LOAN AGREEMENT
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THIS LOAN AGREEMENT is made and entered into as of the 22nd day of
April, 1999, by and between PALLET MANAGEMENT SYSTEMS, INC., a Florida
corporation, PALLET RECYCLING TECHNOLOGIES, INC., a Delaware corporation, ▇▇▇▇▇
LUMBER CORPORATION, a Virginia corporation d/b/a PALLET MANAGEMENT SYSTEMS,
PALLET MANAGEMENT SYSTEMS OF ALABAMA, INC., an Alabama corporation, and PALLET
MANAGEMENT SYSTEMS OF ILLINOIS, INC., an Illinois corporation (all of the above
set forth entities hereinafter individually and collectively referred to as
"Borrower" or "Borrowers"), and NATIONAL BANK OF CANADA, a Canadian Chartered
Bank (hereinafter referred to as "Lender").
W I T N E S S E T H:
WHEREAS, Borrowers desire to obtain extensions of credit of up to Ten
Million and 00/100 Dollars ($10,000,000.00) from the Lender, consisting of a
revolving line of credit in the principal amount of Five Million and 00/100
Dollars ($5,000,000.00) (the "Loan"), the proceeds of which shall be used to
refinance existing indebtedness and to provide working capital for the support
of accounts receivables and inventory of Borrowers; a term loan in the principal
amount of One Million and 00/100 Dollars ($1,000,000.00) (the "Term Loan"), the
proceeds of which shall be used to finance existing machinery and equipment of
Borrowers; and, a CAPEX line/term loan in the maximum principal amount of Four
Million and 00/100 Dollars ($4,000,000.00) (the "CAPEX Line/Term Loan"), the
proceeds of which shall be used to partially finance future machinery and
equipment expenditures of Borrowers, and Lender is agreeable to effectuating the
Loans (as defined herein) up to such amounts, subject to the terms and
provisions set forth herein.
NOW, THEREFORE, for and in consideration of the sum of Ten and 00/100
($10.00) Dollars and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the loans
or extensions of credit heretofore, now or hereafter made or to be made to or
for the benefit of the Borrower by the Lender, the parties do hereby agree as
follows:
Article 1
RECITALS AND DEFINITIONS
1.1 Recitals. The foregoing recitals are acknowledged by the parties to
be true and correct, and are incorporated herein by reference.
1.2 Definitions. As used in this Agreement, the terms listed below
shall have the following meanings:
(a) "Advance": A disbursement by the Lender of a portion of the Loan
proceeds to refinance existing indebtedness and to provide working capital for
the support of accounts receivables and inventory of the Borrower.
(b) "Agreement" or "Loan Agreement": This Loan Agreement.
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(c) "Borrowers": PALLET MANAGEMENT SYSTEMS, INC., a Florida
corporation, PALLET RECYCLING TECHNOLOGIES, INC., a Delaware corporation, ▇▇▇▇▇
LUMBER CORPORATION, a Virginia corporation d/b/a PALLET MANAGEMENT SYSTEMS,
PALLET MANAGEMENT SYSTEMS OF ALABAMA, INC., an Alabama corporation, and PALLET
MANAGEMENT SYSTEMS OF ILLINOIS, INC., an Illinois corporation.
(d) "Borrower Security Agreement": A Security Agreement from Borrower
to Lender securing the Notes and all other obligations and indebtedness of
Borrower to Lender, which is a valid first lien on all of each Borrower's
accounts, accounts receivable, inventory, chattel paper, general intangibles,
fixtures, furniture, instruments, equipment and personal property now owned or
hereafter acquired by Borrower and all proceeds of the foregoing.
(e) "Borrowers' Counsel Opinion Letter": A letter from Borrowers'
Florida Counsel, a letter from Borrowers' Delaware Counsel, a letter from
Borrowers' Virginia Counsel, a letter from Borrowers' Alabama Counsel and a
letter from Borrowers' Illinois Counsel in form and substance satisfactory to
Lender and Lender's Counsel, opining as to certain matters concerning the Loans.
(f) "Business Days": Days upon which the Lender is open for normal
business.
(g) "CAPEX Line/Term Loan": A CAPEX Line/Term Loan in the principal
amount of up to Four Million and 00/100 Dollars ($4,000,000.00) from Lender to
Borrowers.
(h) "CAPEX Line/Term Note": A CAPEX Line/Term Loan Promissory Note in
the principal amount of Four Million and 00/100 Dollars ($4,000,000.00) from
Borrowers to Lender of even date herewith and any modifications, amendments or
renewals thereof, evidencing the CAPEX Line/Term Loan.
(i) "Cash Collateral Account". A cash collateral account pledged by
Borrower in favor of Lender, into which all collections shall be remitted from a
lockbox account into which Borrowers' account debtors remit all payments, which
collections shall be applied against the Loan, the Term Loan and the CAPEX
Line/Term Loan facility balances in accordance with the terms and provisions of
the Security Cash Collateral Account and Lockbox Agreement. The Borrowers shall
not have access to the Lockbox(s) or the Cash Collateral Account.
(j) "Closing": The time of the execution and delivery of this Agreement
by Borrower and Lender.
(k) "Code": The Internal Revenue Code of 1986, as amended from time to
time, and applicable Department of Treasury regulations thereunder.
(l) "Conversion Date": The 22nd day of April, 2000.
(m) "Credit Facility Letter": That certain credit facility letter dated
April 1, 1999 executed by Lender and Borrowers.
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(n) "Dollars" or "$": United States Dollars.
(o) "Due Diligence": A due diligence review and investigation of the
Borrowers by the Lender, including without limitation, a field examination of
each Borrower's books and records, as well as its business plans and products,
and, financial projections of Borrower for the term of the Loans, together with
any other matters which Lender wishes to investigate and review, which must
result in findings satisfactory to Lender, in Lender's sole and absolute
discretion.
(p) "Eligible Inventory": All inventory of raw materials and finished
goods then owned by the Borrower and held for sale in the ordinary course of
business as then conducted. However, Eligible Inventory shall not include any
item of inventory that: (i) is not in good condition or of merchantable quality;
(ii) is defective or does not meet the established specifications of the
Borrower for its type; (iii) is obsolete or infrequently sold (unless the
subject of a current purchase order); (iv) together with other items of its type
exceed reasonably expected sales over the next 12 months by more than 50%; (v)
is held by any person other than a Borrower or a party to a bailment agreement
with the Lender (in such form and substance as may be acceptable to the Lender);
(vi) is located at any location other than each Borrower's principal place of
business; (vii) is located on any leased premises where the landlord is not a
party to a waiver and access agreement with the Lender (in such form as may be
acceptable to the Lender); (viii) is located at any location outside the United
States of America; (ix) is subject to any prior lien, encumbrance or claim so
that the Lender does not hold a perfected first priority security interest in
the inventory; (x) is the subject of any financing statement, lien or other
encumbrance other than in favor of the Lender; or (xi) is the subject of any
other person's claim of ownership, whether legal, beneficial or otherwise.
Eligible Inventory shall exclude any inventory on which the Lender, for any
reason, does not hold a perfected security interest subject to no prior liens or
claims. In addition, Lender has the right to deem any inventory as ineligible
for lending purposes if it is not in the Lender's judgment adequately documented
by the Borrower's books and records or if the Lender otherwise deems such
inventory as ineligible for any reason, as determined by Lender in its sole and
absolute discretion.
(q) "Eligible Receivables": Accounts receivable of Borrower which are
accounts receivable arising out of sales of tangible personal property made by
Borrower in the ordinary course of its business, which are no more than sixty
(60) days old from its original due date and no more than ninety (90) days old
from its original invoice date, according to the original terms of sale, and,
the payment of which is not in dispute and in which the Lender has a first
priority security interest; provided however, that if fifty percent (50%) or
more of the Receivables from any account debtor are more than sixty (60) days
old from the original due date and more than ninety (90) days old from the
original invoice date, all of said account debtor's Receivables shall be deemed
ineligible. Notwithstanding the last sentence as to Eligible Receivables, the
Eligible Receivables from Chep only, shall be defined as accounts receivable of
Borrower which are accounts receivable arising out of sales of tangible personal
property made by Borrower in the ordinary course of its business, which are not
more than thirty (30) days old from its original due date and no more than sixty
(60) days old from its original invoice date, according to the original terms of
sale, and, the payment of which is not in dispute and in which the Lender has a
first priority security interest ("Chep Eligible Receivables"); provided
however, that if fifty percent (50%) or more of the Receivables from Chep
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are more than thirty (30) days old from the original due date and more than
sixty (60) days old from the original invoice date, all of Chep's Receivables
shall be deemed ineligible. The Lender may treat any Receivable as ineligible
(i) if any warranty contained in this or any related agreement is breached with
respect thereto; (ii) if the customer or account debtor has disputed liability
or made any claim with respect to the Receivable or the merchandise covered
thereby or with respect to any other Receivable due from said customer to the
Borrower; (iii) if the customer or account debtor has filed a petition for
bankruptcy or any other application for relief under the Bankruptcy Act,
assigned for the benefit of creditors, or if any petition or any other
application for relief under the Bankruptcy Act has been filed against the said
customer or account debtor, or if the customer or account debtor has failed,
suspended business, become insolvent, or had or suffered a receiver or trustee
to be appointed for any of its assets or affairs; (iv) if the customer or
account debtor is located outside the United States or Canada; (v) if the
Receivable is a government receivable in which the Lender will not be able to
perfect its lien under the Federal Assignment of Claims Act for any reason
whatsoever; (vi) if the Receivable is offset, in whole or in part, by a credit
due and owing from the Borrower to that account debtor; (vii) if the Receivable
is due and owing from an account debtor who is also a creditor of Borrower;
(viii) if any portion of the Receivable represents finance and service charges
due and owing to Borrower from said account debtor; (ix) if any portion of the
Receivable represents a deposit already collected by the Borrower, the amount of
the Receivable which is eligible for financing hereunder shall be reduced by an
amount equal to the amount of the deposit which has been collected by the
Borrower from the account debtor; (x) if the Receivable represents sums due and
owing for work and/or service currently being rendered by Borrower but not yet
completed by Borrower; (xi) if the Receivable is due and owing from an affiliate
corporation or related entity of any Borrower; (xii) if the Receivable
represents a consignment sale or warranty work; (xiii) if the Receivable
represents a C.O.D. sale; (xiv) if the Receivable represents sums due and owing
from an employee of any Borrower; (xv) if the Receivable represents retainage
due and owing to Borrower; (xvi) if the Receivable represents a ▇▇▇▇ and Hold
Invoice for items which have been billed and are not yet due and payable; (xvii)
if the account debtor is located in the State of Minnesota or State of New
Jersey and the Borrower, as the owner of such receivable, has neither qualified
as a foreign corporation to do business in such state nor filed a Notice of
Business Activities report with the appropriate officials in such state for the
then current year; or (xviii) if the Lender believes, in its credit judgement in
Lender's sole discretion, that collection of such Receivable is insecure or that
it may not be paid by reason of financial inability to pay or otherwise or that
such Receivable is not suitable for use as collateral hereunder.
(r) "Equipment Appraisal": An MAI Machinery and Equipment appraisal
prepared by ▇▇▇▇▇-▇▇▇▇▇▇, which appraisal must result in findings satisfactory
to Lender, in Lender's sole and absolute discretion, which appraisal shall be
performed at Borrowers' sole cost and expense. The Equipment Appraisal shall be
in the nature of an "auction sale value" appraisal.
(s) "ERISA": The Employee Retirement Income Security Act of 1974, as
amended from time to time.
(t) "Event of Default": The occurrence of any one or more of the Events
of Default described in Article 9 hereof.
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(u) "Financing Statements": Financing Statements from Borrower to
Lender to perfect Lender's security interest in the property described in the
Security Agreements.
(v) "Generally Accepted Accounting Principles" or "GAAP": Those
principles of accounting set forth in opinions of the Financial Accounting
Standards Board of the American Institute of Public Accountants or which have
other substantial authoritative support and are applicable in the circumstances
as of the date of any report required herein or as of the date of an application
of such principles as required herein.
(w) "Governmental Authority": Any federal, state, provincial, county,
municipal or other governmental department, commission, board, bureau, court,
agency, or any instrumentality of any other governmental entity.
(x) "Governmental Requirements": Any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, writ, injunction, franchise, permit,
certificate, license, authorization, or other direction or requirement of any
Governmental Authority now existing or hereafter enacted, adopted, promulgated,
entered or issued applicable to the Loans or to the Borrower.
(y) "Indebtedness": Collectively, all of the Borrowers' presently
existing or hereafter created or assumed obligations to the Lender, including,
without limitation, obligations for borrowed money, notes payable and drafts
accepted representing extensions of credit (whether or not representing
obligations for borrowed money), obligations representing the Loans and any
modifications or renewals thereof, obligations representing indebtedness to the
Lender whether or not assumed, secured or unsecured, however and wherever
incurred, acquired or evidenced, whether primary or secondary, direct or
indirect, absolute or contingent, joint or several or due or to become due,
including without limitation, all such obligations, liabilities and all
indebtedness and obligations now or hereafter owed by Borrower to Lender, its
affiliates, successors and/or assigns.
(z) "Initial Advance": The first Advance of the Loan proceeds.
(aa) "Leases": Leases for all locations where each Borrower leases
property in connection with its business operations.
(bb) "Loan": A revolving line of credit in the maximum principal amount
of Five Million and 00/100 Dollars ($5,000,000.00) from Lender to Borrowers.
(cc) "Loan Account": Borrowers' account on the books of the Lender in
which Advances will be recorded, as well as payments made on the Loans and other
appropriate debits and credits as provided in this Agreement.
(dd) "Loan Documents": This Agreement, the Notes, the Security
Agreements, and all other associated loan documents executed in connection with
the making of the Loans (and any modification, renewal or extension thereof).
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(ee) "Loans": The Loan, the Term Loan and the CAPEX Line/Term Loan.
(ff) "Machinery and Equipment". All machinery, equipment, furniture,
fixtures, computer hardware and software, hand and power tools, trucks,
trailers, forklifts, automobiles, heavy equipment, and other motor vehicles,
trucks, trailers, machinery and equipment of all classes, together with all
parts thereof and all accessions thereto, wherever located, now owned or
hereafter acquired by the Borrower.
(gg) "Maturity Date": As to the Loan, April 22, 2002; as to the CAPEX
Line/Term Loan, April 22, 2002; and as to the Term Loan, April 22, 2002, upon
which date the entire principal balance and accrued interest and all other
applicable charges under the respective Loans shall become due and payable in
full.
(hh) "Note": A Master Revolving Promissory Note in the principal amount
of Five Million and 00/100 Dollars ($5,000,000.00) from Borrower to Lender of
even date herewith, and any modifications, amendments or renewals thereof,
evidencing the Loan.
(ii) "Notes": The CAPEX Line/Term Note, the Note and the Term Note,
together with all amendments, extensions and renewals thereof. The Notes shall
be and are cross-collateralized and cross-defaulted such that a default under
any of the Note shall be and constitute a default under all of the Notes.
(jj) "Person": As the case may be, any corporation, natural person,
firm, joint venture, partnership, trust, unincorporated organization and
government, or any department or agency of any government.
(kk) "Plan": Any pension plan which is governed by the terms and
provisions of Title IV of ERISA and in respect of which the Borrower or a
commonly controlled entity of the Borrower is an "Employer" (as defined in
Section 407(d)(7) of ERISA).
(ll) "Prime Rate". The interest rate announced from time to time
charged by National Bank of Canada as its United States Prime Lending Rate,
which rate is purely discretionary and is not necessarily the best or lowest
rate charged borrowing customers of the Lender.
(mm) "Receivables". All accounts, accounts receivable, general
intangibles, contract rights and other obligations of any kind, whether now
owned or hereafter acquired by each Borrower and all proceeds of the foregoing
and all rights now or hereafter existing in and to all security agreements,
leases and other contracts security or otherwise relating to any such accounts,
contract rights, chattel paper instruments, general intangibles and obligations
and all proceeds, profits, deposits, products and accessions of and to all of
the foregoing.
(nn) "Reportable Event": Any of the events set forth in Section 4043(b)
of ERISA or the regulations thereunder.
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(oo) "Security Agreements": Collectively, the Borrower's Security
Agreement and the Security Cash Collateral Account and Lockbox Agreement, which
provide a valid first lien on the property identified in the Security
Agreements.
(pp) "Security Cash Collateral Account and Lockbox Agreement". A
Security Cash Collateral Account and Lockbox Agreement whereby and whereunder
payment of all of Borrowers' Receivables shall be directed to a lockbox
maintained with NationsBank, N.A. (the "Lockbox") to flow through the Cash
Collateral Account, and, be applied against the Loan facility, the CAPEX
Line/Term Loan facility and the Term Loan facility in accordance with the terms
and provisions of said Agreement.
(qq) "Solvent": That, at the time of determination, (i) the fair market
value of each Borrower's assets (both at fair valuation and at present fair
saleable value on an orderly basis) is in excess of the total amount of its
liabilities, including contingent obligations; (ii) it is then able and expects
to be able to pay its debts as they mature; and (iii) it has capital sufficient
to carry on its business as conducted and as proposed to be conducted.
(rr) "Term Loan": A term loan in the principal amount of One Million
and 00/100 Dollars ($1,000,000.00) from Lender to Borrowers.
(ss) "Term Note": A Promissory Note in the principal amount of One
Million and 00/100 Dollars ($1,000,000.00) from Borrowers to Lender of even date
herewith, and any modifications, amendments or renewals thereof, evidencing the
Term Loan.
1.3 Other Definitional Provisions. (a) The terms "material" and
"materially" shall have the meanings ascribed to such terms under Generally
Accepted Accounting Principles as such would be applied to the business of the
Borrower, except as the context shall clearly otherwise set forth; (b) all of
the terms defined in this Agreement shall have such defined meanings when used
in other documents issued under, or delivered pursuant to, this Agreement,
unless the context shall otherwise require; (c) all terms defined in this
Agreement in the singular shall have comparable meanings when used in the
plural, and vice versa; (d) accounting terms to the extent not otherwise defined
shall have the respective meanings given them under, and shall be construed in
accordance with Generally Accepted Accounting Principles; (e) the words
"hereby", "hereto", "hereof", "herein", "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; (f) the masculine and neuter genders
are used herein and whenever used shall include the masculine, feminine and
neuter as well; and (g) whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include their heirs, personal
representatives, successors and assigns of such parties unless the context shall
expressly provide otherwise.
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Article 2
THE LOANS
2.1 Loan. Provided there does not exist an Event of Default, and no
event with which notice or lapse of time or both would become such an Event of
Default, and subject to the terms and provisions of this Agreement, Lender will,
under the Note, lend or advance for the account of Borrowers from time to time,
and, Borrowers may borrow, repay and re-borrow (provided that unless Borrower
intends to pay and satisfy the Loan in full, Borrower shall not reduce the
outstanding principal balance under the Loan to a sum of less than One Thousand
Dollars ($1,000.00)) such amounts as may be required to refinance existing
indebtedness and to provide working capital for the support of accounts
receivable and inventory of the Borrowers, not exceeding in the aggregate an
amount equal to (i) eighty-five percent (85%) of Eligible Receivables, including
the Chep Eligible Receivables, provided that a Receivable may be devalued in
such amount as shall be determined by Lender in its sole discretion due to
"Dilution" which is defined as and is the result of non-cash credits posted
against the Receivable which results in payment or other satisfaction of all or
any portion of the Receivable for reasons other than full payment of the
Receivable in cash, together with an amount equal to (ii) fifty-five percent
(55%) of the Borrowers' Eligible Inventory, the Eligible Inventory Loan Advances
not to exceed the aggregate sum of One Million Five Hundred Thousand and 00/100
Dollars ($1,500,000.00); or, the aggregate sum of Five Million and 00/100
Dollars ($5,000,000.00), whichever is less. In connection with Advances based
upon the Borrowers inventory, it is acknowledged that Lender shall determine, in
its sole discretion, which inventory shall constitute Eligible Inventory which
is eligible for financing hereunder. The aggregate amounts outstanding under the
Loan shall not at any time exceed the amount provided above, and in the event
the amount outstanding at any time exceeds the permitted amount, said excess
amount shall bear interest at the rate set forth in the Note and shall be due
and payable in full on DEMAND.
2.2 Term Loan. Borrower has additionally borrowed the sum of One
Million and 00/100 Dollars ($1,000,000.00) from Lender under the Term Loan for
the purposes set forth in this Agreement. It is acknowledged that the amount of
the Term Loan represents an amount not in excess of eighty percent (80%) of MAI
Appraised Auction Sale Value of Borrowers' existing Machinery and Equipment
specifically listed and set forth in the Equipment Appraisal (as said value is
set forth in the Equipment Appraisal).
2.3 CAPEX Line/Term Loan. Provided there does not exist an Event of
Default, and no event with which notice or lapse of time or both would become
such an Event of Default, and subject to the terms and provisions of this
Agreement, Lender will, under the CAPEX Line/Term Note, lend or advance for the
account of Borrower from time to time such amounts as may be required by the
Borrower to partially finance future machine and equipment capital expenditures
of Borrower. Advances may be made under the CAPEX Line/Term Loan until the
Conversion Date, provided that said advances shall be made for newly purchased
machinery and equipment within ninety (90) days of the date of purchase;
provided further, that said amounts may not be repaid and reborrowed by the
Borrower. Advances shall be made based upon an advance rate of eighty percent
(80%) of the original invoice purchase price amount (not including the cost of
delivery, installation, etc.) of future machinery and equipment purchases by
Borrower. Advances shall be made based upon Lender's
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review of the original invoice and any other documentation required by Lender in
connection with the purchase of the machinery and equipment, and shall be made
in the sole and absolute discretion of the Lender. The maximum amount which may
be advanced under the CAPEX Line/Term Loan is the sum of Four Million and 00/100
Dollars ($4,000,000.00).
2.4 Loan Fee, Audit Fees, Unused Line Fee and Prepayment Fees. In
connection with the Loans, the following fees and rates shall apply:
(a) LOAN FEE: A Loan Fee in the amount of Twenty Thousand and 00/100
Dollars ($20,000.00) which was paid by the Borrower prior to the time of
Closing.
(b) AUDIT FEES: There shall be quarterly audits of the Borrower
performed in each fiscal year of Borrower during the term of the Loans. There
shall be a quarterly audit fee due and owing from Borrower to Lender in
connection with said audits based upon a charge of Four Hundred and 00/100
Dollars ($400.00) per day plus expenses; provided, further, that so long as
audits are not conducted more often than on a quarterly basis and so long as no
Event of Default has occurred, the annual fees for said audits shall not exceed
the sum of Eight Thousand and 00/100 Dollars ($8,000.00), plus expenses. In the
event of the occurrence of an Event of Default, the frequency of said audits may
be adjusted by Lender as determined by Lender in its sole discretion.
(c) UNUSED LINE FEE: An unused line fee shall be charged in connection
with the Loan, such that the unused portion of the Loan shall be subject to an
annual fee of one-quarter of one percent (.25%) per annum to be calculated and
payable upon a monthly basis based on the average outstanding principal balance
under the Loan for the proceeding month. The unused line fee shall be paid on
the first day of each month for the preceding month by means of an Advance under
the Note; provided, however, that if there is not adequate availability under
the Loan to effectuate any such Advance, Borrower shall jointly and severally be
responsible for payment of the same.
(d) PREPAYMENT FEES: If during the first year of the Loan (i) the Loan
is paid down to a zero balance, or (ii) the Lender's obligation to make Advances
under the Loan ceases, the Borrower shall pay to the Lender a prepayment fee in
an amount equal to one percent (1%) of the face amount of the Note. After the
first year of the Loan, the Note may be prepaid in whole or in part at any time
without premium or penalty.
During the first year of the Term Loan, full (but not partial)
prepayment of the Term Loan shall be permitted, with payment of a prepayment fee
in an amount equal to one percent (1%) of the outstanding principal balance of
the Term Note at the time of prepayment. After the first year of the Term Loan,
the Term Loan may be prepaid in whole or in part at any time without premium or
penalty. Any partial prepayment shall be applied in the inverse order of
maturity, and shall not reduce or delay the payment of the next regularly
scheduled payment under the Term Loan.
If, during the first year of the CAPEX Line/Term Loan (i) the
CAPEX Line/Term Loan is paid down to a zero balance or (ii) the Lender's
obligation to make advances under the CAPEX Line/Term Loan ceases, the Borrower
shall pay to Lender a prepayment fee in an amount
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equal to one percent (1%) of the face amount of the CAPEX Line/Term Note. After
the Conversion Date, the CAPEX Line/Term Loan may be prepaid in whole or in part
at any time without premium or penalty. After the Conversion Date, any partial
repayment shall be applied in the inverse order of maturity, and shall not
reduce or delay the payment of the next regularly scheduled payment under the
CAPEX Line/Term Loan.
The above set forth prepayment fee(s) shall be due and payable
whether such prepayment or cessation of Lender's obligation to make advances is
voluntary or involuntary, or a result of an Event of Default and/or the result
of acceleration of all or other sums due as a result of such acceleration or
default and shall be due and payable in addition to any default rate interest
collected by Lender. The Borrower agrees that the Lender shall suffer losses and
damages from such early repayment and accordingly, it is difficult to determine
in advance what the amount of said loss or damage will actually be, and, the
foregoing formula is a reasonable estimate of such loss or damages, and,
Borrower jointly and severally agrees to pay the same.
2.5 Loan Account. All Advances hereunder and under the Note shall be
recorded by Lender in the Loan Account.
2.6 Loan Documents. Borrower's obligation to repay the Loans is
evidenced by the Notes delivered simultaneously herewith, which set forth the
method for payment, rates of interest, and such further terms as are therein set
forth. The repayment of the Notes and the Indebtedness is to be secured by the
following documentation, which documents Borrower shall deliver, or cause to be
delivered, to Lender simultaneously with the delivery of the Notes and which
documents must be received prior to any funding hereunder:
(a) The Security Agreements, in form and substance satisfactory to
Lender and Lender's counsel.
(b) Financing statements filed in such public offices as Lender and
Lender's counsel may deem necessary to perfect a security interest in any of the
personal property referred to in the Security Agreements.
(c) Borrower's Counsel Opinion Letter, in form and substance
satisfactory to Lender and Lender's Counsel, from Borrower's Counsel from the
States of Florida, Delaware, Virginia, Alabama and Illinois opining as to
certain matters concerning the Loans.
(d) Such policies of liability insurance, worker's compensation
insurance and hazard insurance (with fire, extended coverage, vandalism and
mischief protection) as the Lender may reasonably request, subject to standard
loss-payee's and additional insured's endorsements, as applicable, in the
Lender's favor, and providing at least thirty (30) days prior written notice of
any cancellation, modification or non-renewal of the insurance coverage.
(e) Incumbency Certificate and Resolutions of the directors of each
Borrower authorizing the Loans, and the execution of all Loan Documents related
thereto.
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(f) Certificates of Good Standing evidencing that each Borrower is in
good standing under the laws of the state of its incorporation and in each other
state in which each Borrower is required to be qualified to conduct business.
(g) Certified copies of the Articles of Incorporation and By-Laws of
each Borrower.
(h) Evidence of compliance by each Borrower with any applicable
Fictitious Name Statute.
(i) Certified copies of the Leases in connection with all leased
premises of each Borrower.
(j) Landlord's Waiver of Lien Agreement(s) executed by all landlords
and all other necessary parties at business locations of each Borrower or
storage locations of each Borrower's inventory, waiving the landlord's lien.
(k) Financial statements of each Borrower, in form and substance
acceptable to Lender.
(l) Such other documentation as may be required by Lender or Lender's
Counsel.
Article 3
MANNER OF MAKING LOAN ADVANCES
3.1 Advances. Each Advance to the Borrower under the Loan shall be made
by the Lender upon written request of the Borrower stating the date on which the
Advance is to be made (the "Borrowing Date"), and the principal amount of the
Advance requested, said Advance Request to be delivered by no later than 12:00
p.m. (New York time) on the day of the requested Advance. The above set forth
written form may be sent via facsimile, to be immediately followed by delivery
of the original form to Lender. Any notice delivered under this subsection shall
be irrevocable and bind the Borrower to consummate the Advance on the Borrowing
Date.
3.2 Borrowing Base Certificate. Advances will be made based on the most
recent Borrowing Base Certificate submitted by Borrower to Lender. The form of
the Borrowing Base Certificate is appended hereto and made a part hereof as
Exhibit "A" (the "Borrowing Base Certificate"). The Borrowing Base Certificate
shall be provided by Borrower to Lender, no less than one (1) time in each week
in each month in each fiscal year of the Borrower; provided further, that upon
the occurrence of an Event of Default, Lender may require that Borrower submit
the Borrowing Base Certificate on a more frequent basis at such intervals as
shall be determined by Lender in its sole discretion.
3.3 Supporting Documentation. At the time of the Advance, upon request
of Lender, the Borrower shall deliver to Lender, such listings of Eligible
Receivables and Eligible Inventory and such other reports and documentation as
shall be required by Lender to support the Advance.
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Article 4
INTEREST AND PAYMENTS
All interest under the Loans shall be computed on the basis of a year
containing three hundred sixty (360) days for the actual number of days elapsed.
Payments of interest (and principal under the Term Note and principal under the
CAPEX Line/Term Note after the Conversion Date) shall be due and payable to the
Lender in accordance with the terms and provisions of the Notes, and interest
shall accrue at the rate of interest provided in the Notes for each advance
thereunder. Each payment of principal, interest and/or fees, and any other
amounts required to be paid to the Lender with respect to the Loans, shall be
effectuated by means of an Advance under the Note; provide, however, that if
there is not adequate availability under the Loan to effectuate any such
Advance, Borrower shall be jointly and severally responsible for payment of the
same. Payments of principal, interest, fees or other amounts made by the
Borrower shall be made to the Lender at the Lender's offices located at ▇▇▇ ▇.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, for the account of Lender, in
Dollars and in immediately available funds before 12:00 p.m. (New York time) on
the date such payment is due. The Lender shall deem any payment made by or on
behalf of the Borrower that is not made in immediately available funds and prior
to 12:00 p.m. (New York time) to be a non-conforming payment, which shall not be
deemed to be received by the Lender until the later of (a) the time such funds
become available funds or (b) the next Business Day. Any non-conforming payment
may constitute or become an Event of Default hereunder. Interest shall continue
to accrue on any principal as to which a non-conforming payment is made until
the later of (a) the date such funds become available funds or (b) the next
Business Day. All payments to be made by the Borrower on account of principal,
interest and/or fees, shall be made without diminution, setoff, recoupment or
counterclaim.
Article 5
CONDITIONS PRECEDENT TO FIRST ADVANCE AND ADDITIONAL ADVANCES
5.1 Conditions Precedent. The obligations of Lender to make the Initial
Advance and all additional Advances under the Loans are subject to the following
conditions precedent:
(a) Representations and Warranties. The representations, covenants and
warranties made by Borrower in this Agreement shall be true and correct on and
as of the date of such Advance.
(b) No Default. There shall be no Event of Default, and no event which
with notice or lapse of time or both would become such an Event of Default,
under this Agreement, any of the Notes, the Security Agreements, or any other
Loan Documents.
(c) Due Diligence. Lender shall have completed its Due Diligence, which
must have resulted in findings satisfactory to Lender, in Lender's sole
discretion.
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(d) No Material Adverse Change. There shall have been no material
adverse change in the business or financial condition of any of the Borrowers or
in the value of the Collateral (as defined in the Credit Facility Letter) since
the date of the Credit Facility Letter.
(e) Equipment Appraisal. The Equipment Appraisal shall have been
completed and delivered to Lender resulting in findings satisfactory to Lender,
in Lender's sole discretion.
(f) Lien and Judgment Searches: Lien and judgment searches of each
Borrower shall have been conducted in all jurisdictions required by Lender,
which must result in findings satisfactory to Lender, in Lender's sole
discretion.
(g) Delivery of Loan Documents. All of the Loan Documents shall have
been duly executed and delivered to Lender, and the Financing Statements and the
Security Agreements (if applicable) shall have been recorded in the appropriate
public offices.
(h) Delivery of Other Documents. Borrower shall have delivered, or
caused to be delivered to Lender, the other documents required under Article 2
hereof, and shall have also delivered or caused to be delivered to Lender, the
following:
(i) Annual audited financial statements of Borrower in form
and substance acceptable to the Lender, prepared in accordance with
GAAP, by a certified public accountant(s) acceptable to the Lender, in
form and substance acceptable to Lender.
(ii) Borrowers' Annual Report including its 10K.
(iii) Borrowers' 10-Q Statements.
(iv) Report on Receivables evidencing that there are adequate
Eligible Receivables to support the Initial Advance and each subsequent
Advance.
(v) Report on all of Borrowers inventory evidencing that there
is adequate Eligible Inventory to support the Initial Advance and each
subsequent Advance.
(vi) Such policies of liability insurance, flood insurance,
worker's compensation insurance and hazard insurance (with fire,
extended coverage, vandalism and mischief protection) as Lender may
reasonably request subject to standard loss-payee's and additional
insured's endorsements, as applicable, in the Lender's favor.
(vii) Such other certification or documentation to be executed
by Borrower as may be reasonably required by Lender or Lender's counsel
pertaining to the closing of the Initial Advance and all subsequent
Advances of the proceeds hereunder, it being understood that all such
items shall be promptly delivered prior to Lender's obligation to
making further Advances hereunder.
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Article 6
USE OF LOAN PROCEEDS; MARGIN STOCK
The proceeds of the Loans shall be used for the purposes set forth in
this Agreement. Borrowers do not own any margin securities and no portion of any
Advance or any of the Loans will be used for the purpose of reducing or retiring
any indebtedness which was originally incurred by Borrower to purchase any
margin securities, and neither the making of any and all Loans and Advances nor
the use of the proceeds thereof will violate or be inconsistent with the
provisions of Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System of the United States.
Article 7
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties. Borrower represents and warrants to
Lender that, so long as credit remains available to the Borrower or there is any
outstanding balance due under any of the Notes as secured by the Loan Documents:
(a) Each Borrower has the power to engage in all the transactions
contemplated by this Agreement and have full power, authority and legal right to
execute and deliver, and to comply with their respective obligations under the
Loan Documents, which documents constitute the valid and legally binding
obligations of Borrower enforceable against Borrower in accordance with their
respective terms.
(b) To the best of its knowledge and belief, there is no suit, action,
or proceeding pending or threatened against or affecting any Borrower, before or
by any court, administrative agency or other Governmental Authority which brings
into question the validity of the transactions contemplated hereby or would
interfere with the ability of each Borrower to comply with the terms hereof.
(c) Each Borrower is in good standing under the laws of the state of
its incorporation and each Borrower is in good standing and fully qualified and
authorized to do business in all states where each Borrower conducts business.
Borrower, prior to Closing, will deliver to Lender: (i) resolutions certified as
true by the secretary of each Borrower authorizing each Borrowers' participation
in connection with the transactions contemplated herein and execution of the
Notes, and related Loan Documents; (ii) incumbency certificates of each
Borrower; (iii) certified copies of the Articles of Incorporation and By-laws of
each Borrower; and (iv) Corporate Certificates of Good Standing for each
Borrower.
(d) Except as otherwise disclosed on Exhibit "B" appended hereto and
made a part hereof, during the one (1) year period preceding the date of
Closing, the Borrowers have not been known as or used any corporate or
fictitious names other than the corporate name of the Borrowers on the Closing
date. All trade names or styles under which the Borrowers sell inventory or
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equipment or create Receivables or to which instruments in payment of
Receivables are made payable, are set forth on Exhibit "B".
(e) The Borrowers own or possess all intellectual property required to
conduct its businesses as now and presently planned to be conducted without, to
their knowledge, conflict with the rights of others.
(f) Each Borrower is Solvent after giving effect to the transactions
contemplated by the Loan Documents.
(g) Neither the execution nor delivery of any of the Loan Documents,
nor any other document relating hereto, will conflict with or result in a breach
of any of the provisions of the Charter, Articles of Incorporation, By-Laws or
Partnership Agreement, where applicable, of any Borrower or of any applicable
law, judgment, order, writ, injunction, decree, rule or regulation of any court,
administrative agency or other Governmental Authority, or of any agreement or
other instrument to which any Borrower is a party or by which any of them is
bound or constitute a default under any thereof, or result in the creation or
imposition of any lien, charge or encumbrance upon any property of any Borrower,
other than those created under this transaction in favor of Lender.
(h) No consent, approval or other authorization of or by any
Governmental Authority is required in connection with the execution or delivery
by Borrower of the Loan Documents, or compliance with the provisions hereof or
thereof.
(i) There are no actions, suits or proceedings pending or, to the
knowledge of the Borrower, overtly threatened against or affecting any Borrower,
at law or in equity, or before or by any Federal, State, Provincial, municipal
or other Governmental Authority, which involve any of the transactions herein
contemplated or the possibility of any judgment or liability which would, in the
case of the Borrower, result in any material adverse change in the business,
operations, properties or assets or in the financial condition of the Borrower.
No Borrower is in default with respect to (a) any judgment, order, writ,
injunction or decree or (b) any rule or regulation of any court or Federal,
State, Provincial, municipal or other Governmental Authority, which would have a
material adverse effect on its business, properties or condition (financial or
otherwise).
(j) Subject to any limitation stated thereon or by Borrower in writing,
all balance sheets, earnings statements and other financial data which have been
or shall hereafter be furnished to the Lender to induce it to enter into this
Agreement or otherwise in connection herewith, do or will fairly represent the
financial condition of the Borrower as of the dates and the results of their
operations for the period for which the same are furnished to the Lender and
have been or will be prepared in accordance with Lender's requirements, and that
all other information, reports and other papers and data furnished to the Lender
are or will be, at the time the same are so furnished, accurate and correct in
all material respects and complete insofar as completeness may be necessary to
give the Lender a true and accurate knowledge of the subject matter. There are
no material liabilities of any kind of any Borrower as of the date of the most
recent financial statements which are not reflected therein.
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There have been no materially adverse changes in the financial condition or
operation of the Borrower since the date of such financial statements.
(k) Borrower will pay all obligations, including tax claims, when due,
except such as the Borrower contests in an appropriate proceeding, in which
event Borrower shall furnish to Lender, if requested, a bond or other security
satisfactory to Lender in an amount sufficient to protect Lender and its
interest herein.
(l) There is no default on the part of Borrower under this Agreement,
any of the Notes, either of the Security Agreements, or any of the other Loan
Documents.
(m) The Borrowers hereby agree to jointly and severally indemnify the
Lender and to hold the Lender harmless of and from any and all claims for
broker's or finder's fees or commissions in connection with the Loans, and
agrees to pay all expenses (including but not limited to attorney's fees and
expenses) incurred by the Lender in connection with the defense of any action or
proceeding brought to collect any such fees and commissions, or otherwise
relating to any such broker's claims resulting from or arising out of any claim
that the Borrower consulted, dealt or negotiated with the person or entity
making such brokerage claim.
(n) Each Plan, pension, profit sharing or other employee benefit plan,
maintained by each Borrower is in material compliance with ERISA, the Code, and
all applicable rules and regulations adopted by regulatory authorities pursuant
thereto. The Borrowers have filed all material reports required to be filed by
ERISA, the Code, and such rules and regulations. In addition, any qualified
Plans subject to the minimum funding standards, do not, as of the date hereof,
have a funding deficiency, as defined by ERISA. No Reportable Event material in
relation to the business operations, property, financial or other conditions of
the Borrower has occurred with respect to any Plan. No tax penalty nor other
liability in the aggregate material in relation to business operations,
property, or financial conditions of the Borrower has been assessed against any
Borrower with respect to a Plan.
(o) Each Borrower has filed or caused to be filed all tax returns,
which to the knowledge of the Borrower, are required to be filed, and has fully
paid all taxes shown to be due and payable on said returns or any assessments
made against it or its property, and all other taxes, fees, or other charges
imposed on it or any of its property by any Governmental Authority. No tax liens
have been filed and, to the knowledge of Borrower, no claims are being made or
may hereafter be asserted with respect to any such taxes, fees or other charges
except for (i) those, the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with Generally Accepted Accounting Principles have been
provided on the books of Borrower; and (ii) such failures to file or pay such
tax liens or claims as could not, in the aggregate, reasonably be expected to
have a material adverse effect on the business operations, property or financial
or other condition of the Borrower, and can not reasonably be expected to have
an adverse effect on the ability of the Borrower to perform any of its
obligations in any material respect under this Agreement, the other Loan
Documents, or under any other contractual obligation.
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(p) All copies of all documents, reports, and statements heretofore
furnished by or on behalf of Borrower or in connection with this Agreement, to
the Lender are, and those delivered subsequent to the date hereof will be, true
and correct copies of the originals of such documents, reports and statements.
All matters stated or certified in any written statement, certificate, report or
other writing heretofore furnished pursuant to this Agreement by or on behalf of
the Borrower to the Lender are, and all matters stated or certified subsequent
to the date hereof will be, true and correct as of the date stated or certified.
All such documents, reports, statements, writings and certifications shall be in
form and detail satisfactory to the Lender.
(q) The Borrowers own or lease all of their properties and assets
reflected on the balance sheets referred to in Section 7.1(j) hereof.
(r) All of the properties and assets of the Borrower set forth in
Section 7.1(q) are free and clear of all mortgages, pledges, liens, charges and
other encumbrances of any nature whatsoever, excepting for Permitted
Encumbrances (as defined and set forth in the Borrower Security Agreement).
(s) The Borrowers are not in default in the performance, observance of
fulfillment of any of the obligations, covenants or conditions contained in any
lease for real or personal property, which would have a material adverse affect
on their businesses and all such leases are valid and existing and in full force
and effect.
(t) No Borrower is an "investment company" within the meaning of the
Investment Company Act of 1940 and any amendments thereto.
(u) None of the employees of any Borrower or any of their subsidiaries
are subject to any collective bargaining agreement and there are no strikes,
work stoppages, election or decertification petitions or proceedings, unfair
labor charges, equal opportunity proceedings, or other material labor/employee
related controversies or proceedings pending, or, to the best knowledge of the
Borrower, threatening any Borrower or any of their subsidiaries, or between any
Borrower (or any of its subsidiaries) and any of their employees, other than
employee grievances arising in the ordinary course of business which could not
reasonably be expected, individually or in the aggregate, to have a materially
adverse effect on the Borrower.
Article 8
COVENANTS OF BORROWER
8.1 Each Borrower shall do, or cause to be done, all of the things
necessary to preserve, renew and keep in full force and effect, its corporate
existence and its rights, licenses, franchises and permits and shall comply with
all laws applicable to it, operate its business in a proper and efficient
manner, and substantially as presently operated or proposed to be operated, and
at all times shall maintain, preserve and protect all franchises and trade names
and preserve all property used or useful in the conduct of its business, and
keep the same in good repair, working order and condition, and from time to time
make or cause to be made any needed and proper repairs, renewals, replacements,
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betterments and improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
8.2 Each Borrower shall at all times maintain true and correct books
and records and shall keep its books and records in accordance with Generally
Accepted Accounting Principles, and shall furnish the Lender with such financial
statements as may be required by Lender on a yearly and interim basis as set
forth in this paragraph and other parts of this Agreement.
8.3 Each Borrower shall properly pay and discharge (a) all taxes,
assessments and governmental charges upon or against each Borrower or its assets
prior to the date on which penalties are attached thereto, unless, and to the
extent, such taxes are being diligently contested in good faith by appropriate
proceedings and appropriate reserves therefor have been established; and (b) all
lawful claims for labor, materials, supplies, services or anything else which
might or could, if unpaid, become a lien or charge upon the properties or assets
of the Borrower, unless and to the extent only that the same are transferred to
bond, being diligently contested in good faith, and by appropriate proceedings
and appropriate reserves therefor have been established.
8.4 The Borrowers shall maintain the Cash Collateral Account, into
which all proceeds of Receivables (as collected from the Lockbox and otherwise)
will be deposited on a daily basis.
8.5 The Borrowers shall, at their expense, comply with all of the
insurance requirements set forth in this Agreement and the Security Agreements
throughout the term of the Loans.
8.6 The Borrowers, jointly and severally, shall indemnify and save
harmless Lender from any and all loss or damage of whatsoever kind and from any
suits, claims, or demands, including, without limitation, Lender's reasonable
legal fees and expenses, at all trial and appellate levels, on account of any
matter or thing arising out of this Agreement or in connection herewith, or on
account of any act or omission to act by Borrower in connection with this
Agreement and the Loans. The Borrowers, jointly and severally, agree to pay any
and all taxes (other than taxes on or measured by net income of Lender) incurred
or payable in connection with the execution and delivery of this Agreement and
all Loans, as well as all costs and expenses (including attorneys' fees)
incurred by Lender in enforcing this Agreement. Such obligation shall survive
repayment of the Loans.
8.7 Lender shall have the right, from time to time hereafter and until
the maturity of the Loans, to secure printed publicity, in the form of tombstone
ads or other similar ads, through newspapers and other media concerning the
Loans.
8.8 The Borrower shall: (a) make full and timely payments of the
principal and interest due and owing under each of the Notes and the
Indebtedness of the Borrower to the Lender, whether now existing or hereafter
arising; (b) duly comply with all of the terms and covenants contained in each
of the Loan Documents; and (c) at all times maintain the liens and security
interests provided for under or pursuant to this Agreement and all other
applicable Loan Documents as valid and perfected liens and security interests on
the property intended to be covered thereby.
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8.9 The Borrower shall promptly notify the Lender upon the commencement
of any action, suit or claim or counter-claim or proceeding against or
investigation of any Borrower (except when such alleged liability is fully
covered by insurance).
8.10 Each Borrower shall pay all indebtedness and obligations promptly
and in accordance with its respective terms and pay and discharge promptly all
taxes, assessments, and governmental charges or levies imposed upon it or in
respect of its property, before the same shall become in default, as well as all
lawful claims for labor, materials, and supplies or otherwise which, if unpaid,
might become a lien or charge upon such property or any part thereof, and timely
comply with all applicable laws and governmental rules and regulations.
8.11 The Borrower shall promptly notify the Lender in writing of: (a)
any material assessments by any taxing authorities for unpaid taxes as soon as
Borrower has knowledge thereof; and (b) any alleged default by any Borrower in
the performance of or any modification of any of the terms and conditions
contained in any agreement, mortgage or indenture or instrument to which any
Borrower is a party, or which is binding upon any Borrower, and upon any default
by any Borrower in the payment of any of its indebtedness.
8.12 Borrower shall provide to Lender annual audited financial
statements of Borrower, in form and substance acceptable to Lender, prepared in
accordance with GAAP, by a certified public accountant(s) acceptable to Lender,
in form and substance acceptable to Lender, within one hundred twenty (120) days
following the end of each fiscal year of Borrower.
8.13 Borrower shall provide to Lender its annual report including its
10-K Statements within one hundred twenty (120) days following the end of each
fiscal year of Borrower.
8.14 Borrower shall provide to Lender 10-Q Statements within forty-five
(45) days of the end of each quarterly period in each fiscal year of Borrower.
8.15 Borrower shall provide to Lender monthly internally prepared
financial statements of Borrower, in form and substance acceptable to Lender,
certified by Borrowers' chief financial officer as being true and correct in all
respects and otherwise in form and substance acceptable to Lender within thirty
(30) days following the end of each monthly period in each fiscal year of
Borrower.
8.16 Borrower shall provide to Lender, a Covenant Compliance
Certificate in the form attached hereto and made a part hereof as Exhibit "C"
(the "Covenant Compliance Certificate"), within forty-five (45) days of the end
of each fiscal quarterly period in each fiscal year of the Borrower. The
Covenant Compliance Certificate will be certified by Borrower's chief financial
officer as being true and correct in all respects.
8.17 Borrower shall provide to Lender monthly, a Period End
Recapitulation Report, on National Bank of Canada form, in the form attached
hereto and made a part hereof as Exhibit "D", together with a Period End
Accounts Receivable and Loan Reconciliation Report, on National Bank
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of Canada form, in the form attached hereto and made a part hereof as Exhibit
"E", within twenty (20) days following the end of each monthly period in each
fiscal year of Borrower.
8.18 Borrower shall allow Lender to conduct an audit, examination and
inspection of the properties and places of business of Borrower, including the
Borrower's respective books and records (and to make extracts therefrom), and,
including an audit confirmation of the accounts receivable balances and
ownership interest in the inventory, assets and business property of Borrower.
Such audits, examinations and inspections shall be at the sole expense of
Borrower. The cost of such audits shall be Four Hundred and 00/100 Dollars
($400.00) per day plus expenses; provided, further, that so long as audits are
not conducted more often than on a quarterly basis and so long as no Event of
Default has occurred, the annual fees for said audits shall not exceed the sum
of Eight Thousand and 00/100 Dollars ($8,000.00), plus expenses subject to the
terms and provisions of Section 2.4(b). Said audits, examinations and
inspections shall be conducted on a quarterly basis unless adjusted by Lender
after the occurrence of an Event of Default as set forth in Section 2.4(b).
8.19 Borrower shall provide Lender, within thirty (30) days prior to
the end of each fiscal year of Borrower, projections reflecting the Borrowers'
performance for the next two (2) fiscal years, including a balance sheet and
profit and loss statement, with said projections to be broken down on a monthly
basis for the next fiscal year and on an annual basis for the second year.
8.20 Borrower shall provide to Lender monthly an aged analysis of all
outstanding accounts receivable and accounts payable of Borrower, in form and
substance acceptable to Lender, within twenty (20) days following the end of
each monthly period in each fiscal year of Borrower.
8.21 Borrower shall provide to Lender monthly a listing of all
inventory of Borrower, in form and substance acceptable to Lender, within twenty
(20) days following the end of each monthly period in each fiscal year of
Borrower.
8.22 Borrower shall provide to Lender on a semi-annual basis, a
complete and updated listing of all of its customers and account debtors, which
listing shall include all of the customers' and account debtors' addresses and
phone numbers.
8.23 Borrower shall not sell or convey any of its assets, except in the
normal and ordinary course of business. Additionally, no Borrower shall be a
party to any merger, consolidation or reorganization and there shall be no
change in the senior management of any Borrower unless consented to in writing
by Lender, which consent shall not be unreasonably withheld.
8.24 Borrower shall maintain a Debt Ratio (which is defined as
consolidated total liabilities, less subordinated debt, divided by tangible net
worth) of not greater than 2.0 to 1 from the date of Closing and at all times
thereafter.
8.25 Borrower shall maintain a Tangible Net Worth (which is defined as
book net worth plus subordinated debt less intangibles) of not less than
$5,000,000.00 from the date of Closing through and including June 30, 2000, to
be increased by a minium of $500,000 in each fiscal year
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thereafter, such that for each subsequent fiscal year, Borrower's Minimum
Tangible Net Worth shall be $500,000.00 or more greater than Borrower's Tangible
Net Worth as of the close of the previous fiscal year. Proceeds from any
secondary equity or subordinated debt offering will not count towards the
required Five Hundred Thousand and 00/100 Dollars ($500,000.00) annual increase.
8.26 Borrower shall maintain an Interest Coverage Ratio (which is
defined as earnings before interest and taxes divided by interest expense) of
not less than 2.0 to 1 from the date of Closing and at all times thereafter.
8.27 Borrower shall maintain a Fixed Charges Coverage (which is defined
as earnings before interest, taxes, depreciation, and amortization, less
unfinanced capital expenditures, divided by current maturities of long term
debt, plus interest, plus income tax, plus dividends) of not less than 1.1 to 1
from the date of Closing and at all times thereafter.
NOTE: Compliance with the above set forth covenants shall be tested on
a quarterly basis.
8.28 Borrower shall not incur any capital expenditures (excluding
acquisitions), in excess of Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00) in the aggregate from July 1, 1998 through and including June
30, 1999, in excess of Five Million and 00/100 Dollars ($5,000,000.00) in the
aggregate from July 1, 1999 through and including June 30, 2000, in excess of
One Million and 00/100 Dollars ($1,000,000.00) in the aggregate from July 1,
2000 through and including June 30, 2001, and in excess of One Million and
00/100 Dollars ($1,000,000.00) in the aggregate from July 1, 2001 through the
Maturity Date.
8.29 Borrower will not assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligation of any other
person, firm or corporation without Lender's prior written consent, which
consent shall be in Lender's sole discretion.
8.30 Borrower shall not incur any additional secured indebtedness in
excess of Two Hundred Thousand and 00/100 Dollars ($200,000.00) in the aggregate
in each fiscal year of Borrower, without the prior written approval of Lender,
which approval shall be in Lender's sole discretion.
8.31 Borrower shall not make loans in excess of Three Hundred Thousand
and 00/100 Dollars ($300,000.00) in the aggregate to officers, directors and/or
employees of Borrower during the term of the Loans, without the prior written
approval of Lender, in Lender's sole discretion. In the event that Borrower
currently has outstanding loans to officers, directors and/or employees of
Borrower, the aggregate of those outstanding loans shall reduce the Three
Hundred Thousand and 00/100 Dollar ($300,000.00) threshold, such that Borrower
shall not have on its books at any given time an excess of Three Hundred
Thousand and 00/100 Dollars ($300,000.00) in loans to officers, directors and/or
employees of Borrower during the term of the Loans.
8.32 It is acknowledged that Borrower has entered into a substantial
contract or contracts with CHEP (collectively, the "Chep Contract"). Borrower
hereby covenants to immediately notify
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Lender, in writing, of the occurrence of any Event of Default by any Borrower or
Chep under the Chep Contract, or in the event that any account(s) receivable due
and owing under the Chep Contract, which, in the aggregate, equals or exceeds
the sum of $50,000.00, are not paid in full on or before their due date.
NOTE: In connection with the above, all accounting terms used shall be
construed in accordance with GAAP.
8.33 There shall be no subordinate financing of any of the property
encumbered by the Security Agreements, or otherwise included in the Collateral,
and, no changes in any borrowing entity without Lender's prior written approval.
8.34 The Borrower shall give the Lender prompt written notice of any
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency, the outcome of which might adversely affect the
operations or financial condition of the Borrower or adversely affect the
ability of the Borrower to perform their respective obligations under the Loan
Documents.
8.35 The Borrower shall give Lender prompt written notice of any Event
of Default hereunder, or any event of default with respect to its obligations
under any of the other Loan Documents to which it is a party, indicating the
nature and status thereof and the action which the party giving such notice
proposes to take with respect thereto.
8.36 Borrower shall not directly or indirectly engage in any business
activity which would represent a material change from the kind of business
activity currently engaged in by it, which in the aggregate would have a
substantial and material effect on the Borrowers' businesses, without the prior
written consent of Lender, which consent shall be in Lender's sole discretion.
8.37 Borrower shall provide to the Lender all information reasonably
necessary for the Lender to verify the credit standing of each Borrower during
the term of the Loans.
8.38 The Borrower shall establish no additional employee benefit plans
of any nature without the prior written consent of the Lender, which consent
shall not be unreasonably withheld. Each pension, profit sharing, or other
employee benefit plan, at any time, maintained by the Borrower, shall be in
material compliance with ERISA, the Code and all applicable rules and
regulations adopted by regulatory authorities, pursuant thereto. The Borrower
will cause to be filed all material reports required to be filed by ERISA, the
Code and such rules and regulations.
8.39 The Borrower within ten (10) days after written request from the
Lender, will furnish a written statement in form satisfactory to the Lender,
duly acknowledged: (i) setting forth the unpaid principal balance of, and the
interest and other sums due on, the Indebtedness evidenced by the Notes and/or
secured by any of the other Loan Documents; (ii) stating whether or not any
offsets or defenses exist against the payments due under the Notes or any of the
other Loan Documents; (iii)
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stating the current maturity date of the Notes; and (iv) setting forth such
other information as the Lender may request from time to time.
8.40 The Borrower will not assume, guaranty, endorse or otherwise
become directly or contingently liable in connection with any obligation of any
other person, firm or corporation without Lender's prior written consent, which
consent shall be in Lender's sole discretion.
8.41 The Borrower shall notify the Lender immediately of any change in
the name of either Borrower, the principal place of business of the Borrower,
the office where the books and records of the Borrower are kept or any change in
the registered agent of the Borrower for the purpose of service of process.
8.42 The Borrowers shall use the funds borrowed by the Borrowers under
this Agreement solely for the purposes set forth in this Agreement.
8.43 Borrowers shall take all actions necessary to assure that
Borrowers' computer based systems are able to operate and effectively process
data including dates on and after January 1, 2000. At the request of Lender,
Borrowers shall provide Lender assurance acceptable to Lender of Borrowers' Year
2000 compatibility. Borrowers hereby covenant and agree that all of Borrowers'
information systems, including without limitation all computer hardware and
software, networks, databases, and all other electronic data storage, retrieval
and computation hardware, software and devices of any kind (collectively, the
"Information Systems"), have been and/or will be updated and modified to
accommodate and conform to the Year 2000 date change, and are and/or will be in
full compliance with any and all federal, state and local laws, regulations and
ordinances relating to the same, whether now in effect, or hereafter enacted
(collectively, the "Information System Laws").
Borrowers hereby jointly and severally agree, unconditionally,
absolutely, and irrevocably, to indemnify, defend, and hold harmless Lender, its
affiliates, successors, assigns, and its officers, directors, employees, and
agents against and in respect of any loss, liability, cost, injury, expense, or
damage of any and every kind whatsoever (including without limitation, court
costs and attorneys' fees and expenses) which at any time or from time to time
may be suffered or incurred, directly or indirectly, in connection with, with
respect to, or as a direct or indirect result of the failure of Borrowers to
update or modify their Information Systems to accommodate and conform to the
Year 2000 date change and/or fully comply with all Information System Laws
including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses, or claims asserted or arising under the Information System
Laws, whether now known or unknown.
Article 9
EVENTS OF DEFAULT
9.1 Events of Default. Each of the following is an Event of Default
hereunder:
(a) If Borrower fails to pay any installment of interest or principal
under any of the Notes when the same shall become due;
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(b) The dissolution, termination of existence, merger, consolidation or
reorganization of any Borrower, subject to notice and a ten (10) business day
right to cure;
(c) If there occurs any default or Event of Default under any other
term of this Agreement, any of the Notes, either of the Security Agreements, or
any of the other Loan Documents relating hereto or thereto, subject to any
applicable notice and/or cure periods set forth therein, if and as applicable;
(d) The commencement of levy, execution or attachment proceedings
against any Borrower, or any principal thereof, or the application for or
appointment of a liquidator, receiver, custodian, sequester, conservator,
trustee, or other similar judicial officer (and such appointment continues for a
period of thirty (30) days in the case of an involuntary proceeding), or the
insolvency, in the bankruptcy or equity sense, of any Borrower or any principal
thereof;
(e) The assignment for the benefit of creditors, or the admission in
writing of any inability to pay any debts generally as they become due, or
ordering the winding up or liquidation of its affairs, by any Borrower or any
principal thereof, or the commencement of a case by or against any Borrower or
any principal thereof, under any insolvency, bankruptcy, creditor adjustment,
debtor rehabilitation or similar law, state or federal;
(f) The determination by any Borrower or any principal thereof, to
request relief under any insolvency, bankruptcy, creditor adjustment, debtor
rehabilitation or similar proceeding, provincial, state or federal, including
without limitation the consent by any of them to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
or similar official for it or for any of its respective property or assets;
(g) There shall have occurred any material adverse change in the
financial condition of any Borrower, subject to notice and a ten (10) business
day right to cure;
(h) The issuing of any attachment or garnishment, or the filing of any
lien against the Collateral, or the pledge, assignment, transfer or granting of
a security interest by any Borrower of any equity in any of the Collateral
without the written consent of the Lender, subject to notice and a ten (10)
business day right to cure;
(i) The taking of possession of any substantial part of the property of
any Borrower at the instance of any Governmental Authority, subject to notice
and a ten (10) business day right to cure;
(j) Falsity in any material respect of, or any material omission in,
any representation or statement made to Lender by or on behalf of the Borrower
in connection with the Loans;
(k) If the Borrower shall have failed to comply with any other
agreement, covenant, condition, provision or term contained in this Agreement,
subject to notice and a ten (10) business day right to cure;
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(l) There shall be entered against any one or more of the Borrowers,
one or more judgments or decrees in excess of Two Hundred Thousand and 00/100
Dollars ($200,000.00) in the aggregate, which remain unsatisfied for a period of
thirty (30) days or which are not appealed and transferred to bond within thirty
(30) days of entry of the same;
(m) There shall occur an Event of Default by any Borrower in the
performance of its obligations under the Indebtedness, or under any other loan
agreement with the Lender and/or any other lender, subject to any applicable
notice and/or cure period set forth therein, if and as applicable;
(n) If any change or event shall occur which in Lender's judgment
impairs any security for the Loans, increases Lender's risk in connection with
the Loans, or indicates that Borrower may be unable to perform their respective
obligations under any of the Loan Documents, provided, that within thirty (30)
days after demand from Lender, Borrower does not deposit with Lender as part of
the Collateral, additional property which is satisfactory to Lender.
Article 10
SET-OFFS
In addition to any other rights the Lender may have at law or in
equity, if any Borrower becomes insolvent howsoever evidenced, or any Event of
Default occurs and is continuing, any indebtedness from the Lender to any
Borrower or all Borrowers, and any other property of any Borrower or all
Borrowers held by the Lender, may be set-off and applied towards the payment of
the Indebtedness of the Borrower under this Agreement (including, but not
limited to all Indebtedness evidenced by the Notes) to the Lender, including,
without limitation, any note payable to the Lender, whether or not such
Indebtedness of the Borrower to the Lender on such note or any part thereof
shall then be due.
Article 11
LENDER'S REMEDIES IN EVENT OF DEFAULT
11.1 Upon the occurrence of any Event of Default, subject only to any
notice requirement and grace period expressly provided in the Notes, the
Security Agreements, or any other Loan Documents, if any, the Lender shall be
entitled to all of its rights and remedies hereunder, at law or in equity and
under the Notes, the Security Agreements, and any of the other Loan Documents,
including, without limitation, the right to declare the outstanding principal
balance of the Notes, the accrued interest thereon, and all other obligations of
the Borrower to the Lender under this Agreement, the other Loan Documents or
otherwise to be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
anything in this Agreement, the Notes or any of the other Loan Documents to the
contrary notwithstanding, and the Lender's obligation to make any additional
Advances hereunder shall be permanently terminated.
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11.2 All of the remedies herein given to Lender or otherwise available
to it shall be cumulative and may be exercised concurrently. Failure to exercise
any of the remedies herein provided shall not constitute a waiver thereof by
Lender, nor shall use of any such remedies prevent the subsequent or concurrent
resort to any other remedy or remedies which shall be vested in Lender by this
Agreement or at law or in equity. To be effective, any waiver by Lender must be
in writing and such waiver shall be limited in its effect to the condition or
default specified therein; but no such waiver shall extend to any subsequent
condition or default or impair any right consequent thereon.
Article 12
TAX INDEMNIFICATION
Borrower hereby agree to and do hereby jointly and severally indemnify
and hold harmless Lender of and from any and all liability in connection with
payment of any and all intangible, documentary stamp, transfer, recording and
other taxes due and owing to the States of Florida, Delaware, Virginia, Alabama
and Illinois, and all other applicable jurisdictions in connection with the
execution, delivery and/or enforcement of this Agreement, the Notes, the
Security Agreements, and all associated Loan Documents, together with all
penalties and interest associated therewith, if any. Accordingly, Borrowers do
hereby authorize Lender to reimburse itself for any such taxes that Lender pays
upon behalf of Borrower from the proceeds under the Note, in the event Lender,
at any time, in its sole discretion, deems it necessary to pay such taxes,
together with any penalties and interest associated therewith. This
indemnification shall survive repayment of the Loans.
Article 13
CROSS-DEFAULT AND CROSS-COLLATERALIZATION
It is agreed, acknowledged and understood that the Loans, as evidenced
by the Notes and the Loan Documents, are cross-defaulted such that an event of
default by Borrower under any of the Notes or any of the Loan Documents shall be
and constitute a default under all of the Notes, this Agreement and all of the
Loan Documents entitling Lender to exercise all remedies provided herein and in
the Loan Documents in connection with the Notes, the Indebtedness and all
obligations associated therewith.
It is additionally agreed, acknowledged and understood that the Loans,
as evidenced by the Notes and the Loan Documents, are cross-collateralized such
that no collateral which secures the Loans shall be released without the
Lender's prior written consent, which consent shall be in Lender's sole and
absolute discretion, until such time as all of the Notes are paid and satisfied
in full.
Article 14
LOAN RESERVE - LANDLORD'S WAIVER OF LIEN AGREEMENTS
Notwithstanding anything to the contrary set forth in this Agreement or
the Credit Facility Letter, Borrower shall use its best efforts to obtain
Landlord's Waiver of Lien Agreements from each Landlord at or prior to Closing.
In the event Borrower is unable to obtain said Agreement from each Landlord,
then and in that event a reserve from the Loan shall be established at Closing
equal to
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three (3) months rent and additional rent and applicable sales tax under the
applicable lease for each Landlord failing to provide Lender with the Landlord's
Waiver of Lien Agreement in form and content satisfactory to Lender and its
counsel. Said reserve will be held during the term of the Loan and shall reduce
the outstanding amount available to Borrower under the Loan on a dollar for
dollar basis. If Borrower is in default under any applicable Lease and fails to
cure any monetary default within any cure period available under the terms of
the applicable Lease, if any, Lender shall, upon three (3) days prior written
notice to Borrower, have the option, but not the obligation, to cure the
monetary default to the applicable Landlord and charge the Loan for said
payment, provided, however, that Lender shall not exercise the aforesaid option
in the event Borrower disputes the default claimed by Landlord and pays the same
into the registry of the court having jurisdiction of the dispute. Borrower upon
receipt shall provide Lender with copies of all notices of default received from
any Landlord at each business location of Borrower.
Article 15
MISCELLANEOUS
15.1 Verification of Facts. Any condition of this Agreement which
requires the submission of evidence of the existence or non-existence of a
specified fact or facts implies as a condition the existence or non-existence,
as the case may be, of such fact or facts, and Lender shall, at all times, be
free independently to establish to its satisfaction and in its absolute
discretion such existence or non-existence.
15.2 No Levy or Attachment. No part of the Loans will be, at any time,
subject or liable to attachment or levy at the suit of any creditor of any
Borrower or of any other interested party, or at the suit of any contractor,
subcontractor, sub-subcontractors or materialman, or any of their creditors.
15.3 Severability. If performance of any provision hereof or any
transaction related hereto is limited by law, then the obligation to be
performed shall be reduced accordingly, and if any clause or provision herein
contained operates or would operate to invalidate this Agreement in part, then
the invalid part of said clause or provisions only shall be held for naught as
though not contained herein, and the remainder of this Agreement shall remain
operative and in full force and effect.
15.4 Waiver. If Lender shall waive any provisions of the Loan
Documents, or shall fail to enforce any of the conditions or provisions of this
Agreement, such waiver shall not be deemed to be a continuing waiver, and shall
never be construed as such, and Lender shall thereafter have the right to insist
upon the enforcement of such conditions or provisions. Furthermore, no provision
of this Agreement shall be amended, waived, modified, discharged or terminated
except by instrument in writing, signed by the parties hereto.
15.5 Entire Agreement. This Agreement and the documents expressly
referred to herein embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating to the subject
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matter. This Agreement may be changed, waived, discharged, or terminated only by
an instrument in writing duly executed by the party against which enforcement of
such change, waiver, discharge, or termination is sought.
15.6 No Violation. Anything in this Agreement to the contrary
notwithstanding, the Lender shall not be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
15.7 Notices. All notices given hereunder shall be in writing and
addressed as follows:
(a) Lender: NATIONAL BANK OF CANADA
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. D'Alto, Vice President
with copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
MOMBACH, ▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) Borrower: PALLET MANAGEMENT SYSTEMS, INC.
PALLET RECYCLING TECHNOLOGIES, INC.
▇▇▇▇▇ LUMBER CORPORATION d/b/a PALLET
MANAGEMENT SYSTEMS
PALLET MANAGEMENT SYSTEMS OF ALABAMA, INC.
PALLET MANAGEMENT SYSTEMS OF ILLINOIS, INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
with copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
FOWLER, WHITE, BURNETT, HURLEY,
▇▇▇▇▇▇ & STRICKROOT, P.A.
NationsBank Tower, Seventeenth Floor
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
15.8 Reproduction of Documents. This Agreement, the Loan Documents and
all other documents relating hereto or thereto may be reproduced by the Lender,
and, the Lender may destroy any original documents so reproduced. The Borrowers
agree and stipulate that any such reproduction shall be admissible in evidence
as the original itself in any jurisdiction or administrative proceeding (whether
or not the original is in existence and whether or not such reproduction was
made by the Lender in the regular course of business) and that any enlargement,
facsimile, or further reproduction of said document shall likewise be admissible
in evidence.
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15.9 No Partnership or Control. In no event shall the Lender's rights
hereunder or under any of the Loan Documents grant the Lender the right to or be
deemed to indicate that the Lender is in control of the business, management or
properties of the Borrower, or has power over the daily management functions and
operating decisions made by the Borrower. The Lender is the Lender only and
shall not be considered a shareholder, joint venturer or partner of the
Borrowers.
15.10 Headings. The headings preceding the text of the sections of this
Agreement are used solely for convenience of reference and shall not affect the
meaning, construction, or effect of this Agreement.
15.11 Assignment or Participation by Lender. Lender shall have the
right at any time to convey or assign the Loans or any portion thereof, and,
additionally, shall have the right to sell a participation in the Loans to
another lending institution at any time that the Loans are outstanding, in any
amount as solely determined by Lender, and Lender is hereby authorized to
release all financial information of the Borrower to said assignee or
participating lender(s).
15.12 No Assignment by Borrower. Borrower shall not assign this
Agreement without the prior written consent of Lender, and any assignment in
violation hereof shall be of no force and effect and shall constitute an Event
of Default herein. Subject to the previous sentence, this Agreement shall extend
to and bind the parties hereto, and their respective successors and assigns.
15.13 Survival of Representations and Warranties. Except as otherwise
noted herein, all covenants, agreements, representations and warranties made
herein and in the Loan Documents shall survive the respective dates of
effectiveness thereof and shall continue in full force and effect so long as the
Loan Documents, or any of them, remain in effect or any of the obligations
evidenced thereby are outstanding and unpaid.
15.14 Conflicts. In the event of any conflict, inconsistency or
ambiguity between the provisions of this Agreement and the provisions of the
Credit Facility Letter, the Notes, the Security Agreements or any other Loan
Documents, the provisions of this Agreement shall control and prevail.
15.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. Any term used herein shall
be equally applicable to both the singular and plural forms.
15.16 Expenses. Borrower will pay all reasonable out-of-pocket expenses
incurred by Lender in connection with the preparation of the Loan Documents
(whether or not the transactions contemplated hereby shall be consummated), the
making of the Loans, the enforcement and protection in any legal or equitable
proceeding of the rights of the Lender in connection with the Loan Documents,
and in connection with any action or claim under the Loan Documents including
the Notes, or in any way related thereto, including, without limitation, the
reasonable fees and disbursements of counsel of the Lender.
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15.17 No Usury. It is the intention of the parties hereto to comply
with the usury laws of applicable governmental authorities; accordingly, it is
agreed that, notwithstanding any provision to the contrary in the Notes, this
Loan Agreement or any of the other documents securing payment thereof or
otherwise relating hereto, no such provision shall require the payment or permit
the collection of interest in excess of the maximum permitted by law. In
determining the maximum rate allowed, Lender may take advantage of any state or
federal law, rule or regulation in effect from time to time which may govern the
maximum rate of interest which may be charged. If any excess of interest in such
respect is provided for, or shall be adjudicated to be so provided for, in the
Notes, this Loan Agreement or in any of the other documents securing payment
thereof or otherwise relating hereto, then in such event: (a) the provisions of
this paragraph shall govern and control; (b) neither Borrower nor their heirs,
personal representatives, successors or assigns or any other party liable for
the payment thereof, shall be obligated to pay the amount of such interest to
the extent that it is in excess of the maximum amount permitted by law; (c) any
such excess which may have been collected shall be either applied as a credit
against the then unpaid principal amount of the Notes or refunded to Borrower;
and (d) the effective rate of interest shall be automatically reduced to the
maximum lawful contract rate allowed under the applicable usury laws.
15.18 Waiver. The Borrower hereby waives any right to require a
proceeding first against any other party providing collateral, or to exhaust any
security for the performance of the Indebtedness. The Borrower further covenants
that no security now or subsequently held by the Lender for the payment of the
Indebtedness evidenced by the Notes made by Borrower under this Agreement, or
for the payment of any other Indebtedness of Borrower to the Lender under this
Agreement or the other Loan Documents, whether in the nature of a security
interest, pledge, lien, assignment, setoff, suretyship, guaranty, indemnity,
insurance or otherwise, and no act, omission or other conduct of the Lender in
respect of such security (excluding fraud, gross negligence or willful
misconduct), shall affect in any manner whatsoever the unconditional obligation
of the Borrower under this Agreement and the Notes, and the Lender may release,
exchange, enforce, apply the proceeds of and otherwise deal with any such
security without affecting in any manner the unconditional obligation of the
Borrower under this Agreement and the Notes.
Without limiting the generality of the foregoing, such obligations, and
the rights of the Lender to enforce the same, by proceedings, whether by action
at law, suit in equity or otherwise, shall not be in any way affected by (i) any
insolvency, bankruptcy, liquidation, reorganization, readjustment, composition,
dissolution, winding up or other proceeding involving or affecting the Borrower
or others, or (ii) any change in the ownership of any of the capital stock of
the Borrower or any other party providing collateral for any of the
Indebtedness, or any of their respective affiliates.
The Borrowers hereby waive to the fullest extent possible under
applicable law:
(a) any defense based upon the doctrine of marshaling of
assets or upon an election of remedies by the Lender, including, without
limitation, an election to proceed by nonjudicial rather than judicial
foreclosure;
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(b) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal; and
(c) any other event or action (excluding the Borrower's
compliance with the provisions hereof) that would result in the discharge by
operation of law or otherwise of the Borrower from the performance or observance
of any obligation, covenant or agreement contained in this Agreement, the Notes
or any other Loan Documents.
15.19 Indemnification. The Borrowers shall jointly and severally
indemnify and hold harmless the Lender, and its directors, officers, employees
and agents against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of
litigation or preparation therefor whether or not the Lender is a party thereto)
which it may pay or incur arising out of or relating to, directly or indirectly,
this Agreement, the Notes, the other Loan Documents, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loans hereunder.
15.20 Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal statutes and laws of the State of New York
(other than with respect to conflicts of laws), but giving effect to federal
laws applicable to national banks to the extent applicable, except as required
by mandatory provisions of laws and except to the extent that the validity or
perfection of the security interest created hereby, or remedies hereunder, in
respect of any particular Collateral are governed by the laws of a jurisdiction
other than the State of New York.
15.21 THE BORROWERS HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO
THE NONEXCLUSIVE JURISDICTION OF ALL STATE AND FEDERAL COURTS SITTING IN NEW
YORK COUNTY, NEW YORK, AND AGREE THAT ALL SUMMONS AND OTHER COURT PROCESS ISSUED
BY SAID COURTS MAY BE SERVED UPON THE BORROWERS, WITHIN OR OUTSIDE OF SAID
COURTS' TERRITORIAL JURISDICTION, BY MAILING THE SAME, BY REGISTERED OR
CERTIFIED MAIL, OR BY PERSONAL SERVICE, TO THE BORROWERS AT THEIR ADDRESS
SPECIFIED HEREIN.
IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT NO SUIT OR ACTION SHALL BE
COMMENCED BY ANY BORROWER, OR BY ANY SUCCESSOR, PERSONAL REPRESENTATIVE OR
ASSIGN OF ANY BORROWER, WITH RESPECT TO THE LOANS, THIS LOAN AGREEMENT OR ANY
OTHER LOAN DOCUMENTS, OTHER THAN IN A STATE COURT OF COMPETENT JURISDICTION IN
AND FOR NEW YORK COUNTY, NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT IN THE UNITED STATES IN WHICH THE PRINCIPAL PLACE OF BUSINESS OF
THE LENDER IN THE STATE OF NEW YORK IS SITUATED, AND NOT ELSEWHERE. NOTHING
CONTAINED IN THIS PARAGRAPH SHALL PROHIBIT THE LENDER FROM INSTITUTING SUIT IN
ANY COURT OF COMPETENT JURISDICTION FOR THE ENFORCEMENT OF ITS RIGHTS HEREUNDER,
IN THE NOTES, IN THE SECURITY AGREEMENTS OR IN ANY OTHER LOAN DOCUMENT.
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WAIVER OF JURY TRIAL. LENDER AND BORROWERS HEREBY MUTUALLY, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY
IN RESPECT TO ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED OR TO BE EXECUTED
IN CONJUNCTION HEREWITH, UNDER ANY OF THE LOAN DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF
EITHER PARTY. THE BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A
MATERIAL INDUCEMENT TO THE LENDER IN ACCEPTING THIS AGREEMENT, AND, THAT THE
LENDER WOULD NOT HAVE ACCEPTED THIS AGREEMENT WITHOUT THIS JURY TRIAL WAIVER,
AND, THAT THE UNDERSIGNED HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN
OPPORTUNITY TO CONSULT WITH AN ATTORNEY REGARDING THIS JURY TRIAL WAIVER, AND,
UNDERSTANDS THE LEGAL EFFECT OF THIS JURY TRIAL WAIVER.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
Signed, sealed and delivered in BORROWER:
the presence of:
PALLET MANAGEMENT SYSTEMS, INC.,
a Florida corporation
---------------------------
By: ___________________________________
___________________________ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
(Corporate Seal)
PALLET RECYCLING TECHNOLOGIES,
INC., a Delaware corporation
---------------------------
By: ___________________________________
___________________________ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
(Corporate Seal)
-▇▇-
▇▇▇▇▇ ▇▇▇▇▇▇ CORPORATION, a
Virginia corporation d/b/a PALLET
MANAGEMENT SYSTEMS
---------------------------
By: ___________________________________
___________________________ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
(Corporate Seal)
PALLET MANAGEMENT SYSTEMS OF
ALABAMA, INC., an Alabama corporation
---------------------------
By: ___________________________________
___________________________ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
(Corporate Seal)
PALLET MANAGEMENT SYSTEMS OF
ILLINOIS, INC., an Illinois corporation
---------------------------
By: ___________________________________
___________________________ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
(Corporate Seal)
SECURED PARTY:
NATIONAL BANK OF CANADA, a
Canadian Chartered Bank
______________________________ By: ___________________________________
Title: __________________________________
------------------------------
______________________________ By: ___________________________________
Title: __________________________________
------------------------------
-▇▇-
▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ )
COUNTY OF _______________ )
The foregoing instrument was acknowledged before me this _____ day of
April, 1999, by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, as President of and on behalf of PALLET
MANAGEMENT SYSTEMS, INC., a Florida corporation, PALLET RECYCLING TECHNOLOGIES,
INC., a Delaware corporation, ▇▇▇▇▇ LUMBER CORPORATION, a Virginia corporation
d/b/a PALLET MANAGEMENT SYSTEMS, PALLET MANAGEMENT SYSTEMS OF ALABAMA, INC., an
Alabama corporation and PALLET MANAGEMENT SYSTEMS OF ILLINOIS, INC., an Illinois
corporation who |_| is personally known to me or |_| produced his/her driver's
license as identification.
-------------------------------------
NOTARY PUBLIC - State of North Carolina
Print/Type/Stamp Name:
Commission Expiration Date:
Notary Seal:
STATE OF NEW YORK )
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this ___ day of
____________, 1999, by __________________________, as ______________ of and on
behalf of NATIONAL BANK OF CANADA, a Canadian Chartered Bank, who is personally
known to me or who has produced a __________ driver's license as identification.
-------------------------------------
NOTARY PUBLIC - State of New York
Print/Type/Stamp Name:
Commission Expiration Date:
Notary Seal:
STATE OF NEW YORK )
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this ___ day of
____________, 1999, by __________________________, as ______________ of and on
behalf of NATIONAL BANK OF CANADA, a Canadian Chartered Bank, who is personally
known to me or who has produced a __________ driver's license as identification.
-------------------------------------
NOTARY PUBLIC - State of New York
Print/Type/Stamp Name:
Commission Expiration Date:
Notary Seal:
-34-
EXHIBITS
--------
Description Exhibit
----------- -------
Borrowing Base Certificate..........................................A
Any corporate or fictitious names
used with respect to Receivables....................................B
Covenant Compliance Certificate.....................................C
Period End Recapitulation Report....................................D
Period End Accounts Receivable and
Loan Reconciliation Report..........................................E
EXHIBIT "B"
CORPORATE OR FICTITIOUS NAMES
-----------------------------
USED WITH RESPECT TO RECEIVABLES
--------------------------------
▇▇▇▇▇ Lumber Corporation, a Virginia corporation, d/b/a Pallet
Management Systems