Exhibit 10.16
LOAN AGREEMENT
THIS LOAN AGREEMENT (the “Agreement”), is entered into as of February 5, 2010,
between PREFORMED LINE PRODUCTS COMPANY (the “Borrower”), with an address at 660
Beta Drive, Mayfield Village, Ohio 44143, and PNC BANK, NATIONAL ASSOCIATION
(the “Bank”), with an address at 1900 East Ninth Street, Cleveland, Ohio 44114.
The Borrower and the Bank, with the intent to be legally bound, agree as
follows:
1. Loan. The Bank has made or may make one or more loans (collectively and
individually, the “Loan” or a “Loan”) to the Borrower subject to the terms and
conditions and in reliance upon the representations and warranties of the
Borrower set forth in this Agreement. The Loan is or will be evidenced by a
promissory note or notes of the Borrower and all renewals, extensions,
amendments and restatements thereof (if one or more, collectively, the “Note”)
acceptable to the Bank, which shall set forth the interest rate, repayment and
other provisions, the terms of which are incorporated into this Agreement by
reference.
This Agreement, the Note, the subject LCs (as hereinafter defined) and all other
agreements and documents now or hereafter executed and/or delivered pursuant
hereto or thereto, as each may be amended, modified, extended or renewed from
time to time, are collectively referred to as the “Loan Documents.” Capitalized
and other terms not defined herein shall have the meanings ascribed to them in
the Loan Documents.
The term “Companies” shall mean, collectively, the Borrower and the Subsidiaries
of the Borrower, and “Company” means any one of them, as the context may
require.
The term “Subsidiary” shall mean a corporation or other business entity if
shares constituting a majority of its outstanding capital stock (or other form
of ownership) or constituting a majority of the voting power in any election of
directors (or shares constituting both majorities) are (or upon exercise of any
outstanding warrants, options or other rights would be) owned directly or
indirectly at the time in question by the corporation or other business entity
in question or another “Subsidiary of that corporation or other business entity
or any combination of the foregoing.
2. Letters of Credit. Bank agrees that until the Expiration Date Bank will issue
such letters of credit (each, a “subject LC”) for Borrower’s account as Borrower
may from time to time request subject, however, to the conditions of this
Agreement.
2.1 Maximum. Bank shall not issue any subject LC if, after giving effect
thereto,
(a) the sum of (i) the aggregate undrawn balance of all then outstanding subject
LCs plus (ii) the aggregate amount of all unreimbursed draws of all then
outstanding subject LCs (the “LC Exposure”) would exceed Fifteen Million Dollars
($15,000,000) or
(b) the sum of the then aggregate outstanding Loans plus the then LC Exposure
would exceed $30,000,000.
2.2 Term. No subject LC shall permit any draft to be drawn thereunder on a date
(the “last draw date”) that is more than one (1) year after the date of its
issue, nor shall any subject LC permit the last draw date to be later than the
third (3rd) banking day next preceding the Expiration Date.

 

 

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2.3 Form. Each subject LC shall:
(a) be issued in such form as Bank may reasonably require,
(b) be either a commercial letter of credit used solely for the importation of
goods in the ordinary course of Borrower’s business or a standby letter of
credit, and
(c) be denominated in Dollars or Agreed Foreign Currencies (as such terms are
defined in the Note).
2.4 Commission. Borrower shall pay Bank at the issuance of each subject LC a
non-refundable commission equal to
(a) Bank’s standard percentage fee of the face amount of each commercial import
letter of credit, or
(b) one and one-quarter percent (1.25%) of the face amount of each standby
letter of credit
plus any other standard fees for issuance, amendment, registration or draws or
any similar act generally charged by Bank in respect of letters of credit issued
by it.
2.5 Reimbursement. Borrower agrees to reimburse Bank for each draft or other
item paid by Bank pursuant to or otherwise in respect of any subject LC not
later than one (1) Business Day after the date on which Bank made such payment.
2.6 Subject to Loan Back-up. In the event of a draw under any subject LC, Bank
is irrevocably authorized to prepare, to sign Borrower’s name to, and to deliver
on Borrower’s behalf an appropriate credit request requesting a Loan in an
amount equal to the reimbursement amount plus any interest thereon, in the
applicable currency. Bank will make the requested Loan even if any Event of
Default shall then exist and even if Borrower for any other reason would then
not be entitled to obtain any subject loan. Bank shall disburse all such loan
proceeds directly to Bank to satisfy Borrower’s reimbursement liability.
2.7 Unconditional Obligation. The obligation of Bank to make, and of Borrower to
pay, the Loans made pursuant to the preceding section shall be absolute and
unconditional and shall be performed under all circumstances, including (without
limitation):
(a) any lack of validity or enforceability of the subject LC in question,
(b) the existence of any claim, offset, defense or other right that Borrower may
have against the beneficiary of such subject LC or any of its successors in
interest,
(c) the existence of any claim, offset, defense or other right that Bank may
have against Borrower or any of its affiliates or against the beneficiary of
such subject LC or any of their successors in interest,
(d) the existence of any fraud or misrepresentation in the presentment of any
draft or other item drawn and paid under such subject LC or

 

 

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(e) any payment of any draft or other item by Bank which does not strictly
comply with the terms of such subject LC provided such payment shall not have
constituted gross negligence or willful misconduct.
2.8 Cash Collateralization. If any Default or Event of Default shall occur and
be continuing, on the Business Day that the Borrower receives notice from the
Bank demanding the deposit of cash collateral pursuant to this paragraph, the
Borrower shall deposit in an account with the Bank, in the name and for the
benefit of the Lender (the “LC Collateral Account”), an amount in cash equal to
105% of the LC Exposure as of such date plus accrued and unpaid interest
thereon; provided that the obligation to deposit such cash collateral shall
become effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower described in clauses (iii),
(iv) or (vi) of Section 10 of the Note. Such deposit shall be held by the Bank
as collateral for the payment and performance of the Borrower’s obligations
under the Loan Documents. The Bank shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account and the Borrower
hereby grants the Bank a security interest in the LC Collateral Account. Other
than any interest earned on the investment of such deposits, which investments
shall be made at the option and sole discretion of the Bank and at the
Borrower’s risk and expense, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys in
such account shall be applied by the Bank for draws on subject LCs for which it
has not been reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated, be
applied to satisfy any other obligations.
2.9 Existing Letters of Credit. The parties acknowledge and agree that the
following Letters of Credit have been issued by the Bank in favor of the
Borrower and are outstanding on and as of the date of this Agreement:
(i) SCL013677 in the original face amount of $1,916,275 issued on May 23, 2007
in favor of Borrower for the benefit of Standard Chartered Bank (China), and
(ii) SCL015875 in the original face amount of $2,099,265 issued on December 11,
2009 in favor of Borrower for the benefit of Citibank, N.A., Bangkok Branch
(collectively, the “Existing Letters of Credit”). It is expressly understood and
agreed by each of the parties hereto that the Existing Letters of Credit shall
(i) constitute and be deemed to be subject LCs for all purposes of this
Agreement, the Note and the other Loan Documents, and (ii) remain in full force
and effect. Borrower hereby ratifies, confirms and reaffirms in all respects its
obligations under and with respect to the Existing Letters of Credit.
3. Representations and Warranties. The Borrower hereby makes the following
representations and warranties, which shall be continuing in nature and remain
in full force and effect until the Obligations are paid in full, and which shall
be true and correct except as otherwise set forth on the Addendum attached
hereto and incorporated herein by reference (the “Addendum”):
3.1. Existence, Power and Authority. Each Company is duly organized, validly
existing and in good standing under the laws of the State of its incorporation
or organization and has the organizational power and authority to own and
operate its assets and to conduct its business as now or proposed to be carried
on, and is duly qualified, licensed and in good standing to do business in all
jurisdictions where its ownership of property or the nature of its business
requires such qualification or licensing, except where the failure to be so
qualified or licensed could not reasonably be expected to result in a material
adverse change in its business, assets, operations, condition (financial or
otherwise) or results of operations. Each Company is duly authorized to execute
and deliver the Loan Documents to which it is a party, all necessary
organizational action to authorize the execution and delivery of the Loan
Documents has been properly taken, and the Borrower is and will continue to be
duly authorized to borrow under this Agreement and to perform all of the other
terms and provisions of the Loan Documents.

 

 

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3.2. Financial Statements. The Borrower has delivered or caused to be delivered
to the Bank its most recent balance sheet, income statement and statement of
cash flows (as applicable, the “Historical Financial Statements”). The
Historical Financial Statements are true, complete and accurate in all material
respects and fairly present the financial condition, assets and liabilities,
whether accrued, absolute, contingent or otherwise and the results of the
Companies’ operations for the period specified therein. The Historical Financial
Statements have been prepared in accordance with generally accepted accounting
principles in effect from time to time (“GAAP”) consistently applied from period
to period, subject in the case of interim statements to normal year-end
adjustments and to any customary comments and notes reasonably acceptable to the
Bank.
3.3. No Material Adverse Change. Since the date of the most recent Financial
Statements (as hereinafter defined), the Companies on a consolidated basis have
not suffered any damage, destruction or loss, and no event or condition has
occurred or exists, which has resulted or could reasonably be expected to result
in a material adverse change in their business, assets, operations, condition
(financial or otherwise) or results of operation.
3.4. Binding Obligations. Each Company has full power and authority to enter
into the transactions provided for in this Agreement and the other Loan
Documents; and the Loan Documents, when executed and delivered by such Company,
will constitute the legal, valid and binding obligations of such Company
enforceable in accordance with their terms.
3.5. No Defaults or Violations. There does not exist any Default or Event of
Default or any default or violation by any Company of or under any of the terms,
conditions or obligations of: (i) its partnership agreement if such Company is a
partnership, its articles or certificate of incorporation, regulations or bylaws
if such Company is a corporation or its other organizational documents as
applicable; (ii) any indenture, mortgage, deed of trust, franchise, permit,
contract, agreement, or other instrument to which it is a party or by which it
is bound, the violation of which could reasonably be expected to have a material
adverse effect on the business, assets, operations, condition (financial or
otherwise) or results of operations of the Companies on a consolidated basis; or
(iii) in any material respect, any law, ordinance, regulation, ruling, order,
injunction, decree, condition or other requirement applicable to or imposed upon
it by any law, the action of any court or any governmental authority or agency;
and the consummation of this Agreement and the transactions set forth herein
will not result in any such default or violation or Event of Default.
3.6. Title to Assets. Each Company has good and marketable title to the assets
reflected on the most recent Financial Statements, free and clear of all liens
and encumbrances, except for (i) current taxes and assessments not yet due and
payable, (ii) assets disposed of by such Company in the ordinary course of
business since the date of the most recent Financial Statements, and
(iii) Permitted Encumbrances (as hereinafter defined).
3.7. Litigation. There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrower, threatened against
any Company, which could reasonably be expected to result in a material adverse
change in its business, assets, operations, condition (financial or otherwise)
or results of operations of the Companies on a consolidated basis and there is
no basis known to the Borrower for any action, suit, proceeding or investigation
which could reasonably be expected to result in such a material adverse change.
All pending litigation against any domestic Company and litigation threatened in
writing, in each case as of the date of this Agreement, is listed on the
Addendum.
3.8. Tax Returns. Each Company has filed all returns and reports that are
required to be filed by it in connection with any federal, state or local tax,
duty or charge levied, assessed or imposed upon it or its property or withheld
by it, including income, unemployment, social security and similar taxes, and
all of such taxes have been either paid or adequate reserve or other provision
has been made therefor.

 

 

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3.9. Employee Benefit Plans. Each employee benefit plan as to which any Company
may have any liability complies in all material respects with all applicable
provisions of the Employee Retirement Income Security Act of 1974 (as amended
from time to time, “ERISA”), including minimum funding requirements, and (i) no
Prohibited Transaction (as defined under ERISA) has occurred with respect to any
such plan, (ii) no Reportable Event (as defined under Section 4043 of ERISA) has
occurred with respect to any such plan which would cause the Pension Benefit
Guaranty Corporation to institute proceedings under Section 4042 of ERISA,
(iii) no Company has withdrawn from any such plan or initiated steps to do so,
and (iv) no steps have been taken to terminate any such plan.
3.10 Environmental Matters. Each Company is in compliance, in all material
respects, with all Environmental Laws (as hereinafter defined), including,
without limitation, all Environmental Laws in jurisdictions in which such
Company owns or operates, or has owned or operated, a facility or site, stores
Collateral, arranges or has arranged for disposal or treatment of hazardous
substances, solid waste or other waste, accepts or has accepted for transport
any hazardous substances, solid waste or other wastes or holds or has held any
interest in real property or otherwise. Except as otherwise disclosed on the
Addendum, no litigation or proceeding arising under, relating to or in
connection with any Environmental Law is pending or, to the best of the
Borrower’s knowledge, threatened against any Company, any real property which
any Company holds or has held an interest or any past or present operation of
any Company. No release, threatened release or disposal of hazardous waste,
solid waste or other wastes is occurring, or to the best of the Borrower’s
knowledge has occurred, on, under or to any real property in which any Company
holds or has held any interest or performs or has performed any of its
operations, in violation of any Environmental Law. As used in this Section,
“litigation or proceeding” means any demand, claim notice, suit, suit in equity,
action, administrative action, investigation or inquiry whether brought by a
governmental authority or other person, and “Environmental Laws” means all
provisions of laws, statutes, ordinances, rules, regulations, permits, licenses,
judgments, writs, injunctions, decrees, orders, awards and standards promulgated
by any federal, state or local governmental authority concerning health, safety
and protection of, or regulation of the discharge of substances into, the
environment.
3.11. Intellectual Property. Each Company owns or is licensed to use all
patents, patent rights, trademarks, trade names, service marks, copyrights,
intellectual property, technology, know-how and processes necessary for the
conduct of its business as currently conducted that are material to the
condition (financial or otherwise), business or operations of the Companies on a
consolidated basis.
3.12. Regulatory Matters. No part of the proceeds of the Loan will be used for
“purchasing” or “carrying” any “margin stock” within the respective meanings of
each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time in effect or for any purpose
which violates the provisions of the Regulations of such Board of Governors.
3.13. Solvency. After giving effect to the transactions contemplated by the Loan
Documents, (i) the aggregate value of the Borrower’s assets will exceed its
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities), (ii) the Borrower will have sufficient cash flow to enable it to
pay its debts as they become due, and (iii) the Borrower will not have
unreasonably small capital for the business in which it is engaged.

 

 

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3.14. Disclosure. None of the Loan Documents contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary in order to make the statements contained in this Agreement or the
Loan Documents not misleading. There is no fact known to the Borrower which
materially adversely affects or, so far as the Borrower can now foresee, might
materially adversely affect the business, assets, operations, condition
(financial or otherwise) or results of operation of any Company and which has
not otherwise been fully set forth in this Agreement or in the Loan Documents.
4. Affirmative Covenants. The Borrower agrees that from the date of execution of
this Agreement until all Obligations have been paid in full and any commitments
of the Bank to the Borrower have been terminated, the Borrower will:
4.1. Books and Records. Maintain, and cause each other Company to maintain,
books and records in accordance with GAAP and give representatives of the Bank
access thereto at all reasonable times, upon reasonable advance notice and in
the presence of a representative of the Borrower, including permission to
examine, copy and make abstracts from any of such books and records and such
other information as the Bank may from time to time reasonably request, and the
Borrower will make available to the Bank for examination copies of any reports,
statements and returns which the Borrower or any other Company may make to or
file with any federal, state or local governmental department, bureau or agency.
In addition, each Company will permit the Bank at all reasonable times upon
reasonable advance notice to consult with such Company’s directors, officers,
accountants, plan administrators and, in the presence of an officer or
designated representative of the Borrower, employees in respect of its financial
condition, properties and operations, each of which parties is hereby authorized
to make such information available to the Bank to the same extent it would to
such Company.
4.2. Interim Financial Statements; Certificate of No Default. Furnish the Bank
within 45 days after the end of each of the first three fiscal quarters of each
fiscal year the Borrower’s Financial Statements for such period, in reasonable
detail, certified by an authorized officer of the Borrower and prepared in
accordance with GAAP consistently applied from period to period. The Borrower
shall also deliver a certificate as to its compliance with applicable financial
covenants (containing detailed calculations of all financial covenants) for the
period then ended and whether any Event of Default exists, and, if so, the
nature thereof and the corrective measures the Borrower proposes to take. As
used in this Agreement, “Financial Statements” means the Borrower’s consolidated
and, if required by the Bank in its reasonable discretion, consolidating balance
sheets, income statements and statements of cash flows for the year, month or
quarter together with year-to-date figures and comparative figures for the
corresponding periods of the prior year.
4.3. Annual Financial Statements; Budget; Other Financial Info. (a) Furnish the
Borrower’s Financial Statements to the Bank within 120 days after the end of
each fiscal year. Those Financial Statements will be prepared on an audited
basis in accordance with GAAP by an independent certified public accountant
selected by the Borrower and reasonably satisfactory to the Bank. Audited
Financial Statements shall contain the unqualified opinion of an independent
certified public accountant and all accountant examinations shall have been made
in accordance with GAAP consistently applied from period to period. The Borrower
shall also deliver to the Bank (i) copies of any management letters and auditor
letters relating to its Financial Statements and (ii) a certificate as to its
compliance with applicable financial covenants (containing detailed calculations
of all financial covenants) for the period then ended and whether any Event of
Default exists, and, if so, the nature thereof and the corrective measures the
Borrower proposes to take.
(b) [INTENTIONALLY OMITTED]

 

 

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(c) promptly following any request therefor, furnish such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Subsidiary, or compliance with the terms of this Agreement, as
the Bank may reasonably request.
4.4. Payment of Taxes and Other Charges. Pay and discharge when due all
indebtedness and all taxes, assessments, charges, levies and other liabilities
imposed upon any Company, its income, profits, property or business, except
those which currently are being contested in good faith by appropriate
proceedings and for which the Borrower shall have set aside adequate reserves or
made other adequate provision with respect thereto acceptable to the Bank in its
reasonable discretion.
4.5. Maintenance of Existence, Operation and Assets. Do all things necessary to
(i) except as expressly permitted by Section 5.5, maintain, renew and keep in
full force and effect each Company’s organizational existence and all rights,
permits and franchises necessary to enable it to continue its business as
currently conducted; (ii) continue in operation in substantially the same manner
as at present; (iii) keep each Company’s properties in good operating condition
and repair, ordinary wear and tear excepted; and (iv) make all necessary and
proper repairs, renewals, replacements, additions and improvements thereto.
4.6. Insurance. Maintain, and will cause each other Company to maintain, with
financially sound and reputable insurers, insurance with respect to its property
and business against such casualties and contingencies, of such types and in
such amounts, as is customary for established companies engaged in the same or
similar business and similarly situated.
4.7. Compliance with Laws. Comply. and cause each other Company to, comply, in
all material respects, with all laws applicable to it and each Company and to
the operation of its and each Company’s business (including without limitation
any statute, ordinance, rule or regulation relating to employment practices,
pension benefits or environmental, occupational and health standards and
controls).
4.8. Bank Accounts. Establish and maintain at the Bank the Borrower’s primary
domestic depository accounts.
4.9. Financial Covenants. Comply with all of the financial and other covenants,
if any, set forth on the Addendum (the “Financial Covenants”).
4.10. Additional Reports. Provide prompt written notice to the Bank of the
occurrence of any of the following (together with a description of the action
which the Borrower or the applicable Company proposes to take with respect
thereto): (i) any Event of Default or any event, act or condition which, with
the passage of time or the giving of notice, or both, would constitute an Event
of Default (a “Default”), (ii) any litigation filed by or against any Company
involving (A) potential damages, amounts in dispute or fines of more than
$1,500,000, (B) any temporary or permanent injunctive relief, or (C) criminal
charges, (iii) any Reportable Event or Prohibited Transaction with respect to
any Employee Benefit Plan(s) (as defined in ERISA) or (iv) any event which
likely may result in a material adverse change in the business, assets,
operations, condition (financial or otherwise) or results of operation of the
Companies on a consolidated basis.
4.11. Further Assurances. (a) Subject to applicable law, at the request of the
Bank, the Borrower shall cause each of its domestic Subsidiaries formed or
acquired after the date of this Agreement to execute a guaranty in favor of the
Bank in form and substance satisfactory to the Bank, in its sole discretion.

 

 

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(b) Without limiting the foregoing, Borrower will, and will cause each other
Company to, execute and deliver, or cause to be executed and delivered, to the
Bank such documents, agreements and instruments, and will take or cause to be
taken such further actions (including the filing and recording of financing
statements, fixture filings, mortgages, deeds of trust and other documents),
which may be required by law or which the Bank may, from time to time,
reasonably request to carry out the terms and conditions of this Agreement and
the other Loan Documents.
5. Negative Covenants. The Borrower covenants and agrees that from the date of
this Agreement until all Obligations have been paid in full and any commitments
of the Bank to the Borrower have been terminated, except as set forth in the
Addendum, the Borrower will not, and will not permit any other Company to,
without the Bank’s prior written consent:
5.1. Indebtedness. Create, incur, assume or suffer to exist any indebtedness for
borrowed money other than: (i) the Loan and any subsequent indebtedness to the
Bank; (ii) open account trade debt incurred in the ordinary course of business,
(iii) secured indebtedness permitted under Section 5.2 hereof and refinancing
thereof, provided that the principal amount does not increase, (iv) indebtedness
in favor of the Borrower or any other Company, (v) unsecured indebtedness in
respect of bid, performance or surety, appeal or similar bonds, and completion
guarantees, incurred in the ordinary course of business, (vi) interest rate
hedging obligations, (vii) indebtedness listed on the Addendum existing on the
date hereof (the “Existing Indebtedness”) so long as such indebtedness is
unsecured, (viii) additional unsecured indebtedness not exceeding an aggregate
principal amount of three million dollars ($3,000,000) at any one time
outstanding for all Companies, and (ix) other additional unsecured indebtedness
not exceeding an aggregate principal amount of twelve million dollars
($12,000,000) at any one time outstanding for all Companies (“Additional
Unsecured Indebtedness”); provided, however, that in no event shall any such
Additional Unsecured Indebtedness incurred after the date of this Agreement
which is provided by any Domestic Lender to any Company, or by any Foreign
Lender to any domestic Company (x) contain any representations, warranties,
indemnities, covenants, pricing terms or any other terms (whether of a business
nature or otherwise) that are more favorable to such Domestic Lender or Foreign
Lender, as applicable, than those contained in the Loan Documents, (y) contain
any terms that conflict with, or that are otherwise more restrictive on any
Company than, any of the terms of the Loan Documents, or (z) confer rights on or
to such Domestic Lender or Foreign Lender, as applicable, that are not conferred
on or to the Bank under the Loan Documents or otherwise.
For purposes of this Section 5.1, the following terms shall have the following
meanings:
“Domestic Lender” means (A) a financial institution, or a firm, corporation or
other entity otherwise engaged in making, purchasing, holding or investing in
loans and/or other extensions of credit, in any such case that is (1) organized
under the federal laws of the United States of America, or (2) located in, or
organized under the laws of, one of the states of the United States of America
or any territory or other political subdivision of the United States of America,
and (B) any branch, Subsidiary or affiliate of a financial institution, firm,
corporation or other entity described in the immediately preceding clause
(A) which is located outside of, or otherwise organized under the laws of any
jurisdiction outside of, the United States of America or any territory or
political subdivision thereof.
“Foreign Lender” means (A) a financial institution, or a firm, corporation or
other entity otherwise engaged in making, purchasing, holding or investing in
loans and/or other extensions of credit, in any such case that is located in, or
organized under the laws of, a jurisdiction other than the United States of
America or any one of the states, territories or other political subdivisions of
the United States of America, and (B) any branch, Subsidiary or affiliate of a
financial institution, firm, corporation or other entity described in the
immediately preceding clause (A) which is located in, or otherwise organized
under the laws of, the United States of America or any state, territory or
political subdivision of the United States of America, in each case to the
extent not otherwise covered by the definition of “Domestic Lender”.

 

 

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5.2. Liens and Encumbrances. Except as provided in Section 3.6, create, assume,
incur or permit to exist any mortgage, pledge, encumbrance, security interest,
lien or charge of any kind upon any of its property, now owned or hereafter
acquired, or acquire or agree to acquire any kind of property subject to any
conditional sales or other title retention agreement, other than (collectively,
“Permitted Encumbrances”):
(i) any tax lien, or any lien securing workers’ compensation or unemployment
insurance obligations, or any mechanic’s, carrier’s or landlord’s lien, or any
lien arising under ERISA, or any security interest arising under article four
(Bank deposits and collections) or five (letters of credit) of the Uniform
Commercial Code, or any similar security interest or other lien, provided,
however, that this clause (i) shall apply only to security interests and other
liens arising by operation of law (whether statutory or common law) and in the
ordinary course of business and shall not apply to any security interest or
other lien that secures any indebtedness for borrowed money or any guaranty
thereof or any obligation that is in material default in any manner (other than
any default contested in good faith by timely and appropriate proceedings
effective to stay enforcement of the security interest or other lien in
question);
(ii) zoning or deed restriction, public utility easement, minor title
irregularities and similar matters having no adverse effect as a practical
matter on the ownership or use of any of the property in question;
(iii) any lien securing or given in lieu of surety, stay, appeal or performance
bonds, or securing performance of contracts or bids (other than contracts for
the payment of money borrowed), or deposits required by law or governmental
regulations or by any court order, decree, judgment or rule or as a condition to
the transaction of business or the exercise of any right, privilege or license,
provided, however, that this clause (iii) shall not apply to any lien or deposit
securing an obligation that is in material default in any manner (other than any
default contested in good faith by timely and appropriate proceedings effective
to stay enforcement of the security interest or other lien in question);
(iv) any mortgage, security interest or other lien securing only the Loans and
other obligations under this Agreement and the other Loan Documents;
(v) any mortgage, security interest, capitalized lease or other lien (each a
“purchase money security interest”) which is created or assumed in purchasing,
constructing or improving any real property or equipment or to which any such
property is subject when purchased, provided, however, that (A) the purchase
money security interest shall be confined to the aforesaid property, (B) the
indebtedness secured thereby does not exceed the total cost of the purchase,
construction or improvement, (C) any such indebtedness, if repaid in whole or in
part, cannot be reborrowed and (D) the aggregate amount of all indebtedness
secured by purchase money security interests permitted by this clause (vi) shall
not at any time exceed an aggregate amount equal to five million dollars
($5,000,000) at any one time outstanding for all Companies;
(vi) any mortgage, security interest or other lien (other than any purchase
money security interest) which encumbers any fixed asset of any corporation or
other business entity that is not a Subsidiary of Borrower on the date of this
Agreement but which becomes, by acquisition, a subsidiary of Borrower after the
date of this Agreement, but only if (A) the mortgage, security interest or other
lien in question encumbered the fixed asset in question at the time such
subsidiary is acquired and (B) the aggregate amount of all indebtedness secured
by mortgages, security interests or other liens permitted by this clause
(vi) does not at any time exceed an aggregate amount equal to five million
dollars ($5,000,000) at any one time outstanding for all Companies;

 

 

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(vii) any lease other than any capitalized lease (it being agreed that a
capitalized lease is a lien rather than a lease for the purposes of this
Agreement);
(viii) any mortgage, security interest or other lien which (A) is fully
disclosed in Borrower’s most recent financial statements or in the supplemental
schedule and (B) secures only indebtedness that is fully disclosed in Borrower’s
most recent financial statements or in the supplemental schedule or any renewal
or refinancing of any such indebtedness if and to the extent that the renewal or
refinancing does not increase the then amount of the indebtedness renewed or
refinanced;
(ix) any mortgage, security interest or other lien not otherwise permitted under
this Section 5.2; provided, however, that the aggregate amount of all
indebtedness secured by mortgages, security interests and other liens permitted
by this clause (vii) does not at any time exceed an aggregate amount equal to
ten million dollars ($10,000,000) at any one time outstanding for all Companies;
and
(x) any financing statement perfecting a security interest that would be
permissible under this Section 5.2.
5.3. Guarantees. Guarantee, endorse or become contingently liable for the
obligations of any person, firm, corporation or other entity, except (i) in
connection with the endorsement and deposit of checks in the ordinary course of
business for collection, (ii) any existing or future guaranty by a Company of
any liability owing by any other Company, (iii) any guaranty by any Subsidiary
of the Borrower executed in favor of the Bank, and (iv) any existing or future
guaranty; provided, however, that after giving effect thereto, the maximum
aggregate amount of all liabilities incurred by the Companies pursuant to one or
more guaranties (exclusive of guaranties permitted by clauses (i) through
(iii) above) would not at any time exceed an amount equal to ten million dollars
($10,000,000) at any one time outstanding for all Companies.
5.4. Loans or Advances. Purchase or hold beneficially any stock, other
securities or evidences of indebtedness of, or make or have outstanding, any
loans or advances to, or otherwise extend credit to, or make any investment or
acquire any interest whatsoever in, any other person, firm, corporation or other
entity, except (i) investments disclosed on the Borrower’s Historical Financial
Statements, (ii) any existing or future advances made to an officer or employee
of the Borrower solely for the purpose of paying ordinary and reasonable
business expenses of the Borrower, (iii) any existing or future investment in
direct obligations of the United States of America or any agency thereof, in
certificates of deposit issued by the Bank, or in any other money-market
investment if it carries the highest quality rating of any nationally-recognized
rating agency; provided, however, that no investment permitted pursuant to this
clause (iii) shall mature more than ninety (90) days after the date when made,
(iv) any endorsement of a check or other medium of payment for deposit or
collection, or any similar transaction in the normal course of business,
(v) purchases or other acquisitions of all or substantially all of the capital
stock of any corporation or other business enterprise expressly permitted under
Section 5.8, or (vi) any existing or future investment, advance or loan;
provided, however, that after giving effect thereto the aggregate amount of all
investments, advances and loans (exclusive of investments, advances and loans
permitted under clauses (i) through (v) of this Section 5.4) made by the
Companies would not at any time exceed an aggregate amount equal to fifteen
million dollars ($15,000,000) for all Companies.

 

 

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5.5. Merger or Transfer of Assets. Liquidate or dissolve, or merge or
consolidate with or into any person, firm, corporation or other entity, or sell,
lease, transfer or otherwise dispose of all or any substantial part of its
property, assets (other than (y) transfers of inventory in the ordinary course
of business and (z) other assets in the ordinary course of business having a
value of not more than $3,000,000 in any fiscal year of Borrower), operations or
business, whether now owned or hereafter acquired, except, so long as both
immediately before and after giving effect thereto, no Default of Event of
Default exists or shall exist, a merger or consolidation involving only
Subsidiaries of the Borrower, any merger of Borrower with one or more of its
Subsidiaries in which Borrower is the surviving corporation or any dissolution
and liquidation of a Subsidiary of the Borrower.
5.6. Change in Business, Management or Ownership. Make or permit any change in
its form of organization (except pursuant to a transaction permitted pursuant to
Section 5.5), or the nature of its business as carried on as of the date hereof.
5.7. Dividends. Declare or pay any dividends on or make any distribution with
respect to any class of its equity or ownership interest, or purchase, redeem,
retire or otherwise acquire any of its equity; provided, however, that Borrower
may declare and pay dividends (in cash or in kind) so long as (i) no Default or
Event of Default shall then exist or would thereupon occur, and (ii) the amount
or value of such dividend, when added to the amount and/or value of all
dividends made by Borrower in the fiscal year in which such dividend is proposed
to be made, does not exceed five million dollars ($5,000,000); and provided,
further, that any Subsidiary of Borrower may declare and pay dividends to (in
cash or in kind) to the Borrower; and provided, further, that Borrower may
purchase, redeem, retire or otherwise acquire any of its equity so long as
(i) no Default or Event of Default shall then exist or would thereupon occur,
and (ii) the dollar amount of such purchase, redemption, retirement or
acquisition, when added to the dollar amounts of all purchases, redemptions,
retirements or acquisitions of its equity made by Borrower during the period
commencing on the date hereof and ending on the date of the proposed
transaction, does not exceed fifteen million dollars ($15,000,000).
5.8. Acquisitions. Make acquisitions of all or substantially all of the property
or assets of any person, firm, corporation or other entity, except that the
Borrower may make purchases or other acquisitions of all or substantially all of
the capital stock or assets and business of any corporation, division or other
business enterprise so long as (i) the aggregate consideration of any individual
transaction does not exceed $35,000,000 and the aggregate consideration of all
such transactions consummated during the term of this Agreement does not exceed
$55,000,000, (ii) both immediately before and after giving effect to the
proposed transaction, no Default or Event of Default shall exist, (iii) both
immediately before and after giving effect to the proposed transaction, Borrower
shall be in compliance with the Financial Covenants, (iv) (A) not less than
30 days prior to the consummation of the proposed transaction, the Borrower
shall have provided the Bank with notice of such transaction, (B) not less than
ten (10) Business Days prior to the consummation of the proposed transaction,
(1) copies of then available drafts of all agreements and other instruments and
documents to be executed in connection with such transaction and (2) a copy of
all business and financial information reasonably requested by the Bank
including pro forma consolidating financial statements and statements of cash
flow, and (C) not less than two (2) Business Days prior to the consummation of
the proposed transaction, copies of the final forms of all agreements and other
instruments and documents to be executed in connection with such transaction
(collectively, the “Final Agreements”) (together with all drafts thereof
produced after the delivery of the drafts delivered under clause (iv)(B) of this
Section 5.8), and (v) the terms of the proposed transaction are reasonably
acceptable to the Bank. So long as Bank shall have received all of the items
referred to in the foregoing clause (iv) of this Section 5.8 within the time
periods set forth therein, the Bank shall notify the Borrower not later than one
(1) Business Day prior to the consummation of the proposed transaction whether
or not the terms of such transaction are acceptable to the Bank. In the event
that Bank so notifies the Borrower that the terms of the proposed transaction
are acceptable to the Bank, so long as all of the conditions set forth in this
Section 5.8 shall have been met, the Borrower may proceed to consummate the
proposed transaction in accordance with, and utilizing, the Final Agreements
with respect to such proposed transaction (it being understood that such Final
Agreements may contain minor, non-substantive changes to the non-material terms
thereof). Not later than ten (10) Business Days after the consummation of any
such transaction, Borrower shall deliver to Bank copies of all of the
agreements, instruments and other documents executed and delivered in connection
therewith.

 

 

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5.9 Restrictive Agreements. Directly or indirectly, enter into, incur or permit
to exist any agreement or other arrangement after the date of this Agreement
that prohibits, restricts or imposes any condition upon (a) the ability of the
Borrower or any other Company to create, incur or permit to exist any lien,
mortgage, pledge, encumbrance, security interest or charge of any kind upon any
of its property or assets, or (b) the ability of any Company to pay dividends or
other distributions with respect to any shares of its capital stock (or other
form of ownership) or to make or repay loans or advances to the Borrower or any
other Company or to guarantee indebtedness of the Borrower or any other Company;
provided that (i) the foregoing shall not apply to restrictions and conditions
imposed by law or by any Loan Document and (ii) clause (a) of the foregoing
shall not apply to restrictions or conditions imposed by any agreement relating
to secured indebtedness permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such indebtedness.
6. Events of Default. The occurrence of any of the following will be deemed to
be an Event of Default:
6.1. Covenant Default. Any Company shall fail to observe or perform or otherwise
default in the performance of any of the covenants or agreements contained in
Sections 2.4, 2.5,4.1, 4.2, 4.3, 4.5, 4.7, 4.9, 4.10, 4.11 or 5.1 through 5.9
(inclusive) of this Agreement.
6.2. Covenant Default with Grace. Any Company shall fail to observe or perform
or otherwise default in the performance of any covenant or agreement contained
in this Agreement (other than those referred to in Section 6.1 above) and such
failure or default shall continue unremedied or uncured for a period of thirty
(30) days after the earlier of knowledge by any Company of such failure or
default or notice thereof from the Bank; provided that in no event shall this
Section 6.2 in any way serve to increase any of the grace periods set forth in
Section 10 of the Note or in any other Loan Document.
6.3. Breach of Warranty. Any Financial Statement, representation, warranty or
certificate made or furnished by the Borrower or any other Company to the Bank
in connection with this Agreement shall be false, incorrect or incomplete in any
material respect when made.
6.4. Other Default. The occurrence of an Event of Default as defined in the Note
or any of the Loan Documents.
Upon the occurrence and during the continuance of an Event of Default, the Bank
will have all rights and remedies specified in the Note and the Loan Documents
and all rights and remedies (which are cumulative and not exclusive) available
under applicable law or in equity.
7. Conditions. The Bank’s obligation to make any advance under the Loan is
subject to the conditions that as of the date of the advance:
7.1. Conditions to Effectiveness of this Agreement. The obligations of the Bank
to make Loans and to issue subject LCs hereunder shall not become effective
until the date on which each of the conditions set forth on the Closing
Checklist is satisfied, which Closing Checklist is attached hereto as Exhibit A
and hereby incorporated herein by reference.

 

 

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7.2 Conditions to Each Advance. In addition to the satisfaction of the
conditions set forth in Section 7.1 above, the obligation of the Bank to make a
Loan and to issue, amend, renew or extend any subject LC, is subject to the
satisfaction of the following conditions:
(a) The representations and warranties of the Borrower set forth in this
Agreement shall be true and correct on and as of the date of such Loan or the
date of issuance, amendment, renewal or extension of such letter of credit, as
applicable.
(b) At the time of and immediately after giving effect to such Loan or the
issuance, amendment, renewal or extension of such subject LC, as applicable, no
Default or Event of Default shall have occurred and be continuing.
(c) After giving effect to any Loan or the issuance of any subject LC, the
aggregate outstanding balance of the Loans plus the aggregate face amount of all
outstanding subject LCs shall not exceed $30,000,000.
Each Loan and each issuance, amendment, renewal or extension of a subject LC
shall be deemed to constitute a representation and warranty by the Borrower on
the date thereof as to the matters specified in paragraphs (a), (b) and (c) of
this Section.
8. Expenses. The Borrower agrees to pay the Bank, upon the execution of this
Agreement, and otherwise on demand, all reasonable out-of-pocket costs and
expenses incurred by the Bank in connection with the preparation, negotiation
and delivery of this Agreement and the other Loan Documents, and any
modifications thereto, and the collection of all of the Obligations, including
but not limited to enforcement actions, relating to the Loan, whether through
judicial proceedings or otherwise, or in defending or prosecuting any actions or
proceedings arising out of or relating to this Agreement, including reasonable
fees and expenses of counsel (which may include costs of in-house counsel),
expenses for auditors, appraisers and environmental consultants, lien searches,
recording and filing fees and taxes.
9. Increased Costs. On written demand, together with written evidence of the
justification therefor, the Borrower agrees to pay the Bank all direct costs
incurred and any losses suffered or payments made by the Bank as a consequence
of making the Loan by reason of any change in law or regulation, or the
interpretation thereof, imposing any reserve, deposit, allocation of capital or
similar requirement (including without limitation, Regulation D of the Board of
Governors of the Federal Reserve System) on the Bank, its holding company or any
of their respective assets.
10. Miscellaneous.
10.1. Notices: All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder (“Notices”) must be in writing
and will be effective upon receipt. Notices may be given in any manner to which
the parties may separately agree, including electronic mail. Without limiting
the foregoing, first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party’s
address as set forth above or to such other address as any party may give to the
other for such purpose in accordance with this section.
10.2. Preservation of Rights. No delay or omission on the Bank’s part to
exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power, nor will the Bank s
action or inaction impair any such right or power. The Bank’s rights and
remedies hereunder are cumulative and not exclusive of any other rights or
remedies which the Bank may have under other agreements, at law or in equity.

 

 

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10.3. Illegality. If any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, it shall not affect or impair
the validity, legality and enforceability of the remaining provisions of this
Agreement.
10.4. Changes in Writing. No modification, amendment or waiver of, or consent to
any departure by the Borrower from, any provision of this Agreement will be
effective unless made in a writing signed by the party to be charged, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on the Borrower will entitle
the Borrower to any other or further notice or demand in the same, similar or
other circumstance.
10.5. Entire Agreement. This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.
10.6. Counterparts. This Agreement may be signed in any number of counterpart
copies and by the parties hereto on separate counterparts, but all such copies
shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile transmission
shall be effective as delivery of a manually executed counterpart. Any party so
executing this Agreement by facsimile transmission shall promptly deliver a
manually executed counterpart, provided that any failure to do so shall not
affect the validity of the counterpart executed by facsimile transmission.
10.7. Successors and Assigns. This Agreement will be binding upon and inure to
the benefit of the Borrower and the Bank and their respective heirs, executors,
administrators, successors and assigns; provided, however, that the Borrower may
not assign this Agreement in whole or in part without the Bank’s prior written
consent and the Bank at any time may assign this Agreement in whole or in part.
10.8. Interpretation. In this Agreement, unless the Bank and the Borrower
otherwise agree in writing, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word “or”
shall be deemed to include “and/or”, the words “including”, “includes” and
“include” shall be deemed to be followed by the words “without limitation”;
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement; and references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement. Section
headings in this Agreement are included for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose. Unless
otherwise specified in this Agreement, all accounting terms shall be interpreted
and all accounting determinations shall be made in accordance with GAAP. If this
Agreement is executed by more than one party as Borrower, the obligations of
such persons or entities will be joint and several.
10.9. No Consequential Damages, Etc. The Bank will not be responsible for any
damages, consequential, incidental, special, punitive or otherwise, that may be
incurred or alleged by any person or entity, including the Borrower and any
Guarantor, as a result of this Agreement, the other Loan Documents, the
transactions contemplated hereby or thereby, or the use of the proceeds of the
Loan.

 

 

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10.10. Assignments and Participations. At any time, without any notice to the
Borrower, the Bank may sell, assign, transfer, negotiate, grant participations
in, or otherwise dispose of all or any part of the Bank’s interest in the Loan.
The Borrower hereby authorizes the Bank to provide, without any notice to the
Borrower, any information concerning the Borrower, including information
pertaining to the Borrower’s financial condition, business operations or general
creditworthiness, to any person or entity which may succeed to or participate in
all or any part of the Bank’s interest in the Loan.
10.11. Governing Law and Jurisdiction. This Agreement has been delivered to and
accepted by the Bank and will be deemed to be made in the State where the Bank’s
office indicated above is located. This Agreement will be interpreted and the
rights and liabilities of the parties hereto determined in accordance with the
laws of the State where the Bank’s office indicated above is located, excluding
its conflict of laws rules. The Borrower hereby irrevocably consents to the
exclusive jurisdiction of any state or federal court in the county or judicial
district where the Bank’s office indicated above is located; provided that
nothing contained in this Agreement will prevent the Bank from bringing any
action, enforcing any award or judgment or exercising any rights against the
Borrower individually, against any security or against any property of the
Borrower within any other county, state or other foreign or domestic
jurisdiction. The Bank and the Borrower agree that the venue provided above is
the most convenient forum for both the Bank and the Borrower. The Borrower
waives any objection to venue and any objection based on a more convenient forum
in any action instituted under this Agreement.
10.12 USA PATRIOT ACT. The Bank that hereby notifies the Borrower that pursuant
to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)) (the “Act”), the Bank is required to obtain, verify
and record information that identifies the Borrower, which information includes
the name and address of the Borrower and other information that will allow the
Bank to identify the Borrower in accordance with the Act.
10.13. WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE BANK IRREVOCABLY
WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN
ANY OF SUCH DOCUMENTS. THE BORROWER AND THE BANK ACKNOWLEDGE THAT THE FOREGOING
WAIVER IS KNOWING AND VOLUNTARY.
[Remainder of Page Intentionally Left Blank]

 

 

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The Borrower acknowledges that it has read and understood all the provisions of
this Agreement, including the waiver of jury trial, and has been advised by
counsel as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as of the date first
written above.

                              WITNESS / ATTEST:       PREFORMED LINE PRODUCTS
COMPANY    
 
                            By:   /s/ Caroline Vaccariello       By:   /s/ Eric
R. Graef                          
 
  Name:   Caroline Vaccariello           Name:   Eric R. Graef    
 
                  Title:   CFO — Vice President of Finance    
 
                                            PNC BANK, NATIONAL ASSOCIATION    
 
                                            By:   /s/ Christian S. Brown        
                     
 
                  Name:   Christian S. Brown    
 
                  Title:   Vice President    

Signature Page to Loan Agreement

 

 

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ADDENDUM to that certain Loan Agreement dated February 5, 2010 between PREFORMED
LINE PRODUCTS COMPANY as the Borrower and PNC Bank, National Association, as the
Bank. Capitalized terms used in this Addendum and not otherwise defined shall
have the meanings given them in the Agreement. Section numbers below refer to
the sections of the Agreement.
3.6 Title to Assets. Describe additional liens and encumbrances below with
respect to domestic Companies:
3.7 Litigation. Describe pending and threatened litigation, investigations,
proceedings, etc. below with respect to domestic Companies:
5.1 Indebtedness. Describe unsecured indebtedness existing on the date of the
Agreement below:
Signature Page to Loan Agreement

 

 

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CONTINUATION OF ADDENDUM
FINANCIAL COVENANTS
(1) The Borrower will maintain at all times a minimum Tangible Net Worth of
$145,000,000, to be increased on each December 31 commencing on December 31,
2010, by an amount equal to 50.0% of the Borrower’s net income after taxes (if a
positive number) for the fiscal year then ending.
(2) The Borrower will maintain at all times a ratio of Funded Debt to EBITDA on
a rolling four quarter basis of less than 2.50 to 1.0.
(3) The Borrower will maintain as of the end of each fiscal quarter, on a
rolling four quarters basis, an Interest Coverage Ratio of at least 3.50 to 1.0.
As used herein:
“EBIT” means net income plus interest expense plus federal, state and local
income tax expense.
“EBITDA” means net income plus interest expense plus federal, state and local
income tax expense plus depreciation plus amortization.
“Interest Coverage Ratio” means (i) EBIT, divided by (ii) the sum of interest
expense.
“Funded Debt” means all indebtedness for borrowed money having an original term
of more than one year, including but not limited to capitalized lease
obligations, reimbursement obligations in respect of letters of credit, and
guaranties of any such indebtedness.
“Tangible Net Worth” means stockholders’ equity in the Borrower less any
advances to affiliated parties less all items properly classified as
intangibles.
All of the above financial covenants shall be computed and determined in
accordance with GAAP applied on a consistent basis (subject to normal year-end
adjustments).