Unsecured Credit Note

Exhibit 10.3


DENISON HYDRAULICS, INC.


REVOLVING CREDIT LOAN AGREEMENT


May 18,1999


Table of Contents


Page


ARTICLE 1. REVOLVING CREDIT LOANS ....................................... 1
1.1 Revolving Credit Commitment ...................................... 1
1.2 Conversion Options ............................................... 2
1.3 Revolving Credit Note ............................................ 2
1.4 Use of Revolving Credit Loan Funds ............................... 4
1.5 Default Rate ..................................................... 4
1.6 Additional Provisions and Limitations Relating to LIBOR Rate Loans 5


ARTICLE 2. PAYMENTS, SETOFFS, SECURITY .................................. 7
2.1 Payments ......................................................... 7
2.2 Application of Payments .......................................... 7
2.3 Setoffs .......................................................... 7
2.4 Collateral ....................................................... 7
2.5 Late Fee ......................................................... 7
2.6 Availability Fee ................................................. 8


ARTICLE 3. EXECUTION AND CONDITIONS OF BORROWING ........................ 8
3.1 Opinion of Counsel ............................................... 8
3.2 Resolution Authorizing Execution of Loan Documents ............... 9
3.3 Compliance with this Agreement ................................... 9
3.4 Incumbency Certificate ........................................... 9
3.5 Execution and Delivery of the Promissory Notes ................... 9


ARTICLE 4. REPRESENTATIONS AND WARRANTIES ............................... 10
4.1 Organization and Authority to Execute Documents .................. 10
4.2 Financial Statements ............................................. 10
4.3 No Guaranties of Others' Obligations ............................. 10
4.4 Compliance with Occupational Safety & Health Act ................. 10
4.5 No Undisclosed Liabilities ....................................... 10
4.6 No Undisclosed Subsidiaries ...................................... 10
4.7 Good Title to Assets and No Undisclosed Liens .................... 11
4.8 Possess Necessary Patents, Trademarks, and Licenses .............. 11
4.9 No Undisclosed Interest in the Title to Assets ................... 11 4.10 No Undisclosed Financing Statements .............................. 11 4.11 No Lawsuits or Judgments ......................................... 11 4.12 Filing and Payment of Taxes ...................................... 11 4.13 No Default of this Agreement ..................................... 12 4.14 Insurance ........................................................ 12 4.15 No Untrue or Misleading Statements or Omissions .................. 12 4.16 Pollutants ....................................................... 12 4.17 No Margin Activity ............................................... 12


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4.18 ERISA .................................................... 13 4.19 Year 2000 ................................................ 13


ARTICLE 5. AFFIRMATIVE COVENANTS ......................... 14
5.1 Annual Financial Statements .............................. 14
5.2 Periodic Financial Statements ............................ 14
5.3 No Default Certificate ................................... 14
5.4 Insurance ................................................ 14
5.5 Bank One to be Primary Depository ........................ 15
5.6 Payment of Taxes ......................................... 15
5.7 Compliance with Laws ..................................... 15
5.8 Preserve and Maintain Corporate Rights ................... 15
5.9 Payment of Legal, Filing, and Closing Costs .............. 15
5.10 Maintain and Preserve Assets ............................. 15
5.11 ERISA .................................................... 16
5.12 Notification of Certain Adverse Events ................... 16
5.13 Notice of the Existence of Pollutants .................... 17
5.14 Inspection of Books and Records .......................... 17


ARTICLE 6. NEGATIVE COVENANTS ..................................... 18
6.1 Encumbering Assets ....................................... 18
6.2 Incurring Other Debt ..................................... 18
6.3 Guaranty of Others' Debts ................................ 18
6.4 Merger or Consolidation .................................. 18
6.5 Transfer of Substantial Portion of Assets ................ 18
6.6 Disposing of Notes/Accounts Receivable ................... 18
6.7 Amount of Tangible Net Worth ............................. 19
6.8 Funded Debt to EBITDA .................................... 19
6.9 Interest Coverage Ratio .................................. 19
6.10 Year 2000 Covenants ...................................... 19
6.11 Transactions with Affiliated Persons ..................... 20


ARTICLE 7. EVENTS OF DEFAULT AND REMEDIES ......................... 20
7.1 Events of Default ........................................ 20


ARTICLE 8. DEFINITIONS ............................................ 22
8.1 Definitions .............................................. 22
8.2 Generally Accepted Accounting Principles ................. 27


ARTICLE 9. MISCELLANEOUS .......................................... 28
9.1 Successors and Assigns ................................... 28
9.2 Notices .................................................. 28
9.3 Waiver ................................................... 28
9.4 Duration ................................................. 28
9.5 Governing Law and Jurisdiction ........................... 29


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9.6 Amendments ..................................... 29
9.7 Severability ................................... 29
9.8 Captions ....................................... 29
9.9 Arbitration .................................... 29
9.10 Entire Agreement ............................... 30
9.11 Waiver Of Jury Trial ........................... 30


EXHIBIT "A" - REVOLVING CREDIT NOTE


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REVOLVING CREDIT LOAN AGREEMENT


THIS REVOLVING CREDIT LOAN AGREEMENT ("Agreement") dated as of May 18, 1999, is entered into by and between DENISON HYDRAULICS, INC., a New York corporation (hereinafter called "Borrower"), and BANK ONE, N.A., a national banking association (hereinafter called "Bank One").


WHEREAS, Borrower and Bank One are entering into this Agreement to set forth the terms and conditions pursuant to which Bank One will provide a revolving line of credit of $15,000,000 to Borrower; and


WHEREAS, Borrower and Bank One desire to establish the conditions under which the loan contemplated above will be established;


NOW THEREFORE, Borrower and Bank One hereby agree as hereinafter set forth.


ARTICLE 1. REVOLVING CREDIT LOANS


1.1 Revolving Credit Commitment. Bank One hereby agrees on the terms and conditions of this Agreement to lend to Borrower the maximum sum of Fifteen Million Dollars ($15,000,000) (the "Revolving Credit Commitment"). The Revolving Credit Commitment shall be available to Borrower, subject to the limitations herein, in whole or part and from time to time until April 30, 2002 (the "Termination Date"), and any amounts borrowed may be repaid in whole or in part and reborrowed until such date. Annually, Bank One shall consider extending the Termination Date for additional periods of one year in duration with such decision regarding extending the Termination Date to be in Bank One's sole discretion. Each borrowing under the Revolving Credit Commitment shall be made in accordance with the provisions of this Section 1.1 and shall be subject to the conditions of Article 4 (a "Revolving Credit Loan").


Each Revolving Credit Loan shall, at the election of Borrower, be made either in the form of (i) a Variable Rate Loan (individually a "Variable Rate Loan" and collectively the "Variable Rate Loans") or (ii) a LIBOR Rate Loan (individually a "LIBOR Rate Loan" and collectively the "LIBOR Rate Loans"). The aggregate unpaid principal amount of the Variable Rate Loans and the LIBOR Rate Loans at any one time outstanding shall not exceed the Revolving Credit Commitment.


Each Revolving Credit Loan shall be made pursuant to the request of Borrower to Bank One which request for a Revolving Credit Loan shall specify (i) the total amount of the Revolving Credit Loan (which for the initial borrowing under a LIBOR


Rate Loan shall be in an amount of not less than Five Hundred Thousand Dollars ($500,000) and each borrowing as a LIBOR Rate Loan thereafter shall be in an amount of not less than Two Hundred Fifty Thousand Dollars ($250,000)); (ii) the borrowing date (the "Borrowing Date"), which shall be a Business Day in the case of a Variable Rate Loan and a London Banking Day in the case of a LIBOR Rate Loan; and (iii) whether the Revolving Credit Loan is to be a Variable Rate Loan or a LIBOR Rate Loan (and in the case of a LIBOR Rate Loan, the length of the Interest Period). Requests for Variable Rate Loans may be made on the applicable Borrowing Date. Requests for LIBOR Rate Loans shall be made at least three LIBOR Banking Days prior to the applicable Borrowing Date.


In the case of a request for a LIBOR Rate Loan, Bank One shall not later than 11:00 a.m., Columbus, Ohio time two London Banking Days prior to the Borrowing Date, give notice to Borrower, of the LIBOR Rate applicable for the Interest Period requested by Borrower. Borrower shall, not later than 11:30 a.m., Columbus, Ohio time two LIBOR Banking Days prior to the Borrowing Date, give notice by telephone confirmed in writing to Bank One whether it wishes (i) to complete such borrowing in the form of a LIBOR Rate Loan; (ii) to complete such borrowing as a Variable Rate Loan; or (iii) to cancel its request for a Revolving Credit Loan. Failure by Borrower to timely deliver such notice shall constitute cancellation of such request.


1.2 Conversion Options. Borrower may elect from time to time to convert not less than Two Hundred Fifty Thousand Dollars ($250,000) of the Variable Rate Loans then outstanding to LIBOR Rate Loans by giving Bank One irrevocable telephone notice of such election as provided in this Section 1.2. Each LIBOR Rate Loan shall automatically convert to a Variable Rate Loan upon its maturity unless Borrower elects to continue such LIBOR Rate Loan as a LIBOR Rate Loan by giving Bank One irrevocable telephone notice of such election as provided in this Section 1.2. Any such notice pursuant to this Section 1.2 shall be received by Bank One at least two LIBOR Banking Days prior to the proposed conversion date, which shall be a LIBOR Banking Day, and shall specify (i) the conversion date and (ii) the length of the new Interest Period. If no Event of Default then exists, such conversion shall be made on the requested conversion date.


1.3 Revolving Credit Note. The Revolving Credit Commitment shall be evidenced by a master promissory note (the "Revolving Credit Note") of Borrower executed by a duly authorized officer of Borrower, which shall be in the form of Exhibit "A" attached hereto. Each Revolving Credit Loan made by Bank One and each payment made on account of principal on the Revolving Credit Note shall be recorded by Bank One; provided, however, that the failure of Bank One to make such notation shall not limit or otherwise affect the obligations of Borrower under the Revolving Credit Note or this Agreement. The Revolving Credit Note shall include the following terms:


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(a) Term. The Revolving Credit Note shall be dated as of the date
of this Agreement and shall be due and payable in full on or before the
Termination Date.


(b) Interest Rate on Variable Rate Loans. From its date, each
Variable Rate Loan shall bear interest (computed on the basis of the
actual number of days elapsed over a Business Year) on the unpaid
principal balance at a fluctuating rate per annum equal to the Prime
Rate. Any change in the interest rate due to a change in the Prime Rate
shall be effective immediately upon and after the date of each such
change in the Prime Rate.


Interest on the Variable Rate Loans shall be payable monthly on the
first day of each calendar month (the "Interest Payment Date"),
commencing on the first day of the month following the initial
disbursement of the initial Revolving Credit Loan.


(c) Interest Rate on LIBOR Rate Loans. From its date, each LIBOR
Rate Loan shall bear interest during the period from the date thereof
until and including the maturity date thereof at a rate per annum
equal to the LIBOR Rate plus the Margin shown below applicable to
LIBOR Rate Loans. The initial Margin for a LIBOR Rate Loan shall be
87.5 basis points. Borrower shall be obligated to pay with respect to
each LIBOR Rate Loan such additional amounts as shall be determined
pursuant to Section 1.6. Any change in the interest rate due to a
change in the Margin, as described below, shall be effective
immediately upon and after the date of each such change in the Margin.


Interest on LIBOR Rate Loans shall be payable on each Interest
Payment Date and at the end of the Interest Period selected by Borrower
for each such LIBOR Rate Loan. Interest on all LIBOR Rate Loans shall be
calculated on the basis of the actual number of days elapsed over a
Business Year.


For purposes of Section 1.3(c), the Margin applicable to the LIBOR
Rate Loans shall be determined as provided in the following table:


If Borrower's Funded LIBOR
Debt to EBITDA Ratio is: Rate Margin
------------------------ -----------


Equal to or greater than 3:25 to 1:00 1.25%


Less than 3:25 to 1:00 and 1.00%
Equal to or greater than 2:50 to 1:00


Less than 2:50 to 1:00 .875%


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Bank One shall calculate Borrower's Funded Debt to EBITA (as defined in
Section 6.8 hereof) on a rolling four quarter basis and adjusted at each
fiscal quarter and promptly upon receipt of Borrower's quarterly ending
Financial Statement beginning as of the quarter ending March 31, 1999,
and on each quarter ending thereafter. The Margin shall be adjusted
appropriately effective as of the date of Bank One's calculation of the
Funded Debt to EBITDA.


(d) Optional Repayments. Outstanding Variable Rate Loans may be
repaid in whole or in part at any time, without premium or penalty, in
principal amounts not less than the minimum Revolving Credit Loan for any
borrowing (after the initial borrowing) under Section 1.1 by tender of
payment and delivery of written, facsimile or oral notice of payment to
Bank One not later than 1:30 p.m., Columbus, Ohio time, on the Business
Day on which such repayment is to be made. Payments received after 1:30
p.m. shall be deemed tendered on the following Business Day. Outstanding
LIBOR Rate Loans may be prepaid in whole or in part at any time, so long
as such prepayment is accompanied by a prepayment premium contemplated
below, with such prepayments in principal amounts not less than the
minimum Revolving Credit Loan for any borrowing (after the initial
borrowing) under Section 1.1 by tender of payment after delivery of
written, facsimile or oral notice of payment to Bank One not later than
1:30 p.m., Columbus, Ohio time, five Business Days before the date such
repayment is to be made. Interest accrued to the date of payment shall be
due and payable on the next following Interest Payment Date unless the
Revolving Credit Note is paid in full, in which event, accrued interest
shall become due and payable on the payment date. The prepayment premium
for a prepayment of a LIBOR Rate Loan shall be an amount or amounts as in
the reasonable judgment of Bank One will compensate Bank One for any
loss, premium or penalty incurred by it because of such prepayment of a
LIBOR Rate Loan.


1.4 Use of Revolving Credit Loan Funds. The funds from the Revolving Credit Commitment shall be used by Borrower for working capital and acquisition activities.


1.5 Default Rate. Upon any of the Events of Default, including failure to pay the Revolving Credit Note upon final maturity, Bank One, at its option, may, in addition to any other remedies available to Bank One as contemplated in this Agreement, if permitted under applicable law, do one or both of the following: (a) increase the applicable interest rate on the outstanding principal sum under the Revolving Credit Commitment and accrued interest to 2.00 percentage points in excess of the Prime Rate, and (b) add any unpaid accrued interest to principal and such sum will bear interest therefrom until paid at the rate provided in subsection (a).


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1.6 Additional Provisions and Limitations Relating to LIBOR Rate Loans. The additional provisions and limitations set forth below shall apply with respect to LIBOR Rate Loans:


(a) If Bank One shall, in good faith, determine that it is unable
to reasonably ascertain the LIBOR Rate or to acquire London Interbank
Market deposits on reasonable terms in an amount sufficient to meet a
request for a LIBOR Rate Loan, Bank One shall promptly notify Borrower.
In such event, Borrower may request a Variable Rate Loan of like amount
without regard to the notice requirement of Section 1.1 or may cancel
such request.


(b) The obligation of Bank One to make LIBOR Rate Loans hereunder
shall be suspended in the event that any change in any law or regulation
or in any interpretation thereof by any governmental authority charged
with its administration shall, in the sole opinion of Bank One, make it
unlawful for Bank One to comply with its obligation to make or maintain
any LIBOR Rate Loan hereunder for the duration of such illegality. Bank
One shall promptly notify Borrower of such suspension, and, if and when,
in the sole opinion of Bank One, such illegality ceases to exist, such
suspension shall cease and Bank One shall promptly notify Borrower of the
termination of such suspension.


(c) If Bank One has LIBOR Rate Loans outstanding and there shall
occur any change in applicable law, regulation or interpretation
(including any request, guideline or policy not having the force of law by
any authority charged with the administration or interpretation thereof)
(i) which change directly affects transactions in the London Interbank
Market, (ii) which involves new or additional taxes, reserves or deposit
requirements in regard to the LIBOR Rate Loans or changes in the basis of
taxation of payments on LIBOR Rate Loans, or (iii) which, if the LIBOR
Rate Loans made hereunder by Bank One were to have been matched with
London Interbank Market deposits corresponding in amounts to such LIBOR
Rate Loans and having maturity dates which are the same as such LIBOR Rate
Loans regardless of whether or not such LIBOR Rate Loans are in fact so
matched, increases the cost to Bank One of making or maintaining the LIBOR
Rate Loans hereunder or reduces the amount of any payments (whether of
principal, interest or otherwise) receivable by Bank One as to any LIBOR
Rate Loans or requires Bank One to make any payment on or calculated by
reference to the gross amount of any sum received by it as to such LIBOR
Rate Loans, then where the amount of any such additional cost, reduction
or payment is deemed material by Bank One:


(i) Bank One shall promptly notify Borrower of the
occurrence of such event;


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(ii) Bank One shall promptly deliver to Borrower a
certificate stating the change which has occurred, together with the
date thereof and the amount of and the manner of calculating the
increased cost on any outstanding LIBOR Rate Loan; and


(iii) upon receipt of such certificate from Bank One,
Borrower shall pay to Bank One on demand the amount or amounts of such
additional cost with respect to such outstanding LIBOR Rate Loan as
additional compensation hereunder.


(d) The certificate of Bank One delivered to Borrower as to the additional amount payable pursuant to Section 1.6(c) shall (in the absence of manifest error in the transmission or calculation) be conclusive evidence of the amount thereof. The protection of this Section 1.6(d) shall be available to Bank One regardless of any possible contention of invalidity or inapplicability of the law, regulation or condition which has been imposed. However, if Borrower has made a payment of any additional amounts pursuant to Section 1.6(c) and any subsequent event occurs which reduces the amount of the increased cost incurred by Bank One, then Bank One shall promptly refund to Borrower an amount equal to such reduction in the amount of increased cost.


(e) If Borrower is required to pay to Bank One any additional amount pursuant to Sections 1.6(c) or (f), Borrower shall be entitled upon giving Bank One not less than five days' written notice, in addition to its other rights, to prepay any outstanding LIBOR Rate Loan with respect to which such additional amounts of payment are required (all such prepayments shall be in full and not in part with interest accrued to the date of such prepayments) by substituting a Variable Rate Loan of equal principal amount therefor. As a condition of such prepayments, Borrower shall promptly pay to Bank One, for the account of Bank One, upon Bank One's written request such amount or amounts as in the reasonable judgment of Bank One will compensate Bank One for any loss, premium or penalty incurred by it because of such prepayment.


(f) In addition to the other amounts payable hereunder, Borrower shall pay to Bank One such additional amounts as shall compensate Bank One for increased costs which Bank One, in its sole discretion, reasonably determines in good faith to be allocable to LIBOR Rate Loans. Additional amounts payable under this Section 1.6(f) shall be paid by Borrower to Bank One on the maturity of the respective LIBOR Rate Loans, subject to receipt by Borrower from Bank One of a certificate showing the amount and certifying as to the correctness thereof.


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ARTICLE 2. PAYMENTS, SETOFFS, SECURITY


2.1 Payments. All payments and prepayments by Borrower to be made in respect of principal or interest on the Revolving Credit Note shall become due at 3:00 p.m., Columbus, Ohio time on the day when due, and shall be made to Bank One in federal funds or other immediately available lawful money of the United States of America. Borrower acknowledges that all payments due hereunder, except for any balloon payments, shall electronically be debited by Bank One from Borrower's designated account when such payments are due. Whenever any payment to be made hereunder shall be due other than on a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in such case be included in the computation of interest or fees hereunder.


2.2 Application of Payments. Unless otherwise agreed to, in writing, or otherwise required by applicable law, payments will be applied first to accrued, unpaid interest, then to principal, and any remaining amount to any unpaid collection costs, late charges and other charges, provided, however, upon any of the Events of Default, Bank One reserves the right to apply payments among principal, interest, late charges, collection costs and other charges at its discretion. All prepayments shall be applied to the indebtedness owing hereunder in such order and manner as Bank One may from time to time determine in its sole discretion.


2.3 Setoffs. Upon the occurrence of any Event of Default, Bank One shall have the right to set off against all obligations of Borrower to Bank One under this Agreement and the Revolving Credit Note, whether matured or unmatured, all amounts owing to Borrower by Bank One, whether or not then due and payable, and all funds or property of Borrower on deposit in operating accounts of Borrower with or otherwise held or in the custody of Bank One.


2.4 Collateral. Borrower shall not be required to provide any collateral as security for its obligations hereunder. However, on or before the date of borrowing, Guarantor shall execute and deliver to Bank One in a form satisfactory to Bank One, the Guaranty, whereby Guarantor shall agree to guaranty the performance of all of Borrower's obligations hereunder.


2.5 Late Fee. Bank One shall have the right to assess to Borrower a late payment fee in the amount of the greater of $25.00 or 5% of the late payment of the Revolving Credit Loan, up to the maximum amount of $1,500.00 per late charge in the event of a default in payment that remains uncured for a period of 10 days or more. Notwithstanding the foregoing, no late payment fee shall be assessed in the event that the late payment results from Bank One's failure to timely withdraw funds from Borrower's account to make such payment in accordance with the agreement between Bank One and Borrower.


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2.6 Availability Fee. Borrower shall pay to Bank One an availability fee equal in amount to .10% of the average daily unused portion of the Revolving Credit Commitment payable by Borrower to Bank One quarterly in arrears on the last day of each March, June, September and December of each year, commencing June 30, 1999, through the Termination Date.


ARTICLE 3. EXECUTION AND CONDITIONS OF BORROWING


The obligation of Bank One to make disbursements under the Revolving Credit Note to Borrower provided for hereunder shall be subject to the following conditions:


3.1 Opinion of Counsel. Borrower's counsel in Ohio shall supply to Bank One on or prior to the date of initial borrowing, an opinion satisfactory to Bank One, which shall include. but not be limited to, opinion to the effect that Borrower is a duly organized and existing corporation under the laws of the State of New York; that Borrower is qualified to do business in Ohio and all other states as shall be designated in the opinion lett ...