer Plan, or the receipt by
Borrower, or any ERISA Affiliate, of notice from a Multiemployer Plan that it is
in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or
that it intends to terminate or has terminated under Section 4041A of ERISA; and
(v) the institution of a proceeding by a fiduciary or any Multiemployer
Plan against Borrower or any ERISA Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within 30 days;
(n) promptly, and in any event within five business days after the sending
or filing thereof, copies of all proxy statements, financial statements, and
reports which Borrower sends to its stockholders, and copies of all regular,
periodic and special reports and all registration statements which Borrower
files with the Securities and Exchange Commission or any other governmental
authority, or with any national securities exchange;
(o) such other information respecting the condition or operations,
financial or otherwise, of Borrower, or any Guarantor, as the Bank may from time
to time reasonably request.
Section 8.09. Payment of Obligations. Pay, discharge or otherwise satisfy
at or before maturity or before they become delinquent, as the case may be, all
material Debt except for any Debt which is being contested in good faith and
with respect to which, on a consolidated basis, adequate reserves are maintained
in conformity with GAAP.
Section 8.10. Payment of Taxes. Pay and discharge promptly all taxes,
assessments and government charges or levies imposed upon it or upon its income
and profits, or upon any of its property, real, personal or mixed, or upon any
part thereof, before the same shall become in default, and all other material
obligations (including lawful claims for labor, materials and supplies which, if
unpaid, might become a Lien) except that neither the Company nor any Guarantor
shall be required to pay any such tax, assessment, charge, levy or claim so long
as the validity thereof shall be contested in good faith by appropriate
proceedings and there shall have been set aside on its books adequate reserves
determined in accordance with GAAP with respect to any such tax, assessment,
charge, levy or claim so contested, provided that, except as provided in Section
9.02, the Company and each Guarantor shall pay all such taxes, assessments,
charges, levies or claims promptly if any Lien has attached as security
therefor.
Section 8.11. Acquisitions. Prior to entering into any letter of intent,
agreement or other commitment or proposed commitment relating to any
Acquisition, furnish the Bank with notice of same and with such information
relating to the Acquisition as Borrower possesses at the time it provides notice
to the Bank and which the Bank may reasonably request.
Section 8.12. Management. Use its best efforts to cause Xxxxxx Xxxxxx,
Xxxxxxx Xxxx, Xxxxxxxx Xxxxxxxx and Xxxx Xxxxxxxx to continue in the employ of
the Borrower in their present positions with their existing authority as
executive officers of Borrower, and consult with the Bank regarding the
replacement of any of them.
ARTICLE 9. NEGATIVE COVENANTS.
So long as the Note shall remain unpaid or the Bank shall have any
obligations under this Agreement, Borrower shall not:
Section 9.01. Debt and Guaranties.
(a) Create, incur, assume or suffer to exist, or permit any Guarantors to
create, incur, assume or suffer to exist any Debt, except:
(i) Debt arising under this Agreement or the Note;
(ii) Debt described in Schedule III, and any renewals,
extensions or refinancings thereof, provided that such renewals, extensions
or refinancing are on terms no less favorable to Borrower or the Guarantor than
the original terms of such Debt (except for increases in interest rates not
inconsistent with increases in prevailing interest rates);
(iii) Debt incurred in connection with operating leases entered
into by Borrower, the Guarantors, or any of them, consistent with past practices
or in the ordinary course of business; and
(iv) Debt of Borrower, or the Guarantors, or any of them,
secured by purchase money Liens permitted by Section 9.02.
(b) Guaranty, endorse, become surety for or otherwise in any way become or
be responsible for the Debt or obligations of any Person, whether by agreement
to maintain capital, equity, net worth or solvency of any Person, by agreement
to purchase or discharge the Debt of any Person, or agreement to purchase
merchandise, materials, supplies or other property, if such agreement provides
that payment shall be made whether or not delivery of such merchandise,
materials, supplies or other property is ever made or tendered except:
(i) guarantees executed prior to the date hereof as described on
Schedule V attached hereto;
(ii) endorsements of negotiable instruments for collection or
deposit in the ordinary course of business; and
(iii) guarantees under this Agreement or of Debt of Borrower or
any Guarantor owing to the Bank.
Section 9.02. Liens. Create, incur, assume or suffer to exist, or permit
any of the Guarantors to create, incur, assume or suffer to exist, any Lien,
upon or with respect to any of its properties, now owned or hereafter acquired,
except:
(a) Liens in favor of the Bank securing the Loans hereunder;
(b) Liens for taxes or assessments or other government charges or levies if
not yet due and payable or if due and payable if they are being contested in
good faith by appropriate proceedings and for which appropriate reserves are
maintained in conformity with GAAP;
(c) Liens (i) imposed by law, such as mechanic's, supplier's,
materialmen's, landlord's, warehousemen's and carrier's Liens, and other similar
Liens, securing obligations incurred in the ordinary course of business which
are not past due for more than 30 days or (ii) which are being contested in good
faith by appropriate proceedings and for which appropriate reserves have been
established which, when aggregated with all indebtedness secured by all such
other Liens, secure indebtedness having an aggregate principal balance not in
excess of $50,000;
(d) Liens under workers' compensation unemployment insurance, social
security or similar legislation (other than ERISA);
(e) judgment and other similar Liens arising in connection with court
proceedings that have been in existence for fewer than 30 days after entry of
the judgment or the execution or other enforcement of which is effectively
stayed, and the claims secured thereby are being actively contested, in
Borrower's reasonable judgment, in good faith and by appropriate proceedings, or
which relate to judgments which, when aggregated with all other judgments
secured by such Liens, total less than $50,000; and
(f) purchase money Liens on any property heretofore or hereafter acquired
or the assumption of any Lien on property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale or other
title retention agreement or a Capital Lease; provided that such liens attach
only to the property as acquired and do not extend to any additional property of
Borrower.
Section 9.03. Investments and Advances. Make or permit any Subsidiary to
make any loan or advance to any Person, or purchase, redeem or otherwise
acquire, or permit any such Subsidiary to purchase, redeem or otherwise acquire
any capital stock, assets, obligations or other securities, or make any capital
contribution to otherwise invest in or acquire any interest in any Person
(including, without limitation, any Borrower or any Subsidiary or Affiliate of
any Borrower), except:
(a) obligations issued or guaranteed by states or municipalities within the
United States of American and rated at least A-1 by Standard & Poor's;
(b) obligations issued or guaranteed by the United States of America or any
agency or subdivision thereof, the payment or guarantee of which constitutes a
full faith and credit obligation of the United States of America;
(c) certificates of deposit, time deposits, Eurodollar certificates of
deposit, bankers acceptances and other money market instruments issued by any
bank, trust company or financial institution organized under the laws of the
United States of America or any state (or in the case of Eurodollar certificates
of deposit, a branch of any such bank, trust company or financial institution)
having capital and surplus in an aggregate amount not less than $200,000,000 and
with such instrument rated at least A-1 by Standard & Poor's;
(d) commercial paper rated at least Prime-1 by Xxxxx'x Investor Services or
A-1 by Standard & Poor's;
(e) repurchase agreements entered into with any bank, trust company or
other financial institution organized under the laws of the United States of
America or any state having capital and surplus in an aggregate amount not less
than $200,000,000 and which are fully secured by obligations of the type
described in Section 9.03(b);
(f) Acquisitions permitted pursuant to Section 9.07 hereof; and
(g) Investments of Borrower in any Subsidiary or investment of any
Subsidiary in any other Subsidiary.
Section 9.04. Sale of Assets. Sell, lease, assign, transfer or otherwise
dispose of, or permit any of the Guarantors to sell, lease, assign, transfer or
otherwise dispose of, any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of such
Subsidiaries, receivables and leasehold interests) except for (i) assets
disposed of as no longer used or useful in the conduct of their respective
business or as have been disposed of in the ordinary course of business
consistent with Borrower's past practice or (ii) transfers of assets between or
among Borrower and Subsidiaries of Borrower, provided all such Subsidiaries are
Guarantors which have executed Security Agreements.
Section 9.05. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate or permit any of the Guarantors to
enter into any transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate, except
in the ordinary course of and pursuant to the reasonable requirements of
Borrower's or such Guarantors business and upon fair and reasonable terms not
materially less favorable to Borrower or such Guarantor than would be obtained
in a comparable arm's length transaction with a Person not an Affiliate.
Section 9.06. Mergers. Except as permitted in Section 9.07, and except for
mergers of any Subsidiary with and into either Borrower or any Subsidiary which
is at such time a Guarantor, merge or consolidate with, or sell, assign, lease
or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, or acquire all or substantially all of the
assets or the business of any Person (or enter into any agreement to do any of
the foregoing), or permit any of the Guarantors to do so.
Section 9.07. Acquisitions. Make any Acquisition, unless the entity to be
acquired is primarily in the business of manufacturing and printing of specialty
packaging and the Bank has been furnished with (a) such documents as are
necessary in the Bank's discretion to provide the Bank with a Guaranty of the
entity to be acquired (if it is to be a Subsidiary) and to grant the Bank a
perfected lien upon the assets so acquired, (b) satisfactory evidence that the
total cash consideration paid or to be paid by the Borrower in connection with
such Acquisition, when aggregated with the cash consideration paid or to be paid
in connection with all other Acquisitions during the period beginning on the
Closing Date, does not exceed the lesser of (i) $3,000,000 or (ii) 25% of
Tangible Net Worth, (c) a certificate of the president or chief financial
officer of Borrower certifying that no Default or Event of Default has occurred
and is continuing and that no Default or Event of Default would occur as a
result of Borrower's making such Acquisition and (d) within 15 days of
completing such Acquisition, a balance sheet of the Borrower prepared by
Borrower's management demonstrating compliance, on a pro forma basis, with the
covenants contained in Article 10 immediately after the Acquisition.
Section 9.08. No Activities Leading to Forfeiture Proceeding. Engage in or
permit any Guarantor to engage in any unlawful activity which could reasonably
be expected to result in a Forfeiture Proceeding.
Section 9.09. Corporate Documents; Fiscal Year. Change its fiscal year, or
amend, modify or supplement its certificate or articles of incorporation or
by-laws in any way with the result that any of the individuals identified in
Section 8.12 have diminished responsibilities or operating and management
authority over Borrower and its Subsidiaries.
Section 9.10. New Subsidiaries. Form, or permit any Guarantor to form, any
Subsidiary unless such Subsidiary shall become a party to the Guaranty.
ARTICLE 10. FINANCIAL COVENANTS.
So long as any of the Notes shall remain unpaid or the Bank has any
obligations under this Agreement:
Section 10.01. Net Income. Borrower shall maintain at all times a positive
Net Income on a fiscal year basis.
Section 10.02. Current Ratio. Borrower shall maintain at all times a
Current Ratio of not less than 1.25:1.00.
Section 10.03. Maximum Liabilities to Worth Ratio. Borrower shall maintain
on a consolidated basis at all times a ratio of Total Liabilities to Tangible
Net Worth of not more than 2.75:1.0.
Section 10.04. Debt Coverage Ratio. Borrower shall maintain on a
consolidated basis at all times a Debt Coverage Ratio of not less than 1.25:1.0.
Section 10.05. Determination of Compliance. Compliance with these financial
covenants shall be determined by reference to the consolidated financial
statements of Borrower and its Subsidiaries delivered to the Bank in accordance
with Section 8.08. Except as set forth in 10.01, all financial covenants shall
be applicable at all times and shall be tested at the end of each fiscal quarter
based upon the balance sheet information and the results of operations for the
period of 12 months preceding the date of determination. For purposes of
calculating compliance with Sections 10.02, 10.03 and 10.04, the principal
portion of all Revolving Credit Loans and the Revolving Credit Note shall be
deemed to be a current liability and not long-term indebtedness.
ARTICLE 11. EVENTS OF DEFAULT.
Section 11.01. Events of Default. The occurrence of any of the following
events shall be an "Event of Default":
(a) Borrower shall fail to pay within five days of due date (i) principal
of the Note, (ii) interest on the Note or (iii) any fee or other amount due
hereunder as and when due and payable.
(b) Any representation or warranty made or deemed made by Borrower in this
Agreement, or by Borrower or any Guarantor in any certificate delivered pursuant
to this Agreement or any other Loan Document, or which is contained in any
certificate, document, opinion, financial or other statement furnished to the
Bank at any time pursuant to any Loan Document, shall prove to have been
incorrect in any material respect on or as of the date made or deemed made;
(c) Borrower shall fail to perform or observe any term, covenant or
agreement contained in Section 2.03 or Articles 8, 9 or 10;
(d) Borrower or any Guarantor shall fail to perform or observe any term,
covenant or agreement on its part to be performed or observed in any Loan
Document and such failure shall continue for 15 consecutive days;
(e) Borrower or any Guarantor shall (i) fail to pay any amounts with
respect to any Debt in favor of the Bank, including but not limited to
indebtedness for borrowed money (other than the payment obligations described in
(a) above) of Borrower or such Guarantor, as the case may be, or any interest or
premium thereon, when due (giving effect to any applicable grace period),
whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise, (ii) fail to pay any amounts in excess of $50,000 in the aggregate
with respect to any other Debt, including but not limited to indebtedness for
borrowed money of Borrower or such Guarantor, as the case may be, or any
interest or premium thereon, when due (giving effect to any applicable grace
period), whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise, (iii) fail to perform or observe any term, covenant or
condition on its part to be performed or observed under any agreement or
instrument relating to any Debt when required to be performed or observed, if
the effect of such failure to perform or observe is to accelerate, or to permit
the acceleration of, after the giving of notice or passage of time or both, the
maturity of such Debt, whether or not such failure to perform or observe shall
be waived by the holder of such Debt or (iv) any Debt shall be declared to be
due and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof;
(f) Borrower or any Guarantor shall (i) generally not, be unable to or
admit in writing its or their inability to, pay its or their debts as such debts
become due; or (ii) make an assignment for the benefit of creditors, petition or
apply to any court or otherwise for the appointment of a custodian, receiver or
trustee for it or a substantial part of its or their assets, (iii) as debtor,
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, (iv) have had any such
petition or application filed or any such proceeding shall have been commenced,
against it or them, in which an adjudication or appointment is made or order for
relief is entered, and which petition, application or proceeding remains
undismissed for a period of 30 days or more, or (v) by any act or omission shall
indicate its or their consent to, approval of or acquiescence in any such
petition, application or proceeding or order for relief or the appointment of a
custodian, receiver or trustee for all or any substantial part of its or their
property, (vi) suffer any such custodianship, receivership or trusteeship to
continue undischarged for a period of 30 days or more or (vii) cease to be
Solvent;
(g) one or more judgments, decrees or orders for the payment of money in
excess of $50,000 in the aggregate in respect of uninsured or unbonded claims
shall be rendered against Borrower or any of Guarantor and such judgments,
decrees or orders shall continue unsatisfied and in effect for a period of 30
consecutive days without being vacated, discharged, satisfied or stayed or
bonded pending appeal;
(h) An event or condition specified in Section 8.08(m) hereof shall occur
or exist with respect to any Plan or Multiemployer Plan and, as a result of such
event or condition, together with all other such events or conditions, Borrower
or any ERISA Affiliate shall incur or in the opinion of the Bank shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC
(or any combination of the foregoing) which is, in the determination of the
Bank, material in relation to the financial condition, operations, business or
prospects of Borrower or the Guarantors;
(i) Any Forfeiture Proceeding shall have been commenced; or
(j) The Security Agreement shall at any time after its execution and
delivery and for any reason cease to create a valid and perfected first security
interest in the Collateral or to be in full force and effect, or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by Borrower, or Borrower shall deny that it has any further liability
or obligation under a Security Agreement to which it is a party, or Borrower
shall fail to perform any of its material obligations under any Security
Agreement.
Section 11.02. Remedies. If any Event of Default shall occur, the Bank
shall (a) declare the Revolving Credit Commitment to be terminated, whereupon
the same shall forthwith terminate, and (b) declare the outstanding principal of
the Notes, all interest thereon and all other amounts payable under this
Agreement and the Notes to be forthwith due and payable, whereupon the Notes,
all such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by Borrower; provided that, in the case of
an Event of Default referred to in Section 11.01(e) or Section 11.01(h) above,
the Commitments shall be immediately terminated, and the Note, all interest
thereon and all other amounts payable under this Agreement and the Note shall be
immediately due and payable without notice, presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by
Borrower.
ARTICLE 12. MISCELLANEOUS.
Section 12.01. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by Borrower and the Bank, and
any provision of this Agreement may be waived by Borrower or by the Bank;
provided that no amendment, modification or waiver shall be effective, unless by
an instrument signed by the Bank. No failure on the part of the Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 12.02. Usury. Anything herein to the contrary notwithstanding, the
obligations of Borrower under this Agreement and the Notes shall be subject to
the limitation that payments of interest shall not be required to the extent
that receipt thereof would be contrary to provisions of law applicable to the
Bank limiting rates of interest which may be charged or collected by the Bank.
Section 12.03. Expenses. Borrower shall reimburse the Bank on demand for
all reasonable costs, expenses, and charges (including, without limitation,
reasonable fees and charges of external legal counsel for the Bank) incurred by
the Bank in connection with the preparation or performance of this Agreement and
the Loan Documents. In addition, Borrower shall reimburse the Bank for all of
its reasonable costs and expenses in connection with the enforcement or
preservation of any rights under this Agreement, the Note or the other Loan
Documents. Borrower agrees to indemnify the Bank and its directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of them arising
out of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to any actual or proposed use by Borrower, of the proceeds of the
Loans, including, without limitation, the reasonable fees and disbursements of
counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified).
Section 12.04. Survival. The obligations of Borrower under Section 2.03(b),
Article 5 and Section 12.03 shall survive the repayment of the Loans for a
period corresponding to the maximum applicable statute of limitations in effect
in the State of New York from time to time.
Section 12.05. Assignment. This Agreement shall be binding upon, and shall
inure to the benefit of, Borrower and the Bank and their respective successors
and assigns, except that Borrower may not assign or transfer its rights or
obligations hereunder.
Section 12.06. Notices. All notices, consents, approvals and other
communications required or permitted to be given to a party under this Agreement
shall be in writing and shall be delivered personally to the party, sent by any
national overnight courier or mailed first class certified mail, return receipt
requested, to the party at the address indicated on page one, to the attention
of Xxxxxx Xxxxx for the Bank and to the attention of Xxxxxxxx Xxxxxxxx for
Borrower. Any item delivered in accordance with the provisions of this Section
shall be deemed to have been delivered (i) on the date of personal delivery,
(ii) on the business day following the date sent by overnight courier or (ii) on
the fifth day following the date on which it was so mailed, as the case may be.
Section 12.07. Setoff. Borrower agrees that, in addition to (and without
limitation of) any right of setoff, banker's lien or counterclaim the Bank may
otherwise have, the Bank shall be entitled, at its option without any prior
notice to Borrower (any such notice being expressly waived by Borrower to the
extent permitted by applicable law), to offset balances (general or special,
time or demand, provisional or final) held by it for the account of Borrower at
any of the Bank's offices against any amount then due and payable by Borrower to
the Bank under this Agreement or the Note which is not paid when due (regardless
of whether such balances are then due to Borrower), in which case it shall
promptly notify Borrower thereof, provided that the Bank's failure to give such
notice shall not affect the validity thereof. Payments by Borrower hereunder
shall be made without setoff or counterclaim.
Section 12.08. Jurisdiction; Immunities.
(a) Borrowers hereby irrevocably submits to the jurisdiction of any
New York State or United States Federal court sitting in Suffolk or Nassau
County over any action or proceeding arising out of or relating to this
Agreement or the Note, and Borrower hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York State or Federal court. To the extent permitted by applicable law, Borrower
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing (by certified or registered mail) of copies of such
process to it. Borrower agrees that a final judgment in any such 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. To the extent
permitted by applicable law, Borrower further waives any objection to venue in
such State or Federal Court and any objection to an action or proceeding in such
State or Federal Court on the basis of forum non conveniens. Borrower further
agrees that any action or proceeding brought against the Bank shall be brought
only in New York State or United States Federal court sitting in Suffolk or
Nassau County.
(b) THE PARTIES WAIVE ANY RIGHT TO A JURY TRIAL.
(c) Nothing in this Section shall affect the right of the Bank to
serve legal process in any other manner permitted by law or affect the
right of the Bank to bring any action or proceeding against Borrower or its
property in the courts of any other jurisdictions.
(d) To the extent that Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
from service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property,
Borrower hereby irrevocably waives, to the extent permitted by applicable law,
such immunity in respect of its obligations under this Agreement and the Note.
Section 12.09. Severability. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 12.10. Integration. The Loan Documents set forth the
entire agreement among the parties hereto relating to the transactions
contemplated thereby and supersede any prior oral or written statements or
agreements with respect to such transactions.
Section 12.11. Governing Law. This Agreement shall be governed by,
and interpreted and construed in accordance with, the law of the State of New
York applicable to agreements made and to be performed wholly within the State
of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
DISC GRAPHICS, INC. KEYBANK NATIONAL ASSOCIATION
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxx Xxxxx
Name: Xxxxxx Xxxxxx Name: Xxxxxx Xxxxx
Title: President and Title: Vice President
Chief Executive Officer
List of Schedules and Exhibits
Schedule I Description of Liens
Schedule II List of subsidiaries of Borrower
Schedule III List of Credit Agreements (including indentures, purchase
agreements, guaranties, Capital Leases, etc.)
Schedule IV Agreements effecting Loan Documents
Schedule V List of Guaranties
* * * * *
Exhibit A-1 Form of Revolving Credit Note
Exhibit A-2 Form of Term Note
Exhibit B Form of Guaranty
Exhibit C-1 Security Agreement of Borrower
Exhibit C-2 Security Agreement of Guarantors
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Opinion of Counsel
Exhibit F Form of Notice of Borrowing
