Exhibit 10.16
REVOLVING LOAN AGREEMENT
THIS REVOLVING LOAN AGREEMENT made this 6th day of May, 1998, by and
between IMPERIAL NURSERIES, INC., a Delaware corporation with its chief
executive office and principal place of business at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter called the "Borrower") and FLEET NATIONAL
BANK, a national banking association with an office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter called the "Lender"). The Borrower
and the Lender hereby agree as follows:
SECTION 1. DEFINITIONS. As used herein:
1.1. OBLIGATIONS - means all loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to the Lender of
every kind and description (whether or not evidenced by any note or
other instrument and whether or not for the payment of money), direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, in each case related to the transaction described in
this Loan Agreement, including without limitation, all interest, fees,
charges, expenses and attorneys' fees chargeable to the Borrower or
incurred by the Lender in connection with the Borrower's account whether
provided for herein or in any Supplemental Agreement.
1.2. COLLATERAL - means Receivables, Inventory, Equipment, Patents,, Farm
Products and Additional Collateral, as hereinafter defined.
1.3. RECEIVABLES - means (a) all of the Borrower's now owned and hereafter
acquired, present and future, accounts, contract rights, chattel paper,
documents, and instruments, including without limitation all obligations
to the Borrower for the payment of money, whether arising out of the
Borrower's sale of goods or rendition of services or otherwise (all
hereinafter called "Accounts, Etc."), and all proceeds of the foregoing
and all proceeds of any insurance on the foregoing; (b) all of the
Borrower's rights, remedies, security and liens, in, to and in respect
of the Accounts, Etc., present and future, including without limitation,
rights of stoppage in transit, replevin, repossession and reclamation
and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to the
Accounts, Etc., deposits or other security for the obligation of any
debtor or obligor in any way obligated on or in connection with any
Accounts, Etc., and credit and other insurance, and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing; and (c)
all of the Borrower's right, title and interest, present and future, in,
to and in respect of all goods relating to, or which by sale have
resulted in, Accounts, Etc., including without limitation all goods
described in invoices or other documents or instruments with respect to,
or otherwise representing or evidencing any Accounts, Etc., and all
returned, reclaimed or repossessed goods, and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing.
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1.4. ELIGIBLE RECEIVABLES - means the net amount of those Receivables which
continually meet the following requirements:
a. With respect to current accounts receivable, each invoice
evidencing the Receivable is due and payable not more than one
hundred twenty (120) days from the current date. With respect to
any past due Receivable, such Receivable is no more than sixty
(60) days past due as of the current date.
b. The account arose from the performance of services by the
Borrower which have been fully and satisfactorily performed or
from the absolute sale of goods by the Borrower in which the
Borrower had the sole and complete ownership and the goods have
been shipped or delivered to the account debtor evidencing which
the Borrower or the Lender has the possession of shipping and
delivery receipts;
c. The account is not subject to any prior or subsequent assignment,
claim, lien or security interest other than that of the Lender;
d. To the best of the Borrower's knowledge, the account is not
subject to setoff, counterclaim, defense, allowance or adjustment
other than discounts for prompt payment shown on the invoice, or
to dispute, objection or complaint by the account debtor
concerning his liability on the account, and the goods, the sale
of which gave rise to the account, have not been returned,
rejected, lost or damaged;
e. The account arose in the ordinary course of business; and
f. To the best of the Borrower's knowledge, no petition or other
application for relief under the Bankruptcy Code or other
insolvency law has been filed with respect to the customer or
account debtor; and the customer or account debtor has not made
an assignment for the benefit of creditors, become insolvent, or
suspended or terminated business; and the account debtor is
generally paying its debts as they become due.
PROVIDED THAT, if at any time forty (40%) percent or more of the
aggregate amount of the accounts due from any account debtor are
otherwise not Eligible (excluding accounts with balances of less than
$5,000), from and after such time none of the accounts (then existing or
thereafter arising) due from such debtor shall be deemed to be Eligible
Receivables until such time as less than forty (40%) percent of the
aggregate amount of the accounts due from such debtor (excluding
accounts with balances of less than $5,000) are thereafter deemed
Eligible; and,
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PROVIDED FURTHER, all accounts whether or not Eligible Receivables
constitute the Lender's collateral.
1.5. INVENTORY - means all inventory of whatsoever name, nature, kind,
description now owned and hereafter acquired, present and future, by the
Borrower, wherever located, including without limitation all contract
rights with respect thereto and documents representing the same, all
goods held for sale or lease or to be furnished under contracts of
service, finished goods, work in process, raw materials, materials used
or consumed by the Borrower, parts, supplies, and all wrapping,
packaging, advertising and shipping materials and any documents relating
thereto, and all labels and other devices, names and marks affixed or to
be affixed thereto for purposes of selling or of identifying the same or
the seller or manufacturer thereof, and all right, title and interest of
the Borrower therein and thereto, and all proceeds of the foregoing and
all proceeds of any insurance on the foregoing.
1.6. ELIGIBLE INVENTORY - means potted Inventory (valued based on values set
forth in Guarantor's financial statement) located at Borrower's
container growing operations as well as its wholesale locations which
continually meets the following requirements:
a. It is salable through normal trade channels; and
b. It is owned by the Borrower and is not subject to any lien or
security interest whatsoever other than that of the Lender;
By example only, Inventory consisting of field grown and consigned
Inventory shall not be deemed Eligible.
1.7. EQUIPMENT - means all machinery, equipment, furniture, fixtures, tools,
parts, supplies and motor vehicles, now owned and hereafter acquired,
present and future, by the Borrower of whatsoever name, nature, kind or
description, wherever located, and all additions and accessions thereto
and replacements or substitutions therefor, and all proceeds thereof and
all proceeds of any insurance thereon.
1.8. PATENTS - means all of the Borrower's right, title and interest, present
and future, in and to (a) all letters patent of the United States or any
other country, all right, title and interest therein and thereto, and
all registrations and recordings thereof, including without limitation
applications, registrations and recordings in the United States Patent
and Trademark Office or in any similar office or agency of the United
States and State thereof or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by the
Borrower; and (b) all reissues, continuations, continuations-in-part or
extensions thereof and all licenses thereof; and all proceeds of the
foregoing and all proceeds of any insurance on the foregoing.
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1.9. INTENTIONALLY DELETED.
1.10 FARM PRODUCTS - means all of the Borrower's crops or seed now or
hereafter growing or grown and all other personal property of Borrower
used or for use in farming operations including, without limitation,
ornamental shrubs, trees, flowering plants and supplies now or hereafter
owned by Borrower or now or hereafter purchased by or for the benefit of
Borrower, together with any timber to be cut.
1.11. ADDITIONAL COLLATERAL - means (a) all other general intangibles of every
kind and description of the Borrower, including without limitation
Federal, State and local tax refund claims of all kinds, whether now
existing or hereafter arising; (b) all of the Borrower's deposit
accounts, whether now owned or hereafter created, wherever located; (c)
all monies, securities, financial assets, instruments, cash and other
property of the Borrower and the proceeds thereof, now or hereafter held
or received by, or in transit to, the Lender from or for the Borrower,
whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all of the Borrower's deposits (general or special,
balances, sums, proceeds and credits of the Borrower with the Lender at
any time existing); and (d) all books, records, customer lists, ledger
cards, computer programs, computer tapes, disks, printouts and records,
and other property and general intangibles at any time evidencing or
relating to any of the foregoing, whether now in existence or hereafter
created; and all proceeds of the foregoing and all proceeds of any
insurance on the foregoing.
1.12. LOAN AGREEMENT - means this Revolving Loan Agreement, as the same may
hereafter be supplemented, modified or amended.
1.13. SUPPLEMENTAL AGREEMENTS - means any and all agreements, instruments,
documents, security agreements, financing statements, and supplements
thereto granting or intending to grant to the Lender any lien, security
interest, pledge, assignment or indemnification to secure the
Obligations and any amendments, modifications or replacements thereof.
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1.14. EFFECTIVE DATE - means the date of execution of this Loan Agreement.
1.15. GUARANTOR - means any person, firm or corporation which has guaranteed
or endorsed or has agreed to act as surety for any of the Obligations,
including, without limitation, ▇▇▇▇▇▇▇ Land & Nurseries, Inc.
1.16. NOTE - means the Revolving Promissory Note from Borrower in favor of
Lender dated of even date herewith in the principal amount of
$10,000,000, as the same may be amended, restated, modified, extended or
replaced.
1.17. MATURITY DATE - means June 30, 1999.
1.18. DEFAULT RATE - shall have the meaning set forth in the Note.
1.19. ADDITIONAL DEFINITIONS. Unless otherwise specifically defined herein,
all terms used in this Loan Agreement and in all documents referred to
herein and which have been defined in Articles 1, 2 or 9, Uniform
Commercial Code, shall be interpreted and construed in light of the
sections, the definitions, the "official comment", and the definitional
and substantive cross-references of the Uniform Commercial Code.
SECTION 2. TERMS OF BORROWING.
2.1. REVOLVING LOAN. The Lender shall loan to the Borrower, and the Borrower
may borrow from the Lender, from time to time (the "Revolving Loan"), up
to that amount (hereinafter referred to as the "Borrowing Base") which
is the lesser of:
a. The sum of:
(1) EIGHTY PERCENT (80%) of the Borrower's Eligible Receivables;
AND
(2) The following percentages of the Borrower's Eligible
Inventory, but in any event not to exceed the amounts set
forth below:
(i) 25% for the months of December through April up to a
maximum of $7,500,000;
(ii) 20% for the months of May through August up to a
maximum of $5,500,000; and
(iii) 15% for the months of September through November up
to a maximum of $4,500,000.
or
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b. TEN MILLION DOLLARS ($10,000,000), adjusted as follows:
(1) $10,000,000 for the months of March, April and May;
(2) $7,000,000 for the months of June, July and August;
(3) $5,000,000 for the month of September;
(4) $4,000,000 for the month of October; and
(5) $7,000,000 for the months of November through February.
Nothing shall prohibit the Lender from lending in excess of the
Borrowing Base.
2.2. BORROWING BASE REPORT, ETC. For purposes of computing the Borrowing
Base, the Borrower shall furnish to the Lender information adequate to
identify Receivables and Inventory at times and in form and substance as
may be required by the Lender, together with such certificates as the
Lender may require from the Borrower representing that no Event of
Default has occurred and that the Borrower knows of no event which, but
for the passage of time or the giving of notice, would create an Event
of Default. From time to time, the Borrower shall provide the Lender
with schedules describing all Receivables created or acquired by the
Borrower and shall execute and deliver written assignments of such
Receivables to the Lender; provided, however, that the Borrower's
failure to execute and deliver such schedules and/or assignments shall
not affect or limit the Lender's security interest or other rights in
and to any Collateral. After an Event of Default or in connection with
any audit by Lender, the Borrower shall, upon request of the Lender,
furnish copies of customers' invoices or the equivalent, and original
shipping or delivery receipts for all merchandise sold, and the Borrower
warrants the genuineness thereof. The Borrower further warrants that
all Receivables are and will be bona fide existing obligations created
by the sale and delivery of merchandise or the rendition of services to
customers in the ordinary course of business, free of liens,
encumbrances and security interests and unconditionally owed to the
Borrower and, to the best of the Borrower's knowledge, without defense,
offset or counterclaim, subject to credits which, to the best of the
Borrower's actual knowledge at that time, will not exceed 5% of
Borrower's total Receivables.
2.3. REPAYMENT OF THE REVOLVING LOAN. In the event the Revolving Loan at any
time exceeds the Borrowing Base, the Borrower will immediately, upon
notification thereof from the Lender, repay to the Lender the amount by
which the Revolving Loan exceeds the Borrowing Base. Advances will be
evidenced by the Note. However, at the time of each advance under the
Revolving Loan, the Borrower will, upon request of the Lender, execute a
replacement or supplemental promissory note evidencing such advance,
such note to be in such form and to contain such provisions as the
Lender shall deem desirable. If the Lender shall elect not to have the
Borrower execute notes, each advance shall be recorded in an account on
the Lender's books in which shall also be recorded accrued interest on
advances, payments on such advances, and other appropriate debits and
credits as herein provided, and such account shall, absent manifest
error, constitute prima facie evidence of the information contained
therein.
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2.4. INTEREST ON THE REVOLVING LOAN. Interest on the Revolving Loan will be
payable monthly in arrears on the first business day of each month,
commencing on the first business day of the month subsequent to the date
of this Loan Agreement, and will be charged to the Borrower upon any and
all balances due to the Lender at that rate set forth in the Revolving
Note. The Borrower agrees to pay the Lender a late charge fee equal to
five percent (5%) of any payment due to the Lender which is not received
before the expiration of ten (10) days after the payment is due. It is
further agreed that upon an Event of Default and at any time thereafter,
the Borrower shall pay interest to the Lender at the Default Rate until
the Obligations are paid in full.
2.5. COLLECTION OF RECEIVABLES. During the continuance of an Event of
Default, the Lender or its designee may notify customers or account
debtors at any time thereafter that Receivables have been assigned to
the Lender or of the Lender's security interest therein and collect them
directly and charge the collection costs and expenses to the Borrower's
account; Borrower has executed a Lock Box Agreement which permits the
lender to receive payments thereon. Lender acknowledges all of
Borrower's service centers will utilize local depository banks and will
transfer funds to Lender on a regular basis, and at such times upon
Lender's request during the continuance of an Event of Default. All
such payments will be placed by the Lender into a cash collateral
account and, until credited to the Borrower's account as hereinafter set
forth, shall be held by the Lender as collateral for payment and/or
performance of the Borrower's Obligations to the Lender. After allowing
two (2) days for collection of checks and other instruments, the Lender
will credit (conditional upon final collection) all such payments, or
those made on account thereof, to the Borrower's account. Lender will
give immediate credit for all good funds such as wire transfers or
certified funds.
2.6. RETURNS, CREDITS, ETC. Any merchandise which is returned by a customer
or account debtor or otherwise recovered shall remain part of the
Lender's security. The Borrower shall notify the Lender monthly of the
aggregate amount of all returns and recoveries. The Borrower shall also
notify the Lender promptly of all disputes and claims and settle or
adjust them at no expense to the Lender, but no discount, credit or
allowance (other than in the ordinary course of the Borrower's business)
shall be granted to any customer or account debtor, and no returns of
merchandise (other than in the ordinary course of the Borrower's
business) shall be accepted by the Borrower without the Lender's
consent. The Lender may, after an Event of Default, settle or adjust
disputes and claims directly with customers or account debtors for
amounts and upon terms which the Lender considers advisable, and in all
cases the Lender will credit the Borrower's account with only the net
amounts received by the Lender in payment of Receivables.
2.7. FURTHER ASSURANCE. Upon the Lender's reasonable request, the Borrower
shall perform all other steps requested by the Lender necessary to
create and maintain in the Lender's favor a valid first priority
security interest, assignment or lien in, of or on all Receivables and
all other security held by or for the Lender.
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2.8. POWER OF ATTORNEY. The Borrower appoints the Lender, or any person whom
the Lender may designate, as its attorney, during the continuance of an
Event of Default with power: to endorse the Borrower's name on any
checks, notes, acceptances, money orders, drafts or other forms of
payment or security that may come into the Lender's possession; to sign
the Borrower's name on any invoice or ▇▇▇▇ of lading relating to any
Receivables, on notices of assignment, financing statements, and other
public records, on verifications of accounts and on notices to
customers; to notify the post office authorities to change the address
for delivery of the Borrower's mail to an address designated by the
Lender; to send requests for verification of Receivables to customers or
account debtors; and to do all things necessary to carry out this Loan
Agreement. The Borrower ratifies and approves all acts of the attorney.
Neither the Lender nor the attorney will be liable for any acts or
omissions nor for any error of judgment or mistake of fact or law unless
solely due to its gross negligence or willful misconduct. This power,
being coupled with an interest, is irrevocable so long as any
Receivables assigned to the Lender or in which the Lender has a security
interest remain unpaid or until the Obligations have been fully
satisfied. The Lender may file one or more financing statement
disclosing the Lender's security interest without the Borrower's
signature appearing thereon.
2.9. TERMINATION. All outstanding balances under the Revolving Loan shall be
payable on the Maturity Date. Notwithstanding the foregoing, should
either the Lender or the Borrower become insolvent or go out of
business, the other party shall have the right to terminate this
Agreement at any time without notice. Upon the effective date of
termination, all Obligations, whether or not incurred under this Loan
Agreement or any Supplemental Agreement or otherwise, shall become
immediately due and payable without notice or demand. Notwithstanding
termination, until all Obligations have been fully satisfied, the Lender
shall retain its security interest in all existing Collateral and that
arising thereafter; the Borrower shall continue to assign Receivables to
the Lender and turn over all collections to the Lender; and, except for
those specific covenants and conditions dealing with the making of
advances, all terms and conditions of all agreements between the
Borrower and the Lender shall remain in full force and effect.
2.10. ADDITIONAL PAYMENTS. If the Lender shall deem applicable to this Loan
Agreement (including the borrowed and the unused portion thereof) any
requirement of any law of the United States of America, any regulation,
order, interpretation, ruling, official directive or guideline (whether
or not having the force of law) of the Board of Governors of the Federal
Reserve System, the Comptroller of the Currency, the Federal Deposit
Insurance Corporation or any other board or governmental or
administrative agency of the United States of America which shall
impose, increase, modify or make applicable to this Loan Agreement, or
cause to be included in, any reserve, special deposit, calculation used
in the computation of regulatory capital standards, assessment or other
requirement which imposes on the Lender any cost that is attributable to
the maintenance of this Loan Agreement, then, and in each such event,
the Borrower shall promptly pay the Lender, upon its demand, such amount
as will compensate the Lender for any such cost, which determination may
be based upon the Lender's reasonable
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allocation of the aggregate of such costs resulting from such events.
In the event any such cost is a continuing cost, a fee payable to the
Lender may be imposed upon the Borrower periodically for so long as any
such cost is deemed applicable to the Lender, in an amount reasonably
determined by the Lender to be necessary to compensate the Lender for
any such cost. The determination by the Lender of the existence and
amount of any such cost shall, in the absence of manifest error, be
conclusive.
2.11. LINE FEE. As further inducement for the Lender to enter into the
Commercial Revolving Loan Agreement pursuant to Section 2 hereof,
Borrower shall pay on the first business day of each month during the
term of this Loan Agreement a fee (the "Line Fee") equal to one twelfth
(1/12th) of Three Hundred Seventy-Five Hundredths of one percent (0.375
%) of the average daily unused portion of the Revolving Loan for the
immediately preceding month through May 31, 1998 and, effective on June
1, 1998, the Line Fee will be reduced from 0.375% to 0.25% per annum.
Said average daily unused portion shall refer to that amount which is
equal to the difference between the maximum loan amount set forth in
Section 2.1 (b) and the average daily outstanding balance of the
Revolving Loan for the immediately preceding month for which such Line
Fee is due. The Line Fee will, at the option of the Lender, be charged
to the account of Borrower when due.
2.12. Intentionally Deleted.
2.13. METHOD OF PAYMENT. The Borrower hereby authorizes the Lender to charge
from time to time against its disbursement account any amount due under
this Loan Agreement. Whenever any payment to be made under this Loan
Agreement shall be stated to be due on a day other than a Banking Day
(hereafter defined), such charge shall be made in the next Banking Day
and such extension of time shall, in such case, be included in the
computation of the payment of accrued interest. For the purpose hereof,
Banking Day means any day other than Saturday, Sunday or other days on
which commercial banks in Hartford, Connecticut are authorized or
required to close according to the laws of the State of Connecticut.
SECTION 3. REPRESENTATIONS AND WARRANTIES
As part of the consideration for this Loan Agreement and as part of the
inducement to the Lender to enter into and perform this Agreement, Borrower
hereby makes each of the following representations and warranties, the only
exceptions to which, if any, are expressly set forth in the applicable schedules
attached hereto (all references in this section to "initial advance" or "initial
loan advance" under this Agreement shall mean the initial loan advance to be
made on the date hereof pursuant to Section 2.1 hereof):
3.1. SOLVENCY. Upon the initial loan advance required under this Agreement,
the fair salable value of Borrower's assets shall be greater than the
amount required to pay its total liabilities and Borrower will be able
to pay its debts as they mature. The Borrower will
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maintain such solvent condition, giving effect to all indebtedness due
to the Lender pursuant to this Agreement, so long as Borrower is
obligated to the Lender under this Agreement or in any other manner
whatsoever.
3.2. CORPORATE STATUS. Schedule 3.2 states (a) the correct jurisdiction of
Borrower's organization, (b) the number, nature and holder of all
outstanding securities of Borrower (and in each case where any such
securities are held by an entity other than an individual, the identity
of all ultimate individual holders of each such entity), and (c) the
number of authorized, issued and treasury shares of Borrower. All such
shares and interests have been duly issued and are fully paid and
non-assessable and each said share or interest is duly held by the party
identified on Schedule 3.2 with good and marketable title, free and
clear of all liens.
3.3. GOOD STANDING; AUTHORITY. Borrower (a) is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization; (b) has all requisite power and authority and necessary
licenses and permits to OWN and operate its properties and to carry on
its businesses now and as proposed to be conducted; and (c) has duly
qualified and is authorized to do business and is in good standing in
each jurisdiction where the character of its properties or the nature of
its activities makes such qualification necessary or desirable.
3.4. NATURE OF BUSINESS; CORPORATE NAME. Schedule 3.4 correctly describes
the general nature of the businesses and principal properties (including
all owned real property, leases and leasehold interests) of Borrower as
of the time of the initial advance pursuant to this Agreement. Except
as set forth on Schedule 3.4, Borrower has not as of the time of the
initial loan advance hereunder and within the two (2) years prior
thereto changed its name, been the surviving entity of a merger of
consolidation or acquired all or substantially all of the assets of any
person or entity.
3.5. CONTRACTS; OPERATION OF BUSINESS. Schedule 3.5 accurately and
completely lists all material contracts, agreements, franchises, leases,
permits, consents, distributorship agreements, licenses or commitments,
whether written or oral, presently in effect or proposed to be in effect
as of the time of the initial advance of the loan hereunder materially
affecting or relating to the business of Borrower (other than real
property leases identified in Schedule 3.4 hereof) and copies of the
same have been provided to the Lender. All such contracts, agreements,
franchises, leases, permits, consents, licenses, distributorship
agreements or commitments are, or shall be as of the time of the initial
advance of the loan, in full force and effect in accordance with their
respective terms. No defaults exist pursuant to said contracts,
agreements, franchises, leases, permits, consents and licenses of a type
which could now or hereafter result in cancellation or termination or
liability for damages where such cancellation, termination, liability or
default could materially adversely affect the business, prospects,
profits, properties or condition (financial or otherwise) of Borrower or
Borrower's ability to perform its obligations set forth or referred to
herein. Without limiting the generality of the foregoing, all equipment
necessary for the continued operation of the
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business of Borrower is being utilized, operated and maintained in
conformity with the provisions of applicable contracts, agreements,
franchises, leases, permits, consents and licenses. Borrower has not in
any manner, at any time prior hereto, failed to so utilize, operate and
maintain such equipment necessary for the continued operation of the
business of said Borrower in a manner which could now or hereafter
result in cancellation or termination of its right to use such
equipment, or liability for damages in connection therewith.
3.6. TITLE TO PROPERTY. Borrower shall, at or before the time of the initial
advance of the loan hereunder, have fee simple title sufficient for
Borrower's operations (or its equivalent under applicable law) to all
the real property, and good title to all the other property, it then
purports to own, including that reflected on Schedule 3.4 and in the
most recent financial statements provided by said Borrower to the Lender
(except as sold or otherwise disposed of in the ordinary course of
business), free from liens not permitted by the terms of this Agreement
but subject to liens to which the Lender has expressly consented and
which are expressly disclosed in the security agreements delivered
pursuant to Section 7.4 hereof.
3.7. INTENTIONALLY DELETED.
3.8. EMPLOYMENT AGREEMENTS. Except as reflected in Schedule 3.8, Borrower
has never nor will have as of the time of the initial loan advance
hereunder entered into any employment agreements or other obligations or
contracts providing for the retaining or employment of personnel.
Furthermore, the employees of Borrower are not and will not be as of the
time of the initial loan advance hereunder a party to any collective
bargaining agreement with Borrower, and, to the best knowledge of
Borrower and its officers, there are no material grievances, disputes or
controversies with any union or any other organization of any of
Borrower's employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or
organization. Copies of all of the foregoing agreements and contracts
disclosed on Schedule 3.8 have been provided to the Lender.
3.9. ERISA. Borrower has not nor will it have as of the time of the initial
advance of the loan any "Pension Plan," as that term is defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Borrower will notify Lender if it subsequently
creates such a Pension Plan and shall thereafter comply with all laws
applicable to such Plan, and notify Lender in the event of any
non-compliance.
3.10. LITIGATION. No legal action of any material nature, either in law or in
equity, has been instituted or is otherwise pending against Borrower or
with respect to any properties of Borrower and no threats or intimations
of material litigation have been received by Borrower with respect to
itself or its properties.
3.11. BUSINESS RECORDS. The books of account of Borrower since its
organization have been kept and maintained in accordance with generally
accepted accounting principles and
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practices applied on a consistent basis and reflect all moneys due or to
become due from or to Borrower for any reason whatsoever.
3.12. CORPORATE DOCUMENTS. The By-laws and Charter of the Borrower as
contained in those certificates delivered to the Lender pursuant to
Section 7.10 of this Agreement, respectively, are the duly adopted
By-laws and Charter of Borrower and have not been modified, amended or
repealed.
3.13. CORPORATION TAXES. Borrower has duly paid any and all franchise and
annual corporation taxes, duties or charges, levied, assessed or imposed
upon it, or upon any of its property, of whatsoever kind or description.
3.14. STOCKHOLDER DISTRIBUTIONS. No dividends or other payments of profits,
surplus, or reserves of Borrower have been declared to the stockholders
of Borrower nor are at the date hereof due and payable, declared, or
provided for by Borrower or in any other manner presently existing
obligations of Borrower.
3.15. AUTHORIZATION. This Loan Agreement, and each of the transactions
contemplated hereby, has been duly authorized by proper action of
Borrower and approved by its stockholders and directors and when
executed, this Loan Agreement will constitute a binding obligation on
Borrower in accordance with its terms.
3.16. FINANCIAL INFORMATION. The financial statements for fiscal year end
November 29, 1997 and other financial information provided by or on
behalf of Borrower to the Lender in contemplation of the loans to be
made hereunder to the best of Borrower's knowledge do not contain any
untrue statement of a material fact nor omit any material fact necessary
to reflect Borrower's financial condition or its ability to continue
ordinary business operations.
3.17. CHANGES IN OPERATIONS. There has been no change in the business,
operations, prospects, profits, properties or condition (financial or
otherwise) of Borrower since the date of the most recent financial
statement provided by Borrower to the Lender except changes in the
ordinary course of business, none of which, either individually or in
the aggregate, has been materially adverse.
3.18. INTANGIBLE RIGHTS. Borrower owns or possesses all of the patents,
trademarks, service marks, trade names, copyrights, licenses and rights
with respect to the foregoing necessary for the present and planned
future conduct of its business, without any known conflict with the
rights of others, and all patents and trademarks owned are set forth on
Schedule 3.18.
3.19. TAXES. All tax returns required to be filed by Borrower in any
jurisdiction have in fact been filed, and all taxes, assessments, fees
and other governmental charges upon Borrower or upon any of its
properties, income or franchises, which are due and payable
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have been paid. The provisions for taxes on the books of Borrower are
adequate for all open years and for its current fiscal period.
3.20. PROHIBITIONS IN CONTRACTS. Borrower is not a party to any contract or
agreement or subject to any charter or other corporate restriction which
materially and adversely affects the business of Borrower. Borrower is
not a party to any material contract or agreement which restricts its
right or ability to enter into this Agreement or any of the transactions
contemplated hereby except such as will be discharged upon conclusion of
the transaction contemplated hereby.
3.21. GOVERNMENT CONSENT. Neither the nature of Borrower nor of any of its
businesses or properties, nor any relationship between the Borrower and
any other person, nor any circumstance in connection with the execution
or delivery of this Agreement or any instruments contemplated hereby is
such as to require a consent, approval or authorization of or filing,
registration or qualification with, any governmental authority on the
part of Borrower as a condition of the execution, delivery or
performance of this Agreement and any note, agreement or document
contemplated hereby.
3.22. SECURITIES COMPLIANCE. Borrower hereby agrees that neither it nor
anyone acting on its behalf has offered or will offer the notes issued
pursuant hereto or any part thereof or any similar securities for issue
or sale to, or solicit any offer to acquire any of the same from anyone
so as to bring the issuance of said notes within the provisions of
Section 5 of the Securities Act of 1933, as amended.
3.23. COMPLIANCE WITH LAWS. Borrower to the best of its knowledge (a) is not
in violation of any laws, ordinances, governmental rules and regulations
to which it is subject, or (b) has not failed to obtain any licenses,
permits, franchises or other governmental authorizations necessary to
the ownership of its Property or to the conduct of its business, which
violation or failure to obtain materially and adversely affects the
business, prospects, profits, properties or condition (financial or
otherwise) of said Borrower.
3.24. BORROWED MONEY. At the time that the initial loan advance is made
hereunder, Borrower will not be liable in respect of any obligations for
borrowed money except in favor of Lender or except as otherwise set
forth on Schedule 3.24 hereto.
SECTION 4. NEGATIVE COVENANTS
As long as any obligations are outstanding under this Loan Agreement, or
otherwise, between Borrower and the Lender, Borrower agrees that it will not,
without the prior written consent of the Lender or except as indicated on an
appropriate schedule attached hereto numbered to correspond to the specific
section to which such exception relates:
4.1. LOANS. Except as provided in Section 4.7 below, lend money to or
guarantee the payment or performance of any liability or obligation of
any person or entity;
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4.2. MERGER. Be a party to any consolidation or merger without the prior
written consent of Lender, not to be unreasonably withheld or delayed;
4.3. INVESTMENTS. Invest in or otherwise acquire any stock or substantially
all the assets of any corporation, firm, or business, or division
thereof the value of which exceeds $50,000 without the prior written
consent of Lender, not to be unreasonably withheld or delayed;
4.4. CHANGE BUSINESS. Change the general character of its business as
conducted at the date hereof, or engage in any type of business not
reasonably related to its business as normally conducted;
4.5. LIENS. Create or suffer to exist any mortgage, security interest, or
lien on any of its property other than mortgages, security interests or
liens created pursuant to this Loan Agreement which may secure any
indebtedness in excess of $50,000;
4.6. SUBSIDIARIES. Cause, suffer or permit any of its subsidiaries to do
with respect to itself or its property, any of the things prohibited in
its case;
4.7. DISTRIBUTIONS. Declare or pay any dividend on its capital shares of any
class, make any distribution to any stockholders as such, purchase,
redeem or otherwise acquire for value any shares of its stock of any
class and/or any warrants or options for the acquisition of such shares,
or make any loan to stockholders; PROVIDED, HOWEVER, Borrower may make
loans to Guarantor up to the maximum amount of One Million Five Hundred
Thousand Dollars ($1,500,000) during the period December 1, 1997 through
June 30, 1999. At Borrower's fiscal year end November 28, 1998, to the
extent that EBITDA (hereinafter defined) minus $1,500,000 minus capital
expenditures (excluding assets purchased to open a New Jersey wholesale
sales and service center permitted under Section 4.8) exceeds one and
one-half times the Borrower's Fixed Charges (hereinafter defined) for
such fiscal year, Borrower may distribute such additional cash flow to
Guarantor. "EBITDA" is hereby defined as Borrower's earnings (excluding
extraordinary earnings or gains but including extraordinary losses)
before interest, taxes, depreciation and amortization. "Fixed Charges"
are hereby defined as Borrower's (i) interest expense plus (ii) current
maturities of long-term debt (excluding outstandings under the Revolving
Loan), plus (iii) taxes paid.
4.8. FIXED ASSETS. Make any investments in fixed or capital assets in excess
of $2,500,000 within any fiscal year of Borrower or make any investment
in or otherwise acquire assets not in the ordinary course of its
business other than as permitted in Section 4.3 above, PROVIDED that
Borrower may purchase without Lender's consent assets to open a New
Jersey wholesale sales and service center in an amount not to exceed
$4,000,000 .
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4.9. BORROWED MONEY. Incur or in any other manner become liable in respect
of any obligation for borrowed money except in favor of the Lender
provided, however, Borrower shall be permitted to borrow from Guarantor
such amounts as it deems necessary and, provided no Event of Default has
occurred and is continuing, Borrower may repay any loans or advances
made by Guarantor to Borrower on or after April 4, 1998, and provided
further that Borrower may repay up to $5,826,000 of the indebtedness
owing by Borrower to Guarantor as of April 4, 1998 which total
indebtedness as of such date was in the amount of $35,892,000 and
provided, further, that not less than $30,000,000 of said indebtedness
shall be subordinated by Guarantor to the full and final payment of the
Obligations, and Borrower shall not make any payments to Guarantor with
respect to said $30,000,000 of subordinated indebtedness;
4.10. SALE OF ASSETS. Sell or otherwise dispose of any of its or his assets
except in the ordinary course of its business or except for arms length
sale of worn or obsolete equipment with an aggregate value of not more
than $100,000 in any fiscal year without the prior written consent of
Lender, not to be unreasonably withheld or delayed;
4.11. ACQUIRE ASSETS. Acquire assets with an aggregate value of greater than
$1,000,000 within any fiscal year for use in its business operations by
means of lease, sale leaseback or otherwise in any manner which results
in title to said assets being held or retained by a party other than the
Borrower and which results in the Lender being unable to maintain a
security interest or lien with respect to said asset of the same type
and priority which would exist if the Borrower owned any said asset;
4.12. LOCATION OF ASSETS. Change the location of any of its assets in such a
manner as would impair the perfection or priority of any lien or
security interest which now or hereafter exists in favor of the Lender;
4.13. AFFILIATE TRANSACTIONS. Except as set forth in Schedule 4.13 without
the prior written consent of Lender, not to be unreasonably withheld or
delayed, enter into any transaction, including, without limitation, the
purchase, sale or exchange of property or the rendering of any service
with any affiliate except in the ordinary course of and pursuant to the
reasonable requirements of the Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than would pertain in
a comparable arms-length transaction with a party other than an
affiliate;
4.14. STOCK SALES. Issue, sell or dispose of any shares of its stock of any
class;
4.15. LEASES. Become lessee under any lease of real property except as
indicated on Schedule 3.4 to this Agreement.
4.16. MAXIMUM DEBT TO WORTH. Permit the ratio of its debt to tangible net
worth plus subordinated debt to exceed 0.5 to 1.0.
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4.17 MINIMUM FIXED CHARGE COVERAGE. Permit the ratio of Cash Flow to Fixed
Charges to be less than 1.5 to 1.0 at any time, tested quarterly and
measured on a rolling four (4) quarter basis. For the purposes of this
paragraph, "Cash Flow" is defined as EBITDA (as defined in Section 4.7
hereof) plus Borrower's Three Million Three Hundred Thousand Dollar
($3,300,000) non -cash inventory write-down taken by Borrower during
Fiscal Year 1997 and minus capital expenditures (excluding assets
purchased to open a New Jersey wholesale sales and service center
permitted under Section 4.8). "Fixed Charges" shall have the meaning
set forth in Section 4.7 hereof.
SECTION 5. AFFIRMATIVE COVENANTS
So long as any obligations are outstanding under this Loan Agreement between
Borrower and the Lender, the Borrower expressly covenants and agrees with the
Lender that, except as the Lender may expressly agree in writing and except as
otherwise expressly permitted by any appropriate Schedule attached hereto
numbered to correspond to the specific section to which such exception relates:
5.1. PAYMENT OF LOANS. It will promptly pay or cause to be paid the
principal and interest to become due on the notes provided for herein
and the Line Fee at the times and places and in the manner specified
therein and herein.
5.2. FINANCIAL INFORMATION. The Borrower will deliver to the Lender, so long
as Lender remains a holder of any of the notes provided for herein:
A. As soon as practical and in any event within thirty
(30) days after the end of each monthly period in
each fiscal year commencing with the monthly period
ending on February 28, 1998, an interim financial
statement disclosing results for such month and
results for the period from the beginning of the
current fiscal year to the end of such monthly
period and a balance sheet as of the end of such
monthly period, all in reasonable detail and
certified as correct, except for such changes as may
result from year-end adjustments, by an authorized
financial officer of the Borrower.
B. As soon as practicable, and in any event within
thirty (30) days after the end of each monthly
period in each fiscal year commencing with the
monthly period ending on February 28, 1998, the
following financial data: (i) borrowing certificate;
(ii) inventory and accounts receivable verification
reports and aging cycle; and (iii) collateral update
certificate, all in reasonable detail and certified
as correct, except for such changes as may result
from year-end adjustments, by an authorized
financial officer of the Borrower.
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C. As soon as practicable, and in any event within
fifty (50) days of the end of each quarterly period
in each fiscal year commencing with the quarterly
period ending on February 28, 1998, a covenant
compliance certificate certifying that the Borrower
is in compliance with all of the covenants set forth
in this Loan Agreement in such form as Lender may
reasonably require.
D. As soon as practicable, and in any event within
sixty (60) days of the end of each fiscal year of
Borrower, an annual budget projection for the
immediately succeeding fiscal year, all in
reasonable detail and in such form as Lender may
reasonably require.
E. With reasonable promptness, such other financial
data as Lender may reasonably request.
5.3. GUARANTOR INFORMATION. As soon as practical, Guarantor shall submit to
Lender internally prepared quarterly financial statements on a
consolidated and consolidating basis within fifty (50) days of the end
of the ending quarter, and audited year-end financial statements for
Guarantor within one hundred (100) days after the end of each fiscal
year on a consolidated basis. Such annual audit and statements shall
set forth in reasonable detail the results of operations and financial
condition of the Guarantor and shall be prepared by and accompanied by
the certificate of a certified public accountant or firm of certified
public accountants reasonably satisfactory to the Lender (who may be the
accountant or firm of accountants regularly employed by the Borrower to
audit and examine its books). Such statement shall be prepared in
conformity with generally accepted accounting principles applied on a
basis consistent with that of the preceding year and accompanied by a
statement thereon containing an opinion unqualified as to scope
limitations imposed by such firm of certified public accountants.
Guarantor shall also provide to Lender promptly upon receipt thereof,
(i) copies of all detailed audit reports, if any, submitted by the
Guarantor's independent certified public accountant in connection with
each annual audit of the books of Guarantor, (ii) internal reports
prepared by Guarantor as they relate to Borrower, and (iii) copies of
all financial statements and reports the Guarantor shall send to its
stockholders and with reasonable promptness such other financial data in
such manner and in such detail as the Lender may reasonably request.
5.4. FINANCIAL CERTIFICATE. Borrower and Guarantor will deliver to the
Lender annually and within one hundred (100) days after the end of each
fiscal year, a certificate by their independent certified public
accountant and by an officer of the Borrower that to the best of their
knowledge no default exists under this Loan Agreement, or under any
indenture pursuant to which any other indebtedness of the Borrower is
outstanding in excess of $50,000, and that all the terms of this Loan
Agreement have been fully performed, or if to the knowledge of either of
them, any of the terms of this Loan
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Agreement have not been fully performed, such certificate shall specify
the nature of the default and the steps taken by the Borrower to correct
such default.
5.5. BOOKS AND RECORDS. Borrower and Guarantor will at all times keep proper
books and records of account in which full, true, and correct entries
will be made of each of their transactions in accordance with sound
accounting practice.
5.6. INSURANCE. Borrower will at all times keep all its insurable properties
insured against loss or damage by fire and by other risks usually
insured against by entities operating like properties and will maintain
liability insurance and all such workmen's compensation, motor vehicle
or similar insurance as may be required by law, in such reasonable
amounts as Lender may reasonably require sufficient to cover the
lendable value thereof. All such insurance shall be effected under
valid and enforceable policies of insurance issued by insurers of
recognized responsibility, and shall name the Borrower and the Lender as
beneficiaries, loss payees or additional insured, as applicable, as
their interests may appear.
5.7. NO WASTE. Borrower will maintain, preserve, and keep its buildings,
machinery, and equipment in good condition, repair and working order for
the proper and efficient operation of its business.
5.8. TAXES. Borrower will pay all taxes, assessments, or governmental
charges levied, assessed, or imposed against it or its properties or
arising out of its operations promptly as they become due and payable,
provided, however, that if Borrower shall have set aside on its books
reserves deemed by the Borrower adequate therefor, said Borrower shall
have the right to contest in good faith by appropriate proceedings any
such taxes, assessments, or governmental charges or levies, and pending
such contest may delay or defer the payment thereof unless thereby
property of the Borrower will be in danger of being forfeited or lost.
5.9. COMPLIANCE WITH LAW. Borrower will comply in all material respects with
all laws and regulations of the Federal Government and of any State of
the United States or any of their subdivisions, departments, or agencies
applicable to the business or properties of the Borrower, provided,
however, that if the Borrower shall have set aside on its books reserves
deemed by the Borrower adequate to defray the cost of such compliance,
the Borrower shall have the right to contest in good faith by
appropriate proceedings any such laws or regulations and pending such
contest may delay or defer compliance therewith unless by such delay
property of the Borrower will be in danger of being forfeited or lost.
5.10. FICA. Borrower will, upon request after an Event of Default or in
connection with any audit conducted by Lender, furnish Lender with proof
satisfactory to the Lender of the payment or deposit of FICA and
withholding taxes required of Borrower by applicable law. Such proof
shall be furnished within a reasonable time after request.
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5.11. MAINTENANCE OF EXISTENCE. Borrower will maintain its corporate
existence and will maintain its right to carry on business and will
continuously operate its businesses except for interruptions caused by
acts of God, catastrophe, or any other events over which it has no
control.
5.12. Intentionally Deleted.
5.13. INSPECTION. Borrower will permit representatives of the Lender, at the
Lender's reasonable request, to visit and inspect any of the properties
of Borrower and to examine Borrower's books of account, records, reports
and other papers, to make copies and extracts therefrom and to discuss
Borrower's affairs, finances and accounts with the officers, employees
and independent public accountants of Borrower, in each case at such
reasonable times as the Lender may request.
5.14. BENEFIT PLANS. Borrower shall, with respect to all pension, profit
sharing or other employee benefit plans maintained at any time by
Borrower, meet all requirements on its part to be met and pay all sums
required to be paid in connection therewith.
5.15. STOCK OWNERSHIP. Those persons and entities identified in Schedule 3.2
to this Agreement shall continue to own that amount of the legal and
beneficial interest of each class of capital stock of Borrower, as
applicable, as indicated on said Schedule 3.2.
5.16. COOPERATION. Borrower will from time to time execute and deliver to the
Lender such other instruments, certificates and documents and will take
such other action and do all other things as may from time to time be
reasonably requested by the Lender in order to implement or effectuate
the provisions of, or more fully perfect the rights granted or intended
to be granted by Borrower to the Lender pursuant to the terms of, this
Agreement or any other agreement or instrument contemplated hereby.
5.17. LEGAL ACTIONS. In the event any material legal action is commenced
against Borrower, Borrower shall promptly notify the Lender of same. To
the extent Borrower disputes such legal action, Borrower shall contest
same in good faith by appropriate proceedings and shall maintain
reserves deemed adequate by the Borrower in the exercise of reasonable
discretion (giving effect to the likelihood of any adverse judgment and
the nature and amount of the obligation which would be imposed thereby)
to satisfy the obligations which would be imposed by any adverse
judgment rendered in such legal action.
5.18. PERMIT COMPLIANCE. Borrower shall maintain in full force and effect all
of its material franchises, leases, commitments, consents, permits,
agreements, contracts and licenses (whether written or oral), materially
affecting or relating to the business of Borrower, in full force and
effect.
5.19. FURTHER ASSURANCES RE INVENTORY. The Borrower shall perform any and all
steps reasonably requested by the Lender necessary to perfect the
Lender's security interest in
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the Inventory, such as leasing warehouses to the Lender or the Lender's
designee, placing and maintaining signs, appointing custodians,
executing and filing financing or continuation statements in form and
substance satisfactory to the Lender, maintaining stock records and
transferring Inventory to warehouses. If any Inventory is in the
possession or control of any of the Borrower's agents or processors, the
Borrower shall notify such agents or processors of the Lender's security
interest therein, and, upon request, instruct them to hold all such
Inventory for the Lender's account and subject to the Lender's
instructions. A physical listing of all Inventory, wherever located,
shall be taken by the Borrower at least annually and, during the
continuance of an Event of Default, whenever requested by the Lender,
and a copy of each such physical listing shall be supplied to the Lender
if requested by Lender. The Lender may examine and inspect the
Inventory at any time.
5.20. ENVIRONMENTAL COMPLIANCE. The Borrower will comply with the material
terms and conditions of any leases covering the premises wherein the
Collateral is located and any orders, ordinances, laws or statutes of
any city, state or other governmental department having jurisdiction
with respect to such premises or the conduct of business thereon. The
Borrower shall indemnify the Lender and hold the Lender harmless and
does hereby indemnify Lender from and against all loss, liability,
damage and expense, including attorney's fees, suffered or incurred by
the Lender, (i) under or on account of Chapter 446k of the Connecticut
General Statutes (Revision of 1958), as amended (the "Act") or related
regulations, or any similar applicable federal laws or regulations,
including the assertion of any liens thereunder; (ii) with respect to
any discharge, spillage, uncontrolled loss, seepage or filtration of oil
or petroleum or chemical, liquids or solid, liquid or gaseous products
or hazardous waste which, if contained or removed or mitigated by the
State of Connecticut, would give rights to a lien under Connecticut
General Statutes Section 22a-452a, as amended (a "Spill") affecting any
real or personal property owned or leased by the Borrower, including any
loss of value of any such property as a result of such Spill; and (iii)
with respect to any other matter affecting the real or personal property
owned or leased by the Borrower and governed by the provisions of the
Act or related regulations or any similar applicable federal laws or
regulations.
SECTION 6. DEFAULT.
If any one of the following events shall occur and be continuing beyond
any cure period (each herein referred to as an Event of Default), all
obligations of the Borrower to the Lender, whether pursuant to those notes
described in Sections 1 and 2 to this Agreement or otherwise, together with the
accrued interest thereon, shall, at the option of the Lender, forthwith become
due and payable without presentment, demand, protest or notice of any kind, all
of which are expressly waived; and the Borrower shall thereupon forthwith pay in
full, or make provisions for the payment in full, of all said obligations, and
the Lender shall be entitled to exercise all rights, and avail itself of all
remedies, in order to effect such payment in full:
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6.1. Borrower defaults in the payment of any sum due pursuant to any of the
notes described in Sections 1 and 2 to this Agreement which default
continues for more that five (5) Business Days beyond the applicable due
date; or
6.2. The failure to pay the Line Fee when due pursuant to Section 2.11
hereof; or
6.3. Borrower defaults in the performance of any covenant or agreement
contained in this Agreement, other than the defaults described in
Sections 6.1 and 6.2 hereof and such default shall not have been
remedied within twenty (20) days after Lender notifies Borrower of the
occurrence of said default, provided that if such default cannot
reasonably be cured within such twenty (20) day period it shall not be
an Event of Default if Borrower commences to cure such default within
such twenty (20) day period and diligently pursues the cure to
completion within sixty (60) days thereafter; or
6.4. Any of the following events occur with respect to Borrower or any
Guarantor:
A. Borrower or any Guarantor makes an assignment for
the benefit of creditors; or
B. A trustee or receiver of the Borrower or any
Guarantor or of any substantial part of the assets
of the Borrower or any Guarantor is appointed, and
if such trustee or receiver is appointed in a
proceeding brought against the Borrower or any
Guarantor, the Borrower or the Guarantor by any
action indicates its approval of, consent to, or
acquiescence in such appointment, or any such
trustee or receiver is not discharged within sixty
(60) days; or
C. Any proceeding involving the Borrower or any
Guarantor is commenced by or against the Borrower or
any Guarantor under any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or
liquidation laws or statute of the Federal
Government or any State Government, and if such
proceeding is instituted against the Borrower or any
Guarantor, the Borrower or any Guarantor by any
action indicates its approval of, consent to, or
acquiescence therein, or the same shall remain
undismissed for sixty (60) days; or
6.5. Borrower or any Guarantor defaults in the performance of any other term,
condition, or covenant contained in any Supplemental Agreement which now
or hereafter exists between the Lender and Borrower or any Guarantor
which default continues beyond the expiration of all applicable notice
and cure periods; or
6.6. Borrower defaults in any payment of principal or interest on any
obligation for borrowed money in excess of $50,000 beyond any period of
grace provided with respect thereto, or in the performance of any other
term, condition, or covenant contained in any
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agreement under which any such obligation is created, the effect of
which default is to cause such obligation to become due and payable
prior to its stated maturity; or
6.7. If any material representation or warranty made by Borrower or any
Guarantor herein or pursuant hereto or to any agreement executed
pursuant hereto is untrue or incomplete in any material respect, or any
Schedule, statement, report, notice or writing furnished by Borrower or
any Guarantor or on behalf of Borrower or any Guarantor to the Lender is
untrue or incomplete in any material respect as of the date to which the
facts set forth are stated or certified.
6.8. Notice of termination of guaranty is given by any party who has executed
and delivered to the Lender a guaranty agreement pursuant to Section 7.3
of this Agreement.
6.9. The issuance, filing or levy against the Borrower or any Guarantor of an
attachment, injunction, execution, lien or judgment for an amount in
excess of $25,000 which is not discharged in full or stayed within
thirty (30) days after issuance or filing.
6.10. Material loss, theft, damage, destruction or diminution in market value
of the collateral provided to the Lender pursuant to the security
agreements delivered to the Lender pursuant to Section 7.4 hereof;
provided, however, that such event shall not be deemed an Event of
Default if such loss is covered by insurance in such amounts as Lender
reasonably deems satisfactory.
6.11. Termination by Borrower of the loan arrangement provided pursuant to
Section 2 of this Agreement.
SECTION 7. - CLOSING CONDITIONS
The closing shall be held at the offices of Brown, Rudnick, Freed &
Gesmer in Hartford, Connecticut on May 6, 1998 (herein referred to as the
Closing Date). The obligation of the Lender to make the initial loan advances
specified pursuant to this Agreement shall be subject to the satisfaction or
waiver by Lender of each of the following conditions precedent (all references
to the Closing Checklist hereinafter contained shall mean that Closing Checklist
attached hereto as Schedule 7):
7.1. The Lender shall have received from counsel for the Borrower and the
Guarantor a closing opinion in form and substance reasonably
satisfactory to the Lender and its counsel dated as of the date of the
initial loan advance.
7.2. The Note shall have been duly executed and delivered to the Lender.
7.3. Each of the guaranty agreements identified in the Closing Checklist
shall have been duly executed and delivered to the Lender.
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7.4. There shall have been duly executed and delivered to the Lender each of
the security agreements specified in the Closing Checklist.
7.5. All filings of Uniform Commercial Code financing statements and all
other filings and action necessary to perfect the Lender's security
interests or liens granted pursuant to any security agreement
(including, without limitation, all liens on motor vehicles) shall have
been filed and confirmation thereof received, and there shall have been
provided to the Lender all necessary lien search reports as the Lender
may require to provide evidence of and/or to confirm and verify that no
liens or encumbrances exist with respect to any of the Borrower's
tangible or intangible personal property assets except as expressly
permitted pursuant to the terms of this Agreement.
7.6. To the extent required by the Lender, there shall have been executed and
delivered to the Lender from each landlord and mortgagee of any of the
Borrowers' premises, as specified by the Lender pursuant to the Closing
Checklist, a Landlord and Mortgagee Consent and Waiver Agreement in form
and substance satisfactory to the Lender.
7.7. INTENTIONALLY DELETED.
7.8. There shall have been duly executed and delivered to the Lender such
agreements as the Lender may require, in form and substance reasonably
satisfactory to the Lender, to perfect and assure its liens and/or
assignments with respect to the Borrower's interests in intellectual
property as specified in the Closing Checklist.
7.9. With respect to each policy of insurance which the Borrower is required
to maintain pursuant to the terms of this Agreement, there shall have
been executed and delivered to the Lender a loss payable endorsement in
form and substance reasonably satisfactory to the Lender and there shall
have been provided the original or a certificate of each said policy in
form and substance satisfactory to the Lender.
7.10. There shall have been duly executed and delivered to the Lender a
secretary's certificate with respect to the Borrower, together with all
schedules and exhibits thereto, in form and substance satisfactory to
the Lender.
7.11. Intentionally Deleted.
7.12. Intentionally Deleted.
7.13. All warranties and representations contained in this Agreement shall be
true in all material respects on the date of the initial loan advance.
7.14. Borrower shall have performed and complied with all covenants,
agreements and conditions contained in this Agreement which are required
to be performed or complied with by it before or on the date of the
initial loan advance.
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7.15. All proceedings taken in connection with the execution of this Agreement
and all other documents and agreements relating thereto or contemplated
hereby shall be reasonably satisfactory to the Lender and its counsel in
all respects.
7.16. There shall have occurred no material adverse change in the financial
conditions of the Borrower and the Guarantor from that set forth on the
most recent financial statements and other materials submitted by said
parties to the Lender.
7.17. All schedules to this Agreement shall be complete and satisfactory to
the Lender and copies of all agreements referenced in said schedules
requested by the Lender or required to be delivered pursuant hereto
shall have been so delivered.
SECTION 8. MISCELLANEOUS
8.1. COSTS AND EXPENSES. Borrower agrees (1) to pay all reasonable costs and
expenses, including reasonable counsel fees and expenses and recording
and filing fees, incurred by the Lender in connection with the financing
being concluded hereunder as well as (2) any fees and expenses,
including reasonable counsel fees and expenses, which the Lender may
hereafter incur in reasonably protecting, enforcing or realizing any of
its rights against Borrower in connection with any security held by the
Lender or against any guarantor or endorser. All said fees and expenses
referenced in Clause (2) of this Section 8.1 shall be repayable on
demand, together with interest from the date incurred until repaid, at
the Default Rate. Borrower specifically authorizes Lender to pay all
such fees and expenses and charge the same to its disbursement account.
8.2. WAIVERS. Every right and remedy provided in this Loan Agreement shall
be cumulative of every other right or remedy of the Lender, whether
herein or by law conferred, and may be enforced concurrently herewith;
and no waiver by the Lender of the performance of any obligation by
Borrower shall be construed as a waiver of the same or any other default
then, theretofore, or thereafter existing.
8.3. ADDITIONAL DOCUMENTS. Borrower agrees that, any time or from time to
time upon the written request of Lender, Borrower will execute and
deliver such further documents and do such other acts and things as
Lender may reasonably request in order to fully effect the purpose of
this Agreement.
8.4. SUCCESSORS. This Loan Agreement and all of the covenants and conditions
hereinabove contained shall be for the benefit of and shall apply to and
bind the parties hereto and their respective successors, assigns, heirs
and legal representatives.
8.5. GOVERNING LAW. This Loan Agreement shall be governed in all respects by
the laws of the State of Connecticut.
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8.6. SURVIVAL. All agreements, representations and warranties made herein
and in any statement, notices, invoices, certificates, schedules,
consignments, designations, documents or other instruments delivered to
Lender hereunder or as security in connection with this Agreement shall
survive the closing of the loans provided for hereunder.
8.7. REFERENCES. Whenever used, the singular number shall include the
plural, the plural the singular, and the use of any gender shall include
all genders and the use of reference to any entity as a Borrower herein
shall refer and include all entities who are Borrowers hereunder.
8.8. NOTICES. All notices or demands by any party to the other relating to
this Agreement shall, except as otherwise provided herein, be in writing
and sent by Certified Mail, Return Receipt Requested or by telecopier
to the following fax numbers if also delivered by certified mail, return
receipt requested. Notice shall be deemed received on the earlier of
(i) when received by telecopier if transmitted on a Business Day during
normal business hours or (ii) three (3) Business Days after deposit in a
United States Post Office Box, postage prepaid, properly addressed to
recipient at the mailing addresses set forth below or to such other
addresses as Borrower or the Lender may from time to time specify in
writing:
As to Borrower:
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
As to Guarantor:
▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
As to Lender:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
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8.9. PRIOR AGREEMENTS. This Agreement, including the Exhibits, Schedules and
other agreements referred to herein, is the entire agreement between the
parties relating to the subject matter hereof, incorporates or rescinds
all prior agreements and understanding between the parties hereto
relating to the subject matter hereof, and cannot be changed or
terminated orally.
8.10. ADDITIONAL TERMS. The additional terms and conditions set forth on
Exhibit A hereto are specifically made a part hereof.
8.11. WAIVER OF RIGHT TO PREJUDGMENT REMEDY NOTICE AND HEARING. The Borrower
acknowledges its understanding that the Lender may have rights against
the Borrower, now or in the future, in its capacity as secured party,
creditor, or in any other capacities. Such rights may include the right
to deprive the Borrower of or affect the use of or possession or
enjoyment of the Borrower's property; and in the event the Lender deems
it necessary to exercise any of such rights prior to the rendition of a
final judgment against the Borrower, or otherwise, the Borrower may be
entitled to notice and/or hearing under the Constitution of the United
States and/or State of Connecticut, Connecticut statutes (to determine
whether or not the Lender has a probable cause to sustain the validity
of the Lender's claim), or the right to notice and/or hearing under
other applicable state or federal laws pertaining to prejudgment
remedies, prior to the exercise by the Lender of any such rights. The
Borrower expressly waives any such right to prejudgment remedy notice or
hearing to which the Borrower may be entitled; and further waives any
requirement that the Lender post a bond or other security in connection
with such action, provided, however, that this waiver shall not include
a waiver of such rights as the Borrower shall have to prior notice of
the proposed disposition of Collateral by the Lender. Specifically and
without limiting the generality of the foregoing, the Borrower
recognizes that the Lender has and shall continue to have an absolute
right after the occurrence of an Event of Default to effect collection
of any of the Receivables or Collateral with respect to which the Lender
holds a security interest without the necessity of according to the
Borrower any prior notice or hearing. This shall be a continuing waiver
and remain in full force and effect so long as the Borrower is obligated
to the Lender.
8.12. WAIVER OF RIGHT TO TRIAL BY JURY AND CONSENT TO JURISDICTION. THE
BORROWER AND EACH GUARANTOR HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN
ACTION MAY BE COMMENCED ARISING OUT OF THIS LOAN AGREEMENT, THE
SUPPLEMENTAL AGREEMENTS OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY
OTHER CAUSE OR DISPUTE BETWEEN THE BORROWER, ANY GUARANTOR AND THE
LENDER.
The Borrower and each Guarantor hereby further agrees that the following
courts:
State Court - Any state or local court of the ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-▇▇-
▇▇▇▇▇▇▇ ▇▇▇▇▇ - ▇▇▇▇▇▇ ▇▇▇▇▇▇ District Court for the District of
Connecticut
or at the option of the Lender, any court in which the Lender shall
initiate legal or equitable proceedings and which has subject matter
jurisdiction over the matter in controversy, shall have exclusive
jurisdiction to hear and determine any claims or disputes between the
Borrower, Guarantor and the Lender pertaining directly or indirectly to
this Loan Agreement or to any matter arising in connection with this
Loan Agreement. The Borrower and Guarantor expressly submits and
consents in advance to such jurisdiction in any action or proceeding
commenced in such courts. The exclusive choice of forum set forth
herein shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Loan
Agreement to enforce the same in any appropriate jurisdiction.
8.13. PARTICIPATIONS. Lender shall have the unrestricted right at any time
and from time to time, and without the consent of or notice to, but at
no cost or expense to, Borrower or any Guarantor, to grant to one or
more banks or other financial institutions (each a "Participant")
participating interest in Lender's obligations to lend hereunder and/or
any or all of the loans held by Lender hereunder. In the event that any
such grant by Lender of a participating interest to a Participant,
whether or not upon notice to the Borrower, Lender shall remain
responsible for the performance of its obligations hereunder and
Borrower shall continue to deal solely and directly with Lender in
connection with Lender's rights and obligations hereunder. Lender may
furnish any information concerning Borrower and Guarantor in its
possession from time to time to prospective assignees and Participants,
provided that Lender shall require any such prospective assignee or
Participant to agree in writing to maintain the confidentiality of such
information. Lender shall notify Borrower of the names of such
participants and the percentage interest sold to a participant within
thirty (30) days after such grant.
8.14 LOST NOTES. Upon receipt of an affidavit of an officer of Lender as to
the loss, theft, destruction or mutilation of the Note or any other
security document which is not of public record, and, in the case of any
such loss, theft, destruction or mutilation, upon surrendering and
cancellation of such Note or other security document, Borrower will
issue, in lieu thereof, a replacement note or other security document in
the same principal amount thereof and otherwise of like tender.
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IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be duly
executed and delivered by the proper and duly authorized officers as of the date
and year first above written.
BORROWER:
IMPERIAL NURSERIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Its Senior Vice President
Duly Authorized
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Vice President
Duly Authorized
ACCEPTED AND AGREED TO BY THE GUARANTOR
GUARANTOR:
▇▇▇▇▇▇▇ LAND & NURSERIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Its Vice President
Duly Authorized
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EXHIBIT A
TO REVOLVING LOAN AND TERM LOAN AGREEMENT
OTHER TERMS AND CONDITIONS
1. USE OF PROCEEDS. The proceeds of the Revolving Loan shall be used by the
Borrower for general working capital purposes.
2. LENDER'S AUDIT FEE. The Borrower agrees to pay to the Lender, upon
demand, a nonrefundable audit fee (the "AUDIT FEE") to reimburse Lender
for the costs and expenses of auditing the books and records of the
Borrower. Provided no Event of Default has occurred, such fee shall be
capped at Three Thousand Dollars ($3,000) per audit.
3. ACCOUNTING TERMS. All accounting terms not specifically defined in this
Loan Agreement shall be construed in accordance with generally accepted
accounting principles and all financial data submitted pursuant to this
Loan Agreement shall be prepared in accordance with such principles.
4. MAINTENANCE OF DEPOSITORY ACCOUNTS. The Borrower shall maintain all of
its disbursement accounts with the Lender and shall pay all associated
bank fees for maintenance and service of those accounts. The Lender
acknowledges that the Borrower maintains depository accounts with banks
other than the Lender for each of the Borrower's wholesale locations.
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GUARANTY
To: FLEET NATIONAL BANK
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To induce FLEET NATIONAL BANK (hereinafter referred to as the "LENDER") to
enter into a Revolving Loan Agreement dated of even date herewith (hereinafter
referred to as the "LOAN AGREEMENT") with IMPERIAL NURSERIES, INC. (hereinafter
referred to as the "BORROWER") and in consideration thereof and of any loans,
advances or financial accommodations heretofore or hereafter granted by the
Lender to or for the account of the Borrower, whether pursuant to the Loan
Agreement or otherwise, each of the undersigned Guarantors (hereinafter, and
collectively if more than one, referred to as the "GUARANTOR") unconditionally
guarantees by this agreement (the "GUARANTY") the payment and performance from
or by the Borrower of any and all obligations from the Borrower to the Lender
(the "OBLIGATIONS"). "OBLIGATIONS" shall have the meaning set forth in the Loan
Agreement.
The Guarantor also agrees: that this Guaranty shall not be impaired by any
modification, release or other alteration of any of the Obligations or
arrangements whatsoever with the Borrower or anyone else; that the liability of
the Guarantor is direct and unconditional and may be enforced without requiring
the Lender first to resort to any other right, remedy or security; to waive and
hereby does waive any right of subrogation, reimbursement or indemnity
whatsoever, and any right of recourse to security for the debts and Obligations
of the Borrower to the Lender and the Guarantor until all of the Obligations are
paid in full; that if there is more than one Guarantor, the liability of the
Guarantors hereunder shall be joint and several; that if the Borrower or any
Guarantor should at any time become insolvent or make a general assignment, or
if any petition in bankruptcy or any insolvency or reorganization proceedings
shall be filed or commenced by, against or in respect of the Borrower or any
Guarantor, any and all Obligations of each Guarantor shall, at the Lender's
option, forthwith become due and payable without notice; that the Lender's books
and records showing the account between the Lender and the Borrower shall be
admissible in any action or proceedings, shall constitute prima facie proof
thereof; that this Guaranty is, as to each Guarantor, a continuing Guaranty;
that the death of any Guarantor shall not affect the termination of this
Guaranty as to such deceased or as to any other Guarantor; that nothing shall
discharge or satisfy the liability of any Guarantor hereunder except the
satisfaction in full of all of the Obligations; and that all sums at any time in
the Lender's possession (except for any pension or retirement accounts
maintained under ERISA including, without limitation, Guarantor's 401K Plan
account) shall be deemed held by the Lender as security for the Obligations to
the Lender and to the Lender's subsidiaries, no matter how or when arising,
whether absolute or contingent, whether due or to become due and whether under
this Guaranty or otherwise, but specifically excluding Guarantor's 401k Plan
account. The Guarantor hereby gives the Lender a lien and right of setoff for
the Obligations upon and against the deposits, credits and property of the
Guarantor now or hereafter in the Lender's possession or control or in transit
to the Lender (except for any pension or retirement accounts maintained under
ERISA including, without limitation, Guarantor's 401K Plan account). The Lender
may at
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any time apply the same or any part thereof to any of the Obligations, though
unmatured, without notice and without first resorting to any other collateral.
The Guarantor further agrees to furnish to the Lender the financial
information concerning Guarantor as required under the Loan Agreement, and
promptly after the Lender's request, such other information as the Lender may,
from time to time, reasonably request.
The Guarantor waives: notice of acceptance hereof; presentment and protest
of any instrument, and notice thereof; notice of default; and all other notices
to which such Guarantor might otherwise be entitled.
Without the Lender's prior written consent after full disclosure, the
Guarantor shall not transfer any material portion of the Guarantor's property,
real or personal, or release any contract right or claim which constitutes a
material portion of the Guarantor's net worth, either voluntarily or
involuntarily, absolutely or collaterally, without receiving full fair market
value therefor. The Guarantor agrees that any transfer or release in violation
of the foregoing provisions shall PER SE be deemed to have occurred with an
intent to defraud creditors. For purposes of the foregoing, the term "material"
shall be defined as any transfer or release involving more than ten percent
(10%) of the Guarantor's net worth in any calendar year.
This Guaranty shall be valid and binding upon the Guarantor, regardless of
any invalidity, irregularity, defect or unenforceability of or in any of the
Obligations. The Guarantor further agrees that this Guaranty shall continue to
be effective or be reinstated, as the case may be, if at any time payment of all
or any part of the Obligations is rescinded or otherwise must be restored by the
Lender to the Borrower or to the creditors of the Borrower or any representative
of the Borrower or representative of its creditors upon the insolvency,
bankruptcy or reorganization of the Borrower, or to any Guarantor or the
creditors of any Guarantor or any representative of any Guarantor or
representative of the creditors of any Guarantor upon the insolvency, bankruptcy
or reorganization of any Guarantor, or otherwise, all as though such payments
had not been made.
The Guarantor acknowledges that the transactions under which this Guaranty
is a part are commercial transactions, and the Guarantor hereby waives such
rights as the Guarantor may have to notice and/or hearing under Connecticut
General Statutes Section 52-278a et. seq. as amended or as otherwise allowed by
any applicable federal or state laws pertaining to the exercise by the Lender of
such rights as the Lender may have, including but not limited to the right to
deprive the Guarantor of or affect the use of or possession or enjoyment of the
Guarantor's property prior to the rendition of a final judgment against the
Guarantor, and further waives any bond requirement in connection therewith.
The Guarantor hereby waives the right to trial by jury in any action or
proceeding of any kind or nature in any court in which an action may be
commenced arising out of this Guaranty or any assignment thereof or by reason of
any other cause or dispute between the Guarantor and the Lender.
The Guarantor hereby further agrees that the following courts:
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State Court: - Any state or local court of the State of Connecticut.
Federal Court: - United States District Court for the District of
Connecticut.
or at the option of the Lender, any court in which the Lender shall initiate
legal or equitable proceedings and which has subject matter jurisdiction over
the matter in controversy, shall have jurisdiction to hear and determine any
claims or disputes between the Guarantor and the Lender pertaining directly or
indirectly to this Guaranty or to any matter arising in connection with this
Guaranty. The Guarantor expressly submits and consents in advance to such
jurisdiction in any action or proceeding commenced in such courts. The choice
of forum set forth herein shall not be deemed to preclude the enforcement of any
judgment obtained in such forum or the taking of any action under this Guaranty
to enforce the same in any appropriate jurisdiction.
For the purposes of this Guaranty, "BORROWER" shall mean and include any
successor of the Borrower including the Borrower as Debtor or any representative
of the Borrower under the provisions of any state or federal law governing
bankruptcy, insolvency, receivership or reorganization.
This Guaranty, all acts and transactions hereunder, and the rights and
obligations of the parties hereto shall be governed, construed and interpreted
according to the laws of the State of Connecticut, shall be binding upon the
heirs, executors, administrators, successors and assigns of each Guarantor and
shall inure to the benefit of the Lender's successors and assigns.
Dated: May 6, 1998
▇▇▇▇▇▇▇ LAND & NURSERIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇
---------------------------
Its Vice-President
Duly Authorized
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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